QJnrnpU ICaui ^rl^nol Htbrary Cornell University Library KDC 554.C59 V.1 3 1924 024 628 467 'Ml Cornell University Library The original of tiiis 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/cu31924024628467 A TEEATISE OS THE LAW OF PARTNERSHIP JOINT-STOCK COMPANIES, ACCORDING TO THE LAW OF SCOTLAND. MURRAY AND GIBB, PRINTERS, ISDINBURGII. A TREATISE LAW or PAETNERSHIP AND JOINT-STOCK COMPANIES, ACCORDING TO THE LAW OF SCOTLAND, INCLUDING PRIVATE COPARTNERIES, COMMON LAW COMPANIES, REGISTERED COMPANIES, CHARTERED COMPANIES, RAILWAY COMPANIES, AND OTHERS, FORMED UNDER THE CONSOLIDA TION ACTS. FRANCIS WILLIAM CLARK, ADVOCATE. -^ VOL. I. EDINBURGH: T. & T. CLAKK, LAW BOOKSELLEES, GEORGE STREET. LONDON: STEVENS AND SONS. GLASGOW: J. SMITH AND SON. MDCCCLXVI. TO THE RIGHT HONOURABLE DUNCAN M'NEILL, r OF COLONSAY, LORD JtrSTICE-GENERAL OF SCOTLAND, This Treatise PARTNERSHIP AND JOINT-STOCK COMPANIES WITH HIS LORDSHIP'S KIND PERMISSION, RESPECTFULLY INSCRIBED. PREFACE. My design in the present Treatise is to investigate the principles of the Scottish law of Society, in so far as they are applicahle to associations formed for purposes of mercantile gain ; and to trace their practical working in the private copartnery, in the pubhc company existing at common law, and in the corporation created by Koyal Charter, by Registration, or by Special Act. The systems of partnership law existing in England and Scot- land respectively, discover, when properly understood, the same underlying principles of equity, and in the general case eventuate in similar practical results. It is obvious, however, on the most cursory examination, that the theory of each is essentially different, — the Scottish 'system prominently recognising, the English system entirely ignoring, a quasi person in unincorporated associations how- ever large. The consequence is, that while the English authorities, so much more numerous than our own, form valuable precedents in Scottish practice, their indiscriminate use is fraught with great danger, and has unquestionably tended to obscure the simplicity and artistic beauty which characterize the Scottish law of society. Throughout the present work I have endeavoured to trace out and bring into prominent notice this fundamental distinction,, and to show in what respects it produces a mere variance in phraseology, and in what cases it creates a difference in legal principle or in matter of remedy. To accomplish this object in a way com- mensurate with its importance, would necessitate an acquaintance with English law for which the mere theoretical study of that system is a very inadequate preparation. I have sought to com- pensate for the disadvantages under which, in this respect, I have viii PREFACE. laboured, by appending to each statement in the text a full list of the authorities on which it is based, and of which it is presented as the exponent. In treating of the law of incorporated associations, I have also been careful to notice what have been deemed differential charac- teristics between the two legal systems. In many respects, I am inclined to believe that these apparent points of contrariety have been unduly exaggerated, from a misconception of the technical phraseology employed, or from founding on certain usages which were common and perhaps legal prior tothe Union, but which appear to be no longer precedents since the Constitution has settled into its existing form. The Consolidation Acts will be found reviewed at considerable length, and illustrated by authorities taken both from English and Scottish law. The importance of railway law has induced me to treat of it in great detail. I have endeavoured to bring under review all the existing public statutes bearing upon this subject in the law of Scotland, and have also referred to the corresponding English Acts. The provisions of the Registration Act of 1862 occupy a con- siderable portion of the work ; and it is hoped that the chapters on winding up will be found to contain all the more important authorities. Considerable attention has been given to the law of companies formed by royal charter ; and this has necessitated a general examination of the Letters Patent Acts. The Appendix will be found to contain a collection of forms. Those applicable to articles of copartnery are intended more as suggestions than as precedents, — their primary object being to indicate the principles upon which such contracts should be framed, and the meaning and effect of the ordinary provisions. There has also been annexed a reprint of all the more impor- tant Statutes applicable to partnership and joint-stock companies in Scotland. It is hoped that this will supply a want which,' from the scattered nature of such enactments, has long been felt. The subject-matter of the work being very extensive, every effort has been made to study brevity and compression. With this PREFACE. IX view, all quotations from opinions or dicta have, except in rare instances, been dispensed with ; but while what is conceived to be their import has been stated in the text as succinctly as possible, the authorities themselves will always be found appended in the notes below. The plan of treatment may be thought deficient in symmetry and in order of sequence ; nor is it such as 1 should have chosen if I had been less studious of compression. It is not the form in which the Treatise was originally cast ; but was adopted after many others had been tried and abandoned, as it seemed best calculated to avoid repetition or cross reference. I should also mention that, while the manuscript, was passing through the press, some important statutory alterations were made on the law, and these I deemed it better to incorporate in the text than to notice in the Appendix. While engaged in collecting materials for the present work, nothing has so much arrested my attention as the immense supe- riority which the Scottish theory of the private partnership and unincorporated company possesses over that adopted, or rather con- tended with, in England ; and while observing that the principle of the separate persona has been adopted by the imperial Legislature in the registration statutes, whose enactment the admitted imper- fections of the English theoiy of partnership had rendered neces- sary, I have often felt surprise and disappointment that no writer on English law appears to have been even aware that this very principle has for ages formed an integral part of the Scottish law of partnership, in which indeed it received still greater prominence at a period when English precedents were little known or regarded. In this as in many other branches of commercial law, and in none more than in that of bankruptcy, it humbly appears to me that the imperial Legislature would find the usages of Scotland presenting much more valuable precedents than any system of foreign juris- prudence is calculated to afford. But while entertaining an excusable predilection for those cha- racteristic features of Scottish law, which must be appreciated as soon as they are understood, I am very far from undervaluing the intrinsic excellence of the laws of England ; and, indeed, I cannot help regarding it as a very great defect in our system of legal educa- tion, that a course of English law forms no part of the curriculum. X PREFACE. The law of Rome has been described as a system of written reason ; the Code Napoleon is probably unrivalled for simplicity, precision, and homogeneity ; the laws of England appear to me to possess the proud distinction of insensibly but surely educating the people for the exercise and maintenance of their political rights, by familiariz- ing them, through the medium of the ordinary administration of justice, with those great principles of constitutional law, of which the British form of government is the most perfect embodiment which the world has yet seen. The English common law may be characterized as the application of the principles of the British con- stitution to the affairs of men in every-day life ; or, as it. may be otherwise expressed, the principles of the British constitution are those of the common law seen at a great angle. It is from con- siderations such as these that the laws of England, so little under- stood or appreciated by foreign jurists, receive their highest and most complete vindication. In the preparation of this work I have received very great benefit from the labours of others who have treated of the same or of similar branches of law. In Scottish law, the Commentaries of Professor Bell, Mr Stark's work on Partnership, and the late Mr Henderson's Notes on Joint-stock Companies, have proved valuable aids. In the law of England, I must specially refer to the treatise of Mr Lindley, — a work which, I believe, stands unequalled for industry, erudition, and legal acumen, and whose sterling qualities can perhaps only be fully appreciated by one who has laboured in a similar field. The work of Sir William Hodge on Railway Law has been of great use to me in treating of that branch of the sub- ject. Besides these, there are many other writers on English and American law, by whose labours I have greatly benefited. They are mentioned in the List of Authorities. To my brethren of the Bar, and also to many gentlemen in other branches of the profession, I must return my grateful thanks for the valuable assistance they have at all times given, and for the many useful suggestions they have made during the progress of the work. To Mr William Guthrie, Advocate, I am under great obligations. He carefully revised all the references, pointed out several oversights, and made many important suggestions, particu- larly in reference to foreign and international law. PREFACE. XI In the citation of authorities and decided cases, the following general principles have been adopted. I have endeavoured to cite all the Scottish cases which bear directly on the matter immediately under consideration, and reference is often made to many others which may be found useful as illustrative of the principles involved. Theembarras de richesse presented by theEnglish authorities rendered it necessary to make a selection. In doing this, I have endeavoured to choose, in the first place, the more leading cases ; and where, as often happened, even these appeared too numerous for reference, I gave the preference to such as were of most recent date, contained the greatest number of references to other cases, and were least liable to the objection of proceeding on principles or technical rules peculiar to the English system. When the matter under considera- tion is regulated by a British Act, or by enactments substantially the same in both countries — e.g. the Registration Act of 1862, or the Consolidation Acts of 1845 — the English authorities have been quoted with great fulness, and without any effort at selection. In dealing with the English authorities, I have endeavoured to avoid the use of technical expressions, and have generally succeeded in expressing their import in ordinary language. Sometimes, how- ever, the employment of phrases peculiar to that system was un- avoidable. In such cases, the explanation will generally be found in the immediate context; but to provide against any oversight which may have occurred in this matter, the Index of Subjects will be found to contain the Scotch equivalents, or a brief explanation of such English words or phrases as are of most common occur- rence in partnership law. It is hoped that this may also be found useful, if the reader (as I have to request he may) will consult the English authorities and reported cases to which throughout the Treatise he will find a continual reference. Appended to the Index of Oases, there will be found a Table of all the Authorities and Collections of Reports to which refer- ence is made throughout the work, or which I have had occasion to consult in the course of its preparation. To each is prefixed the customary abbreviation, unfamiliarity with which, when perusing English law works, sometimes creates considerable embarrassment. I have endeavoured to make this table as comprehensive as possible, so that it may be found useful not only to those who consult the xii PKEPACE. present Treatise, but to such as may be induced to extend their acquaintance with the subject by the perusal of the works of English and American jurists. In conclusion, I must observe, that though the present Treatise has been the work of many years, and has been more than once almost entirely re-written, it is still very far from doing justice to the subject, and may easily be made the object of adverse criticism. When, indeed, I contrast the design with the performance, I am painfully conscious of how much the latter falls short of the former ; nor can I doubt that, with all the industry I have had it in my power to bestow, several Scottish decisions of importance may have escaped my notice, that numerous valuable dicta to be found in cases not having an ex facie bearing on partnership law have been overlooked, and that the text itself may be chargeable with misstate- ments of law. Such considerations strongly suggest the propriety of soliciting the indulgent consideration of the profession, when the result of my labours is now finally submitted to their scrutiny. FEAS. W. CLARK. Edinburgh, 5 Fouth Street, Apnl 18C6. CONTENTS. INTRODUCTION, PAOI! Containing an Historical Sketch of the Law of Partnership and Joint- stock Companies in Scotland, and explaining the Objects and Plan of the Treatise, . .... 1 Unincorporated Companies, . . . . . 3 Companies incorporated by Act of Parliament, Royal Charter, or Registration, ....... 6 Winding-up Acts, . ...... 10 Consolidation Acts, ..... 10 BOOK I. CONSTITUTION OF SOCIETY. Chap. I. For what purposes Society may be constituted, and what Partnerships or Companies are illegal, . . 17 II. Who are capable of contracting and sustaining the Society Relation, . . . . . .22 III. Of Partnerships and Corporations, and their differential Characteristics, ..... 29 Private Partnership, . . . . .80 Corporations, ...... 32 IV. Of the Forms assumed in Scotland by Associations con- stituted for pecuniary Profit, ... 40 Sec. 1. Private Partnerships and Common Law Com- panies, ..... 40 Sec. 2. Companies erected by Public Authority, but not vested with full Corporation Privileges, 41 Sec. 3. Proper Corporations, . . . .42 Sec. 4. Corporations with .peculiar Privileges and aggressive Powers, .... 42 V. Formation of the Partnership relation in private Copart- neries and Common Law Companies, . . 43 , Constitution of Partnership proper, ... 46 VI. Of quasi Partners, or Persons who incur Liability to the Public, though not Partners, ... 52 XIV CONTENTS. XL Chap. VII. Difference between a formed and a contemplated Partner ship, ..... VIII. Evidence of Partnership, . IX. Different kinds of Partners, X. Pubhc Companies, Preliminaries to Formation, Promoters, .... Formation of Registered Companies under the Act 1862 Sec. 1. Companies limited by Shares, Sec. 2. Companies limited by Guarantee, Sec. S. Companies with unlimited Liability, . General Eules applicable to the Three Kinds of Companies, Application of the Act to Companies already existing. Formation of Companies by Royal Charter and Letters Patent, .... Sec.1. Chartered Companies, . Sec. 2. Letters Patent Companies, Formation of Companies under the Companies Clauses Consolidation (Scotland) Act, 1845, XII. XIII. 61 64 67 69 69 75 86 87 87 89 91 97 100 102 BOOK II. CONSTITUTION AND MANAGEMENT OF PARTNERSHIPS AND COMPANIES. Chap. I. General Rules, Companies, ..... II. Constitution and Management of Companies registered under the Act of 1862, III. Constitution and Management of Companies formed by Royal Charter and Letters Patent, . IV. Constitution and Management of Companies formed under the Companies Clauses Act, 1845, Appointment of Directors, Powers of Directors, Proceedings of Directors, Auditors, .... V. Capital of Companies, and its Division into Shares, Sec. 1. Shares in Partnerships, Shares in Companies, . Consolidated Stock, Sec. 2. Transfer of Shares, Sec. 3. Retirement and Surrender of Shares, . Sec. 4. Expulsion of Members and Forfeiture of Shares, VI. Calls, Sec. 1. Mode of making Calls, Sec. 2. Liability for Calls, 107 108 112 119 123 125 127 127 129 132 185 187 189 141 161 153 157 157 161 CONTENTS. PAGE Chap. VII. Company or Partnership Property, . . . 168 Conveyance and Vesting of Company Property, 168 Company Property as distinguished from Separate Estate, .... .171 Conversion of Company Property into Separate Estate, 177 Nature of Partnership Property, . . 178 Property held by Corporations, . . . 179 VIII. Duties of Partners towards the Company and each other, 182 IX. Powers of Majorities, ..... 186 X. Powers of Partners, .... 179 XI. Powers and Duties of Directors, .... 203 XII. Powers of Partners, Directors, and other Officials, 212 Buying and Selling, . . . . . 21 2 Leasing, .... 215 Borrowing, ..... 215 Pledging, .... .220 Mortgaging, . . . 220 Bills and Notes, ..... 229 Bank Cheques, .... .236 Guarantee and Suretyship, 236 Lending, .... .238 Letting and Hiring, ... . 238 Insurance, .... . 289 XIII. Constitution of Company Obligations, . . 241 Sec. 1. Obligations arising from Contract and quasi Contract, ..... 241 Modes in which the Company is bound, . 242- Damages for Non-fulfilment of Contracts, . 251 Sec. 2. Obligations arising from Delict and quasi Delict, 252 False Representations made to induce a Person to become a Partner, . . . 256 Criminal Acts, . . 262 XIV. Extinction of Company Obligations, . . 265 Sec. 1. Actual Fuiaiment, . . . .265 Application of indefinite Payments, . 266 Sec. 2. Virtual Fulfilment, . . . .270 (1.) Compensation, .... 270 In Companies and Firms unincorporate, 270 In the case of Incorporated Companies, 271 (2.) Delegation and Novation, . . 271 Sec. 3. Release — Discharge by Creditor, and by Opera- tion of Law, .... 275 Sec. 4. Pi'esumed Abandonment or Satisfaction, . 279 Prescription or Limitation, . . 279 XV. Liabilities of Partners and Shareholders for the Company Obligations, ...... 