16. RETIREMENT AND RELEASE OF SHAREHOLDER.

Arrangement with Shareholder for Forfeiture. The directors of a company can only bind their shareholders by acts within the scope of the authority delegated to them by the deed of settlement; and an arrangement ultra vires of the directors, by which, in consideration of a money payment by a shareholder desiring to retire, they declared his shares forfeited, is not, nor can any lapse of time render it, binding on the general body of the shareholders, unless it is shewn, not only that the latter might have been, but also that they actually were, fully aware of the transaction. Stanhope, Ex p.; Agriculturist Cattle Insurance Co., in re, 35 L. J. Ch. 296; L. R. 1 Ch. 161; 12 Jur. (N.s.) 79; 14 L. T. 468; 14 W. R. 266.

By an arrangement between the directors of a company and a shareholder desirous of retiring from the company, in consideration of a sum of money paid by him, his shares were declared forfeited for non-payment of certain calls in arrear. His shares were accordingly transferred to the company, and the transfer was duly registered. No notice of the transaction was given to the shareholders, though the facts might have been discovered on a minute examination of the books and documents of the company. Twelve years afterwards the company was wound up :---Held, that the transaction was irregular and collusive, and that, notwithstanding the lapse of time, the name of the executrix of the shareholder ought to be put upon the list. Ib.

The directors of a company made arrangements with S., a shareholder who was dissatisfied with its management and desirous of obtaining a winding-up order, for enabling him to retire from the company by a forfeiture of his shares for non-payment of calls upon the terms of the shareholders paying a sum of money to the directors. The stipulated sum of money was paid; a resolution of the board of directors was passed declaring the shares forfeited for non-payment of calls, and the forfeiture registered at the office for the registration of joint-stock companies; and from that time the name of S. was omitted from the list of shareholders in the shareregister-book, and in the next balance-sheet the shares were entered as cancelled; but no other notice of the transaction was given to the other shareholders, and no notice of any of the transactions of the company was given to S. after the registration of his forfeiture. Twelve years afterwards the company was ordered to be wound up, and three years later an application was made by the official manager to add the name of S. to the list of contributories -Held, that the transaction was collusive between S. and the directors, and was not cured by lapse of time; and the name of S. was ordered to be added to the list of contributories Spackman, Ex p.; Agricultural Cattle Insurance Co., in re, 34 L. J. Ch. 321; 11 Jur. (N.S.) 207; 12 L. T. 130; 13 W. R. 479. Affirmed sub nom.

Spackman v. Evans, 37 L. J. Ch. 752; L. R. 3 H. L. 171; 19 L. T. 151.

If a transaction with the directors of a company is irregular, and is attempted to be supported by the plea of acquiescence and lapse of time, it is incumbent on the party setting up such an offence to show that the transaction was fully made known to the general body of the shareholders, and he cannot be permitted to insist that it was the duty of the directors to state the transaction to the shareholders, and that he trusted to them to რა so. Ib. And see Heritage's Case, L. R. 9 Eq. 5; 39 L. J. Ch. 238; 22 L. T. 479; 26 W. R. 847; Addison's Case, L. R. 5 Ch. 294; 22 L. T. 692; 18 W. R. 365; Morton's Case, L. R. 16 Eq. 104; 42 L. J. Ch. 786; 21 W. R. 933.

Entry of Release in Minute-book-Adoption by Shareholders after Bill Filed.]-A. and B., by deed dated November 1, 1854, transferred to trustees their interest in leasehold property, and also the copyright of an unpublished book on life insurance, with a view to the formation of an insurance company, in consideration of £2,000. A. subscribed for 25,000 shares, and paid £250, part of the deposit, leaving £1,000 due. B. subscribed for 30,000 shares, and paid £500, part of the deposit, leaving £1,000 due. The deed was duly adopted by an extraordinary general meeting of the shareholders; and the two sums of £1,000 were paid to A. and B., and by them repaid in respect of their deposits. In 1856 the plaintiff became a shareholder and director of the company; and at a board meeting, at which the plaintiff was present, a minute was entered, by which it was provided that A. and B., having surrendered all right to 20,000 shares held by them in order to effect the complete registration of the company, they should be relieved from all responsibility in respect of such shares, and that the shares should be transferred into the names of other directors. After the bill was filed, this minute was adopted at a general meeting of the shareholders. The bill prayed for a declaration that A. and B. were liable to calls on the whole amount of the shares; and that the entry in the minute-book might be declared fraudulent and void :-Held, that the transaction carried out after the bill was filed was unimpeachable, either as contrary to the Act of Parliament, or the stipulations of the deed of settlement. Burt v. British Nation Life Insurance Association, 5 Jur. (N.s.) 355, 406. Affirmed 5 Jur. (N.s.) 612; 7 W. R. 517L.JJ.

