Joint-Stock Company-7 & 8 Vict. c. 110. -Powers-Lease of the Undertaking. A company, established for the preparation and sale of porcelain clay, carried on business for several years but without success; their resources having become nearly exhausted, and an entire re-construction of their works and alteration in their mode of manufacture being found necessary, a resolution was passed, for winding up the company. Before the resolution was confirmed, a proposition was made, and finally accepted by a majority of more than twothirds of the shareholders, for leasing their works upon terms apparently advantageous. The deed of settlement empowered the directors, with the sanction of two-thirds of the votes recorded at an extraordinary general meeting, to do any act which the whole body of shareholders, all consenting, could do. Upon a bill filed by a dissentient shareholder to set aside the lease as being inconsistent with the purpose for which the company had been incorporated, and as having been granted ultra vires-Held, that the lease was good, as being a lawful means of making the most of the assets of the company, and that the granting of it was not ultra vires. The object of this suit was to set aside a lease of the company's works which had been granted under the circumstances stated below. The plaintiffs in the suit were the executors of W. Featherstonhaugh, Esq., who was at the time of his death, and had been for some years previously, the registered holder of 800 shares in the company of the class termed "deferred" shares. The Lee Moor Porcelain Clay Company was established in 1852, and registered under the act, 7 & 8 Vict. c. 110. The deed of settlement provided, that the business of the company should, "in the first instance, be the working, preparation and sale of porcelain clay and its adjuncts or incidental products," with power in certain events to include mining operations, "but so that the preparation and sale of porcelain clay should always bonâ fide continue the main or principal business of the company." The capital was to consist of 100,000l., divided into 4,000 shares of 25l. each, of which 80,000l. should represent the value of the then existing leases, works, plant, machinery, and other advantages secured to the company under their deed, the remaining 20,000l. to be raised by the issue of shares. The shares representing the 80,000l. were to be entitled to a preferential dividend of 67. per cent. in priority to the payment of any dividend upon the remain ing or "deferred" shares. The property of the company was held under lease for a term of ninety-nine years, from the 1st of January, 1835, and provision was made for the continuance of the company during that period, subject to its earlier dissolution, "upon a resolution to that effect being carried at two extraordinary general meetings by a majority of twothirds of the recorded votes." In March, 1854, a dividend was declared of 6. per cent. on the preference shares, and . per cent. on the deferred shares; no further dividend was ever afterwards declared by the company. In 1861, in consequence of the death of Mr. Phillips, under whose management the operations had been carried on from their commencement up to that time, the directors took upon themselves the management of the business, but without any success: one chief cause of failure being the position of the works at the top of a hill, which entailed great expense in carting the clay. It was found that to continue the business with any prospect of success, it would be necessary not only to alter the whole mode of manufacture, but also to construct new works in a more advantageous site. The. resources of the company were at the same time nearly exhausted; the lease under which their property was held was burdened with a dead rent of nearly 3007. per annum, and a liability to forfeiture if the works were not carried on. Considerable expenditure had been incurred in the purchase of some adjoining brickworks and leasehold premises, belonging to the estate of Mr. Phillips, which had always been used in connexion with the business, and a debt of 10,0007. had been contracted, while there remained only 2,000l. not called up on the original shares, and 17,000l. on 800 new 67. per cent. preference shares, which had been recently issued and taken up principally by the directors. Under these circumstances, in August, 1862, a notice was issued for two extraordinary general meetings, to be held on the 11th of September and on the 14th of October, to consider the propriety of winding up the company. At the first of these meetings a resolution was passed for dissolving and winding up the company; but before the day appointed for the second meeting the directors received an intimation that an arrangement might be entered into for leasing the works on favourable terms; accordingly, on the 14th of October, the question of dissolution was adjourned, and the directors immediately issued an advertisement to the public stating the terms on which a lease of the works would be granted. In answer to this advertisement a proposal was tendered in behalf of Mrs. Martin, and accepted by the directors, subject to the confirmation