EXPENSES OF COMPANY.

(See PROMOTERS.)

Misfeasance of Director-Improper Payment-Personal Liability.

A director of a company was present and voted at a meeting where a payment was made for preliminary expenses. He made no inquiry as to what the payment was for. It was, in fact, for expenses incurred in fraudulently raising the prices of the company's shares in the market. The payment was included in an item which appeared in the annual balance-sheets, and passed unquestioned. The company's articles of association contained a provision empowering the directors "to pay all costs and expenses whatsoever of and incident to the promotion, formation, establishment, and registration of the company."

Held, that the director was liable, under section 165 of the Companies Act, 1862, to repay the amount so paid to the official liquidator in the winding-up. That there had been no ratification by the company of the payment, there being no notice such as to attract the attention of persons of ordinary care, or to put them upon inquiry.

Though a director's liability is not governed by the strict rules applied in the case of trustees, he must show reasonable diligence. A director would not be liable for an improper payment sanctioned by him bona fide on the report of a finance committee that it was proper.-Re Railway, etc., Co., Marzetti's Case, 1880, Ct. of App. (James, Brett, and Cotton, L. JJ.); 42 L. T. (N. s.) 206; W. N., 1880, p. 50; 28 W. R. 541. (Jessel, M. R., affirmed.)

D

FALSE REPORTS.

(See REPORTS.)

False Reports-Liability of Directors and Officials.

In Cullen v. Thompson (6 L. T. 870; 4 Macq. H. L. Cas. 441), which was decided by the House of Lords in 1862, the directors of a joint-stock company issued false and fraudulent reports-the statements for such reports having been supplied by the secretary and other officers, who knew that they were false, and were to be used for the purpose of deceiving the public. The plaintiff acting upon such reports bought shares in the company, and thereby suffered loss. The House of Lords held that each of the officers of the company, who knowingly assisted in the fraud, was personally liable for the loss caused to the plaintiff by the misrepresentations in the report, although the report was signed by the directors only, and not by the subordinate officers.

These officials were, however, civilly responsible for the consequence of having joined with and assisted their masters in the commission of fraud. It was immaterial that their concurrence was unknown to the party injured.

This proceeded from the general rule, that all persons directly concerned in the commission of a fraud are to be treated as principals. No person will be allowed to excuse himself on the ground that he acted as the agent or as the servant of another; for the contract of agency

or of service cannot impose any obligation on the agent or servant to commit or assist in commiting a fraud. (Per Westbury, L. C.)

FIRE INSURANCE.

See POLICY.

INCUMBRANCES.

Annuity charged on Land-Annuity Act-Registry Acts— Notice to Purchaser.

An annuity charged on land, but not registered under the 18 & 19 Vict. c. 15, was held, by Jessel, M. R., to be invalid as against subsequent incumbrances taken with express notice of the annuity, and even as against the trustee in bankruptcy of the grantor.

The Court of Appeal, however, took quite a different view, and held that a purchaser or mortgagee,-who has notice of any prior incumbrance, annuity, or contract whatsoever, cannot shelter himself under section 12 of the Annuity Act, any more than he can under the County Registry Acts, and that the trustee in bankruptcy cannot be in a better position than the grantor of the annuity.-Greaves v. Tofield, 1880, W. N., 1880, pp. 14, 81; 28 W. R. 840.

The difference of the views taken by Jessel, M. R., on one point, as compared with those of James, Baggallay,

and Bramwell, L. JJ., is traceable in part to the word "creditors" in the Annuity Act; an expression which the Court of Appeal regarded as not inclusive of a trustee in bankruptcy, but rather of such creditors as have some special right or remedy against the land, as, for example, execution creditors.

INFANTS.

See MINORS.

INTEREST.

See PROSPECTIVE PAYMENTS; also DIVIDENDS.

INTERROGATORIES.

1.-Interrogating a Member.

(i.)—It is unnecessary to make a member of a company a party to an action for the purpose of interrogating him; and, if so joined, he will be struck out.Wilson v. Church, 1878, Jessel, M. R.; L. R. 9 Ch. D. 552.

(ii.)-Per Jessel, M. R.:—

"It is for the Court to decide which member [of a company] is to be interrogated; and [if reasons are shown] why one member can give the information and not another, or why one member can give information.

on one set of questions, and another member on another set of questions, the Court can direct which member or members shall be examined to give information." (Ibid. L. R. 9 Ch. D. 557.)

2.-A Vendor and Director liable to be interrogated.

Upon an affidavit stating that T. was a vendor to, and until recently a director of, the defendant company, and that he is still a member, and well acquainted with all its affairs, leave was granted to the plaintiff to serve T. with interrogatories.-Berkeley v. Standard Discount Co., 1879, Ct. of App. (Jessel, M. R., Baggallay and Thesiger, L. JJ.); L. R. 13 Ch. Div. 97; 41 L. T. (N. S.) 374; 49 L. J., Ch., 1. (Fry, J., reversed.)

3.-Costs of the Members.

(i.)-A member of a company, to whom interrogatories have been delivered under the Rules of Court, 1875, Order XXXI, r. 4, is not entitled to his taxed costs of answering those interrogatorics before delivering his answers; nor will the Court make any order as to the payment of his costs separately from the costs of the company.

(ii.)-Per Jessel, M. R.:

"The ordinary practice is for the company's solicitor to act for the officer or member who is directed to answer and to charge the

costs against the company."

Berkeley v. Standard Discount Co., see supra.

4-As between First and Second Mortgagees.

In an action for redemption by a second mortgagee against a first mortgagec, the defendants answered that part of an interrogatory, in which they were asked to set forth the amount due for principal, interest, and costs, but declined to answer further. The interrogatories asked, in