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it was incumbent on the plaintiff to prove that the directors of that company had authority to bind the other members, by drawing and accepting bills of exchange; and that the plaintiff not having produced the deed of copartnership, nor given any evidence to shew that it was necessary for the purpose of carrying on the business of that mining company; or usual for other mining companies to draw or accept hills of exchange, there was no evidence of such an authority to draw or accept any bills, and still less to draw or accept in this form, which in effect were promissory notes. Dickinson v. Valpy, 10 B. & C. 128; 5 M. & R. 126.

down by the defendant company, the work to be paid for by instalments, the first instalment to be paid when the order was given, and the subsequent instalments as the work was certified by B., the engineer of the plaintiff company. The option was exercised, and on the order being given, the first instalment of 40,000l. was paid to the defendant company, and 6007. commission thereon was also paid by the plaintiff company to B. The plaintiff company afterwards discovered that B. had a secret sub-contract with the defendant company that he should lay the cable himself:-Held, that the plaintiff company was entitled to have the contract set aside, and to have the two sums of 40,000l. and 6007. returned to them. Panama and South Pacific Telegraph Company v. Indiarubber, Gutta Percha and Telegraph Works Company, 10 L. R., Ch. 515; 45 L. J., Ch. 121; 32 L. T. 517; 23 W. R. 583.

f. Effect of Business Ceasing.

Non-payment not Barring Right of Purchaser.]


"the amount

No Implied Contract to Carry on Business.]The plaintiff sold a concession, supposed to be valuable, to a company, and, by the agreement for sale, which was sanctioned by the private act incorporating the company, it was provided that he should be paid partly in preference-By a deed executed in 1857, in pursuance of a shares and partly by a percentage varying with preliminary agreement and an act of parliament the surplus available for dividends :-Held, that confirming the same, certain waterworks and prothere was no implied contract on the part of the perty were transferred by an old company to a company with the plaintiff to carry on the busi-new company, upon certain terms, under which ness for which they were incorporated. Hope v. the latter was to pay to the former a rent equal Gibbs, 47 L. J., Ch. 82; 26 W. R. 72. to interest upon the share capital of the former at 5 per cent., with a clause for reducing the Guarantee of Dividends.]-In 1872 a company rate of interest to 4 per cent. in certain events. was formed to purchase a going concern consist- The deed contained a proviso that, if the transing of railway tyre and steam roller works, and ferees, desirous of becoming absolute owners of to carry on all or any of the businesses of the the works, "should, on or before any 25th day of The purchase was completed, the ven- December, after having given to the old company dor accepting part of the purchase-money in fully six calendar months' previous notice of their paid-up shares in the company. By an agree- desire to avail themselves of the option thereby ment made between the vendor and the promoter given, pay unto the old company of the company, and recited in the articles of of their share capital, the party making such association, the vendor guaranteed to the share-payment should thereupon become entitled to holders for the time being a dividend for five the works freed from the rent thereby reserved. years from the date of the formation of the com- Notice to purchase was given in due course, but pany upon the capital from time to time called the money was not paid at the time specified in up after the rate of 101. per cent. per annum, and the notice-Held, that the right to purchase that, if in any one of the five years the profits had not been lost by the non-payment of the should prove insufficient to pay such dividend, money. Ward v. Wolverhampton Waterworks he would pay the amount required to make up Company, 13 L. R., Eq. 243; 41 L. J., Ch. 308 ; such dividend. The business was carried on at 25 L. T. 487; 20 W. R. 85. a loss from the first, and in 1874 the directors, upon whom the articles of association conferred the widest powers of management, shut up the railway tyre department, which comprised fourfifths of the whole concern, and which they had carried on at a very considerable loss. In 1875 there were no profits to divide, and the company commenced an action against the vendor to enforce payment of an amount sufficient to pay a dividend of 107. per cent. upon the called-up capital in accordance with his guarantee :Held, that the discontinuance by the company of one branch of its business did not discharge the vendor from his guarantee, and that the company was entitled to judgment for the sum claimed, together with interest and costs. Brown & Company v. Brown, 36 L. T. 272-C. A. Affirming 35 L. T. 34.

g. Rescission of.

