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L. JJ.

1869

STRINGER'S
CASE.

instituted without any bill. He goes on, however, to say, "The vice of the Master's order lies in this, that it assumes that the five individuals where there is no cheque forthcoming, or three of them where there are cheques, are the parties who, as between the persons signing and the company, are solely and ultimately chargeable with the moneys misapplied." And he then says that he thinks there was that which, in substance, was a valid objection for want of parties. That case appears to me to be of importance in two respects, first, as shewing the clear opinion of so eminent a Judge as Sir James Parker, that in such a case the Master had jurisdiction without any bill being filed; and, secondly, that in those summary proceedings every objection is just as open to the person sought to be charged as it would have been if a bill had been filed. I need not multiply instances of the exercise of this summary jurisdiction; another is found in In re Direct East and West Junction Railway Company, Ex parte Johnson (1). But it is perfectly true that notwithstanding those proceedings and those opinions so expressed by several Judges, a doubt as to the propriety or the competency of the Court to exercise this jurisdiction was very frequently expressed by the late Lord Justice Turner. The matter very seldom came before him without his taking the opportunity of saying that in his judgment such proceedings were, if not unlawful, at all events inexpedient, and I believe that it was in consequence of the doubt so frequently expressed by that eminent Judge that the clauses were introduced into the subsequent Act of Parliament, and made so comprehensive and stringent as they now are. We find them expressed in the most wide and general terms. It is true they are permissive, but the proceedings are to be taken under the authority of the Court. They are to be taken by the official liquidator, who is the officer appointed by the Court, under the advice of solicitors appointed with the sanction of the Court, and under those circumstances I think it may be assumed that proceedings so instituted would be properly conducted, that is to say, that they would be so conducted as to afford to the persons sought to be charged a full knowledge of all the points of the case intended to be brought against them, and would give to them the fullest opportunity of defending themselves in any legitimate

(1) 1 Jur. (N.S.) 913.

way; and the able counsel who have argued this case on behalf of Mr. Stringer have entirely failed (although requested by the Court to do so) to point out any substantial difference or disadvantage in the position in which the present Respondent, Mr. Stringer, stands from that which he would have occupied if a bill had been filed containing the same statements as those found in the affidavit filed by the official liquidator, and concluding with a prayer in the precise words of the present notice of motion. The summary power which has been given by the recent Act of Parliament has been very frequently exercised; and in a case before the Master of the Rolls, the Cardiff Preserved Coal Company v. Norton (1), there is a very strong expression of his Lordship's opinion as to the propriety of such proceedings, for he there says (2): "It is said that the shares taken by them in exchange from the Crown Company belong to and form part of the assets of the Cardiff Company. If this be so, the proper mode of getting at the assets of the company in the hands of contributories is by a proceeding in the Court in which the company is being wound up." That was in the Court of Bankruptcy, which, under the peculiar circumstances of that case, was the Court having the conduct of the winding-up. Therefore, that amounts to an expression of opinion by the Master of the Rolls that a bill was not the proper proceeding in such a case, but a proceeding in the Court of Bankruptcy under the winding-up. It appears that this power has been very recently exercised, particularly in Shipman's Case, which came before the Lord Justice when Vice-Chancellor, and still more recently in a case mentioned at the Bar, the London and Provincial Starch Company, but which has not yet been reported, decided by Vice-Chancellor James.

Under these circumstances it appears to me that we should be doing something which is entirely inconsistent with the provisions of the Act of Parliament, so general as they are, if we were to introduce any such qualification as that said to have been laid down by the Master of the Rolls in the case of the Royal Hotel Company of Great Yarmouth (3). His Lordship is there reported to have said (4), "Where there is really a question to be tried, then I do not think this 165th section enables you to dispose of it in this

(1) Law Rep. 2 Eq. 558.
(2) Ibid. 563.

(3) Law Rep. 4 Eq. 244.
(4) Ibid. 248.

L. JJ.

1869

STRINGER'S

CASE.

L. JJ.

1869

STRINGER'S

CASE.

way ;"and, again (1), he says, the Court "can only do so in plain and straightforward cases where there is no point of law to be determined." Considering the great accuracy of the present Law Reports, one is very much disinclined to doubt that those are the words of the Master of the Rolls; otherwise, having regard to what I have always understood to be his own opinion upon this subject, and to his own decision in the case to which I have referred of the Cardiff Preserved Coal Company v. Norton (2), I could not help thinking that there must be some error in that report. However that may be, I feel bound to say that I do not think there is to be found, either in the words of the present Act of Parliament or in the conclusion which is justly to be drawn from the decisions upon this subject, any such qualification or limitation as that which is there expressed by his Lordship; and if we were so to hold in all these cases we should be inducing the person against whom the charge is made to endeavour to make out that there was some question to be tried, or that the matter was not so plain or straightforward as it was represented to be; and there are very few cases indeed in which some such attempt as that might not be made with some reasonable hope of success. The result would be to occasion the necessity for a double mode of proceeding and unnecessary expense and delay.

