M.R. LORD ROMILLY. Feb. 12, 19.

In re THE HAFOD LEAD MINING COMPANY (LIMITED). Joint-Stock Company - Questionable Transfer--False Consideration.

A transfer, made from a desire on the part of the transferor to escape from liability, is not bad where the directors have no veto, even though money should have been paid to the transferee for taking the shares, and the transfer falsely states money to have been paid to the transferor.

This was an adjourned summons, which had been taken out by the official liquidator of the above company, which was being wound up, to have Thomas Slater placed on the list of contributories in respect of 100 shares, which had been transferred by him to one Cassin under circumstances which, as the liquidator alleged, rendered the transfer void.

In and previously to the month of Nobember, 1863, T. Slater was the holder of 100 shares in the above company. A call of 10s. per share had been made in the previous month of September, and the secretary had hinted at the possibility of the company being wound up. Slater became anxious about his position, and desirous of being quit of any further liability, and he had some discussions with one Mr. Cassin, an accountant, as to the position of the company and the course he ought to adopt. Cassin, at the request of Slater, made some investigations into the affairs of the company, and ultimately, on the 12th of November, Slater executed a transfer of the 100 shares to Cassin, the consideration expressed in the transfer being 251. paid from Cassin to Slater.

Cassin was at that time indebted to Slater in a sum of 2291. on a bond, and instead of paying 251. for the shares, as stated on the transfer, he received 57. in cash, and had 25l. written off his debt to Slater.

On the 27th of November the transfer was duly registered.

On the 4th of November, 1864, the company was ordered to be wound up; but no objection was made to the validity of the transfer for many months after.

The evidence as to the circumstances under which the transfer was executed was conflicting, Cassin stating that he took the transfer under pressure, and through fear of being sued by Slater for his debt; Slater, on the contrary, insisted that Cassin took the shares in the hope of being appointed official liquidator in the event of the company being wound up. It appeared that Cassin had asked for an indemnity, but that it had been refused. His Lordship considered that on the evidence there was nothing in the circumstances, apart from the mis-statement of the consideration, to entitle the liquidator to set aside the transfer.

It did not appear that, by the articles of association, the assent of the directors was necessary to a valid transfer being made.

Mr. Selwyn and Mr. Roxburgh, for the official liquidator, argued that Cassin was insolvent, that the whole transaction was fraudulent as against the other shareholders; the arrangement being, that Cassin was to be the legal owner, in order that better terms might, in the event of a winding-up, be made with the company; but that all liabilities were to be borne by Slater. They also insisted that the mis-statement of the consideration alone rendered the transfer void, being made to conceal the nature of the transaction from the directors. They cited

Budd's case, 30 Beav. 143; s. c. 31 Law J. Rep. (N.S.) Chanc. 4, as proving that the fact of the transfer being made so long before the winding-up was immaterial. They also cited

Hyam's case, 1 De Gex, F. & J. 75; s. c. 29 Law J. Rep. (N.S.) Chanc. 243. Lund's "s case, 27 Beav. 465; s. c. 28 Law J. Rep. (N.s.) Chanc. 628. Costello's case, 2 De Gex, F. & J. 302; s. c. 30 Law J. Rep. (N.S.) Chanc. 113. They urged that

De Pass's case, 4 De Gex & J. 544; s.c. 28 Law J. Rep. (N.S.) Chanc. 769, was the only one against them.

Mr. Southgate and Mr. Crossley, for Slater, opposed the application. They argued that even if, as between Cassin and Slater, the circumstances had been such as to entitle Cassin to set the transaction aside, yet that would not entitle the

liquidator to intervene; that there was, in fact, no ground for saying that the transaction was colourable, and that the mere fact that the transferor was anxious to get out of the company would not make the transfer bad. On the last point, they relied

on

Jessop's case, 2 De Gex & J. 638; s. c. 27 Law J. Rep. (N.s.) Chanc. 757. They also cited and commented on the authorities above referred to.

Mr. Selwyn, in reply.

The MASTER OF THE ROLLS (Feb. 19), after stating the facts, said: Unquestionably, where a shareholder has assigned his shares to a pauper, or a servant, to avoid paying his share of the debts of the company, so as to throw an increased liability on the other shareholders, I have always held the transaction void; but I do not think those cases prevent a bona fide sale or a bona fide giving of money to a person to take shares off one's hands. --His Lordship then went through the evidence in detail, and said there was nothing to induce him to suppose that Cassin was not able to pay any calls that might be made, and, after pointing out that no indemnity had been given to him by Slater, said that, apart from the false statement of the consideration, there was no ground for holding the transfer bad; that last was a very serious matter, and not explained on either side, and, no doubt, it would deceive the directors. Still, as he could not find that the directors here had, by the rules of the company, power to prevent a transfer to any particular transferee being registered, he could not hold that that fact alone, though very objectionable, was sufficient to induce the Court to set the transfer aside as fraudulent: it would be too much to lay down as a rule that, whenever the consideration was mis-stated, the transfer would be void. The summons would be dismissed; but Mr. Slater must pay his own costs.