284 Unlimited Liability of Partners and Shareholders in Firms and Unincorporated Associations, . . 286 XVI. Commencement of the Liability of Partners for Company Debts and Obligations; . . 292 XVI CONTENTS. Chap. XVII. Continuance and Extinction of Liability of Partners, etc., for Company Obligations, . . . 306 Sec. 1. Termination of Liability of Partners for Com- pany Obligations already incurred, . 307 Termination of a Partner's Liability to be made responsible for the future Acts of the Com- pany, . . • . 308 (1.) Dissolution by Death, . . . 311 (2.) Dissolution by Bankruptcy, . . 312 (3.) Retirement of dormant Partners, . 314 Sec. 2. Cases of continuing Liability to be made re- sponsible for Company Obligations con- tracted subsequently to Dissolution or Retirement with Notice, . . .315 XVIII. Liability of Members or Shareholders for the Debts and Obligations of Incorporated Companies, . . 319 XIX. Liability of Trustees holding Shares in a Partnership or Company, ...... 326 XX. Liabilities of Partners and Directors considered as Agents and Trustees for the Company, . . . 329 Sec. 1. Liabilities of Partners, . . . 329 Sec. 2. Liabilities of Directors, . . 333 BOOK III. RIGHTS AND OBLIGATIONS ■ OF PARTNERS AND COMPANIES. Chap. I. Preliminary, . . . ... II. General View of the Rights and Obligations oiE Partners and Shareholders in relation to the Company, to each other, and to the Public, Sec. 1. Inter socios, .... Sec. 2. In Questions with the Public, . III. Rights and Obligations of Companies, Rights and Obligations in relation to Formation, Right to dispose of Company Property, Rights and Obligations in Suretyship and Guarantee, Contracts of Service, .... Holding Property, and corresponding Rights and Obli gations, ..... Rights and Obligations under Contracts, Competition of Rights, Obligations of Companies to their Partners, Bills and Notes, .... Extinction of Company Rights and Obligations, Prescription, ..... Right to Interdict, .... Public Burdens, ..... 337 341 341 348 351 351 357 ■358 361 364 365 366 369 370 374 374 375 375 CONTENTS. Chap. JV. Right to share Profits and Dividends, Public Companies, ..... V. Right to share in Management, . . . . Right to inspect Company Books, VI. Right and Obligation to account as between Companies and their Partners or Members, VII. Contribution and Indemnity, .... Sec. 1. Liability of the Partners to contribute rateably towards the Losses and Debts of the Firm, . Sec. 2. Cases in which a Partner's Claims against the Company suffer Abatement proportionally to his own Liability to Contribution, . Sec. 3. Of the Right which a Partner has to be in- demnified by the Company for Losses sus- tained or Obligations incurred by him on its account, .... VIII. Compensation, ..... IX. Retention or Lien, .... X. Good-wiU, . , . ' . XI. Extraordinary Privileges and Aggressive Powers, General Enactments, .... XII. Lands Clauses Consolidation Act, Assessment of Claims, .... Inquisition by Sheriff, .... Inquisition by Arbitration, Inquisition by Jury, .... Inquisition by Valuators, Power of Review, .... Apportionment and Application of Compensation , Money, ..... Obligations on Owner, etc., when Money has been paid or consigned, .... Entry on Lands, .... Portions of intersected Land, . Common Lands, .... Mortgages, Liens, or other Rights in Security affecting Lands, ..... Feu-duties, Ground-annuals, Casualties of Superiority, etc., ...... Lands subject to Leases, Lands omitted to be purchased. Lands taken beyond what is reqtiired for the purpose of the Undertaking, .... Manner of holding Lands, and Rights of Superiors, Land Tax, Poor-rates, and Prison Assessment, XIII. Railway Clauses Consolidation Act, Temporary Occupation of Lands, Crossing of Roads and Construction of Bridges, Accommodation Works, Mines lying under or near the Railway, h PAGE 377 882 386 387 396 406 406 408 409 416 425 430 433 441 444 449 450 451 454 458 459 461 465 469 471 472 474 476 477 478 479 480 485 486 489 491 494 497 XVUl CONTENTS. Chap. XIV. In what Cases Compensation may be claimed, XV. Bye-laws, ..... XVI. General Provisions as to EaUway Traflac, . PAGE 500 504 507 BOOK IV. JUDICIAL PROCEEDINGS. Chap. I. Preliminary, ...... II. Powers of Partners, etc., to bind the Company in Judicial Proceedings, .... Suing and Defending, .... Power to refer to Arbitration, and to compromise. Reference to Oath, .... Admissions, ..... Power to take payment of Debts due to the Firm, and herein of granting Leases so as to bind the Firm, Notice, ...... III. How Partnerships and Common Law Companies Sue and are Sued, ..... Appearance in the descriptive Name, with Joinder of Partners, ..... Appearance in the social Name, Appearance by Officials, Appearance in name of all the Partners or Members, IV. How Corporations Sue and are Sued, Foreign Companies, V. Jurisdiction, Statutory Tribunals, Declinature of Judge, . VI. Citation, or serving of Process, Sec. 1. Firms and Common Law Companies, . Sec. 2. Corporations, .... VII. Particular Actions and Forms of Procedure, Interdict, ..... In Private Partnerships, In Public Companies, .... Interdict in Questions between Public Companies and Strangers, ..... VIII. Judicial Factor, ..... IX. Criminal and quasi Criminal Procedure, . Statutory Penalties, .... X. Arbitration, ..... Private Firms and Common Law Companies, . Statutory Arbitration, .... XI. Evidence, .... XII. Judicial Pleading and Issues, 519 524 524 527 529 532 533 536 537 539 541 543 550 554 555 557 561 564 566 566 568 571 571 573 573 579 583 589 591 595 595 597 602 609 CONTENTS. XIX PAGE Chap. XIII. Executorials, ...... 620 Sec. 1. Diligence at the Company's instance, . . 622 Sec. 2. Diligence against the Company, . . 625 Sec. 3. When Diligence has to be used for a Company Debt against the Partners individually, . 626 Arrestment, ..... 628 Procedure in Arrestments, . . . 637 Furthcoming, . . . 639 Poinding, • . . . . .640 (1.) Personal Poinding, . . . 640 (2.) Real Poinding, or Poinding of the Ground, . . .644 Inhibition, ..... 645 Adjudication, ..... 647 Adjudication at instance of the Company, . 648 Adjudications against the Company, . . 649 Adjudication against the Separate Estate of individual Partners as Mable for Company Debts, 650 Diligence by and against Incorporated Com- panies, ..... 650 BOOK Y. DISSOLUTION OP COMPANIES. Chap. I. Preliminary, ...... 651 II. Dissolution of Private Copartneries and Unincorporated Companies, ...... 656 Common Law Companies, .... 665 III. Consequences of Dissolution, and herein of the Winding up of Partnerships, ..... 666 Sec. 1. Consequences of Dissolution as regards the Partners themselves, . . . 666 Sec. 2. Consequences of Dissolution as regards Third ' Parties, ..... 676 IV. Consequences of Death, ..... 681 Rights and Obligations of Partners in winding up Companies dissolved by Death, . . . 681 Testate and Intestate Succession, . . . 682 Transmission of Shares, . . . . _ 686 Eights and Liabilities, Executors and Representa- tives, ...... 687 Provisions for Widows and Children, . . . 695 Procedure to recover Company Debts against the Estate of a deceased Partner, .... 697 V. Dissolution of Incorporated Companies, . . . 701 CONTENTS. PAGE Chap. VI. Windiug up under Act of 1862, . . . .705 Sec. 1. Winding up by the Court, . . . 706 The Court for winding up, . . . 706 In what Circumstances winding up may take place, ..... 708 Petition, and relative Procedure, . . 709 Official Liquidators, .... 711 Powers and Duties of Official Liquidators, . 711 Company Creditors, .... 712 Oontributories and their Liabilities, . . 715 Who are Oontributories, . . . 717 Members and their Eepresentatives, . . 719 Effect of Transfers of Shares, . . .723 Effect of Surrender and Forfeiture of Shares, . 724 Persons induced to take Shares by Fraud, . 725 Calls, 726 Costs, ...... 729 Distribution of Surplus Assets, and Dissolution, 731 Sec. 2. Winding up voluntarily, . . . 731 Sec. 3. Winding up subject to Supervision of the Court, 735 VII. The Abandonment of Railways Act, 1850, . . 737 VIII. Amalgamation of Companies, .... 740 IX. Bankruptcy, ...... 746 Partner becoming bankrupt while Company remains solvent, ...... 705 Where the Company becomes bankrupt, and a Partner remains solvent, ..... 752 Where both the Company and its Partners are bankrupt, 753 For what Claims the Estate is liable, . . ' . 755 Preferable Claims, ..... 768 Election when the Firm is equivocal, . . . 760 Effects of Bankruptcy in relation to Contracts, . 760 Reduction of Deeds and Alienations, . . . 760 Modes of extricating Bankrupt's Affairs, . . 762 X. Sequestration, ...... 765 Awarding of Sequestration, .... 766 Oath of Verity, ..... 773 Recall of Sequestration, .... 775 Ranking of Claims, ..... 776 Rules as to Voting, . . . . . 776 Ranking for Dividends, .... 779 Election of Trustee, ..... 782 Rights and Duties of Trustee, . • . . . 786 Liabilities of Trustee and Commissioners, . . 793 Duties of the Bankrupt, .... 793 Examination of Bankrupt, .... 794 Allowance to Bankrupt, .... 796 Calling and Procedure at Meetings, . . . 796 Discharge of Bankrupt, .... 797 Cessio Bonorum, ..... 799 CONTENTS. Supplemental Chapter on Railway Companies, Formation of Railway Companies, . Constitution and Internal Management, Constructive and aggressive Powers, and exercise. Railway Construction Facilities Act, The Railway Company Powers Act, Arbitration, Public Duties, Dissolution of Railway Companies, Compensation for their PAOE 801 801 803 803 804 804 805 805 806 APPENDIX. FORMS. Articles of Copartnery, ..... 809 Preliminary Observations, . . . . . .811 Practical Suggestions, . . " . . . . 812 I. Articles applicable to a Company consisting of Three or more Partners, . . i . . . . . 816 II. Contract of Copartnery between Two Traders, . . 833 Additional Articles, ' . .... 844 Concluding Remarks, . .... 847 Definitions of Society, ...... 848 Judicial Appearance, . . . . . .851 Issues, ■ . . . . . . . . 854 Form of Declaration to authenticate Statements under Sec. 186 of the 25 and 26 Vict. c. 89 (1862), ..... 866 STATUTES. 1 Vict. c. 73, An Act for better enabling her Majesty to confer certain Pqwers and Immunities on trading and other Companies, . 1 Vict. c. 83, An Act to compel Clerks of the Peace for Counties and other Persons to take the Custody of such Documents as shall be directed to be deposited with them under the Standing Orders of either House of Parliament, ..... 1 and 2 Vict. c. 98, An Act to provide for the Conveyance of the Mails, by Railways, ....... 3 and 4 Vict. c. 97, An Act for regulating Railways, 5 and 6 Vict. c. 55, An Act for the better Regulation of Railways, and for the Conveyance of Troops, ..... 5 and 6 Vict. c. 79, An Act to repeal the Duties payable on Stage Car- riages and on Passengers conveyed upon Railways, and certain other Stamp Duties in Great Britain, and to grant other Duties in lieu thereof ; and also to amend the Laws relating to the Stamp Duties, 869 879 880 885 889 896 xxu CONTENTS. PAGE 7 and 8 Vict. c. 85, An Act to attach certain Conditions to the Construc- tion of future Railways authorized or to be authorized by any Act of the present or succeeding Sessions of Parliament ; and for other Purposes in relation to Railways, ..... 907 8 Vict. c. 3, An Act fsr the Appointment of Constables or other Officers for keeping the Peace near Public Works in Scotland, . . 914 8 Vict. c. 17, An Act for consolidating in One Act certain Provisions usually inserted in Acts with respect to the Constitution of Com- panies incorporated for carrying on Undertakings of a Public Nature in Scotland, ........ 915 8 Vict. c. 19, An Act for consolidating in One Act certain Provisions usually inserted in Acts authorizing the taking of Lands for Under- takings of a Public Nature in Scotland, .... 940 8 and 9 Vict. c. 33, An Act for consolidating in One Act certain Provi- sions usually inserted in Acts authorizing the making of Railways in Scotland, 968 8 and 9 Vict. c. 28, An Act to empower Canal Companies and the Commissioners of Navigable Rivers to vary their ToUs, Rates, and Charges on different Parts of their Navigations, . . . 998 8 and 9 Vict. c. 42, An Act to enable Canal Companies to become Carriers of Goods upon their Canals, ..... 1001 8 and Vict. c. 96, An Act to restrict the Powers of selling or leasing Railways contained in certain Acts of Parliament relating to such Railways, ........ 1004 9 Vict. c. 20, An Act to amend an Act of the Second Year of her present Majesty, for providing for the Custody of certain Monies paid, in pursuance of the Standing Orders of either House of Parliament, by Subscribers to Works or Undertakings to be effected under the Authority of Parliament, ...... 1004 9 and 10 Vict. c. 57, An Act for regulating the Gauge of Railways, . 1007 10 and 11 Vict. c. 42, An Act to transfer the Collection and Management of the Duties in respect of Stage Carriages, Hackney Carriages, and Railway Passengers from the Commissioners of Stamps and Taxes to the Commissioners of Excise, ..... 1008 10 and 11 Vict. c. 69, An Act for the more effectual Taxation of Costs on Private Bills in the House of Commons, .... 1010 10 and 11 Vict. c. 85, An Act for giving further Facilities for the Trans- mission of Letters by Post, and for the regulating the Duties of Postage thereon, and for other Purposes relating to the Post Office, ........ 1013 10 and 11 Vict. c. 94, An Act to amend an Act to enable Canal Com- panies to become Carriers upon their Canals, . . . 1016 12 and'13 Vict. c. 78, An Act for the more effectual Taxation of Costs on Private Bills in the House of Lords, and to facilitate the Taxa- tion of other Costs on Private Bills in certain Oases, . . 1017 13 and 14 Vict. c. 83, An Act to facilitate the Abandonment of Rail- ways, and the Dissolution of Railway Companies, in certain Cases, . 1021 14 and 15 Vict. c. 49, An Act to repeal an Act of the Eleventh and TweKth Years of her present Majesty, for making preliminary In- quiries in certain Cases of Applications for Local Acts, and to make other Provisions in Keu thereof, . . . . .1030 CONTENTS. 14 arid 15 Vict. c. 64, An Act to repeal the Act for constituting Commis- sioners of Railways, . . . - . . . .1031 17 and 18 Vict. c. 31, An Act for the better Eegnlation of the Traffic on Rail-ways and Canals, ...... 1032 21 and 22 Vict. c. 75, An Act to amend the Law relating to Cheap Trains, and to restrain the Exercise of certain Powers by Canal Companies being also Railway Companies, .... 1035 21 and 22 Vict. c. 78, An Act to enable the Committees of both Houses of Parliament to administer Oaths to Witnesses in certain Cases, . 1035 22 and 23 Vict. c..59, An Act to enable Railway Companies to settle their Differences with other Companies by Arbitration, . . 1036 23 Vict. c. 14, An Act for granting to her Majesty Duties on Profits arising from Property, Professions, Trades, and Offices, . . 1038 23 and 24 Vict. c. 106, An Act to amend the Lands Clauses Consolida- tion Acts (1845) in regard to Sales and Compensation for Land by way of a Rentcharge, Annual Feu-duty or Ground-annual, and to enable her Majesty's Principal Secretary of State for the "War De- partment to avail himself of the Powers and Provisions contained in the same Acts, ....... 1039 24 and 25 Vict. c. 50, An Act for facilitating the Transfer of Mortgages and Bonds granted by Railway Companies in Scotland, . . 1040 25 and 26 Vict. c. 89, An Act for the Incorporation, Regulation, and Winding up of Trading Companies and other Associations, . 1041 26 and 27 Vict. c. 92, An Act for consoKdating in One Act certain Pro- visions frequently inserted in Acts relating to Railways, . . 1099 26 and 27 Vict. c. 112, An Act to regulate the Exercise of Powers under Special Acts for the Construction and Maintenance of Telegraphs, . 1109 27 Vict. c. 19, An Act to enable Joint-stock Companies carrying on Business in Foreign Countries to have Official Seals to be used in such Countries, . . . . . . .1122 27 and 28 Vict. c. 120, An Act to facilitate in certain Cases the obtain- ing of further Powers by Railway Companies, . . . 1123 27 and 28 Vict. c. 121, An Act to faciHtate in certain Cases the obtain- ing of Powers for the Construction of Railways, . . . 1130 28 Vict. c. 27, An Act for awarding Costs in certain Cases of Private Bills, 1347 28 and 29 Vict. c. 86, An Act to amend the Law of Partnership, . 1148 Convention between her Majesty and the Emperor of the French, relative to Joint-stock Companies, . . ... 1149 INDEX OF CASES. A. B. V. Binny, ... 795 A'Beckett ex parte, . . . 730 Abel V. Sutton, ... 317 Abercrombie, petr., . . . 586 Aberdeen Brewery Co. v. Gray, . 243 Aberdeen Ea. Co. v. Blaikie, . 209 Aberdeen Ea. Co. v. Ferrier, 557, 566 Aberdeen Town and County Bank v. Clark, . . 66, 136, 377, 668, 852 Aberdeen Town and County Bank v. Scottish Equitable Insurance Co., 564 Abraham v. Great Northern Eailway Co., .... 488, 489 Acton V. Blundell, . . 501 Adam v. M'Lachlan, . . . 771 Adams v. Bingley, . . . 536 Adams v. M'Leroy and Co., . . 376 Adamson v. Edinburgh and Glasgow Ra. Co., .... 485 Addie v. Western Bank,, . 725 AddineU's case, . . . Ixvi Addison and Sons v. Crabb, . 799 Addison v. Tate, .... 322 Adley u. Whitstable Ra. Co., 193, 381, 382, 576, 577 Advocate-General v. Grants, . 363 Advocate-General v. Wilson, 414 Agace ex parte, .... 247 Agar V. Athenseum Assurance Society, 217, 527 Agar V. Macklew, . . . 403 Agar V. Regents Ra. Co., . 581 Aggs V. Nicholson, . . . 231 Agricultural Cattle Insurance Co. (Stanhope's case), . . . Ixvii Aitken's Trs. v. Shanks, . 663, 666 Ainslie v. his Creditors! . . 799 Aitchison and Co. v. Burnside's Trs., 524, 541, 542, 652 Aitchison v. Lee, . . . . 313 Aitken v. Eennie, . . . 590 Aitkens v. Crawford, ... 27 Aitken's Trs. v. Shanks, . 666, 667 PAGE Alton V. Cheap, . . . 312, 663 Akhurst v. Jackson, . . 356, 752 Alcock V. Taylor, .... 657 Alder v Fouracre, 183, 210, 331, 573 Alderson v. Clay, . . . . Ill Alderson v. Pope, . . .59, 248, 536 Aldham v. Brown, . 162, 356, 357 Alexander's case, . . . 328 Alexander v. Clark, . 