of the shareholders. Due notice was then given that at an extraordinary general meeting to be held on the 17th of December, 1862, a resolution would be proposed purporting to authorize the directors to grant a lease of the works of the company to Mrs. Martin for twentyone years, at a net rent of 8001. for the first seven years, 1,000l. for the second seven years, and 1,2007. for the third seven years. The lease was to comprise the whole of the company's property, the lessee undertaking to erect the new works, and at the expiration of the term to deliver up the business to the company in an available condition, and in the mean time to indemnify the company against all burdens and liabilities to which they were subject under their original lease. Mr. Featherstonhaugh, upon the receipt of the notice, wrote to the directors, protesting against the letting of the works; but no attention was paid by them to his protest. The resolution was put to the meeting and unanimously passed by those present. Mr. Featherstonhaugh, on the 20th of February, 1863, wrote to the directors, threatening to file a bill in Chancery for an injunction against granting the lease, to which the directors replied, that the lease had already been executed by them on the 12th of February. Mr. Featherstonhaugh then gave instructions for the preparation of a bill to set aside the lease, but died before the filing of the bill. The bill, which was subsequently filed by his executors, in August, 1863, charged that the lease was inconsistent with the objects for which the company was formed, and that under the deed of settlement no general meeting, ordinary or extraordinary, could have power to authorize the directors to deal with the business of the company in a manner inconsistent with its objects as therein defined. The bill also alleged that from the terms of the lease it was impossible that the deferred shareholders could ever receive any interest or dividend upon their shares during the whole period for which the lease was granted, while their liabilities would continue, and the bed of clay, which the company was formed to work, might be consumed, and must at any rate be much diminished. Other charges, not material to the case, were made as to the state of the finances of the company and improper expenditure on the part of the directors. The clause in the deed of settlement, under which the directors contended that they were empowered to grant the lease, was as follows: ..... "It shall be competent for any extraordinary general meeting, by a majority of two-thirds in number of the whole number of votes recorded, . . . . . so far as the rules of law or equity will permit, to amend, add to, or repeal all or any of the clauses, provisions or stipulations herein contained, and also to make, do, or exercise, and to bind the company and every shareholder thereof to any act, deed, matter or thing whatsoever which the company, by virtue of its corporate capacity or otherwise, or all the shareholders thereof together, is or would be enabled to make, do or execute, if the consent of every shareholder were given thereto." Mr. Osborne and Mr. Macnaghten, for the plaintiffs. Mr. Rolt, Mr. Waley and Mr. Druce, for the company. Mr. Giffard and Mr. E. Charles, for the lessees. The nature of the arguments adduced will sufficiently appear from the judgment of the Vice Chancellor. The following cases were cited: Natusch v. Irving, Gow on Partner- Colman v. the Eastern Counties Rail- Whalley v. Whalley, 2 De Gex, F. & Also, on the point of acquiescence and expenditure by the lessees, The Master of Clare Hall v. Harding, 6 Hare, 273, 292; s. c. 17 Law J. Rep. (N.S.) Chanc. 301. Rennie v. Young, 2 De Gex & Jo. 136; s. c. 27 Law J. Rep. (N.s.) Chanc. 753. Mr. Osborne, in reply. WOOD, V.C.-It seems to me that I should be controlling improperly the effect of this deed if I did not allow the company to do that act which they have, through the medium of their directors, done. The question is whether, under the unusually large power conferred upon a meeting of the shareholders by this deed (which is not by any means an unreasonable power), the company is not able to do that which they may deem best with reference to their own assets. It was put very ably by Mr. Waley in this way, that the company having taken certain powers with reference to amending, altering and varying the provisions in the deed, he would concede that all those powers tended to the altering, varying or amending anything that might be requisite for the immediate carrying on of the business which was in hand; but then a crisis might come, in which it would be necessary to have larger powers with reference to the administration of the property of the concern than could be given under any ordinary shareholders' deed, it being well known that under an ordinary shareholders' deed the only thing you can do when difficulties arise, is to make a provision (if there is no power of sale contained in the deed) for the dissolution of the company and winding up their affairs. Then Mr. Waley put this question, whether anything could be conceived as a more natural interpretation of this clause than to say that it was with