Traffic Agreements-Misapplication of Funds. 85

latter, is void :" (Lancaster and Carlisle Railway Co. v. London and 8 & 9 VICT, C. 16. North-Western Railway Co., 2 K. & J. 293.)

traffic on lines

constructed.

In a late case, which turned upon the construction of the same Agreements with agreement as that which formed the subject of Hare v. London respect to future and North-Western Railway Co., (ubi supra,) Sir R. T. Kindersley, not yet autho V.-C., decided, that whatever may have been the validity of the rised to be agreement as to the routes in existence at the time of entering into it, that agreement could not be held to apply to a line of railway constructed since that time: (Midland Railway Co. v. London and North-Western Railway Co., L. R. 2 Eq. 524 ;) and his Honour said that he was of opinion, though not free from doubt, that it would be ultrâ vires of the board of directors of a railway company to enter into a contract fixing and regulating the future traffic which might be carried upon a line of railway which the company might thereafter be empowered to construct, and the profits of such traffic, so as to give to another railway company an interest in such traffic and profits: (Ibid. p. 531.)

take shares in

It is a misappropriation of the funds of a railway company to take Railway comshares in another railway company without the authority of Parlia- panies may not ment for that purpose expressly given: (Salomons v. Laing, 12 Bea. another com377; 6 R. C. 289; 19 L. J. (Ch.) 269.)

pany without authority.

Whether a railway company having been authorised to take Whether, having shares in another railway company are entitled to take new shares shares, they may allotted to the holders of other shares, is a matter of great doubt: accept new (Great Western Railway Co. v. Metropolitan Railway Co., 32 L. J. to them. (Ch.) 382.)

shares allotted

There is, however, no doubt that the protection of an interest May not increase already acquired does not warrant the increasing of such interest their interest. without authority; and directors were held not to be justified in taking additional shares in order to assist another railway company

in making their line: (Salomons v. Laing, 12 Bea. 377; 6 R. C. 289; 19 L. J. (Ch.) 225, 291.)

purposes.

Although, in accordance with the principle laid down in Foss V. Application of Harbottle, (2 Hare, 461; see ante, p. 72,) the Court will not inter- capital to fere in matters relating to the internal regulation of the affairs of unauthorised a company, and will not, therefore, restrain the issue of capital authorised to be raised; still it will not, in a suit properly framed, allow the issue of capital, however regularly the issue may be made, if it is intended to apply it to purposes not authorised by the act of Parliament.

tion of different

Thus an injunction will be granted to restrain the application of Application of capital raised by an issue of scrip to the construction of a line scrip to construcdifferent from the prescribed line: (Bagshaw v. Eastern Union line. Railway Co., 7 Hare, 114; 2 MN. & G. 389; ante, p. 10.)

And the holder of such scrip may sue in respect thereof, although Remedy of scriphe be also an ordinary shareholder, since the right to protect his holder if also ordinary shareinterest in the latter character is the very equity upon which he holder." sues: (Ibid.)

decreed.

Amongst other cases in which directors may be controlled in Accounts of the exercise of their powers, the Court will, upon a bill properly abortive schemes framed, decree accounts with respect to expenses incurred by provisional directors of schemes which have proved abortive: (Wilhams v. Salmond, 2 K. & J. 463; Apperley v. Page, 1 Ph. 779; 4

8 & 9 VICT. c. 16. R. C. 568; Cooper v. Webb, 4 R. C. 582; Clements v. Bowes, 1 Drew. 684.)

Allegations

of fraud to be

If it is sought in such cases to make the directors or provisional against directors committee personally liable, general allegations of fraud are not specific, and not sufficient to support the bill; such allegations must be clear and merely general. precise: (Sibson v. Edgworth, 2 De G. & Sm. 73; but see Apperley v. Page, 1 Ph. 779; 4 R. C. 568; and Cooper v. Webb, 4 R. C. 582.)

Directors must

not take personal

advantage of their position.

Director dealing

in shares.

Contracts by directors. Common seal

does not bind if contract ultra

vires.

Arbitration clauses where

contract ultrà vires.

Question of fact sent to law.

Interim

injunction.

venience greater

to plaintiff.

For a case of misappropriation of funds by a committee of management of a company, repayment of the money misapplied being decreed, see Bryson v. Warwick Canal Co., 4 De G. M. & G. 711.

