aiiii iiiiiiiii J! 'i Cornell University Library KD 2149.W52 European arbltratlon.Lord Westburys dec 3 1924 017 815 063 Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924017815063 EUROPEAN ARBITliTION. LORD/WESTBUEY'S ^ REPORTED By FRANCIS S. REIILLY, M,A., OF LIlfCOLN's INN, JSSQ., BARBIBTBE-AT-LAW. Part I. L 01^ DOS: 8 T E YENS & MA f .3Sr E S, BELL YAED, TEMPLE "BAE. 1873. PBJOE SEVEN SHlLLimS AmJJXPENCE. The Eeportee, having assisted IS6]M)^estbuet in the work of Ihe Arbi- tration (with the designation of Assessor), has thought that a report prepared by him of these decisions would be acceptable to members of the legal pro- fession and to those concerned in the conduct of Life Assurance business. The full names of the companies in liquidation appear in the Schedule to the Arbitration Act in the Appendix. The names of reported cases cited are in some instances varied for brevity and convenience of reference and recollection. Some of the superfluities of diction in affidavits and other documents quoted are retrenched. Apra 1873. OASES IN PAET I. BuTHiN Case — r Beserved Fund of GtAblant'b GASE-^Ifiterest on Debt „ Indemnity Case — Amalgamation Pownall's Case — lAst of Contributories ;Btkb's Case — Conduct of Liquida- tions .. .. .. .. Lancet's Case — List if Contributories Head's Case — List of Contributories — - Transfer not completed before Wind- ing-up Cathie's Case — OaU — Bonus credited on Share Bbowh's Case— iis* of Contributories 1 2 3 .8 12 12 19 27 — Liquidation by Arrangement under Bankruptcy Act of 1869 Lloyd's Case — List of Contributories — Transfer not completed before Wind- ing-up — Disapprobation by Directors of proposed Transferee Coghlan's Case — Policy — Novation — Protest — Bonus Wallbebg's Case — Valuation of Poli- cies and Annuities — Payment ^Pre- miums — Interest — Payments on Ac- count of Annuities .. ., „ Blundell's Case — Policy — Novation 32 35 46 65 84 APPENDIX. A. EuKOPBAN Abbitbatioh Act 3 33/(^C APPENDIX. A. EUROPEAN ARBITRATION ACT, 1872. 35 & 36 Vict. c. cxlv. An Act to effect a settlement of the affairs of the European Assur- ance Society, and of other compauies. [25th July, 1872.] Whbeeas the People's Provident Assurance Society was established by deed of settlement, dated the 2nd day of September, 1854, and was completely registered under the Act of the 7th and 8th Victoria, chapter 110, for the registration, in- corporation, and regulation of joint stock companies for the purpose among other things of can-ying on a life assurance, annuity, endowment, loan, reversionary, and guarantee business, and also to grant assurances against fire or other casualty, to collect rents and guarantee the payment thereof, and of other debts, and to grant assurances on lives against the risk of accidental death : And whereas by an Act intituled the European Assurance Society's Act, 1869, passed in the Session of Parliament held in the 22nd and 23rd years of Her Majesty's reign (in this Act called the recited Act), the name of the People's Provident Assurance Society was changed to the European Assurance Society, and the Commissioners of Her Maji sty's Treasury and other bodies and persons were amongst other things authorised to take tlie guarantee of the said society instead of other security required from persons in public and other offices and employments : And whereas the said society (in this Act called the European Society) has a share capital of the nominal amount of one million sterling divided into 400,000 shares of £2 10s. Od. each, whereof 311,733 shares, representing the capital sum of £779 332 10s. Od., have been subscribed, and calls amounting together to the sum of £1 10s. per share have been made upon the said shares and the sum of £297,590 12s. Gd. has been paid thereon : And whereas the European Society at divers times purchased on various terms the assets and business (subject to the liabilities on policies, annuities, endow- ments, and otherwise) of the following companies ; that is to say, 1. The Athenaaum Life Assurance Society ; 2. The British Nation Pire Insurance Company, Limited ; B ii APPENDIX A. 3. The British Nation Life Assurance Association ; 4. The European Life Assurance and Annuity Company ; 5. The India and London Life Assurance Company ; 6. The Industrial and General Life Assurance and Deposit Company ; 7. The Prince of Wales Life and Education Insurance Company ; 8. The Professional Life Assurance Company ; 9. The Eoyal Naval Military and East India Company Life Assurance Society ; 10. The United Guarantee and Life Assurance Company ; 11. The United Mutual Mining and General Life Assurance Company ; 12. The United Service and General Life Assurance and Guarantee Associa- tion. And whereas the European Society gave to all or some of the said selling com- panies, as one of the terms on which the respective purchase was expressed to be made, a general indemnity against claims, whether on policies, annuities, and endowments, and otherwise, current at the time of the purchase or otherwise : And whereas the said British Nation Fire Insurance Company, Limiteil, had, previous to the sale of its assets and business to the European Society, purchased the business and assets of the Alexandra Insurance Oompiiny, Limited, subject to its liabilities, and with such indemnity as aforesaid : And whereas the said British Nation Life Assurance Association had, previous to the sale of its assets and business to the European Society, purchased the busi- ness and assets of the following insurance companies, subject to their respective liabilities and with such indemnities as aforesaid ; that is to say, the British Commercial Insurance Company, the British Provident Life and Fire' Assurance Company, the English and Irish Church and University Assurance Society, the English Widows Fund and General Life Assurance Association, the General Accident and Compensation Assurance Company, the London Equitable Mutual Life Insurance Society, the London and Provincial Provident Society, the Phoenix Life Assurance Company, the Waterloo Life Education Casualty and Self- Relief Assurance Company, and the Wellington Eeversionary Annuity and Life Assur- ance Society : And whereas the said British Provident Life and Fire Assurance Company had, previous to the sale of its assets and business to the British Nation Ijife Assurance Association, purchased the assets and business of the Anglo-Australian and Uni- versal Family Life Assurance Company and the Diadem Life Assurance Company, subject to their respective liabilities and with such indemnities as aforesaid : And whereas the said English and Irish Church and University Assurance Society had, previous to the sale of its assets and business to the said British Nation Life Assurance Association, purchased the business and assets of the Hou.seholders Life Assurance Company and the Engineers Masonic and Universal Life Mutual Assurance Society and the Age Assurance Company, subject to their respective liabilities and with such indemnities as aforesaid : And whereas the said English Widows' Fund and General Life Assurance Association had, previous to the sale of its assets and business to the said British Nation Life Assurance Association, purchased the business and assets of the English and Cambrian Assurance Society, the General Indemnity Life and Fire Insurance Company, and the Commercial and General Life Assurance Annuity Family EUROPEAN ARBITRATION ACT. iii Endowment and Loan Association, subject to their respective liabilities and 'with such indemnities as aforesaid : And whereas the said London and Provincial Provident Society had, previous to the sale of its assets and business to the said British Nation Life Assurance Association, purchased the assets and business of the British Shield Mutual Life Assurance Institution, subject to its liabilities and with such indemnity as aforesaid : And whereas the said Phcenix Life Assurance Company had, previous to the sale of its assets and business to the said British Nation Life Assurance Associa- tion, purchased the assets and business of the Catholic Law and General Life Assurance Company subject to its liabilities and with such indemnity as aforesaid : And whereas the said Waterloo Life Education Casualty and Self-Relief As- surance Company had, previous to the sale of its assets and business to the said British Nation Life Assurance Association, purchased the business and assets of the Magnet Life Assurance Company, the Life Assurance Treasury, and the National Assurance and Investment Association, subject to its respective liabilities and with such indemnities as aforesaid : And whereas tbe said Wellington Reversionary Annuity and Life Assurance Society had, previous to the sale of its assets and business to the said British Nation Life Assurance Association, purchased the assets and business of the London and Yorkshire Assurance Company, subject to its liabilities,' and with such indemnity as aforesaid : And whereas the said Anglo-Australian and Universal Family Life Assurance Company had, previous to the sale of its assets and business to the said British Provident Life and Fire Assurance Company, purchased the business and assets of the Accumulative Life Fund and General Assurance Company, subject to its liabilities, and with such indemnity as aforesaid : And whereas the said Householders' Life Assurance Company had, previous to the sale of its assets and business to the said English and Irish Church and University Assurance Society, purchased the assets and business of the Tontine Life Assurance Company, subject to its liabilities, and with such indemnity as aforesaid : And whereas two petitions were presented to the Court of Chancery, one by Joseph Greenough, on the 10th day of June, and the other by Charles Holt, on the 5tb day of July, 1871, both alleging, among other things, that the European Society was insolvent and unable to meet its engagements, and praying that it might be wound up under the provisions of the Companies' Acts 1862 and 1867 : And whereas by an Order dated the 25th day of July, 1871, the said Court being of opinion that it had been proved that the European Society was in- solvent, ordered that the further hearing of the said petitions should stand over until Michaelmas Term, then next ; and by the same Order it was directed that all premiums which should be paid on policies of the said society after that date should be carried to a suspense account and returned to the persons paying the same in case an Order should be made for the winding-up of the said society : And whereas the said Court, by an order dated the 17th day of November, 1871, ordered that Charles John Bunyon, William Pollard Pattison, and Stephen Philpot Low should be appointed provisional official liquidators of the said B 2 w APPENDIX A. society, and that the further hearing of the said petitions should be adjourned until Hilary Term then next : And whereas upon the hearing of the said petitions the said Court, by an Order dated the 12th of January, 1872, and made by the Vicc-Chancellor Sir Richard Malins, ordered that the European Society should be wound up by the said Court under the provisions of the Companies Acts 1862 and 1867, and by an Order made on the 8th day of February, 1872, in the matter of the said winding-up, the said Court appointed the said Charles John Bunyon, "William Pollard Pattison, and Stephen Philpot Low ofScial liquidators of the said society : And whereas the said AthensBum Assurance Society, Professional Life As- surance Company, British Provident Life and Fire Assurance Company, English and Irish Church and University Assurance Society, English Widows' Fund and General Life Assurance Association, Phoenix Life Assurance Company, Waterloo Life Education Casualty and Self-Relief Assurance Company, General Indemnity Life and Fire Insurance Company, Commercial and General Annuity Family Endowment and Loan Association, Life Assurance Treasury, and National As- surance and Investment Association, were previously to the said 10th day of June, 1871, in course of being wound up by or under the supervision of the Court of Chancery : And whereas, since the said 10th day of June, 1871, the said Royal Naval, Military, and East India Company Life Assurance Society, and the said British Nation Life Assuiance Association, and the said British Nation Fire Assurance Company, Limited, have gone into liquidation : And whereas, in the circumstances hereinbefore appearing, grave questions have arisen, and it is apprehended will arise, between the European Society on the one hand and the aforesaid several companies on the other hand, and also amongst some of the last-mentioned companies, as between one another : And whereas the policy-holders, annuitants, endowment-holders, and other creditors of the European Society and the said other companies, except such of them as have claims on such of the said companies as are solvent, are in danger of losing a large portion of their claims on account of the insolvency of the European Society, and of such of the said other companies as are insolvent, and the risks and costs of the liquidation of the European Society and of the said other companies : And whereas it may be expedient that the liabilities of the European Society, and of the said other companies, or some of them, on policies, annuities, and endow- ments should not be disposed of as immediate claims in the ordinary course of liquidation, but should be met subject to any necessary deductions at maturity ; and for this purpose, that the life assurance business of the European Society should be carried on to its natural termination by means of a transfer of the same to another company, upon terms to be agreed upon, or by a sale of the goodwill of the snid business : And whereas in the ordinary course of liquidation it would be impossible to obtain the assent of the creditors of the European Society and the sa-d several other companies to any scheme of transfer or arrangement unless all the said companies were in liquidation and all the creditors thereof respectively had finally proved their debts : EUEOPEAN AEBITEATION ACT. v And whereas it is desirable, for the purpose of transferring the said business, or disposing of the goodwill thereof, or arranging or finally winding up the affairs of the European Society, that discretion should be placed in an arbitrator specially constituted for the purpose to determine the rights and settle the affairs of the European Society and of the said several other companies and their creditors ; and it is expedient to give power to such arbitrator, if he shall think fit, to settle a scheme for the reconstruction of the European Society, or for the transfer of the said business, or the sale of the goodwill of the European Society, and to provide, so far as possible, for the satisfaction of its pending insurance liabilities in the natural course of maturing, and for the settlement of all matters and questions relating to the afiairs of the said companies respectively, as fully and effectually as could be done by Parliament : And whereas the person named in that behalf in this Act has consented to be the arbitrator for the purposes of this Act : And whereas the several purposes aforesaid cannot be effected without the authority of Parliament : May it therefore please your Majesty that it may be enacted, and be it enacted by the Queen's most excellent Majesty, by and with the advice and consent of the Lords Spiritvial and Temporal and Commons in this present Parliament assembled, and by the authority of the same, as follows : that is to say, 1. This Act may be cited for all purposes as The European Assurance Society Arbitration Act, 1872. 2. In this Act — " The European Society " means the European Assurance Society. "The scheduled companies" means the several companies, associations, societies, or partnerships named in the schedule to this Act, whether legally constituted companies or not ; " The absorbed companies " means the several companies (if any) which have from time to time been directly or indirectly transferred, absorbed into, or amalgamated or united with any of the scheduled companies ; "Creditor" includes policy-holder, annuitant, or endowment-holder, and a person claiming or alleged to be a creditor as a policy-holder, annuitant, endovpment-holder, or otherwise ; " Shareholder " includes member, proprietor, or partner, and a person claim- ing or alleged to be a shareholder, member, proprietor, or partner, of or in a company, association, society, or partnership ; " Contributory " includes a person claiming or alleged to be a contributory ; " Creditor," " debtor," " shareholder," and " contributory " respectively in- clude the heirs, executors, administrators^ successors, and assigns of a creditor, debtor, shareholder, or contributory ; " Person " includes corporation or body ; " Liability " includes policy, annuity, endowment, and guarantee, and any liability present, future, liquidated, contingent, or other on or in respect of a policy, annuity, endowment, or guarantee. 3. For the purpose of settling the affairs by this Act referied to arbitration the Bight Honourable Eichard Baron Westbury is hereby ajipointed the arbitrator. vi APPENDIX A. 4, The matters by ttis Act referred to arbitration comprise the following : (a.) The relative rights, liabilities, and interests of the several absorbed and scheduled companies on the one hand, and of their respective creditors, debtors, shareholders, and contributories on the other hand ; (J.) The relative rights, liabilities, and interests of the several absorbed and scheduled companies as between each other ; (c.) The claims of the several absorbed and scheduled companies or their respective creditors, shareholders, and contributories against any person, and of any person against those several companies, in respect of any pay- ment made or anything done or omitted by or on behalf of any of those companies, or by any person in relation to the affairs of any of those companies ; (d.) All matters in question as between all parties in all liquidations of any of the several absorbed and scheduled companies, and in all suits, actions, and proceedings relating to the affairs of those several companies, and every such liquidation, suit, action, and proceedings ; (e.) Any claims and matters in question between any present- or former share- holder of any of the several absorbed and scheduled companies, and any trustees, directors, or officers of such companies respectively in respect of any alleged fraud, misfeasance and nonfeasance, misappropriation, or otherwise ; (/.) Generally the winding-up and final settlement of the affairs of the several absorbed and scheduled companies. 5. The arbitrator may, if he thinks fit, settle and award a scheme or schemes for the arrangement, compromise, and final settlement of all or any part or parts of the affairs of the several absorbed and scheduled companies or any or either of them, and of all or any of the matters by this Act referred to arbitration ; and any such scheme or schemes may provide for the matters aforesaid or any of them in either of the forms following : (a.) In the form of a reconstruction or reconstitution of the European Society, with or without modification or the incorporation by registration or otherwise of that society, or the appointment of another Company for the purpose of collecting the premiums and managing the business and guaranteeing the investment of the funds in either of those cases, with provisions for the continuance and conduct of all or any branch or part of the insurance, and other business of the European Society, to the natural termination of that business or otherwise, and with or without in either of those cases the payment to any holder of a policy^ annuity, endowment or guarantee of the surrender or other estimated value thereof ; (h.) In the form of a transfer, total or partial, of that business to another company or other companies existing or to be constituted under the directions of any scheme or schemes, or otherwise ; or in any such other form or manner as the arbitrator in his absolute and un- fettered discretion thinks expedient. e. The arbitrator shall have power, for the purposes of any scheme or any EUEOPEAN AEBITEATION ACT. vii other purpose of the arbitration, to do all or any of the following things, namely : (1.) To value and estimate any liabilities or claims, whether present, future, liquidated, contingent, or otherwise : (2.) To direct the winding-up of any of the scheduled or absorbed companies not in liquidation, in any case in which the Court of Chancery might, in the opinion of the arbitrator, order the same, or in any such case to deal with them or any of them and their respective creditors, debtors, shareholders and contributories, as if such companies were in liquida- tion: (3.) To direct s\ich contributions and payments to be made, and in such manner and by such persons or classes of persons and companies as he thinks equitable and expedient : (4.) To make such deductions, present or future, fixed or contingent, from liabilities or claims, and to establish such funds, securities, guarantees, trusts and powers, as appear to him expedient and equitable : (5.) To reduce the amount of the contracts of all or any of the scheduled or absorbed companies on such terms and subject to such conditions as he thinks just : (6.) To take the advice and opinion of actuaries, surveyors, and other experts, and to adopt and act on any such advice or opinion if and as far as he ■thinks fit. 7. The arbitrator shall have power, for the purposes of any scheme or any other purpose of the arbitration, to get in or direct the getting in, and to apply or dis- tribute, or direct the application or distribution of, or to otherwise deal with all or any part of the assets of any of the several absorbed or scheduled Companies, including any guarantee fund, indemnity fund, or other special fund belonging to or held in trust for, or established for any purpose of, or relating to any of those companies ; and all matters in question, as between all parties to any suit or proceeding pending at the passing of this Act, relating to any such fund as afore- said, and every such suit or proceeding shall be comprised among the matters by this Act referred to arbitration : Provided always, that nothing herein contained shall affect the Reserved Fund and the application thereof under the recited Act. 8. The arbitrator may settle and determine the matters by this Act referred to arbitration, not only in accordance with the legal and equitable rights of the parties as recognised in the Courts of Law or Equity, but on such terms and in such manner in all respects as he in his absolute and unfettered discretion thinks most fit, equitable, and expedient, and as fully and effectually as could be done by Act of Parliament. 9. With respect to the authority and jurisdiction of the arbitrator generally, the following provisions shall have effect : namely, (1.) The arbitrator shall have such powers and authorities as an arbitrator appointed by consent of parties or by order of a court or of a judge has at common law or by statute or otherwise, and in addition thereto and to the powers and authorities expressly given to him by this Act, he shall have all the powers, authorities and jurisdiction vested in or oxer- viii APPENDIX A. ciseable by the Court of Chancery or a Judge thereof, in Court or at Chambers, in the liquidations of any of the Scheduled Companies pending at the passing of this Act, and all such powers, authorities and jurisdic- tion as would have been vested in or exerciseable by the Court of Chancery or a Judge thereof, in Court or at Chambers, if all the scheduled and absorbed Companies had been in liquidation in the Court of Chancery at the passing of this Act : (2.) The arbitrator may make all such orders and do all such acts and things as^the Court of Chancery, or a Judge thereof in Court or at Chambers, might have made or done in any such liquidation as aforesaid : (3.) Every order, act, and thing, so made and done by the arbitrator, shall have to all intents the like effect, as if it had been made or done by the Court of Chancery, or a Judge thereof in Court or at Chambers, and shall be acted on, obeyed, executed, and enforced by all sheriffs and other officers and persons accordingly : (4.) The arbitrator shall have the like power of appointing an official liquidator or official liquidators for the purposes of any such liquidation as afore- said as the Court of Chancery has or would have ; and an official liquidator appointed by the arbitrator shall have the like powers and authorities subject to the like restrictions as an official liquidator appointed by the Court of Chancery : (5.) For the purposes of this Act, Parts IV. and VIII. of the Companies Act, 1862 (relating respectively to winding up and to unregistered com- panies), and all provisions of that Act relative thereto, and all enact- ments amending those parts and provisions, shall have effect as if throughout those parts, provisions, and enactments, the arbitrator were mentioned instead of the Court of Chancery or a Judge thereof : (6.) The jurisdiction of the arbitrator shall extend to India, Canada, the Australian and other Colonies, and all other parts of Her Majesty's dominions, and the arbitrators shall have all the powers, authorities, and jurisdiction vested in or exerciseable by any Court in India, Canada, the Australian and other colonies, or in any other part of Her Majesty's dominions, in respect to any of the scheduled and absorbed companies, and their respective creditors, debtors, shareholders, or contributories, or to any of the matters by this Act referred to arbitration : And nothing in this Act shall be construed as restricting the generality of this section. 10. No suit, action, or proceeding shall, after the passing of this Act, and pend- ing the arbitration, be instituted, brought, or taken in respect of any of the matters by this Act referred to arbitration, except by the direction of the arbi- trator, and subject to such terms and conditions as he thinks fit to impose. 11. Any liquidation, suit, action, or proceeding which at the passing of this Act is pending in or under appeal from any Court of Law or Equity, in respect of any of the matters by this Act referred to arbitration, shall not be carried on after the Ijassing of this Act otherwise than before the arbitrator, except with the leave of the arbitrator, and subject to such terms and conditions as he thinks fit to impose. 12. All money and securities under the control of the Court of Chancery in EUROPEAN ARBITRATION ACT. ix any of the liquidations of any of the absorbed or scheduled companies pending at the passing of this Act, or of any of the licLuidatovs therein, and all books, papers, and documents relating to any of those liquidations in the possession, custody, or control of any of the liquidators therein, shall on the passing of this Act be paid and delivered up to the arbitrator, or as he directs. 13. The liquidators of such of the several absorbed and scheduled companies as are in liquidation shall take such steps and proceedings, and do all such things in the Court of Chancery or elsewhere with reference to the matters by this Act referred to arbitration, as the arbitrator directs. 14. The arbitrator may refer for taxation to one of the taxing masters of the Court of Chancery all bills of costs, accounts of allowances and remuneration, and other charges of solicitors, liquidators, and others claimed against any of the ab- sorbed and scheduled companies or any of their creditors, debtors, shareholders, or contributories, in respect of the liquidation of any of those companies or otherwise in respect of any mattei- pending at the passing of this Act in relation to those companies or any of them, and the taking master to whom the same are referred shall (subject to any directions of the arbitrator) tax those bills and accounts as if they had been referred for taxation by the Court of Chancery, and shall report on the same to the arbitrator, if so required by him. 15. The arbitrator may allow or direct any proceeding pending at the passing of this Act to proceed to judgment or such other stage as he may think fit, and may direct any new proceeding to be taken, and to proceed to judgijient or such other stage as he may think fit, and the arbitrator may also, in his discretion, adopt any judgmeutj verdict, decree, order, or certificate made in any proceeding pending at the passing of this Act or directed or allowed by him to be taken, and may adopt and avail himself of any such proceeding and of any evidence taken therein as he thinks fit, and may make any award or order in pursuance, either wholly or partly, of any such judgment, verdict, decree, order, certificate, or pro- ceeding, or may award or order that any proceeding be carried on as if this Act had not been passed, and may make his final award without awaiting the termination of the proceeding. 16. Applications to the arbitrator shall be made in such manner and form and shall be heard and disposed of on the attendance of or notice to such parties or persons chosen as representatives of such parties on such written or other statements and on such evidence as the arbitrator by general regulations or otherwise from time to time directs, and the costs of any such applications and of all proceedings before the arbitrator or under his authority or otherwise under this Act shall be in the discretion of the arbitrator, who may direct to or by whom or out of what fund the same shaU be paid ; and the opinion or decision of the arbitrator on any such application or with respect to the costs thereof or on any matter or thing within his jurisdiction, shall not be subject to review or appeal, and the amount of such costs may be ascertained by the arbitrator or by taxation in the Court of Chancery, or otherwise as he directs. 17. The arbitra^toT may make and vary such general rules, regulations, and orders as he from time to.time thinks fit as to parties, mode of procedure, notices, evidence, or costs... X APPENDIX A. 18. All awards, orders, certificates, or other instruments made by or proceeding from the arbitrator shall be sufiSciently authenticated if under his hand, and may be in writiug or print, or partly in writing and partly in print, and all Courts in every part of her Majesty's dominions shall take judicial notice of his signature. 19. Any notice issued by the arbitrator or any award, order, certificate, or other instrument made by or proceeding from him shall, if he so directs, be pub- lished in the London Gazette, or in any other official gazette or like publication published in any part of Her Majesty's dominions. 20. The arbitrator may, from time to time, mate any certificate, award, order, or other instrument touching any one or more of the questions, matters, or things before him, and may, by any subsequent certificate, award, order, or other instrument, supplement or vary any previous certificate, award, order, or other instrument, and shall, within one year after the passing of this Act, or within such extended period as he by writing under his hand from time to time appoints in this behalf, make a final award for the settlement of all matters by this Act referred to arbitration. 21. All awards, ordfers, certificates, or other instruments made by or proceed- ing from the arbitrator shall be binding and conclusive on all parties and persons to all intents and purposes whatsoever, and shall not be removed or removable by certiorari or by other writ or process into any of her Majesty's Court-s of Law or Equity, and the proceedings or acts of the arbitrator shall not be liable to be interfered with by any Court of Law or Equity by way of mandamus, prohibition, injunction, or otherwise ; and no such award, order, certificate, or other instrument shall be set aside for any irregularity or informality, or by reason of any matter referred being left undecided ; and no such award, order, certificate, or other in- strument shall be subject to review or appeal or be liable to be questioned on any ground before or after the maKng the final award in any Court of Law or Equity or elsewhere by any proceeding against any of the scheduled or absorbed companies or of the respective creditors, debtors, shareholders or contributories, or against the arbitrator, or against any sheriff or other ofBcer or person or otherwise ; and every such award shall have the like effect as if it had been enacted or confirmed by Act of Parliament. 