300, 346, 370 Alexander v. M'Lay and Others, . 640 Alexander v. Scott, . . . 361 Alexander v. West End of London and Crystal Palace Ea. Co., . 471 Alison V. African and Indian Co., 629 Allan V. Allan and Co., . . 269 Allan V. Allan's Trs., . . 173 Allan V. M'Leish, .... 262 Allan V. Morrison, . . . 784 Allan )). Ormiston, . . . 280 Allan V. Turnbull, . . . 327 Allan V. Wright and Glasgow Ex- change Co., . . . 259, 261 Allen V. Kilbre, . . . 346, 673 Allen V. Sea, Fire, and Life Assur- ance Co., .... 231 Allfrey v. AUfrey, . . . 402 Ambergate Ea. Co. v. Mitchell, 135, 159 Anchor c^e in re Era Insurance Co., 213, 742 Anderson v. Aberdeen Ea. Co., . 580 Anderson v. Bank of Scotland, . 564 Anderson v. Bolton and Barker, 627, 643 Anderson v. Bolton, . . . 627 Anderson v. Brownlee, . . 263, 363 Anderson v. Campbell, . 36, 563, 702 Anderson v. Cullen, . 163, 164, 647 Anderson v. Currie, . . 627, 643 Anderson v. Deeside Ra. Co., 452 Anderson w. Goddart and Co., . 252 Anderson v. M'Nair and Brand, . 578 Anderson v. Monteath, . 774, 785 Anderson v. Morton, . . 235, 243 Anderson v. Pyper and Co., . . 264 XXVI INDEX OF CASES. Anderson v. Rutherford, 423, 424, 673, 679 Anderson v. Union Canal Co., . 375 Anderson v. Wright, . . . 606 Anderson and Childs v. Pott and xM'Millan, .... 639 Anderson and Child v. Wood, . 558 Anderson and Co. v. Collier, . . 426 Anderson and Others v. Simpson, . 668 Anderston New Victualling Society v. Dewar and Co., . . 48, 216, 229 Anderston Victualling Society, 48, 229 Andrews v. Garstin, . . 354, 654 Angas' case, .... 717, 721 Anglo-Australian Insur. Co. v. Brit. Prov. Insur. Society, . 213, 742 Anon, 533, 573 Anstruther v. East of Fife Ea. Co., 578 Antram v. Chase, .... 529 Appin's Creditors, . . . 427 Appleton V. Binks, . . . 328 Apps ex parte, .... 724 Apsey ex parte, . . . 255 Arbuckle v. Taylor, . . . 590 Arbuthnot v. Arbuthnot, . . 694 Arden v. Sharp, .... 216 Ardrossan Ea. Co. v. Glasgow, Kil- marnock, and Ardrossan Ea. Co., 575 Armitage v. Winterbottom, . . 240 Armour v. Finlay and Co., . . 643 Armour v. Gibson, . . 309, 315 Armstead v. North Stafford Ea. Co., 446 Armstrong's Assignees v. Leith Bank- ing Co., .... 373 Armstrong's case, . . 328, 722 Armstrong u. Edinburgh and Leith Shipping Co., . . . 374 Arnauld v. Boick, ... 27 Aruot V. Stewart, . . 559 Arton V. Booth, .... 536 Askew's case, . . . . 98 Aspinall v. London and North- Western Ea. Co., .... 534 Astle V. Wright, .... 355 Athenseum Life Society, re the, . 288 Athenaeum Insurance Co. v. Pooley, 205, 208, 213, 216, 219 Atkyns v. Kinnier, . . . 676 Attorney- General v. Andrews, . 578 Attorney- General v. Davy, . . 35 Attorney-General v. East. Counties Ea. Co., . . . . 488,' 579 Attorney-General v. Great Northern Ea. Co., . . . 492, 517 Attorney-General v. London and South- ampton Ea. Co., . . ■ . 492 Attorney-General «. London and S.-W. Ea. Co., .... 492 Attorney-Genera) v. Manch. and Leeds Ea. Co., .... 581 PAGE Attorney - General v. Sheffield Gas Co., 580 Attorney-General v. Tewkesbury and Malvern Ea. Co., ... 487 Attorney-General v. United Kingdom Electric Telegraph Co., . . 518 Attwood V. Kinnear and Sons, 220, 426, 790 Attwood V. Munnings, . . . 234 Aubert v. Maze, .... 18 Auchmutie v. Ferguson, . . 605 Ault V. Goodriche, . . 316, 673 Austen v. Boys, .... 432 Australian Auxiliary Steam Clipper Co. V. Mounsey, 134, 190, 217, 221, 225 Aylesbury Ea. Co. v. Thompson, 165, 167 Ayray's case, . . . . 36 Ayre's case, .... 259 Aytoun v. Dundee Banking Co., 311, 359, 406, 669 Aytoun v. Magistrates of Kirkcaldy, 374 Backwell v. Child, . . 142 Bagg's case, .... 152, 724 Baglehole ex parte, ... 28 Bagnall v. London and North-Western Ea. Co 503 Bagshaw v. Eastern Union Ea. Co., 71, 192, 204, 205, 576 Bagshaw v. Parker, . . . 660 Baily's case, 153 Bailey v. Birkenhead Ra. Co., . 575 Bailey v. Universal Provident Associa- tion, Bain v. Balfour and Co, Bain v. Black, Baird v. Caledonian Ea. Co., Baird v. Graham, Iron Baird v. Hamilton, Baird v. Monklands Co., . Baird i'. Planque, Baird v. Reilly, Baird v. Eoss, Bakers' case. Baker v. Charlton, Bakers of Paisley i Paisley, Bald V. Alloa Colliery Co Baldwin v. Lawrence, Balfour's Trs. v. Edinburgh and North- ern Ea. Co., 37, 107, 193, 199, 387,576 Balfour v. Ernest, . 116, 218, 235 Balfour v. Kerr, . . . 345, 524 Ballam n. Price 276 Ballandene v. Glasgo-w Union Bank, 344, 348, 380 Balmain !'. Shore, . . . 178 Bank of Augusta v. Earle, . . 555 144 361 661 588 363 263 and Steel 580 58 147 . 82, 335, 356 412 234, 760 Magistrates of 376 364 INDEX OF CASES. xxvii Bank of Australasia v. Bank of Aus- tralia, .... 217, Bank of Gibraltar v. Malta, . 707, Bank of London v. Tyrrell, . Bank of Scotland v. Ogilvie's Trs., Bank of Scotland v. Eamsay, Bank of A. Charles v. De Bernares, Bannatyne's Representatives v. Brown's 218 735 209 649 564 556 270 166 726 710 673 310 Trs., .... 269, Banwen Iron Co. v. Barnett, Barclay's case, . . ' . Barclay ea; parte, . . . 145, Barclay v. Lawrie, . . 668, Barfoot v. Goodal, Bargate v. Shortridge, 74, 141, 144, 166, 207 Baring v. Dix, .... 661 Barker v. Allan, . . . 238, 332 Barker v. Richardson, . . . 536 Barklie v. Scott, . . . . 23, 48 Barnet v. Lambert, ... 81 Barnsley Canal Co. v. Twibell, 498, 502 Barr v. Speirs, . . . 658, 661 Barr v. Stirling and Dunfermline Ra. Co., 488 Barret ex parte, .... 725 Barret v. Great Northern Ra. Co., 616 Barron v. National Bank, . . 328 Barrow ex parte, .... 60 Barry v. Croskey, . . . 145 Barry v. Nesham, . . 53, 54, 56 Barstow v. Lindsay, . . 756 Bartlett v. Lambert, . . . 76 Barton's case, . 164, 193, 381, 725 Barton v. Hanson, . . . 292 Bartonshill Coal Co. v. M'Guire, . 364 Bartonshill Coal Co. v. Reid, . 364 Basset v. Wood, . . . 275 Batard v. Douglas, . . 62, 80 Batard v. Hawes, . . 80, 62, 239 Batchelor v. M'Gilvray, . 239, 362 Battley v. Lewis, .... 61 Baxendale v. Great Western Ra. Co., 517 Baxendale v. London and South-West- ern Ra. Co., .... Ixviii Baxter v. Aitchison, ... 66 Baxter v. Earl of Portsmouth, . 26 Baxter v. North British Ra. Co., 437, 441, 579 Baxter v. West, . . . . 661 Bayley ex parte, .... 356 Bayley v. Wilkins, . . . 146 Bayliffe v. Butterworth, . 146 Baynard v. Wooley, . . 414 Bayne v. Ferguson, . . 178 Bayne v. Kidd, ... 382 Beadell v. Eastern Counties Ra. Co., 517 Beak V. Beak, . . . 669 Beale v. Caddick, . 268 Beale v. Mouls, . 79 Beardmer v. London and North-West- ern Ra. Co., . . . . 487 Beath U.Campbell, . . . 416 Beattie v. M'Lellan, . . 641 Beck ex parte, . . . 583 Beck V. Kanterowicz, . . 82, 209,. 331 Beckham v. Drake, . . 219, 239 Beckett v. Midland Ra. Co., . . Ixvii Beckitt V. Bilbrough, . . 71, 147, 164 Bedford v. Bagshaw, ... 82 Bedford v. Deakin, ... 274 Beech v. Eyre, .... 79 Begbie and Co. v. Frame, . . 864 Belch, Dundas v., . 533, 602, 795 Belfast Ra. Co. v. Strange, . 163 Belhaven ex parte, . . . 725 Bell's case, .... 259, 726 Bell ex parte, . . . 586 Bell V. Hull and Selby Ra. Co., . 579 Bell V. Lady Ashburton, . . 686 Bell V. Leighton, .... 262 Bell V. London & North-WesternRa. Co., 633 BeU V. Phyn, .... 178 Bell U.Williamson, . . 316, 674 Bell V. Willison, . 397, 550, 691, 693 BeUis & Thimdercliffe v. M'Gregor, 766, 772 Beman v. Rufford, Benjamin v. Porteous, Benford v. Dommett, Bennet v. Eraser, Benson v. Heathorn, Bentley v. Bates, . Bentley v. Craven, Berresford's case, . Berry v. Lamb, . Berrys v. Wight, . Bertram v. M'Intosh, Besch V. Frolich, . Best's case, . Bevan v. Lewis, . Bevan v. M'Connell, Beveridge v. Wilson, Biddulph ex parte, Bigge's case. 439, 576 54 378 634 185, 209 . 51, 141, 397 182, 184, 331 153 182, 183, 415 281 310 660 720 219 26 852 264 260 Bignold ex parte, 344, 401, 412, 413, 414 Bignold V. Waterhouse, . . 636 Bill V. Sierra Nevada Mining Co., 678 Binford v. Dommett, . . . 136 Binks V. South Yorkshire and River Devon Co., .... 496 Binnie v. Mackray, . . . 561 Birkenhead and Lancashire Ra. Co., 24, 104, 159, 163, 166, 166 Birmingham, Bristol, etc., Ra. Co. v. Locke,-. . 71,74,105,163,165 Bishop V. Church, ... 690 Bishop V. Countess of Jersey, . 255 Bishop V. Mersey and Clyde Navigation Co., .... 559, 566 XXVIU INDEX OP CASES. I'AGE Bisset V. Nicholson, . . 784 Black V. Formartine and Buohan Ra. Co 495, 579 Black and Knox v. Ellis and Sons, 569 Blackburn's case, . . . 63, 725 Blackburn v. Buchanan, 75. 108, 374, 576 Blackburn v. Finlay, . . 75, 108, 374 Blackburn v. Stewart, 107, 190, 192, 411, 576 Blackly v. Eymer, . . . 401 Blackwood v. Hay, ... 66 Blackwood and Co. v. Bower, . 372 Blaikies v. Aberdeen Ra. Co., 126, 250 Blaikie v. Duncan, . . . 346 Blair v. Bromley, . . . 264, 256 Blair v. Bryson, . 216, 229, 247, 372 Blair v. Douglas, Heron, and Co., 407, 671, 672 Blair v. Miller and Douglas, . . 248 Blair v. Russell, 135, 369, 603, 668, 680 Blair v. Sampson, . . . 564 Blair Iron Co. v. Alison, 260, 229, 232, 243 Blair's Trs., petr., ... 463 Blake ex parte, .... 725 Blakeley's Executors' case, . . 312 Blakeney v. Dufaur, . . 584, 675 Blew V. Wyatt, . . . 273, 308 Bligh V. Brent, .... 145 Blisset V. Daniel, . 163, 164, 657, 815 Bluck V. Mallalue, . 353, 414, 677 Blundell v. Brettargh, ... 672 Blundell v. Winsor, ... 20 Bodenham v. Purchas, . 268, 269, 278 Bodmin United Mines, in re, . 152 Boe V. Anderson, .... 661 Bogle's Creditorsv.Ballantyne, 270, 421, 423 Bonar v. Liddell, . . . 773, 786 Bonbonus ex parte, 200, 220, 230, 249 Bond V. Gibson, . . . 212, 249 Bond V. Pittard, .... 49 Bo'ness Canal Co. v. M'Alpine, 73, 200 Booth V. Booth, .... 692 Booth V. Commercial Bank, 234, 237, 858, 526, 543 Booth V. Parkes, ... 669 Booth V. Quin, ... 200 Borrows v. Colquhoun, . 171, 366 Borthwick v. Wright, . . . 762 Bosanquet v. Shortridge, . 109, 166 Bostock V. North Staffordshire Ra. Co., 206 Boswell V. Glasgow and South-Western Ra. Co., . . . . 4S8 Bosworthen Mines, in re, . 730 Bothwejl V. Humphries, . . 216 Boulter v. Peplow, ... 80 Boulton V. Mansfield, . . .53, 309 Bourne v. Freeth, ... 69 Bow, etc., V. Patrons of Cowan's Hos- pital, . . 526, 527, 544, 554 rAGB 276 497 235, 243, 358 402 846, 674 328 Bower v. Swadlin, Bowes V. Ravensworth, Bowie V. Wilson, Bowmont v. Boultbee, . Boyd V. Fraser's Trs., . Bradley v. Heath, Bradley v. London and North -Western Ra. Co., .... 451 Bradley v. Southampton Local Board of Health, .... 502 Bradshaw's Arbitration, . . 449 Braithwaite v. Skofield, . . 60, 80 Bramah i'. Roberts, . . 231, 235 Brand v. Hammersmith and City Ra. Co., ....'. Ixvii Brand v. Kennedy, . . . 415 Brash v. Steel, .... 262 Brashe v. M'Kinnon, ... 18 Brasier u. Hudson, . . 534, 681 Bray v. Fromont, . . .60, 397 Braynton v. London and North- West em Ra. Co., .... Brechin Gas Co. v. Whitson, Breichan v. Muirhead, . Bremner v. Chamberlayne, . Bremner v. Huntly Friendly Society, Brereton v. Stewart, Brettel v. Williams, Bright V. Hutton, Bright V. North, .... Brickbede Life Assurance Co., in re. Brine v. Great Western Ra. Co., . British Alkali Co., in re, British and Foreign Cork Co. diild's case), British Linen Co. v. Alexander, British Sugar Co., Broadbent v. Imperial Gas Co., Brock V. Brown, . Brockbank v. Anderson, Brockwell's case, . Brooke v. Garrod, Brooke v. Enderby, Broome ex parte, . Broom v. Edgley, Broom v. Hall, Broughton v. Broughton, Brown's case. Brown's Claim, . Brown ex parte, . Brown v. Sir C. Adam, 107, 192, 375,' 387, 576, 578 Brown v. Andrew, . 109, 196, 207 Brown v. Blaikie, . . . 631 Brown v. Byers, . . . . 231 Brown v. De Tastet, 183, 397, 415, 669, 688 Brown v. Duncan, . . . 19 Brown v. Edinburgh and Glasgow Ra. Co., .... 496 492 144 349 79 562 647 199, 236 78 192 730 503 709 (Leif- Ixvi 873 110 680 182 66 259, 726 684 268, 815 59, 685, 674 281, 531 145 366 213 219, 742 218, 723 INDEX OF CASES. PAGE Brown v. Forsyth, . . . 253 Brown v. Pruth, .... 62 'Brown v. Gibbins, . . 409, 410 Brown V. Gordon, . . . 274 Brown V. Heritors of Kilberry, . "564 Brown v. Leonard, . . . 318 Brown v. M'Oallum, . . 772, 774 Brown v. M'Dougall and Co., 245, 246 Brown v. M'Gregor, . . . 863 Brown u. Monmouthshire Ra. Co., 381, 383, 385, 577 Brown v. Oakshott, . . . 176 Brown v. Ogilvie, . . . 679 Brown V. Perkins, . . . 402 Brown v. Richmond and Co., . 564 Brown u. Smith, .... 239 Brown r. Syme, . . . 258, 353 Browning v. Great Central Mining Co., 85 Bruce and Co. v. Beat, . . 199 Bruce v. M'Kenzie, . . . ' 371 Bruce v. Ogilvie, . . . 173, 377 Brydges v. BranflU, . . . 254 Bryon v. Metropolitan Saloon Co., 134, 190, 216, 217, 224, 577 Buchanan v. Adam, . . . 274 Buchanan and Anderson, petrs., . 769 Buchanan v. Caledonian Ra. Co., 437, 441, 579 Buchanan v. Dennistoun, . . 237 Buchanan v. Lennox, 136, 305, 380, 401, 668 Buchanan t;. Magistrates of Dunfermline, 283 Buchanan v. Muirhead, 596, 671, 672 Buchanan v. Parker, . . . 376 Buchanan v. Somerville, 272, 300, 308 Buchanan v. West of Scotland Iron Co., 534 Buck V. Buck, . . . 145, 146 BuckwaU V. Boyston, . . . 428 Buckley ex parte, . . . 246 Budd'scase, 328 Budd ex parte, .... 724 Bugg ex parte, .... 721 BuUen v. Sharp, .... Ixvi Bullock V. Chapman, . . 573, 575 Bult V. MorreU, . . . 238, 236 Bunn's case, 828 Bunten v. Barclay, . . 71, 143, 152 Burden v. Burden, . . 183, 688 Burdon v. Barkus, . . . 658 Burge V. Burton, .... 366 Burgess v. Buck and Co., . 246, 559 Burgh V. Legge, .... 161 Burlinson's case, 717 Burmestro v. Norris, . . . 216 Burn V. Burn, .... 690 Burness v. Fennel (Forth Marine In- surance Co.), 108, 143, 165, 203, 356, 383, 527, 536. Burnet v. Calder, ... 795 PAGK Burnett). Knowles, . . 441, 563 Burnet v. Lynch, . . . 164 Burns v. Bruce and Baxter, . . 631 Burns v. Laurie's Trustees, 867, 427, 790 Burnside v. DayreU, . . .79, 82 Burls V. Smith, . . . . 60, 80 Burstall v. Stein, .... 854 Burt V. Bell_, .... 787 Burt V. British Nation Insurance Asso., 152 Burton v. Issett, .... 817 Bury V. Allen, . . . 330, 855 Busk's' case, 724 Butchart v. Dresser, . 195, 316, 673 Bute, Marquis of, petr., . . 462 CabbeU v. Brock, . . . 540, 547 Cadell 0. Paul, .... 607 Caithness, Earl of, v. Baton, Hammond, and Co., .... 645 Calder v. Downie, . . .22, 23 Calder and Hebble Navigation Co. v. Pilling, .... 506 Calder v. Miller, .... 790 Caldicott V. Griffiths, . . .46, 81 Caledonian Dairy Co. v. Campbell, 62, 182 Caledonian and Dumbarton Ra. Co. v. Crum, 860 Caledonian and Dumbartonshire Ra. Co. V. Lockhart, . 104, 105, 608 Caledonian Insurance Co. v. British Linen Co., .... 262 Caledonian Iron Co. v. Clyne, 645, 646 Caledonian Ra. Co. v. Barr, 479, 502, 503 Caledonian Ra. Co. v. Belhaven, . 498 Caledonian Ra. Co. v. Buchanan, 580, 581 Caledonian Ra. Co. v. Campbell, . 78 Caledonian Ra. Co. v. Colt, . . 501 Caledonian Ra. Co. v. Edinburgh and Glasgow Ra. Co., . . . 446 Caledonian Ra. Co. v. Lockhart, 163, 452 Caledonian Ra. Co. v. Lockhart's Trs., 452 Caledonian Ra. Co. v. Ogilvie, 459, 494, 501, 503 Caledonian Ra. Co. v. Sprot, . 498 Cambridge, Corporation of, ex parte, 462 Cameron v. Charing Cross Ra. Co., 449, 503 Camerons, Colebrook, and Co. v. Ed- wards, .... 231, 233 Cameron v. M'Murray, . Cameron's Trs. v. Cameron, Cammell v. Sewell, Campbell, petr., . Campbell v. Baird, Campbell v. Ballantyne, Campbell v. Beath, Campbell v. Buchanan, Campbell v. Calder Iron Co., 171, 174, 175-, 176, 679 888 415 560 816, 462, 769 289 282, 532 182 784 INDEX OP CASES. Campbell v. Caledonian Ea. Co., 363, 514 Campbell v. CampbeU, 330, 331, 333, 400, 414 Campbell v. Cruickshank, . . 273 Campbell v. Edinburgh and Glasgow Ba. Co., . . 493, 502, 580 Campbell v. Faikney, . . • 633 Campbell v. Lauder, etc., . . 76, 77 Campbell v. M'Farlane, . . 65, 583 Campbell v. M'Lintock, . . 309 Campbell v. Maund, . . . 117 Campbell v. Mullet, . . 51, 175 CampbeU v. Myles, . 773, 774, 785 Campbell, Sir H., v. Orphan Hospital and Workhouse, . . • 179 Campbell Eenton v. North British Ea. Co., . . . 448, 449, 579 Campbell v. Stein, ... 240 Campbell's Trs. v. Thomson, 136, 377, 379, 668 Candler v. Candler, . . 19, 586, 674 Cape's Executors' case, . . . 303 Cappers' case, .... 77 Garden v. General Cemetery Co., . 81 Garden v. Dundee and Perth Ka. Co., 262 CargiU v. Sir J. Forrest, . . 575 Carlen v. Drury, ; . . . 577 Carlisle v. South-Eastern Ea. Co., 385, 577 Carmarthen Ea. Co. v. "Wright, . 105 Carmichael's case, ... 70 Garrick v. Saunders, . . . 606 Garron v. Cowan and Co., . . 27 Carron Co. v. Maclareu, . . 559 Garron Co. v. Stainton, 560, 561 Carruthers v. Johnstone, . 645, 548 Carter v. Home, .... 210 Garter v. WhaUey, ... 315 Castle-Douglas Ea. Co. v. Lee, etc., 581 Catchpole v. Ambergate Ea. Co., 106, 154 Caterham Go. v. Brighton Ea. Co., 517 Cathcart v. Blackwood, . . 798 CatholicPubhshing, etc., Co. (Limited), in re, 710 Catt V. Howard, . . . 296, 533 Oaven v. Mackie, . . . 415, 643 Chalmers v. Chalmers, . 142, 472, 694 Chamberlain's case, . . . 503 Chamberlain v. West End and Crystal Palace Ea. Co., . . 501, 503 Chanter and Co. v. Borthwick, 556, 561 Chapman's case, .... Ixviii Chapman v. Beach, . . . 585 Chapman v. Monmouth Ea. Co., . 458 Charitable Corporation v. Sutton, 208 Charlton v. Newcastle Ea. Co., " 192, 576 Charlton v. Poulter, . 388, 573, 661 Ohatto and Co. v. Pyper, . . 65, 602 Chavanay v. Van Sommer, . . 657 Cheale v. Kenward, . 148, 164, 353 PAGE Cheap V. Alton, .... 312 Cheetham v. Ward, ... 276 Cheltenham and Great Western Ea. Co. V. Daniel, .... 143 Cheltenham and Great Western Ea. Co. V. Price, . . . 104, 163 Oheyne v. Guthrie, ... 783 Cheyne v. Little, . . . 545, 548 Child V. Ferguson's Trs., . 361, 674 Child V. Morley, .... 410 Childs V. Morrins, ... 328 Chilton V. London and Croydon Ea. Co., 506 Chippendale ex parte, 199, 219, 344, 413 Christie v. Caledonian Ea. Co., . 493 Christie v. Eeid, . 201, 242, 349, 361 Christie v. Eoyal Bank, 59, 269, 311, 663 Chivas V. Duke of Gordon, . . 563 Chuck ex parte, .... 53 Churnside v. Currie, ... 25 Church of England Life and Fire As- surance Company v. Wink, etc., 860 Churton v. Douglas, . 431, 573, 676 City of Berne v. Bank of England, 656 City of London Gas Company v. NichoUs, . . . 212, 246 Clarke's case, . . . 730 Clarke v. Bickers, . . . 690 Clarke v. Chaplin, . . 82, 356 Clarke v. Dickson, . . . 725 Clarke v. Hart, . . 152, 153, 154 Clarke v. Imperial Gas Company, 527 Clark V. Loos, .... 