agreed to accept him as a partner in his personal or in his fiduciary character. The presumption of law would seem to be for the former, and the onus of proving the latter will lie on the partner (a). In public companies the liabilities of trustees taking shares will, in a question with the world, fall to be regulated by the same principles as we have already seen to be applicable in the case of private partnerships; that is to say, they will be held to have bound themselves as ordinary shareholders, whatever liabilities that relation may involve. socios. When the question arises inter socios, the presumption for per- Questions inter sonal liability will be almost as strong as when it arises with the public creditor. The reason of this is, that in all that concerns transference of shares or admission of members, the shareholders have as little to do as the public. The management of such matters is committed to the directors, who must act in accordance with the constitution of the company. Now, the power to admit members with a liability limited to that of trustees, is in fact a power to admit some persons with privileges not possessed by the others, or rather with a right of indemnity against the others for all losses and debts of the concern beyond the amount of the trust funds,-a power which never can be presumed, and which could only be validly exercised where it was specially conferred in the instrument of formation. It would therefore seem that an arrangement by which the liability of certain shareholders is inter socios limited to that of trustees, can only be validly entered into when the directors have special powers to that effect, or when it has received the sanction of the whole body of shareholders, or at least of a general meeting (b). When shareholders are entered on the register as trustees eo nomine, this is intended merely to mark the property vested in them as belonging to the trust estate, and is quite consistent with their personal liability either to the company or its creditors (c). (a) See per Lord Justice-Clerk in Lumsden v. Buchanan, supra, and opinions of the judges generally. (b) Lumsden v. Buchanan, as revd. on appeal June 22, 1865; and see, in particular, the opinion of the Lord Justice-Clerk, which was adopted in the House of Lords, and which contains a full exposition of the legal principles involved in questions of (c) Per Lord Westbury, Ch., in Liability of cestui que trustent. Liability to indemnify trustee. Statutory provisions. It has been held in England, that the cestui que trust of shares in an unincorporated company is liable as a quasi partner to the creditors of the company (a); but in corporations, this liability, whatever it may be, attaches to the ostensible holder of shares only (b). Even in this latter case, however, the beneficiary may be made a contributory, if it can be shown that he procured shares to be placed in the name of nominees of his own, with the fraudulent purpose of saving himself from liability (c). Beneficiaries, or cestui que trustent, may in some cases be liable to indemnify the trustee, but with that the company have in general no concern (d). The latter may, however, incur this liability by immixing themselves in the transaction, or by unreasonable conduct. Thus A. purchased railway shares, and took the certificates in name of B. He afterwards pledged them with a bank in security of advances, representing B. as merely his trustee. A. became insolvent, and B. being required by the railway company to pay calls, requested the bank either to pay them, or to deliver the certificates to him, so that he might sell them. The bank having refused to do either, it was held that they were identified with A., and liable to relieve B. (e). By the Companies Clauses Act, 1845, sec. 21, it is provided that the company shall not be bound to regard any trust, whether express, implied, or constructive, to which any of the shares may be subject; and by sec. 30 of the Companies Act of 1862 it is provided, that no notice of any trust shall be entered in the register in the case of companies registered in England or Ireland. The provision, however, does not extend to Scotland,—a peculiarity much to be regretted. man v. Monroe, 1 Maule and Sel. 412; (a) See Goddard v. Hodges, 3 Tyrw. 209. (b) Newry Ra. Co. v. Moss, 14 Beav. 64. (c) Costello's case, 2 De G. F. and J. 302; Alexander's case, 9 W. R. 410; Budd's case, 10 W. R. 51; Hatton's case, 10 W. R. 313; De Pass's case, 4 De G. and J. 544. (d) See Bunn's case, 2 De G. F. and J. 275. (e) Barron v. National Bank, 1852, 14 D. 565. CHAPTER XX. LIABILITIES OF PARTNERS AND DIRECTORS CONSIDERED AS liability. WE have now considered somewhat fully the liabilities which part- Origin of this ners and shareholders incur for such obligations as are constituted against the firm or company of which they are members; but there is another class of liabilities which may be incurred both by partners and managing officials, not only to the company but to the world, and which arise from the fact that partners in private firms and managing officials in larger associations hold the character of agents and trustees for the society. These liabilities have already been noticed as they incidentally presented themselves; but as the subject is one of considerable importance, it is proposed to examine the principles by which it is regulated more connectedly and in detail in the present chapter. We shall first consider these liabilities as they arise in the case of partners, and shall then advert to the corresponding liabilities which may be incurred by directors and other managing officials. I. LIABILITIES OF PARTNERS. liability of partners. We have already seen that the partners of a private firm par- Twofold take of the characters both of trustees and for the concern: agents Trustees, to whose care its interests are confided; Agents, by the intervention of whom it acts and transacts with the public. The consequence of this is, that partners may incur a twofold liability; inter socios on the one hand, and to strangers on the other. 