22. Notice of the making of every award of the arbitrator shall be given in the London Gazette, and every such award shall be enrolled in the High Couit of Chancery within three months after the execution thereof, and a copy thereof certified by the proper ofBcer of the Enrolment Office of the Court, or printed by the Queen's printers, shall be evidence of the contents of the award, and that it was duly made and all the requisitions of this Act in relation thereto were complied with. 23. AH trustees, executors, and administrators, trustees and assignees in Bank- ruptcy, trustees and inspectors under deeds of arrangement, or composition liquidators, and corporations holding or being entitled to or interested in (on any trust or otherwise) any policy, annuity, or endowment granted by any of the transferred, scheduled, or absorbed companies, and all guardians and committees of infants and lunatics, holding or being entitled to or interested in any such policy, annuity, or endowment, may for the purposes of any scheme, and any other pur- EUROPEAN ARBITEATION ACT. xi pose of the arbitration, exercise all ['owers of consenting, voting, appointing proxies, accepting substituted policies, annuities, and endowments, and sub- mitting to reduction of the amount of policies, annuities, and endowments, and generally all powers and discretions that would have been exerciseablo by them for the purposes of any scheme, or any other purpose of the arbitration, if they had been individuals entitled in their own right, and not under disability ; and they shall be by virtue of this Act indemnified in respect thereof ; and every sub- stituted or reduced policy, annuity, or endowment shall be, by virtue of this Act, subject and liable to the same trusts and charges as affect the policy, annuity, or endowment for or from which the same is substituted or reduced, and the same shall, by virtue of this Act, vest and pass, so as to give effect to and not revoke any settlement or testamentary or other disposition of, or affecting the policy, annuity, or endowment for or from which the same is substituted or reduced, and the arbitrator may give such directions as he thinks just and expedient for the better execution of this section. 24. The arbitrator may appoint and employ any registrar, assessor, examiner, secretary, clerks, and other officers for the purposes of this Act, and fix their remuneration, and determine and direct out of what funds the same shall be paid. 25. The expenses of the arbitration shall be determined by the arbitrator, and paid in such manner as he directs, including a sum of not more than three thousand five hundred guineas to the arbitrator for his personal trouble. 26. If the arbitrator appointed by this Act, or any succeeding arbitrator under this Act, dies, resigns, or from any cause becomes incapable of acting or unwilling to act, an arbitrator shall be appointed in bis place by the Lord High Chancellor of Great Britain for the time being; such last-mentioned arbitrator being a person filling or having filled the office of a Judge, or in one of the Superior Courts of Law or Equity in the United Kingdom, or being a member of the Judicial Com- mittee of the Privy Council ; and the provisions of this Act relating to the arbitrator shall extend to any person so appointed. , 27. AH costs, charges, and expenses preliminary to, and of and incident to the preparing, applying for, obtaining, and passing of this Act (including the costs of the petition of the Liquidators of the British Nation Life Assurance Association in relation to this Act) shall be paid out of the assets of the European Society. The SCHEDULE referred to in the foregoing Act. European Assurance Society. Athenaeum Life Assurance Society. British Nation Eire Insurance Company, Limited. British Nation Life Assurance Association. European Life Assurance and Annuity Company. India and London Life Assurance Company. Industrial and Greneral Life Assurance and Deposit Company. xii APPENDIX A. Prince of Wales Life and Education Insurance Company. Professional Life Assurance Company. , Royal Naval, Military, and East India Company Life Assurance Society. , United truarantee and Life Assurance Company. United Mutual Mining and General Life Assurance Company. United Service and General Life Assurance and Guarantee Association. Alexandra Insurance Company, Limited. British Commercial Insurance Company. British Provident Life and Fire Assurance Company. English and Irish Church and University Assurance Society. English Widows' Fund and General Life Assurance Association. General Accident and Compensation Assurance Company. London Equitahle Mutual Life Insurance Society. London and Provincial Provident Society. Phoenix Life Assurance Company. Waterloo Life, Education, Casualty, and Self Relief Assurance Company. Wellington Reversionary Annuity and Life Assurance Society. Anglo-Australian and Universal Family Life Assurance Company. Diadem Life Assurance Company. Householders' Life Assurance Company. Engineers', Masonic, and Universal Mutual Life Assurance Society. English and Cambrian Assurance Society. General Indemnity Life and Fire Insurance Company. Commercial and General Life Assurance, Annuity, Family Endowment, and Loan Association. British Shield Mutual Life Assurance Institution. Catholic, Law, and General Life Assurance Company. Magnet Life Assurance Company. Life Assurance Treasury. National As.surance and Investment Association. London and Yorkshire Assurance Company. Accumulative Life Fund and General Assurance Companj'. Tontine Life Assurance Company. Age Assurauce Company, EUROPEAN AEBITEATION. LORD WESTBURY'S DECISIONS. EUTHIN CASE. 1872 Reserved Fund of European. Od^. iHIS was an application by the Guardians of the Ruthin Poor Law Union for payment out of the Reserved Fund of the European, constituted and regulated by the European Society's Act, 1859, of a sum due to the guardians on a bond of fidelity. The case turned mainly on the construction and effect of the proviso to section 7 of the Arbitration Act, which is to the effect, that nothing therein contained shall affect the Eeserved Fund and the application thereof under the Act of 1859. Further legislation respecting the fund being probable, a com- plete report of the case is not now given. Mr. Benjamin, Q.C., (Mr. H. M. JaeJcson with him) was for the applicants. Mr. Eiggins, Q.C., (Mr. Coohson with him) was for the European. Mr. Eemming was for the Commissioners of the Treasury. Solicitors for Guardians : Messrs. Boohs, Kenrich, & Harston. Solicitors for European : Messrs. Mercer & Mercer. Solicitors for Treasury : Messrs. Baven & Bradley. EUROPEAN AEBITBATION. 1872 GAELANT'S CASE. ^f^^' Interest on Debt. Interest not allowed on a debt whicli did not become payable until after the presentation of the petition to wind up. 1 HIS was an application by Mr. Garlant, the official liquidator of the Oporto Mining Company, Limited, in liquidation, seeking to prove against the European in respect of a sum due on a bond of fidelity, with interest, and to have immediate payment out of the Keserved Fund. The bond had been given by a former official liquidator of the same company, who had misapplied money in his office, so that a sum of £761 12s. 9d. had been found due from the European on the bond by a certificate of the Chief Clerk of Vice-Chancellor Malins, made in the liquidation, and dated 11 November, 1871, which certificate was by the terms of the bond conclusive evidence of the forfeiture of the bond and of the amount due. As far as the claim related to the Reserved Fund it was governed by the Ruthin Case. Mr. Garlant claimed interest on the sum found due, as from the date of the Chief Clerk's certificate. Mr. Whitehorne was for Mr. Garlant. Mr. Siggins, Q.C., (Mr. Cookaon with him) was for the European. Mr. Whitehorne said this was a specialty debt. Interest should be allowed at 5 per cent, per anuum from the date of the certifi- cate. He cited Times Company's Case, 2 H. & M. 722. Mr. Higgins was not called on. Lord Westburt : — The case cited differs from the present. Here the debt is not ascertained and does not carry interest before the commencement of the winding-up. When the debt does arise LOKD WESTBUEY'S DECISIONS. J it becomes due by reason of the Chief Clerk's certificate of 11 No- Gablant's vember, 1871. At that time there was no person from whom the 1' debt could be demanded ; no person had at that time power to pay. A petition for winding-up was pending. This shews one of the reasons for making the presentation of the petition the com- mencemeat of the winding-up. The debt, therefore, was not withheld from Mr. Garlant by reason of the refusal or the negli- gence of any person liable to pay it. I cannot, therefore, give interest; that would interfere with the proper distribution of the assets. Solicitors for Mr. Garlant : Messrs. Lewis, Munns, <& Longden. Solicitors for European : Messrs. Mercer & Mercer. INDEMNITY CASE. .1872 Amalgamation. ^'^' "^• On the construction of the amalgamation agreement between the European and the British Nation (Life); Held — (1) That the liability of the European to indemnify the British Nation, under the agreement was limited to the subscribed capital of the European : (2) That the question whether the indemnity extended to the costs of the, liquidation of the British Nation could not be dealt with until the amount of those costs had been ascertained, and the British Nation were prepared with a definite statement shewing that the whole of those costs, or some specific part thereof, had been incurred by reason of a breach by the European of their undertaking to indemnify. _LHIS was an application, on a Case stated by agreement, for the decision of the Arbitrator on the following questions : (1) Whether the liability of the European to indemnify the British Nation {I^f^) under the amalgamation agreement was limited to the subscribed capital of the European or wholly un- limited : (2) Whether the European were liable to indemnify the British Nation against the costs of and incidental to the liquidation of the British Nation. The amalgamation agreement between the European and the B 2 I EUROPEAN ARBITRATION. Indemnity British Nation, embodied in a deed of 16 March 1865, was in part ' to the effect following : In consideration of the amalgamation and of the premises the European cove- nanted with the British, Nation that the European, their successors or assigns, would from the execution of that deed undertake to pay or perform all and every of the existing hond and other debts, assurances, annuities, endowments, guarantees, and other engagements or liabilities of the British Nation, and would at all times thereafter save, defend, keep harmless and indemnified the British Nation and the individual proprietors of shares in the capital thereof from and against all actions, suits, proceedings, costs, damages, claims and demands whatsoever for, upon account, or in respect of the same, all, any, or either of them, or otherwise in relation thereto respectively. And the same deed contained a proviso to the effect following: That the subscribed capital of the European remaining at the time of any claim made in respect of that deed, or by any holders of any policies, or by any annuitant, or otherwise by virtue of any of the covenants, clauses and agreements therein contained, should alone be liable to answer such claims ; and that no director or other proprietor of the European, his heirs, executors or administrators, should by reason of any of the covenants, clauses and agreements thereinbefore contained be in any wise individually liable to pay any such claim against the European beyond the amount of the unpaid part (if any) of his particular share of the subscribed capital of the European. Mr. F. G. J. Millar was for the British Nation. Mr. Higgins, Q.C., (Mr. CooJcson with him) was for the Euro- pean. Mr. Millar : — There is no question raised respecting the validity of the amalgamation. Lord Westbury : — Clause 24 of the European deed requires that in every contract there shall be inserted a limitation of lia- bility. If the amalgamation agreement is in conformity with that stipulation, there is no unlimited liability; if it is not, it is ultra vires. Mr. Millar : — Then it is reduced to the question of the costs of our liquidation. The result of the insolvency of the European and of their non-fulfilment of their covenant of indemnity has beea that the British Nation have been revived as a company for the purpose of being wound up. The covenant is very special with LOED WESTBUEY'S DECISIONS. t respect to proceedings and costs. The case would be clear except Indemnity for Lord Cairns's decision in the Albert Arbitration, ' Indemnity Case, Reports, 17. Lord Westbuey : — Much stress does not appear to have been laid there on the word proceedings. May not the liquidation to which the British Nation have been subjected be called a proceed- ing against them ? [Mr. Higgins : — It is a voluntary winding-up.] Mr. Millar : — Anticipating the catastrophe that has occurred in consequence of the failure of the European to meet their engage- ments with the British Nation, that company met and passed a resolution to wind up. They were harassed by the creditors against whom the European undertook to indemnify them. LoED Westbuet : — The British Nation come here at present telling me that there is a proceeding under which their liability may be very considerable ; but that it has not yet matured and been enforced against them. They have paid nothing, and the only damage they have at present sustained is the self-inflicted damage of this proceeding to wind up. I must refuse to make any order at present, but without prejudice to any future application on their part for the purpose of proving against the Eurojpean any such costs as can be shewn to have resulted from the non-payment by the European of debts of the British Nation. Mr. Higgins : — It will not be taken that the European consent to the view that any costs can come on them. The whole question will be open. We rely on the decision of Lord Cairns in the Albert Arbitration. LoED Westbuey : — I do not gi^e any decision at present. It will be open to argument for the European that no claim can be made for costs. I entirely concur with Lord Cairns where he says that the winding-up will settle a great many things with which tbe Albert, that is, here, the European, have nothing to do. Mr. Higgins was not called on. LoED Westbuey : — With regard to the first question, I think there is uo reasonable ground for making any such claim. It is 6 EUROPEAN AEBITEATION. Indemkity quite clear that the powers of the directors of the European ■ would be limited by the restiictions imposed upon them by the deed of settlement, which restrictions are followed in the deed of amalgamation. The deed of settlement never contemplated that the shareholders could by force of any contract made by the directors be subjected to a liability beyond the amount of the liability in respect of their shares. There may possibly be an exception of contracts made by directors for necessary purposes of the company ; with those I do not deal ; but I am dealing here with the contract for purchase, or for amalgamation or union with the European, of a very large and similar undertaking, namely the British Nation, and any contract for that purpose, under clause 24 of the deed, must be a contract that shall not avail to throw upon the shareholders, even in name, any liability be- yond the liability to which they were then subject in respect of their shares. It is quite clear that this was perfectly well known to the British Nation at the time of the engagement, and accord- ingly it was the basis of their mutual agreement. The deed of amalgamation faithfully represents that course, and in that deed of amalgamation there is the express stipulation appended to the covenant by the European, restricting any larger application of that covenant, and limiting the effect to the extent of the deed of settlement, namely, that it should throw upon the shareholders of the European a liability only to the extent of their unpaid capital. There was therefore no pretence for saying there was unlimited liability upon the part of the European shareholders, and if it had not been for the engagement under which you all mutually came, — which I desire al\\ays to promote, because the European will gain, by promoting arrangements of that kind, much greater benefit in the despatch of business, and in avoiding a lapse of time, than it will suffer loss from paying the costs, — if it had not been for that arrangement and my desire to promote it, I should have made the British Nation pay the costs of this case. But having regard to the manner in which it has come here, I give the British Nation their costs of the case out of the estate of the European. With regard to the costs incurred by the British Nation in their own liquidation, there is a much more difficult questipn. In LORD WESTBUEY'S DECISIONS. 7 point of reason and justice, I think that I ought to give some Indemnitt effect to the coTenant of indemnity, so far as that- covenant ' extends to the costs that may be sustained by the British Nation in consequence of the refusal or the inability of the European to fulfil their engagements ; but it would be idle for me to make a general declaration upon the subject of the costs, when that declaration could not define in any distinct direction the amount of damage sustained by the breach of the engagement by the European. Here I find a claim made for the general costs of the whole of the proceeding, which proceeding is directed to a number of objects beyond and exclusive of the object of coming to be indemnified for the costs incurred by reason of these par- ticular debts not having been paid ; I cannot therefore deal with that question in a final manner, for a mere general declaration without pointing to the sum to be proved would be a barren one. I cannot deal with that till the whole amount of costs incurred in that proceeding by the British Nation has been ascertained, and the British Nation can come here with a definite statement that the whole of those costs, or some specific part of them, has been incurred by reason of a breach of this covenant on the part of the European. That portion of the case must stand over, with liberty to the British Nation to apply. Solicitors for British Nation : Messrs. Eyre & Co. Solicitors for European : Messrs. Mercer & Mercer. EUROPEAN AEBITEATION. 1872 POWNALL'S CASE. "<''■ 23- List of Contributories. Where a person whose name stood on the share register of a company in liquidation, which had amalgamated with another company, applied to have his name removed from the list of contributories of the first-mentioned com- pany, the transferors, on the ground that on the amalgamation he had accepted shares in the transferee company in substitution for his shares in the transferor company : Held, that, notwithstanding what had been done on the amalgamation, his name must remain on the list of the transferor company. 1 HIS was an application, on a Case stated by agreement, for a decision of the Arbitrator on a claim by Mr. Pownall to have his name removed from the list of contributories of the British Nation One of the terms of the amalgamation of the British Nation with the European, embodied in the deed between the two compa- nies, was that the Eurojaean should allot to each shareholder in the British Nation three shares in the capital of the European, in respect of each of his shares in the capital of the British Nation, and every share so allotted should be deemed to have a sum of ten shillings and sixpence paid up thereon, and the holder thereof should be entitled to participate in the next and subsequent divi- dends on shares in the European, pari passu with the. holders of the other shares therein. The Case stated to the effect that on the execution of the deed, and in pursuance of the amalgamation, the assets and property of the British Nation were taken possession of by the European, and the business which had theretofore been carried on by the British Nation was thenceforth carried on with and as part of the business of the European, at their office. At the amalgamation, 18,000 shares in the British Nation had been from time to time created and issued, and were then existing, and twenty-three shillings had been paid on each. At that time the shares of the European had ten shillings and sixpence paid on each. After the amalgamation, the European made allotments of shares to share- holders in the British Nation, and among them to Mr. Pownall, LOBD WESTBURY'S DECISIONS. 9 at the rate of three shares in the European ia exchange for each Pownall's share in the British Nation ; and the names of those shareholders ' were entered in the European register of shareholders, and the cer- tificates for their shares in the British Nation were given up. Dividends on the shares allotted had been paid, and calls had been made thereon, by the European. The names of those shareholders, including the name of Mr. Poumall, still remained on the share register of the British Nation, and they had been placed on the list of contributories of the British Nation as still being share- holders therein. Mr. Pownall disputed his liability to be a con- tributory on the following (among other) grounds : (1) That he accepted the shares in the European in lieu of and substitution for the shares held by him in the British Nation, and that he never undertook or became liable to accept or hold shares at the same time in both those companies : (2) That the shares allotted to him in the European were to be deemed either as allotted in satisfaction and extinguishment of the shares theretofore held by him in the British Nation, or else as being to all intents the same shares under a new denomination : (3) That the creditors of the British Nation were to be deemed to have had, and in fact had, full knowledge and notice of the powers conferred by the British Nation deed of settlement and of the amalgamation. The liquidators of the British Nation, on the contrary, contended that, as long as any claims against the British Nation remained unsatisfied, Mr. Pownall was bound to contribute in the first in- stance to the liquidation of those claims, and that his name ought therefore to remain on the list. Mr. F. G. J. Millar was for Mr. Pownall. Mr. Coohson was for the British Nation. Mr. Millar : — (1.) Creditors of the British Nation had notice of the British Nation deed, and consequently had notice of the possi- bility of such an amalgamation. (2.) It is not contended that the existence of the British Nation ceased ; the winding-up order proves the contrary ; but for all purposes of action that company 10 EDEOPEAN ARBITRATION. PowNALt's had ceased to exist. (3.) The shares allotted in the united com- *°^' pany which took the name of the European are to be considered the same shares. In any company shares may be called in and others issiied in their stead. Here the old certificates were pro- duced and cancelled and the new certificates given out ; and whether this was done by the company under the old name, or was done by the company under the new name, is imma- terial. (4.) The European are to be deemed purchasers of the shares. Mr, Cookson was not called on. Lord Westbuey : — There is no ground for this application. The application is made to me by a gentleman who appears at present to be a shareholder, and has been put on the list, ac- cording to the Case, as a contributory to the British Nation, which is being wound up. The British Nation are liable on a variety of contracts and engagements. The British Nation united with the European. That union, or amalgamation, as it is com- monly called, was in conformity with the powers contained in the deed of settlement of the Europea/n, I will take it that it was also perfectly within the competency of the directors and shareholders of the British Nation. It was a term in that amal- gamation that in respect of the shares then held by the share- holders of the British Nation, shares in the European should be given to those shareholders. It is contended, and it may be the fact, that according to the contract between the parties the character of shareholder in the British Nation was to cease, and the character of shareholder in the European was to supervene and be substituted for the original status of the shareholder as a member of the British Nation. I do not enter into the question whether that is the strict interpretation of the deed or not ; it is the interpretation that has been contended for, and for the purpose of this case I am willing to accept that interpretation. The ques- tion is, whether this arrangement between the British Nation and the European has any effect whatever upon the persons who at that time held the shares of the British Nation, liable to the con- tracts and engagements of that company ? LOED WESTBUEY'S DECISIONS. 11 It is ingeniously suggested that the creditors may be considered Pownall'b as bound, because the creditors had notice of the deed of settle- " ment of the British Nation, and were aware that it contained a power, under which power what was actually done, that is, the arrangement made between the British Nation and the Euro- jaean, might legally be done ; but it is impossible for me to impute to a creditor knowledge of the details of an arrangement which might possibly come within a power contained in the deed of settlement. The creditor has no business with, nor has he any means of prosecuting any inquiry as to, what is done under that power. To bind the creditor you must prove that the creditor knew of this supposed discharge of the persons from the character of shareholders of the British Nation, and that he consented to those shareholders being so discharged. There is no pretext for any such thing ; there is nothing from which I can impute to any creditor existing at the time acquiescence in his debtor being released from his engagement, and the debtor being converted into another person who would not be liable for that engagement. Another argument is this : it is contended that under the agree- ment, in reality, there has been a lond fide transfer of the shares of Mr. Pownall in the British Nation to the European themselves, and that, therefore, he has ceased to be the holder of the shares. The amalgamation deed is not at all a transfer made or effected in the manner in which it would be competent to a shareholder in the British Nation to transfer his shares to another individual ; nor were the European ever entered in the share list of the British Nation as the holders of those shares. The Eurc^ean could not by possibility be so, because the whole thing was transferred bodily from the British Nation to the European. Mr. Pownall has parted with his shares, but he has retained his liability, and therefore he must still remain in the character in which he originally was, namely, as a shareholder of the British Nation, until all the contracts and engagements to which he became a party in that company have been discharged. Solicitors for Mr. Pownall : Messrs. Eyre & Co. Solicitors for British Nation : Messrs. Mercer & Mercer. 12 EUEOPEAN ABBITEATION. 1872 DYKE'S CASE. Oct. 23. Conduct of Liquidations. Appointment of liquidator in India and London separate from liquidators of European refused. 1 HIS was an application, on notice, by Colonel Dyhe, a creditor of the India and London, who had obtained the winding-up order, for the appointment of a separate liquidator, on the ground that there were only two creditors, and that it was not reasonable that they should have to wait for payment pending the liquidation of ihe Ev/rofean. Mr. W, D. Gardiner was for Colonel DyJce. Mr. Siggins, Q.C., (Mr. CooJcson with him) was for the India and London. LoED Westbury refused the application, but directed the list of contributories of the India and London to be at once settled, and all other necessary steps to be immediately taken for payment of the debts. Solicitors for Colonel Dj/Jce : Messrs. Ba/ngerjield & Fraser. Solicitors for India and London ; Messrs. Mercer dt Mercer. 1872 LANCET'S CASE. ^''*- 2^- List of Contributories. Where the executrix of a person whose name stood in the share register hook of a company in liquidation, which had amalgamated with another company, applied to have her name removed from the list of pontributorits of the first-mentioned company, the transferors, on the ground that on the amalgamation the amount paid on the testator's shares had been paid back LOED WESTBURY'S DECISIONS. 13 to her by the transferee company, and the share certificates had been deli- Lanoey'b vered up to that company : Cash. Held, that, notwithstanding what had been done on the amalgamation, the name of the executrix must remain on the list of the transferor company. i HIS was an applicatioD, on a Case stated by agreement, for the decision of the Arbitrator on a claim of the executrix of Major Lancey to have her name removed from the list of contributories of the Royal Naval and Military. The Boyal Naval and Military was instituted by a deed of settlement, dated 1 January, 1839. Major Lancey held 100 shares of £25 each, on which £500 had been paid up. In 1866 the Boyal Naval and Military amalgamated with the European. On 18 August, 1866, the following circular was sent to Major Lancey by the directors of the Royal Naval and Military : To the Policy-holders and Shareholders of the Boyal Naval and Military. 17, Waterloo Place, London, 8. W. 18th August, 1866. Mt Lokds, Ladies, and Gentlemen, In face of the active competition now so prevalent in life assurance busi- ness, and of the union or amalgamation of offices so constantly taking place, to their mutual advantage, by lessening the expenses of management and increasing their vitality and strength, my colleagues and I have for some time been most anxiously considering whether the interests of the assured and proprietors of our society would not be maintained and promoted by the union of its business with that of some other larger company, and we have arrived at the conclusion that such would undoubtedly be the case. Started originally in the interests of the naval and military services, the society's business has almost necessarily been of a restricted character, and though in later years we have tried to extend it into a more general connection our success has been but partial. The society is, however, as it has ever been, in a sound and healthy state, and its business must be a valuable accession to any office of greater means and capabilities. Under this belief, therefore, we have entertained overtures from a company of very large business and undoubted security, who are willing to take over the society's business and responsibilities, under an arrangement which, after ade- quately securing as the primary consideration the society's policy-holders, will give the shareholders a return of their original paid-up capital in cash or at their option in shares of that company, and in the latter case with a considerable bonus. The constitution of all modern companies provides for these advantageous unions or amalgamations, and this proposed arrangement virtually amounts to union or amalgamation with the company referred to. The society's deed of settlement, though not expressly providing fur union or 14 EUEOPEAN AEBITEATION. Lanoey's amalgamation, does in effect render it practicable by a dissolution of the society, Case. and, after due deliberation, we bave deemed it our duty to call an extraordinary general meeting of the shareholders to take the subject into consideration as indi- cated in the annexed notice, and we trust the movement may receive your cordial approval and co-operation. I should add that the proposed arrangement provides for two of my colleagues and myself joining the board of the other company in order the more effectually to secure the interests of our assured and shareholders, and that the principal portion of the staff at present employed by the society will go over to that com- pany, and the society's business would be continued at No. 17, Waterloo Place, until further notice. I have, &c., FsEDBEicK Smith, Chairman. Notice is hereby given that an extraordinary general court of the Royal Naval, pursuant to the society's deed of settlement, will be held at the office of the society. No. 17 Waterloo Place, London, S. W., on the 31st day of August instant, at one o'clock, p.m., precisely, for the purpose of taking into consideration the propriety of dissolving the society (in view of a transfer of its business). Dated 18th August, 1866. By Order of an Extraordinary Court of Directors, Arthue E. Hamilton, Secretary. (N.B. — Proprietors only can attend the meeting.) The amalgamation was carried into effect by means of two deeds dated 17 September, 1866. In October, 1866, the following circular was sent to Major Lancey : To the Shareholders of the Royal Naval. ^ European Assurance Sooiett, Empowered by Special Act of Parliament, With which is consolidated the business of the Royal Naval (Chief OfBces, 316, Regent Street) [Royal Naval and Military Department]. 17, Waterloo Place, Pall Mall, London, October, 1866. Sir, Adverting to the circular I addressed to you on the 18th of August last, I have the satisfaction to inform you that the two extraordinary general courts of proprietors required by the society's deed of settlement for the purpose, unani- mously decided upon a dissolution of the society, and that its dissolution takes place as from the 17th of September last. The first duty of the directors was to make, in accordance with the deed of settlement, an arrangement with another company for undertaktug the obligation of the policies and securing the interests of the assured ; and they have accordingly made such an arrangement with the European Assurance Society. General Sir Oeorge Polloch, G.C.B., K.S.I., Vice-Admiral Michael Quin, and I, join the Board of the European Socitty, in order the more effectually to secure the interests of the Royal Naval and Military Society. LOED WESTBURY'S DECISIONS. 