633 Clarke v. Manchester, Sheffield, and Lincoln Ea. Co., ... 492 Clarke v. Shepherd, . . 199, 243 Clarke v. Eussel, . . . 360 Clarke u.. Tipping, . . . 402 Clarke v. Wilson, . . . 548 Clay V. Langslow (Clayton's case. See Devaynes v. Noble), . . 65 Clayton v. Kynaston, . . . 276 Clegg V. Fishwick, 184, 210, 331, 887, 675 Gleland v. M'Cleland, 281, 282, 532, 608 Cleland v. Magistrates of Pittenweem, 243 Cleland v. Weir, Clements v. Bowes, Clements v. Hall, 175 Clements v. Todd, Clerk V. Eussell, . Cliiford V. Brooke, Clifton's case, Glouston V. Edinburgh Ea. Co., Clowes V. Brettell, Clyne v. Edinburgh Oil Gas Co., . Coats V. Clarence Ea. Co., . Coates V. Nottingham Water Works Co., 617 402 184, 210, 331, 669 82 680 855 730 and Glasgow Ixvii 81 864 579 382 INDEX OF CASES. XXXI PAGE Cochrane, petr., .... 462 Cochrane v. Black, 175, 255, 381, 669, 691 Cochrane v. Bogle and Co., . . 649 Cochrane v. Paul, . . . 560 Cochrane and Co. v. Mathie, . 269 Cookerell v. Van Diemen's Land Co., 147 Cockburn v. Richardson, . . 264 Cohen v. Wilkinson, . . . 576 Colbech, in re, 53, 54 Cole V. West London and Crystal Palace Ra. Co., . . . 471 Coleman v. Eastern Counties Ea. Co., 205, 576 Collie V. Cruickshank, . . . 728 Collins V. North British Bank, 108, 334, 388, 389 Collins V. South Staffordshire Ea. Co., 463 Collins V. Young, . . . 585 CoUinson v. Lister, . . . 636 Colquhoun z;.Finlay,Duff,andCo., 220, 368 Colt V. Caledonian Ea. Co., . . 441 Colt V. Woollaston, ... 654 Columbine v. Chichester, 147, 353 Commercial Bank v. Pollock Trs., 362, 637, 547 Connell ex parte, . . . 173 Connell v. Clyde Trs., ... 438 Conway's case, .... 730 Const V. Harris, . . 190, 196, 815 Conybeare v. New Brunswick Ra. Co., 654 Cook V. Collingridge, . . . 667 Cookson V. Cookson, . . . 178 Cooling, in re, . . . . 502 Coope V. Byre, .... 47 Cooper V. Bertram, Shotts Friendly Society, . . . . 595 Cooper V. North British Ea. Co., . 488 Cooper V. Shropshire Ea. Co., . 575 Cooper V. Watlington, . . 676 Cooper V. Watson, . . . 432 Copeland v. North-Eastern Ea. Co., 106, 144 Copland v. Toulmin, ... 379 Corden v. Universal Gas Light Co., 163 Cork and Bandon Ea. Co. v. Cazenove, 25, 165 Cormack v. Campbell, . 782, 784 Cornwall Consolidated Mining Co. u. Bennett, . . . . Ill Corpe V. Overton, ... 24 Corrie v. Calder, ... 428 Corrigal v. London and Blackwall Ea. Co., 460 Corry v. Londonderry Ea. Co., 382, 383 Corse V. Corse, . . . 137, 178 Corse V. Masterton, . . . 630 Corstorphine v. Trades of Calton, 87, 98 Costello's case, . . . 328, 721 Costello ex parte, . . . 724 PAGE Cother V. Midland Ea. Co., . . 488 Coupland v. Challis, . . . 356 Cowan V. Davidson and Co., . 246 Cowan V. M'Micking, . . . 239 Cox V. Hickman, . 49, 50, 55, 58, 197 Cox V. Mitchell, .... 560 Cox V. Stead, . 176, 428, 666, 791 Craddock v. Piper, . . . 366 Cragg «. Ford, . . . 413,415 Craig V. Brock and Ferguson, 542, 642 Craig V. Douglas, Heron, and Co., 354, 374, 407 Craig V. Fleming, . . . 553 Craig V. Great North of Scotland Ea. Co., 692 Craig and Co. v. Hamilton, . . 374 Craven v. Widdows, . . . 199 Crawford v. Chester and Holyhead Ea. Co., 488 Crawford v. Hamilton, . . 683 Crawford v. M'Cormick, . . 347 Crawford v. Mitchell, . . . 643 Crawford v. North-Eastern Ea. Co., 382, 677 Crawford v. Stirling, ... 236 Crawshay v. Colhns, 183, 416, 667, 666, 669, 688 Crawshay v. Maule, 657, 663, 666, 667 Creighton v. Eankin, . . . 544 Crellin v. Brook, . . . 199, 200 Croft V. Day, .... 676 Croft V. London and North- Western Ea. Co., . . . 471, 602 Croker v. Stevenston Coll. Co., . 364 CroU V. Scottish Central Ea. Co., . 376 Orombie v. M'Ewan, . . . 641 Oromford Canal Co. v. Cutts, 497, 498, 602 Oromford Ea. Co. v. Lacy, . . 74 Cropper's case, . . . 413, 714 Crossfield's case, .... 722 Crouch V. London and North-Western Ea. Co., .... 615 Croxton's case, . 409, 410, 723, 730 Crum and Co. v. M'Lean, . . 247 Orutwell V. Lye, . . 431, 676 Culcreuch Cotton Co. v. Mathie, 243, 637, 541 CuUen V. Black, .... 617 Cullen V. Johnstone, . 335, 336, 858 Cullen V. Kerr, .... 146 Cullen V. M'Farlane, . . 782, 785 Cullen V. Thomson and Kerr, 363, 858 Cunliff V. Manchester and Bolton Canal Co., . . . . 578 Cunningham v. Edinburgh and Northern Ra. Co., . . 474, 503, 580 Cunningham v. Home, . . . 631 Cunningham v. Kinnear, . . 66 Cunningham v. Warner, 178 XXXll INDEX OF CASES. PAGE Cupper's case, 780 Currie v. Glen, 530 Currie's case. 720 Curtis V. Perry, . 174 Cutbill V. Kingdom, 110 Dakin v. London and North-Western Ea. Co., .... 471 Dale V. Dumbarton Glasswork Co., 362 Dale V. Hamilton, . . . 353 Dalgleisb v. Sorley, . 309, 658, 690 Dalgleish v. Stirling and Dunfermline Ra. Co., . . 441, 469, 579 Dairy, Heritors of, v. NewaU and Others, 537 Dalrymple v. Halket, . . . 188 Dalrymple v. M'Gill, ... 263 Dalton V. Midland Ba. Co., . . 383 Daniel's case, in re The Universal Pro- vident Life Association, Daniel v. Cross, . Daniel ex parte, . Darby v. Darby, . Darbey v. Whitaker, 720, 724 278 726 178 672 Darnley u. Ijondon, Chatham, and Dover Ra. Co., .... 496 Darvill v. Roper, .... 497 David V. ElKce, . . 273, 274, 808 Davidson's case, .... 720 Davidson v. Murray, . . . 631 Davidson v. Napier, . . . 573 Davidson v. Rankine, . 272, 308, 690 Davidson v. Robertson, 40, 234, 872, 608 Davies ex ^arte, . . . . 718 Davies v. Hodgson, . . 318, 431 Davis V. Amer, . . 573, 586, 674 Davis V. Cary, .... 745 Davis V. Hawkins, . . . 109 Dawson v. CuUen, . . . 642 Dawson v. Paver, . . . 580 Dawson's Trs. v. Macleans, . . 578 De Berenger v. Hammel, . . 660 De Cosse Brissac v. Rathbone, . 561 Dee's case, 708 De Mautort v. Saunders, . . 246 Dearden v. Townseud, . . . Ixvii Dempster v. Masters and Seamen of Dundee, .... 35 Dennistoun, MacNair, and Co., v. Mao- farlane, . . . 169, 170 Dennistoun v. Mudie, . . 23, 24 Dennistoun v. Newbigging, . 756, 792 Denton v. Great Northern Ra. Co., 349 Denton v. Rodie, .... 344 De Pass's case, .... 328 Deposit Life Assurance Co. v. Aysoough, 166 De Tastet v. Bordenave, . 318, 675 Devaynesu. Noble (Clayton's case), 59, 254, 267, 268, 269, 691 Dewar v. MOler, . . 216, 229, 248 Dewar v. Munnoch, . . . 550 Dewar v. Nairne, .... 363 De Winton v. Brecon, etc., . . 222 Dickinson y. Valpy,58, 199, 204, 229, 231, 292, 410 Dickson v. Cass, . . . 313 Dickson v. Dickson, . . 107, 386 Dickson v. Dickson and Co., . . 255 Dickson ex parte, . . 659, 665 Dickson v. Henderson, . . 147, 252 Dickson v. Kerr, .... 532 Dickson and Sons v. Dickson and Co., 607 Digby ex parte, . . . . 58, 54 Dingwall v. M'Combie, 367, 761, 790 Dixon ex parte, .... 583 Dixon V. Hammond, . . . 424 Dixon V. Ranken, .... 264 Dixon V. Dixon, . . . 586, 674 Dixon, Langdale, and Co. v. Cowan, 762 Dixons V. Monklands Cajial Co., 348, 440 Dobell V. Stevens, . . , . 349 Dobbie v. Johnston, 304, 335, 386, 607, 795, 858 Dobbins and Bibby v. Stephenson and Co., 641 Dobson V. Christie, . . . 424 Docker v. Sommes, . . 670, 691 Dodd V. Salisbury Ra. Co., . . 438 Dodgson ex parte, ... 60 Dolman v. Orchard, . . . 818 Donald v. Humphrey, . . . 491 Donaldson v. Donaldson's Trs., . 696 Donaldson v. Findlay and Co., . 236 Donaldson v. WiUiamson, . . 194 Doo V. London and Croydon Ra. Co., 447 Doubleday v. Muskett, . . .60, 80 Douglas V. Caledonian Ra. Co., . 448 Douglas V. Craig, .... 762 Douglas V. Dundee and Newtyle Ra. Co., 581 Douglas V. Gordon and Co., . . 359 Douglas and Heron v. Armstrong, 642 Douglas, Heron, and Co. v. Blair, . 407 Douglas, Heron, and Co. v. Earl of Galloway, .... 564 Douglas, Heron, and Co. v. Gordon, 541 Douglas, Heron, and Co. v. Hair, 286, 816 Douglas 1-. Hunter, . . . 776 Douglas V. Jones, . . 558, 685 Douglas V. Patrick, . . . 534 Douglas V. Sanderson, . . . 776 Douglas, Wilson, and M'CauUy v. Gordon and Co., . . 310, 680 Dove V. Wilkinson, . . . 213 Downe v. M'Kinlay, . . . 252 Downe v. Pitcairne, . . . 545 Downes v. M'Fie and Co., . . 230 Downs V. Collins, . . . 352, 684 Doyle's case, .... 722 INDEX OF CASES. XXXIU Dremry v. Barnes, Drew V. Lumsden, Drouet v. Taylor, . Drummond's case, Drummond v. Holliday, Drummond ». Hunter, . Drummond v. Macgregor, PAGE 588 725 . 79, 82 721 407, 548 350, 354, 685 262 Drummond v. Thomson's Trs., 63, 73, 143, 676 Drummond's Trs. v. Melville, . 691 Dry V. Boswell, .... 54 Drysdale v. Lawson, . 316, 585, 674 Dublin and Wicklow Ra. Co. v. Black, 166 Dudley Canal Co. v. Grazebrook, . 499 Duff V. Easflndia Co., . . 534 Duffus and Others v. Mackay and Others, . . . 558, 686 Duke V. Andrews, . . 70, 72, 357 Duke V. Forbes, . . . 355, 357 . Duke V. Dive, .... 162 Dumville v. Ashbrooke, . . 588 Dunbar«.Eemington,Wilson, &Co., 310, 677 Duncan v. Forbes, . . 281, 282 Duncan v. Houstoun, . . . 748 Duncan v. Lowndes, . 236, 237, 250 Duncan v. Union Canal Co., 182, 415 Duncuft );. Albrecht, . . 147, 353 Dundas v. Belch, . . 533, 602, 795 Dundee and Aberdeen Ea. Co. v. Eichardson, .... 452 Dundee Gas Co. v. Mags, of Dundee, 438 Dundee Gas Light Co. v. Dundee New Gas Light Co., ... 582 Dundee and Newtyle Ra. Co. v. Miller and Soot, ... 66, 527 Dundee Union Bank v. Dundee and Newtyle Ra. Co., 357 Dunkeld, Bishop of, v . Balmerino, 99 Dunlop V. MacKellar, , , 252 Dunlop V. Geils, . , 799 Dunlop V. Higgins, . 147 Dunlop V. Spiers, . . 754 Dunston v. Imperial Gas Co., 211 Durham's case, 288 Duranty ex parte, . 726 Dutch East India Co. V. Van Meye rs, 556 Dutch West India Co. V. Moses, 555 Duvergier v. Fellows, 20 Dyce V. Paterson, . 776 Dykes v. Watson, ■ 361 'Eagh Co. ex parte, . . 206,527 East of England Bank (Feltom's Exe- cutors' case), .... Ixvii East India Co. v. Blake, . . 411 East Lothian Ea. Co. v. Peffers, 71, 142, 164 East Lothian Bank v. Turnbull, 63, 73, 143, 354 Eastern Counties Ea. Co. v. Marriage, 472 Eastern Union Ea. Co. v. Bagshaw, 204 Eastern Union Ea. Co. v. Cochrane, 745 Easton v. Johnston, . . 280, 531 Eastwood V. Bain, . 115, 218, 233 Eds and Bond v. Findlay, Duff, and Co., .... 368,426 Edgar v. Knapp, ... 80, 289 Edinburgh and Glasgow Bank v. E wan, 556, 561 Edinburgh and Glasgow Bank v. Steele, 245 Edinburgh and Glasgow Canal v. Earl of Hopetoun, . . . 438 Edinburgh and Glasgow Ea. Co. v. Adamson, .... 375 Edinburgh and Glasgow Ea. Co. v. Arthur, .... 375 Edinburgh and Glasgow Ra. Co. v. Cadder Road Trustees, . 563, 564 Edinburgh and Glasgow Ea. Co. v. Campbell, .... 745 Edinburgh and Glasgow Ea. Co. v. Earl of Hopetoun, . . 564 Edinburgh and Glasgow Ra. Co. v. HaU, Ixviii Edinburgh and Glasgow Ra. Co. v. Magistrates of Linlithgow, , 435, 437 Edinburgh and Glasgow Ea. Co. v. Meek, 375 Edinburgh and Glasgow Ea. Co. v. Monklands Ra. Co., 438, 446, 447, 580 Edinbiirgh and Glasgow Ra. Co. v. Stirling and Dunfermline Ra. Co., .... 365,439 Edinburgh and Glasgow Ea. Co. v. Wauohope, .... 437 Edinburgh and Glasgow Union Canal V. Johnston, .... 264 Edinburgh and Leith Glass Co. v. North British Ea. Co., . 449, 455 Edinburgh and Leith Ea. Co. v. Hebblewhite, . 109, 157, 161 Edinburgh and Leith Ra. Co. v. Manson, .... 71 Edinburgh and Leith Shipping Co. v. Downe, .... 208 Edinburgh and Leith Shipping Co. v. GiUon, 553 Edinburgh and Newhaven Ra. Co. v. Sprott 167, 342 Edinburgh Oil Gas Co. v. dyne's Trs., 596, 860 Edinburgh, Perth, and Dundee Ra. Co. V. Arthur, . . . 375 Edinburgh, Perth, and Dundee Ra. Co. petr 464,562 Edinburgh, Perth, and Dundee Ra. Co. V. Hope, .... 470 XXXIV INDEX OP CASES. Edinburgh, Perth, and Dundee Ra. Co. V. Leven, . . 447, 455 Edinburgh, Perth, and Dundee Ea. Co. V. North British Ra. Co., 527, 581 Edinburgh, Perth, and Dundee Ra. Co. V. Philip, ... 440 Edinburgh Water Co. v. Bell, . 361 Edinburgh Water Co. v. Hay, . 485 Edmiston v. Wright, ... 410 Edmonston v. Thompson, . . 57 Edwards v. Camerons, Coalbrook, and Co., .... 231, 233 Edwards v. Grand Junction Ea. Co., 84 Edwards v. Hooper, . . . 813 Edwards v. Shrewsbury Ra. Co., . 575 Elder v. Croal, .... 263 Electric Telegraph Co. of Ireland, in re, . . . 132, 133, 665 Elibank, Lord, petr., . . 462, 468 Ellis and Co. v. Finlayson, . . 360 Elliot V. South Devon Ra. Co., 472, 487 Ellis V. Coleman, . . 204, 207, 210 EUis ex parte 709 Ellis, petr., .... 659, 665 Ellis V. Smoeck, .... 59 ElUs V. Walker, .... 142 Elton, Hammond, and Co. v. Nielsen, 359 Elwood V. Bullock, ... 506 Emly ex parte, .... 233 Emly V. Lye, . . 219, 233, 247 Emmet v. Bradley, . . . 318 Endo V. Caleham, . . . 402 England v. Curling, . 184, 353, 573 Era Life Insurance Co., in re, . 742 Ernest v. NichoUs, 110, 204, 206, 213 Erskine v. Aberdeen Ea. Co., . 467 Erskine v. Cormack, . . . 349 Essell V. Hayward, . . . 660 Essex V. Essex, .... 178 Estwick V. Conningsby, . . 674 Etherton v. Burney, . . . 202 Evans v. Coventry, . 152, 415, 585 Evans w. Drummond, . . 272,315 Evans v. Eichardson, ... 28 Evans v. Yetherd, . . . 414 Everet v. Williams, ... 17 Ewing V. Chrichton, . 172, 400, 604 Bwing, May, and Co. v. Johnston and M'Quoid, .... 367 Ewing V. M'Clelland, 627, 628, 633, 634, 647, 758 Ewing V. Wright, . . . 360 Bwing V. York, .... 489 Eyre ex parte, .... 255 Factage Parisien, in re, Fairbairn v. Pearson, . Fairholm v. Marjoribanks, 709 585 60 PAGE 453 398 Co., 454, 455, 460, 478, 502 Falls V. Belfast and BaUymena Ea. Co., 472 Fairlie v. M'Gown, Fairthorne v. Weston, . Falconer v. Aberdeen Ea. Farlow ex parte, Farquharson v. Stott, Farr v. Pearce, Farrar v. Beswick, Farrar v. Deflinne, Farrar v. Hutchinson, Farrar and Booth v. 502 696 318, 430, 431, 675 378 315 534 North British 426 874 402 363 Farries v. Smith, . Farrington v. Chute, Faulds V. Townsend, Fawcett v. York and North Midland Ra. Co 492 Fawcett v. Whitehouse, 82, 209, 381, 397 Fearnside and Deans' case, . . Ixvi Featherstonhaugh v. Fenwick, 152, 175, 183, 210, 331, 657, 658, 666, 669, 688 Featherstonhaugh v. Lee Moor Porce- lain Co., . . . Ixvi Featherstonehaugh v. Turner, 183, 356, 670 Feltom's case, .... Ixvi Fenton v. Ijivingstone, . . . 560 Fenwick's case, . . . 721, 728 Ferguson v Grahame, 66, 136, 377, 668 Ferguson v. London, Brighton, and South Coast Ra. Co., . . 471 Ferm v. Harrison, . . . 198 Ferrier !>. Alison, .... 453 Ferrier v. Berry, .... 793 Ferrier v. Dodds, .... 245 Fife V. Swaby, .... 575 Fife Bank v. Holhday, ... 897 Fife and Kinross Ra. Co. v. Deas, 207, 473, 503 Fife and Kinross Ra. Co. v. Gentle, 72, 167 Figes V. Cutler, .... 354 Findlater v. Dunmore and Co., . 559 Findlay v. Fleming and Co., . 245 Findlay, Bannatyne, and Co. v. Ord, 678, 771, 780 Finkle v. Stacy, .... 47 Finlay v. Thomson, ... 264 Pinlay and Co. v. Campbell, . 596 Finlayson v. Braidbar Quarry Co., 247, 882, 413 Finlayson v. Rutherford, . . 378 Finnie v. Glasgow and South-Western Ra. Co., . . . 513, 580 Fisher V. Hepburn and Syme, 545, 554, 624, 641 Fisher v. Taylor, . . 133, 216, 292 Fleming v. BaUantyne, 243, 282, 537, 544, 623, 624, 774 Fleming v. Caledonian Ra. Co., 469, 582 INDEX OP CASES. XXXV Fleming v. Campbell and Others, 107, 190, 204, 387, 411, 577 Fleming v. Finlay and Co., . . 424 Fleming v. Hector, Fleming v. Newton, Fleming v. Twaddle, Fletcher v. Dyche, Fletcher v. Great Western Ra 46 571 642 424 Co., 497, 498, 502 Fletcher v. Marshall, . . . 146 Flowerdewu. Dundee Shipping Co., 380,400 Flowerdew v. Laing, . 374, 401, 668 Ffooks V. South- Western Ea. Co., 145 Fooks V. Wilts, Somerset, and Wey- mouth Ra. Co., . . . 579 Forbes v Duffus, .... 530 Forbes v. Edinburgh Water Co., . 374 Forbes v. Forrester's Exrs., . . 760 Forbes v. Gallie, ... 639 Forbes v. Innes, 269 Forbes v. Manson, . . 759, 774 Forbes v. York Buildings Co., . 650 Forbes and Co. v. Dundas, . . 361 Fordyce v. Bridges, . . . 638 Fordyce v. York Buildings Co., . 762 Forman v. Homfray, . . . 398 Forrest v. Borthwick, . . . 784 Forrest v. Campbell, ... 25 Forrest esc parte, . 714 (2 Giff. 42) Forrest v. Manchester Ra. Co., 205, 576 Forrester v. BeU, .... 62 Forrester v. M'Kenzie, . . . 783 Forster v. Hale, .... 173 Forster v. Lawson, . . . 346 Forster v. Orr's Trs., . . 668, 670 Forsyth v. Hare and Co., 242, 541, 542, 543, 567, 623 Forth and Clyde Canal Co., . . 376 Forth and Clyde Ra. Co., v. Ewing, 450 Forth Marine Insurance Co. v. Bur- ness (Burness v. Fennel), 74, 203, 260, 261. Fortune v. Edinburgh and Bathgate Ea. Co., .... Fortune v. Luke, .... Fosdick V. North British Ra. Co., . Foss V. Harbottle, Fox V. Clifton, . Fox V. Hanbury, Foulds V. Thomson, Fowler v. Wyatt, . Franklyn v. Lamond, Fraser, petr.. Eraser v. Burnet, . Fraser v. Dunlop, Fraser v. Edinburgh Union Canal Co., Fraser v. Hair, Fraser v. Hill, 460 372 362 109, 210, 577 58, 62, 63, 70, 72 813, 664 145 402 146, 147 798 564 263, 363 and Glasgow 580 18, 66, 396, 401, 654, 853 66, 400, 413, 654 Fraser v. Kershaw, Fraser v. Lovat, . Faser v. Whalley, etc., Fraser, Reid, and Sons v. Jamieson, Frayes v. Worms, French v. Andrade, French v. Backhouse, French v. Styring, Freeman v. Cooke, Freeman ex parte, Freeman v. Fairlie, Freeland v. Stansfield, Friendly Insurance Co. Fripp V. Chard Ra. Co. Frost V Moulton, Frowd ex parte, . Fry ex parte, FuUarton v. Dixon, Furlong v. M'Nair, Furnival v. Weston, Fyfe V. Carfrae, . . Fyfe V. Kedslie, . FyfEe v. Fergusson, PAGE 346, 586, 673, 674 462 575 Lancaster and 642 561 271 239 51 58 296, 302 388 355, 573, 586 Royal Bank, 564 588 657 725 296 587, 674 785 536 283 694 558, 680, 692 586, Gabriel v. Evill, . Gainsford v. Carroll, Gale V. Leckie, Gall V. Bird, Gallie, etc., v. Wilson's Trs., Gallie V. Wyllie, . Galloway v. Henderson, Galloway v. Liddell and Eeid, 367, 61 251 354 618 853 752 774 558, 636 504 Galloway v. Eanken, Galvanized Iron Co. v. Westoby, 63, 72, 165 Gal way v. Matthew, 200, 216,. 230, 248 GammeU, petr., .... 464 Garden and Son's Sequestration (MacKellar's case), Gardiner !>. Childs, Gardner v. Anderson, . .58, 318 Gardner v. Trinity House of Leith, Gardner v. Charing Cross Ea. Co., Gardner v. M'Cutchen, Gardners v. Eoyal Bank, . 384. Gardom ex parte. Garland ex parte, Garrard v. Hardy, Garwood v. Ede, Gaskell v. Chambers, Gattke's case, Gault V. M'Aulay, Geddes v. Hamilton, Geddes v. Hopkirk, Geddes v. Wallace, Geils, petr., . Gemmel v. Barclay, 783 213 854 179 472 185 427 236 53, 326, 691, 692 20 82, 356 210, 569 501 50 183, 415 525, 550 407, 815 462 546 48. XXXVl INDEX OF CASES. PAGE Gemmel ex parte, .... 