1. If they abuse the powers of agency or trust with which they are charged, so as to sacrifice the common interest, or to involve the society in losses or liabilities; if they set at nought the interests of Liability to the company, the concern in order to further their own, or appropriate to themselves that which either belonged to or ought to have been secured for the company; if they neglect their duties as partners to such an extent as amounts to a fraud on their copartners, and thereby seriously injure the common interests;-in these and the like cases they become liable to indemnify the company, and may be proceeded against at its instance, or at the instance of any partner who deems himself aggrieved. 2. If a partner, taking advantage of his connection with the company, enters into transactions with a stranger, which, from being ultra vires of his agency, or for some other reason, do not bind the company, and the stranger thereby suffers loss or damage, the partner incurs a personal liability to the stranger, provided the latter have not been privy to a fraud sought to be practised on the company. 1. Liability to the Company.-In the English case of Bury v. or inter socios. Allen (a), it was stated by the Court: Suppose the case of an act of fraud, or culpable negligence, or wilful default by a partner during the partnership, to the damage of its property or interests, in breach of his duty to the partnership; whether at law compellable or not compellable, he is certainly in equity compellable to compensate or indemnify the partnership in this respect.' The case of Campbell v. Campbell (b) is also a strong example of the application of the principles here enunciated. In that case, one of the partners of a distillery company having been found liable in Excise penalties in consequence of the others having without his knowledge engaged in illicit distillation, they were held bound to indemnify him in full. And where, again, a partner exceeded the limits of his agency, and thereby involved the other partners in heavy responsibilities, they were found entitled to relief in full against him (e). Liability of partners benefiting themselves at Partners have no right to take advantage of their connection with the company so as to obtain for themselves advantages, or the expense of make acquisitions which, if secured at all, ought to have been the company acquired for the company (d). If they do so, they must either communicate to the company the advantages or property so acquired, (a) 1 Coll. 604. 415; M'Ilreath v. Margetson, 4 Doug. 278. (b) 1834, 12 S. 573; 1 Rob. App. 4. (c) Robertson v. Southgate, 6 Ha. 540. See also re Webb, 2 B. Moore 500; Stalsmidt v. Lett, 1 Sm. and G. (d) See Wallace v. Campbell, 1. S. 53 and 509, 2 S. Ap. 467 (1824); and antea, p. 183. or else they must indemnify the company to the full extent. This was expressly laid down in the late case of Pender v. Henderson and Co. (a), in which the authorities, both Scotch and English, were fully examined. It was stated from the bench to be an indisputable principle of partnership, 'that a partner is bound to communicate to his copartners any benefit or advantage obtained by him in the affairs of the copartnery;' and 'that a partner, in this respect, stands on the same footing with a trustee or tutor, or other person holding a confidential position.' In cases of this kind the offending partner or partners may be Modes of obtaining proceeded against not only at the instance of the company or redress. firm, but in the name of any single partner who considers himself aggrieved. If this were not so, a majority of wrong-doers might set a minority at defiance (b). If the offending partners are in the minority, it seems to be the proper course to raise the action in the company name; if, again, those seeking reparation be a minority, the action should be libelled in their individual names. But it must be observed that the firm itself ought in no case to be made the defender, however numerous the wrong-doers may be; for this would not only be incorrect in theory, but would render the pursuers themselves contributories in any decree for damages which might be obtained: in other words, the decree being obtained against the firm, the pursuers could only claim payment under deduction of their individual liabilities to contribution as being themselves partners. strangers. 2. Liability to the Public.-If a person represent himself to be Liability to the agent of another, and in that character induce a third party to contract with him, and it afterwards turn out that the contract cannot be enforced against the alleged principal in consequence of its being ultra vires of the agency, it is plainly equitable that the agent should indemnify the other party for any loss or damage which he may have thereby sustained; and the case will be all the (a) Pender v. Henderson and Co., 1864, 2 Macph. 1428. See Featherstonchaugh v. Fenwick, 17 Ves. 298; Alder v. Fouracre, 3 Swa. 489; Clegg v. Fishwick, 1 M. and G. 294; Clements v. Hall, 24 Be. 333; Inglis v. Austine and Others, 1624, M. 14562; Ersk. iii. 3, 20; 2 Bell's Com. 614; Coll. 118-122; Bentley v. Craven, 1853, 18 Be. 75; Fawcett v. Whitehouse, 1 R. and M. 132; (b) Campbell v. Campbell, 1834, 12 |