15 The report of the European Society for 1865 shews that the annual revenue Lanoek's exceeds £330,000, that the capital subscrihed by nearly 2000 shareholders exceeds Cam. £800,000, and that the new premium revenue for the year 1865 exceeded £62,000. 1. You are entitled to take shares in the European Assurance Society of £2 10s. each, with 10s. 6d. per share paid up, and your dividend thereby will be on the sum of £ or 2. You are entitled to receive the sum of £ , being the amount originally paid on your shares, in two instalments, namely, one half in six months, and one half in twelve months from the 17th of September last, together with interest from that date at the rate of 5 per cent, per annum. Mr. Lake, the general manager of the European Society, forwards to you annexed forms, in which you can enter your decision. I have, &c., Fbedeeick Smith, Chairman of the Eoyal Naval. To this was subjoined the following circular, having the same address, heading, and date: The foregoing letter from the chairman of the Eoyal Naval announces to you that its business has been taken over, and its policies and other liabilities are now guaranteed by this [EuropeanJ society, and that you are entitled as a shareholder to make your election — 1. To take shares in this society, thus securing your original paid-up capital, together with the bonus declared thereon, or 2. To take your original paid-up capital in cash, one half in six months, and one half in twelve months from the 17th of September last. I have the pleasure of informing you that General Sir George PoUocIe, G.C.B., K.S.I., Vice-Admiral Quin, and General Sir Frederick Smith, K.H., having become duly qualified as shareholders, have been elected directors, and that General Sir Frederick Smith, K.H., has been elected chairman of this society. Annexed is a form on which I shall feel obliged by your entering your election, and returning the same to me when signed. I have, &c., Henry Lake, Manager. No. 1. To the Directors of the European. Gentlemen, I elect to take shares in the European in respect of my shares in the Royal Naval, in accordance with the deeds between the two societies dated the 17th of September, 1866. Dated this day of ,1866. Name Residence All shares taken carry the bonus as well as the capital originally paid up. 16 EUROPEAN AEBITEATION. Lancet's No. 2. IJase. To the Directors of the European. Gentlemen, I elect to take cash in respect of my shares in the Eoyal Naval, in accordance with the deeds hetween the two societies dated the 17th Septemher, 1866. Dated this day of , 186G. Name Residence The payment in cash excludes the honus and applies only to the capital origi- nally paid up. On 7 December, 1866, Major Lancey died, and on 1 February, 1867, his will was proved by liis widow and executrix. The executrix elected the second of the alternatives proposed, and delivered up to the European the certificates of the testator's shares in the Royal Naval and Military, and received from the Ewrojpean the sum of £525, in two instalments, the second being paid in September, 1867, on the following receipt: The European Assurance Society, 316, Regent Street, London, W, Share Department. 186 . Eeceived, this 23rd day of Septemher, 1867, of the European, the sum of £262 10s., being the amount of the second and final instalment of my original paid-up capital, payable hy them to me as the holder of 100 shares in the Royal Naval and Military, on the register of that company, on the 14th day of Sep- tember, 1866 (when the said company was dissolved), pursuant to the provisions of a certain deed, dated the 17th day of September, 1866, between the said Euro~ pean, and three of its directors, and the trustees of the Royal Naval and Mili- tary, with interim interest, from the 17th day of September, 1866, at the rate of £5 per centum per annum. As witness my hand. Maegaeet Lancey, As executrix of the late Major William Lancey. £262 10s. The Case submitted on behalf of the executrix was in substance, as follows: (1) Her connexion with the Royal Naval and Military having ceased in consequence of her having given up the shares therein, in the circumstances stated, she should not be made a contributory of either company : (2) If she was liable as a contributory of the Royal Naval and Military, the shareholders of the Royal Naval and Military who accepted shares in the European, with the other European share- holders (they having agreed to indemnify the Royal Naval and LORD WESTBURY'S DECISIONS. 17 Military shareholders, and take on themselves their liability), Lanoeys should be first exhausted, before any call was made on the Royal ' Naval and Military shareholders, which might never be necessary : (3) The Eurojpean shareholders were the proper parties to be called on in the first instance, they being the shareholders in the Royal Naval and Military at the date of the petition for winding up the European, within section 38 of the Companies Act, 1862. The Case stated that the liquidators of the Royal Naval and Military, on the other hand, contended that as long as any claims against the Royal Naval and Military remained unsatisfied the testatrix was bound to contribute in the first instance to the liqui- dation of the claims, and that her name should therefore remain on the list. Mr. /. W. Chitty was for the executrix. Mr. CooJcson was for the Royal Naval and Military. Mr. Chitty : — The question turns on clauses 52, 134, 135, 139, 141, 142, 172, 173, of the Royal Naval and Military deed, (1.) The executrix, regarded as a shareholder, could do nothing more to transfer the shares ; what she did was a substantial compliance with the deed ; she in fact sold her shares to the JEk/ropean. (2.) The amalgamation being in compliance with the deed is binding on creditors, who must be regarded as having clauses 172 and 173 of the deed imported into their contracts; and the result of those clauses is that on the specified things being done, which were all done according to the deed, the shareholders would be discharged. (3.) There is the subsidiary point in this case, that the alleged contributoi y is in the position of executrix, — a position, according to the deed, of suspense, — and that she was bound as executrix either to become a proprietor or to sell ; what was done was a sale ; and clause 142 says that on a sale being effected, the shareholder is for ever thenceforth acquitted and discharged from all obligations. Mr. Coohson was not called on. Lord Westbury : — There was an obligation or power imposed on, or given to, an executor to sell ; that means to sell to another c 18 EUEOPEAN AEBITEATION. Lancet's person who may be substituted on the register of shareholders for ^^' the testator. The executrix here did no such thing. It is perfectly clear, that if an individual takes shares in a company of this kind, and then that company is dissolved, or the business of the company is transferred, unless the dissolution or the transfer involves a discharge to the creditors of the dissolving company, which dis- charge binds those creditors, the liability of the partners con- tinues. Whatever you may denominate the transaction, whether you call it dissolution, or whether you call it transfer, if there is a power to dissolve contained in the deed, with a proviso that the dissolution shall not affect the necessary operation of winding up tlie society after a resolution to dissolve ; and if that is also accompanied with power to the directors to consummate the disso- lution by entering into engagements with another company to take ovei' the liabilities ; then if that latter power is executed, and they enter into an engagement with a company to take over the liabi- lity, the liability of the shareholders unquestionably remains in respect of those debts which are so taken over. If, however, the creditors of the society so dissolving accede to the transfer and to the proposed indemnity and accept the transferring company, then the indemnifying company are alone liable, to the exclusion and discharge of the persons who originally contracted. Now there is nothing of that kind here, and the executrix elected to take money for her shares, depending on the arrangement that had been made with the European. The arrangement with the European was that they would undertake the debts, and also in- demnify the persons transferring to them. But in all these cases the old proverb applies, they reckon without their host, the host being here the outstanding creditor ; and if he is not brought in and made a party to the transaction, his rights are not prejudiced. They remain, and may be enforced, notwithstanding the arrange- ment to indemnify, on which the original debtor relies. That arrangement is in itself a confession and acknowledgment that the liability remains, and that the party liable is content to rest on his security. Solicitor for the Executrix : Mr. Mortimer. Solicitors for Boyal Naval and Military: Messrs. Mercer & Mercer. Oct. 25. LORD WESTBURV'S DECISIONS. 1^ READ'S CASE. 1872 List of Oontributories — Transfer not completed be/ore Winding-up. A shareholder in the European had taken proceedings for a transfer of his shares, but the same not having been completed, in accordance with the deed, before the commencement of the winding-up, and there being no wilful delay attributable to the directors in respect of the completion of the transfer : Eeld, that the shareholder must be on the list of oontributories. 1 HIS was an application, on a Case stated by agreement, for the decision of the Arbitrator, whether the name of Mr. Bead ought, or ought not, to be placed on the list of contributories of the European. In April, 1871, Mr. Bead being then registered as a holder of 400 shares in the European, the following instrument, dated 28 April, was executed by the parties thereto : I, Joseph Head, of 74, Lord Street, Liverpool, in consideration of the sum of 5s. paid to me by William Atkinson, of 74, Lord Street, aforesaid, book-keeper, do hereby bargain, sell, assign, and transfer to the said William Atkinson all those shares in the European Assurance Sodtty now standing in the books of the company in my name. To hold unto the said William Atkinson, his executors, administrators, and assigns, subject to the several conditions on which I held the same immediately before the execution hereof; and I, the said William Atkinson, do hereby agree to accept and take the said shares subject to the conditions aforesaid. A correspondence ensued between Mr. GiU, Mr. Bead's solicitor, and Mr. Easum, secretary to the Eu/ropean. Mr. Gill wrote to Mr. Easum : 28th April, 1871. Bead to Atkinson. I beg to fonvard you transfer of shares, which I shall be glad to hear has been registered. Mr. Easum answered : 29th April, 1871. Mead to Atkinson. I beg to return this transfer, as all such deeds must be on the special form pro- vided by the society, and which is only issued after an application has been sent in and approved by the directors. C 2 20 ETJEOPEAN AEBITEATION. Bead's Mr. OiU replied : Case. 2nd May, 1871. Mr. Joseph Bead, the holder of shares in the European Assurance Society, wishes to transfer them to Mr. William Atkinson, of 74, Lord Street, Liverpool. May I trouble you, therefore, to forward me the form of transfer used by your society for this purpose. Mr. BumviUe, clerk to Mr. QUI, stated in an affidavit that a day or two after the date of Mr. Gill's last letter he called at the office of the European and saw the secretary, who said the directors proposed taking into consideration many applications for transfer of shares which had been recently made; he inquired if any notice of wish to transfer had been sent to the office ; Mr. Dum- ville informed him that a notice had been sent ; the secretary informed Mr. DumviUe that a special form of application was supplied to shareholders, but if otice of the application had been given, it was sufficient, and requested him on his return to Liverpool to communicate again, in writing, asking for a reply to Mr. Gill's letter of 2 May. Accordingly Mr. GiU wrote to the secretary of the European as follows : 8th May, 1871. Beferring to my letter to you of the 2nd, I shall be glad to receive forms of transfer for the shares Mr. Joseph Head wishes to assign to Mr. William Atkinson. No answer was sent to tliis letter. On 20 May, 1871, a call in the European of 5s. a share became due and payable. On 10 June, 1871, the petition to wind up was presented. On 14 June Mr. Gill wrote to the secretary of the European as follows : 14th June, 1871. Keferring to your letter to me of the 29th April, and my reply of the 2nd May last, I shall feel obliged by your at once forwarding me the special form of transfer referred to in your letter, so that I may send you a transfer of the shares held by Mr. Joseph Head, of No. 74, Lord Street, Liverpool, to Mr. William Atkinson, of No. 74, Lord Street, Liverpool, book-keeper. Mr. Mead will pay the call which has been made since his application when the transfer is forwarded for registration. In answer to which letter the secretary wrote as follows : 15th June, 1871. Bead to Atkinson. We do not appear to have received a notice of transfer, so I inclose one here- with ; at the same time I had better state it will be quite impossible for the directors to entertain it until all calls now due are paid. LORD WESTBUEY'S DECISIONS. 21 Mr. Hemming was for Mr. Bead and for Mr. Atkinson. Mr. Cookson was for the European. Mr. Eismminff: — Mr. Bead's name remained on the register at the commencement of the winding-up in consequence of the un- necessary delay of the directors, and not from any default of his own. He had done all he could, and if the directors or their officers had done their duty, the name of his transferee, instead of himself, would have been on the register. The question turns on clauses 96 and 97 of the Ev/ropean deed. The instrument of 28 April, 1871, and Mr. GrilTs letter of the same date, together convey to the directors the two substantial things which the notice required by clause 96 is intended to convey to them, namely, (1) the name, address, and occupation of the proposed transferee ; and (2) the desire of the shareholder that that person should be accepted. It was a good notice ; and the directors, while saying that it was irregular, stated they would treat it as a notice and would consider the case. Whether the first slightly informal but substantial notice, or the second notice of 2 May, is taken, all Mr. Qill then wrote to the secretary : Read'! 17th June, 1871. Bead to Atkinson. I must remind you that at your interview with the writer on the 5th day of May, you stated that a letter containing information as to the proposed transfer, and which you were told had been sent, was sufficient as a notice. I have, how- ever, filled up the form, with the date of my original application, on behalf of Mr. Read. The application having been made prior to the call, the directors cannot have declined to entertain the application until the calls were paid. The calls however will be paid when the transfer is forwarded. I shall be glad to hear from you by return of post that the directors have approved it. And the secretary replied : 19th June, 1871. Read to Atkinson. Pending the petition before the Vice-Chancellor, it is impossible for the directors to take any action in the transfer of these or any other shares ; also the books are closed until after the extraordinary general meeting to be holden on the 7th proximo ; and, as I before stated, no notice of transfer can be brought before the committee until after all the calls are paid. 22 BUEOPEAN AEBITEATION. Bead's that was required was done much more than fourteen days before -^ the commencement of the winding-up, and also before any call became due and payable. The directors bad ample time to ap- prove or disapprove before the commencement of the winding-up, and by neglecting to do so they made it impossible for Mr. Bead to execute the transfer. LoED Westbuey : — He may have a remedy against the direc- tors ; but has he a right to say as against all persons interested that he has parted with the character of shareholder ? Mr. Semming : — If a shareholder can shew that he has done all that lies on him to do to get rid of his shares, and that if the directors had not omitted their duty he would have been free before the winding-up, the creditors have no position different from the shareholders : Beese Biver Company v. Smith, L. R. 4 H. L. 64 ; Oahes v. Tv/rquand, L. E. 2 H. L. 325. What has to be shewn is, that at the commencement of the winding-up the shareholder who seeks to be relieved was a con- senting party to his remaining as one of the shareholders of the company. The directors said that no transfer would do unless in the form got from them. Therefore the only thing the share- holder could do was to write to the secretary and ask for a form of transfer. The secretary did not send it, and by his delay he made it impossible for the shareholder to have bis name taken off. The omission of this duty ought not to prejudice the shareholder : Bush's Case, L. R. 6 Ch. 246. LoED Westbuey : — This is the case of a voluntary transfer. There is no equity. If the legal solemnities had been completed, it might be well ; but, they not being completed, there is not a particle of equity or merit for the shareholder to have anything done for him that was left undone ; and as to delay, the letter of 14 June, four days after the presentation of the petition to wind up, precludes him from saying he has any complaint on that ground. Mr, Hemming : — That letter was written at the request of the LOED WESTBURY'S DECISIONS. 23 secretary, and ought not to put him in a worse position. As to ebad's the voluntary nature of the transfer, the question arises between '^°^" members of a company ; and the scheme of the company, on the faith of which the members took their shares, was that every shareholder should have a right within a fortnight to get rid of his shares, either to his own nominee, or to some one named by the directors. There is no veto in the directors, except on the con- dition of their finding somebody else. That is the agreement among the members; and the directors, who have prevented Mr. Bead from executing the transfer, cannot say that he has not done all that the deed required him to do, and therefore he must remain on the list. That would be allowing directors to take advantage of their own wrong : Fyfe's Case, L. E. 4 Ch. 768 ; Bargate v. Shortridge, 5 H. L. 0. 297. There the matters omitted were matters not of form, but of substance. Here there are two persons asking the Arbitrator to give effect to the rights which they conceive they have acquired as against the company, and as between them and the company there is nothing voluntary. The shareholders see by the deed that if everything is fairly done on the part of the directors, they ' should be able to free themselves within a fortnight. Wix. Bead takes the necessary steps; the fortnight elapses; and the only reason he cannot go further is because the next step is to be taken by the directors, and they refuse to take it. Whether it was calculated neglect, or indolent neglect, or from whatever cause it may have arisen, it was the directors, and not Mr. Bead, that stopped the proceedings ; his liability terminated, and he is entitled to be relieved : Nation's Case, L. E. 3 Eq. 77. There is no suggestion that Mr. Atkinson is a man of straw. If there were it would be beside the case ; for the deed says, whether he is a man of straw or not, they are bound to take him unless they can find another. The clause is a common one in insurance ofBce deeds. In ChappeU's Case, L. E. 6 Ch, 902, there was some incidental discussion on a clause like this, although 24 EUEOPEAN AEBITEATION. Bead's the case turned on a different question ; and Lord Justice MeUish Case. says : I am of opinion that the 21st clause of the deed of settlement does not give power to the directors absolutely to reject any person to whom a shareholder proposes to transfer his shares. They are only to see if they can provide a substitute who will take the shares. Mr. Cookson was not called on. LoED Westbuey : — 'The applicant in this case is a gentleman holding 400 shares in the Europecm, who, at a time full of doubt and uncertainty with regard to the position of the company, formed the design of transferring his shares for a nominal consideration to his servant, in order that he himself might be relieved from future responsibility. If he had a right to do so, and if he had taken pains completely to do so before his proceedings were inter- cepted, probably his desigu would have beeu effectual ; but there is no pretence made to me that this was intended to be, or was in fact, a bond fide transfer of shares to a gentleman of equal respect- ability with Mr. Bead. Mr. Bead comes now to be relieved from his liability on the ground that he really did intend to transfer these shares to his servant, and he complains that he has not been enabled to consummate that attempt by reason of the default of the directors. The argument before me is that everything must be considered to have been done which would have been done if the directors had used perfect diligence, and that if they had used perfect diligence this transaction would have been completed, and, therefore, I must take it to be so. This is a case in which no Court would feel disposed to abandon or set aside any description of legal difiSculty in the way of such an applicant. His whole equity depends on his being able to shew that he had completed, duly and regularly, a legal transfer of his shares before the pre- sentation of the winding-up petition. 1 am quite willing to take it on the ground put by his counsel, who has argued the case most ably, that he shall have the credit of having done everything which, if the directors had been diligent, he really could have done. This society provides a mode by which LORD WESTBURY'S DECISIONS. 25 the shares of its shareholders may be transferred. When a man Reads who is a shareliolder desires to part with his shares, he has to give — ! notice to the company of his desire so to do, and he is particularly to specify the name of the person to whom he proposes to transfer his shares ; and then, as I read the deed, three things may be done: first, the directors may refuse the application; secondly, the directors may propose another person to be substituted as assignee of the shares ; thirdly, the directors may omit, for fourteen days after the notice, to assent or dissent, and in that case it shall be considered, as against them, that they have acceded to the application, and are willing to adopt the proposed transferee. I agree, that no special form of notice of the intended transfer is required by the deed, and therefore I cannot insist on the necessity of this gentleman having adopted the notice which the company had prepared. Instead of giving notice of his intention to transfer, the first step taken by him is to make a complete transfer — to execute a deed for that purpose. Now, I must impute to him, as a shareholder, knowledge of the provisions of the deed. He knew that he had no right to make a transfer until he had preceded it by a preliminary notice, not in any special form, but a notice that should be sufficient to give to the directors information of the status of the individual to whom the shares were proposed to be trans- ferred. He does not do so, and he makes a deed of transfer in his own form to Atkinson, his servant. AtMnson signs the deed, and then the deed is forwarded to the company not by Atkinson, who, if there is hona fides in the matter is the person interested, but by Mr. Gill, the solicitor of Mr. Bead, in a letter of 28 April 1871. That is answered by the secretary on 29 April, — there was not much delay there, — in which he says that the special form of transfer provided by the society is only issued after an application has been sent in and approved by the directors. The application there referred to is, plainly, the notice of the intended transfer, with the name of the transferee. That, I suppose, was received in due course by Mr. GiU, perhaps on 30 April ; and then comes the letter of 2 May which Mr. Gill writes to the secretary, in which the position in life of Atkinson is not stated. With that letter the proceedings must be taken to begin ; because there Mr. Gill, on the part of Mr. Bead, does send a notice for leave to transfer, and a 26 EUROPEAN ARBITEATIOIS. Bead's notice of the intended transferee, and applies for the proper form of '^.^ transfer. That was probably received by the secretary on 3 May, and is followed by the interview between the clerk of Mr. QUI and the secretary, which I will suppose to have been on 5 May. In the conversation which then took place, the secretary dis- penses with the necessity of using any special form of notice, and, taking the letter of Mr. CUll on 2 May to have been a sufficient form- of notice, the fourteen days would have to be calculated from 3 May, the date of the receipt of that letter. But the secretary informs Mr. Dumville, the clerk, that the directors intended to hold a meeting for the purpose of considering the applications made to them, and their interview concludes by his suggesting that another letter should be written to him, requesting a reply to Mr. GilVs last letter of 2 May. Mr. Gill accordingly acquiesces in that by a letter of 8 May, which appears to be a repetition of what was contained in the letter of the 2nd, with the addition of a request for the form of transfer. Now, on 20 May, before the fourteen days had expired, computing them from the date of this letter, a call of five shillings became due and payable, and the necessity of paying that call before any transfer could be made was imposed by clause 96 of the deed. If, therefore, the form of transfer had then been sent, that transfer could not have been made available until the call of fiye shillings per share, which became due on 20 May, had been paid. I come now to the letter of 14 June, and this is very material with reference to the complaint so strenuously insisted on at the Bar, that there had been wilful delay on the part of the directors ; the wilful delay must have been delay in sending the form of transfer. I have already said, if the form of transfer had been sent, nothing could have been done with it until the call had been paid ; but when a party thus complains of delay, a material inquiry is in what view the matter was regarded by his own solicitor previously to the present complaint. The solicitor writing on 14 June, a long while after 20 May, and a longer time after the date of his letter of 8 May, writes to the secretary of the company in the fdUowing words : Beferring to your letter to me of the 29th April, and my reply of the 2nd May last, I shall feel obliged by your at once forwarding me the special form of transfer referred to in your letter, so that I may send you a transfer, . . . LOED WESTBUEY'S DECISIONS. 27 Mr. Bead will pay the call whieli has been made since his application when the Read's transfer is forwarded for registration. Cask. I must hold that that letter was written by a gentleman who did not consider that he had any ground for imputing wilful delay ; who was very willing to go on with the transaction if a form of transfer were then forwarded to him, and who did not imagine that he had a right to treat what had previously occurred as dispensing with the necessity of any transfer at all ; for that is the argument before me. It is indisputable that the necessity of paying the calls intervened, and that the obligation to pay the same was not for a moment proposed to be fulfilled until this letter of the 14th was written by the solicitor, four days after the time when all transactions in shares in the company became impossible, and when the request contained in this letter was one that it was no longer in the power of the directors to accede to. There is not a pretence for imputing to these directors wilful delay in completing the transfer anterior to 14 June. There is no justification for any part of the case. Mr. Read must be on the list. Solicitors for Mr. Read : Messrs. Chester & Co. Solicitors for European : Messrs. Mercer & Mercer. CATHIE'S CASE. Call — Bonus credited on Share. Shareholders held entitled, under a company's deed, to have deducted from calls made on them the amount of bonuses appropriated out of profits to their shares and credited thereon. JL HIS was an application, on a Case stated by agreement, for the decision of the Arbitrator on the question whether or not a share- holder in the Ewropeam, was entitled to deduct from the call the amount of bonuses credited on his shares. The Case referred to clauses 4, 20, 35, and 48 to 53, of the European deed. On 28 May, 1863, a bonus of sixpence a share was declared. In 1872 Oct. 26. 28 EUBOPEAN AEBITEATION. Cathie's April, 1867, a bonus of one shilling a share was declared, and a .1^ notice thereof was issued to the shareholders by circular from the manager as follows : Tke valuation of the affairs of this society to the 31st of December, 1865, having been completed, a bonus of one shilling per share has been declared, as the proprietors' division of the profits. This having been credited to your share account in the hooks of the company, in conformity with the deed of settlement, your paid-up capital is raised from ton ' shillings and sixpence to eleven shillings and sixpence per share, on which latter amount the interest will henceforth be payable. Mr. CooJcson was for the Ikiropecm. Mr. Lemon was for Mr. Cathie. Mr. Cookson : — The question is, whether a portion of the profits of the company unreceived by a shareholder, but credited to his account as paid-up capital, is or is not to be taken, as against policy-holders and other creditors, as a reduction- of his original liability to contribute to the assets of the company for the purpose of satisfying outstanding claims. LoBD Westbuet : — Was there anything in the law to prohibit the directors from deducting, from time to time, from the amount remaining unpaid the bonuses that accrued due ? Mr. CooJcson : — It would seem not ; but it would be for the shareholder to shew that the deed empowers the directors to make the deduction. The intention of clause 53 was that the amount of dividend not paid to the shareholders from time to time in cash was to be detained by way of a reserved fund, bearing interest at 5 per cent, per annum, to which interest the shareholders are en- titled, as it accrues, but that until the amount attains the maximum fixed in the deed, namely, twice the amount of the paid-up capital, no part thereof is to be paid to the shareholders in money. The clause, no doubt, speaks of this apportionment being made by way of addition to the amount paid on the shares, but these words seem to imply that the amount paid up is one thing and the added fund is another. There is nothing pointing to a substitution of a LOED WESTBURY'S DECISIONS. 