This was a petition for the interim investment of a sum of 4,8407. paid for the purchase of some land by the Brighton and South Coast Railway Company, under the Lands' Clauses Consolidation Act. The land formed part of a freehold estate at Camberwell, devised by the will of Thomas Wootton to his wife for life or during widowhood, with remainders over.

The testator at the time of his death was seised in fee subject to a long building lease which had been granted in 1781, at a ground-rent (considerably less than a rack-rent) of 407. per annum, in consideration of a covenant by the lessee to lay out a certain sum of money in building on the estate. The devise in the will comprised all the testator's real estate, with a declaration that the trustees should not have any power to sell or dispose of the same.

The land was taken by the company subject to the lease, nearly twelve years of the term still remaining unexpired. The lessee's interest dealt with sepa

rately.

was

Some dispute having arisen between the parties as to the value of the reversion, the whole price had been assessed by a jury at 4,8407.

An apportionment had been made of the ground-rent, leaving 107. a year payable to the company in respect of the land taken by them.

The question now arose whether the petitioner, Mrs. Wootton, as tenant for life, was entitled to the whole income of the 4,8401. (which would amount to about

1607. per annum) or whether she was only entitled to receive 107. a year in respect of the rent apportioned on the land taken, the remaindermen contending that the excess of income should be accumulated for the benefit of the estate until the expiration of the lease.

Mr. Speed, for the tenant for life.-The price given by the company exactly represents the value of that which was devised by the testator, namely, his estate and interest in the land subject to the lease, not merely the rent reserved by the lease. Accordingly the petitioner is entitled to the whole income arising from the fund

Re Steward's Estate, 1 Drew. 636.

Mr. Pitcairn, for the remaindermen.— The tenant for life is entitled during the lease to her share of the rent, and no more. Subject to that, the whole estate is in the remaindermen. The declaration in the will shews the intention of the testator that the estate should not be enjoyed to the prejudice of those entitled in remainder. The sale of the land ought not to affect the position of the parties. The purchase-money is the price of the present rent and the future reversion. The comes within the 74th section of the act

case

Morgan's Chancery Acts, p. 37, and

cases there cited. Compare Jeffreys v. Conner, 28 Beav. 328. Re Money's Trusts, 2 Drew. & Sm. 94; s. c. 31 Law J. Rep. (N.S.) Chanc.

496.

Mr. J. H. Taylor, for the company, submitted to take the usual order to pay the costs of the application, "except such, if any, as were occasioned by litigation between adverse claimants"

Re Cant's Estate, 1 De Gex, F. & J. 153.

Mr. Speed, in reply.-The provisions of the 74th section apply to a tenant for life of the reversion, a contingent interest which may never be enjoyed. Here the life estate is immediate. Jeffreys v. Conner was a case of specifically devised leaseholds. The respondents have no right to increase

the value of the reversion at the expense of the tenant for life.

KINDERSLEY, V.C. (Feb. 24), after stating the case, said-In the first place, I must assume that the jury put a fair and proper value on what they assessed, and it must also be assumed that the value of the lessee's interest and the reversion together make up the whole value of the fee simple in possession. Now it is clear that if a rack-rent had been payable by the lessee, no question would have arisen; the tenant for life would have been entitled to the whole income and it is equally clear that the remaindermen must be entitled at the end of the term to the whole value of the fee simple in possession. But then, why should this lady have a larger income than she had before the land was taken? She was not in possession of the property, and there has been no damage to her from severance; she is simply deprived of that portion of the rent; and, of course, she ought to be compensated to that extent, but I see no reason for her receiving more. Looking at the interest of the remaindermen in the reversion, their right is at the expiration of the lease, whether the tenant for life shall be living or not, to have the fund, then representing the purchase-money of the land, equal in value to the value of the fee simple in possession. It is clear that if the tenant for life takes the whole income, there will not be such a fund. I think, therefore, that the rule of equity applicable to this case is that which has been usually adopted in cases of ecclesiastical property held under beneficial leases. The tenant for life is entitled to 107. a year out of the income arising from this fund. The income in excess must be accumulated until the expiration of the lease for the benefit of the estate.

Solicitors-Messrs. Wootton & Son, for the estate; Messrs. Faithfull, Son & Coode, for the railway company.

Company Contributory--Executor.

Certain reserved shares in a company were allotted in respect of the original shares, and the executors of a deceased member accepted new shares allotted in respect of their testator's shares, though they had no power 80 to do under his will:-Held (reversing the decision of Kindersley, V.C.), that the executors must be put upon the list of contributories in their individual capacity in respect of the new shares. Even assuming that under the deed of settlement the executors had no right to acquire or hold the shares in their own right, still their personal liability would follow on acceptance of the shares unless the contract were set aside.

These were appeals from decisions of Vice Chancellor Kindersley, which are reported ante, p. 75, where the facts are fully stated. The appellant in each case was the official liquidator of the bank, who sought to have Richard Dobson put upon the list of contributories in his individual capacity in respect of the two new shares taken by him; and to have Sarah Fearnside and John Dean put upon the same list in their individual capacities in respect of the two new shares taken by them.

Mr. Glasse and Mr. Cotton were for the appellant.