Secret Sub-Contract.]-The plaintiff company entered into a contract with the defendant company, which gave the plaintiff company the option of having a telegraph cable made and laid

h. Where Director is Interested. There can be no remedy against a company registered under 7 & 8 Vict. c. 110, s. 29, on any contract, in which a director of the company was a party, and in which he was interested, unless the provisions of s. 29 were strictly observed. Ernest v. Nicholls, 6 H. L. Cas. 401; 3 Jur., N. S. 919.

A director of a company registered under 19 & 20 Vict. c. 47, cannot make a binding contract for profit to himself in a transaction with the company. Hill, Ex parte, Cardiff Preserved Coal and Coke Company, In re, 32 L. J., Ch. 154; 7 L. T. 656.

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i. When procured by fraud. Misrepresentation.] - Where a person has been, by the fraudulent misrepresentations of directors, or by their fraudulent concealment of facts, drawn into a contract to purchase shares in a company, the directors cannot enforce the contract against him, but he may rescind it.


But he must do so within a reasonable time. | specific performance by the defendant of an Oakes v. Turquand, 2 L. R., H. L. Cas. 325; agreement which he had entered into to take 36 L. J., Ch. 949; 16 L. T. 808; 15 W. R. 2,000 107. shares in the company, and pay for them in such numbers and at such times as should be required for the purposes of the company. His name had been placed on the register of shareholders, and a call had been made upon him which he refused to pay. Contemporaneously with the agreement to take the shares the board of directors had agreed with the defendant to pay him 4,000l. in consideration of services rendered by him to the company. This sum was to be paid twelve months after the shares should have been paid for in full. The directors afterwards called on the defendant to pay up the full amount of 1,000 of his shares, which he refused to do. The defendant alleged that the two agreements formed really only one contract for the issue of the shares at a discount; that he had not rendered any services to the company; and that the contract was divided into two parts for the express purpose of evading a provision of the company's articles of association which prohibited the directors from issuing shares at a price below par without the consent of a general meeting. No such consent had been given to the contract with the defendant :-Held, that, as the defendant had acted in collusion with the directors to defraud the company, he could not be heard to set up this fraud for the purpose of making invalid the agreement, which was ex facie valid, to take and pay for the shares. 1b.

But a shareholder whose name is upon the register of shareholders when the order for winding up is made, cannot, as against the creditors of the company, defend himself against his primâ facie liability to contribute, by alleging and proving that he was induced, by the fraud of the company, to become a shareholder. Ib.

But when a person has been drawn into a contract to purchase shares belonging to a company by fraudulent misrepresentations by the directors, and the directors seek to enforce that contract, or the person who has been deceived institutes a suit against the company to rescind the contract, on the ground of fraud, the purchaser cannot be held to his contract, because a company cannot retain any benefit which it has obtained through the fraud of their agents.


Cheque Drawn by Directors.]-A., B. and C., three directors of a railway company, in fraud of the company, drew a cheque upon the company's bankers in favour of one of their body. This cheque, though bearing the stamp usually impressed upon documents issued by the company, and countersigned by the secretary, did not upon the face of it purport to be drawn on behalf of the company, nor did the drawers describe themselves therein as directors :-Held, that the company was not liable for the amount to a bonâ fide holder for value. Serrell v. Derbyshire, &c. Railway Company, 9 C. B. 811; 19 L. J., C. P.


Arrangement by Shareholders.] -A shareholder in a gold mining company in Victoria, took proceedings to obtain possession of a claim belonging to the company for a forfeiture under the mining act of the colony. By an agreement with a majority of the shareholders of the company, in consideration of their not opposing his proceedings to enforce a forfeiture, he guaranteed them in the event of his success the full benefit of their shares :-Held, that such an arrangement was one that a court of equity could not allow to stand. Smith v. Harrison or Bank of Australia, 41 L. J., P. C. 34; 27 L. T. 188; 20 W. R. 594.

Fraud of Agent.]-An action of deceit may be maintained against a company, whether incorporated or not incorporated, in respect of the fraud of its agents. Mackay v. Commercial Bank of New Brunswick, 5 L. R., P. C. 394; 43 L. J., P. C. 31; 30 L. T. 180; 22 W. R. 473.