29 sum of money laid bj', for that money which is demandable from Cathie's the shareholders from time to time in the shape of calls, as the ' exigencies of the company require. The construction contended for on the other side amounts in effect to an authority in the directors to reduce the capital of the shareholders by the amount set apart, and so to bring about an alteration of one of the funda- mental elements of the company's constitution. The capital is the fund to which the policy-holders are entitled to look. Dividends not received remain part of the general assets, and are as much applicable to payment of debts as the amount of calls or premiums paid. As against policy-holders, nothing more has been done with respect to these bonus additions than to abstain from distribution. There is nothing in the clause to point to deduction, merger, or substitution. Addition only is provided for, and that is an addi- tion simply to ascertain the total amount on which from time to time interest is to be calculated. Then there is another point. Section 26 of the Companies Aet of 1862 requires the European (being registered under that Act) to make returns of various matters, including the amount of calls made on each share. A creditor inspecting the returns, and finding that the calls made on each share amounted to lOs. only, and knowing that the shares were £2 10s. each, would conceive that there was a sum of £2 a share yet to be called. That would be his inference. But the fact would be, if Mr. Cafhie'syibw is cor- rect, that the sum paid up on each share was lis. Qd. instead of 10s„ and so the creditor would be deceived. He would think he had a fund of £2 to fall back on in respect of each share, whereas in fact he would only have £2 less Is. 6d. Mr. Lemon was not called on. LoED Westbtjky : — The claim is in effect this, that the amount of profit credited to a shareholder as an item belonging to him is not to be included in the same sum with the item of amount due from him, but is to be treated as an independent thing. If it were capable of being so separated, or if any meaning could be given to the clear words of clause 53 that would admit of a diffe- 30 EUROPEAN AEBITEATION. Cathie's I'^nt interpretation from that which makes the amount of the ^*^^- profit a sum to be deducted from the share capital still due from the shareholder — if anything of that kind could be found, then I admit that the whole amount of the unpaid share capital must be brought in by the shareholder into this liqiaidation, and that he must be left to pursue his remedy in respect of the amount assigned to him for profit in the ordinary way against the company. It could not in that case be made the subject of a set-off. But the matter is concluded, for the whole operation is distinctly defined by clause 53. This is the only matter to be appealed to in this ques- tion, which is one between the shareholder and the company. It is said that, if we admitted of these things being done in the book-keeping of the directors, and they did not appear in the return to the registrar, a very unfair result would be the conse- quence with respect to creditors consulting the register in order to ascertain the means of the company ; because when they found £4, we will say, due originally from every shareholder, and £3 only paid, they would assume that there was £1 remaining due. But when we look to the words of section 26 of the Act of 1862, the words are certainly not sufficient to impose in terms on the direc- tors the obligation of returning the exact amount of the share capital remaining uncalled for. It is true there is an obliga- tion to state the amount of the calls ; but it is equally true that every person entering into an engagement with the company must be taken to have entered into that engagement with a knowledge of the provisions of the deed ; and if attention be directed to clause 53, inquiry would naturally be made how much of the share capital remaining uncalled for has been diminished or actually paid by these directions which order that the amount of the profit assigned to each shareholder, if not taken by the share- holder, shall be credited to him as an addition to the amount paid by him on his shares. When it is credited to him as an addition to the amount paid, we have described in very accurate language the process of keeping the account. Suppose an account opened with him originally in respect of four shares amounting. to £100, then he would be debited on one side of the account with the amount of those four shares or £100. He would be credited on the other side of the account with three calls of £25 each, includ- ing the original subscription in respect of those shares. Hi LORD WESTBURY'S DECISIONS. 31 account, therefore, would shew that £25 remained due from him. Cathie's Then there is a profit declared on these shares of £1 on each share, '^'' and then, according to the directions of the deed, as soon as that profit is declared the directors are hound to enter the amount in addition to the amount paid. Suppose the profit be £4, the last entry would be after the three entries to his credit of £25 each, £4 to his credit ; and then I suppose that this involves what is the necessary consequence, that you must sum up the amount on the one side and sum up the amount on the other side, and the balance will represent the sum that is due by the shareholder. And that balance, so represented in conformity with this deed, is the amount of the call that can now be made on him, and no more. But then it is quite clear that the amount of the profits no longer preserves a separate existence, nor has an independent identity. It is merged in the sum that is paid, by force of the words that it is to be taken as an addition to the amount paid. After that has been done it will be no longer competent to the shareholder to call for that as the subject of an individual payment to him. It is merged in the account of what he has paid, and he can no longer get it as a separate debt. Well, then, he is to have interest on it just as he has interest on the other payments that he has made. So that the whole thing is treated from the beginning to the end as a sum no longer to be regarded with reference to its origin — namely, profits, but to be regarded as an additional payment merged together with the payments already made in one total, which is to be deducted from the total of the amount of the shares with which the share- holder was originally debited. We are bound, especially in a matter of this kind, to give a plain, common-sense, obvious inter- pretation to language. But if I had been in the situation of Mr. Cathie, supposing him to have had a profit of £4 which he had not received, but permitted to be thus credited, in additioa to what he had paid, I should have said : There is due from me £1 in respect of each of my shares, mmws the sum of £4 which has been given credit to me and is to be deducted therefrom. The balance represents what we are entitled to call on Mr. Cathie to pay. Solicitors for European : Messrs. Mercer & Mereer. Solicitor for Mr. Cathie : Mr. Tucker. 32 EUEOPEAN ARBITRATION. 1872 BEOWN'S CASE. List of Ccntrihutories — Liquidation hy Arrangement under Bankruptcy Act of 1869. A person wlio was on the register of shareholders of a company in liqui- dation had before the winding-up order made a liquidation by arrangement with his creditors, under the Bankruptcy Act of 1869 ; the company proved for calls due and in respect of the liability for the amount per share uncalled ; the trustee disclaimed the shares ; an application to put on the list of con- tributories the debtor and the trustee, or one of them, was refused ; and no order was made. JL HIS was an application, on a Case stated by agreement, for the decision of the Arbitrator on the effect of proceedings in liquida- tion by arrangement under the BanJcruptcy Act of 1869, as regards liability to be made a contributory. Mr. Michael Brown, of Stoehport, dogger, held 800 shares in the Euriypean. On 28 October, 1871, he filed his petition, under Part VI. of the Bankruptcy Act of 1869, for liquidation by arrangement, in the County Court of Cheshire, holden at Stockport. The general meeting of creditors was held on 14 Noyember, 1871, whereat it was resolved by the statutory majority of the creditors present as follows : 1. That the affairs of M. Brown should be liquidated by arrangement, and not in bankruptcy. 2. That Mr. J. Barratt should be and he was thereby appointed trustee. 3. That the discharge of M. Brown should be and the same was thereby granted. 4. That J. Barratt should be entrusted with the registration of that special resolution. The resolution was filed and registered under the Act. At that meeting the European proved their debt due from the debtor at £636 38. 9d., in respect of calls then due on his shares and in- terest on the calls, and at £800 in respect of the liability of £1 per share uncalled on his shares. The statement of the debtor was then produced, whereby it appeared that his assets amounted to £4, and his liabilities to £2393 2s. Id. On 15 November, 1871, the Eegistrar of the County Court at Stockport certified that LOBD WESTBUEY'S DECISIONS. 33 J. Barratt was appointed and was thereby declared to be trustee Brown's under the liquidation, and on the next day that the discharge of — ! the debtor was granted. On the same day the trustee, by a writing or disclaimer under his hand, disclaimed the shares held by the debtor at the date of the appointment of the trustee, and on the next day a duplicate of the disclaimer (with the seven original share certificates therein referred to and thereto annexed) was served on the European. The questions stated for the consideration of the Arbitrator were in substance as follows : (1) Whether regard being had to the Banhruftcy Act and to the disclaimer, and to the fact of the proof in respect of the call which was due, and in respect of the future liability, the order of discharge was a discharge in respect of the calls due before 14 November, 1871, and the date of the order of discharge : (2) Whether the order of discharge was a discharge against any future liability for calls arising subsequently to 14 November, 1871, and to the date of the order of discharge : (3) Whether the liability of the contributory to contribute to the costs of the liquidation could be deemed a debt proveable in bank- ruptcy as being a liability incapable of being fairly estimated, and whether the disclaimer and order of discharge were a discharge in respect of this liability : (4) Whether the name of the debtor and of the trustee, or either of them, ought to be placed on the list of contributories. Mr. Goohson was for the European. Mr. Graham Hastings was for Mr. Brown and for the trustee in his liquidation. Mr. Goohson: — The question arises on sections 28, 31, and 126 of the Banltruptey Act of 1869. There may be many other persons who have adopted a similar course, against whom it might be material to prove for the costs of the liquidation. The company were entitled to consider they would continue to carry on their business, and the remote claim for those costs would not be a contingency covered even by the large words of the Act of 1869. D 34 EUEOPEAN AEBITEATION. Brown's Loed Westbuey : — There can be no possibility of liability to ' costs unless there is a continued ownership of shares ; here the shares are forfeited. It may be a question whether the transaction cannot be overreached by the retrospectlTe operation of section 153 of the Companies Act of 1862. Can a statutory forfeiture be deemed a transfer within that section ? or an alteration of the status of a member of the company ? If it is an alteration by operation of a subsequent statute, it would seem not. If this matter were to be adjudged according to the rule of what is right, I should first direct application to be made to set aside the liqui- dation and the proceedings thereunder as having been collusive and designed with a fraudulent intent ; and if that were done the whole thing would fall to the ground, and Mr. Brown would be dealt with as an owner of shares. But if that cannot be done ; and I certainly see no way of doing it now, especially after the unwise step on the part of the company of proving this large debt against a man who confessed property only to the amount of £4, and whose confession was believed and acted on by his creditors ; it would be an idle thing to attempt to pursue him for his liability to contribute to the future expenses of the winding-up of the company. The Act of 1869 provides that for any injury inflicted on the company they may prove, and they have gone in and proved an estimate of this liability to a large amount, as futile a thing as could have been done. Mr. Codkson : — The Legislature could scarcely have intended to give such scope to a forfeiture under the Act of 1869. Mr. Eastings was not called on. Loed Westbuey: — I shall make no order in this case. Mr. Brown cannot be regarded as a person who would represent the liability to future costs of the winding-up, because his shares have been forfeited. The trustee cannot be regarded as a person to represent that liability, for nothing has passed to him. H© has faithfully done what it was intended he should do, disclaimed the shares, in order to their being annihilated and to his friend the debtor being relieved from liability; and the company have adopted LORD WESTBURY'S DECISIONS. 35 it all, and have brought the matter to such a pass that it is hope- Brown's less to attempt to do anything with it. ' Solicitors for European : Messrs. Mercer & Mercer. Solicitors for Mr. Brown and the trustee : Messrs. Dangerjidd & Fraser. LLOYD'S CASE. 1872 Lisl of Coniribiitories — Transfer not completed before Winding-up — DisapprO' Oct. 29. bation by Directors of proposed Transferee. A shareholder in the European delivered to the directors notice in writing of his desire to transfer his shares, with the name and a description of the proposed transferee ; the directors, having made inquiries respecting the pro- posed transferee, informed the shareholder in writing, within fourteen days after receipt of his notice, that they did not consent to the transfer ; no transfer was approved by the directors hefore the winding-up and the share- holder remained on the register : Held, that he must he on the list of contributories, the true construction of the deed being that a shareholder's power to transfer arose in three cases only ; (1) where the transferee proposed by him was approved by the directors ; (2) where the directors within fourteen days nominated another person to be transferee ; (3) where the directors remained silent during foiirteen days ; but that the power did not arise where the directors within fourteen days ex- pressed their disapprobation of the transferee proposed by the shareholder, there appearing good grounds for their disapprobation. XHIS was an application, on a Case and Counter-case stated, for the decision of the Arbitrator, on the question of the liability of Mr. EJawd William Lloyd to be placed on the list of contributories of the Ewropean. In January, 1865, Mr. Lloyd purchased 630 shares in the European, and was registered as a shareholder. On 28 July, 1870, Mr. Lloyd, having filled up the form of notice required by the directors of the Ewopean under clause 96 of the deed, with the name and addition of Arthur JacTcson, wine merchant, as pro- posed transferee of the shares, sent it to the office of the company with a transfer deed executed by himself and Mr. JaeJcson, as follows ; I, Howel William Lloyd, of .... in consideration of the sum of five shillings D 2 3(5 EUROPEAN ARBITRATION. Lloyd's paid to me by Arthur Jachson, of No. 43, Tavistock Terrace, Upper Uolloway, Case. -vime merchant, do hereby bargain, sell, assign, and transfer to the said Arthur ~ Jachson, All those shares [described] in the undertaking called the European Assurance Society, To hold unto the said Arthur Jachson, his executors, adminis- trators, and assigns, subject to the several conditions on which I held the same im- mediately before the execution hereof, And the said Arthur Jachson dotb hereby agree to accept and take the said shares subject to the conditions aforesaid. As witness our hands and seals this 18th day of July, 1870. By letter of 23 July, 1870, the secretary acknowledged the receipt of the notice and transfer deed, and stated that they should be submitted to the board, and on 26 July, 1870, wrote further to Mr. Lloyd, as follows : 26 July, 1870. Yourself to Jachson. The directors have looked in the directory, and do not find the name of the proposed transferee. They have also inquired and cannot obtain any satisfactory account of him. Under these circumstances the directors, though desirous of facilitating any arrangement proposed to be made by the shareholders, cannot, in the due performance of their duty, consent to the transfer. A correspondence ensued between Mr. Lloyd and his solicitors on the one hand, and the secretary on the other. The following are three of the secretary's letters to Mr. Lloyd : 23rd August, 1870. With, reference to your application for transfer of shares in this society, I am desired to inform you that until the appeal petition of Mr. Crowe for the rehear- ing of his petition is disposed of, it cannot be entertained. 6th September, 1870. Lloyd to Jachson. Your letter of 31st ult. has been duly laid before the board, and in reply I am instructed to inform you that the directors are advised that pending the appeal against the company they would not be justified in making any transfer of shares. 1st November, 1870. Yourself to Jachson. The directors are advised that the proposed transferee is not a proper person to take a transfer of the shares in question, that he is not to be seen at his nominal place of business ; and from this and other facts which have come to their know- ledge, the directors decline to sanction the transfer. I therefore return the deed, certificates, and the fee paid. In an affidavit filed in a suit instituted by Mr. Lloyd against the company, he said : The transfer of the said shares was intended and understood both by myself and the DeiendRnt Arthur Jachson to be and wasa bondfdeont and out transfer under which any benefit thereafter to accrue from the shares would belong abso- LORD WESTBUEY'S DECISIONS. 37 lutely to Arthur Jackson, and any future liability in respect thereof would fall Lloyd's upon him. No consideration was paid by Arthur Jackson for the transfer, and Oasb. a nominal consideration was therefore inserted in the deed. The anticipated liability on the shares being then, in the judgment of myself and Arthur Jackson, slightly in excess of the prospective profits to accrue from them, I (as part of the transaction) undertook to pay to Arthur Jackson the sum of £20, which we con- sidered to fairly represent such excess of liability. Arthur Jackson, although not rich, is a solvent and highly respectable man, and was and is willing to accept the said shares so transferred to him as aforesaid. In cross-examination on his affidavit Mr. Lloyd said : I never knew Arthur Jackson personally, I knew him through my lawyers. I never had any direct communication with Arthur Jackson. I know of him simply what my lawyers told me, that he was a person of respectable position. I only * know what his residence was or had been from what I was told by my lawyeis. I only know as to any changes of his residence what my lawyers told me. The bargain between myself and Mr. Jackson was, that he was to take my C30 shares at a nominal value of 5s., and that I was to pay him £20 on the transfer being registered by the society. The bargain was made through my lawyers ; I only know that it was so made through their telling me so, and I saw a letter from Mr. Jackson saying that it was so ; the bargain was made in July, 1870 ; I was at that time desirous of finding a purchaser for my shares in this society, the total number of shares I then held was 630, and the bargain with Jackson was he should take all I held. I was indifferent as to who became the purchaser of my 630 shares. My only object was to get rid of them, it was an object to me then to get rid of them because I had lost my confidence in the society, I thought that most probably it was then insolvent ; I was looking for a purchaser to take all my shares ofi' my hands on any terms. . . . This notice is entirely filled up in my own handwriting both as to figures and words, and I have therein written that the occupation of Mr. Jackson was that of a wine merchant. Q. Was Arthur Jackson a wine merchant on the 18th of July, 1870 ? A. As far as I know and believe he was. I have heard that he has changed his profession since ; I forget what I have been told he now is. ... I have no knowledge whatever as to Arthur Jackson's solvency in July, 1870, or at the present time, or at any time between the two dates. I did not pay him the £20, that was to be paid only on the registration being completed. I have heard that he is in receipt of a salary in some capacity in a telegraph office. I never knew, of my own knowledge, anything of Arthur Jackson's place of business. I have heard that he had a nominal place of business, I do not know now where that nominal place of business is or was. In the case for the company various objections of a formal nature respecting the notice and the transfer deed were raised, and it was contended that, apart from any question on clauses 96 and 97 of the deed, and the duties of the directors thereunder, the omission from the transfer deed of the true consideration, and 38 EUEOPEAN AEBITEATION. Lloyd's the statement of a consideration untrue to the knowledge of both _1!^' parties, amounted to a sufficient reason for the retention of Mr. Lloyd's name on the register. Mr. Lloyd's Counter-case went at length into statements respect- ing (among other things) the established practice of the company relative to transfers, with the view of meeting the formal objections raised on behalf of the company, and of shewing that Mr. Lloyd had fully complied with the practice of the company, alleging that it was only on the eve of the winding-up that the directors began to insist on the formalities which it had previously been their invariable practice to waive. It also contained full state- ments respecting Mr. Jackson's position, and respecting the nego- tiations between Mr. Lloyd and the company relative to the proposed transfer. Mr. Hemming was for Mr. Lloyd. Mr. Street was for Mr. Jackson. Mr. Cookson (Mr. Riggins, Q.C., with him) was for the European. Mr. Hemming: — Mr. Lloyd was entitled under the deed, by going through certain proceedings, to divest himself of his shares, and to require the company either to' take the transferee proposed by him or to procure a substitute. He took every step that the contract between him and the company in the deed required him to take, up to the moment when the company discharged him from doing any more by telling him in the most plain way that under no circumstances would they take as a shareholder the person whom he proposed. This case is distinguished from Bead's Case. Here the proposed transfer was in July, 1870, a full year before the winding-up. All calls had been paid. Long after the date of this proposed transfer shares to a considerable amount were sold. Mr. Jackson bought to sell again, as others were then doing, and as he was entitled to do. The course of proceeding prescribed by the deed had been departed from in the practice of the company, so that they had debarred themselves from objecting in point of form. It has been decided in Bead's Case that no particular form of notice was required. LOED WESTBUEY'S DECISIONS. 39 Lord VVestbuey : — That is so ; but the shareholder is bound Llo-kd's by the deed to give correct information to the directors respecting ' * the person whom he proposes to substitute for himself. I shall not try this case by the form of notice, but I shall try it by the honesty of the notice. [Mr. Cookson : — I do not propose to rely on the technicalities.] Mr. Hemming! : — That greatly relieves the case. Then, on the notice, the question comes to this, whether Mr. Lloyd complied with the substance of the deed. Mr. Jackson was described as a wine merchant. In every sale, whether the vendor acts for him- self, or acts by a broker, or by a solicitor, of necessity the descrip- tion of the transferee comes from the transferee. The onus of disproving the truth of the description lies on the company, and there is no evidence to that effect. The conduct of the directors amounted to an approval of the transferee. Their failure for fourteen days to nominate another transferee is an approval. Express disapproval is ultra vires. The second alternative of the clause takes away all power of dis- approval, except a conditional one. An absolute power of reject- tion, such as is given in some companies, is inconvenient, because shareholders of position will not take shares in companies so con- stituted. If it was intended to give the directors that power in this case, why limit the period for their nominating a substitute, and provide that on tlieir failure to do so, they should be taken to approve of the transferee ? The intention was that the transferor should be absolutely certain that within a fortnight he would be perfectly relieved by transfer; while, to protect the company, the directors are enabled to get rid of an objectionable transferee by proposing within the time limited a transferee of their own : ChappelTs Case, L. K. 6 Oh. 902. The words of the clause there were substantially identical with those here. Directors would never take on themselves the burden of finding a substitute if they had the power of simply rejecting the proposed transferee. Hence pressure is put on them, and the finding of a substitute is made obligatory : Weston's Case, L. E. 4 Ch. 20. 40 EUROPEAN ARBITRATION. Lloyd's As regards the suggestion that, because the shares were sold _^' at a minus price, therefore Mr. Lloyd was bound to go beyond what the deed requires, and to give full and true particulars respecting the consideration, it is quite as proper to put in a nominal consi- deration as not. The absence of information as to the real con- sideration, a collateral matter, could not influence the directors in their refusal. If they had accepted Mr. Jackson, it might be different. There is here no representation which has in any way influenced the directors, nor is there any failure to give information, on the part of Mr. Llot/d. Mr. Coohson was not called on. Lord Westbury : — I must have it understood that in matters of this kind I will not have a veil thrown before my eyes by any description of technical argument. When I have ascertained the I'acts I will decide according to truth and justice. In the present case the old observation applies, res i^sa loqmtur. A gentleman is the owner, in July, 1870, of 630 shares in this company; they represent a liability of at least £630. He tells me frankly and honestly, like a man of integrity, that he believed the company to be insolvent ; he tells me also that he then set about meditating a mode of releasing himself from liability. I do not impute to him that as a crime ; he had a perfect right to endeavour to get rid of his liability ; I am not going to denomi- nate that a culpable motive. He had a motive and a right to release himself fairly and honestly from his liability if he could find the means of doing so. He tells me frankly what he did. He went to his solicitors, he stated his position, and I infer from his words that some such conversation as this took place : What am I to do in order to escape from the peril of my situation ? His solicitors seem to have been ingenious men, and they told him in return : We will find a man to take a transfer of your shares ; of course he will be a man not worth a shilling, for no man would place himself in a situation of liability without the possible prospect of anything to recompense him for putting himself in that situation ; LORD WESTBUEY'S DECISIONS. 41 you will have to give him money, tlierefore, to put himself in your Lloyd's shoes ; it may not be successful, therefore it will be prudent to ' promise him the money only when it is successful. There Mr. Lloyd seems to have left the matter ; he trusted to his solicitors. They cast about, and they found a man whom they represented to be a wine merchant. Mr. Lloyd was told he was a wine merchant, and he tells me he knew no more than he was told. The origin, therefore, of this story of the trading as a wine merchant is brought home to Mr. Lloyd's solicitors, and what those gentlemen knew must be imputed to him. Is it possible for any one not to perceive in this transaction, that they went into the market and bought a man to stand in the situation of transferee ? Why these things are so important is apparent to all who will pay the least attention to the reason why regulations were intro- duced on this subject. When the power of transferring their shares was given to shareholders, it was felt that it was a power that must be limited by some conditions. It became requisite to secure some kind of caution and protection to the other share- holders against one of their partners attempting to get rid of his joint liability with them in an unfair and improper manner. This was attempted to be done sometimes by a clause such as we find in this deed of settlement, sometimes by a clause somewhat differ- ing from it, such as that in GhappelVs Case. The clause in that case varies from the clause in this, just in a manner which might have warranted the observations of Lord Justice Mellish, but would not make those observations at all applicable to the present clause, which is differently worded. Now, I beg that particular attention may be given to the construc- tion I put on this clause. You will observe in the outset that the power of "transfer here is a power given to the shareholder after certain things have been done. Of course, it is necessary, that those things should be done hond fide, because what precedes the arising of the power is a representation made to the whole body of the partnership through the medium of their agents the directors, to warrant the conclusion that it is a proper case in which the power .of transfer ought to be exercised. Now, according to this form of clause, the shareholder who wishes to transfer is under an obliga- tion to give to the company, in the first place, a notice in writing 42 EUEOPEAN ARBITEATION. Lloyd's containing the full name and profession or calling and place of L' abode of the proposed shareholder. I do not mean to dwell in the smallest degree upon the proposed technical objections that have been raised, that the notice here given by Mr. Lloyd was not exactly in the form of words required by the company. There is no power in the company to limit any particular form of notice, or to prescribe it, and therefore a notice complying with the requisitions of the clause, however given, if it complied with the substantial requisitions, would satisfy my mind. Then it goes on ; after he has given that notice, two alternatives shall arise; first of all, if the person is approved of as hereinafter mentioned — that is one alternative. If that takes place the share- holder's power to transfer his shares immediately arises. Then there is another alternative, and it is quite clear that this other alternative was put in for the purpose of protecting the directors. The person who drew the clause naturally felt that in many cases the directors might not be able either to approve in terms or to dis- approve, or they might have a case in which they would feel it pro- bably a very difficult matter to disapprove. If they disapproved and stated their doubt of the solvency of the proposed transferee, they might incur in so doing very considerable legal liability. In all doubtful cases, therefore, this option was given to the directors, that instead of either approving or disapproving they might avoid the obligation and the risk of so doing, and propose to the share- holder a nominee of their own, and accordingly the alternative runs thus, or, that is, if he is not disapproved of, or if he is not approved of, then the directors may take this course. This alternative was intended to answer another purpose also, namely, that the shareholder, the applicant wishing to transfer, might be kept, without this clause, for a considerable period in doubt and uncertainty, whether the directors would approve or disapprove. And accordingly, the clause answers two purposes ; one that it should be a protection to the directors from revealing what were the motives that influenced their approval or their disapproval, and the other that it should give to the shareholder the right of limiting the period of their deliberation and of drawing a conclusive inference if he received no communication from the directors within fourteen days. Of course, if he received a com- LORD WESTBUKY'S DECISIONS. 43 munication of approval the clause became unnecessary ; equally Lloyd's so if he received a communication of disapproval. But if he heard ' nothing, to which case only the clause applies, then he would be warranted in arriving at the conclusion that the person proposed should be considered as approved ; and then follow the words, which are most material, after stating these alternatives, as to the course that might be pursued by the directors, the clause runs — then and in such case, that is, approval of the proposed substi- tution of another nominee, or saying nothing, keeping silence, in which case his proposal is to be considered as accepted ; then and in such case the shareholder may transfer the same share or shares. The power to transfer arises only on one of the antece- dent alternatives taking place. If the nominee is approved of the power arises. If instead of the nominee another person is proposed by the directors the power arises. If the directors neither approve nor propose another nominee, keeping silence, then their silence is to be construed as an acceptance of the proposal of the shareholder, and then the power arises. In the present case what have we got ? I will take the ap- plication to have been made in a formal manner on 23 July, and I entirely put aside the technical objections that have been made, of there not having been a special form of notice, and of the transfer having been made before the answer of the directors, which was not in conformity with the deed, and which made the transfer go for nothing. The application is made on 23 July, and much, within fourteen days from that time the applicant, Mr. Lloyd, is not left in silence. He is not warranted in supposing that the directors have a nominee of their own, neither is he war- ranted in supposing that the directors mean to acquiesce in his proposal, but he is told distinctly that his nominee is not approved of or accepted. How then did he get the power of transferring ? How could that transfer have been made after that communica- tion ? He could make no transfer whatever, nor could anybody else make a transfer. But then if he desires me to examine the grounds of the disapproval, although I do not know that any Court has the power of controuling the discretion of the directors in this matter, and I do not know that in any case short of fraud or combination by the directors against the shareholders I could 44 EUROPEAN AEBITEATION. Lloyd's examine their grounds ; but if I do examine their grounds, I fiod _^" very sound and good grounds of objection taken. I find them so stated, that if they could have been removed Mr. Lhyd might have removed them, I say it would have been an utter departure from their duty if the directors, with their knowledge at the time, had approved of Mr. Lloyd's proposed assignee, Mr. Jackson. It certainly is not within the power of Mr. Lloyd to say: You ought to have accepted my nominee, and therefore I have a right to treat you as having made the transfer which you ought to have made. I desire, therefore, to put the case on these two grounds, first, that Mr. Lloyd's nominee having been disapproved of, the power of Mr. Lhyd to transfer never arose : secondly, that Mr. Lloyd's nominee having been disapproved of, that disapproval is shewn to my mind to be warranted by every sense and feeling of the duty that the directors owed to the shareholders. I also say that the proposal by Mr. Lloyd of a man of this stamp was a proposal at vai-iance with the obligation under a sense of which it was in- tended that a shareholder making such a proposal should make it, namely, that he should propose a person who, as between himself and his brother shareholders, might be fairly and reasonably accepted as a substitute for himself, and stand in his shoes, with equal power to perform the obligations of a shareholder to the company. I said on a former occasion that if a man meditating this is for- tunate enough to complete the transfer before it can be discovered and impeached, then I can do nothing ; he has the benefit of a concluded matter. But that is not the case here. Mr. Lloyd comes here to have an incomplete transaction completed. Mr. Lloyd's merits in point of equity are none ; his merits in point of law are, if possible, less. Tf it could be put on the ground that he had done everything which it was incumbent on him to do in law and equity, and that the directors, by their refusal, violated the principles of equity and of justice, then BIr. Lloyd would be entitled to succeed on every ground. But there is no such proposition that he can maintain in any part, and therefore I am bound to reject, and in a case of this kind I do reject with very much satisfaction, this attempt to inflict a loss on the company. Mr. Lloyd must be on LOED WESTBURY'S DECISIONS. 