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Lord CRANWORTH concurred. Whether the Court below had taken the most prudent course in doing as they had done, might be a future subject of inquiry; but at present it was incompetent to appeal, and it was a mere confusion of terms to say that the Court below had no jurisdiction to do what they had done.

Lord COLONSAY said that from the first this case seemed to him to be free from difficulty. The statute conclusively showed there was no right of appeal at present, and there could not be a shadow of doubt as to the jurisdiction of the Court below to make such an interlocutor as this. Even if they had erred in some step of the procedure directed by the statute, it was an extravagant and unwarranted proposition that an appeal on that ground would be competent. To hold this was running counter to the practice under the statute for the last sixty years, and contrary also to principle as well as precedent. There might be difficulty hereafter in settling the relevancy of the action, but all that had yet been done was to call in the aid of the accountant to enable the Court to read with his eyes the various averments founded on the state of the accounts. It was a provident and a competent course for the Court below to take, and it was enough to say that at present an appeal was incompetent.

Appeal dismissed, with costs.

Act.-Att. Gen. Rolt, A. B. Shand. Alt.-Decanus, Young.


COMPANY-Prospectus-Misrepresentation.—A shareholder cannot file a bill on behalf of himself and all other shareholders seeking particular relief on his own behalf and also general relief on behalf of the other shareholders.-Distinction between a misrepresentation in a prospectus issued before, and one issued after registration of the memorandum and articles of association.-A prospectus contained a statement that certain persons, who had agreed to act, were directors of a company, but they in fact refused to act before the allotment of plaintiff's shares-Held, per Wood, V.C., that this was not a fraudulent misrepresentation affording ground for relief. A prospectus, issued after registration of articles of association, stated that the company would commence operations with ships of a certain class and number:-Held, that as the applicant must have known that, under the articles, the directors could deal as they pleased with reference to the starting or non-starting of the company, he was not entitled to relief on bill filed against the directors and company for indemnity in respect of his shares, but the bill as to this dismissed, without costs. Semble-The majority of the original subscribers to the memorandum of association may nominate directors without holding a meeting to appoint such directors.-Hallows v. Fernie, 36 L. J. Ch. 267.

COMPANY-CONTRIBUTORY—Forfeiture of shares.-Articles of association provided that if a shareholder should neglect to pay any call, the company might give notice of forfeiture, and that if default should be made in payment, the directors might pass a resolution to forfeit the shares, and that upon an entry of such forfeiture being made in the books, and notice thereof given to the shareholder, the shares should become the property of the company. A shareholder being in default, notice of forfeiture was given. The shareholder did not pay. There was no evidence that any resolution was passed; but entries were made in the company's books that the shares had been forfeited, and that they had been transferred from the name of the shareholder into that of the company. No further notice was given to the shareholder, but he was treated by the company as no longer a member :-Forfeiture held complete, and on the company being after

wards wound up, the shareholder's name ordered to be taken off the list of contributories as a present member.-North Hallenbeagle Tin and Copper Mining Co., ex parte Knight, 36 L.J. Ch. 317.

DEBENTURE" Undertaking." Receiver or Manager.—An ordinary debenture of a railway company in the form of Schedule C. of the Companies' Clauses Consol. Act, 1845, gives the holder a charge on the undertaking generally and on the tolls and sums of money earned by the company, but gives no specific charge upon the lands of the company, whether those upon which the railway is constructed or surplus lands, or upon the rolling stock. The railway was mortgaged as a going concern, and is not to be interfered with or broken up by the mortgagees. The right of the mortgagees is to have a receiver of the earnings of the company only, and not to have a manager appointed by the Court. A charge given by directors on moneys arising from the sale of surplus lands belonging to the company, for a debt owing by the company, held to be valid. Per Lord Cairns, L. J., "This Court does not assume the management of a business or undertaking, except with a view to the winding up and sale of the business or undertaking. The management is an interim management; its necessity and its justification spring out of the jurisdiction to liquidate and to sell; the business or undertaking is managed and continued in order that it may be sold as a going concern, and with the sale the management ends. To the management of the undertakings of the L. C. & D. Ry. Co., assumed by the V.-C.'s orders of the 12th and 17th July, 1866, no limits, short of repayment of the whole debenture debt could be assigned; for it has not been and could not be contended that there would at the hearing of the cause be any power of selling the undertakings. But in addition to the general principle that the Court of Chancery will not in any case assume the permanent management of a business or undertaking, there is that peculiarity in the undertaking of a railway, which would, in my opinion, make it improper for the Court to assume the management of it at all. When Parliament, acting for the public interest, authorizes the construction and maintenance of a railway, both as a highway for the public, and as a road on which the company may themselves become carriers of passengers and goods, it confers powers and imposes duties and responsibilities of the largest and most important kind, and it confers and imposes them upon the company which Parliament has before it, and upon no other body of persons. These powers must be executed, and these duties discharged, by the company. They cannot be delegated, or transferred. The company will, of course, act by its servants, for a corporation cannot act otherwise, but the responsibility will be that of the company. The company could not by agreement hand over the management of the railway to the debenture-holders. It is impossible to suppose that the Court can make itself or its officer, without any Parliamentary authority, the hand to execute these powers, and all the more impossible, when it is obvious that there can be no real and correlative responsibility, for the consequences of any imperfect management." "Surplus land may arise in one of two ways: it may be land originally taken by the railway company in the expectation that it would be required for their line, or for stations and works; or (and this is the origin of by far the greater quantity of surplus land), it may be land which the owner, under the provisions of the Lands Clauses Act, has forced the company to buy, that he may not have a severed part of a tenement or field left on his hands. In either case the company is obliged to resell the land within a limited time, applying the proceeds to the purposes of their Act, on pain of the land revesting in the original owner, who, if the land be not in a town, is to have the first option of repurchase. It is obvious from this that the surplus land is, in truth, the representative and equivalent of a portion of the capital provided by the company for the execution of their works, which has, not for the purposes of profit, but for protection of landowners, been temporarily diverted, and which is to return to the capital of the company when the object for which it has been diverted has been accomplished. And, as regards the interim rents, if any, of surplus lands, they appear to be in the same position as the income arising from capital provided by the company and temporarily invested in any other manner until needed. A railway