reference to dealing with the assets in cases of emergency that a power of such a large description was inserted. Then this emergency has arisen, that it is considered by a large majority of shareholders, by everybody in fact, except the plaintiffs' testator, that a dissolution must take place. There were remonstrances by the testator in that respect, but everybody came to that opinion, and indeed they passed a resolution at a meeting of the shareholders to that effect, that a dissolution should take place. That resolution had to be confirmed by a second general meeting. In the interval a proposal came from some one more sanguine than the shareholders, saying, "I am prepared to erect new works. I will work with your assets for twenty-one years, and deliver up the works at the end of that time in an available condition, with better machinery, better arranged and better placed." Now, of course, this power, although very large, would be controlled by the general scope and purport of the deed. Mr. Osborne says, that by the act the company must tell the legislature what it is incorporated for, and it cannot deviate from its purpose without having a supplemental deed properly executed and registered. He says, upon the authorities, beginning with Natusch v. Irving downwards, we have the same state of law, namely, that persons having associated and bound themselves together for one purpose, cannot, without the consent of every individual proprietor, bind themselves in an engagement to carry on some totally different object. Now, although that class of decisions might not reach the whole of the case contended for, it is not necessary for this decision that Í should go so far as to say that this clause would justify the passing by two-thirds of the shareholders of such a resolution as to carry on a gold-mine in South America or any purpose utterly unconnected with the scope of this deed. But I think there is a construction of the clause perfectly consistent with the decided cases and with the act of parliament, and which will authorize me so far to avail myself of the grounds of the decision of the House of Lords in Simpson v. the Westminster Palace Hotel Company as to say that, for the purposes of this case, the test may well be, has the company, either on the one hand abandoned, or on the other hand exceeded, its purposes? Those were the two cases put by Lord Campbell. Now they cannot, I think, be said to have abandoned their purpose. They take a rent for their property instead of working it themselves. At the end of twenty-one years they are to have the whole of the property back, and as it appeared to them (and they are the sole judges in that respect), they will have it back in a more profitable condition. On the other hand, no one can contend that parting with their property for a certain time was exceeding their powers. I apprehend that it is perfectly competent for a meeting to say, China clay is in a very depressed state; the market is very bad; and we agree not to work it for two or three years. That would be entirely within their functions. This being so, I have only to look at the emergency that has arisen. Perhaps I am hardly justified in doing so, if I am right in my construction, that it is for the company to judge what is best in the emergency; but with reference to what has been suggested as giving a clue to the interpretation of the clause, I think it right to say a few words. Mr. Osborne says, the construction of the company renders it necessary for the Court to hold its hand in this matter; since it tends to give an undue advantage to the preference shareholders over the deferred shareholders, the scheme being that the deferred shareholders can take nothing until 61. per cent. has been paid to the preference shareholders; and it happening at the present time that there is a decided majority-a majority of two-thirds of the preference shareholders, it will be a necessary consequence of such a construction of the deed as is asked for by the defendants, that the interests of the deferred shareholders will be put entirely at the mercy of the preference shareholders. The first answer to this argument, I apprehend, would be, that the persons who entered into these engagements knew exactly the constitution of the company, and entered into the deed with this clause before them, and were willing to trust to two-thirds of the shareholders at a general meeting all the authorities and powers thereby conferred, so that the Court would not be justified in saying, because an act done incidentally may give a benefit to the preference at the expense of the deferred shareholders, that therefore there is a fraudulent or improper exercise of the power; and I take it that the construction of this clause is not in any way altered by the circumstance on the face of the deed, that there are two distinct classes of shareholders. His Honour then referred in detail to the circumstances above stated, under which the determination to grant the lease had been come to by the directors, and continued his judgment:-There can be no doubt that this was an afterthought. Their first intention was to wind up the company, and the fact that the