45 the list. I direct Mr. Lloyd to pay the expenses of the applica- Lloyd's tion. .' I cannot leave the case without observing that I think there is nothing at all casting any reflection on Mr. Lloyd. He believed that he was acting iu conformity with the law, and he believed, which a great many other persons are in the habit of doing, that what the law permitted must be right. He has come here with a very truthful account of the whole transaction, and that makes me regret that on general principles I am obliged to make him pay the costs. Solicitors for Mr. Lloyd : Messrs. Ward, Mills, & Co. Solicitors for European : Messrs. Mercer & Mercer. 46 EUROPEAN ARBITRATION. 1872 COGHLAN'S CASE. ^o^- !• Policy — Novatimi — Protest — Bonus. Observations on general rules for decision of cases of novation, especially with reference to the necessity for the acceptance by the policy-holder of the liability of the transferee company being proved by unequivocal acts on his part, and on section 7 of Life Assurance Companies Act, 1872. Held, that, in a case of alleged novation, it is not incumbent on the policy- holder to prove that he did not intend to adopt by way of substitution the liability of the transferee company ; that is an inversion of the proper order ; it is incumbent on the company alleging a substitution to prove an agi'eement by the policy-holder to make a novation, and it is for them, in the absence of any definite written declaration, to prove acts of the pohcy-holder un- equivocally involving evidence of his intention to accept the transferee company instead of his assuring company. Novation consequent on amalgamation not established against a policy- holder, in the following circumstances : On the first amalgamation (there having been three in succession) he re- ceived no amalgamation circular from his assuring company, the transferors, but received one from the transferee company, pointing out the advantages likely to arise to the transferee company from the amalgamation, to which circular he gave no answer. On being applied to by his assuring company to exchange his policy for one in the transferee company, he refused. Before the first premium after the amalgamation became due he wrote to two of the directors of his assuring company asking for a receipt as theretofore, or a re- turn of his premiums ; and he was told by one of them that he could have a receipt as theretofore, signed by two directors of the transferee company who had been directors of his assuring company, and were still directors until that company was dissolved, on his paying the premium at the ofSce of the transferee company. In that and each subsequent year until the second amalgamation he so paid the premium, and was given a receipt accordingly : On the second amalgamation (in which the first transferee company became transferors) he received an amalgamation circular from each of the two com- panies. He went to the office of the second transferee company, and pro- tested and objected against being passed over to that company, and refused to have his policy indorsed by them. On paying the first premium at the office of the second transferee company, he asked for a receipt of his assuring com- pany, which was refused ; he continued to pay his premiums to and take receipts of the second transferee company : On the third amalgamation (in which the second transferee company be- came transferors) he received no amalgamation circular, and he paid his premiums to and took receipts of the third transferee company, stating on the first occasion his objection to do so : A reversionary bonus was declared on his policy by the second transferee LORD WESTBUEY'S DECISIONS. 47 company, and afterwards one by the third transferee company ; he did not Coqiilan's acknowledge the receipt of either of the bonus circulars, or agree to accept Case. either bonus. 1 HIS was an application, on a Case stated by agreement, for the decision of the Arbitrator on the claim of Mr. Goglilan to be a creditor of the Catholie. The Catholie amalgamated with the Phoenix in 1857 ; the Phoenix ■with the British Nation {Life) in 1860; the British Nation ^vith the European in 1866. In 1848, Mr. Goghlan effected with the Catholic a policy of assur- ance, dated 13 January, 1848, No. 138, on his own life, for £200, with profits, at a yearly premium of £5 15s. 4d, payable on or before 13 January in each year. The policy was headed : ' The Catholic Law and General Life Assurance Company, incorporated under 7 & 8 Vict. c. 1 1 0. Capital £1,000,000, in 50,000 shares of £20 each. No. 8, Neto Coventry Street, Leicester Square, London.' It contained the following proviso : That the subscribed capital and other stocks, funds, securities, and property of the company which at the time of any claim or demand being made in respect of this policy shall remain unapplied or undisposed of under the trusts, powers, and authorities of the deed or deeds of settlement of the company shall alone be liable to make good all claims and demands upon the company in respect of this policy ; and that no director of the company by whom the policy is signed shall be respon- sible for the payment of or for contribution towards the moneys assured by this policy to any greater extent than the funds or property of the company in his hands or power at the time of such moneys being recovered shall be competent to discharge; and that no shareholder of the company shall in any event whatsoever be liable to or for any demand against the company beyond the amount of the unpaid part of his or her share or shares in the subscribed capital of the company, save so far as he or she may be liable under the provisions of the Act for the regis- tration, incorporation, and regulation of joint stock companies. The policy was signed by Thomas Boyle, and Anthony Magee, and M. S. Forristall, three of the directors. The receipt for the premium paid in 1849 was as follows : Catholic Law and General Life Assueancb Company. Eeceipt No. 203. Policy No. 138. Eeceived this 15th day of January, 1849, of Thomas Coghlan, Esquire, the sum of £5 15s. id., being the premium for twelve months ending the 12th day 48 EUROPEAN AEBITEATION. CoQHLAis's of January, 1850, for the assurance of the sum of £200 upon the life of himself, Case. agreeably with the terms of a policy of assurance granted the 13th day of January, 1848, numbered as above. * William Moreis ) Dj.g.tors of the said company. M. S. FOKEISTALL J Subsequent receipts were in the same form. In June, 1857, Mr. Coghlan received the following circular : Confidential Circular. Phcenix Life Assukancb Company, 1, Leadenkall Street, London, June 1st, 1857. To the Shareholders and Policy-holders of the Phcenix. We have this day completed the arrangement by which the Catholic .... Company pass over their entire business to us, and we sincerely hope that you will approve of this measure, which is likely to bring us not only a considerable . business, but a proprietary second in influence to none, and that, stimulated by this increased aid and extended field of action, you will kindly exert your best powers to help us in carrying out our now sanguine anticipation. Your obedient servants, E. H. GooLDEN, M.D., Chairman. Henby R. Addison, Managing Director. Beyond the receipt of this circular Mr. CogMan had no intima- tion from the Catholic that they were about to transfer their business. He returned no answer to this circular. He next re- ceived the following letter from Mr. ForriataU, a director of the Catholic : 12 June, 1857. Will you kindly let me have your policy by return of post, and it shall in- stantly be exchanged for one of equal amount, and having precisely the same advantages, dates of payment, &o., in the Phoenix. His answer was as follows : June 19, 1857. I beg to acknowledge the receipt of your letter of the 12th instant, and regret to say that circumstances have come to my knowledge which render it quite impossible that I can comply with your request. However, as I wish to avoid litigation, lam prepared— although I have not yet ascertained the acceptability of my life by any other office — to surrender my policy when the whole of the premiums I have paid have been returned to me. To this letter he received no reply. He then wrote to the Eight Keverend Dr. Morris, another director of the Catholic. The first letter and answer were not forthcoming, but Mr. Coffhlan's second letter was as follows : Dec. 28, 1857. I . . . fear that, in my anxiety to explain how I came to trouble you, I did LOED WESTBURY'S DECISIONS. 49 not make sufficiently plain to you the object of my note, which was to learn Gooiii.an'8 from you, as one of the directors of the Catholic .... Company, wlint is to be Oase. done in the matter of my policy .... Permit me, then, to ask, are you prepared on the part of the company to give me a receipt as hitherto, or to return me the premiums already paid ? . . . Dr. Morris answered : .... I am not prepared to give any receipt, as I have no longer any ofSoial status or position in any company. However, I am quite satisfied that for any payments you may pay there will be given a receipt satisfactory in every way . . . Further correspondence passed, in which Mr. Coghlan was re- ferred by Dr. Morris to Mr. ForristaM, and ultimately Mr. Forrisiall wrote to Mr. CogMan as follows : 8 January, 1858. .... I beg to state that the above [the CatlioUc\ company has amalgamated with the Phoenix, and that you may have a new policy in the latter company on the same conditions contained in the policy you now hold ; but should you be disinclined to exchange your policy for one in the new company, you can receive a receipt as heretofore, signed by two directors who are directors of the Catholic Company, and are still the directors until the Catholic Company is dissolved, on your paying the premium, when due, at the office, 1, Leadenhall Street, London. In January, 1859, Mr. Coghlan wrote to Mr. ForristaM as fol- lows: January 3rd, 1859. I must again trouble you, for the Catholic Company has not been wound up (as you last year stated it would be), to inform me to whom I am to pay the premiums that will be due on my policy on the 12th instant, for the coinpany does not appear to have had a public office for the last fifteen months. Perhaps you will also kindly inform me where and to whom, in the event of my death, my representatives are to apply for the sum for which my life is insured in the above company. To which Mr. ForristaM answered : 4th January, 1859. In answer to your. Letter of yesterday's date, I beg to inform you that you must pay the premium on your policy at the Phcenix, 1, Leadenhall Street, London ; and in the event of your death, your representatives must apply to that company, and they will receive most certainly, and as a matter of course, the amount of your policy. Mr. Coghlan replied as follows : January 5th, 1859. I have just received your letter of the 4th instant, and must say, after what has passed between us on this subject, that you appear to be trifling with me. I have nothing to do with the Phoenix Company ; and after having read, as E 50 EUEOPEAN AEBITEATICN. Ooghlan's you must have done, the petition of Mr. Barlee to the Court of Chancery, I am Case. surprised at your referring me to that company. Again, then, I must beg of you, as one of the directors, to inform me where I am to find the Catholic Law, &e.. Company, as that company is still liable to me for the premiums I have already paid, and to that company only can I pay the premium that will be due on the 12th instant. Thereupon Mr. CogJilan received the following letter from Mr. Bourne, an official of the Phoenix : Phcenix Life Assukakoe Co., 1, Leadenhall Street, 8th Januarj', 1859. Your letter to Mr. Forristall has been d\ily received by him, and I am desired to inform you that you can pay your premium at this ofBce, and receive a Catholic receipt signed by two directors of the Catholic Company. Mr. Goghlan again wrote to Mr. ForHstaU as follows : January 12th, 1859. I beg to acknowledge the receipt of a letter from Mr. Bourne in reply to mine of the 5th instant. Referring to your letter of the 8th of January, 1858, I find you speak of the Catholic Company as being about to be dissolved ; will you kindly tell me when that event is likely to happen. Tou will not, I trust, consider this question as out of place when you reflect that I am asked to pay a premium to the company, although it has had no public oifice since 1857, and has not made its annual return to the Eegistrar of Joint Stock Companies, in conformity with the Act of the 7th & 8th Vict., since the year 1855 or 1856, I forget which. To which another official of the Phoenix replied : 15th January, 1859. Mr. Forristall has handed me your letter to reply to. The business of the late Catholic Company having merged into this company, you can send your premium here, and you will receive a receipt signed by two of their directors. Unless the premium is paid before the expiration of the days of grace, viz. 12th February, your policy will lapse. All the business of the Catholic Company is carried on at this office. On 10 February, 1859, Mr. Coghlan paid the premium, and received a receipt signed by Dr. Morris and Mr. Forristall, on ooe of the Catholic forms. When the premium for the year 1860 was about falling due, Mr. Goghlan, on 12 January, 1860, wrote to Dr. Morris as follows : January 12th, 1860. On the 12th January, 1859, I wrote to Mr. Forristall, one of the directors of the Catholic, reminding him that on 8 January, 1858, he spoke of the above company as being about to be dissolved, and aslied him to have the kindness to inform me when it was likely that that event would take place ; ako why the LORD WESTBURY'S DECISIONS. 51 company have not made its annual return I now, on 12 January, 1860, CoonLAN's just twelve months later, venture most respectfully to put the same questions to_ • you as the other director* of the company who has signed my policy and subse- quently all the receipts. When does the company intend to dissolve ? Why has the company omitted to make the annual return to the Registrar, as required by the statute under which it is incorporated ? And I beg to add another question : Why does the company continue to demand from me a premium in accordance with the profit scale, when, having disposed of its business, it can by no possibility that I can discover have any profits to divide ? On 11 February, 1860, Mr. Goghlan paid the premium, and received a receipt signed by Dr. Morris and Mr. Forristall, on one of the CathoUe forms. Mr. Goghlan next received the following circular ; Phcenix Life Assurance Company, 1, Leadenhall Street. March 22nd, 1860. I believe you are aware, from the statement on the renewal receipts, that the life and endowment policies of this company have been, since the 30th of June last, guaranteed by the British Nation (Life). The directors of this company have now come to the conclusion to transfer the life business absolutely to the British Nation. The transfer takes effect from midnight of the 29th of February last. The existing annual income of the British Nation exceeds thirty thousand pounds, and the capital amounts to more than one hundred thousand pounds, subscribed by upwards of three hundred shareholders. Its new business is also very greatly increasing, and the probability of large bonus advantages iS therefore also great. The terms and conditions contained in the policies issued by this company will remain in any case unaltered by this transfer. The policy-holders are fully guaranteed for all claims by the British Nation under the deed between the two companies ; but any of the assured desiring it can have the indorsement to that effect made on their policies. All communications should be henceforth addressed, and all premiums paid, to Henry Lake, Esq., Manager and Secretary of the British Nation. The directors feel, that in the steps they have takea they have consulted the best interests of their policy-holders, and have secured for them the most jiermanent advantages in their power. I am, &c, Edmond Bealbs, Chairman of the Phcenix. On the fly-sheet of that circular was another circular, signed by Mr. Lake, manager and secretary of the British Nation, containing the following passages : Bhitish Nation Life Assitkance Association, 22 March, 1860. By the accompanying letter of the chairman of the Phoenix you are informed E 2 i2 EUROPEAN AEBITEATION. Coqhi,ak's that the arrangement concluded some time since for the guarantee of the. life and Case. endowment policies of that company by this association has been extended to an absolute transfer. As the life and endowment policies of the Phoenix have, since midnight of the 30th June last, been guaranteed by this association, the premium renewal receipts and (he policies issued since that time bearing that assurance on the face of them, nochange whatever is required in the policies, all the terms and conditions con- tained in them being adopted by this association Mr. CogMan had no knowledge of the previous arrangements referred to between the Phoenix and the British Nation. On 26 March, 1860, Mr. Forristcdl presented a petition to wind up the Phoenix, on which an order was subsequently made. Mr. Goghlan had filed an affidavit, containing passages in sub- stance as follows : 5. Upon the occasion of the circular from the British Nation [of 22 March, I860],- 1 attended at the office of the British Nation, and saw Mr. Lake, and in- formed him that I protested and objected against being passed over to the British Nation. Mr. Lake requested me and pressed me to have my policy indorsed, but I declined, and told Mr. Jjahe that I had a Catholic policy, and would not give it up. 6. On another occasion, on my attending to pay the premium due on the policy, I requested the clerk at the counter to furnish me with a OathoKc receipt, when another clerk came forward and said they had no forms of re- ceipts of the Catholic, and declined to give any other receipt than the receipt upon the form of the British Nation. I requested the clerk to furnish me with his name, which he refused, and I took the British Nation receipt, and protested and objected at the time. 8. After the protest and objection was made, I continued to pay my premiums and take the British Nation receipts, but am unable to state whether I protested upon each occasion, for I considered the protest made by me on the first occasion was sufficient. 9. Upon the occasion of the amalgamation of the British Nation with the European, I, to the best of my belief, received no circular intimating such amal- gamation. 10. Upon my attending to pay the premium due upon the policy after that amalgamation, I asked for the name of one of the superior officials of the Euro- pean, but was informed, as my attendance was early in the morning, that none had arrived, and I paid my premium under protest. 11. I paid the subsequent premiums without, as I believe, any protest, as I had upon the transfer of the Catholic to the Phoenix continuously protested, and having never taken the Phamix receipts, having also protested on the occasion of the first payment to the British Nation, both to the manager and clerk, and being refused any other receipts than those of the British Nation, and having made the like protest when I first ascertained about the amalgamation of the British Nation with the European. 14, A reversionary bonus was declared on the policy of the British Nation, in LOED WESTBURY'S DECISIONS. 53 May, 1863, and anotlier in April, 1867, by the European. I did notaoknowlodgo Coohlan's the receipt of the circulars intimating such bonuses nor agree to accept the same. Case. The following is the receipt given to Mr. GogMan in 1861 ; Beitish Nation Life Assubakcb Association, with which is united the Life and Endowment business of the Ph(esix Life Assubancb Compant. Sum assured, £200. Policy, No. 138 C. 12th February, 1861. Received of Mr. Coglilan the sum of £5 15s. 4c?., being the payment of annual premium from the 13th day of January, 1861, to the 13th day of January, 1862, for an insurance of the sum of £200 on the life of himself effected by the before named policy. (Signed by Secretary.) The receipts for 1862, 1863, 1864, and 1865, were the same with the omission of the words ' with which is united ' to ' Com- pany.' That for 1866 was the same as these four, with the addi- tion of ' in union with the European Assurance Society, empowered by Special Act of Parliament,' after the word ' Association,' in the heading. After some variations in 1867 and 1 868, the final form (1869, 1870, 1871) was as follows : European Assubance Society. Premium £5 15s. 4c?. On the life of T. CogUan. Received the 5th day of February, 1869, the sum above stated, being the amount of premium for the renewal of policy No. 138, for 12 months from the 13th day of January, 1869, according to the tenour of the said policy. (Signed by two Directors.) A reversionary bonus was declared by the British Nation in 1863, and one by the European in 1867, and circulars stating the addition thereof to the policy were sent to Mr. GogJdan, but he did not answer either of them. Mr. E. Cutler was for Mr. Ooghlan. Mr, Higgins, Q.C., (Mr. Goohson with him) was for the European. LoKD Westbuet {BlumdeWs Case having been heard the day next before the hearing of Goghlan's Case) said : — Before you begin, Mr. Cutler, I think it would be desirable that I should mention to the Bar and the suitors some conclusions at which I have arrived upon matters of this kind, and which I mention now, not as indicating the rules that I shall henceforth 54 EUROPEAN AEBITEATION. CoGHLAN's follow without further discussion, but as intimating what my ■ impressions are, which the Bar will be quite at liberty to deal with, to shew that they are mistaken, or that they are injudicious and inexpedient. Looking at the nature of the decisions that have taken place upon the subject of what is called novation, it is, at present, my impression that it will be desirable to have these cases decided with reference to the following rules. First, wherever there is an alleged case of novation, it is my impression, at present, that I must require of the transferee company proof that that company had legal powers to grant new policies to the policy-holders of the transferor company, upon the same terms as are contained in those policies, or to take the policies of the transferor company, and indorse them with the acceptance of the transferee company, so as to make them analogous to original policies granted by the trans- feree company. Secondly, I shall require it to be proved before me that this power of the transferee company was made known to the policy-holder, and that an offer was made to him to accept either a new policy or an indorsed policy of the transferee company. Thirdly, that the acceptance of such an offer or proposal by the policy-holder shall be proved by acts which unequivocally denote his understanding and acceptance of that proposal. I use the word unequivocal for this reason, that I have to consider and decide matters of this description with a species of guide given to me by section 7 of the Life Assurance Companies Act, 1872. It may be very true, that I could not hold myself at liberty to adopt that enactment and apply it to the cases to be decided by me ; but I derive this light from that enactment, that the Legis- lature were satisfied that, in many of these cases, equivocal cir- cumstances had been accepted unfortunately, perhaps unjustly, as evidence of assent on the part of policy-holders, and that, having regard to that, they deemed it right to require in future more un- equivocal proof of the acceptance of the policy-holder. By that I may be guided so far as to require acts on the part of the policy-holder which shall prove to every one's reasonable satisfaction that he did intend to accept, and did accept, the security of the substituted company. These rules are, as I conceive, quite in accordance with the Case. LOED WESTBUEY'S DECISIONS. principles of law fully established long anterior to arbitrations of Coghlan's this character. I propose, subject to argument, to guide myself by those rules, and if I find no reason to alter or to lay them aside in consequence of what may be urged against them — and the Bar will deal with them with perfect freedom — then, if those rules are established as the principles that will guide my deci- sions, they will prevent very much uncertainty, and possibly will prevent a great deal of costly and unnecessary litigation. The policy-holders must understand that, if those rules are once esta- blished, they will come here with any cases that may be at variance with those rules at their peril. I should add, that I carefully exclude all Lord Cairns's deci- sions, the chief of which were cited and commented on in BlundelTs Case. I think those decisions, when properly analysed, really are based on one fact which Lord Cairns found, or considered he had found, in all the cases, namely, that there had been a proposal to the policy-holder to accept the new company, and the acts of the policy-holder, after that proposal, indicated clearly his acceptance of the proposal. The same course must be followed in the argument of this case as was taken in BlimdelVs Case. Mr. Cutler accordingly formally opened the claim. • Mr. Hiffgins: — The Catholic are defunct, and are not here directly ; but the European represent their interests, and are suc- cessors to their liabilities, and therefore have an interest in pre- venting the establishment of a claim which would lead to further expense being incurred in the winding-up of what has long since passed away, and is now a mere shadow. It is satisfactory to be allowed an opportunity of discussing the principles now enunciated, as it is impossible not to be struck with the consideration that some of them may, to some extent, conflict with decisions in other cases. Even judged by those principles, the present case is one of novation. (1.) Independently of that question, however, the policy-holder is bound by what was done on the amalgamation of the Catholic 5G EUEOPEAN ARBITRATION. CoBHLAN's with -the Phoenix, the Catholic was registered under 7 & 8 Viet. ^^' c. 1 10, with very special powers, enabling them to do what they did, and their deed of settlement containing those powers is re- ferred to anil incorporated with Mr. Ooghlan's policy, and the head- ing of his policy refers to the Act. He was therefore bound to take notice of the deed and the provisions of the Act ; as Lord Wensleydale said in Ernest v. Nicholls, 6 H. L. C. 418. The contract by a policy of this character, and the consequent liability, are solely in respect of a fund provided by the constitution of the company, as shewn in the deed. There is no contract with the company otherwise than with the fund, and with responsible owners or trustees of the fund. Clause 161 of the deed here authorizes a dissolution of the company, the winding-up of their affairs, and the satisfaction or transfer to another company of their existing engagements and liabilities. LoKD Westbuby : — Would that enable them to make a policy- holder's claim no longer a liability of their own, but a liability of another company ? Mr. Biggins : — Yes. The conferring of such a power, though large, is, even as regards policy-holders, a mere question of con- tract. A company cannot go on for ever, and there ought to be some authority to say at the right moment : Let us dissolve. The proper parties in the case of a proprietary company are the proprietors. The policy-holders have the security of the respecta- bility and integrity of the directors and proprietors, and they may well be content to leave the question of cessation to them, and to intrust to their discretion the selection of the company to whom the business is to be handed over. The exercise of that discretion, like any other trusteeship, would be subject to the controul of a Court of Equity ; but if it were well and honestly exercised, it might be a better mode of ^meeting the claims on the company than a mere valuation of the policies and the payment of the ac- tuarial value to each person then a policy-holder, or the strict mode of dissolution by winding-up. There is nothing illegal, or agamst equity, or reason, or public policy, in such a contract • especially as LORD WESTBUEY'S DECISIONS. 57 policy-holders may be scattered all over the world, and it may be Coqhlan's physically impossible for directors tD get them together and obtain their consent to an arrangement when necessity arises. In the Albert Arbitration, Mosley's Case, Minutes, 953, Lord Cairns had no doubt that a policy-holder might, if so minded, enter into such a contract. LoED Westbdey : — I have no difficulty about the right to make such a contract. The question is, whether according to the correct interpretation of the deed, such a contract existed here. A deed ought not to be considered as having that meaning unless the words compel one to adopt it. Mr. Biggins ; — ^Every insurance company contracts that the funds of the company shall alone be answerable to meet the de- mands against the company. The funds are intrusted to a certain number of persons for management, and they may, if breach of faith is to be supposed, make away with the whole fund, so that there would be no liability on the part of the shareholders. The provision that in the event of dissolution these managers shall fix, not on a person, but on a company in like business, and make an equitable arrangement with that company, is only similar in character. There may be fraud in the one case as in the other, but it is not more likely in the one case than in the other. LoBD Westbuky: — It is true a policy-holder can only claim against the fund ; but can a provision regulating the appropriation of the fund, although it may be good inter soeios, be good against him unless he has distinctly consented ? Mr. Higgins : — Yes, if he has contracted on the footing of the deed containing that provision. It is always open to him to watch the proceedings of the company, and to require them to make proper arrangements for his protection : Kearns v. Leaf, 1 H. & M. 681 ; Bishop V. Seott, 7 L. T., N.S., 570. (2.) Then as to novation : First, circulars were addressed to Mr. Coghlan giving him notice of the amalgamations, and finally 58 EUEOPEAN AEBITEATION. CooriLAN'B there is the circular of the British Nation telling him that that ■ company is liable to him, and will take over his policy ; and after that he pays, without protest, to that company. His preyious protests or objections are of no avail after that. Secondly, two bonus circulars were addressed by the transferee companies to him, conferring on him the right to reversionary bonuses out of the funds of those companies, and were received and not repudiated by him. Lord Westburt : — Was the Phoenix an office constituted in the same manner as the Catholic ? Mr. Biggins : — That information is not at hand at this moment ; but the question is comparatively unimportant, because, whatever Mr. Coghlan's position may have been in relation to the Phoenix, he subsequently came in to the British Nation ; so that there would be an entire release of the Catholic. There may be novation on a transfer from one company to another, although the transfer be not a valid transaction as between the companies. This is plain from numerous decisions. Lord Westbury : — If company A. transfer to company B., and company B. have power to adopt. the liabilities of company A., or to renew those liabilities, or to make them their own by new contracts, and do so, then it is not necessary for the validity of those new contracts to shew that the transactions between company A. and company B. are unimpeachable. That is all, I think, the decisions you mention go to. That may be readily acquiesced in. Because the person who has originally an engagement of the transferor company gets by the transaction a new contract substituted for his old one, and the contract so substituted is made by a party em- powered to enter into it, and therefore between that party and him it is a concluded transaction. Mr. Siggins .