In an action of deceit, whether against a person or a company, the fraud of the agent may be treated for the purposes of pleading as a fraud of the principal. Ib.

Party cannot set up his own Fraud.]-A person entering into a contract with a company cannot set up the fraud of the directors to which he was a party against the company. Odessa Tramways Company v. Mendel, 3 Ch. D. 235; 47 L. J., Ch. 505; 38 L. T. 731; 26 W. R. 887 -C. A.

An action was brought by a company for the

Specific performance of part.]—Held. also, that as the parties had contemplated a piecemeal performance of the one agreement, the court could compel the performance of a part. Ib.

Held, also, that, in the absence of any proof of mala fides, the resolution of the directors to call up the amount of the shares was conclusive evidence that the money was required for the purposes of the company. Ib.

Breach of Warranty.] Directors acting on behalf of a company impliedly warrant their authority like other agents; and therefore where directors stated, without an intention to deceive, that they had appointed an agent for their company with certain powers, and they had not, in fact, authority to give those powers :-Held, that evidence of an actual warranty by them of their authority to give the powers was unnecessary. Colonial Bank of Australasia v. Cherry, 3 L. R., P. C. 24; 38 L. J., P. C. 49; 21 L. T. 356; 17 W. R. 1031.

By a deed of settlement of a company, its business was declared to be "to build, or purchase, and own or hire iron steam-vessels, and to use or let upon hire the same for the purpose of transport of coals, or other merchandize, from any port or ports of the United Kingdom, or elsewhere, to any other port or ports of the United Kingdom, or elsewhere;" and the powers of the directors were defined to be, "the building, or purchasing or hiring, of such steam-vessels as they should see fit; the general conduct and management of the business of the company, and the controlling, managing and regulating, in all other respects, except as by these presents otherwise provided, of all matters relating to the company, and the affairs thereof." The directors, thinking it expedient to sell all the vessels

belonging to the company, employed shipbrokers, to procure a purchaser. They accordingly negotiated a sale of the vessels upon the terms fixed by the directors, with C.; the negotiation, however, went off, upon an objection urged by C.'s solicitor, that the directors had no power to sell the whole of the vessels, except in the event of the winding up of the company, with the consent of the shareholders, which had not been obtained :-Held, that the brokers were not entitled to maintain an action against the directors upon an implied warranty, that they had authority to sell, which, in point of fact, they had not. Wilson v. Miers, 10 C. B., N. S. 348;

3 L. T. 780.

j. Ratification and Adoption of. By Company.]-A. and B. agreed with C., on behalf of a company intended to be formed, that A. and B. should sell and the company buy a certain business, and it was a term of the agreement that sixty guineas should be paid to J. and P., solicitors, for their expenses and charges in registering the company. The memorandum of association adopted this agreement, and the directors subsequently ratified it. An order having been made for winding up the company, J. and P. claimed to prove for the sixty guineas: -Held, that the claim must be disallowed, for that the contract between A. and B. and C. having been entered into before the company was in existence, could not by mere ratification be made binding on the company, and that a contract between A. and B. and the company, to which J. and P. were in no way parties, that the company should pay money to J. and P., would not entitle J. and P. to proceed against the company. Gregory v. Williams (3 Mer. 582) explained. Empress Engineering Company, In re, 16 Ch. D. 125; 43 L. T. 742; 29 W. R. 342-C. A. See also cases ante, cols. 338, 339.

By Directors.]-When the directors of a company have power to make a contract, they must necessarily have the power also of ratifying a contract to the like effect made on their behalf; and, having ratified it, they can the less repudiate it where they have given possession under the contract. Wilson v. West Hartlepool Harbour and Railway Company, 2 De. G., J. & S. 475; 34 L. J., Ch. 241; 11 Jur., N. S. 124; 11 L. T. 692; 13 W. R. 361.

The 8 & 9 Vict. c. 16, s. 97, which points out in what manner the powers of directors to contract may be lawfully exercised, while enacting that all contracts made according to its provisions shall be binding, does not enact that contracts otherwise entered into shall not be binding; the act being affirmative, it takes away none of the existing rights and remedies, and does not deprive a court of equity of any equity or jurisdiction which it previously possessed. Ib.