Mr. Baily and Mr. Wickens were for the respondents in both cases.

The arguments and cited authorities were the same as in Dobson's case in the Court below.

LORD JUSTICE TURNER (after stating the facts of the cases) said—I take this opportunity of observing that the course of dealing with companies' cases of late has been very satisfactory, the cases being brought before the Court upon admissions which contain a summary of the facts without there being that long discussion upon them which we used to have on the affidavits. These cases, as Vice Chancellor Kindersley NEW SERIES, 35.-CHANC.

has justly observed, are very peculiar in their circumstances; but I think they may well be decided upon principle. It will be convenient, first, to deal with the case of S. Fearnside and J. Dean. With all possible respect to the Vice Chancellor, from whose judgment we have but rarely occasion to differ, I have been unable to satisfy myself that the order putting these persons upon the list of contributories as executors can be correct. The consequence of these persons being so put upon that list must, as it seems to me, be to render the estate of their testator liable in respect of their shares. So long as they stand upon the list as executors it would not, as I apprehend, be competent to them to dispute the liability of their testator's estate in any proceedings which the official liquidator may institute against them. But so far as anything is clear in this case, it is in my opinion quite clear that the estate of the testator is in no way liable in respect of these shares.

It is not, I think, any answer to this view of the case that these persons may be bound to indemnify the testator's estate, for it may not be in their power to do so; and the question whether this order is right or not cannot depend upon their capacity in this respect. If, therefore, these persons ought not to be put upon the list in their individual character, they ought not, as it seems to me, to be put upon the list at all.

Ought they, then, to be put upon the list in their individual character? In my opinion, again speaking with all deference and respect to the Vice Chancellor, they ought. The character in which persons ought to stand upon a list of contributories depended, as I think, until the passing of the late act, upon the relation in which they stood to other contributories; and although the late act may have extended it, it does not seem to me to have otherwise altered the principle upon which the list is to be made up. In what relation, then, did these persons stand to the other contributories of this company when the order for winding up the company was made? Plainly, as it seems to me, upon the footing of equal liability with those of other contributories. It is true that they acquired the shares as executors; but the question is, not in what character

2 R

they acquired the shares, but upon what terms, as between themselves and the other contributories, they held them when so acquired; and I cannot go the length of holding that because a man acquires a right to shares in a company or partnership, as executor, he will be entitled to hold them upon any other than the ordinary terms. An executor may carry on a trade as executor; but he is not the less personally liable for all the debts which he may contract in the trade; and so I take it to be in the case of executors entering into partnership, both as to their liability to creditors, and as to the relation in which they stand towards their partners. To put a case strictly analogous to the present: three persons enter into partnership; they agree that each shall take one-fourth of the profits, and that the remaining fourth shall not be divided, but may at any future time be taken by any of them as they may afterwards agree; and, further, that the partnership shall not be determined by the death of any of them. One of the partners dies; the surviving partners offer the reserved share to his executors, and the executors, without any authority under the will to do so, accept the share: could it be contended that, as between them and the surviving partners, they would be liable in respect of this share only to the extent of the assets of the deceased partner? I think, very clearly, not; and so, I think, it must be in the present case. I do not mean to say that the liability might not be so restricted by express provisions, or that in this case it might not have been so restricted; but I think that something much more strong than is to be found in this case would be necessary so to restrict it. It was argued in support of this order that these shares were a mere accretion to the

original shares, to be held as the original shares were held; and that to make these executors personally liable in respect of them would be to alter the contract upon which the shares were taken. But if, as has seemed to me to be the case, these shares, although acquired by these persons as executors, ought to be taken to be held by them in their own right, this argument does not affect the case. It was further argued, in support of the order, that these shares, being less in number than five, could

not be held by these executors in their own right, by reason of the seventh clause of the deed, which provides that nobody shall hold less than five shares in his own right. But this argument again points to the right to acquire the shares, and not to the consequences resulting from the acquisition of them. The fourteenth and eighteenth articles of the deed were also relied upon to shew that these persons never became members of the company; but there was a complete contract by them to take the shares, as it was held in Barrett's case (1); and if it was necessary to decide the question, the fourteenth article of the deed seems to me to apply only to shares devolving upon executors; and the eighteenth article, whatever its effect may be as to creating a right to forfeit the shares, or neglect or refusal to execute the deed, does not, as I think, prevent the acquisition of the shares. Assuming that these executors acquired no title to hold the shares in their own right, or that they were misled into supposing they could hold them as executors, these are facts which would go no further than to give them a right to set aside the purchase on taking proper proceedings for that purpose; but no such proceedings have been taken, and we can only deal with the case as it stands. I desire, however, not to be understood as intending to give the least encouragement to any such proceedings.

The observations I have made in the case of Fearnside and Dean apply no less to the case of Dobson; and in my opinion, therefore, both these orders ought to be discharged, and both these parties must be put upon the list in their individual character; but having regard to the opinion of the Vice Chancellor, and to these being cases, as we understand them to be, selected for the purpose of settling the general principle, I think we may properly allow the costs of the appeal to be paid out of the estate.

LORD JUSTICE KNIGHT BRUCE.-I agree.