Held, also, that there was nothing illegal in the provisions of the deed of November, 1854. Ib.

Cost-book Mine-Relinquishment of Shares -Winding-up.]—A company was formed in Wales for working a lead mine on the costbook principle, a lease of which the adventurers held. The 24th rule gave power to shareholders to determine their liabilities on giving notice to the purser of a desire to retire, and depositing with the purser a transfer of their shares, and signing a relinquishment of claims on the company in respect of

the shares. One of the adventurers having shares signed a document furnished him at the office, relinquishing his claims in respect of his shares. The company was ordered to be wound up. The master held, that the adventurer was still liable as a contributory in respect of the debt and liabilities of the company existing at the date of his letter of relinquishment, but, on appeal, the lords justices removed his name, and gave him all his costs. Fenn, Ex p., 22 L. J. Ch. 692.

Retirement from Co-partnership-6 Geo. 4, c. 42.]-The 6 Geo. 4, c. 42, does not prevent or interfere with the bonâ fide retirement from the co-partnership of any member; and the company may buy out a partner notwithstanding the Act. Taylor v. Hughes, 2 Jo. & Lat. 24; 7 Ir. Eq. R. 529.

Dissentients from Amalgamation.] — An amalgamation of one company with another had been agreed upon between the directors of the two companies, on conditions, one of which was the voluntary winding-up of one company. The directors of the company proposed to be wound up had power, under the articles of association, to accept surrenders of shares on such terms as they might think fit, and an offer was made by the directors to shareholders who might, if they remained on the register, impede the passing of a resolution to wind up the company, of an option to have their allotments of shares cancelled:-Held, that such offer was not a fraudulent abuse by the directors of their power; and that it was not fraudulent on the part of such shareholders to obtain their release from the position of shareholders in contemplation of a winding-up of the company, such winding-up being proposed in view, not of the insolvency of the company, but of the more beneficial working of its business in combination with another company. Wright, Ex p., 37 L. J. Ch. 529-L.JJ.

Held, also, that the circumstance that a meeting of shareholders had passed a resolution in favour of accepting surrenders of shares from shareholders desirous of retiring, did not curtail the directors' independent right to exercise their power under the articles of accepting surrenders. Ib.

17. MORTGAGE OF SHARES.

Implied Power of Sale-Notice Demanding Payment.]-In cases unaffected by the Conveyancing Act, 1881, s. 19, the law is that a mortgagee of stock or shares may sell the same at any time after the day originally fixed for payment of the loan, or, if no day was originally fixed, then after reasonable notice has been given to the mortgagor and default made by him in payment after such notice. De Verges v. Sandeman, Clark & Co., 71 L. J. Ch. 328; [1902] Ch. 579; 86 L. T. 269; 50 W. R. 404; 18 T. L. R. 375— C. A.

Requisites of Notice-Reasonable TimeMeasure of Damages. ]-The requisites of such a notice considered. Per Vaughan Williams, L.J. The object of such notice is to give to the mortgagor a reasonable opportunity to redeem, and it must fix a day certain for pay

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ment by the mortgagor. Per Stirling, L. J. : Such notice must give a reasonable opportunity to the mortgagor to pay what is due under the mortgage, and it is at least desirable that it should fix a day for that purpose, and also convey to the mind of the mortgagor that if he fails to avail himself of the opportunity to redeem, the mortgagee will be in a position to put in force his rights. Per Cozens-Hardy, L.J. The notice need not state that the mortgagee will sell; it is sufficient that the notice requires payment of the mortgagemoney; but before the poyer can be exercised a reasonable time must elapse after the notice requiring payment. A mistake as to the amount due will not destroy the effect of the notice. Ib.