428 General International Agency Co., in re 730 General Assembly of Baptist Churches <;. Taylor, .... 603 General Indemnity Assurance Co., 729 Gerhard's case, .... 259 Gerhard v. Bates, . . 82, 259, 349 German Mining Co.'s case, . . 412 Gibb V. Wathen and Co., . . 256 Gibson's case, . . . 726,730 Gibson I'. Lupton, ... 47 Gibson v. Smith, . . . 551, 558 Gibson Stewart, 175, 182, 345, 400, 413 526, 534, 654 Gibson Craig, Sir James, v. Aitken, 63, 73, 144, 354 Gilbert v. Cooper, . . . 576 Gilfillan v. Bro-wn, ... 530 GilfiUan V. Henderson, ... 18 GiUan v. Morrison, . . . 413 Gillespie o. Clark, ... 679 Gillespie v. Hamilton, . . . 663 Gillespie v. Young, . . . 100 Gillies V. Hunter, . . . 546 Gilmour v. Stewart's Eeps., . 281 Gilpin V. Enderbey, ... 51 Glasgow and Airdrie Ra. Co. v. Ten- nent, . . . 548, 550, 568 Glasgow and Ardrossan Canal Co. v. Glasgow and Greenock Ea. Co., 444 Glasgow and Ayr Ra. Go. v. Abbey Parish of Paisley, . . . 375 Glasgow and Barrhead Ea. Co. v. Caledonian Ra. Co., 375, 583, 588 Glasgow, Barrhead, and Neilston Ea. Co. V. Nitshill Coal Co., 452, 459, 502 Glasgow and Garnkirk Ea. Co., petr., 588 Glasgow, and Greenock Ra. Co. v. Glasgow and Airdrie Ea. Co., 438, 488 Glasgow and Monklands Ea. Co. v. Glasgow Waterworks Co., 447, 455 Glasgow Water Co. v. Kellar, . »■ 440 Glass V. Hutton, .... 216 Glassington v. Thwaites . 184, 573 Gleadon v. Tinkler, ... 248 Gleadow v. Hull Glass Co., . 409, 410 GledhUl's case, .... 720 Globe Insurance Co. v. Scott's Trs., 633 Globe Insurance Co. ». Tytler, . 649 Gloucester, Aberystwith, and Central Wales Ea. Co., in re, Glover v. North Stafford Ea. Co., . Glyn V. Hood, . . . 141, Goddard v. Hodges, Godfrey v. Turnbull, Goldie V. Gray, . Goldie V. Oswald, . . 441, Golding V. Vaughan, 714 502 663 328 310 752 563 271 Goode V. Harrison, Goodman v. De Beauvoir, Goodman v. Whitcomb, PAGE 25 525 108, 386, 388, 684, 660 366 33 721, 723 326 231 Great 488 367, 790 Goodsir v. Carruthers, . Goodyer v. Shaw, Gordon's case, Gordon v. Anderson, . Gordon v. Assurance Co., Gordon v. Cheltenham and Western Ea. Co., . Gordon v. Cheyne, Gordon v. Douglas, Heron, and Co., 634, 673 Gordon v. Howden, 18, 400, 413, 414, 415, 654, 673, 680 Gordons. M'Cubbin, 372, 678, 770,780,785 Gordon v. Eutherford, . . . 403 Gordon v. Sutherland, ... 229 Gordon v. Tolmie, ... 776 Gorham v. Thompson, . . . 310 Gorton V. Bristol Ea. Co., . . 517 Gough V. Davies, . . . 273, 308 Gould V. Stafford Potteries Water- works Co., . . . . 453 Gouthwaite's case, . . . 401 Gouthwaite ex parte, . . . 722 Gouthwaite v. Duckworth, . . 293 Governor and Company of Bank of England, .... 35 Gow V. Maodonald, 282, 283, 531, 608 Grace v. Smith, .... 63 Graham u. Caledonian Ea. Co., 466,468, 564 Graham v. Garnkirk Ea. Co., . 436 Graham v. Henderson, . . . 309 Graham v. Hope, .... 310 Graham v. Keble, . . . 680, 693 Graham v. North British Bank, 107, 190, 258, 335, 576 Graham v. Sprot, . . . 606 Graham v. Van Diemen's Land Co., 110 Graham v. Western Bank, 261, 653, 654, 725, 859 Graham v. Whichelo, . . . 316 Graham v. Writers to the Signet, 504, 526 Grand Junction Ra. Co. v. White, 496 Grant, petr., .... 799 Grant v. Chalmers, . . 316, 673 Grantu. Creditorsof YorkBuildingsCo., 283 Grant v. Edinburgh and Dundee Ra. Co., .... 467,468 Grant v. Gird wood and Co., . 696, 678 Grant v. Gordon, .... 564 Grant v. Hawkes, .... 230 Grant v. Jackson, . . . 533 Gray v. Brassey, .... 264 Gray v. Douglas, Heron, and Co., 406, 668 Gray v. Haigh, .... 391 Gray v. Polhill and Others, . 635, 767 Gray v. Smith, .... 37 INDEX OP CASES. XXXVll PAQE Gray v. lUidge and Pohill, . . 558 Gray v. Liverpool and Bvuy Ea. Co., 581 Gray, Lord, and Others, petrs., . 366 Great Luxembourg Ea. Co. v. Magnay, 209, 210 Great Northern Ea. Co. v. Clark, 153, 156 Oreat Northern Ea. Co. v. Eastern Counties Ea. Co,, . . 439, 576 Great Northern Ea. Co. ex parte, . 470 Great Northern Ea. Co. v. Inglis, 105, 106, 111,153, 156,159, 160, 163, 243,604,607 Great Northern Ea. Co. v. Shepherd, 514 Great Western Ea. Co. v. Attorney- General, .... Ixviii Great Western Ea. Co. v. Goodman, 506 Greatrix v. Greatrix, . . 388, 573 Green v. Beesley, .... 46 Green v. Brigga, ... 51 Green v. DealSn, .... 249 Green v. Gardiner, . . . 262 Green v. Nixon, .... 204 Greenshield's case, . . . 722 Greenwood's case, . . . 287 Greenslade v. Dower, . 216, 229, 292 Greesham v. Gray, ... 46 Greig v. Mags, of Kirkcaldy, . 374 Griswold v. Waddington, . . 28, 664 Grizewood v. Blane, . . . 145 Grizewood ex parte, . . . 145 Grizewood and Smith ea;^ar. Bristol Ra. Co., Pollock V. King, . Pollock V. Paterson, . . .26, Pollock V. Ritchie, PoUock V. Stables, Pollock, Gilmour,and Co. u. Ritchie, 399, 402 Pollock's Reps. v. Buchanan, 848, 382 Ponton V. Dunn, .... Poole V. Masterman, Poole V. Middleton, Porteous v. Cordiners of Glasgow, Porthouse v. Paiker, Portland, Duke of (Northern Yacht Club), ex parte. Pott V. Eytori, .... Poulson ex parte, . 634 402 575 795 669 107 145 142 398 142 357 586 537 58 256 Powles V. Page, 315, 536 Poynder v. Great Northern Ra. Co., 490 Poynter v. Lorimer, . . . 784 Prendergast v. Turton, . . . 154 Presbytery of Ayr, petr., . . 462 Presbytery of Kirkcudbright v. Blair, 142 Preston v. Grand CoUier Dock Co., 159, 576, 576 Preston v. Liverpool and Manchester Ra. Co., Price and Brown's case. Price V. Barker, . 84 721 276 PAGE Price V. Logan, . . . 661 Price V. Wise, . . . 680, 692 Priestly v. Foulds, . . . 494 Primrose v. Caledonian Ea. Co., 468, 588 Procurator-Fiscal v. Wool-combers of Aberdeen, .... 18 Prole V. Masterman, . . .80, 414 Proprietors of Boness Canal v. M'Al- pine and Co., . . . 260 Proudfoot V. Lindsay, 229, 230, 248, 249, 250 PuUing I'. London, Chatham, and Dover Ra. Co., . . 471, 472 Pulsford V. Richards, . . 70, 653 Purves V. Home, . " . . . 647 Raba v. Ryland, .... 220 Radcliffe v. Glasgow and Dumfries Ea. Co., 470 Rae V. Candlemakers of Edinburgh, 587 Eae V. Kay, 264 Rae V. Neilson, .... 630 Rait V. Primrose, .... 146 Raleigh v. Hughson and Dobson, 270, 422 Ralston, Goodwin, and Co. v. Maclean, 606 Ramsay v. Grierson, . . . 629 Ramsay v. Smaill, etc., 205, 364, 647 Ramsay's Exrs. v. Graham, . 308, 690 Ramsden v. Manchester South Junc- tion Ra. Co., . . 471, 488, 602 Ramsgate Victoria Hotel Co. (Limited) V. Monteflore, . . . Ixvi Randall v. Randall, . . . 178 Ranger v. Great Western Ra. Co., 259 Rankeillor v. Magistrates of St Andrews, 36 Ransome v. Eastern Counties Ra. Co., 516 Rapp V. Latham, . 256 Rawlins v. Wickham, . 654 Rawlinson v. Clarke, 48 Rawsou and Co. v. Johnstone, 198 Raynal ex parte, 453 Raynard v. Chase, 19 Read v. Bowers, . 573 Reade v. Bentley, 657 Reade v. Woodroofe, 401 Reaveley's case, 23 724 Redfearn v. Sommervail, 327 366 Reid's case, .... 724 Reid ex parte, 23 Reid V. BartonshUl Coal Co.,. 264 Reid V. Berry, 783 Reid V. Chalmers, . 30 757 Reid V. Douglas, . 625 661 Reid V. Edinburgh Gas Light Co., 73 Reid V. HoUingshed, 175 Reid V. Kelso, 800 Reid V. Maxwell, . 573 Reid V. Moir, 546 INDEX OF CASES. xlvii PAOE Reid V. Steele, .... 262 Raid V. Watson, . . - . 427 Reid V. White, .... 272 Reid and Maccall v. Douglas, . 559 Renfrewshire Banking Co. v. M'Kellar, 590 Eennie v. Wynn, ... 79 Renton v. Scott's Trs., . . 633 Renter v. Electric Telegraph Co., . 208 R. V. Air and Calder Navigation, 498, 502, 503 R. V. Ambergate Ra. Co., . . 448 R. V. Birmingham and Gloucester Ra. Co., .... 489,492 R. V. Birmingham and Oxford Ra. Co., 446 R. V. Bristol Dock Co., . . . 494 R. V. Caledonian Ra. Co., . . 487 R. V. Cheltenham Commissioners, 460 R. V. Clear, .... 890 R. V. Committee of South Holland Drainage, . . . 449, 460 R. V. Commissioners of Woods and Forests, .... 448 R. V. Cottle, . . . 472, 487 R. V. Dodd, .... 287 R. V. Eastern Archipelago Co., . 99 R. V. Eastern Counties Ra. Co., 461, 492, 501 R. V. Fisher, .... 496 R. V. Frere, 506 R. V. General Cemetery Co., 106, 144 R. V. Grand Junction Ra. Co., . 507 R. V. Great Western Ra. Co., . 446 R. V. Grimshaw, .... 110 R. V. Haythorne, .... 98 R. V. Hodge, .... 755 R. V. Hughes, .... 98 R. V. Hungerford Market Co., . 447 R. V. Inhabitants of Ely, . . 494 R. V. Inhabitants of Kent, . . 494 R. V. Inhabitants of Lindsey, . 494 R. V. Justices of West Riding of York- shire, 460 R. V. Kerrison, .... 494 R. V. Lancaster and Preston Ra. Co., 458, 459 R. V. Langhorn, . . . . llOi R. V. Leeds and Selby Ra. Co., 497, 498, 502 E. V. Liverpool and Manchester Ra. Co., 142, 502 R. V. London and Birmingham Ra. Co., 489, 492 R. V. London and North- Western Ra. Co., . . . 458,460,461 R. V. London and South- Western Ra. Co., .... 472, 507 R. V. Macdonald, .... 48 R. V. Manchester Commissioners, . 447 R. V. Manchester and Leeds Ra. Co., 492 R. V. Metropolitan Board of Works, 501 R. V. Metropolitan Ra. Co., . . 458 R. V. Miller, .... 98 R. V. Mott, 135 R. V. North Midland Ra. Co., 498, 502 R. V. Norwich and Walton Trs., . 460 R. V. Rector of Lambeth, . . 117 R. V. Rigby, .... 492 R. V. Rock, .... 755 R. V. Sanderson, .... 755 R. V. Severn and Wye Ra. Co., . 507 R. V. Sharpe, .... 492 R. V. Sheffield and Manchester Ra. Co., 459 R. V. Southampton Ra. Co., . . 502 R. V. South Wales Ra. Co., . . 495 R. V. Thames and Isis Navigation Com- missioners, .... 502 R. V. WUts and Berks Canal Co., . 390 R. V. Wood, .... 506 R. V. York and North Midland Ra. Co., 448 ReyneU v. Lewis, . 59, 62, 77, 80 Rhiud V. Commercial Bank, . 262, 606 Rhodes ex parte, .... 721 Richards v. Scarborough Public Mar- ket Co., .... 488 Richardson ex parte, . . .^ 826 Richardson, etc., v. Gavin, etc., . 414 Richmond, in re, . . . . 204 Richmond's case, 152, 153, 154, 725, 726 Richmond v. Grahame, . . 546 Ricketts v. Bennet, , 199, 216, 410 Ricketts v. East and West India Docks and Ra. Co., .... 496 Rickman v. Parry and Maclachlan, 560 Ridgway v. Brock, . . 300, 757 Ridgway v. PhilUps, ... 65 Ridley v. Plymouth Griuding Co., 109, 207, 238 Ridley v. Taylor, . . 200, 236, 249 Ridpath v. Forth Marine Insurance Co., 608, 795 Ripley v. Waterworth, . . 178 Ritchie and M'Cormick v. Fraser, 556, 558 Ritchie v. Mackay, . . . 531 Ritchie v. Scottish Central Ra. Co., 576 River Dun Navigation Co. v. North Midland Ra. Co., . . . 579 Robb V. Forrest, . 242, 541, 771, 772 Roberts u. Earl of Rosebery, . 252 Roberts v. Eberhardt, . . 584, 660 Roberts v. Great Western Ea. Co., 496 Robertson v. Anderson, 537, 544, 624 Robertson v. Brown, . . . 453 Robertson v. Gillespie, . . . 245 Robertson v. Great Western Ra. Co., 579 Robertson v. Lockie, . . . 660 Robertson v. Menzies, . . . 865 Robertson v. Southgate, . . 330 xlviii INDEX OF CASES. Robertson v. Thom, Robertson and Co. Eeid, PAGE . 63, 73, 143 Galloway and 237 Ross V. East Lothian Ra. Co., ~ I V. Lauder, Robertson, Creditors of, . . 630 Robertson's Trs. v. Oughterson, . 794 Robinson's case, . . . 722, 726 Robinson ex parte, . . . 313 Robinson's Exrs., .... 414 Robinson v. Anderson, 136, 353, 378, 379 Robinson v. Bland, . . . 560 Robinson v. Gleadow, . . . 240 Robinson v. M'Cullochs, . 147, 252 Robinson v. Marchant, . . . 346 Robinson v. Stewart, . . . 783 Robinsons v. Middleton, . . 198 Robley v. Brooke, . . 173, 380 Robson V. Earl of Devon, . . 653 Rodgers v. Maw, . . . 274 Eodgers v. Tailors of Edinburgh, . 37 Roger V. Jamieson, 316, 346, 526, 674 Eolfe and the Bank of Australia v. Flower and Co., . . . Ixvi Rooth V. Quin, . . . 248, 811 Rose V. Moore, 234, 237, 358, 526, 543 ~ ~ 71, 142 546 696 Ross V. Young and Others, . 233, 332 Rosse V. Wainman, . . . 497 Routh V. Peach, .... 402 Routh V. Thompson, . . . 240 Rowe V. Wood, . . 107, 387, 584 Rowlands v. Evans, . . . 669 Rowlandson ex parte, ... 53 Rowley v. Adams, . . . 178 Rowley v. Home, . . . 311 Roxburgh, Duke of, v. Swinton, . 583 Roxburgh Road Trs. v. North British Ra. Co., . . . . 436 Royal Bank of Scotland, . . 36 Royal Bank of Scotland v. Assignees of Stein, Smith, and Co., . . 798 Royal Bank of Scotland v. Christie, 678 Royal Bank of Scotland v. Fairholme, 188 Royal Bank of Scotland v. Greenock Bank, ..... 199 Royal Bank of Scotland v. Scott, Smith, and Co., .... 660 Royal British Bank v. Turquand, 205, 207, 217 Royal Exchange v. Vaughan, . 98 Royds u. Fraser, .... 316 Russel V. Austwick, . . . i85 Russel V. Glen, .... 671 Russell V. Earl of Breadalbane, 368, 536, 791 Russell V. Kirk, .... 878 Russell V. M'Nab, . . 270, 422 Russell V. Roberts, . . . 212 Rustrick v. Derbyshire Ra. Co., 822, 828 Rutherford v. Finlayson and Finlayson, 345 Rutherford v. North British Ra. Co., 84 U^Q ex parte, . . . 68,70,72 Sadd V. Maldon and Braintree Ra. Co., 448 Sadler v. Lee, . . .26, 264, 669 St Patrick Assurance Co. v. Brebner, 659 St Thomas Hospital v. Charing Cross Ra. Co., . . . . 471 Salisbury, Marquis of, v. Great Northern Ra. Co., . ■ . . . 446 Salmon v. Padon and Vannan, 270, 422 Salmon v. Todd's Trustees, . . 794 Salomons v. Laing, . . 192, 676 Samuel v. Edinburgh & Glasgow Ra. Co., 603 Samuel and Co. v. Brown, . 880, 400 Sandeman v. Scott, . . . 367 Sanders v. King, .... 401 Sanders v. Monro, . . . 783 Sanderson's case, .... 723 Sandilands v. Marsh, . . 199, 237 Sangster v. Burness, . . . 641 SaviUe v. Robertson, . . . 292 Savin v. Hoylake Ra. Co., . . Ixvii Sawers v. Balgarnie, . . . 795 Sawers v. Tradestown Victualling So- ciety, . . . .48, 66, 810 Saxon Life Assurance Society, 274, 742 Sayer v. Bennet, .... 659 Sayles v. Blane, . . . 148, 163 Sceales v. Wighton, . . . 798 Sclanders v. Kennedy, . . .72, 842 Sclater v. Clyne, 524, 552, 668, 664, 665 Scot V. Ker, 773 Scotland v. Walkinshaw, 345, 524, 625 Scott V. Anderson, . . . 564 Scott V. Bird, .... 400 Scott V. Colburn, .... 218 Scott 11. Edinburgh', Leith, and Gran- ton Ra. Co., . . . . 498 Scott V. Fisher, .... 689 Scott V. Napier, . . . 644, 548 Scott V. North British Ra. Co., 448, 462 Scott V. Selbie, . . . .• 252 Scott V. Stewart, .... 643 Scott and HaU v. Bissett, . 270, 422 Scottish Central Ra. Co. v. "Wedder- burn and Others, ... 37 Scottish Emigration Society v. Borland and Others, . . . 845, 524 Scottish North-Eastern Ra. Co. v. Anderson, . . . 618, 866 Scottish North-Eastern Ra. Co. v. Stewart, .... 440 ScouUar u. Campbell and Co., . 641 Sea Insurance Co. v. Gavin, etc., 537, 540, 541, 546, 625 Sedgwick's case, . . . 409, 410 INDEX OF CASES. xlix Sedgwick ex parte, Seddon v. Connel, Selkrig v. Dunlop, Selwyn v. Harrison, PAGE 414, 730 333 216,'229, 242, 642 218, 413 Semple v. London and Birmingham jRa. Co., . . . 580, 581 Senior v. Metropolitan Ea. Co., . 503 Serrell v. Derbyshire Ra. Co., . 233 Shakle v. Baker, .... 431 Shand v. Henderson, . 441, 563, 571 Shand and Co. v. Winton, . . 799 Shanks v. Thomson, . . . 634 Sharp V. Milligan, . . . 215 Sharp, Fairhe, and Co. v. Garden, 638, 642 Shatly V. Robinson and Mven, . 636 Shaw ex parte,' .... 463 Shaw V. Fisher, . . 147, 164, 353 Shaw V. Holland, . . . 147 Sheffield's ease, . . . 725, 726 Sheffield Gas Co. v. Harrison, 352, 353 Sheffield, Aston, and Manchester Ra. Co. w. Woodcock, 74, 105, 126, 143, 159 Sheppard v. Oxenford, . . 585, 674 Sherwood Loan Society, . . 708 Shiels K.Edinburgh & Glasgow Ra. Co., 863 Shirra v. King, . , . . 252 Shireff v. Wilkes, . . 200, 296, 297 Shortridge v. Bosanquet, . 144, 575 Shotton, Malcolm, and Co. v. M'Neil, 649 Shotts Iron Co. v. Hopkirk, 345, 524, 540, 552 Shrewsbury and Birmingham Ra. Co. v.. London and N.-W. Ra. Co., 205, 439 Shropshire Union Ra. Co. v. Anderson, 165 Siffkin V. Walker, ... 233 Sim V. Hodgert, .... 563 Sime V. Balfour, . 137, 175, 178, 761 Simmons v. Leonard, . . . 667 Simons v. Great Western Ea. Co., 516 Simpson v. Chapman, . . 670, 691 Simpson v. Dennison, 192, 439, 576, 578 Simpson v. Ingham, . . 268, 269 Simpson v. Lancaster and Carlisle Ra. Co., ..... 448 Simpson v. Westminster Palace Hotel Co., .... 205, 576 Sims V. Brutton, .... 255 Sims V. Commercial Ra. Co., . 448 Sinclair v. Mossend Iron Co., . 364 Sinclair v. Staples, . 629, 630, 639 Skerratt v. North Staffordshire Ra. Co., 496 Skip V. Hardwood, . . • 428 Skirving v. Smellie, Slater ex parte. Slater v. Henderson, Slipper V. Stidstone, Smith V. Barlas, . Smith V. Craven, . Smith v. Everett, . 35 277 255 271 251 219, 292 431 d PAGK Smith V. Falconer, . . . 283, 532 Smith V. Goldsworthy, 109, 135, 159, 193 Smith V. Hull Glass Co., . . 208 Smith V. Jamieson, . . 199, 255 Smith V. Jarvis, .... 229 Smith V. Jeyes, . . 573, 660, 815 Smith V. Johnson, . . 116, 234 Smith V. Jones, .... 798 Smith V. Logan, . . . 533, 603 Smith V. Mawhood, ... 19 Smith V. Mules, .... 153 Smith V. North British Ra. Co., . 679 Smith V. Parkes, . . . 141, 663 Smith V. PuUar, . 65, 66, 533, 602, 795 Smith V. Smith, . . . 173, 174 Smith V. Stokes, .... 316 Smith V. Watson, . . . 175 Smith V. Wigley, .... 268 Smith V. Winter, .... 317 Society of Practical Knowledge v. Abbott, . . . 204, 209 Solly V. Forbes, . . . . 276 Solomon V. Medex, . . . 346 Somervail v. Edinburgh Bible Society, 546 SomervaUs v. Redfearn, . . 790 Somerville v. Mstckay, . . . 401 Somerville v. Rowbotham, . . 553 Somes V. Currie, . . .98, 136, 383 Sorley's Trustees v. Graham, 214, 246 Southampton Dock Co. v. Richards, 105, 159, 160 Southampton Steamboat Co. (Limited), Hopkin's case, . . . 715 South Carolina Banku. Case, 200, 202, 234, 555 South-Eastern Ka. Co. v. Hebblewhite, 157 South-Eastem Ra. Co. v. European and American Electric Telegraph Co. ex parte, . . . 518, 674 South Essex Gas Light and Coke Co., in re (31 L. 6. C. H. 293, 2 J. & H. 306), ... . . 219 South Metropolitan Gas Co. v. Marquis of Lothian, .... 363 South Stafford Ra. Co. v. Burnside, 722 South Stafford Ra. Co. v. Hall, 501, 502 South Wales Ra. Co. ex parte, . 470 South Wales Ra. Co. v. Redmond, 205 South Wales Ra. Co. v. Richards, 459, 460, 496 Southern Bank of Scotland, petrs., 587, 674 Snodgrass v. Hair, 317, 372, 673, 678, 770, 780 Spaokman's case, .... 725 Spaokman v. Lattimore, . . 73, 85 Sparrow v. Oxford and Wolverhampton Ra. Co., .... 502 Sparrow v. Oxford and Worcester Ra. Co., . . . 446, 447, 471 INDEX OF CASES. PAGE Spears v. Attorney-General, . 755 Speirs v. Ardrossan Canal Co., 457, 564 Speirs V. Dunlop and Co., . . 781 Speirs V. Royal Bank, . 311, 359 Spence v. Auchie, . . . 792 Spence and Others v. Paterson, . 