-—That is all that is contended for ; because in all these cases the assumption has been that as far as the transferee company is concerned there was power to take over in mass a number of policies, and in nearly every case there was express power to do the sort of act attempted by the transfer. It is not LOED WESTBUEY'S DECISIONS. 59 suggested here that there was any want of power on the part of OoanLAs's > t • 11 Oasb. any transferee company to take over policies in mass; but the question of novation consequent on amalgamation is independent of the question whether or not the amalgamation was intra vires. LoED Westbuey: — What, in fact, took place? Were there two general extraordinary meetings of the shareholders of the Catholic ? Mr. Higgins : — The Case does not shew. LoED Westbuey: — Then until that is shewn to me, I shall decline to apply to this case clause 161 of the deed. What was the mode of transfer to the Phcenix ? Mr. Biggins : — That, also, does not appear on the Case. LoED Westbuey : — Then I shall not hold that there was any transfer at all. Mr. Higgins : — The European, by virtue of this series of arrange- ments, did in fact irrevocably accept the liability on this policy. There is a chain of covenants of indemnity, which they cannot repudiate, and which can be shewn at once, as regards the British Nation, and which can no doubt be shewn, if time is given, as regards the Phoenix. But this is not necessary for the European. Kepresenting the ultimate liability, they say to Mr. Ooghlan: You come here to prove on a Catholic policy ; where is the policy ? It is produced. Then the European say : When did you pay the last premium to the Catholic ? He certainly cannot say he has paid a premium to the Catholic since 1860. Then the burden of proof is thrown on him. He says : My payment to the British Nation was payment to the Catholic ; I can shew, although there may have been invalidity in the arrangement, that the British Nation must be treated as having the status of agents of the Catholic. Then he must prove that case. It is not sufficient for him to say : Here is an old policy of 1848, and an old receipt of 1860. Receipts for premiums paid to the Catholic down to the present time must be produced, whereas the Case admits that no premiums have been paid to the Catholic since 1860. 60 EUROPEAN AEBITEATION. Coghlan's The following cases bear on the question of novation, as regards ' bonuses, amalgamation, circulars, and protests : Silencer's Case, L. R. 6 Ch. 362 ; and in the Albert Arbitration : Knox's Case, Reports, 132 ; Clarke's Case, Minutes, 894 ; Allen's Case, Reports, 127 ; WernincJc's Case, Reports, 101 ; Bivaz's Case, Reports, 104 ; Warnes Case, Reports, 113 ; Wood's Case, Reports, 54 ; Bichter's Case, Minutes, 639, 756. (3.) Section 7 of the Act of 1872 ought not to be applied ex post facto ; (1) the Act of 1870 gives the Court of Chancery con- troul over future amalgamations ; therefore there is some reason why the provisions of section 7 should have as regards future amalgamations a force and propriety which otherwise they would not have ; (2) the rule of section 7 is an arbitrary rule, adopted on grounds of public policy, but not to be put in force where by the contract between the parties the rule is unnecessary or inapplicable. The words ' any other act done ' will require great consideration. They can hardly affect a contract. A man may so contract before- hand as to waive the right of notice or to waive the obligation to have written evidence of his assent. But whatever interpretation be adopted, it is plain that equity, as distinguished from public policy, would require that a man should be bound by certain acts, although not evidenced by writing ; for instance, by a vote in favour of amalgamation at a meeting at which policy-holders attended, as they may do in many assurance' companies. Mr. Cuder was not called on. Lord Westbury : — If the case in the Boyal Naval and Military, which I am informed is iu preparation, also raising the question of novation, had been ready so as to be heard at these sittings, I would have postponed the decision in this case until after the argument in that ; but I am told it will not be ready. At the same time, I do not think it is of much consequence, because I think the decision LORD WESTBURY'S DECiSIONS. 61 in this case will turn very much on the special circumstances. Ooqhlan's However, it is necessary to observe particularly upon the very ' bare way in which this matter comes before me, and the paucity of materials in point of fact upon which I shall be compelled to decide. Mr. Goghlan, by the agreed Case, claims to be a creditor of the Catholic, and by his counsel here he asks for an order to wind up the Catholic. The claim being made on the present Joint Official Liquidator of the several companies in liquidation, they appear as acting for the European, and contend that Mr. Coghlan is not a policy-holder of the Catholic, but is a policy-holder of the European. The process by which it is sought to prove that Mr. Coghlan is a policy-holder of the European is somewhat of this nature. It is said that after the policy of Mr. Coghlan was effected with the Catholic, that company transferred their business to the Phoenix, and then it is said that the Phoenix transferred their business to the British Nation, and then it is said that the British Nation transferred their business, which I suppose is to be taken as the accumulated business of the British Nation and the Phoenix and the Catholic, to the European. Now what were the terms of these transfers we are not able to ascertain. We know only the fact that the business was transferred. Whether the Phoenix were authorized to take up and adopt or renew the liabilities of the Catholic, I cannot tell. Whether the British Nation had power to adopt or renew the liabilities of the Catholic and Phoenix, I cannot tell. Neither can I tell, so far as the Case before me is concerned, what were the immediate terms of the transfer of the British Nation to the Ewropean. But the question in all these cases is simply a question of the effect of what was done by the policy-holder, and of the intention of the policy-holder in doing those things. It has been argued at the Bar here, and I am sorry to say that some colour is furnished for that argument by some of the technical decisions that have been cited, as if it were incumbent upon the policy-holder to prove that he did not intend to adopt and to accept by way of substitution the liability of the transferee com- pany. That is quite an inversion of the proper order. It is incum- bent upon the company alleging a substitution, or what has been Q2 EUROPEAN ARBITRATION. Coqhlan's termed novation, to prove an agreement by the policy-holder to ^f^- make that novation, and, in the absence of any definite written declaration, to prove acts of the policy-holder that unequivocally involve the evidence of that intention on the part of the policy- holder to accept the new company instead of the old. Now, of any intention on the part of the policy-holder here to accept either the Phoenix, or the British Nation, or the European, in lieu of his own original company, there is not the least trace of proof; but, on the contrary, there is everything to warrant my finding and declaring that it was not the intention of Mr, CogMan to accept the Phoenix in lieu of the Catholic, or to accept the British Nation in lieu of the Phoenix, or to accept the JEuro^pean: and when I am told that he ought to have continued those protests of his down to the last moment, I cannot help contrasting that argument on the part of these companies with the manner — the unrighteous and unjust manner — in which Mr. CogMan was treated by them. His letters earnestly request in the very outset that lie might have a receipt by his own company for his premiums. He requests again most earnestly that he might know where to pay the premiums, in order to be certain it was a payment to the Catholic who contracted with him. Those letters are met by evasion. At length he is driven to the office of the British Nation, and to the office of the European, in order that he might have some recipient of his premiums. He there begs that he might have a receipt, indicating the manner in which he paid those premiums, and some clerk tells him : We will give you no such receipt, and unless you take our receipt you shall have none at all. Aad then it is argued before me, that because the poor man was thus compelled to take such a receipt as those men chose to give him, therefore he deliberately took that receipt as a thing done in the performance of a new and substi- tuted contract, and that he ought to be held to have deliberately, and with perfect knowledge of what he was about, accepted the new cx)mpany in lieu and substitution of the old. I cannot come to any such conclusion. I cannot find in the conduct of this gentleman the least evidence of an intention to change the persons with whom he had contracted, or to accept a new contract in lieu of the old. Nor have these individuals furnished me with the least proof that they had the right or the power to substitute LORD WESTBUEY'S DECISIONS. 63 a new contract, and to accept from Mr. Coghlan the surrender of Coghlan's the old. ' Now, certainly, I will endeavour, as far as I possibly can, to have these cases treated in a large and liberal manner, and I will not have technicalities used for the purpose of clouding a case, and obscuring what any man must discern to be the truth and justice and honour of the case. It is impossible for any one to read this Case and say that there ever was a time in which Mr. Coghlan was willing, to accept any one of these substituted companies as his sole creditors in this matter. Then, why am I to fasten upon a man a new contract, and to fasten it upon him in invitum ? I have no power to do any such thing, and, if I had the power, I have not the inclination. Observe how individuals are treated by these companies, who assume the power of handing them over from one to another, and then those who receive them assume the , power of ignoring their rights and refusing to listen to any of their complaints or any of their reasonable applications ; then, as in this case, at the end of a great deal of opposition, the policy-holder is told : You have struggled to keep to your original contract ; we have defeated you; and because you came here and paid your premiums in the only manner in which it was possible for you to pay them, although we know perfectly well you did not come here voluntarily, that you came here only by the duress of being told that if you did not pay them here your policy would be gone — then, having treated you in that manner, we turn round and say to you : you were perfectly well satisfied ; you took us and accepted us with pleasure ; you have made with us a new and substituted con- tract ; you have lost your old one ; and, therefore, you shall not now have the benefit of all the efibrts you have made to preserve it. Nothing, to my mind, is more unjust, more discreditable, and more to be condemned than conduct of that description. It then appears, that after Mr. Coghlan had announced to these people that, in his own mind, he was merely the holder of a policy in the Catholic, one of those companies sent a letter, announcing that they had added a sum of money to his policy to be received when the policy became due, and that Mr. Coghlan, acting as every sensible man would naturally do, took not the slightest notice of the 64 EUROPEAN ARBITRATION. CofiHLAN's letter. Then I am deliberately tolil, and cases are cited to prove, ^' that because Mr. Coghlan took no notice of that letter, therefore he accepted the transaction ; therefore he entered into a new contract with the European ; and that alone is sufficient evidence that he regarded himself as a policy-holder under the European, and not as a policy-holder under the original company. I will draw no such in- ference. I am confident that these technical modes of viewing these matters, which have been too numerous, have led to the necessity in the mind of the Legislature of laying down a rule that should save men from having things imputed to them which were directly contrary to their intention, and to the just meaning of their acts, by requiring, what on various other occasions the law has found it necessary to require, namely, some writing declaring the mind and intention of the party. Legislation became necessary to prevent the rights of men being defeated by innocent or equivocal acts being tortured into evidence of conclusions directly opposed to what they themselves held, and what they intended to act upon. When, therefore, I find a case in which, by unequivocal acts, a man has accepted a new company, which has the power of con- tracting with him, in lieu of the old company with which he con- tracted, I shall give efi'ect to the new contract ; but to raise that new contract there must be on the part of the new company a power to make it, and there must be on the part of the policy- holder a knowledge of the company's right so to contract with him, and there must be conduct on the part of the policy-holder, where it is an incomplete contract, or where there is no evidence in writing, that unmistakeably shews that he intended to accept the new contractor and to discharge the old. Then that word novation, or, what I should prefer, the substitution of the new contract in lieu and in discharge of the old, will be a thing established, which I can with satisfaction declare to be the fact ; but, unless that is found to be the case, I must decline to deprive a man by violence of his existing contract, giving him instead another contract, and then mocking him by telling him : You know that you intended to take that other contract, and there are acts, which no doubt you regarded . as having no meaning what- LORD WESTBUEY'S DECISIONS. 65 ever, but to which the law, wiser than you, will impute a meaning. Coohi.an's although it be a meaning directly contrary to your intention. ^' Mr. Coghlatis claim must be admitted against the Oaiholio. Solicitors for Mr. Coghlan : ]\ressrs. Kynaston & Gasguet. Solicitors for Huropean : Messrs. Mercer & Mercer. WALLBEEG'S CASE. Valuation of Policies and Annuiti'is — Payment of Premiums — Interest — Payments on Account of Annuities. The valuation of policies and annuities for purposes of proof in the liqtii- dation was directed to be made as follows : (1) The rules in the first schedule to the Life Assurance Companies Act, 1872, to be adopted : (2) The valuation to be made as at the date of the winding-up order. With respect to payment of premiums on policies the following rules were laid down : (1) Policies not to be deemed lapsed by reason of failure to pay in due time premiums becoming payable between petition and winding-up order : (2) Any such premium to be received by the liquidators if tendered before or at the time of the policy being presented for valuation for proof : (3) A policy not to be valued for proof unless payment first made of all premiums accrued due on it to date of winding-up order, whether days of grace then expired or not : (4) Set-off between premiums and amount of valuation not allowed. The Court of Chancery having by order allowed provisional oflScial liqui- dators to receive premiums on policies becoming due between petition and winding-up order, and to carry the same to a suspense account, or on condition (expressed in the order) that the payers might, in the event of a winding-up order being made, have the premiums returned in full, — Held, that a policy- holder, having so paid, should be deemed entitled to a return of his premium, unless he elected to prove on his policy, in which case, to avoid circuity, the premium should be retained by the liquidators. Interest not allowed on premiums so returned. Observations on Cook's Case. With respect to proof for an (immediate) annuity the following rules were laid down : (1) Annuitant may prove for an instalment which became due before petition to wind up, and for interest thereon from day of due payment till petition : P 1872 Oct. 22 ; Noi'. 1, 2, 5. QQ EUROPEAN ARBITRATION. Walleers's (2) Annuitant may prove for an instalment -which, became due between Case. petition and winding-up order, but without interest : (3) Payments on account to annuitant under order of Court of Chancery to be retained by him, and the amount to be deducted from the amount of his proof for instalments which became due before winding-up order. 1 HIS was an application, on a Case stated by agreement, for the decision of the Arbitrator on questions relating to the valuation of policies and annuities and the payment of premiums. Nothing turned on the terms of Mr. Wallberg's policy, which was selected to raise the questions, or on any matter of fact con- nected therewith. On 10 June, 1871, a petition to wind up the European was presented in the Court of Chancery by Joseph Oreenough, a share- holder. On 5 July, 1871, another petition to wind up the Euro- pean was presented in the Court by Charles Holt, a policy-holder. On 25 July, 1871, Vice-Chancellor Malins made the following order : Vice-Chanoellor itfcr^MS, ) o- t i no-n Tvi T^- -n no/N >■ Tuesday, 2o July, 1871. Mr. King, P.egr., 280. j ■' •" In the Matter of the Companies Acts, 1862 and 1867 ; and In the Matter of the Life Assurance Companies Act, 1870 ; and In the Matter of the European Assurance Society. Upon motion this day made unto this Court by counsel for the European Assurance Society, that all further proceedings upon the petitions of Joseph' Oreenough .... and of Gharles Holt, .... which were part heard before this Court on the 22nd July instant, might be stayed until further order, and that such directions might be given as to the payment by the said society out" of money in hand of its current expenses, and of claims upon policies becoming payable, as might be just, until the said petitions should have been finally disposed of. And upon motion for an injunction this day made unto this Court by counsel for the said society, And upon hearing counsel for the said petitioners and for Benjamin MalKnson, and upon reading an affidavit of ... . , And the said society by their counsel electing not to answer the affidavits already filed in support of the said petitions respectively. And this Court being of opinion that it has been proved that the said society is insolvent, - And the said society by their counsel applying that the further hearing of the said petitions may stand over for the purpose of seeing whether an arrangement can be made under the 22nd section of the Life Assurance Companies Act, 1870, or otherwise : This Court doth order that the further hearing of the said petitions do stand over imtil the first petition day in Michaelmas Term, 1871 : LORD WESTBURY'S DECISIONS. 67 And it is ordered that all actions, suits, and other proceedings against the said WALLBuna's society, including the action commenced by the said Benjamin Mallinson, be ^•*^'^- stayed until further order : And it is ordered that the said society be at liberty until further order to con- tinue the payment of rent, taxes, clerks' salaries, servants' wages, and all other office expenses, and of the reasonable expenses of the committee .... And it is ordered that the said society be at liberty until further order to con- tinue to pay all annuities not exceeding £50, and, in the discretion of the said society, yearly sums not exceeding £50 on account of annuities exceeding that amount, such payments to annuitants to be taken into account in adjusting any claim they may have against the said society : And it is ordered that all premiums on policies to be received by the said society be carried to a suspense account until further order : Any of the parties are to be at liberty to apply as there may be occasion. On 17 November, 1871, Vice-Chancellor Malins made the fol- lowing order: Vice-Chancellor ilfatos, ■) ., , ,„., , „„ , .o_, ,, _. ,. _ ' V Friday, the 17th day of November, 1871. Mr. Disraeli, Eegr. S In the Matter of the Companies Acts, 1862 and 1867 ; and In the Matter of the Life Assurance Companies Act, 1870 ; and In the Matter of the European Assurance Society. Upon the petition of Joseph Qreenough, .... and upon the petition of Charles Holt for winding up of the above-mentioned European Assurance Society, standing this day in the paper of petitions of this Court, in the presence of counsel for the respective petitioners, for the committee of policy-holders, for the company, and for the guardians of the poor of Buthin Union, This Court doth order that the said petitions do respectively stand over till the first petition day of Hilary Term next, with liberty for any parties to apply to have them or either of them restored at an earlier day ; And in the meantime it is ordered tliat Charles John Bunyon .... William Pollard Pattison .... and Stephen Philpot Low .... be appointed provisional ofBoial liqmdators of the said European Assurance Society, the said Stephen Philpot Law consenting to act without remuneration, with liberty for any party to apply to the judge as to security to be given by the said provisional ofScial liquidators : And it is ordered that the power of the said provisional ofBcial liquidators be limited and restricted to the following acts (that is to say), to call meetings of the policy- holders of the said company to consider any arrangements or arrangement which have or may be proposed for their benefit, or the benefit of the said company, and to give such notices as may be necessary to enable any application to be made to Parliament in the next session with reference to the affairs of the said company, if the Court shall hereafter think fit to authorize such to be given, and to apply to the judge in Chambers as to the appointment of a chairman of any meetings of the said company : And it is ordered that any premiums that may be received on any policies of assurance of the said company be continued to be carried to a separate account : And that the said provisional official liquidators are to continue to carry on the F 2 68 EUROPEAN AEBITEATION. Wallberg's business of the said company so far as is necessary for keeping together the busi- Case. ness of the said company, and to collect and get in all outstanding assets of the company, but no payments are to be made by them except for wages and salaries to clerks, and for the current expenses of the said company, without the order of the Court : And it is ordered that the said provisional official liquidators be at liberty, with the sanction of the judge in Chambers, to bring or defend any action, suit, or other legal proceeding in the name and on behalf of the company, and for all or any of the purposes aforesaid, and do all acts, and execute' in the name and on behalf of the company all deeds, receipts, and other documents, and for that pur- pose to use when necessary the company's seal. On 7 December, 1871, Vice-Chancellor Malins made the following order : Vice-Chancellor Malins, | at Chambers. > Thursday, the 7th day of December, 1871. Mr. Latham, Eegr. J In the Matter of the Companies Acts, 1862 and 1867 ; and In the Matter of the Life Assurance Companies Act, 1870 ; and In the Matter of the European Assurance Society. Upon the application of Charles John Bunyon, William, Pollard Pattison, and Stephen Philpot Low, the provisional ofiScial liquidators of the above-named society, and upon hearing the solicitors for the applicants, and upon reading an order dated 17th November, 1871, It is ordered that the said provisional official liquidators, or the official liqui- dators of the above-named society, if and when appointed, be at liberty until further order to receive from all persons assured with the above-named society the renewal premiums which may become due on the policies of the said society, and to carry the same to a separate account, to be entitled The Renewal Premium Account, upon the term or condition that the respective persons paying such renewal premiums may, provided an order be made for the winding-up of the said society, have such premiums returned in full : And it is ordered that the said provisional ofiSoial liquidators be at liberty forth- with to issue notices to holders of policies in the said society that the renewal premiums thereon will be received upon or subject to such condition. On 12 January, 1872, the following order was made by Vice- Chancellor Malins to wind up the European : Vice-Chancellor JkfuKns. ) t, ., m.i t -.or.., Ur. Milne, Hegr., 39. \ May, 12th January, 18/2. In the Matter of the Companies Acls, 1862 and 1867 ; and In the Matter of the Life Assurance Companies Act, 1870 ; and In the Matter of the European Assurance Society. Upon the petition of Joseph Greenough, .... a contributory of the above- named society ; and also upon the petition of Charles Holt, .... a share- holder and policy-holder of the above-named society, . . . . ; and upon hearing counsel for .... ; and also upon the petition of the guardians of the poor of the Ruthin Union, . . . . ; and upon hearing counsel for ... . ; and also upon the LOED WESTBURY'S DEGISIONS. 69 petition of Charles Oarlant, the official liquidator of the Oporto Mining Com- Walmebq s pany, . . . . ; and upon hearing counsel for .... ; and upon reading the said Case. petitions, an affidavit of ... . levidence stated]. This Court doth, upon the petitions of the said Joseph Greenough and Charles Holt, order that the said European Assurance Society be wound up by this Court under the provisions of the Companies Acts, 1862 and 1867 .... [costs provided for'] ■■ s And it is ordered that the time limited by the 6th Rule of the General Orders and Rules of the 11th day of November, 1862, for the advertisement of this Order, be extended to the 31st day of January, 1872. On 17 January, 1872, the following order was made by Vice- Chancellor Malins : Vice-ChauceUor Malins, \ At Chambers. Wednesday, the 17th day of January, 1872. Mr. Sogers, Regr. J In the Matter of the Companies Acts, 1862 and 1867 ; and In the Matter of the Life Assurance Companies Act, 1870 ; and In the Matter of the European Assurance Society. Upon the application of Charles John Bunyon, William, Pollard Pattison, and Stephen Philpot Low, the provisional official liquidators of the above-named society, and upon hearing the solicitors for the applicants, and upon reading four several orders, dated respectively the 25th July, 1871, the 17th November, 1871, the 7th December, 1871, and the 12th January, 1872 : It is ordered that the said provisional official liquidators, or the official liqui- dators of the above-named society, when appointed, be at liberty, out of the money for the time being at the Bank of England to the credit of the renewal premium account, to pay to the several persons assured with the above-named society who have, between the 25th day of July, 1871, and the 7th December, 1871, paid renewal premiums on the policies of the said Society, the amount of the renewal premiums so paid by them, without any deduction. On 8 February, 1872, by an order of Vice-Chancellor Malins at Chambers, the" provisional ofiScial liquidators were appointed ofBciaJ liquidators of the Ewopean. On 5 March, 1872, the following order was made by Vice- Chancellor Malins : Vice-Chancellor Malins, j At Chambers, | Tuesday, the 5th day of March, 1872. Mr. Farrer, Regr. ) In the Matter of the Companies Acts, 1862 and 1867 ; and In the Matter of the Life Assurance Companies Act, 1870 ; and In the Matter of the European Assurance Society. Upon the application of the official liquidators of the above-named Society, and upon hearing the solicitors for the said applicants, and upon reading the orders dated respectively the 25th July, 1871, the. 17th November, 1871, the 70 EUEOPEAN AEBITEATION. Wallberg's 7th Decemljer, 1871, the 12th January, 1872, the 17th January, 1872, and Case. the 8th February, 1872 : It is ordered, that the applicants, in carrying out the order dated the 17th January, 1872, for the return of renewal premiums paid pursuant to the orders in this matter dated respectively the 25th Jnly, 1871, the 17th November, 1871, and the 7th December, 1871, or any of them, be at liberty to make such return or repayment in each case to the person whose name appears in the books of the said society as the person to whom notice of the renewal premium becoming due was to be sent by the said society, or to other the person or persons who may have paid such premium, on the delivery up by such person to the said ofBcia,! liquidators of the renewal jiremium receipt given for such premium. In September, 1871, Mr. Wallherg paid his premium under the orders of the Court ; and that sum and many other sums paid under the orders had not been returned thereunder by 25 July, 1872, when the Arbitration Act passed. On 19 August, 1872, the following notice was issued in the Arbitration : EuEOPEAN ASSUEANCB SOCIETY ABBITKATION. 3, Westminster Chanibers, Victoria Street, London, 8, W. 19 August 1872. Eepayment OF Renewal Pbemiums. Note for persons inquiring. Eepayment of Renewal Premiums paid since 25 July 1871 is suspended until after the valuation of the policies in respect of which such premiums were paid. The final directions of the Arbitrator respecting these premiums will be given at the sittings in the Arbitration in the latter part of October. A further notice will then be issued. All communications respecting this notice should be by prepaid post letter addressed to the Joint Official Liquidator at this ofiBce. By order of the Arbitrator, Thomas Pbeston, Assistant Secretary. On 6 September, 1872, a further notice was issued in the Arbitration containing the following passages : 10. The Arbitrator, having regard to the provisions of sections 5 and 6 of the Life Assurance Companies Act, 1872, and to the proceedings in the liquidation of the European Society anterior to the passing of the Arbitration Act, deems it right to have the following questions argued before him (namely) the question of the date as at which the value of a policy is to be estimated for purposes of proof, and, as connected therewith, all questions relative to payment of premiums accruing due before the date of the order to wind up. 11. Pending the consideration of these questions the Arbitrator has directed the preparation of the necessary materials for the valuation to be proceeded with, LOED WESTBUEY'S DECISIONS. 