conclusion to wind up was come to before the lease was ever thought about is important as proving the entire bona fides of the whole transaction: as a matter of fact, the lease is clearly an advantageous arrangement, and will probably turn the business of the company from a totally discredited concern into a valuable property. If, for instance, as Mr. Waley has argued, such a proposition had been made on behalf of infants in the case of administering a testator's assets, no doubt the Court would have held it a very proper and reasonable arrangement to make. Then, as to the argument which has been advanced, that if the company had realized the assets there might have been something coming to the deferred shareholders: whereas, by the very terms of the lease, it is impossible that they should ever receive any dividend, I think that even if it had been clearly made out that there would have been any assets to divide, this circumstance is a mere incident in the case which amounts to nothing, unless a fraudulent intention can be shewn, and such an intention is hardly even alleged in the present case. It is not necessary for the purpose of this decision to enter at all into the question of laches and acquiescence, which has been urged against the plaintiffs on behalf of the lessees, although in that respect I cannot think that the plaintiffs have come into equity with a very favourable case in a matter like this affecting mining property. Bill dismissed, with costs. ROMILLY, M.R. Nov. 16, 17, 24. GOLDSMID v. THE TUNBRIDGE WELLS IMPROVEMENT COMMISSIONERS. Nuisance Sewage Increasing Pollution. A brook, into which a considerable part of the sewage of Tunbridge Wells was discharged, flowed through the plaintiff's land, entering it at a distance of about 1 miles from the town, and leaving it about 4 miles from the town. The evidence shewed that the water of the brook had been at some time (not clearly defined) fit to drink; that it was no longer so; that it was getting gradually worse, and that the deterioration was owing to the sewage from Tunbridge Wells: -Held, that the plaintiff was entitled to an injunction to restrain the defendants, who had the entire control of the sewage of Tunbridge Wells, from allowing any sewage to flow into the brook so as injuriously to affect the water on the plaintiff's land, although the sewage there did not as yet amount to an absolute nuisance. The plaintiff in this case was the tenant for life in possession of a residential estate called Somerhill Park, near Tunbridge Wells. The estate is traversed by a brook, called the Calverley Brook, which, taking its rise above Tunbridge Wells, flows through the town, and thence down a considerable decline to Somerhill Park. The brook in its course through the town is converted into a common sewer, carrying off a considerable part of the town's drainage, and it continues in the form of a covered sewer for some distance beyond the town. From the spot at which it emerges from the sewer (referred to as the mouth of the sewer) it flows down a distance of about a mile and a half through an estate called Colebrook Park, receiving certain small tributary brooks by the way, to the plaintiff's property; shortly after reaching which it passes a mill called Broke's Mill, which it supplies with water power; it then leaves the plaintiff's property, but soon re-enters it, and flows past a mill called Bourne's Mill, on to a lake or ornamental water of about 11 acres, situate in Somerhill Park, and distant as the stream flows about 3 miles from Tunbridge Wells. From the lake it flows on to a mill, called the Priory Mill, about half a mile below the lake; after which it finally leaves the plaintiff's estate. The brook formerly flowed through a lake or pond in Colebrook Park; but the proprietor had lately diverted it from his lake and used it for irrigating certain meadows. The defendants were a board constituted by a local act, passed in 1846 (9 & 10 Vict. c. cccxlix), entitled 'An Act for paving, watching, lighting, cleansing and otherwise improving the town of Tunbridge Wells.' By this act (which empowered the defendants to sue and be sued in the name either of any one of themselves or of their clerk) all sewers, drains and watercourses within the limits of the act, and all dirt and rubbish to be collected from the streets, sewers and watercourses, were vested in the defendants, with full control over the watering, cleansing and draining of the town, with power to sink wells and construct waterworks, and lay down common sewers and drains, and to alter existing drains, and to inquire into and remove nuisances. The limits of the defendants' jurisdiction did not include any part of the Colebrook estate or of the Somerhill estate. The bill alleged that Tunbridge Wells had greatly increased of late years, and was still increasing; that much greater attention had been paid to sanitary matters within the last six or seven years than formerly; that the drainage of the town had been greatly improved, and that consequently the amount of sewage matter discharged from the town into the main drains and thence, as to a considerable part thereof, into the Calverley Brook, had greatly in |