26 Spence's case, . . . . 722 Spence v. Eadie, .... 783 Spencely v. Greenwood, . . 274 Spencer v. Spencer, . . . 402 Spicer V. James, .... 430 Spottiswood V. Morrison, . . 557 Stables v. Ely, . . . 309, 318 Stainton v. Carron Co., . 402, 410 Stainbank v. Fernley, . . 333, 654 Stalker v. Alton, .... 631 Stalker v. Carmichael, . . . 675 Stalsmidt v. Lett, ... 330 Stamps V. Birmingham Ea. Co., . 448 Standish v. Mayor of Liverpool, . 579 Stanhope's case, . . . 152, 724 Stapley v. London, Brighton, and South Coast Ea. Co., . . Ixvii State Fire Insurance Co., . . 726 Stead V. Salt, . . . 528, 529 Steadman v. Arden, . 82, 356 Steel and Co., petrs., ... 797 Steel and Co. v. Hoome and Co., . 198 Steele v. Midland Ea. Co., . . Ixvii Steigenberger v. Carr, ... 62 Stein V. Calder, .... 229 Stein's Assignees v. M'Clumpha's Trs., 792 Stephen v. Myles, . . 782, 786 Stephen v. Eeynolds, . . . 202 Stephenson and Co. v. Caledonian Ea. Co., .... 576 Stevens v. Cook, . 344 Stevens ex parte, . 470 Stevens v. Guppy, 147 Stevens v. South Devon Ea. Co., 190, 381, 382 383, 577 Stevenson v. Arran Fishing Co., 537 Stevenson v. Campbell, 246 Stevenson v. Duncan, . 409 Stevenson v. Paul, 639 Stevenson v. Wright, . 43 Stevenson and Co. v. Macnair, '20 286 Stewart v. Anglo-Caledonian Gold Mining Co., . 106 Stewart v. Auld, . 782 Stewart v. Bell, . 364 Stewart v. Blackburn, . 577 Stewart v. Cauty, 146 147 Stewart v. Countess of Moray, 364 Stewart v. Forbes, . 136 ,378 ,379 Stewart v. Gibson, 17 Stewart v. Gloag, 336 Stewart v. Lang's Trs., 403 Stewart v. Midland Junction Ea Co., 568 PAGE Stewart v. Scottish Midland Ea. Co., 557 Stewart v. Scottish North-Eastern Ea. Co., .... 436,440 Stewart v. Simpson, . . 666, 667 Stewart v. Stewart, . . 280, 531 Stewart and Co. v. Telfer and Co., 608 Stikeman v. Dawson, . . 28, 165 Stirling v. Edinburgh and Glasgow Ea. Co., 464 Stirling and Dunfermline Ea. Co. v. Edinburgh and Glasgow Ea. Co., 365 Stirling and Sons v. Duncan and Co.., 426 Stirling and Sons v. Stirling and Eobertson, .... 791 Stirling and Robertson v. Stirling and Sons, 639 Stocken v. Dawson, . . 183, 688 Stooker v. Brocklebank, . . 48 Stocker v. Collin, . . . 569 Stocker v. Wedderburn, . . 352 Stokes V. Lewis, .... 410 Stone V. Commercial Ea. Co., 447, 454, 579 Stone V. Marsh, .... 254 Storer v. Great Western Ra. Co., . 495 Stourbridge Canal Co. v. Dudley, 499 Stoveld V. Fade, .... 269 Strachan v. Douglas, . . . 630 Straohan v. Paton, . . . 252 Strangford v. Green, . . . 529 Stratford and Moreton Ea. Co. v. Stratton, . . . 159, 161 Strathmore, Earl of, v. Strathmore Trs., 462 Stray v. Eussel, . . . 146, 147 Street v. Eigby, .... 403 Straffon's Executors' case, in re, 721, 722, 723 Stroud, in re, ... . 461 Struthers (Barr v. M'llwham and Speirs, see Struthers v. Barr), 668 Struthers v. Barr, 135, 377, 378 379, 380 Stuart, petr., .... 783 Stuart V. Bute, . . . 388, 389 Stuart, Lord James, petr., . . 462 Stuart and Fletcher v. M'Gregor and Co., .... 368,426 Stubbs V. Lister, .... 381 Stubley V. London and North-Westem Ea. Co., .... Ixvii Stupart V. Arrowsmith, . . 401 Sturge V. Eastern Counties Ea. Co., 382, 577 Sturrock v. Thorns, 132, 414, 547, 624 Sudlow V. Dutch Renish Ra. Co., . 556 Sumner v. Powell, . . . 690 Sutherland v. Gunn, . . 372, 642 Sutton V. South-Eastern Ea. Co., Ixvii Sutton V. Tatham, . . . 145 INDEX OF CASES. PAGE Swan V. Bank of Scotland, . . 361 Swan ex parte, . . . ■ 148 Swan V. North British Australian Co., 148 Swan V. Steele, . . . 200, 234 Swan's Trs. v. Muirkirk Iron Co., 364 Swansea Dock Co. v. Levien, 109, 124, 158, 167. Swinburne v. Western Bank of Scot- land, 231 Sword V. Cameron, . . . 264 Syme v. Anderson, . . . 635 Taft V. Harrison, . . .142 Talbot's case, .... 288 Tallis V. Tallis, .... 676 Tanner v. Tanner, . . . 166 Tannoch v. Reid, .... 537 Tawney v. Lynn and Ely Ea. Co., 448 Tay Ferry Trusts v. Stewart and Mer^ chant, Taylor, in re. 563 449 24 458, 488 Taylor ex parte, Taylor v. Clemson, Taylor v. Davis, Taylor v. Drummond, . . . 774 Taylor v. Farrie, .... 761 Taylor v. Great Indian Ea. Co., . 148 Taylor v. Hughes, . . . 575 Taylor «. Hunter and Others, . 798' Taylor v. Jones and Latouche, . 166 Taylor v. Kymer, . . . 269 Taylor v. Eundell, . . 888, 389 Taylor v. Shaw, .... 402 Taylor v. Taylor, .... 760 Taylor and Sons v. Taylor, . 375, 573 Telford v. James' Executors, 231, 232, 233 Tempest v. Kilner, . 145, 147 Tennent v. M'Donald, . . 596, 760 Tennant v. Strachan, . . 234 Tennent v. Turner, . . 441, 564 Terrell's case, . . . . 714 Teversham v. Cameron's Coalbrook Co., 414 Thames Haven Dock Co. v. Rose, 109, 158, 207 Thicknesse.i;. Bromilow, . . 229 Thickness v. Lancaster Canal Co., 712 Thom V. North British Bank, 316, 420, 544, 548, 549, 606, 607, 624, 673 Thom V. Stewart, ... 641 Thomas' case, .... 722 Thomas v. Clarke, . . 239, 303 Thomas v. Shillibeer, . . 273, 308 Thomason v. Frere, Thompson v. Wesleyan Newspaper Association, . Thompson v. Brown, . Thompson v. Charnock, 266, 313 231 269 403 PAGE Thompson v. Percival, . 272, 274, 308 Thomson's case, . . . . 725 Thomson v. Bank of Scotland, . 361 Thomson v. Campbell's Trs., . 48, 343 Thomson v. Duncan, . . . 776 Thomson v. FuUarton, 63, 78, 105, 143 Thomson v. Gavin, . . . 639 Thomson v. GiUdson, . . . 553 Thomson «. Johnstone, . 542, 641 Thomson v. LiddellandCo., 232, 541, 558, 627, 642 Thomson v. LyeU, etc., . 688, 694 Thomson u. M'Kailie, . . 17 Thomson v. Monklands Ea. Co., . 604 Thomson v. Shanks, ... 46 Thomson v. Speirs, . . . 310 Thomson v. Stevenson, 270, 271, 422, 587, 674, 752 Thomson v. Universal Salvage Co., 231 Thomson and Co. v. Sharp, . . 372 Thomsons and Co. v. Craig and Hunter, 371 Thorburn v. ElUs, ... 268 Thornton y. Howe, . . 17 Thornton v. Proctor, . . . 410 Thriepland v. Creditors of York Build- ings Co., . . . 762 Tilson v. Warwick Gas Co., . 81 Tink V. Bundle, .... 449 Tisken v. City Gas Co. of Glasgow, 503 Titchfield, Marquis of, v. Glasgow and South-Western Ea. Co., ' . 467 Tittenson v. Peat, ... 402 Todd V. Clyde Trs., . 438, 578, 579 TomHn v. Lawrence, . . . 534 Tooke ei^arte, . . . 159,160 Torphichen, Lord,u. Caledonian Ea. Co., 467 Tothill's case, Ixvi Toulmin v. Copland, . . 388 Towne v. London and Limerick Steam- ship Co., . . . . 569 Townend v. Townend, . . 669, 691 Traquair, Earl of, v. Burrows, 282 Travis v. Milne, . . . 692 Treacher v. Galloway, . . . 282 Tredwin v. Bourne, ... 62 Trinity Hoiise v. Magistrates of Edin- burgh, .... 554 Trotter v. Dores, . . . 544 Troughton v. Hunter, . 309, 573, 575 Troup's case, . . . 217, 412 Trustees of the Harbour of Helensburgh V. Caledonian and Dumbarton Ea. Co., 84 Tulk, Ley, and Co. v. Anderson, . 862 TuUis V. White, .... 641 TuUoch V. Davidson, 331, 334, 385, 336, 859, 863 Tullooh I). Pollock, ... 800 Tunley v. Evans, .... 533 lii INDEX OF CASES. Tuohey v. Great Southern and Western Ea. Co., .... 501 Tupper and Carr v. Rowell and Co., 199, 247, 864 Turnbull v. Allan and Sons, 63, 73, 143, • 144 Turnbull v. Maokie, 199, 216, 229, 232, 249 Turnbull v. Scottish Central Ea. Co., 448 Turnbull v. Smellie, Turner ex parte, . Turner v. Maolaren, Turner v. MoUison, 784 729 428 62, 73, 132, 408 Turner v. Sheffield and Eotherham Ea. Co., Turquand ex parte, Turquand v. Vanderplank, Tweedie v. Seattle, Tyerman v. Smith, 503 61, 355 313 644 452 Union Bank of Calcutta, in re, . 708 United States Bank v. Burney, . 202 University of Glasgow v. Physicians and Surgeons, . . .33, 35, 36 Urie V. Lumsden, .... 729 Usher v. Dauncey, . . . 317 Vance v. East Lancashire Ea. Co., 192, 578 Vane v. -Cobbold, . Van Sandau v. Moore, Venables v. Wood, Vere v. Ashby, Vernon v. Vawdry, Vice V. Anson, Vice V. Fleming, VoUans v. Fletcher, 82 658, 665 51, 65, 66, 293 296 402 . 58, 62, 65 200, 230 82, 356 Vulliamy v. Noble, 59, 254, 311, 683, 691 Waddell u. Gibson, ... 24 Waddell v. Maclaren, . . . 372 Wainwright v. Eamsden, . . 502 Wainwright v. Waterman, . . 684 Walburn v. Ingilby, ... 20 Waldie v. Duke of Eoxburgh, 263, 363 Walker's case, .... 152 Walker v. Bartlett, ... 147 Walker v. Caledonian Ea. Co., . 251 Walker v. Consett, ... 402 Walker v. Davidson, . 807, 360, 680 Walker v. Harris, . . 354, 355 Walker v. Hunter, . . . 646 Walker v. Irvin and Co., . . 641 Walker and Johnston v. Sir W. Forbes 643 376 529, 584 and Co., Walkinshaw v. Adams, Wallace v. Kelsall, Wallace v. Magistrates of St Andrews,' 857 PAGE Wallace v. Plook and Logan, 627, 642 Wallace and Co. v. CampbeU, 173, 249, 830 Wallace, Hamilton, and Co. v. Campbell, 639 Walmsley v. Walmsley, . . 391 Walstab v. Spottiswoode, . 82, 856 Walter's case, . . . 721, 723 Walton ex parte, . . ■ 723 Walworth v. Holt, ... 398 Wansbeck Ea. Co. v. Townsend, . Ixviii Ward V. Londesborough, . . 856 Ward V. Matheson, . . .63, 73 Warden of Dover v. South-Eastern Ea. Co., 488 Wardrop v. Fairholm, . . . 680 Ware v. Grand Junction Water Co., 578 Ware v. Regent's Canal Co., . 502, 503 Warner v. Cunningham, 59, 141, 352, 683 Warren v. Eeid, .... 661 Waterford and Dublin Ea. Co. v. Dal- biac, 167 Waterford and Dublin Ea. Co. v. Pid- oock, 105 Waterford and Dubhn Ea. Co. v. Logan, 672 Waterford and Limerick Ea. Co. v. Kearney, .... 493 Waters v. Taylor, 26, 577,584,659, 660, 667 Watney v. Wells, .... 661 Watson ex parte, . . .24, 57, 58 Watson V. Ayrshire Iron Co., 407, 668 Watson V. Charlemont, . 79, 82, 850 Watson V. Bales, . 153, 154, 167, 576 Watson V. Kidston, . . . 252 Watson V. Neuffert, ... 675 Watson V. Smith, . . . .59, 654 Watson V. Smith and Co., . . 783 Watson V. Spratley, . . . 145 Watson and Co. v. O'Eeilly and Co., 374 Watt V. Doig, .... 748 Watt V. Mitchell, . . . 147, 252 Watts V. Brooks, .... 18 Wauchope, petr., . . . 462, 464 Wauchope v. York Buildings Co., . 374 Waugh V. Carver, . 53, 54, 56, 57, 58 Way V. Kay, etc., . . 644, 549 Weatherly ». Turnbull, 63, 73, 143, 354 Webb, in re, ... 880, 415 Webb V. Manchester and Leeds Ea. Co., .... 448,490 Webster v. Bray, . 186, 183, 358, 379 Webster v. Webster, 59, 318, 431, 682, 691 Wedderburn v. Scottish Central Ea. Co., . 107, 190, 387, 439, 576, 578 Wedderburn v. Wedderburn, 175, 402, 430, 431, 670, 688 Weir V. Falconer, .... 637 Weld V. South-Western Ea. Co., . 446 Welland Ea. Co. v. Blake, . . 556 Wells V. Masterman, . . . • 249 Wells V. Williams, ... 27 INDEX OP CASES. liii Wemyss v. Australian Co. of Edin- burgh, .... 559, 864 "West V. Skip, .... 428 West Cornwall Ea. Co. v. Mowatt, 218 West Cornwall Ea. Co., ' Casandra Wilby v., . . . . 205 West London Ea. Co. v. Bernard, . 160 West of Scotland Malleable Iron Co. v. Bucbanan, . . . 316, 605, 673 Western Bank v. Ayrshire Bank, . 305 Western Bank v. Bairds, . 107, 334, 386 Western Bank v. Douglas, . . 336 Weston V. Corporation of Tailors, . 264 Westropp V. Solomon, . . . 146 Wharton v. May, .... 402 "Wheal Emily Mining Co., in re, . 724 Wheeler v. Van Wart, . 656, 657, 658 Wheldon v. Matthews, ... 311 White V. M'Intyre, . . 292, 293 White V. Spottiswoode, . . 637 White V. Steele, . . . . 117 Whitehaven and Furness Ea. Co. v. Bain, . . . 104, 160, 604 Whitehaven and Furness Ea. Co. v. Macfadyen, . . 36, 554, 606, 860 Whitehead v. Barron, ... 79 Whitehead v. Hughes, . . . 525 Whitehead v. Thompson, . . 561 Whitehead v. Tuokett, ... 198 "Wliitmore ex parte, . . 296, 302 Whittaker v. Howe, . . . 573 Whitle V. Maofarlane, . . 182 Whitwell V. Perrin, . . . 246 Whytlaw v. Coats, . . 380, 666 Wiokham v. Wickham, . . 269 Wightman v. Towuroe, . 327, 691, 692 Wightman v. Watson, ... 53 Wild V. Mihie, .... 666 Wilkie V. Dunlop, ... 24 Wilkie V. Johnstone, ... 66 Wilkie V. Michie, .... 146 Wilkinson v. Fraser, ... 54 Wilkinson v. Lloyd, . . . 147 Willett V. Blanford, . . 669, 670 Willett V. Chambers, . . 249, 254 Willey V. Parrott, ... 82 Williams' case, .... * 742 'Williams ex parte, . 296,302,664 WilUams v. Bingley, . . . 573 Williams v. Great "Western Ea. Co., 506 WilKams v. Keats, . . 58, 310, 318 Wilhams v. Page, .... 208 Williams v. Prince of Wales Life Co., 389 Williams v. Eowlands, . . . 659 Williams v. St George's Harbour Co., 85 Williams v. Williams, . . . 676 Williamson v. Johnson, . . 234 WilMamson v. North British Ea. Co., 107, 190, 387, 575 PAGE Williamson v. White, ... 264 Willis V. Dyson, . . . 230, 248 Willis V. Jernegan, . . . 402 Willison V. Pattison, ... 28 Wills V. Murray, . . . . 1 10 Wilson ex parte, .... 246 Wilson, 387 Wilson V. Alexander, . . . 793 Wilson V. Beveridge, . . . 607 Wilson V. Bruce, . 152, 304, 406, 407 Wilson V. Brunton, . . . 561 Wilson V. Caledonian Ea. Co., 103, 581 Wilson V. Clyde Trustees, . . 438 Wilson V. Curson, ... 81 Wilson V. Ewing and Co., . 623, 641 Wilson V. Glasgow and South- Western Ea. Co., 107, 193, 375, 387, 576, 604, 606. Wilson V. Greenwood. Wilson V. Jobson, . Wilson V. Keating, Wilson V. Kippen, Wilson V. Laidlaw, Wilson V. M'Dougall, Wilson V. Mires, . Wilson V. Moore, . Wilson V. Threshie, Wilson V. Walker, Wilson V. Whitehead, Wilson V. Wilson, 387, 584, 587, 667, 672, 675 537 147 353 543,545, 652^ 624 866, 653 47 213 692 176 145 218, 292 109 Wilson and Co. v. Cunningham and Co., . ... . . 639 Wilson and Co. v. Swing, . . 542 Wilson and Corse v. Gardiner, . 274 Winch V. Birkenhead Ea. Co., 192, 439, 576 Wise ex parte, .... 709 Wishaw Ea. Co. v. Caledonian Ea. Co., 588 Wishaw and Ooltness Ea. Co. v. Dixon, 497 Wishaw & Coltness Ea. Co. v. Stewart's Eepresentatives, . . . 366 Wixon V. Deans, . . . 282 Wixon V. NieoU, . . . 232, 773 Wood V. Argyll, .... 62 Wood V. Braddick, . . . . 583 Wood's Claim (9 W. E. 366, and 10 W. E. 662), . . 213, 219, 742 Wood ex parte, .... 218 Wood V. M'Caul, .... 546 Wood V. North Stafford Ea. Co., . 492 Wood V. Stourbridge Ea. Co., . 601 Wood, James, and Wood v. Downie, 422 Woodside v. Cuthbertson, . ; 246 WooUaston's case, . . . 725 Woolmer ex parte, . . . 730 Woolmer v. Toby, . . . 855 Worcester Corn Exchange Co., in re, 216 219, 288, 413, 536 Wordie v. M'Donald, ... 566 liv INDEX OP CASES. PAGE Worsley v. South Devon Ra. Co., . 446 Worth's case, .... 260 Worth ex parte, . . . 726 Wotherspoon v. Magistrates of Linlith- gow, .... 747, 749 Wight V. Wight, .... 639 Wrexham v. Huddlestone, . 26, 659 Wright V. Arthur, ... 66 Wright V. Gardner's Trs., 152, 310, 407, 689 Wright V. Snowe, ... 24 Wright V. Winter, . . . 795 Wrightson v. Pullar, . . . 317 Wryghte ex parte, . . . 714 Wryghte V. Lindsay, . . . 772 Wylam's Steam Fuel Co. v. Street, 722 Wyld ex parte, .... 709 Wyld V. Hopkins, . . 59, 62, 77, 80 Wynne v. Price, . 147, 148, 164, 353 PAGE Yetts V. Norfolk Ra. Co., . 577 Young V. Brown and Co., . . 362 Young V. Collins, . 316, 317, 674 Young V. Hunter, . . . 296 Young V. Livingston, 543, 557, 566, 567 Young V. Milne, .... 564 Young V. Smart, .... 246 Young, Ross, and Richardson v. Muir, 756, 792 Young's Trs. v. Scott, ... 873 Younger v. Caledonian Ra. Co., . 453 York and North Midland Ra. Co. v. Hudson, 193, 209, 210, 384, 411, 415. York Buildings Co. v. Robertson, . 357 York Buildings Co. v. Ferguson, . 214 York Buildings Co. v. Mathie, . 590 LIST OF AUTHOEITIES WITH THE USUAL ABBREVIATIONS. Abbot Mer. Ship. Abr. Ca. Eq. Ad. Con. . Ad. Torts . Ad. and E. . Alex. Bank. Amb. And. Andr. Annaly Anst. Archb. Ar. . Arch. B. L. Arohb. Part. Arm. M. and 0. Atk. B. C. C. . B. C. E. . Bac. Abr. . Baily B. Bank. I. . Barn. C. . Barn. E. B. Basilicor. Tom. Batten Batt. Beat. Beav. Beaw. Bel. Bell App. . Bell. Arb. . Bell. C. BeU Com. . Bell. D. BeU. Diet. . Belllllust. . Bell. L. Bell. Prin. . , Bendl. or Benl. Benl. and Dal. Bennet Bev. Pro. . Bing. The New Series is cited B. and A. or Barn, and Aid. B. and Ad. or Barn, and Adol. B. and C. or Barn, and Abbot on Merchant Shipping. Abridgment of Oases in Equity. Addison on Contracts. Addison on Torts. Adolphus and Ellis's Reports. as Q. B. Alexander's Digest of the Bankrupt Act. Ambler's Eeports, Chancery. Anderson's Reports, C. P. Andrew's Reports, K. B. Annaly's Reports, K. B. Anstruther's Reports, Exch. Archbold's Law of Arbitration. Archbold's Bankrupt Law. Archbold's Law of Partnership. Armstrong, Macartney, and Ogle's Reports, N. P. Ireland. Atkin's Reports, Chancery. Barnewall and Alderson's Reports, K. B. Barnewall and Adolphus's Reports, K. B. Barnewall and Cresswell's Reports, K. B. Bail Court Cases, Lowndes and Maxwell. Bail Court Reports, Saunders and Cole. Bacon's Abridgment. Baily on Bills. Bankton's Institutes. Barnardiston's Reports, Chancery. Barnardiston's Reports, K. B. Basilioorum, Toma. Batten's Law of Contracts. Batt/s Reports, K. B. Ireland. Beatty's Chancery Reports, Ireland. Beavan's Reports, Rolls Court. Beawe's Lex Mercatoria. Bellewe's Reports, K. B. Bell's Appeal Cases. BeU on Arbitration. Bell's Cases. Bell's Commentaries. BeU's System of Deeds. BeU's Dictionary. Bell's Illustrations. Bell on Leases. BeU's Principles. Benloe's Reports, K. B. Benloe and Dalisen's Reports, C. P. Bennet's Receiver. Beveridge's Forms of Process. Bingham's Reports. Ivi LIST OF AUTHORITIES. Bos. and Pul. N. E. Bing. N. C. Bisset Bl. D. and Osb. Bl. E. Black. W. Black. H.' Blacks. Com Bli. or Bligh BUgh N. S. Br. . B. N. C. B. and P. or Bos. and P. Br. N. 0. Bridg. Bridg. 