Directors must not by virtue of their office acquire profits or advantages which otherwise they could not have obtained.

Thus a director who had earned large profits by dealing in the shares of a railway company, which he placed in the names of his nominees, was ordered to reimburse to the account of the company the profits thus made: (York and North Midland Railway Co. v. Hudson, 16 Bea. 485; 22 L. J. (Ch.) 529; see also Doyle v. Muntz, 5 Hare, 509; Hodgkinson v. National Live Stock Insurance Co., 4 De G. & J. 422; 26 Bea. 473; Preston v. Grand Collier Dock Co., 11 Sim. 327.)

The cases with respect to agreements by directors will be found under s. 97, post, p. 89, et seq. It is necessary, however, here to notice that, although primâ facie a company is bound by an agreement to which the common seal has been affixed, still if the agreement be ultra vires this rule cannot apply: (Shrewsbury and Birmingham Railway Co. v. London and North-Western Railway Co., 6 H. L. 113.)

If an agreement contain stipulations which the Court holds to be ultra vires, it will not give effect to a clause providing that disputes arising upon the agreement shall be referred to arbitration: (Maunsell v. Midland Great Western (Ireland) Railway Co., 1 H. & M. 130.)

If the Court, in adjudicating upon cases of alleged abuse of power by directors, be of opinion that there is a question of fact to be tried, it will send a case for the opinion of the common-law judges, and, in a proper case, will grant an interim injunction in order to keep matters in a position in which, if the proceeding complained of is not pronounced illegal, it may be continued as originally proposed (see Shrewsbury and Birmingham Railway Co. v. London and North-Western Railway Co., 3 MN. & G. 70; 7 R. C. 531; Beman v. Rufford, 1 Sim. N. S. 550; 7 R. C. 48; Cory v. Yarmouth and Norwich Railway Co., 3 Hare, 593; 3 R. C. 542.)

No injunction if Where, upon a bill charging misappropriation of funds and illegal balance of incon- use of powers by directors, the Court is of opinion that more mischief than advantage may be done by interference than by leaving matters to the protection provided by the legislature against disobedience to its enactment, no injunction will be granted: (see Fielden v. Lancashire and Yorkshire Railway Co., 2 De G. & Sm. 531; per Lord Cranworth in Shrewsbury and Chester Railway Co. v. Shrewsbury and Birmingham Railway Co., 1 Sim. N. S. 410; 20 L. J. (Ch.) 574; Cory v. Yarmouth and Norwich Railway Co., 3 Hare, 593; 3 R. C. 524; Rogers v. Oxford, Worcester, and Wolverhampton Railway Co., 2 De G. & J.

662; per Sir J. L. Knight Bruce in Hodgson v. Earl Powis, 7 R. C. 8 & 9 VICT. C. 16. 956.)

Persons having otherwise a good right to complain of the proceed- Laches. ings of directors, will be precluded from asserting such right if they have allowed much time to elapse, or if, by their silence, they may be taken to have acquiesced in the proceedings they seek to impeach.

Thus in a suit by a shareholder against the company and directors, Example: where seeking to restrain the construction of part only of the line, and the by inquiry plaintiff might have making of calls and loans for that purpose, it was held on appeal ascertained how that although the proceedings were illegal, the plaintiff might by an illegal act inquiry have ascertained long previously that the whole line could not possibly be completed: (Graham v. Birkenhead, Lancashire, and Cheshire Junction Railway Co., 2 M'N. & G. 145; 7 R. C. 938.)

was impending.

act, although

So where the plaintiff complained that he could not oppose a bill Actual knowintroduced into Parliament for the abandonment of part of a rail-ledge of illegal way scheme, as the seal of the company had been affixed, and he was plaintiff since therefore, as a member of the corporate body, bound by their act, the precluded from taking proceedCourt held him to be concluded by laches, since he had known of ings. the intention to introduce the bill for three months before the petition was deposited: (Cooper v. Earl of Powis, 3 De G. & Sm. 658.)

tolls.

And acquiescence for forty-seven years to a lease granted by a Acquiescence to canal company of the tolls of the canal, disentitled the plaintiff's illegal lease of to relief: (Gray v. Chaplin,* 2 Russ. 126; 2 S. & S. 267. See also Stupart v. Arrowsmith, 3 Sm. & Giff. 176; Kent v. Jackson, 14 Bea 367; 2 De G. M. & G. 49; Ex parte Morgan, 1 H. & T. 320; 1 M'N. & G. 225; Gregory v. Patchett, 33 Bea. 595.)

