provisions.

The only modification of this doctrine is to be found Directory in the inclination of the courts to consider the provisions regulating the conduct of the directors as directory and not imperative, or, as it is sometimes expressed, to hold that third parties are obliged only to see that the power exists, not that it is executed in manner directed by the regulations of the company.

For example, if the regulations empower the directors to borrow money with the consent of a general meeting, a lender must satisfy himself that the power to borrow exists, but the company cannot dispute the validity of a loan on the ground that no such meeting was held, and therefore that there was no authority in the directors to borrow (a).

Again, in a case in Chancery, a direction that

v. Nicholls, 6 H. L. C. 401. See observations on Ernest v. Nicholls, in London Dock Co. v. Sinnot, 8 Ell. & Bl. 374. Pierce v. Jersey Waterworks Co., L. R., 5 Ex. 209. As to acquiescence of company, infra, p. 124.

(a) Royal Brit. Bank v. Turquand, 6 Ell. & Bl. 327; Agar v. Athenæum Life Society, 3 C. B., N. S. 725; Prince of Wales Insur. Co. v. Harding, Ell. Bl. & Ell. 183; Athenæum Life Society, 4 K. & J. 549; Daniell v. Royal Brit. Bank, 1 H. & N. 681; Lane's case, 1 De G., J. & Sm. 504; but see in equity, Athenæum Life Society v. Pooley, 3 De G. & J. 294, in which debentures of the same character as those in Agar v. Athenæum Life Society were held void in equity, in the hands of a bonâ fide purchaser. The decision in this case appears to have rested on the fact that things in action carry all their equities with them. Policy granted by de facto directors held valid, County Life Assur. Co., 5 Ch. 288. Ex parte Overend Gurney & Co., 4 Ch. 460, is an illustration of the same principles.

Refusal of
courts of

equity to in

terfere in

matters of

cheques should be signed by five directors, was held to be directory and not imperative, and accordingly, on winding up the company, the directors were allowed all sums drawn from the bank by cheques not properly signed, but bona fide applied to the purposes of the trade of the company (a).

On the other hand, in the case of Balfour v. Ernest (b), a bill of exchange was held invalid, even in the hands of a bona fide holder, on the ground that it was drawn for a purpose beyond the scope of the powers not of the directors only, but of the company (c).

A court of equity will not interfere in the internal disputes of a company; a shareholder, therefore, cannot file a bill either on behalf of himself or of himinternal re- self and others, to set aside, on the ground of its improvidence or inexpediency, an act of the directors sanctioned, or capable of being sanctioned, by a majority; nay more, it would appear that he cannot be

gulation.

(a) Norwich Yarn Co., 22 Beav. 143. See also Smith v. Hull Glass Co., 11 C. B. 897. Bonelli's Telegraph Co., 12 Eq. 490. D'Arcy v. Tamar R. Co., L. R., 2 Ex. 158; and compare Wood's claim and Brown's claim, 30 L. J., N. S., Ch. 373; Ridley v. Plymouth Baking Co., 2 Exch. 711; Balfour v. Ernest, 5 C. B., N. S. 601 the two last-mentioned cases may be explained on the ground that the acts of the directors were beyond the scope of the business of the company, and not merely beyond the limited powers of the directors as agents. The observations also of the Lord Chancellor in Greenwood's case, 3 De G., M. & G. 459, deserve attention.

(b) 5 C. B. N. S. 601; Scott v. Colburn, 26 Beav. 276.

(c) It is to be observed also that in this case the holder of the note was by implication of law held to have notice of its illegality.

heard to object to any informality in the proceeding, unless he has attempted to put the company in motion, and the company has refused to take cognizance of the matter.

The question in such cases is, whether the company has power to do the act, and if it has, a court of equity closes its doors against the complainant, and will not, by an undue interference, enable a recusant minority to throw obstacles in the way of a majority carrying into effect any scheme of which it may approve (a),