Brokers who advanced the money on a purchase of shares by their client had the shares registered in their names under a verbal agreement to hold them by way of mortgage to secure the debt. The mortgagees frequently wrote pressing for payment. In August, 1898, a reconstruction of the company was proposed, under which assenting shareholders were to obtain new shares with 3s. liability in lieu of the old shares. On August 22, 1898, the mortgagees wrote to the mortgagor asking whether he intended to participate in the scheme, or whether he would adopt the only other alternative of allowing his shares to be forfeited. They also gave him notice that they would not take up the new shares (which must be done before a named day) on his behalf; also that, as they were unprotected by any security, they should take any necessary steps to recover the debt owing to them. The mortgagor did not pay, and the mortgagees ultimately took up the new shares, paying the 3s. per share themselves; and, acting under the belief that they were absolute owners thereof, sold the shares, which subsequently to the sale rose in value. The mortgagor, who did not know of the sale till after the rise in value, claimed damages for a wrongful sale:-Held (dissentiente Vaughan Williams, L.J.), that sufficient notice had been given by the mortgagees to entitle them to exercise their implied power of sale over the old shares; that such notice remained in force as to the new shares acquired under the reconstruction scheme, and that the sale could be justified under the power of sale though made by the mortgagees under the mistaken belief that they were absolute owners. Held, by Vaughan Williams, L.J., that no sufficient notice had been given by the mortgagees to enable them to exercise their implied power of sale, and that the plaintiff was entitled to damages for a wrongful sale, which, however, under the circumstances of this case, must be estimated at the price of the shares at the time of sale (less the amount owing to the mortgagees), and not at the highest price which the shares had subsequently obtained. Ib.

Shares held in Trust for Mortgagee Liability for Calls.]-A. advanced money to B. on the security of railway shares. They were transferred into the name of C. to secure A., and subject thereto for B. C. died insolvent-Held, that A. was not liable, at the suit of the company, for the arrears of calls

on the shares. Newry, &c., Ry. v. Moss, 14 Beav. 64; 20 L. J. Ch. 633; 15 Jur. 437.

Shares are Chattels within Bankruptcy Act, 1849.]-A solicitor was a shareholder in, and joint secretary of, a railway company. He deposited the certificates of his shares with a client by way of equitable mortgage, with a memorandum accompanying the deposit, to secure money lent. No notice of the transaction was given to the company other than might be inferred from the facts of the mortgagor being secretary, and of his being solicitor for the mortgagee :-Held, first, that the shares were chattels within the meaning of the Bankruptcy Act (12 & 13 Vict. c. 106, s. 125); secondly, that if a valid equitable mortgage can be made of railway shares, notice is necessary in the same way as in the case of other choses in action; thirdly, that the knowledge of the transaction by the mortgagor as secretary, was not notice to the company within the meaning of the Companies Clauses Act (8 & 9 Vict. c. 16); and, fourthly, that the duty of the mortgagor as solicitor to the mortgagee, to give proper notice, was immaterial against the assignees, for that the shares were in the order and disposition of the bankrupt. Boulton, Ex p., 1 De G. & J. 163; 26 L. J. Bk. 45; 3 Jur. (N.S.) 425; 5 W. R. 445.

Equitable Lien.]-A. deposited with B. share certificates as security for a loan, and afterwards assigned all his personal estate to C. and D., in trust for the benefit of his creditors. The assignees gave notice of the assignment to the company, but B. omitted to give notice of his equitable lien :-Held, that notwithstanding the omission of such notice, the trustees could not maintain trover against B. for the certificates. Broadbent v. Varley, 12 C. B. (N.S.) 214.

Notice to Company. ]-Mortgagee of shares in a company must give notice of incumbrance to the secretary, or his lien will be lost as against a subsequent purchaser for valuable consideration without notice. Cumming v. Prescott, 2 Y. & Coll. 488.

Sufficiency.]-The directors and secretary of a joint-stock company joined in depositing the certificates of shares belonging to them with a banking company, as a security for money advanced-Held, that this transaction amounted to a sufficient notice to the company of an equitable assignment of the shares belonging to the secretary, so as to support the title of the equitable mortgagees against his assignees in bankruptcy. Stewart, Ex p.; Shelley, in re, 34 L. J. Bk. 6; 11 Jur. (N.S.) 25; 11 L. T. 554; 13 W. R. 356; 4 De G. J. & S. 453. And see col. 1122.