A. having by letters entered into a contract with the manager of a company for the purchase of lands, a branch line of railway was in accordance with the terms laid down by the company's servants, plant and machinery were removed to the purchased lands by the company, and A. was let into possession:- Held, that although the manager had at the outset no authority to make the contract at all, these subsequent acts of the directors had made it binding upon them. Ib.

Agreement ultra vires.]-A deed of settlement of an electric telegraph company, incorporated by royal charter, empowered the directors to manage the affairs of the company, and to exercise all the powers of the company at large; but contracts, the consideration for which did not exceed 501., were required to be signed by at least three individual directors, or sealed with the seal of the company under the authority of a special meeting, or a resolution of the directors. The chairman of the company made a parol agreement with the plaintiff, by which he was to be allowed 50l. per cent. on messages sent and received through the company's lines, and with his own hand entered a memorandum of the agreement in the minute-book of the company The agreement was afterwards referred to and recognized in a correspondence between the plaintiff and the secretary of the company, and accounts were rendered and payments received by the plaintiff under the agreement by cheques; but there had not been a contract signed by three directors, nor under the seal of the company :Held, that assuming the agreement to be ultra vires of the chairman, it had been ratified and adopted by the company so as to render the company liable. Reuter v. Electric Telegraph Company, 6 El. & Bl. 346; 26 L. J., Q. B. 46; 2 Jur., N. S. 1245.

A landowner withdrew his opposition in parliament to a harbour and railway bill, on an agreement with the promoters that the company would take his land on certain terms. After the passing of the act the landowner brought an action for breach of the agreement against the promoters, which was stayed on the company being made (by arrangement) defendants to a new action, and suffering judgment for the demand-Held, that the company thereby adopted the agreement, whether it would have been otherwise binding on them or not, and that it was not vitiated by one of its terms being that the company should pay the costs of the landowner's opposition to the bill. Williams v. St. George's Harbour Company, 2 De G. & J. 547; 27 L. J., Ch. 691; 4 Jur., N. S. 1066.



a. Powers of Company.
i. Extent of.

General Power not abridged by express Power.]-The articles of association provided that the company might, with the sanction of a general meeting, borrow money not exceeding in amount the one-half of the nominal capital, upon mortgage:-Held, that the express power did not negative the general power, the rule being that a company may mortgage its property unless expressly prohibited by its articles from so doing. Patent File Company, In re, Birmingham Banking Company, Ex parte, 6 L. R., Ch. 83; 40 L. J., Ch. 190; 19 W. R. 183. The memorandum of association of a company, whose nominal capital was 100,000l., stated its objects to be the manufacturing and selling of files and steel, and the doing all such other things (including the acquiring and disposing of lands and buildings) as were incidental or con

ducive to the attainment of those objects. The able to capital out of revenue, they are justified articles of association provided that the company in recouping the revenue account at a subsequent might, with the sanction of an extraordinary time out of capital; and may, if necessary, raise general meeting, borrow on mortgage of its pro- fresh capital under their borrowing powers for perty any sums not exceeding one-half of its that purpose. Mills v. Northern Railway of nominal capital; and provided that the directors Buenos Ayres Company, 5 L. R., Ch. 621; 23 might exercise all such powers of the company L. T. 719; 19 W. R. 171. as were not, by the Companies Act, 1862, or by the articles, required to be exercised by the company in general meeting. The company passed a resolution authorizing a mortgage to the extent of one-third of the nominal capital. A few weeks after this the account of the company with their bankers being overdrawn to the extent of more than 23,000l., and the bankers pressing for security, the directors deposited with them the title-deeds of the property on which the company carried on their business, and gave a memorandum of deposit under the seal of the company, making the deeds a security for the balance of account up to 25,0007. Within six months after this a resolution was passed for winding-up-Held, that this security was valid.