71 and has suspended the repayment of premiums received before tlie date of the Wallbebg's order to wind up. Case. 12. The questions before-mentioned will be argued at the sittings in October. Dated this 6th day of September, 1872. By order of the Arbitrator, Thomas Prisston, Assistant Secretary. European Assurance Society Arbitration Office, 3 Westminster Ohambers, Victoria Street, Westminster, London, S. W. The agreed Case stated the questions for the Arbitrator, iu sub- stance, as follows : (1) Whether premiums paid between the date of the presen- tation of Greenough's petition and the date of the winding-up order ought to be repaid forthwith, or when ; and whether those premiums carried any and what interest, and from what date interest (if any) ought to be computed, and when the same ought to be paid : (2) At what date the value of policies ought to be estimated for the purposes of proof of claims in respect thereof against the Iki/rojpean. Mr. Southgate, Q.C., (Mr. Bomer with him) was for Mr. Wallberg. Oct.2% Mr. Higgins, Q.C., (Mr. Cookson with him) was for the European. Mr Southgate : — Generally, there is a very small gap between the presentation of the petition and the order to wind up, but here the petition was presented on 10 June, 1871, and the winding- up order was not made until 12 January, 1872, and a great number of premiums became due and were paid to the suspense account in the meantime. The present application is limited to the return of these premiums. Lord Westbukt : — How can that be ? The Case raises a very different question, and the orders of the Vice-Chancellor, which I do not perhaps quite understand, were made before the order to wind up. Whether these orders are or are not to form a rule which I should follow, must depend on the effect of the order to wind up. Then the order to wind up has this result, that every policy of 72 EUROPEAN AEBITEA.TION. Walleeeg's assurance must now be valued. The question, then, is, as to the _^' time as at which it is to be valued. If it is to be valued as at the date of the winding-up order, then every premium that accrued due before that order belongs to the liquidation, and must be paid before the valuation can proceed. It is of np use, therefore, limit- ing your view to the orders respecting the premiums. These must be taken in connection with the order to wind up. I should also tell you that it is my intention to adopt, in this liquidation, the rules contained in the first schedule to the Life Assurance Companies Act, 1872. Mr. Sowthgate : — It was held in Cook's Case, L. E. 9 Eq. 703, that where the days of grace expired between petition and order the policy-holder was still entitled to prove. No doubt, if it turned out that the petition was dismissed the policy-holder who had refrained from paying would be in an awkward position ; but where the company is insolvent he is not bound to pay. The order of 25 July is made on the recital that the European had been proved to be insolvent. Lord Westbuey : — The Court finding the society to be insol- vent, but staying its hand and not making aa order to wind up, operates nothing. It is the order to wind up that operates. The ownership of these premiums will depend wholly on the question, at what time is the policy to be valued. I shall not regard the order of 25 July, if on determining that question the premiums are found to belong to the liquidation. Mr. Southgate: — According to Cook's Case, whatever the time of the valuation may be, the company, at the time when the premium was paid, was in such a situation that the policy-holder was not bound to pay the premium ; that is to say, default would not deprive him of his right. That is based on section 84 of the Companies Act, 1862. LoED Westbuby : — Your proposition is, that you are entitled to have your policy valued without the payment of any premium becoming due after the date of the presentation of the petition. LOED WESTBUEY'S DECISIONS. 78 Mr. Southgate : — Yes. But the liquidators are entitled to have Wallberg'b the value of the premium taken into account on their side of the L' valuation. It would be within a few pence the same sum ; but it would only he an item in account. It would not be worth arguing if it were a company paying twenty shillings in the pound. The effect will be that it will be only considered in the amount of dividend they are to receive. No objection to that arises on the rule in the first schedule to the Act of last session. That contains only one reference to time, and it is in connection with something else, but the time referred to is the commence- ment of the winding-up. There is no reference to the date of the order. The present value spoken of is not the value as at the time of the actual valuation. It seems to mean, regard being had to section 84 of the Gomjpanies Ad, 1862, the com- mencement of the winding-up. There are other provisions to the same effect, such as section 163, putting an end to actions and executions after the commencement of the winding-up. In the Albert Arbitration, Lancaster's Case, Eeports, 76, Lord Cairns is reported to have said the valuation is to be made as at the date of the winding-up order, but he did not mean to discriminate between the date of the petition and the date of the winding-up order. What was meant was to decide the ques- tion as to the mode of making the valuation. In Cambrian Steam Case, L. E. 4 Ch. 112, Lord Chancellor Cairns held that the liability of one company to another for damages did not cease at the date of the order. LoED Westbuey : — That is quite a different matter. Mr. Southgate : — The proper thing to do is to value the policy as at the commencement of the winding-up, treating the liability to the premiums in the one case and in the other simply as an item of account. There is no authority for fixing on the date of the wind- ing-up order except the phrase in Rule 25, and on that the obser- vations of Lord Cairns in the Cambrian Steam Case are to be considered. Another course would be to value the policies as at the date of the order of 25 July, which states that the company had been proved to be insolvent ; because it is plain that after that 74 EUROPEAN AEBITEATION. Wallbeks's time nobody, except on a special arrangement, would have paid J^ premiums to the European. That order had reference to section 22 of the Life Asswranee Companies Act, 1870, which authorizes the Court to reduce the amount of the contracts of the company. It has been decided at law that where one party to a contract has intimated an intention not to perform it, the other party may sue for breach of contract without waiting for an actual breach : Danube Railway Oo. v. Xenos, 13 0. B., N. S,, 825. That is analogous to the question here. LoBD Westbuey: — Mr. Riggins, I will not call on you at present. If there is any other policy-holder who wishes to be heard on the points argued in this case, I should like to have an opportunity of hearing him before I finally decide the question. Nov. 1, 2. Accordingly three further cases were brought before the Arbi- trator, namely, Trustram's, Sullivan's, and Smyihes Oases. In Trustram's Case there were four policies. As regards pay- ment of premiums, they stood as follows. With respect to two policies, the premiums became due in December, 1871, and were paid under the orders of the Court, and had not been returned thereunder before the Arbitration. With respect to another policy, a premium became due on 6 June, 1871, so that the thirty days of grace had not expired before petition ; this premium was not paid. With respect to the fourth policy, a premium became due between petition and order ; this premium also was not paid. Mr. Graham Eastings was for the claimants, Trustram's exe- cutors. Mr. Eiggins, Q.C., (Mr. Coohson with him) was for the European. Mr. Eastings .•— (1.) The winding-up order is the cutting down of the tree ; the presentation of the petition is the laying of the axe to the root ; it is one continuous proceeding. The valuation should be as at the commencement of it. (2.) When the petition LOED WESTBUEY'S DECISIONS. 75 was presented the law was that laid down in GooVs Case. Any Walldbbg'b one in a similar position was justified in not paying his premium, _1!^' on that authority. At least, the door should not be shut against payment now. Mr. Higgins: — After the orders of the Court, the liquidators cannot press the contention that non-payment of a premium works a forfeiture, where the days of grace had not expired before petition. In Gook's Case the policy was saved from forfeiture, but the holder had to pay the premium up to the time of the valuation. The rule adopted in the Albert Arbitration should be followed, that is, premiums falling due before the date of valuation must be paid, or be deducted, not from the valuation, but from the dividend. LoED Westbuky : — The difficulty is that the premium may exceed the dividend. In SiilUvan's and Smyfhe's Cases the claimants held immediate annuity contracts from the Boyal Naval and Military. In Smythe's Gase, under the orders of the Court of Chancery, a payment on account had been made to the annuitant. Mr. J. W. Chitty was for the annuitants. Captain Sullivan and Mrs. Smythe. Mr. Codkson was for the Boyal Naval omdL Military. Mr. Ghitty : — The valuation should be made as at the date of the winding-up order. That is the time at which proof should be made, and at which, but for human infirmity and inevitable delays, there would be an immediate distribution. No claimant can be paid, unless he has at the date of the winding-up order a claim under a valid subsisting contract, one which but for the inter- vention of the winding-up order, he could enforce when the time comes. Suppose a contract under which the payment of money was to cease on the happening of an uncertain event, and between petition and order, the contingency happens, there would be no 3laim. So, in bankruptcy, nothing is proveable but what is in sxistence at adjudication. Every condition precedent must be 76 EUROPE A.N AEBITRATION. Wallbbbg's performed before proof. OooKs Case proceeded on the assumption ^^' that the company had absolutely refused to perform the contract, and that this was a dispensation by the company to the policy- holder from paying his premium. This was an erroneous view. There must be an unqualified refusal to perform on the part of one of the contracting parties to entitle the other to treat the contract as at an end : - - Danule Baihvay Co. v. Xenos, 13 C. B. (N.S.) 825 ; Eochster v. De la Tour, 2 E. & B. 678. But there is no such refusal in the case of a company adversely wound up. The company in Cook's Case had nothing to do in the way of performance. There is nothing in the Companies Act to preclude a company from receiving money after petition ; there is therefore nothing to exempt a person who is to pay to the company from the obligation of paying between petition and order. Conse- quently the principle of Cook's Case is unsound. The payment on account of the annuity in Smythe's Case was a proper payment. Interest should be allowed on every instalment of an annuity falling due before or after petition and not paid. LoBD Westbtjet : — Interest is given by reason of a payment not having been made which ought to have been made, but pay- ment of an instalment falling due after the commencement of the winding-up could not have been made, the company being in a state of insolvency as proved by the subsequent order. Mr, Chitty : — Interest is claimed in respect of a breach of con- tract occurring through no default of the annuitant. Debts and damages of every kind as they stand at the date of the winding-up order are proveable. The company by force of a vis major are unable to pay, and are prevented from paying, but they are not absolved from the consequences of their breach of contract ; and whether it is called debt or is called damages is immaterial, because a creditor is entitled to prove not only for damages, but also for interest thereon from the date that the damages ought to have been paid up to the date of the order. Rule 77 of the Bankruptcy Rules of 1869 supports this. There is no distinction there made LOED WESTBUEY'S DECISIONS. 77 n regard to the instalment which might become payable in the Wallbekg's nterval between the act of bankruptcy and the adjudication. — ! Lastly, in the case of a solvent company, an annuitant is entitled ,0 interest on his proof, from the date of the winding-up order intil payment. It was allowed in the Albert Arbitration : WaU's Case, Minutes, 822. Lord Westbubtj : — That point may wait till we find a solvent ;ompany. Mr. CooJcson was not called on. Judgment reserved. Lord Westbuey : — In this case I have to decide various points ; Nov. .'>. the first being as to the time when the valuation of policies and annuities is to be made ; the others with regard to the dealing with those sums of money which were paid under the orders of Vice- Ohancellor Malins, and have not been repaid ; and with regard to some other matters. On the first point, it is matter of surprise to me that any doubt should have been entertained. Doubts, however, have been enter- tained by different judges, and in tlie last Act of Parliament some indefinite enactments may probably be attributed to the existence of those doubts. But if the subject is examined, I think it will be idmitted that there is no well-founded doubt. The necessity for a valuation of these claims against the com- pany arises from this, that all the property of the company is under the winding-up order handed over for equal distribution imong their creditors ; of those creditors annuitants and holders jf policies granted by the company are some ; and the necessity of making an equal distribution of the assets of the insolvent com- pany renders necessary also a valuation of these claims. These ire claims to arise, in the case of annuities, from time to time in f^uturo. In the case of policies they are colitingent claims arising m a contingent event, namely, the death of the person to whom ;he policy is granted. The Legislature have determined, and in ill insolvencies the same rule applies, that in the course of the idministration of the estate of an insolvent company these debts 78 EUEOPEAN ARBITEATION. Wallbero's shall be valued ; they must be valued ; you could not withhold out ^^" of the assets of the company a large sum of money and keep it invested, or in suspense, to answer the claims when they arise; you must have a present value put on these future claims ; and that present value represents the sum for which the claimants, the holders of the claims, will be entitled to rank among the rest of the creditors. When does the necessity ';for this valuation arise ? It arises immediately on the property of the company, the debtor, being directed to be equally distributed. But when is the property of the debtor company subjected to equal distribution among the creditors ? At the date of the winding-up order. Then, and not until then, is the company divested of its property. In effect, the property is then handed over to the official liquidator to be broken up and distributed in proportionate parts among the creditor claimants who are entitled. It follows immediately that the valua- tion must be made at the time when the necessity for a valuation arises. The necessity arises, as I have said, when the order to wind up is made ; and that, therefore, becomes necessarily the date of the valuation. Some confusion appears to have arisen sometimes, as in BelVs Case, from the decision being based on principles utterly foreign to those which govern the administration of an insolvent estate. Some confusion also appears to have arisen from supposing that the winding-up for all purposes relates back to the time when the petition on which the order is made was presented. For some purposes it does, but the property of the company remains in the administration of the company, subject to any order of the Court taking it out of the company's administration ; it remains in the hands of the company until the time when the property of the company is broken up, that is, until the order for winding up. Therefore, if the matter is regarded on principles which should govern it altogether, especially when it is regarded as analogous to the proceeding in bankruptcy, where the valuation is always made as at the time of adjudication, there can be no hesitation in stating that the present value, as it is called in the Act of 1872, is the value that presents itself when you are first obliged to ascertain the value, that is, when you enter on the process of distribution, j LORD WESTBURY'S DECISIONS. 79 This was recognised by the Legislature in the Act of 1862, wallbeeq's which provides in section 158 : In the event of any company being wound up under this Act, all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as is possible, of the value of all such debts or claims as may be subject to any contingency or sound only in damages. The right to be admitted as a creditor jQust be considered as arising immediately that the property is handed over to the cre- ditors, and no longer remains in the hands or under the adminis- tration of the debtor company. That is, again, at the date of the order to wind up. The meaning of that enactment was more fully explained in the General Orders under the Act, when by the 25th Eule it was said : The value of such debts and claims as are made admissible to proof by the 158th section of the said Act shall, so far as is possible, be estimated according to the value thereof at the date of the order to wind up the company. I think that rule was a very correct one ; it correctly interpreted the meaning of the Act ; it was perfectly consistent with prin- ciple, as I have endeavourel to shew, and perfectly consistent with the practice observed in the law, as it had been previously adminis- tered in cases of bankruptcy and insolvency. Lord Cairns observed that rule in the Albert Arbitration, and held that the value must be estimated and ascertained as at the date of the order to wind up. And though the Legislature did not in terms repeat that rule in the Act of last Session, yet in effect they did so by the direction that the present value shall be ascertained, a direction which speaks as at the date of the order to wind up. I have no hesitation, therefore, in adhering to the rule laid down by the Act of 1862 and General Order, and followed by Lord Cairns ; and I declare that every policy and every annuity shall be admissible to proof in this Arbitration according to the value of the policy and the annuity as at the date of the order to wind up. And I declare that the rules given in the first schedule to the Life Assurance Companies Act, 1872, shall be the rules to be followed in this Arbitration, for the purpose of fully carrying into effect the Case. 8Q EUROPEAN ARBITRATION. Wallbekg's valuation of the policies and the annuities as at the date of the ^^ order to wind up. I come to the next point that has been argued before me, and that is what is to be done with the premiums on the policies ? My attention was drawn to a decision of Vice-Chancellor James in Cook's Case, which, as far as is necessary for the present purpose, and as far as I recognise it, laid down this rule, that if a pre- mium on a policy had become due, according to the terms of the policy, at a time anterior to the date of the presentation of the petition on which the order to wind up was subsequently made, but the days of grace did not expire until after that date, that premium might be paid by the policy-holder in the liquidation of the company, and he would not be liable to incur a forfeiture of the policy by reason of the premium not being paid by the very day on which the days of grace expired. I think that was a very moderate and just decision ; and it proceeded on this, that inasmuch as the subsequent winding-up orrler was proof that the company was in a state of insolvency at the time when the days of grace expired, it would be an unreasonable and an unjust thing to deny the policy-holder the benefit of his policy by reason of his not complying literally with the terms of the engagement and paying the money before the expiration of the days of grace. I mean to follow that, and to hold that in the case of every policy brought forward for valuation, any premiums that became due between the date of the petition to wind up and the date of the order may be received by the official liquidator from the policyholder. That adopts the principle of GooFs Case, and will extend it still further. For suppose that the petition having been presented in June, 1871, a premium became due on 1 October, with thirty days of grace it would have to be paid some time in November, if the company were solvent, and if it was at all reason- able to expect that the engagements in the policy would be literally kept by the company. But as that is not the fact, the fact of the •winding-up order following, on that petition retrospectively ought to operate to this extent, to prevent any policy-holder incurring a forfeiture, that is, the loss of his policy, by failure to keep the engagement to pay the premiums which became due at any time LOED WESTBURY'S DECISIONS. yi after the insolvency of the company commenced. I take the in- Wallbebgs solvency of the company, as proved by the subsequent order, as ^^ in fact commencing from the date of the presentation of tlie pe- tition ; and therefore I give the policy-holder the benefit of paying the premiums that became due during that interval, at any time before the policy is presented for valuation. The result of that will be this, that a policy-holder presenting his policy for valuation will be obliged to pay all premiums that have become due previously to the date of the order to wind up. In the case of a policy the premium on which became due and the thirty days of grace also expired before the date of the petition to wind up, the premium not being paid, that policy is null and void. But where the premium becomes due during the period of insolvency that precedes the order to wind up, the policy-holder shall have the option of paying the premium at the time when he presents his policy for valuation. I must, however, require him to pay the premium before the valuation is made. I cannot listen to the argument that was presented to me on one or two occasions, that a policy-holder ought to be allowed to set off the amount of the valuation as against the premium. The pre- mium cannot be made a subject of set-off. The policy must be valued as a current valid engagement. In the premiums so required to be paid, I include any premium that may have become due and payable before the date of the order, though the thirty days' grace for the payment of that pre- mium would, ordinarily, not expire until after the date of the order. The policy-holder will know what is the condition he must fulfil before his policy is valued. He has full liberty not to present his policy for valuation, in which case the policy will become void, and in that case he will be under no obligation to pay the premiums. That leads me to the other part of the application in Wallberg's Case, which was that the policy-holder might have an immediate return made to him of premiums which he paid under the orders of Vice-Chancellor Malins. That, however, was followed afterwards by an application, made to me the other day by the same parties, that a policy-liolder might be at liberty to elect to abandon his G 82 EUEOPEAN AEBITEATION. Wallbebg's policy, and if lie elected to abandon his policy, then that he might ^'^™- have a return of these premiums. I felt some difiSculty at the time in acceding to that application; but having regard to the terms of the orders made by the Vice-Ohancellor, I cannot claim a right to treat payments made under the invitations contained in those orders as if they were voluntary payments made by the policy-holder on account of his policy. Therefore I must hold that any policy-holder who has paid his premiums under those orders, but afterwards elects not to prove on his policy, is entitled to a return of those premiums. If a policy-holder proves on his policy, I should withhold the premium, because he could not prove without payment of the premium, and it would be an idle circuity, of which there has already been enough, to hand him out his money only to make him return that money. But if any policy-holder who has paid his money into Court, which now stands to the suspense account created under those orders, declares that he does not intend to bring forward any proof in respect of his policy, and voluntarily surrenders his policy to the liquidators, then he must receive back the money that he so paid. I cannot treat those payments as voluntary conclusive payments when they were made under the terms of the orders. But I cannot repay the pre- m'liras to him if he tells me he still means to prove in respect of his policy ; for if he does prove in respect of his policy, or declares that he intenrls so to do, then the premiums would become payable before the proof could be admitted, and I could not allow therefore of the money being paid back to an individual who tells me that he will put himself in the situation of having to pay that money again. Those who have already got their money back under the Vice- Chancellor s orders, will have to repay it if they prove. Then I have four questions to determine respecting annuities. First, as regards the instalment of an annuity which became due before the presentation of the petition to wind up, the annuitant is entitled to prove for that instalment, and to prove for interest thereon as from the date of due payment down to the presentation of the petition, and to add the amount of interest to the amount of the instalment. Secondly, as regards instalments which became LORD WESTBURY'S DECISIONS. 83 due after the presentation of the petition, but before the date of Wallbero's the order to wind up, the annuitant is entitled to prove for the — '. amount of those instalments, but not to prove for interest thereon. Thirdly, annuities are to be valued as at the date of the order to wind up, and the proof is to be for the amount of the valuation. Lastly, as regards any payment made under the orders of the Court between the date of the presentation of the petition and the date of the order to wind up, the annuitant is entitled to retain those sums, and will give credit for them as against the amount of proof for the instalments which became due before the winding-up order. Mr. Cookson : — Does your Lordship fix any time within wliich a policy is to be presented for valuation ? LoED Westbuet : — That must be the subject of a general notice. Mr. Cookson : — With regard to the question in the Case as to interest on premiums, I understand that nothing is said about interest on either side ? LoED Westbuey : — No. Solicitor for Mr. WaUherg : Mr. Kearsey. Solicitors for Trustram's Executors : Messrs. Ealse, Trmtram, &Co. Solicitors for Captain Sullivan and Mrs. Smythe: Messrs. Wilkins, Blyth, & Marsland. Solicitors for European : Jlessrs. Mercer & Mercer. G2 Nov. 5. 84 EUEOPEAN AEBITEATION. BLUNDELL'S CASE. 1872 ^'T^, . Policy — Novation. Held, in a case of alleged novation : (1) A transfer of assurance business by company A. to company B. in- volves an aufcliority to company £. to carry on that business, with power to company B. to receive the premiums on policies gi'anted by company A., by virtue of tbe authority impliedly given in the transfer ; ' therefore, all premiums paid to company B. are to be presumed to be received under this implied authority ; and if company B. say they have received them in another capacity, and by virtue of a new contract with themselves, and not by virtue of the original contract transferred, the duty of proving the new contract and shewing the new relation falls on them : (2) The transferee company having a right to receive, by virtue of that delegated authority, the premiums payable to the original company, it is immaterial what form of discharge they give ; the receipt must be referred to the right to receive. Where the amalgamation deed between two assurance companies contained a covenant by the transferee company to indemnify the transferor company, held, on a question of novation, that this covenant necessarily involved, as regards policies and annuities granted by the transferor company, their continuance and existence in accordance with the terms of the original con- tract ; for it was against the original contract that the one company covenanted to indemnify the other. Held, that novation is a question of intention, which intention is a fact to be proved in the clearest manner ; the obligation of proving it lies on the company alleging it. Observations on the rules relating to novation in Eoman law. Novation consequent on amalgamation not established against a policy- holder, in the following circumstances : Having effected an assurance with company A., he accepted receipts, varying in form, with headings referring to companies A., B., and C, through the course of two successive amalga- mations between companies A. and B. and B. and C, and ultimately ac- cepted receipts of company C, simply ; he received no amalgamation circular, and had no notice or knowledge of the arrangements between the com- panies, except as far as he might have it from the receipts ; having effected the assurance through an agent, he continued to pay his premiums at the same office to, and receive receipts there from, the same person, who con- tinued to be described by name as agent on the receipts. XHIS was an application, on a Case stated by agreement, for the decision of the Arbitrator on the claim of Mr. Blundell to be a creditor of the British Commercial. Tlie British Commereial amalgamated with the British Nation LOED WESTBUBY'S DECISIONS. 85 {Life) by a series of proceedings extending from 1859 to the end of Blundell's 1864 ; the British Nation amalgamated with the European in 1866. ^ In 1855 Mr. Blundell effected with the British Commercial a policy of assurance, dated 28 March, 1855, numbered 8779, on his own life, for £400, without profits. Mr. Mahony, of Castlerea, in the county of Boscommon, was in 1855 the agent of the British Commercial there, and Mr. Blundell effected his policy through the agency of Mr. Mahony. From 1855 to 1871 Mr. Blundell paid all premiums on his policy to Mr. Mahony, and received the receipts through him. In and before 1860 the receipts were in the following form : Bbitish Commercial Life Insukancb Company, London. Sum assured, £400. Policy, No. 8779. Eeceived the 13th day of April, 1857, the sum of £9 6s. ^d., being half the premium of insurance on £400 and interest for one year from the 27th day of March, 1857, on the life of the Reverend Robert Blundell. £9 6 4 14 4 £8 2 (Signed by two Directors.) Witness. The receipts for 1861 and 1862 were in the following form : Bbitish Commebcial Life Iksubance Company, London, united with the Bbitish Nation Life Assubance Association. Sum assured £400. Policy No. 8779. Eeceived the 6th.day_of April, 1861 (one), the sum of Ten Pounds 18/9, being half the premium of insurance on £400 and interest for one year from the 27th day of March, 1861, on the life of Eeverend R. Blundell. £10 18 9 Witness, J. Mahony, Castlerea. The receipts for 1863, 1864, and 1865 were in the following form : Bbitish Nation Life Assubance Association, with which is united the Business of the Bbitish Commebcial Life Insurance Company. Chief Offices, 316, Regent Street, London, W. Eeceipt No. 31,594. Policy No. 8779. Sum assured, £400 Eeceived this 26th day of March, Nineteen pounds and nine pence, being the payment of a yearly premium from the 27th day of March, 1863, to the 26th day 0. F. Anderson, III Henry Deffell, 86 EUKOPEAN ARBITRATION. Blundell's of March, 1864, for an assurance on the life of Reverend Robert Blundell effected Case. i,y jjig 'before-named policy. o £19 9 / ^'*"P \ S. Smith, I 2601 March, ) Countersigned V iseS. / Henry Deffell, I S J. Mahcmy, Agent, Castlerea. The receipt for 1866 was in the following form : British Nation Life Assurakcb Association, in union with the Euko- pban assubance society. Empowered by Special Act of Parliament. Offices, 316, Regent Street, London, W. Receipt No. 36,194. Policy No. 8779. Sum assured, £400. Received this 28th day of March, 1866, the sum of nineteen pounds and nine pence, being the payment of 12 months' premium and interest from 27th March, 1866, for an assurance on the life of Reverend R. Blundell, effected by the before- named policy. stamp n-IQ „ q /28th March, 1866, G. F. Anderson, J. Mahony, 1 Agent, Castlerea./ R. Wollen, Junr., The receipts for 1867 to 1871 were in the following form : European Assubanoe Society. Empowered by Special Act of Parliament. Receipt No. 37,516.j GUef Office, 316, Regent Street, W., London. Policy No. 8779. J (69 to 71) 17, Waterloo Place, Pall Mall. J. MaJiony, Agent. Sum assured, £400. Received this 2nd day of April, 1867, the sum of nineteen pounds and nine pence, being the payment of twelve months' premium and interest from 27th March, 1867, for an assurance on the life of Reverend R. Blundell, effected by the before-named policy. T. G. Ilayward, £19 9 M. Jones, Mr. Mahony continued to use the same office from 1855 to 1871. He acted as agent for the British Commercial, British Nation, and LORD WESTBUEY'S DECISIONS. 