10. Investments by Trustees. Statutory power to invest in debenture stock. 11. Additional Capital. Power to con vert loan into capital. Where, however, executors or trustees find among their testator's property railway mortgages or debenture stock, they are not necessarily bound to realize, or guilty of a breach of trust by omitting to do so (y). Modern settlements frequently authorize an investment in the debenture bonds of railway companies, or in such preference or guaranteed stocks as produce an unfluctuating dividend. And it is expressly provided by the Debenture Stock Act, 1871 (z), that trustees empowered to invest trust funds in the mortgages or bonds of a railway company may invest such funds in the debenture stock of a railway company, unless expressly forbidden to do so by the instrument creating the trust. Where there are remaindermen entitled to the capital, an investment in terminable stock at a premium is, of course, improper (a). 11. Additional Capital. With respect to the conversion of borrowed money into capital, the Companies Clauses Consolidation Act enacts, that, if it be not C. C. Act, s. 56. otherwise provided by the special act, the company may raise the additional sum authorized to be borrowed by creating new shares instead of by borrowing, but such augmentation of capital must be authorized at a general meeting of the company: (Sect. 56.) Such additional capital is subject to the same provisions as to payment of calls, &c., as the original capital, except as to the time and amount of the calls, which may be fixed by the company: (Sect. 57.) If the old shares are at a premium, the new shares must be offered to the ing shareholders, shareholders in proportion to their existing shares: (Sect. 58.) The new shares vest in such shareholders, who accept them and pay the instalments due thereon, and if any shareholder fails for one month to accept them, or pay the instalments, the company may dispose of them (Sect. 59.) If the old shares are not at a premium when the capital is augmented, the company may issue the new shares on such terms as they think fit: (Sect. 60). Offer of new shares to exist s. 58. Exercise of option to take new shares. It appears that the shareholder is held strictly to the exercise of his option within the time limited, and that from the nature of the property which is the subject of the option, time is of the essence of the contract (b). The absence, therefore, of the shareholder from England will not be any excuse for his failing to exercise (y) Mortimore v. Mortimore, ubi supra. ference stocks bearing a high rate of interest, and assumed that some of the stocks were of a terminable character. (b) Campbell v. London and Brighton R. Co., 5 Hare, 519. the option within the month (c). But if the new shares be created by an act incorporating Part II. of the Companies Clauses Act, 1863, the directors have power to waive the omission of the shareholder, either from absence abroad, or other satisfactory cause, to signify acceptance within the prescribed period (d). Whether a railway company, authorized by statute to take shares in another company, is entitled to the benefit of an allotment of new shares has not been finally decided. In apparently the only case upon the subject, the Great Western R. Co. were authorized by act of Parliament to subscribe for 17,500 shares in the Metropolitan R. Co. These shares were taken by nominees of the G. W. R. Co. By a subsequent act the M. Co. were authorized to raise additional capital by the creation of new shares. At a general meeting of the M. Co. it was resolved that these shares should be allotted rateably among the holders of original shares. It was held by Wood, V.-C., that neither the G. W. R. Co. nor their nominees were entitled to any new shares, as the G. W. R. Co. had no power to take the shares and would not be liable to calls. But the Lords Justices overruled the demurrer, on the ground that the question could not properly be decided at the then stage of the suit, and intimated an opinion that the G. W. R. Co., though not entitled to hold the shares, might be entitled to have them allotted and sold for their benefit (e). Railway comto subscribe for not entitled to addition. pany authorized certain shares new shares in stock, &c. C. C. Act, 1863. stock. The Companies Clauses Act, 1863 (ƒ), which applies to all com- Preference panies obtaining a special act and incorporating Part II. or IlI. of that act, as the case may be (g), contains some important provisions relating to "additional capital," that is, new ordinary shares or stock, and preference shares or stock; and also relating to "debenture stock," Debenture which includes mortgage preference stock, and funded debt (h). And the Railway Companies Act, 1867 (i), also contains several sections altering and amending the act of 1863. The more important of the provisions of the act of 1863 are, that either new shares or new stock may be created with the sanction of three-fifths of the votes of the shareholders at a special meeting (sect. 12); that preference shares are entitled to dividends only out of the profits of each year (sect. (c) Pearson v. London and Croydon R. Co., 14 Sim. 541. (d) 26 & 27 Vict. c. 118, s. 20, post, vol. II. (e) Great Western R. Co. v. Metropolitan R. Co., 32 L. J., Ch. 383. The point, which still remains doubtful, can be of importance only where the shares are at a premium. (f) 26 & 27 Vict. c. 118, s. 12, et seq., vol. II. (g) Part II., sects. 12-21, deals with preference stock, and Part III., sects. 2235, with debenture stock. By (h) Sect. 35. For construction of clauses (i) 30 & 31 Vict. c. 127, s. 24, et seq., Capital. 