is made and maintained by means of its capital, its borrowed money, its land, its proceeds of sale of surplus land, its permanent way, its rolling stock. All of these may be said in a sense to be connected with, to be parts of, to make up the undertaking. If a mortgage of the undertaking carries in specie the sale moneys of surplus lands, it must equally, and on the same principle, carry in specie the ordinary land of the company, the capital, the permanent way, the rolling stock -nay, even the very money itself lent on the mortgage. The assignment made by the mortgaged debentures is immediate, and is to continue for three years at the least. If the debenture-holders are right in their argument, they became immediate assignees in specie of all the ingredients which I have enumerated as going to make up the undertaking, and they might, from the first, have asserted their rights as mortgagees by taking and impounding not merely the proceeds of surplus lands, but the capital, cash balances, rolling stock, and even their own money advanced. Now the great object which Parliament has in view, when it grants to a railway company its extraordinary powers over private property, is to secure in return to the public the making and maintaining of a great and complete means of public communication; and yet, according to the necessary consequence of the plaintiffs' argument, the moment the company borrowed money on debentures, it would depend on the will or caprice of the debenture-holder whether the railway was made at all. I may further observe that in any sense in which the sale moneys of surplus lands can be considered part of or moneys arising from the undertaking, calls made and paid subsequent to the debenture must be equally a part of or moneys arising from the undertaking. And yet sec. 38 of the Companies' Clauses Act, 1845, and the form of the mortgage in the schedule, clearly assume that under the words of debentures, such as those now before us, future calls would not pass; and sec. 43 provides that even when future calls are expressly included, the company may (unless the contrary is provided) receive the calls and apply them to the purposes of the company. The argument, again, of the debenture-holders goes, in fact, to claim for them the same position, as if, under the term "undertaking," they were mortgagees of the whole property and effects of the company, and, indeed, the prayer in the bill of "Gardiner (No. 2)' uses the words "property belonging to or connected with the undertaking." Now there is nothing in the Companies' Clauses Act, 1845, to prevent the company borrowing both on land and mortgage; and sec. 44 provides that the bondholders "shall be entitled to be paid out of the tolls or other property or effects of the company; "words which in Russell v. East Anglian Railway Company, 3 Mac. and Gor. were held to mean that the bondholders might obtain a judgment, which, under sec. 36, would be executed against the property of the company. But, according to plaintiffs' view, the whole property and effects of the company, being all parts of the undertaking, would be assigned and mortgaged by the debentures, and thus the right apparently given to the bondholder and judgment creditor would be merely illusory. It must be evident that, if the plaintiffs' argument be correct, very grave differences of opinion and of interest might arise among the debenture-holders. Some might desire to arrest the continuance of the undertaking and to obtain repayment out of the capital or other moneys provided for the works; while others might consider that their most hopeful chance of repayment would be by the expenditure of these moneys so as to earn tolls and profits; and it would be difficult in such a case to see any common interest in the body of debenture-holders such as would enable one to maintain a suit on behalf of all. As regards the effect of the word "undertaking" in these securities, we gain but little information from the definition given in the Acts of Parliament. In the two public Acts, the Companies Clauses and the Lands Clauses, the "undertaking" is defined to be the "undertaking or works by the special Act authorized to be executed;" and in the private Acts the object appears to be not so much to describe what is included in the word "undertaking," as to divide by metes and bounds or otherwise the various undertakings of the company from each other. The object and intention of Parliament, however, in the case of each of these various undertakings was clearly to create a railway, which was to be made and maintained, by which tolls and profits were to be earned, which was