Rights of Mortgagor and Mortgagee.]— Transfer, by way of mortgage, of shares in a banking company. The mortgagor afterwards paid off the debt, and applied for a re-transfer of the shares; but the directors of the bank did not permit the re-transfer to be made. In the meantime a creditor recovered judg ment against their public officer, and threatened execution against the mortgagee as one of the shareholders-Held, that

where the mortgage was made simply as an absolute transfer, subject to redemption, and nothing had passed binding the mortgagor to take a re-transfer of the shares, the mortgagor was not liable to indemnify the mortgagee against debts incurred after the transfer made on the mortgage, and before the mortgage debt was paid off; that the mortgagor having elected to take a re-transfer of the shares, the mortgagee became a trustee of the shares for the mortgagor, and the mortgagor was bound to indemnify him against the whole expenses or liabilities which he had properly incurred by holding and maintaining the shares; that the mortgagor, indemnifying the mortgagee in respect of the costs, was entitled to take proceedings in the name of the mortgagee to compel a re-transfer of the shares, and to resist the proceedings against the shareholders under the judgment. The mortgagee had not in such a case any right at law against the mortgagor. Phené v. Gillan, 5 Hare, 1; 15 L. J. Ch. 65; 9 Jur. 1086.

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Account.] When a mortgagee of shares claiming under a legal title applies, under the Companies Act, 1862, s. 35, to have the register of the company rectified, the court may direct an account to be taken of what is due from the mortgagor to the mortgagee; and in the event of the mortgagor declining to take such account within a limited time, will order the mortgagee's name to be put on the register. Davies' Case, Tees Bottle Co., In re, 33 L. T. 834.

Recognition of Transferee Calls on Transferor.]-After a transfer of shares in a company has been made, and after the recog nition of the transferee by the company, the company cannot make any claims for calls which ought to have been paid by the previous owner; neither can the company declare such shares forfeited on the refusal of the transferee to satisfy such demand, though he was only a mortgagee of the shares. Watson v. Eales, 23 Beav. 294; 26 L. J. Ch. 361; 3 Jur. (N.S.) 53.

Mortgage of Shares-Agreement by Mortgagee to Vote in Accordance with Wishes of Mortgagor Mandatory Injunction.]—The court will enforce by mandatory injunction an agreement by a mortgagee of shares in a company to vote at meetings of the company in accordance with the wishes of the mortgagor. Observations of Cotton, L.J., in Loog v. Bean (53 L. J. Ch. 1128; 26 Ch. D. 306) applied. Puddephatt v. Leith (No. 1), 85 L. J. Ch. 185: [1916] 1 Ch. 200; 114 L. T. 454; 60 S. J. 210; 32 T. L. R. 228.

Transfer by Mortgagee to escape Liability.] -Shares were, to escape liability, transferred by the direction of a mortgagee into the name of the mortgagee's servant. The servant afterwards claimed the shares, and contended that, as the transaction was fraudulent as against the company, the court would not assist the mortgagee by declaring that she was a trustee of the shares for him :-Held, that the mortgagee, not being under any liability to the company or to the creditors of the com

any one who signs a transfer on a certificate in blank and hands it to another person knows that third persons would think that that person had authority to deal with it, extends to a person who without having had such a certificate in his possession leaves it in the hands of his broker, and that therefore the plaintiff was estopped from recovering the certificates from the defendants. Fuller v. Glyn, Mills, Currie & Co., 83 L. J. K. B. 764; [1914] 2 K. B. 168; 110 L. T. 318; 19 Com. Cas. 186; 58 S. J. 235; 30 T. L. R. 162.

Duty of Pledgee to Replace.]-A mortgagee who has advanced money on the security of stock for a fixed period is bound, in the absence of express stipulation to the contrary, to return the identical stock pledged at the expiration of the loan, and for this purpose stock is as capable of identification as any other security. If he sells the stock in pledge during the currency of the loan, he is accountable to the mortgagor for any profit made by the sale. Langton v. Waite, 37 L. J. Ch. 345; L. R. 6 Eq. 165; 18 L. T. 80; 16 W. R. 508.