XCI. Except as otherwise provided by the special act, Powers of the the following powers of the company, (that is to say,) the be exercised by choice and removal of the directors, except as herein- the directors. before mentioned, and the increasing or reducing of their number where authorised by the special act, the choice of auditors, the determination as to the remuneration of the directors, auditors, treasurer, and secretary, the determination as to the amount of money to be borrowed on mortgage, the determination as to the augmentation of capital, and the declaration of dividends, shall be exercised only at a general meeting of the company.

PROCEEDINGS AND LIABILITIES OF DIRECTORS.

And with respect to the proceedings and liabilities of Proceedings of the directors, be it enacted as follows:

directors.

XCII. The directors shall hold meetings at such times Meetings of

It was said in this case that, as the interest of the public cannot be affected by laches, had the Attorney-General been made a party, the relief prayed might perhaps have been granted.

directors.

8 & 9 VICT. c. 16. as they shall appoint for the purpose, and they may meet and adjourn as they think proper from time to time and from place to place; and at any time any two of the directors may require the secretary to call a meeting of the directors, and in order to constitute a meeting of directors there shall be present at the least the prescribed quorum, and when no quorum shall be prescribed there shall be present at least one-third of the directors; and all questions at any such meeting shall be determined by the majority of votes of the directors present, and in case of an equal division of votes the chairman shall have a casting vote in addition to his vote as one of the directors.

Permanent chairman of directors.

Occasional chair

XCIII. At the first meeting of directors held after the passing of the special act, and at the first meeting of the directors held after each annual appointment of directors, the directors present at such meeting shall choose one of the directors to act as chairman of the directors for the year following such choice, and shall also, if they think fit, choose another director to act as deputy chairman for the same period; and if the chairman or deputy chairman die or resign, or cease to be a director, or otherwise become disqualified to act, the directors present at the meeting next after the occurrence of such vacancy shall choose some other of the directors to fill such vacancy; and every such chairman or deputy chairman so elected as last aforesaid shall continue in office so long only as the person in whose place he may be so elected would have been entitled to continue if such death, resignation, removal, or disqualification had not happened.

XCIV. If at any meeting of the directors neither the man of directors. chairman nor deputy chairman be present the directors present shall choose some one of their number to be chairman of such meeting.

Committees of directors.

Powers of committees.

XCV. It shall be lawful for the directors to appoint one or more committees, consisting of such number of directors as they think fit, within the prescribed limits, if any, and they may grant to such committees respectively power on behalf of the company to do any acts relating to the affairs of the company which the directors could lawfully do, and which they shall from time to time think proper to intrust to them.

XCVI. The said committees may meet from time to 8 & 9 VICT. c. 16. time, and may adjourn from place to place, as they think Meetings of proper, for carrying into effect the purposes of their committees. appointment; and no such committee shall exercise the powers intrusted to them except at a meeting at which there shall be present the prescribed quorum, or if no quorum be prescribed then a quorum to be fixed for that purpose by the general body of directors; and at all meetings of the committees one of the members present shall be appointed chairman; and all questions at any meeting of the committee shall be determined by a majority of votes of the members present, and in case of an equal division of votes the chairman shall have a casting vote in addition to his vote as a member of the committee.

directors, to be entered

into (a).

XCVII. The power which may be granted to any such contracts by committee to make contracts, as well as the power of the committe, Low directors to make contracts on behalf of the company, may lawfully be exercised as follows; (that is to say,) (b) With respect to any contract which, if made between private persons, would be by law required to be in writing, and under seal, such committee or the directors may make such contract on behalf of the company in writing, and under the common seal of the company, and in the same manner may vary or discharge the same:

With respect to any contract which, if made between private persons, would be by law required to be in writing, and signed by the parties to be charged therewith, then such committee or the directors may make such contract on behalf of the company in writing, signed by such committee or any two of them, or any two of the directors, and in the same manner may vary or discharge the same:

With respect to any contract which, if made between private persons, would by law be valid although made by parol only, and not reduced into writing, such committee or the directors may make such contract on behalf of the company by parol only without writing, and in the same manner may vary or discharge the same:

And all contracts made according to the provisions herein contained shall be effectual in law, and shall be binding