to be worked and managed by a company according to certain rules of management, and under a certain responsibility. The whole of this, when in operation, is the work contemplated by the Legislature, and it is to this that, in my opinion, the name of "undertaking" is given. Moneys are provided for and various ingredients go to make up the undertaking; but the term "undertaking" is the proper style, not for the ingredients, but for the completed work; and it is from the completed work that any return of moneys or earnings can arise. It is in this sense, in my opinion, that the "undertaking" is made the subject of a mortgage. Whatever may be the liability to which any of the property or effects connected with it may be subjected through the legal effect of a judgment recovered against it, the undertaking, so far as these contracts of mortgage are concerned, is, in my opinion, made over as a thing completed; as a going concern, with internal and Parliamentary powers of management not to be interfered with; as a fruit-bearing tree, the produce of which is the fund dedicated by the contract to secure and to pay the debt. The living and going concern thus created by the Legislature must not, under a contract pledging it as security, be destroyed, broken up, or annihilated. The tolls and sums of money ejusdem generis,—that is to say, the earnings of the undertaking, must be made available to satisfy the mortgage; but, in my opinion, the mortgagees cannot under their mortgages, or as mortgagees, by seizing, or calling on this Court to seize, the capital, or the lands, or the proceeds of sales of land, or the stock of the undertaking, either prevent its completion or reduce it into its original elements when it has been completed. I ought not to omit to notice a point much pressed-namely, that as by sec. 127 of the Lands Clauses Act, the sale moneys of surplus lands are to be applied to the purposes of the special Act, and as the payment of overdue debentures ought to be taken to be the first duty of a company, therefore the debenture-holders have a right to sustain a suit for this application of the sale moneys in payment of the debentures. There is no doubt that if the company were to use these sale-moneys in paying debentures they would be acting in accordance with their powers; but even admitting that paying debentures is a purpose of the special Act, there are many other purposes, and the directors, and not the debenture-holders, must, in my opinion, be the judges to which of several purposes the moneys are to be applied. Whether if a company, after mortgaging the undertaking, were to apply their capital or other moneys which ought to go into and improve the undertaking to purposes wholly foreign to the undertaking, they could be controlled by debenture-holders is a question which may at some time have to be considered, but which does not arise in the present case. The observations which I have made show that, in my opinion, no distinction should be made between the sale moneys and the interim rents of surplus land."-Gardiner, Drawbridge, &c., v. London Chatham and Dover Ry. Co. 36 L.J., Ch. 323.

COMPANY-Winding up: Bills of exchange: Set-off-The holders of dishonoured bills of an insolvent company, being also acceptors of other bills not arrived at maturity, which are in the possession of the official liquidator of the company, are not entitled under the Companies' Act 1862, s. 95, to have their acceptances retained by the official liquidator and not negotiated until due, when a right of setoff would arise. Holders of dishonoured acceptances of a company which is being wound up cannot, either at law or in equity, set-off the present liability of the company upon such acceptances against a future liability of themselves on other bills accepted by them, and which the company holds. Nor does set-off in bankruptcy apply to such a case.-Commercial Bank Corporation of India and the East, ex parte Smith, Fleming, & Co., 36 L.J., Ch. 333.

BANKRUPTCY-Policy of assurance: Assignee: Notice.-W. having mortgaged a policy of insurance on his own life, became bankrupt, and died four years after the bankruptcy. The mortgagee gave notice to the insurance office and claimed the proceeds of the policy. No previous notice had been given of the mortgage or of the bankruptcy:-Held, that notice after the bankruptcy was insufficient, and that the policy remained in the order and disposition of the bankrupt. No act of an assignee for value after bankruptcy can give validity to his assignment as against assignees in bankruptcy.-Webb's Policy, 36 L.J., Ch. 341.




WITHOUT entering upon the general subject of the policy of entails, we wish to draw attention to a special point arising out of the Montgomery and Rutherfurd Acts, which, because productive of hardship, is felt not the less but the more because it falls unequally and accidentally.

The Montgomery Act (10 Geo. III. c. 51), the first to remove any of the asperities of the early entail law, provided that an heir in possession who laid out money in certain operations for the improvement of the lands or mansion-house of an entailed estate, should be a creditor of the succeeding heirs of entail to the extent of three-fourths of the sum so expended,-the expenditure by one heir not being effectual to constitute such claim for more than four years' free rent, in the case of improvements upon the lands, and two years' free rent in the case of the mansion-house. Machinery was provided for constituting these claims so as to make them effectual against the next heir, and other machinery was provided by the Rutherfurd Act (11 & 12 Vic. c. 36), which, without repealing the previous method, provided two other modes of recovering a proportion of improvement expenditure, viz. an annualrent for 25 years out of the lands at an advanced rate of interest (7 1-10th per cent.) upon three-fourths of the sum expended, and a bond and disposition in security, with power of sale, over the fee of the estate, for two-thirds of the sum expended.

The particular kinds of improvement thus authorised are defined in sections 9 and 27 of the Montgomery Act, namely: enclosing,



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