There is no authorised rule or custom of the Stock Exchange contravening this principle. Ib.

Equitable Mortgagee of Shares.]—A company's deed provided, that the company should not be affected by notice of any trust, and that where any share should become vested in any person for any interest not absolute the receipt of the shareholder should remain a sufficient discharge :-Held, that the equitable mortgagee of shares had a right to sue the company. Binney v. Ince Hall Coal and Cannel Co., 35 L. J. Ch. 363; 14 L. T. 392.

Deposit of Certificates Duty of Inquiry. It is the duty of a person receiving as an equitable mortgagee of railway stock the certificates of the shares thereof to inquire what is the real position of the person pretending to mortgage the stock, for if such person has only the legal title by having the certificates in his possession, but is, in truth, merely the trustee for another, the equitable mortgagee will be unable to enforce his claim in opposition to the original cestui que trust. Ib.

A certificate of shares is merely a solemn affirmation under the seal of the company, that a certain amount of stock stands in the name of the individual mentioned in the certificate. Shropshire Union Railway and Canal Co. v. R., L. R. 7 H. L. 496; 32 L. T. 283; 23 W. R. 709.

The banker of a railway company was also one of its directors. Under certain business arrangements of the company he was entrusted with the possession of certificates which represented shares, and those shares he beld as trustee for the company; he converted the shares; the conversion was noticed; he gave an explanation, replaced the shares, and continued to held the certificates as before, and stood on the register as the apparent owner of them. He borrowed money of R., and deposited the certificates with him, who

held them for some time, and died without having taken any step to be registered as the owner of the shares. R.'s widow and executrix applied to be registered as the owner; but her application was refused :-Held, that this was the ordinary case of a trustee abusing his trust; that if R. had made proper inquiries, he would have found that the banker was only a trustee; that negligence sufficient to affect their equitable title could not be imputed to the directors; and that, consequently, the equitable title of R. could not prevail against the earlier equitable title of the company. Ib. Whether a transfer of shares in a company can or cannot be made without the production of the certificates of the shares is a matter entirely within the discretion of the directors. Ib.

Mortgage or Sale.]-Stock transferred as a security for a floating balance, and under an agreement to continue it transferred and retransferred by and to the creditor by way of loan ---Held, a sale. Dennison, Ex p., 3 Ves.

552.

For Term of Years-Default-Redemption.] -A stock mortgage was made for a term of years, for securing the retransfer of stock at the end of the term, and payment in the meantime of interest calculated on the proceeds of the stock sold to raise the loan. The mortgage having been allowed to run after the end of the term, and the stock having fallen in price -Held, that the mortgagee was not entitled to the market value of the stock at the end of the term, but that the mortgagor could redeem on replacing the specific amount of stock originally sold. Blyth v. Carpenter, 35 L. J. Ch. 823; L. R. 2 Eq. 501; 12 Jur. (N.s.) 898; 15 L. T. 154; 15 W. R. 3.

Sale for purpose of Loan-Re-investment.] -When stock is sold out to raise money to be advanced on loan, and it is agreed that the borrower, on repayment will make good to the lender the difference, if any, between the price at which the stock was sold and the price at which it will have to be bought back, an actual reinvestment by the lender is no condition precedent to his right to sue for the difference. Fowler v. Peirse, 32 L. T. 493.

Declaration that the plaintiff had lent the defendant on mortgage for five years a sum which the plaintiff had raised by the sale of 3 per cent. consols and 3 per cent. reduced, and that it was afterwards agreed that if the loan should be repaid within five years, and "if on repayment and reinvestment the sums repaid should not be sufficient to replace the specific stocks sold out, the defendant would forthwith make good such deficiency to the plaintiff, so as to enable him to make such reinvestment"; that the loan had been repaid, and there was a deficiency which had not been made good to the plaintiff. Plea, that the plaintiff had not actually reinvested the money so repaid :-Held, a bad plea. Ib.

Bond to Replace Stock.]-If A. agrees to reinvest a sum in the 3 per cent. consols, in the name of B., charging the stock at a price