0. Bro. Stair, Broom Com, Bro. S. Brown Traf, Bro. Supp. Bro. Syn. Brownl. B. and S. Buck Bulst. Bunb. Burge Com. Burr. Burton B. . Byles B. and N, Cald. Oalth. Camp. N. P. Camp. Cit. . C. and K. or Oar. and Kir. C. and P. or Car. and Pa. Cart. Carth. Gary Ch. Gas. . Oliamb. and Pet. Ch. E. Chan. Eu. 1862, Ch. Bills . Chit. Con. . Chitty Com. Ch. Rep. Chitty Car. CI. and Fin. Cod. Jur. Civ. C. Theod. . Code CiT. . Code de Com. Cod. It. Co. Eep. Co. Lit. CoU. Eail. . Coll. C. 0. . Bingham's New Cases. Bisset on Partnership and Joint-stock Companies. Blackham, Dundas, and Osborne's Eeports, N. P. Ireland. Mr Justice Blackstone's Eeports. Sir William Blackstone's Eeports. Henry Blackstone's Eeports. Blackstone's Commentaries. Bligh's Eeports in House of Lords. Bligh's Eeports, New Series. Alexander Bruce's Eeports. Brook's New Oases, K. B. Bosanquet and Puller's Eeports, C. P. Bosanquet and Puller's New Eeports, 0. P. Brooke's New Cases, K. B. Bridgman's Eeports, 0. P. Orlando Bridgman's Eeports, C. P. Brodie's Stair. Broom's Commentaries. Brown on Sale. Brown on the Eailway and Canal TraflSc Act. Brown's Supplement. Brown's Synopsis. Brownlow and Gouldesborough's Reports, 0. P. Best and Smith's Eeports, Q. B. Buck's Eeports in Bankruptcy. Bulstrode's Eeports, K. B. Bunbury's Eeports, Ex. Surge's Commentaries on Colonial and Foreign Law. Burrow's Eeports, K. B. Burton's Law of Bankruptcy. Byles on Bills and Notes. Caldecott's Eeports, K. B. Calthorpe's Eeports, K. B. Campbell's Eeports, N. P. Campbell on Citation and Diligence. Carrington and Kirwan's Eeports, N. P. Carrington and Payne's Eeports, N. P. Carter's Eeports, C. P. Carthew's Eeports, K. B. Gary's Eeports, Chancery. Cases in Chancery. Chambers and Peterson's Law of Eailways. Chancery Reports. Chancery Eules as to Act of 1862. Chitty on Bills. Chitty on Contracts. Chitty on Commerce and Manufactures. Chitty's Eeports, Bail Court. Chitty on the Law of Carriers. Clark and Finnelly's Eeports, House of Lords. Codex Juris Civilis. Codex Theodosiani. Code Civil, or Code Napoleon. Code de Commerce. Oodice Civile, New Italian Code. Coke's Eeports. Coke upon Littleton. Collier's Treatise on Eailway Law. CoUyer, Chancery Cases. LIST OP AUTHORITIES. Ivii OoU. Part, or Coll. . , (yomb. . C. B. or Man. Gr. and S. . 0. B. N. S. Com. St. Ord. Com. Com. Dig. . Con. and Law. Coo. and Al. Cooke Bank. Coop. T. Brougham Cooper Corpus Jur. Civ. or Dig. ; Cowan Stat. Cowp. Cox Rep. . Cox CrabbDig. . Craig Cr. and Ph. Cr. and St. . 0. and J. or Cromp and J. C. and M. or Cromp. and M. C. M. and R. or Cromp, M. and R. Cross Cunn. D. or Dig. . Dalr. Dan. Ch. Pr. Dan. Darl. Pr. . Dav. Day's Pr. . D. and M. . Deac. D. and G. or Deac. and Ch Dean Dean Block. DeG. De G. F. and J. De G. and J. De G. M. and G. De Gex and Sm. Deas and And. Dick. Dirl. Dickson Ev. Dobie Sty. . Domat Doria Bank. Doug. Dow and C. Dow. and Ry. or D andR. Drewry Inj. Drew. Drew, and Sm. Drury Collyer on Partnership. Oomberbach's Reports, K. B. Common Bench Reports, or Manning, Granger, and Scott's Reports. Common Bench Reports, New Series. Commons Standing Orders. Comyn's Reports, K. B. and C. P. Comyn's Digest. Connor and Lawson's Reports, Chancery, Ireland. Cooke and Alcook's Reports, K. B. Ireland. Cooke's Bankruptcy Law, 8th ed. Cooper's Reports, 0. P. Cooper's Reports, Chancery. Corpus Juris Civilis or Digestse. Cowan's Collection of Statutes. Cowper's Reports, K.. B. .Cox's Reports, Chancery. Cox on Joint-stock Companies. Crabb's Digest. Craig, Jus Feudale. Craig and Phillips, Chancery. Craigie and Stewart's Reports, House of Lords. Crompton and Jervis' Reports, Ex. Crompton and Meeson's Reports, Ex. Crompton, Meeson, and Roscoe's Reports, Ex. Cross's Law of Lien. Cunningham's Reports, K. B. Justiniani Digestse. Dalrymple's Decisions. Daniell's Chancery Practice. Daniell's Reports, Ex. Eq. DarHng's Practice. Davy's Reports, Ireland. Davy's Common Law Practice. Davison and Merivale, Q. B. Reports. Deacon's Bankruptcy Cases. Deacon and Chitty's Bankruptcy Reports. Dean on the Effects of "War. Dean on the Law of Blockade. De Gex's Bankruptcy Reports. De Gex, Fisher, and Jones' Reports, Chancery. De Gex and Jones' Reports, Chancery. De Gex, MacNaghten, and Gordon's Reports, Chancery. De Gex and Smale's Reports, Chancery. Deas and Anderson's Reports. Dickens's Reports, Chancery. Dirleton's Decisions. Dickson on Evidence. Dobie's Collection of Styles. Domat's Civil Law. Doria and Macrae's Bankruptcy Law. Douglas's Reports, K. B. Dow and Clark, House of Lords Cases. Dowhng and Ryland's K. B. Reports. Drewry on Injunctions. Drewry's Reports, Chancery. Drewry and Smale's Reports, Chancery. Drury's Reports, Chancery, Ireland. Iviii LIST OP AUTHORITIES. Dr. and Wal. Dr. and War. Duff Duncan's En. Duncan's Man. Dun. or D. . Duranton Durnf. and E. Durie Duvergier Bast Eden Edg. Bdicta Edw. A. R. . El. B. and S. El. andBl. . El. B. and E. El. and El. . Eq. Rep. Ersk. Brsk. Pr. Esp. Evans Traf. Exch. Rep. orWel. H. and G. First Rep. Corp. Com. Fac. Coll. or F. 0. Falc. Far. Ff. . Fifth Rep. Ra. Ca. Fin. Fitz-G. Flan, and K. Fol. Diet, or Diet. F. B. C. . For. Forb. Forester Forsyth Tr. . Fortes. F. and F. . Fount. Fox and S. . Eraser Free. Chy. . Preem. K. B. Fry Contr. . G. and J. Gal. and Dav, Gif. . Gilb. Gilb. R. Gilm. Glassc. Drury and Walsh's Chancery Reports, Ireland. Drury and Warren's Chancery Reports, Ireland. Duff on Conveyancing. Duncan on Entails. Duncan's Manual. Dunlop, Bell, and Murray's Reports. Duranton Droit Francais. Durnford and East on Term Reports, K. B. Durie's Reports. Duvergier, Droit Civil Francais. Bast's Reports. Eden's Reports, Chancery. .Edgar's Reports. Edicts of Justinian. Edwards' Admiralty Reports. EUis, Best, and Smith's Reports, Q. B. Ellis and Blackburn's Reports, Q. B. Ellis, Blackburn, and Ellis' Reports, Q. B. EUis and Ellis' Reports, Q. B. Equity Reports. Erskine's Institutes. Erskine's Principles. Espinasse's Reports or Digest, N. P. Evans on the Railway and Canal Traffic Act. Exchequer Reports, or Welsby, Hurlstone, and Gordon's Reports. First Report of Corporation Commission. Faculty Collection. Falconer's Reports. Farresley (7 Mod. Rep.). Pandectse. Fifth Report on Railway and Canal Bills, 1858. Finch's Reports. Fitz-Gibbon's Reports, K. B. Flanagan and Kelly's Reports, Rolls, Ireland. Foho Dictionary. Fonblanque's Bankruptcy Cases. Forrest's Reports, Ex. Forbes' Decisions. Forester's Reports, Chancery. Forsyth on Trusts. Fortescue's Reports. Poster and Finlayson's Reports, N. P. Fountainhall's Decisions. Fox and Smith's Reports, K. B. Ireland. Fraser on Personal and Domestic Relations. Freeman's Chancery Reports. Freeman's Reports, K. B. Fry on Specific Performance of Contracts, including those of Public Companies. Glyn and Jameson, Bankruptcy Reports. Gale and Davison's Reports, K. B. Giffard's Reports, Chancery. Gilbert's Cases in Law and Equity. Gilbert's Reports. Gilmour's Reports. Glasscock's Reports in all the Courts, Ireland. LIST OP AUTHORITIES. lix Godb. Golds. Gosf. Gow Gow's N. Grant Grant Bank, H. and 0. H. and N. Ha. and Tw. Had. Hag. Adm. Hailes Hare. Hard. Hare or Ha, Harr. Dig. Hay Li. Hayes Hayes and J. Hem. and M Het. H. L. Eep. or Oases Hob. Eep. or Hob. Hodge RaiL Hog. Holland Holt Holt N. P. . Home (Clk.) Hope Hov. Suppl. Hud. and B. Hume Com. Hume Hunter Hut. Ingram's Comp. Inst. Ir. Law and Bq. Ir. Law and Oh. It. Brsk. Ivory Pro. . J. and W. or Jac. and W. Jac. or Jacob James Jar. and Bytbe. Jebb and B. Jebb and S. Jenk. John. John, and H. Jones Bail. . Jones Jones T. and Jones W. Jones W. and T. Godbolt's Reports, K. B. Goldesborough's Reports, K. B. Gosford's Reports. Gow on Partnership. Gow's Nisi Prius Oases. Grant on Corporations. Grant's Law of Banking. Hurlstone and Coltman's Rep. Exch. Hurlstone and Norman's Rep. Bxoh. Hall and Twell's Chancery Reports, i Haddington's Reports. Haggard's Admiralty Reports. Hailes' Decisions. Harcarse's Decisions. Hardre's Reports, Bx. Hare's Reports, Chancery. Harrison's Digest. Hay's Law of Liability. Hayes' Reports, Exchequer, Ireland. Hayes' and Jones' Reports, Exchequer, Ireland. Hemming and Miller, Chancery. Hetley's Reports, 0. P. Clark and Finnelly's House of Lords Reports, New Series. Hobart's Reports, K. B. Hodge's Law of Railways. Hogan's Reports, Rolls, Ireland. Holland's Common Law Procedure Act. Holt's Reports, K. B. Holt's Nisi Prius Reports. Home's Reports. Hope's Reports. Hoveden's Supplement to Vesey Junior's Rep. Ch. Hudson and Brooke's Reports, K. B. Ireland. Hume's Commentaries on Criminal Law. Hume's Decisions. Hunter's Law of Landlord and Tenant. Hutton's Reports, 0. P. Ingram's Treatise on Compensation for Interest in Lands, etc., payable by Public Companies. Institutes of Justinian. Irish Law and Equity Reports. Irish Law and Equity Reports, New Series. Ivory's Erskine's Institutes. Ivory's Forms of Process. Jacob and Walker's Reports, Chancery. Jacob's Reports, Chancery. James's Treatise on Friendly Societies. Jarman and Bythewood's Conveyancing. Jebb and Bourke's Reports, K. B. Ireland. Jebb and Syme's Reports, K. B. Ireland. Jenkins' Reports, Ex. Johnson's Reports, Chancery. Johnson and Hemming's Reports, Chancery. Jones on the Law of Bailments. Jones' Reports, Exch. Ireland. Jones' Reports, K. B. Ix LIST OF AUTHORITIES. Jones and 0. . Jones and Carey's Reports, Exch. Ireland. Jo. and Lat. . Jones and Latouohe's Reports, Chancery, Ireland. Jour. Jut. . . Journal of Jurisprudence. Jur. (Sc). In the present Jurist, Scottish. work it is referred to simply as Jur. . Jur. In the present work it Jurist, English. is referred to as E. Jur. Jur. N. S. In the present Jurist, English, New Series. work it is referred to as E. Jur. N. S . Jur. St. . Juridical Styles. Just. Inst. Or Inst. Just. . Justinian's Institutes. Karnes . E^mes' Decisions. Karnes Eluc. . Kames' Elucidations. Kames Rem. D. . Kames' Remarkable Decisions. Kames Tr. . . Kames' Historical Law Tracts. Kames Eq. . . Kames on Equity. Kay . Kay's Reports, Chancery. Kay and J. . . Kay and Johnson's Reports, Chancery. Keb. . Keble's Reports, K. B. Keen . Keen's Reports, Rolls Court. Kel. . Kelyng's Reports, K. B. Kel. 1, 2, or Kel. CI 1. . Kelynge's Reports, Chancery. KeUw. or Kel. . Keilwey's Reports, K. B. Kent. Comm. . Kent's Commentaries on the Law of the United States. Kilk. . Kilkerran's Decisions. Kin. Bank. . . Kinnear on Bankruptcy. La. or Lane . Lane's Reports, Exchequer. Lat. . Latch's Reports, K. B. L. J. or Law Jour. . Law Journal Reports. L. Mag. . Law Magazine. Law Rec. . . Law Recorder, Irish Reports. Law Rep. . . Law Reports. L. Rev. . Law Review. L. T. . Law Times. Leg. 0. . . Legal Observer. Leon, or Le. Rep. . Leonard's Reports, K. B. ,Les Ord. . . Les Ordonnances 1673, 1681," 1687, generally quoted in full. . Levi's International Law. Levi Int. Com. Lev.' . Levinz's Reports, K. B. Lewin . Lewin on Trusts. Lex Merc. Red. . Lex Mercatoria by Beawes. Ley. . Ley's Reports, K. B. Lindley . Lindley's Law of Partnership. liindley Supp. . Lindley's Supplement. Lit. . Littleton's Reports, C. P. Liver. Ag. . Livermore's Treatise on Agency. L. and Welsh. . Lloyd and Welsby's Commercial Reports. L. M. and P. or L. and M. . Lowndes, Maxwell, and Pollock's Rep. Longf. and T. . Longfield and Townsend's Reports. Long Quinto . Year Book, Pt. 10, K. B. Ld. Ken. . . Lord Kenyon's Reports. Ld. Ray. . . Lord Raymond's Reports. Llo. and Goo. . Lloyd and Good's Reports, Chancery, Ireland. Lo. St. Or. . . Lords' Standing Orders. Lush. Steph. . Lushe's Practice by Stephen. LIST OP AUTHORITIES. Ixi Lut. Lush. Macb. Dig. . M'Ole. M'Cle. and Yo. M'F. P. M'P. Re. . M'P. and Cleg. Mack. Mack. R. L. Maclaren Tr. Macl. and R. Mac. and G. Macph. Macq. H. L. Gas. Madd. Maddox Mai. Man. and G. Man. and Ry. Mar. Marshall's Rail. Co. Marshall's Mar. Ins. Marsh. M. and S. or Mau. and Sel. Mayne Dam. Oomp. M. and W. or Mee. and W. Menzies' Leo. Mer. or Meriv. Mod. Rep. . Montague Part. Mont. B. 0. M. and Ayr. R. Mont, and B. Mont, and Chit. M. and M'A. M. D. and D. Moo. and M. Moo. and R. Mo. . Moore (0. P.) Moo. J. B. . Moo. and P. Moo. and S. More Lee. . More St. . Morr. or M. Mos. Murdoch Bank. Murray or Mur. Myl. and Cr. Myl. and K. Napier Presc. N. Benl. . Nels. N. L. Lutwiche's Reports. Lushington's' Admiralty Reports. Macbrair's Digest. M'Cleland's Reports, Ex. M'Cleland and Young's Reports. Macfarlane, Practice of the Jury Court. Maofarlane's Reports. Macfarlane and Cleghorn on Issues. Mackenzie's Institutions of the Law of Scotland. Mackenzie's Roman Law. Maclaren on Trusts. Maclean and Robinson's Scotch Appeals. Macnaghton and Gordon's Reports, Chancery. Macpherson's Court of Session Cases. Macqueen's Scotch Appeal Cases. Maddock's Reports, Chancery. Maddox's Pirma Burgi. Malyne's Lex Mercatoria. Manning and Granger's Reports, C. P. Manning and Ryland's Reports, K. B. March's Reports, K. B. Marshall on Obligations of Railway Companies considered as Carriers. Marshall on Mariae Insurance. Marshall's Reports, C. P. Maule and Selwyn's Reports, K. B. Mayne's Treatise on Compensation under Lands Clauses Act. Meeson and Welsby's Reports. Menzies on Conyeyancing. Merivale's Reports, Chancery. Modern Reports, K. B. Montague on Partnerships. Montague's Reports, Bankruptcy. Montague and Ayrton's Reports, Bankruptcy. Montague and Bligh's Reports, Bankruptcy. Montague and Chitty's Reports, Bankruptcy. Montague and M'Arthur's Reports, Bankruptcy. Montague, Deacon, and De Gex's Reports, Bankruptcy. Moody and Malkin's Reports, N. P. Moody and Robinson's Reports, N. P. Moore's Reports, K. B. Moore's Common Pleas Reports. J. B. Moore's Reports, C. P. Moore and Payne's Reports, C. P. Moore and Scott's Reports, 0. P. More's Lectures. More's Stair's Institutes. Morrison's Dictionary. Moseley's Reports, Chancery. Murdoch's Law of Bankruptcy. Murray's Jury Court Reports. Mylne and Craig's Reports, Chancery. Mylne and Kames' Reports, Chancery. Napier on Prescription. New Benloe Reports, K. B. Nelson's Reports, Chancery. Nelson's Lutwyche Reports, C. P. Ixii LIST OF AUTHORITIES. N. R. N. R. NeT. and Man. Nev. and P. Nic. Ha. and C. Nortli. Nov. or N. . Noy. 0. Benl. . Orl. Bridgman Ow. n. or 17. Pal. Pand. or Ff. Park's Ins. . Park. Adj. . Par. Pat. Comp. . Pat. App. Cas. Pea. Peak. Ad. Cas. Peak. N. P. C. Penfold . . P. D. or Per. and Dav. PhOl. Com. Phillips Ins. Ph. . PI. Com. . Pol. . Poph. and 2 Poph. Pothier de So. Pothier Obli. Pothier ad Pand. Pr. Falc. . Price or Pr. Pratt's Contr. Pratt's Friend. So. P. W. Q.B. Q. Attach. . Quinti Quinto Rail. C. or Ra. Cas Ca. Ray. T. Reg. Maj. . Rep. Ch. . Rep. Eq. . Rep. Q. A. . Rep. temp. Finch Ridgw. App. Robert. App. Robertson Bank. Ross B. Diet. Ross L. Ross L. C. . or Ra. New Reports. New Reports (Bosanquet and Puller, C. P.). Neville and Manning's Reports, K. B. Neville and Perry's Reports, K. B. NichoU, Hare, and Carrow, Railway Cases. Northington's Reports, Chancery. Novella Juris Civilis. Noy's Reports, K. B. Old.Benloe, C. P. Orlando Bridgman's Reports, C. P. Owen's Reports, K. B. The Digests or Papdects. Palmer's Reports, K. B. Pandectse. Park on Insurance. Parker on Adjudication. Parker's Reports, Ex. Paterson's Compendium of English and Scotch Law. Raton's Appeal Cases. Peake's Reports, N. P. Peake's Additional Cases. Peake's Nisi Prius Cases. Penf old's Law of Rating Railway and other Companies. Perry and Davison's Reports, K. B. Phillimore's Commentaries. PhiUips on Insurance. Phillips' Reports, Chancery. Plowden's Commentaries or Reports, K. B. Pollexfen's Reports, K. B. Popham's Reports, K. B. Pothier de Societe. Pothier on Obligations by Evans. Pothier ad Pandectus. President Falconer's Reports. Price's Reports, Ex. Pratt's Contraband of War. Pratt's Friendly Societies. Peere WiUiam's Rep. Chancery. Queen's Bench Reports, Adolphus and Ellice, New Series. Quoniam Attachianienta. Year Book, 5 Henry v. Railway Cases. Raymond's Reports, K. B. Regiam Majestatem. Reports in Chancery. Gilbert's Reports in Equity. Reports Ump. Queen Anne. Reports by Finch, Chancery. Ridgway's Appeals, Ireland. Robertson's Appeal Cases, House of Lords. Robertson's Handbook of Bankers' Law. Ross's Reports, Bankruptcy. Ross's Bell's Dictionary. Ross's Lectures. Ross's Leading Cases. LIST OF AUTHORITIES. Ixiii Robs L. Ca. Com. or Ross L. C. C. Russel Arb. Russ. Russ. and M. Ry. and M. Salk. Saund. Sau. and Sc. Sav. Savigny Savigny Sys. Say. Sch. and Lef. Scott or Sco. Sco. N. R. Sc. Jut., in this work referred to as Jiir. Sec. Mer. Re. Law Com. S. 0. C. or Sel. Ca. Shand Pr. . S. or S. D. or Sh. Sh. App. . Sh. Bell Com. Sh. Dig. . Sh. and M'L. Shelf. Rail. . Show. Sid. Simon Rail. Ac. Sim. or Sim. N. S. Skin. Sm. and G. Sm. L. C. . Sm. Merc. Law Smith's Rep. Smith Smi. and Bat. Smyth e Sol. Jom'. . Spottis. Stair or St. Stair Stark Stark. N. P. Steph. Com. Story L. U. S. Story B. Exch. Story Con. . Story Ag. . Story Bail. . Story Part. Story Pr. . Stuart Stra. Sty. Sug. v. and P. Sug. P. . Swa. Ad. . Ross's Leading Cases on Commercial Law. Russell on Arbitration. Russell's Reports, Chancery. Russell and Mylne's Reports, Chancery. Ryan and Moody's Reports, N. P. Salkeld's Reports, K. B. Saunders' Reports, K. B. Sause and Scully's Reports, Rolls, Ireland. Savile's Reports, C. P. Savigny on the Roman Law. Savigny's System. Sayers' Reports, K. B. Schoall and Lefroy's Reports, Chancery, Ireland. Scott's Reports, C. P. Scott's New Reports, C. P. Scottish Jurist. Second Mercantile Report of Law Commission. Select Chancery Cases. Shand's Practice. Shaw and Dunlop's Reports. Shaw's Appeals.- Shaw's Bell's Commentaries. Shaw's Digest. Shaw and Maclean's Appeals. Shelford's Law of Railways. Shower's Reports, K. B. Siderfln's Reports, K. B. Simon's Law of Railway Accidents. Simons or Simons's New Series of Reports, Chancery. Skinner's Reports, K. B. Smale and Giffard's Reports, Chancery. Smith's Leading Cases. Smith's Compendium of Mercantile Law. ; Smith's Reparation. Smith's Reports, K. B. Smith and Batty's Reports, K. B. Ireland. Smythe's Reports, 0. P. Ireland. Solicitor's Journal. Spottiswoode's Reports. Stair's Institutions. Stair's Reports. Stark's Treatise on Partnership. Starkie's Reports, N. P. Stephen's Commentaries on the Laws of England. Story's Laws of the United States. Story's Bills of Exchange. Story's Conflict of Laws. Story on Agency. Story on Bailments. Story on Partnership. Story's Promissory-Notes. Stuart, Milne, and Peddie's Reports. Strange's Reports, K. B. Styles' Reports, K. B. Sugden's Vendors. Sugden's Powers. Swabey's Admiralty Reports. Ixiv LIST OP AUTHORITIES. Swans. Taml. Taunt. T. E. or Durn. and East. Th. . Thorns Ja. Fac. Thring Tinw. Tidd P. Toth. Tudor Ca. M. L. or Tudor's Le. Gas. Tudor Cas. Pr. Turn, and R. Tyrw. Tyrw. and G. Ulp. Vaugh. Vent. Vern. Vern. and S. Ves. Ves. Jun. . V. and B. or Ves. and Bea. Vin. Abr. . Vin. Supp. Vin. Inst. . Voet. Wallis Warnk. Com. Wateon Watson Arb. W. R. Westlake Confl. West H. L. West and H. Whart. L. L. Wils. Oh. . Wils. Ex. . Wils. W. and S. App. Wils. Th. . Wight. WiUes Wms. Wm. Rob. . Woobych . Wordsworth Y. B. Yelv. You. Y. and 0. 