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By Banking Company.]-A company deposited deeds with a bank as collateral security for bills under discount, but the deposit was not accompanied with the formalities required by its articles of association upon making a charge or a mortgage, nor was the security registered under the Companies Act, 1862, s. 43. At the time of the winding-up of the company they were indebted to the bank for a bill of exchange which had been discounted for the company, and also for other bills which had not been discounted for the company, but which had been deposited with the bank to secure advances made to various persons. The securities comprised in the deeds having been realized, there remained in the bank's hands a balance after satisfying the bill which had been discounted for the company itself :-Held, first, that the deposit of the deeds constituted a valid mortgage, and that the bankers, not being officers of the company within the meaning of the Companies Act, 1862, s. 165, were not bound to see that the formalities required by the articles of association, and by the Companies Act, 1862, were complied with. General Provident Assurance Company, In re, National Bank, Ex parte, 14 L. R., Eq. 507; 41 L. J., Ch. 823; 27 L. T. 433; 20 W. R. 939.

Held, secondly, that the bank was not bound to hand over the balance to the official liquidator, but was entitled to retain it to meet the amount due upon the bills which had been deposited with them as securities. Ib.

Recouping Revenue out of Capital.]—When a company has paid for things properly charge

Addition of Dividend on Loans.]-A company incorporated by an act of parliament, being already in possession of works constructed by means of capital raised by the issue of shares, obtained by a later act power to raise more capital for the construction of additional works. These works were of a peculiar kind, and could not be constructed by means of contracts taken in the usual way, but required that the company should find the plant and employ workmen to act as directed by their engineer. The capital for the works was raised by the exercise of borrowing powers and by preference shares, the holders of which had certain options to convert them into ordinary shares :-Held, that the company was entitled to add to the capital required for the construction of the works the amount of the interest or dividends on the loans or shares by tion of the works. means of which it was raised until the compleBardwell v. Sheffield Water700; 20 W. R. 939. works Company, 14 L. R., Eq. 517 ; 41 L. J., Ch.


ciation of a company gave the directors an un-
For Illegal Purpose.]-The articles of asso-
limited power of borrowing money on behalf
of another company, the loan being negotiated
of the company. The company borrowed 7,0007.
on behalf of the borrowing company by a di-
rector and the solicitor, who were respectively
also a director and one of the solicitors of the
lending company.
the lending company was told that the money
The managing director of
was wanted to pay a sum which was due to the
borrowing company's contractor, and the director
who negotiated the loan believed that the sum
was really then due to the contractor.
money when lent was employed by the con-
tractor in paying debts which he had incurred
to brokers by reason of purchases which he had
made of the borrowing company's shares for the
purpose of rigging the market. The directors of
the borrowing company knew that the money
was intended to be so employed, but the pur-
chases of the shares had not been made by their
association of the borrowing company forbade the
purchase of the company's own shares :-Held,
that the lending company was entitled to prove
in the winding up of the borrowing company for
the sum advanced. Marseilles Ertension Rail-
and Mobilier of England, Er parte, 7 L. R., Ch.
way and Land Company, In re, Crédit Foncier
161; 41 L. J., Ch. 345; 25 L. T. 858; 20 W. R.

direction or on their account.

The articles of


ii. Upon what Securities.

Proceeds of future Call.]-Under a power to "pledge, mortgage or charge the works, hereditaments, plant, property and effects of the company," in order to secure the repayment of moneys borrowed, the proceeds of a call already made, but not yet paid, may be charged, but not the proceeds of a future call. Sankey Brook

Coal Company, In re (No. 2), 10 L. R., Eq. 381; 22 L. T. 784; 18 W. R. 914.

The memorandum of association of a company stated one of the objects of the company to be the raising of money for the purposes of the company upon mortgage or charge of any property of the company, or upon the debentures, bonds, bills, notes or any other security of the company, and the articles gave express power to mortgage future calls:-Held, to authorize a mortgage of future calls. Phoenix Bessemer Steel Company, In re, 44 L. J., Ch, 683; 32 L. T.


Future Property.]-Under a power to charge the whole or any part of its property, a corporation can effectually charge its future property. Anderson v. Butler's Wharf Company (Limited), 48 L. J., Ch. 824.

Book Debts not yet due.]-Under a power to raise money by mortgage, with or without a power of sale, of any of the property of the company, book debts of the company not yet accrued due may be validly charged. Bloomer V. Union Coal and Iron Company, 16 L. R., Eq. 383; 43 L. J., Ch. 96; 29 L. T. 130; 21 W. R.


iii. When authorized by Statute.

