I think that the order of the lord chancellor should be reversed; but I believe that two of my noble and learned friends are of a different opinion, and, therefore, the result will be that it will stand unreversed.

LORD COLONSAY: My lords, I have very little to say upon this case, on which I have arrived at the same conclusion as my noble and learned friend who has just spoken, nor am I to-day in a condition of health to be able to say much.

The question is, whether, between the 9th of April, 1859 and the winding-up, Mr. Bush was divested of his position as a shareholder in the company. It appears that the proceedings of this company were not conducted with the greatest regularity their books even were not kept with the greatest regularity, and there were many inaccuracies with regard to their proceedings. Mr. Bush, who was a director of the company for a considerable time, as well as a shareholder, may have been in some degree responsible for not seeing that these matters were more carefully looked after; but with regard to the line of argument adopted at the bar upon this appeal, I feel it a duty incumbent upon me to say that I do not think that any case was made out against Mr. Bush personally, of the character that was attempted to be made out against him. I do not think that there was any successful attempt made to impeach his bonâ 55] fides, and that makes me feel the greater regret *that there were inaccuracies which, in my opinion, prevent his obtaining the relief which he seeks. I think the inaccuracies were just those which have been pointed out by my noble and learned friend, and I shall only indicate them as being the basis of what I offer as my opinion.

It appears that on the 9th of April, 1859, Mr. Bush transferred all his shares to Mr. Morrison for £2000, to be paid in the month of April, 1861, contingently. The agreement for the sale of his shares is a very peculiar one, but it does not lead me to retract in any degree what I have said. Then, on the 11th of April, 1859, there was a return of the transfer to the regis trar of joint stock companies. Now the objections are these. In the first place, the transfer was not approved of by competent directors because the persons appointed on the 8th of April were not then shareholders, and therefore were not in a position to be directors of the company. I agree with my noble and learned friend who has just spoken, as to the effect of those elections. I think those persons were not properly shareholders, and therefore they were not capable of giving a valid confirmation to and approval of the transfer. The second objection is that the transferee, Mr. Morrison, had never signed the deed. That also, in my opinion, forms a valid ground of objection.

These, my lords, are the two grounds upon which I think that Mr. Bush could not get himself effectually relieved. I wish it had been otherwise.

LORD CAIRNS: My lords, it appears that in the winding up of this company the name of Peter Morrison was, in the first instance, placed upon the list of contributories as proprietor of the 400 shares which have been mentioned by my noble and learned friend. A summons was subsequently taken out by the executors of Mr. Houldsworth, who, as representing their testator, had been placed upon the list of contributories, and that summons required the respondent, Mr. Bush, to show cause why his name should not be settled upon the list of contributories in respect of these 400 shares, and the name of Peter Morrison removed.

That, my lords, is the foundation of the proceedings which now come before your lordships; and I own, I never have seen a case *which more strongly, to my mind, proved the great [56 advantage of some form of allegation and of pleading in alitigation between adverse parties. Your lordships have now before you a thick volume, containing several hundred pages, and you are left to discover from that volume, and from the arguments of counsel at your lordships' bar, from a mass of affidavits, from some parol testimony, and from a number of documents, what the case is which is alleged, what the ground is why this list of contributories should be altered by one name which has been placed upon it being taken off, and another substituted. And I may say in passing, as if the matter were not difficult enough in itself, the difficulty and confusion in this case have been increased, and, I am sorry to say, the expense increased also, by the circumstance that the appellants have printed at length a very voluminous appendix, and the respondent has printed at length the same appendix, and the respondent has even gone beyond that, for he has added a shorthand writer's note of the argument of counsel in the court below, and, farther, a somewhat long and argumentative affidavit, filed entirely irregularly, to prove whose fault it was that there was a double appendix in place of a single one. My lords, anything more irregular or burdensome as regards costs and the consumption of time than this case is, starting at first with what I have referred to, namely, the absence of any pleading or allegation, and that difficulty added to by the lavish mode in which the parties have proceeded with regard to expense, I have never seen.

Well, my lords, we have, as I have said, to discover from this mass of documents, aided by the argument of counsel at your lordships' bar, which I remember was extremely able, what is the case which is alleged as the foundation of these proceedings? 5 ENG. REP.]

3

It is said that the transfer of the 400 shares in question from Mr. Bush to Mr. Morrison was invalid by reason of informality. I shall reserve for the last of the observations I have to make that ground of attack on the transfer. The second reason alleged is this: the 191st clause of the deed of settlement of this company provided: "That if ever the losses of the company shall have absorbed not only the whole of the fund called the reserve fund, but also 80 per cent on the gross amount of the capital subscribed for, the said company shall be ipso facto 57] dissolved, and the board of directors for the time being shall within twenty days, or as soon after such losses being incurred as the said board possibly can, and they are hereby required to call a special general meeting of the shareholders in such manner as hereinbefore mentioned, and lay a statement of the affairs of the company before such meeting." It is said that before the month of April, 1858, when Mr. Evans made his report, this contingency contemplated by the 191st clause had occurred, that more than 80 per cent of the capital had been lost, and, that, therefore, the clause had became operative. My lords, if the clause become operative, that which had taken place was the ipso facto dissolution of the company, and if the company was ipso facto dissolved I may say that the consequence would have been, not that a question would have arisen as to the transfer of shares as between Bush and Morrison, but the consequence would have been that all transfers afterwards made would have been invalid, and the shares of all persons would have become incapable of transfer, and the company would have become incapable of undertaking any new business or entering into any new contract, whereas, in point of fact, we know that it carried on business for some years subsequently, and that transfers of many other shares were made. If the clause therefore had become applicable, if the contingency mentioned in it had occurred, it would have been a ground not for removing the name of Morrison and substituting the name of Bush upon this register, but it would have been a ground for a proceeding of a wholly different kind, a proceeding challengng everything as absolutely inept and invalid which had been done by the company from the time that the ipso facto dissolution had taken place.

