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.

f. Effect of Business Ceasing.

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.

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 Non-payment not Barring Right of Purchaser.] 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 rate of interest to 4 per cent. in certain events. The deed contained a proviso that, if the transferees, desirous of becoming absolute owners of the works," should, on or before any 25th day of December, after having given to the old company six calendar months' previous notice of their desire to avail themselves of the option thereby given, pay unto the old company the amount of their share capital, the party making such payment should thereupon become entitled to the works freed from the rent thereby reserved. Notice to purchase was given in due course, but the money was not paid at the time specified in the notice :-Held, that the right to purchase had not been lost by the non-payment of the money. Ward v. Wolverhampton Waterworks Company, 13 L. R., Eq. 243; 41 L. J., Ch. 308; 25 L. T. 487; 20 W. R. 85.

concern.

Guarantee of Dividends.]-In 1872 a company was formed to purchase a going concern consisting of railway tyre and steam roller works, and to carry on all or any of the businesses of the The purchase was completed, the vendor accepting part of the purchase-money in fully paid-up shares in the company. By an agreement made between the vendor and the promoter of the company, and recited in the articles of association, the vendor guaranteed to the shareholders for the time being a dividend for five years from the date of the formation of the company upon the capital from time to time called up after the rate of 101. per cent. per annum, and that, if in any one of the five years the profits should prove insufficient to pay such dividend, he would pay the amount required to make up such dividend. The business was carried on at 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.

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.

1201.

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 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 4,0007. 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 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. Ib.

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.

371.

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.

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 Breach of Warranty.] Directors acting on proceedings to enforce a forfeiture, he guaranteed behalf of a company impliedly warrant their them in the event of his success the full benefit authority like other agents; and therefore where of their shares :-Held, that such an arrangement directors stated, without an intention to deceive, was one that a court of equity could not allow that they had appointed an agent for their comto stand. Smith v. Harrison or Bank of Aus-pany with certain powers, and they had not, in tralia, 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

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

ducive to the attainment of those objects. The able to capital out of revenue, they are justified articles of association provided that the company might, with the sanction of an extraordinary general meeting, borrow on mortgage of its property any sums not exceeding one-half of its nominal capital; and provided that the directors might exercise all such powers of the company 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 25,000l. Within six months after this a resolution was passed for winding-up-Held, that this security was valid.

in recouping the revenue account at a subsequent time out of capital; and may, if necessary, raise fresh capital under their borrowing powers for that purpose. Mills v. Northern Railway of Buenos Ayres Company, 5 L. R., Ch. 621; 23 L. T. 719; 19 W. R. 171.

Ib.

Effect of Prior Mortgage.]-The mortgage of the property and undertaking of a company to secure debenture holders or mortgagees in an equivalent position does not prevent the company from making a valid charge on a specific asset as a security for an advance of money necessary for carrying on the business. Hamil ton's Windsor Ironworks, In re, Pitman and Edwards, Ex parte, 12 Ch. D. 707; 40 L. T.

569; 27 W. R. 445.

A trading company has general power to borrow money to an extent which is reasonable and necessary for the purposes of the business. Ib.

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. Bardwell v. Sheffield Watermeans of which it was raised until the compleworks Company, 14 L. R., Eq. 517 ; 41 L. J.. Ch. 700; 20 W. R. 939.

The

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 managing director of
the lending company was told that the money
was wanted to pay a sum which was due to the
who negotiated the loan believed that the sum
borrowing company's contractor, and the director
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
The articles of
direction or on their account.
purchase of the company's own shares :-Held,
association of the borrowing company forbade the
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.

254.