Unauthorized Purposes.]-Where a company, authorized by act of parliament to raise money for certain purposes, has given a bond purporting to be for a sum borrowed and advanced conformably to the act, it is not sufficient for them to plead to an action on such bond, that it was executed colourably, and that the money in fact was not borrowed or lent for the purposes of the statute, as the obligee well knew; the pleas not disclosing any fraud or injury done to the shareholders in the company. Hill v. Manchester and Salford Waterworks Company, 2 B. & Ad.


Subsequent Sanction.]-A railway company had by its original statute of incorporation no power given to borrow money, but a subsequent statute gave power to borrow money from time to time for maintaining and working the railroad, to pledge the lands, tolls, and revenues for due payment thereof, and to make bonds or debentures for securing the repayment of any sums so borrowed in certain terms:-Held, first, that the securities on which the company had power to borrow were not restricted to bonds or debentures. Commercial Bank of Canada v. Great Western Railway Company of Canada, 13 L. T. 105; 3 Moore, P. C. C., N. S. 295.

Held, secondly, that a statute having passed to legalize a loan of money already illegally made by the company to another company, it became as lawful to apply its funds for that other company as for maintaining its own railway.

itself, at its own risk, whether the loan was authorized by the shareholders, and had no right to assume that the directors must have authority to borrow. Ib.


A statute legalized a loan already made by the G. company to another company, and also authorized the G. company to use its funds, by loan or otherwise, to facilitate access to other railways, provided no such expenditure should be incurred unless sanctioned by a vote of twothirds of the G. shareholders :-Held, that a bank, in advancing money to the directors of the G. company, was bound to ascertain for

b. Power of Directors.

deed of settlement of a company authorizing the To Charge Company's Property.]-A power in a directors to mortgage or to charge the property of the company, does not authorize them to include in such mortgage or charge future calls, or, in other words, the unpaid capital of the company. Bank of South Australia v. Abrahams, 6 L. R., P. C. 265 ; 44 L. J., P. C. 76 ; 32 L. T. 277; 23 W. R. 668.

One of the objects of a company was to purchase ships; and the directors were empowered to do all needful acts in furtherance of the

objects of the company; they were also expressly authorized to borrow, on the security of the property of the company, any sum of money not exceeding two-thirds of the capital of the company not called up. The directors mortgaged a ship, the only property of the company, to secure the payment of a sum of money advanced to the company, and of unpaid purchasemoney of the ship; the amount so secured much exceeding two-thirds of the amount not called up of the shares actually issued, but being within two-thirds of the whole nominal capital within the powers of the directors, and was not called up :-Held, that the mortgage was valid; and that the term "capital not called up" included shares which had not been issued. English Channel Steamship Company v. Rolt, 17 Ch. D. 715; 44 L. T. 135.

In a Mining Company.]-The directors of a mining company have no implied authority to borrow money on the credit of the company, for the purpose of carrying on the mines, or for any other purpose, however useful or necessary to the objects for which the company is formed. Burmester v. Norris, 6 Ex. 796; 21 L. J., Ex.


By a deed of settlement under which a company was carried on, a capital of 50,0007, was provided; and there were powers to create new shares, and to alter the provisions of the deed by the vote of a special general meeting. There was also a clause, "that the affairs and business of the company shall be under the sole and entire control of the directors, of whom there shall not be less than five, or more than nine; and three of them shall at all meetings of directors, and for all purposes, be competent to act:" -Held, that under this deed the directors had no express authority to borrow money for the necessary purposes of the mines. Ib.

When a mining concern was carried on by an agent in Cornwall, and distress warrants were issued by the justices of the peace, in consequence of the wages of the workmen not having been paid:-Held, that the agent had no power to borrow money and pledge the credit of his principals, in order to prevent the warrants being put in force. Hawtayne v. Bourne, 7 M. & W. 595; 5 Jur. 118.

One of several co-adventurers in a mine has not, as such, any authority to pledge the credit of the general body for money borrowed for the purposes of the concern. And the fact that he

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