87 European successively, but there had beau no intimation on his Blundell's office of any change in the company, or that the company had J ' transferred their business, or had amalgamated with any other company, or that the person receiving the premiums was acting as agent for any other company than that with which Mr. Blundell had insured. On the amalgamation of the British Commercial and British Nation a circular was issued by the British Nation to the policy- holders of the British Commercial informing them of the amalgama- tion, and on the amalgamation of the British Nation with the European a corresponding circular was issued. Mr. Blundell never received or had any notice of either of these circulars, and, except as far as he might be affected by the receipts, he had no notice or knowledge of any of the arrangements among the three companies. The question stated for the decision of the Arbitrator was whether, in the circumstances, the claimant was or was not entitled to prove against the British Commercial for the value of his policy. Mr. H. M. Jackson was for Mr. Blundell. Oct. 31. Mr. Higgins, Q.O., (Mr. Cookson with him) was for the British Commercial. LoED Westbuey : — The affirmative of the issue is on the official liquidator of the British Commercial, who must shew that there was an effectual novation. Let the claimant produce his policy and evidence of payment of premiums. That constitutes a prima facie case on his part. Then, is there any reason why I should not adopt the rule of evidence furnished by section 7 of the Life Assurance Companies Act, 1872, and say I will not attribute force to equivocal things, although done before the passing of that Act, unless there is evidence in writing ? Mr. Biggins: — That enactment introduces a new principle, which, if adopted in this Arbitration, would establish a rule in rela- tion to past transactions, diametrically opposed to many decisions in the Court of Chancery and of Lord Cairns in the Alhert Arbitra- 88 EUEOPEAN ARBITRATION. Blcndell's tion. Besides, the rule is one of considerable danger and opposed Ji_' to common notions of equity. LoKU Westbuhy : — Why so ? Is not the principle like that of Lord Tenter den's Aei ? Mr. Eiggins: — The decisions on that Act have been very numerous, and the law is not clear as to what constitutes an admis- sion in writing. There is much to be said against this new principle. Suppose a circular served on a policy-holder in company A., inform- ing him of an intended transfer of policy-holders to company B., under a supposed power for that purpose, representing great ad- vantages as certain, but fairly stating a doubt whether the power to transfer exists, and asking the policy-holder to object if he does not approve of what is proposed. Suppose the policy-holder then to go over to company B., and to take company JB.'s receipts for his premiums, knowing that company B. do not accept the premiums as agents of company A., but only on condition of the validity of the arrangements between the two companies. How could it be said, years afterwards, that the policy-holder had not abandoned all right against company A. ? It would be against equity for the policy-holder to allow the company with which he contracted to act on the faith of his assent, where he had the opportunity of objecting, and where it is a question whether what is proposed to be done could be done validly, to go over to com- pany B., to take all the advantages arising from the arrangements of company B. for years, to cease all contributions to company A., to make his contributions in the shape of premiums to company J5., and then to say all this did not affect his right to come, years afterwards, and declare that, nevertheless, he claimed against com- pany A., and had no claim against company B, This would be so, even in an ordinary contract, but there is besides an important peculiarity in the contract of assurance. It is a contract that on condition of the policy-holder paying the premiums to the com- pany, then, in the event insured against, the company shall be liable to pay. Then where a person does not fulfil that condition according to the letter or the spirit of the contract, what right can he have against the company ? LORD WESTBURY'S DECISIONS. 89 To come to the facts of this case. The form of the receipts Blbndbll's changes from time to time, and on the completion of the arrange- ment between the British Commercial and the British Nation the name of the British Nation is put more prominently forward ; receipts are given in that name, merely mentioning the union of business. LoED Westbuey : — That is in a great measure controuled by the fact that the particular policy in respect of which the money is paid is referred to by number on the receipt. If the policy had been set out, it would appear to be a policy granted by the British Commercial, and the transaction recorded in the receipt would be a transaction on the basis of that policy, not on the basis of a past thing, but on the basis of an existing thing. Mr. BLiggins : — Mr. Blunddl must shew his position with respect to the British Commercial. He does so by producing a receipt of the British Nation in respect of a policy effected with the British Commercial. But suppose he had gone to the British Alliance, or any other company where there was no pretence for any Talid arrangement between the parties, in consequence, it might be, of something said by some of the officers of the company with which he insured, and paid his money to a stranger to the British Commercial, the company issuing his policy, there would be no oblig8*ien on the British Commercial. The policy-holder, there- fore, is in a dilemma. Either he goes on the footing of the arrangement, relying on the validity of it and with a view to giving effect to it, or he goes at his own peril, without any authority, and repudiating all that has been done. Mr. Blundell must be taken to have adopted the arrangements, believing they were for his benefit, and waiving any right to prove on his original policy. Could the European repudiate his claim to prove against them ? LoED Westbuet : — A man may have a right to prove against two. If he elects to prove against one, he loses his right to prove against the other, but not until he elects. Mr. Blundell may or may not have a right to prove against the European. Mr. Higgins: — if he could prove against the European, it follows he cannot prove against the British Commercial, because Case. 90 EUROPEAN ARBITRATION. Blunubll's his proof against the Eurojaean could only be on the footing of ' his having a contract with them by novation. That the European received premiums as agents would be a hopeless contention, because the successive arrangements preclude the idea of agency. There was no agency, in fact. Agency would imply accountability. The British Nation could not have filed a bill against the European to make them account for moneys received in respect of the transfer. It was a contract of absolute sale, implying that while the right to receive the premiums would belong to the company taking the transfer, so on the other hand the liability would attach to them. He referred to Fleming's Case, L. E. 9 Eq. 306 ; and to the following cases in the Albert Arbitration ; Buddens Case, Eeports, 120 ; Pagan's Case, Minutes, 568 ; Mivaz's Case, Reports, 104; Kennedy's Case, Eeports, 5 ; Andrew's Case, Reports, 107 ; Lancaster's Case (No. 2.), Reports, 95. LoKD Westbury : — Budden's Case was decided on the fact that, with perfect knowledge, the last receipts were taken from the Albert alone, and that the first act of the party after the dropping of the life was to bring in a death claim against the Albert. Fagan's Case was decided on the circular. In Bivaz's Case the amalgamation circular was received and not answered by the policy-holder, except by his immediately going and paying his premiums to the Albert; which Lord Cairns regarded, and I think with great reason, as a practical answer to the circular. In Ken- nedy's Case there was a circular received. Andrew's Case depends on the circular. I should not be inclined to dispute any of those cases on the present occasion. In Lancaster's Case (No. 2,.) there was no circular, but there was something more important, namely, that the Albert intimated to the policy-holder, through his solicitor, that they were acting on the assumption that they were to take over the policy. Then the policy-holder having that information goes and pays the Albert. LORD WESTBURY'S DECISIONS. 91 Mr. Higgins > — Lastly, there is to be considered the special Bmndell's element or characteristic of the contract of life assurance. It is .' not merely a contract requiring a payment, year by year, for the purpose of keeping the liability of the assuring company on foot, -but it is also a contract which implies contribution to a common fund. In some cases, as here, there is also a kind of guaranty by a proprietary. Now, in this case, a fund for payment of claims, as they arose, would be a fund, to a great extent, composed of contributions accruing from the policy-holders themselves. In that respect the contract of assurance involves considerations to be found in hardly any otlier contract. What, then, is the real character of the transaction involved in a transfer of liabilities, that is, of policies ? Does it not mean that company A. hand over not merely the liabilities, but also the contributions to meet them ? In the case, of young policies a transfer is a positive benefit. In some cases, and especially of young lives, a solvent company can be found which will take over policies without pay- ment. Is there to be no statute of limitations, no protection against the original contract, founded on a conception of the essential characteristic of the contract, namely, that it is a con- tract which carries its own remedy in respect of any claim arising under it, the contribution, as well as the liability ? Can a person, for fifteen or twenty years, contribute to a fund, which according *" the constitution of the company receiving his contribution, is ._ answer his claim when it arises, and afterwards turn round and repadftrte all that, and come back for contributions on proprietors whose contributions were only a guaranty, a sort of underwriting pledge in support of the fund to be produced by the contributions of the policy-holders ? A policy-holder in one sense is a shareholder, in the case of a limited company, or a company with virtual limita- . tion, as here. If policy-holders are to be regarded leniently, so ought shareholders. They come together on a common under- standing that there is this fund, one portion of which depends on a guaranty, the other portion of which is to consist of the con- tributions of the policy-holders. A policy-holder going over to a strange company, and paying into the funds of that company the contributions which ought to be the main element of security for himself and his co-policy-holders, does an act which deprives him of 92 EUEOPEAN AEBITEATION. Blfndell's the. right to go against that minor portion of the fund which formed '. the guaranty in the shape of contributions from the shareholders. Mr, JaeJcson was not called on. Lord Westbuey : — I understand there are other cases, and I give the parties concerned in them an opportunity of adding more if they think they can do so. Judgment reserved. Noo. 5. LoED Westbuey : — This case is singularly devoid of every cir- cumstance that could induce me to hold that Mr. Blundell has adopted the European in discharge of the party originally liable to him, namely, the British Commercial. It appears that the British Commercial was a company formed as long ago as the year 1821. It was an ordinary joint stock company of that day. The British Nation {Life) was formed by a deed of settlement in 1855. Afterwards a species of union or amalgamation was formed between the British Commercial and the British Nation ; and I read the principal terms of this amalgama- tion from the final deed, which is dated 31 December, 1864. That deed, after refening to a previous partial amalgamation, and recit- ing that the continuance of the business of the British Commercial separate and apart from the business of the British Nation, and the severance of the assets of the one company from the assets of the other, were attended with trouble, and were prejudicial alike to both 'the parties, and that accordingly the business and assets had, since a certain day in 1863, been in practice amalgamated and united, witnesses that, in pursuance of further resolutions recited, the British Commercial and their representatives transfer and dispose of unto the British Nation all the shares in the British Commercial, and all the interest and goodwill of the shareholders and proprietors therein, and all the life assurance business and other the business or businesses theretofore carried on by the British Commercial. And then it is declared that these are assigned to the British Nation, in order and to the intent that the British Commercial and the capital and business thereof may be henceforth amalgamated with the British Nation. LORD WESTBUEY'S DECISIONS. 9y I pause for a moment for the purpose of indicating here a con- Blundell's elusion to which I shall adhere in the process of these windings-up. ^°'°" If company A. transfer their business to company B., the transfer, in my mind, involves an authority to company B. to carry on that business, and that would involve power in company B. to receive in the case of policies granted by company A. the premiums pay- able on those policies, and they would receive those premiums by virtue of the authority impliedly given in the transfer by company A. to company B. It is part of the carrying on of the business of company A. If the business is transferred it involves all the sub- sisting policies. It involves the right to receive the premiums that become due by virtue of the contracts contained in those policies. If the matter, therefore, does not assume any other shape, or is not transferred into any other contract, all the premiums thenceforth paid by the policy-holder at the date of the transfer to company B., the transferee, will in the first place be considered as received by company B. under that implied authority. And if company B. mean to say that they have received it in another capacity, and by virtue of a new contract with themselves, and not by virtue of the original contract transferred to them, the duty of proving the new contract and -shewing the new relation falls on eompany B. The amalgamation deed then contains a covenant to indemnify bv the British Nation, given to the British Gommercial. I beg it it may be observed what that covenant to indemnify neces- sarily involves. It necessarily involves the fact of the continued existence of the policies and annuities granted by the British Com- mercial, their continuance and existence in accordance with the terms of the original contract. For it is against the original contract that the British Nation covenant to indemnify the British Commercial. And it is said here that they will indemnify them from all damages, claims, and demands whatsoever for, upon account, or in respect of the said debts and sums of money due from the British Commercial, or any of them, or for, upon account, under, or in respect -of any policy of insurance, grant of annuity, or other security heretofore issued or granted by the British Commercial. Nothing can be plainer than a transaction of this kind. The business, the property, the position, the rights of the original 94 EDEOPEAN ARBITRATION. Bltjndell's company are transferred to their assignee. They delegate to the ' assignee all the powers requisite for the purpose of carrying on their business, and performing their ordinary engagements, and the second, or transferee company, covenant to indemnify the transferor company against all these engagements. Of course the transferee company have a right to receive, by virtue of that authority, the premiums payable to the original company, and it is perfectly immaterial what discharge they give, or what form of discharge they give. If they give a discharge in their own names, it is equivalent only to my attorney, having the power of attorney from me, signing the receipt in his own name, without adding to it — as my attorney. The receipt must be referred to the right that he had to receive ; and unless it can be shewn that he had some other right to receive than my delegated authority the receipt must be referred to that authority. . I mention this because I am by no means disposed to hold, that if a receipt be given by the British Nation in their own name, and the policy-holder, going to pay upon his policy, takes that receipt, the policy-holder is to be charged with having entered into a new contract, and that it must be ascribed to him that he paid the transferee company in their own right, and not in the right of the transferor company ; and yet these are the means by which we have arrived hitherto frequently at the conclusion that there has been a novation of the contract. I refuse to recognise in that bare fact any evidence of intention by the policy-holder to adopt the transferee company in extinguishment of his claims upon the old, and to substitute anew contract with the assignee company for the original contract that he had entered into. The Legislature clearly were of that opinion, as I infer from the enactment that was made in the statute of this last session. But it is a strange thing that the Legislature in coming to this conclusion adopted in fact the rule of the civil law, from which law we have borrowed the term novation. It was a natural thing to refer to the civil law for the purpose of ascertaining what were the rules which in that law governed this question of novation ; and when I read to you the passage which I have extracted for the purpose of so doing, it will be plain that the civil law utterly excluded these presumptions that have been made, refused LORD WESTBURY'S DECISIONS. 95 to be guided by presumptions and inferences, and excluded all Blundell's novation wbere the intent of a creditor to novate was not expressly '. and plainly declared. The passage occurs in the 29th (30th) title X)f the third book of Institutes, in the third paragraph. I will read it in the original Latin that there inay be no doubt about the interpretation, but will construe it in a plain manner to you when I have completed the passage. The Latin of the Institutes, as you know, is not always of the most classical kind, and there may be a diflElculty in following it : Sed qiium hoc quidem inter veteres constabat, tunc fieri novationem, cum novandi animo in secundam obligationem itum fuerat, per hoc autem dubium erat, quando novandi animo videretnr hoc fieri, et quasdam de hoc praesumtiones ahi in aliis casibus introducebant, ideo nostra processit constitutio, quae apertis- sime definivit, tunc solum novationem fieri, quoties hoc ipsum inter contrahentes expressum fuerit, quod propter novationem prioris obligatioiiis convenerunt ; aho- quin manere et pristinam obligationem, et secundam ei acoedere, ut maneat ex utraque causa obligatio secundum nostrae oonstitutionis definitionem. The translation is this : But inasmuch as this point was well settled among ancient lawyers that nova- tion was made then, at that time, When the parties entered upon the second obli- gation with an intent of making a novation ; that being settled, there was nevertheless a doubt on this point, namely, at what time this might seem to be done with an intent to make an novation. It was clear that the animus was required, but it was doubtful at what time and how you were to look for the animus. And different' liM^tm in different cases were in the habit of introducing certain • presumptions upon this point (namely, when the animus arose), therefore our decree has gone forth, which has most plainly defined that at that time only was there to be considered as made a novation of the prior contract, as often as this very thing shall have been expressed (not from presumption, shall have been expressed), between the contracting parties, that they had met together for the pui-pose of making a novation of the prior contract ; otherwise that the old con- tract would remain, and that the second contract was to be added to it, in order that the duty, the obligation, might remain, from either cause, from either source. It would be difScult to find words to more exactly express the difBculties that were then felt, the ingenuity by which certain presumptions had been introduced, how the presumptions varied in various cases, and the necessity in the mind of Justinian that there should be a definite rule on the subject which should exclude presumption. And he accordingly made that rule which the Legis- 96 EUROPEAN ARBITRATION. Bldndell's lature have embodied in their enactment, that no novation should ■ be arrived at by presumption, but that it must be arrived at by- written evidence of the intention of tlie party. Now this is the old law. If you take the word, the law should accompany the word, and the application thereof. You have taken the word novation and adopted it. Take, therefore, the rules by which novation, for the sake of general utility, was originally held to be governed. I mean to adhere to that, although I cannot legislate to the extent of saying that I will require a writing. But I will require evidence of an intention to make a new contract as plainly as if it were expressed in writing. I do not adopt the language of the statute in all cases to the extent of requiring a writing, because I can conceive a case of this kind, which hap- pened, I think, before Lord Cairns: a company, which was the assignee of another company, and had power to grant new con- tracts in lieu of the old, wrote to an old policy-holder offering him a new contract ; the policy-holder did not return any answer in writing to that, but he immediately went and paid his premiums to the company that made the offer ; Lord Cairns held, and very justly, that that was to his mind an acceptance of the offer. And I think also with him that it was as plainly accepted by the thing done as if the acceptance had been expressed in writing. There is no difference between us on the principle of law that governs these cases. Lord Cairns held it to be a question of intention, and that the intention was a question of fact. I hold also that nova- tion is a question of intention, and that the intention is a fact that must be proved. I will not admit of presumptions or inferences as the media from which I will infer that intention, any more than Justinian did when he referred to the uncertainty and diffi- culty that clouded the subject, as long as it was possible to intro- duce those presumptions, and he superseded the presumptions by a plain and a direct rule. Whenever, therefore, there is a transfer of business by one company to another, and a policy-holder of the first company afterwards goes and pays the second company, the act is equivocal. He may pay the second company, regarding them as the assignees of the business of the first, and as autho- rized by the firt^t to receive the premiums, or possibly, if the transferring company have power to grant him a new policy iden- LORD WESTBUEYS DECISIONS. 97 tical with the old, he may intend to pay the premia to the new Bmndell's company with a view of standing in the same relation to them that ' he previously stood in to the old company. But that intention must be proved, it cannot be inferred from the heading of the receipt. The obligation, the onus probandi, the duty of proving, lies on the company that allege a novation. It is a question of intent to be evidenced in the clearest manner, and, unless that intent is evidenced, the simple payment of the premia will be referred to the old contract, which will be considered as still kept up by the assignees of the business who by virtue of that transfer have a right to receive the premia on old policies, as authorized by the company granting those policies. These are rules which, I think, will tend to solve most of the ques- tions that have been presented. But that would be hardly necessary in the case I have before me ; because here the materials for raising a case of novation are of the most evanescent character. Mr. Elundell originally contracted his policy with an agent of the British Commercial, a gentleman of the name of Mahony, who had an ofBce as agent of the British Commercial at a place called Castlerea, in Ireland. After the union of the British Commercial with the British Nation, Mr. Mahony kept on the same office without any alteration. After the union of the British Commercial with the European he continued in the same office, and apparently in the same character. Mr. Blundell knew no other person than Mr. Mahony ; he "went to Mr. Mahony originally, and he continued to go to Mr. Mahony, and pay him until the end. There is nothing at all to ascribe to Mr.vlundell even a knowledge of the fact of the union of the companies, and in point of fact that he should have had such knowledge is entirely excluded by the Case, for the Case states as a fact that the claimant never received or had any notice whatever of either of the circular letters which on the occasion of the transfer to the British Nation were, it is said, sent to the policy-holders, and on the occasion of the transfer of the British Nation to the European were also sent to the policy-holders. Even the knowledge that might have been conveyed by those circulars was not possessed by Mr. Blundell. He went therefore and paid his premiums as before, and this higlily technical mode of reasoning is resorted to for the purpose of imputing to Mr. H 98 EUEOPEAN AEBITEATION. Blundbll's Blundell, who knew nothing, constructive and implied knowledge. ^^ It is said that he took on the last occasion from Mr. Mahony a receipt, which was in this form : European Assurance Society. Policy No. 8779. Eeceivcd this second day of April, 1867, the sum of £19 Os. 9i., being the pay- ment of twelve months' premium and interest from the 27th of March, 1867, for an assurance on the life of the Rev. B. Blundell effected by the before-named policy. Now the before-named policy is the policy in the margin numbered 8,779, which was the original number of the policy when granted by the British Commercial. It is very true, that that number may have been entered upon the receipt for the purpose only of denominating, indicating, and causing easy reference to the policy, the premium on which is represented to have been thus received. Then I was told in argument, this receipt is headed Euro;pean Assurance Society ; and it was the duty of this policy- bolder to have ascertained how the receipt got to be so entitled ; and if he had inquired, as he might and ought to have inquired, he would have learnt that the European sprang from the British- Nation, and he would have learnt that the British Nation was nothing in the world more than a company that absorbed and consolidated his original company, and then he would have arrived at the fact that be was dealing with the European, and was not dealing with any agent of his original company. I must entirely repudiate any notion of dealing with men on such principles. Men coming to deal with a plain contract shall be considered as understanding the contract to be what it purports to be ; and I wiR not deprive them of this knowledge and impute to them this kind of constructive notice, to the annihilation of the original contract on which they trusted, unless it be proved to me that they knew perfectly with whom they were dealing^ and unless it be proved to me that they did apply to the new company as being the company that had absorbed their original contracting party, and the company that were able to grant them a new policy, and to enter into a new contract, and that they paid the money with the intent and object that that new contract should be entered into. That is precisely what I find here, expressed in the Latin very well; says Justinian, you shall prove to me quod propter LORD WESTBUEY'S DECISIONS. 99 novaiionem prioris ohligationis convenerunt ; you shall prove to Blundbll's me that they met together for the purpose of novating and ,* substituting for the former contract a new contract. Therefore if you could shew to me that when Mr. Blundell went to the old accustomed office of Mr. Mahony, Mr. Mahony told him : Mr. Blundell, I have got a new character ; I am no longer the agent of the British Commercial; but I am the agent of the Ev/rcypean ; nay, I am a very Proteus, because there was another transforma- tion ; I was first an agent of the British Commercial, then I became the agent of the British Nation, and now I am the agent of the European ; do you mean to enter into a new contract with the Ev/ropean ? — then Mr. Blundell would have been aware of what he was about ; then the parties would have met propter novaiionem. And then, if Mr. Blundell had said : Yes, I will adopt the European ; I will pin myself on to the skirts of the European ; and I pay you this money of mine in the capacity of their agent, — that would have been a different thing. But there is nothing of the kind. He went there believing that Mr. Mahony was, as in fact he was, still an agent of the British Commercial; he was an agent oi the British Commercial; because after the business of the British Commercial had been trans- ferred to the British Nation, the British Nation continued him in the same capacity ; and he was an agent still of the British Commer- cial, because when the British Nation transferred their business to the European, the European continued him in the same capacity. ''If- w#^nd a case in which the parties have met for the purpose of making a novation, in which the company alleging novation have a clear right to grant a new contract in the same terms as the original ; and when it is clear that they offered to the policy-holder to give him that new contract in lieu of the old one ; when it is clear also that, upon that offer being so made, the policy-holder with a knowledge of the facts paid his money eo intuitu that it might be received by virtue and on the footing of the new con- tract and not the old, then there can be novation. Men's dealings will rest on a basis of certainty if we exclude presumptions, and implications, and constructive information, and allow them to have their rights regulated by what they believed and what they knew, and what they had a right to adhere to until they voluntarily relinquished that right and accepted in lieu of it something else. 100 \ \ ^^35 J j EUEOPEAN AEBITEATION. BLijNDEi;bC^i./^^/nglitly or wrongly, I have clearly stated to you the plain ™' common-sense principles, which are not only common-sense but are warranted by the highest considerations of law, by which I shall guide myself in questions of this kind under this Arbitration. I may observe by the way, although it is a little pedantic to notice it, that it is a very incorrect use of the word novation. The civil law tells you that the word ought to be delegation, which is a particular species of novation, and in that sense the British Commercial would be the delegating company, the delegate company would be the British Nation or the European ; the term implying that the com- pany originally contracting delegate to their creditor, that is, offer to delegate to him, another contracting party ; and in those eases it is laid down in the Pandects that you must have the clearest proof of the concurrence, complete knowledge, and mutual consent of all the parties, both the company that delegate, the company that are delegated, and the creditor who accepts the delegated company in lieu of the original company. I say, therefore, that these principles are warranted by common sense, and that they are justified by the highest authority. There is no difference between myself as to the mode in which I view these cases, in principle, and former judges : but I have the advantage of review- ing them by the light thrown upon them by the enactment to which I have referred, and I have the advantage of being able to trace that enactment to its source in the civil law from which all this doctrine was derived ; and I guide myself by the rules that were then established for the express purpose of excluding those diffi- culties and uncertainties which, proceeding upon presumptions and imputed knowledge and inferences of intention, were found to arise, instead of adhering to the rule that the intention must be proved and manifested in the most definite manner. In the case of Mr. Blunddl I hold that there is no ground what- ever for imputing to him an acceptance of the Euro;pean in discharge of the British Commercial, and I hold him therefore to be a policy-holder of the British Commercial, and entitled to all his rights as such. Solicitors for Mr. Blundell: Messrs. Baxter, Rose, Norton, & Co. Solicitors for British Commercial : Messrs. Mercer & Mercer. Lately Published. ALBERT ARBITRATION. LORD CAIRNS'S DECISIONS. Eepobied bt FRANCIS S. REILLY, M.A., OF LINCOLN'S INN, ESQ., BAERISTER-AT-LAW. Parts I. & II. OASES IN PAET I. Lee's Case — List of Oontnbutories .. 1 Kennedy's Case — Poliey-^Novation.. 5 Dale's Cas^— Annuity — Novation .. 11 Indemnity Case — Arruilgatnation-^ Marshalling .. .. .. .. CASES IN PART II. Bbivee's Case— iig* of Oontributories 36 Nichols's Case — List of Oontributories 40 Wyatt's Case — Anmiity — Application of Trust Ftmd .. .. .. 42 Boubne'b Case — Loan on Policy with Gha/rge on Land — Set-off — Indetn- nitg for Depreciation of PoUcy ■ .. 44 Pablbt's Case — loan 'on Policy-^ Legal Ptlt—8et-qff .. .. ■ .. 48 Wood's Case — Effect of Amalgamation - on Non-assenting PoUey-holders — ', -^ovation~^Protest .. .. .. 54 Whitehaven Bane Case— Pofey — Novation ..• .... , .. 62 Kibbt's Case — List of Oontributories — Joint Holders of Shares — Eiceautors 67 Slatob's Case — Valuation of Policies 71 iiAKOABTEE's Cabe — Valuation of An- nuities and Poilicies .. .. , .. 76 Lanoastee's Case (No. 2.) — Poliey^- Novation .. .. .. ... 95 Webninok's Case — Policy— ^Novation — Bonus — Mortgage.. .. .. ,101 RivAz's Case — = Policy — ■ Novation — Protest ., .. .. .. Andbew's Case — Policy — Marriage Settlement — Trustees Holmes's Case — Policy — Novation — Bonus— Protest ... W-abne'S' Case —Policy — Novation — Protest — Days of Grace HowBLli's Case —Policy — Novation — Protest Buddbn's Case — Policy — Novation — Death Ola/im .. Allen's Ca"be — Policy — Novation — Bonus ., ., I, Knox's Case — Policy — Novation — Bonus .. GlAzebrook's Case— Potey — Nova- , tion — Bonils .. Hawtbey's Case — Endowment Con- tract — Novation DoBNiNGi's Case — Policy^-Novation — Protest .. APPENDIX TO PART I. A. Albeet Abbitbation Act B. Albert Deed op Settlement 0. Albebt Supplemental Deed D. Albert Special Besouitions 1 xi .'xxxiv ' 5iil iiii^ ^i ilil ■ill iM I 'Hi if ililiife .' 1. ? ! i "! i' J t T ' iiiii iiiiiiii 'ifflt wm ili «i :ilil i ■iiiiiiii: WB ;M1* iiiiiiif 4r