11. Additional 14); that, where the ordinary shares are at a premium, the new stock shall," unless the company otherwise determine," be offered to existing shareholders at par (sect. 17); and as to debenture stock, that the payment of arrears of interest may be enforced by the appointment of a receiver: (Sect. 25.) Certificate of tional capital. The Railway Companies Powers Act, 1864 (k), also contains proauthorizing addi- visions empowering the Board of Trade (in the case of railway companies incorporated by special act or by certificate under the Railways Construction Facilities Act, 1864 (1), to grant a certificate that the company are authorized to raise a capital for the purposes of the certificate such additional sum of money as therein limited by the issue of new shares or new stock, either ordinary or preference or partly ordinary and partly preference, or partly in that mode and partly by borrowing on mortgage, at the option of the company or as may be prescribed in the certificate, and with power to create and issue debenture stock. Issue of preferred and deferred ordinary stock. The Regulation of Railways Act, 1868 (m), also provides that any company which in the year immediately preceding has paid a dividend on their ordinary stock of not less than three per cent. may, pursuant to the resolution of an extraordinary general meeting, divide their paid-up ordinary stock into preferred ordinary stock and deferred ordinary stock, and issue the same subject to certain provisions and with certain consequences set forth in the act. The principal provisions are, that the preferred stock bears a fixed maximum dividend at the rate of 6 per cent., but that where there are not profits available for payment of such dividend, no part of the deficiency is to be made good out of the profits of any subsequent year: (Sect. 13, sub-sects. 6, 9.) (k) 27 & 28 Vict. c. 120, post, vol. II. For the procedure under this act and the amending act of 1870, see post, Ch. X., "Jurisdiction of the Board of Trade." CHAPTER IV. ON THE POWERS TO TAKE OR INJURIOUSLY AFFECT LANDS. 1. Agreements made before the Special Act is obtained. We will first treat of contracts to take lands, entered into by railway companies under their permissive powers, and the subject naturally divides itself into two branches, i. e., first, where the con tracts are made before the special act for making the railway is obtained; and, secondly, where they are made afterwards. The first branch has been fruitful of litigation, as we shall see upon an investigation of the authorities. In the early days of railways it was frequently held, in conformity with a previous decision of Lord Eldon (a), that agreements made by landowners with promoters of railway companies to sell their lands, and to withdraw or withhold opposition to a bill in Parliament (b), were not illegal, either as being a fraud upon the Legislature or other landowners, or as being contrary to public policy; and landowners recovered from companies large sums of money which had been agreed by promoters to be paid them as the price of their land, with a view to secure the withdrawal of their opposition to such bills (c). And it (a) Vauxhall Bridge Co. v. Spencer, Jac. 64. See 2 Madd. 356. (b) In Poole v. Poole, 34 L. J., Ch. 586; 13 W. R. 648, Kindersley, V.-C., held a tenant for life, who had received a large sum of money to withdraw opposition to a railway bill, to be a trustee of it for the benefit of himself and the remaindermen. See also Earl Shrewsbury v. North Staffordshire R. Co., 35 L. J., Ch. 166. (c) Stanley v. Chester and Birkenhead R. Co., 1 Railw. Cas. 58; 9 Sim. 264; 3 Myl. & Cr. 773; Lord Petre v. Eastern 1. Agreements before the Act. How far conpromoters are tracts made by binding on company. 1. Agreements before the Act. Lord Cotten. ham's doctrine in Edwards v. Grand Junction R. Co. was also held, that the fact of the landowner being a peer or member of Parliament did not render an agreement for the sale of his land at an exorbitant price the less valid, as such persons have as much right to sell their land for the highest price they can get as other people; though, of course, a substantive agreement by a member of the Legislature to take money for his vote would be illegal (d). Moreover, Lord Cottenham considered, that the company, when established under an act of Parliament, are entitled to all the rights and subject to all the liabilities of the projectors, and ought to be regarded in equity as the successors and assignees of the projectors; and he more than once held, that the company were so far bound by agreements entered into by the promoters or provisional committee or other agents, previous to or during the progress of the bill through Parliament, that he granted injunctions to restrain companies, when incorporated, from exercising powers acquired through the medium of such agreements, without carrying the whole agreements into effect (e). And his decisions were for some time acquiesced in and followed by other judges, and even elicited expressions of approbation in the House of Lords. But doubts have been thrown upon those decisions, which must therefore be considered to be considerably shaken, though they have not hitherto been expressly overruled. These doubts are founded chiefly upon the ground, first, that the company when incorporated are not in fact the successors or assignees of the promoters, but generally consist of shareholders who were neither themselves the promoters, nor in any way connected with the promoters of the act, but became subscrihers to the funds of the company after incorporation, upon the faith of the act of Parliament, which makes no allusion to any agreement entered into by the promoters; and to hold such subscribers bound by agreements entered into before the act was passed, and not mentioned in the act, would be a fraud upon them, as well as upon the Legislature and other landowners (as indeed was contended in the early cases) and, secondly, that the carrying out such agreements, by the payment of money out of the funds of the company when incorporated, is a misapplication of the funds of the company, and (d) See the cases of Lords Petre, Howden and Lindsey, ubi supra. See also Scottish North Eastern R. Co. v. Stewart, 3 M'Q. 382. (e) Edwards v. Grand Junction R. Co., 1 Railw. Cas. 173; 1 Myl. & Cr. 650; Stanley v. Chester and Birkenhead R. Co., ubi supra; Lord Petre v. Eastern Counties R. Co., 1 Railw. Cas. 462; G. W. R. Co. v. Birmingham and Oxford Junction R. Co, 2 Ph. 597, 605 ; 17 L. J., Ch. 243; Earl of Lindsey v. G. N. R. Co., ubi supra ; Gooday v. Colchester R. Co., 17 Beav. 132; Eastern Counties R. Co. v. Hawkes, 5 H. L. C. 356, 374-380. Of course a party, intending to require a substituted company to perform a contract made by him with other persons, must lose no time in asserting his rights, or equity will afford him no relief. Greenhalgh v. Manchester and Birmingham R. Co., 1 Railw. Cas. 68; 9 Sim. 416; 3 Myl. & Cr. 784. |