But I am bound farther to say that it appears to me that the proof that the contingency contemplated by the 191st section had occurred, has entirely failed. I have looked at the report of Mr. Evans, and it appears to me that this observation is to be made upon that report; which, indeed, Mr. Evans himself made in the document which accompanied it he has taken an account of the capital of the company, and of the debts and the

Of

liabilities, but he has not, as he himself states, made any allowance for the value of the goodwill of the company as a going concern. The company was an extremely peculiar one. the insurances and risks we *are only now told the par- [58 ticulars. There was coming in year after year a body of premiums varying from £30,000 to £40,000, a connection, a goodwill, a public favor had been created by the company, rightly or wrongly, by means of its business as conducted up to that time, and by means of the advertisements to which it had resorted; and whether that goodwill should be estimated as it is stated to have been estimated by a valuator, as of the value of three years of these annual premiums, or at a smaller or at a larger sum, I need not stop to inquire. It is abundantly evident that the goodwill of the concern as a going concern was worth some substantial sum, and that sum is altogether omitted, as indeed Mr. Evans states, from his calculations. Whether if a proper sum had been allowed in respect of goodwill it would have shown that the capital had been reduced anything like 80 per cent your lordships cannot, I think, speculate. It is sufficient to say that there is no proof upon the subject, and therefore those upon whom the onus of proof lay to show that the contingency mentioned in the 191st section had occurred, have entirely failed, as it seems to me, to sustain that onus.

Then, my lords, I pass to the next head of challenge of the transfer of these shares, which, in point of fact, occupied the greatest portion of the argument at your lordships' bar. I am obliged to look at the case of the appellants for a statement of what this head of challenge is to be taken to mean, and I find at the commencement of the case, on the first page, "the appellants contend that the transfer was informal and invalid, and was part of a scheme by which the respondent Bush and the only other two directors of the company were enabled to leave the company without exciting the suspicion of the shareholders, and without informing them of what the directors knew to be the fact, namely, that the company's capital was insufficient to meet its engagements, and that the company was in such a position that, according to the provisions of its deed of settlement, it ought to be wound up." And farther on, at page 15 of the case, there commences a narrative of the proceedings of the directors from the month of April, 1858, when Mr. Evans's report was made. It states the resignation of Mr. Fitzpatrick, who was the first of the directors who resigned, and transferred his shares in the month *of April, 1858-it states the re- [59 signation and transfer of the shares of Mr. Smith and of Mr. Tyler, and then it continues: "In this way three out of the seven persons who were directors at the time Evans's report

was made quietly got rid of their shares, and Hope, Johnson, Western, and Bush were left the only directors of the company." And the first of the reasons for the appeal is stated thus: "Because it was the duty of the respondent Bush, and of the other directors of the company, after receiving Evans's report and the balance sheet accompanying the same to lay such balance sheet, or some other true statement of the affairs of the company before the shareholders, and instead of doing this the said respondent and the other directors of the company concealed the true state of the company's affairs, and improperly prolonged the existence of the company, and thereby were enabled to transfer, or affect to transfer, all their shares therein."

Now I understand this to be an allegation (a very grave, and a very important one) to this effect; that a fraudulent scheme was originated and planned among the directors, having its origin at the time of the making of Evans's report in the month of April, 1858-a scheme to keep back from the shareholders of the company a knowledge of the true state of its affairs, and to keep back that knowledge for this purpose, namely, in order that the directors themselves, who held a large number of shares in the company, might have time and opportunity given to them to get rid of their shares, to leave the company, and to put other persons in their place to bear the responsibility which otherwise would have been theirs. My lords, I wish to state my opinion with regard to that part of the case at the outset, because I think it extremely important that, so far as my opinion goes at least, I should place upon record the view I take of it. Even if the whole of this grave allegation had been true, and true to the letter, it appears to me to state and allege a case which is not a case for a proceeding of settling contributories under the Winding up Act, but is a case for relief of a wholly different description. It is a case which, if proved to be true, and to be one which would entitle the person alleging it to any relief at all, the relief would be in the nature of a proceeding by a bill in Chancery to make those persons who had carried on the com60] pany, who had added to its liabilities, who had *fraudulently concealed its affairs from the shareholders for the purpose of effecting their own end, answerable for the loss which had been incurred in carrying on the company, and to make them subject to an indemnity in favor of those who had sustained this loss. It appears to me to be a case wholly foreign to the purpose of a proceeding for settling contributories under the Winding up Act, where it appears to me that the question to be discussed and decided is whether a particular person was or was not at a particular time, or is or is not at the present time, a shareholder in the company.