It is not to be inferred from any of the preceding

(a) Foss v. Harbottle, 2 Hare, 471; Mozley v. Alston, 1 Phil. 790; Lord v. Co. of Copper Miners, 2 Phil. 740; Hodgkinson v. National Live Stock Insur. Co., 26 Beav. 473, 4 De G. & J., 422; Orr v. Glasgow, &c. R. Co., 3 Mcq. 799. This salutary principle of non-interference was carried to its full extent in Davidson v. Tulloch, 3 Mcq. 783, in which Lord Cranworth observed, "If there had been nothing alleged against the directors but that they had advanced money (even putting in the word 'fraudulently') for the benefit of persons with whom they or some of them were associated, and whom they wished to assist, I should have been very reluctant indeed to hold that that was not an act which the body at large might not have sanctioned; for in truth it amounts to no more than this-an improvident and improper advance of funds." Again, in Gray v. Lewis, 8 Ch. 1035, Lord Justice James said (p. 1051), “I think it is of the utmost importance to maintain the rule laid down in Mozley v. Alston and Foss v. Harbottle; to which, as I understand, the only exception is where the corporate body has got into the hands of directors and of the majority, which directors and majority are using their power for the purpose of doing something fraudulent against the minority, who are overwhelmed by them, as in Atwool v. Merryweather (5 Eq., 464, n.), where V. C. Wood, under those circum

Personal

liability of

unautho

directors for observations, that persons dealing with directors who exceed their authority are, by the escape of the company, left without a remedy.

rized acts.

On documents not excluding personal liability.

Directors professing to enter into a contract on behalf of a company, impliedly warrant their authority; and if it turns out that they have no authority, although they are not bound by the contract, they will, on the principle of Collen v. Wright (a), be liable in damages for breach of the implied warranty (b).

Similarly, a director signing a promissory note, with nothing in the note itself to exclude personal liability, will be personally liable on it. For a person signing a contract in his own name, without qualification, is prima facie to be deemed to be contracting personally; and, in order to prevent his liability attaching, the document must show that he did not intend to bind himself as principal (c).

stances, sustained a bill by a shareholder on behalf of himself and others; and there it was after an attempt had been made to obtain a proper authority from the corporate body itself in public meeting assembled." See also the observations of the same learned judge in Fox ex parte, 6 Ch. pp. 185-6. Menier v. Hooper's Telegraph Works, 9 Ch. 350, a case resembling Atwool v. Merryweather.

(a) 8 E. & B. 647.

Weeks v.

(b) Richardson v. Williamson, L. R., 6 Q. B. 276. Propert, L. R., 8 C. P. 427. But where there is no misrepresentation of fact, but merely a mistaken representation of law, the agent will not be liable. Rashdall v. Ford, Eq. 750. Beattie v. Lord Ebury, 7 Ch. 778.

Affirmed L. R., 7 H. L. 102.

(e) Notes to Thomson v. Davenport, 2 Smith, L. C., 6th edition, at p. 344. Lindus v. Melrose, 3 H. & N. 177. Price v. Taylor

presenta

It has been already seen that no doubt exists as to For misrethe personal liability, in an action on the case for tions. deceit, of persons making false and fraudulent representations, whereby others are damnified (a). Nor is there any doubt as to the concurrent jurisdiction of courts of equity on a bill for indemnification (b).

Such a proceeding is analogous to the common law action for deceit; and this being so, no delay short of

5 H. & N. 540. The mere affixing of the company's seal to a promissory note will not exclude the personal liability of the maker. Dalton v. Marsh, L. R., 6 Q. B. 361.

(a) Gerhard v. Bates, 2 Ell. & Bl. 476. Supra, pp. 29, 30. (b) Henderson v. Lacon, 5 Eq. 249. Peek v. Gurney, 13 Eq. 79, L. R., 6 H. L. 377. The question of the liability of a person who makes or is party to an untrue representation which he does not know to be untrue, seems not to be quite clearly settled. See Chandelor v. Lopus, 1 Smith, L. C., 6th edition, p. 165, and notes there; and compare Attwood v. Small, 6 Cl. & Fin., 444, and the observations of V.-C. Wood, in Henderson v. Lacon, with those of Maule, J., in Evans v. Edmons, 13 C. B. 777, of the L.J.J. in Rawlins v. Wickham, 3 De G. & J., 304, and of Lord Cairns in Reese River Mining Co. v. Smith, L. R., 4 H. L. 64, though it may perhaps be said that his Lordship was only dealing with an application for rescission of the contract.

Stewart v. Austin, 3 Eq. 299 and Ship v. Croskill, 10 Eq. 73, were decided on the ground that mere excess of authority on the part of an agent does not constitute fraud.

Mere non-disclosure in a prospectus of material facts would seem to form no ground for an action in the nature of an action for misrepresentation, Peek v. Gurney, L. R., 6 H. L. 377, per Lord Cairns, at p. 403.

As to criminal liability of directors, and the criterion of criminal fraud, namely, intention or the mens rea, see Reg. v. Gurney, Finlason's Report, and especially pp. 215, 254; 24 & 25 Vict. c. 96, s. 84.

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