Applying, then, these observations to the present case, and assuming, with reference to this part of the case, that the ViceChancellor was right when he said that "this was a wholly delusive and improper dividend-in effect, a return of one-fourth of the capital, and a return of capital in violation of every rule of propriety, a return of capital in violation of the general provisions of the Act that dividends are not to be declared out of capital, and, above all, an extraordinary violation of their own rule which prescribes that they are not to pay dividends except out of profits," or, as it is more concisely put in another passage in the same judgment, that "this is a dividend most improperly made, and a return of one-fourth of the capital"-under those circumstances, has this Court jurisdiction under the 101st and 165th sections of this Act to order the return of money so improperly paid without the necessity of having a bill filed? In my judgment, there is no (1) Law Rep. 4 Eq. 249. (2) Law Rep. 2 Ch. 405.

L. JJ.

1869

CASE.

doubt that the Court has that power under either of these sections; for under the 101st section, under the circumstances stated by the Vice-Chancellor, can it be doubted that the amount STRINGER'S of such a dividend so improperly paid, of capital so improperly expended, would be "a sum of money owing from the contributory" who receives it to the company within the terms of that section? If so, there is under the Act of Parliament the clearest authority without bill filed to order a return of the money so received. The 165th section is, if possible, even clearer. That is, in particular, the section which was framed in this very comprehensive form in order to obviate the doubts expressed by Lord Justice Turner. [His Lordship read the section.] There is no such limitation to be found in the words of either of these sections as is reported to be considered as included in them by the Master of the Rolls in the case of In re Royal Hotel Company of Great Yarmouth (1); but, on the contrary, the Court is empowered to examine into the conduct of the director, and that necessarily implies deciding the question whether he has been guilty of any misfeasance or breach of trust, and therefore there would be a question to be tried in every such case. It is open to the Court to examine into his conduct, to compel him to repay any moneys so misapplied, or to contribute such sums by way of compensation as the Court shall think fit. It appears to me that if we had now to draw a clause in the widest and fullest manner it would be very difficult to conceive anything more large or comprehensive than the words of the 165th section. Under these circumstances, it appears to me that if this was a wholly delusive dividend, and an improper return of capital, this money so received by the managing director of the company in respect of that delusive and improper dividend, and in respect of that improper return of capital, would be a sum of money for which the managing director would be accountable, and which, consequently, the Court might, under this jurisdiction, order him to refund. I must therefore entirely differ, though most respectfully, from the conclusion at which the learned Vice-Chancellor has arrived upon this part of the case, and I consider that in so doing I am acting in accordance with a long series of authorities in this Court.

(1) Law Rep. 4 Eq. 244.

L. JJ.

1869

STRINGER'S
CASE.

There remains, however, the question upon the merits of this case, and that question may be shortly stated thus:-Whether the dividend of £25 per cent. which was declared and paid by the directors in this case is to be considered, as the learned ViceChancellor has considered it, so wholly delusive and improper, or, in substance, such a return of capital, as to justify the Court in any jurisdiction in making Mr. Stringer pay the amount of £25 per cent, on the nominal value of the shares standing in his name. Now, I quite agree with the argument which has been addressed to us on behalf of the official liquidator to this extent, that the Act which confers on these companies the privilege of limited liability imposes upon them at the same time certain conditions which they are bound to observe, and which may be considered as the price of that privilege; and if it is made to appear that for the purposes of fraud, or for any other improper motive, a company has declared and paid a wholly delusive and improper dividend, and has thereby in effect taken away from its creditors a portion of the capital which was available for the debts of those creditors, I entertain no doubt that the Court would have full jurisdiction, and would exercise it by ordering the repayment of the money so improperly paid. But in the present case we have to consider whether this dividend was, in truth, a dividend declared under such circumstances. I think that (having regard to the amount of the balance) we may dismiss from our consideration some of the minor items upon which considerable discussion has arisen. The substantial question in the case depends upon the consideration of three items in this account. Those are, first, the ships which were actually lost; secondly, the debt due from the Confederate government; and, thirdly, the cotton which was in the Confederate States at the time when the balance sheet was made out. It is very material to observe in this case that no fraud on the shareholders can be, or is attempted to be, alleged in argument, because in this case a full and fair dividend was declared, and was paid, or intended to be paid, to all the shareholders equally without any preference or priority. Neither was there any fraud upon the public intended or practised, nor even upon that part of the public who might be expected to become purchasers of the shares, because it is admitted that the shares

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