0. C. Y. and J. or You. and Jer. . Swanston's Reports, Chancery. Tamlyn's Reports, Rolls. Taunton's Reports, C. P. Term Reports, Durnford and East. Thomson on Bills and Notes. Wil. Th. — New Edition by Dove Wilson. Thorns on Judicial Factors. Thring on Joint-stock Companies. Tinwald's Reports. Tidd's Practice. Tothill's Reports, Chancery. Tudor's Leading Cases on Mercantile Law. Tudor's Leading Cases on Real Property. Turner and Russell's Reports, Chancery. Tyrwhitt's Reports, Exchequer, Tyrwhitt and Granger's Reports, Exchequer. Ulpian Fragmenta. Vaughan's Reports, 0. P. Ventris's Reports, K. B. Vernon's Reports, Chancery. Vernon and Soriven's Reports, K. B. Ireland. Vesey's Reports, Chancery. Vesey Junior's Reports, Chancery. Vesey and Beames's Reports, Chancery. Viner's Abridgment. Viner's Supplement. Vinnius Institutiones. Voetius ad Pandectas. Wallis's Reports, Chancery, Ireland. AVarnkoenig's Commentaries. Watson on Partnership. Watson on Arbitration. Weekly Reporter. Westlake's Conflict of Laws. West's Reports, House of Lords. West's Reports, Chancery. Wharton's Law Lexicon. Wilson's Chancery Reports. Wilson's Exchequer Reports. Wilson's Reports, K. B. Wilson and Shaw's Reports, House of Lords. Wilson's Thomson on Bills and Notes. Wightwicke's Reports, Exchequer. Willes's Reports, K. B. and C. P. Williams' Reports, Chancery. William Robinson's New Admiralty Reports. Woolrych on the Law of Ways. Wordsworth on Joint-stock Companies. Year Books. — The initial letter of the king's reign is gene- rally prefixed or added. Sometimes the Y. B. is omitted. Yelverton's Reports, K. B. Younge's Reports, Exchequer. Younge and CoUyer's Chancery Cases. Young and Jervis' Reports, Exchequer. EEEATA. Page 432, note (a), HaU v. HaU, 20 Beav. 139. Page 798, note (c), for 252, read 512. Page 860, note (c), for Crown, read Cruna. Page 188, note (c), for Pro read No. Page 212, note (a), for Monaco's Trs., read Monaco's Creds. v. The Trustee. Page 252, note (a), for Morrin read Morison v. Boswell. Page 252, note (a), for Shirra, etc., read King v. Shirra, 1827, 5 S. 215. Page 501, for Tushey read Tuohey. Page 688, note (J), Struthers is reported as Barr v. Spiers. Page 323, for ' a charge has been given to,' read a decree has been obtained against. Page 281, note (a). Brown v. Bdgley, 1014, read Broom v. Edgley, 1087. Page 657, note (/), for 1 Wilson, read 1 J. and W. 267. OMISSA. Page 272, note (V), Ker v. M'Kechnie, 1845, 7 D. 494. Note (c), Buchanan and Co. v. Adam, 1833, N. S. 762 ; Nisbet v. Taylor's Exrs., 1840, 3 D. 332. At top of page 648 add, ' but not for attaching such as are declared moveable by statute,' Sinclair v. Staples, 1860, 22 D. 600. [ Ixvi ] ADDENDA. Partnership Articles. Construction of provisions creating a right of pre-emption.— iyom/rat/ v. Fothergill, 1866, 1 Law Eep. (Equity) 567. Adoption of Liabilities of an Old Firm hy a New. Rolfe and the Bank of Australasia v. Flower and Co.., 1866, 1 Law Eep. (Judicial Committee Appeals) 27. Powers of Majorities. To lease company property. — Featherstonhaugh v. Lee Moor Porcelain''Co., 1865, 1 Law Eep. (Equity) 818. Wlien a company is formed for working a patent, it is not idtra vires to pur- chase the patent. — British and Foreign Cork Co. (Leifchild's case), 1865, 1 Law Eep. (Equity) 231. Quasi Partnership. Application of the doctrine that agency is a test of the partnership~relation. — Bullen V. Sharp, 1866, 1 Law Eep. (Common Pleas) 86. This case is valuable for the opinions of the judges. Allotment of Shares. Allotment of shares must be made within a reasonable time, otherwise it does not bind the applicant. — Ramsgate Victoria Hotel Co. {Limited) v. Monte- fore, 1866, 1 Law Eep. (Exch.) 109. Repudiation of Contract to become a Shareholder. A person who had been iuduced to take shares in a company on the faith of representations which he afterwards discovered to be false, but who, subse- quently to this discovery, instructed his broker to sell the shares, was found not entitled to avoid the contract, and so escape from the habihties of a contribu- tory in the vrinding up. — Hop and Malt Exchange and Warehouse Co. (ex parte Briggs), 1 Law Eeports (Equity) 483. Who are Contributories. A party who had signed articles of association for twenty-five shares, but had applied for fifty shares and no allotment was made, was found to be a con- tributory for twenty-five shares only. — Llanharry Hxmatite Iron Co. (TothilVs case), 1865, 1 Law Eep. (Chancery Appeals) 85. A party was found to have become a shareholder by offer and acceptance to take shares, and therefore liable to be made a contributory, but not as to four shares for which he had also made an offer, but in the acceptance relative to which a condition of forfeiture was added, which formed a variance of the con- tract, and which variance was not agreed to by payment within the prescribed time. — Leeds Banking Co. {AddineWs case), 1865, 1 Law Rep. (Equity) 225. Executors who accept shares must be put on the list in their own and not m their representative character. — Fearnside and Dean's case, 1865, 85 Law Jour. (Chancery) 75. All agreements with directors whereby a shareholder may by payments or ADDENDA. Ixvii otherwise be relieved from liability to become a contributory are invalid. — Agri- culturalist Cattle Insurance Co. (Stanhope's case), 1 Law Rep. (Chancery Appeals) 161. Winding up. The 165th section of the Companies Act of 1862, which empowers the Court to compel payment by directors and officers of companies in respect of mis- feasance or breach of trust relating to the affairs of the company, does not apply as against the executors of a deceased director. — Re East of England Bank (Feltom's Exrs. case), 1865, 1 Law Rep. (Equity) 219. The Court will not at the instance of contributories interfere with a voluntary winding up under supervision, except where the resolution for winding up voluntarily has been obtained by fraud, or by an inequitable overbearing of the rights of a dissentient minority by improper influence. — Re London and Mer- cantile Discount Co., 1865, 1 Law Rep. (Equity) 277. Remuneration of Officials. A proposal to give large sums to the chairman and other officials of a railway company which had been dissolved by amalgamation was held to be beyond the powers of the company, which still subsisted for the purposes of winding up, and question whether railway companies have power to apply their revenue in giving their servants compensation for loss of office in consideration of past services. — Clouston, etc. v. Edinburgh and Glasgow Ra. Co., 1866, 4 Macph. 207. Meetings of Shareholders. A proposal to vote large sums to officials for long and faithful services held to be business of a nature which could not be entered upon at a half-yearly statutory meeting without special notice. — Clouston, etc. v. Edinburgh and Glas- gow Ra. Co., 1865, 4 Maoph. 207. Lands Clauses Act. To what extent adjacent lands can be regarded as part of a house. The general principle is, that such only are to be so regarded as would pass under a devise or conveyance of the 'house' without further specification. — Steele v. The Midland Ra. Co., 1866, 1 Law Rep. (Equity Appeals) 275. Compensation for injury to lands by railway vibration. Brand v. Hammer- smith and City Ra. Co., 1866, 1 Law Rep. (Queen's Bench) 130. Railway Clauses Act. Level crossings — neghgence in respect to. See Stapley v. London, Brighton, and South Coast Ra. Co., 1865, 1 Law Rep. (Exch.) 21 ; Stubley v. London and North- Western Ra. Co., 1865, 1 Law Rep. (Exch.) 13. Arbitration. In an action against a railway company upon an award of an arbitrator appointed to determine a claim under the Lands Clauses Act, it was pleaded in defence that the award was void by reason of its giving compensation for what was not injuriously affected. It was held on demurrer that the plea was good ; in other words, the relevancy of the defence was sustained. — Beckett v. Midland Ra. Co., 1866, 1 Law Rep. Common Pleas, 241. Private Act. Previous agreement allowed to be equitably pleaded in derogation of. — Savin V. Hoylake Ra. Co., 1865, 1 Law Rep. (Exch.) 9. Bye-laws. Bye-laws wiU be so interpreted as not to bear oppressively on the pubhc, and wiU only be capable of enforcement in so far as their provisions are reasonable. —Jennings v. Great Northern Ra. Co., 1865, 1 Law Rep. (Queen's Bench) 7; Dearden v. Townsend, 1865, 1 Law Rep. (Q. B.) 10. Ixviii ADDENDA. Inequality of Charges. See Baxendale v. London and South-Western Ra. Co., 1866, 1 Law Rep. (Exch.) 137; Sutton v. South-Eastem Ra. Co., 1 Law Rep. (Exch.) 32; Napier V. Glasgow and South- Western Ra. Co., 1865, 4 Macph. 87. Public Burdens. Amount of deduction to which, in relation to poor-rates, a railway company- is entitled in respect of repairs made on the line, etc. — Edinburgh and Glasgow Ra. Co. V. Hall, 1866, 4 Macph. 301. Construction of 5 and 6 Vict. c. 79, iu relation to railway passenger trains duty in the case of cheap trains. — Great Western Ra. Co. and Others v. Attorney- General, 1866, 1 Law Rep. (English Appeals) 1. Cost.) 2 Bell's Com. 625. V. Waddington, 15 John. 57, and 16 (c) Grant on Corporations, p. 5 ; John. 438; O'Mealy v. WiUon, 1 Lindley 78. Camp. 482 ; ex parte Bagleliole, 18 [ 29 ] CHAPTER III. OP PARTNERSHIPS AND CORPORATIONS, AND THEIR DIFFERENTIAL CHARACTERISTICS. The principle of society or association for the purposes of gain assumes in Scotland, as already mentioned, various forms. But among these, two types can be plainly distinguished, to which all Types of the others stand in the relation of intermediate or improved varie- ties, specialized or adapted for particular purposes. These are the mere private partnership on the one hand, and the proper corpora- tion on the other. It is very probable, indeed, that the former is the original type, of which the latter is only a highly improved species. Yet the differential characteristics of both, though less broadly marked in this country than in England, have never been confounded from the remotest period at which we have any traces of the Scottish law of society. A mere firm has always been one thing, and a true corporation another; and notwithstanding the existence of numerous intermediate varieties, none have ever been permitted to assume the characters of the corporation without the sanction of public authority. The importance of obtaining, clear conceptions of these two importance of ... , . distinction primary types oi commercial associations, not only as they are m between part- themselves, but as they differ from each other, will become more corporation. apparent as the work advances ; but it may be sufficient at the outset to instance the following considerations. Questions of difficulty as to the management of companies, and the powers and liabilities of the members, whether inter sese or in questions with the public, often admit of an easy solution, when it is once settled whether the radical type of the society is a partnership or a corporation. But as the superficial appearance of the former often presents in Scotland a delusive similarity to the realities of the latter, it becomes all the 30 PRIVATE PARTNEESHIP. [Book I. more necessary to have the fundamental characteristics sharply defined. There is also reason to believe that the want of clear notions on this subject has deprived the Scottish lawyer of much valuable light which English law would have cast on his own system, or has even converted that light into a source of confusion and error. The remainder of the present chapter will accordingly be occu- pied with an examination of the leading characteristics of these two types of association. PRIVATE PARTNERSHIP. It is always difficult, and often dangerous, to give rigid definitions of legal terms ; and even when the definition is open to no other objection, it is generally found to be of little practical utility. Numerous definitions have been given of partnership, many of which are remarkable for 'their elegance and apparent simplicity ; few or none for elucidating the nature and effects of the contract. Without attempting to define, we shall endeavour to describe as briefly as possible the nature of the relation as it is understood in the law of Scotland. General Partnership is a voluntary association of two (a) or more persons description of , i i- i i ■ i . i • j- c partnership. to carry on some lawful busmess or undertakmg tor purposes oi mer- cantile gain. All the members are bound to further the interests of the association to the best of their ability, and all of them are in the general case required to contribute goods, money, skill, or industry. The partnership itself forms a quasi persona in law, so that it may contract the relations of debtor and creditor, not only with the world, but with its own members. Within the sphere of its line of business its members are its implied agents, and they stand to the public as sureties for its debts; so that as soon as these have been duly constituted, the members may be proceeded against singuli in solidum to the utmost of their means and estate. Among themselves they are always entitled to some share of the profit, and are liable for some part of the loss ; but the proportions are regu- lated by the terms of the agreement. (a) Nairn v. Sir Will. Forbes and Co., 1795, 2 Bell's Com. 625, n. 1 ; lieid T. Chalmers, 1828, 6 S. 1120. Chap. III.] PRIVATE PARTNERSHIP. 31 The distinctive or central feature of the Scottish partnership is Scottish theory of partnership. that it constitutes a quasi persona, of which the members are agents and sureties, — a principle which exactly realizes the notion of a firm entertained by mercantile men both in this country and in England. This principle has everything to recommend it on the score of sim- plicity and convenience ; and it has accordingly been adopted by the Legislature in the English and British Eegistration Acts, of which it forms the basis and theory. While this is the Scottish theory of a partnership, that adopted English theory . .. AT 1 °^ partnership. in the law of England is entirely different. Accordmg to that system, the firm has no existence separate from the units of which it is at any given time composed. Hence it can neither possess rights nor incur obligations distinct from those of its members ; nor can the relations of debtor and creditor subsist between it and them. In suits by or against the firm, all the partners must be made plaintiffs or defendants ; and as this requirement cannot be complied with in actions between the firm and its members, it has often been found that justice could only be obtained by dissolution. These consequences of the non-recognition of the quasi person Consequences of the firm have, it is true, been somewhat modified in later times theory. by courts of equity and bankruptcy ; but they have always been rigidly enforced at common law, and so pervade the English system as to render the Scottish lawyer justly suspicious of any decision in which it is possible they may have formed an element. But while the law of Scotland recognises a distinct quasi person Difference in a private copartnery, it is careful not to confound this legal nerships and abstraction with the proper person of a corporation. Hence a ""'^p"''^ '°''^' private copartnery, however large, is no more entitled by the law of Scotland than by that of England to hold property, to act or transact, or to sue or be sued in a corporate name ; but in these and similar cases, the names of some, though not generally all, of the partners must appear in conjunction with, or as forming part of, the name of the quasi person, — thus exhibiting the individuality of the partners as well as the aggregation of the firm. As partnerships are created by the mere will of their members. Dissolution of they are dependent on that will for their continued existence, and ^^^ "^^^ ^^^' do not, like corporations, possess the element of endless duration. 32 CORPOKATIONS. [Book I. CORPORATIONS. General obser- vations. Similarity of English and Scotch law. These associations, being the creations not of private will but of public authority, fall to be regulated rather by the constitutional laws of the empire than by the systems of private or municipal law. When they are the creatures of statute, they possess any privileges amounting to aggression or monopoly which the Legislature, in the plenitude of its power, may choose to confer ; nor can these be in any respect limited by the usages of the common law. When, again, they owe their origin to prerogative, the rights and privileges they enjoy can never exceed what the principles of the constitution empower the Crown to confer. In considering, therefore, the law of corporations, a distinction must be made between the practice of remoter times, and what must be held to be law since the constitution has settled into its existing form. Corporations may, it is true, continue to enjoy privileges of the most invidious nature conferred on them by competent authority in remote ages, until deprived of them by Act of ParHament ; but when it is asked what privileges can now be conferred otherwise than by the Legislature, regard must be had simply to the existing state of the constitution, and precedents prior to the Revolution are of no importance whatever. These considerations lead to the inference that, apart from special legislation, the existing law of corporations is at the present day substantially the same in Scotland as in England. Exclusive pri- vileges, aggressive powers, the right of framing bye-laws binding on the public, and even what are termed the naturalia of a corpo- ration, have all a tendency to affect more or less directly the liberty of the subject, or the general rights of the community. Now it cannot be supposed, a priori, that the law regulating the creation or management of associations vested with rights and privileges of this kind should differ in England and Scotland. Such an assump- tion would infer a difference in constitutional law ; and therefore we may reasonably conclude, that whatever anomalies the old law of Scotland might exhibit in this respect prior to the Union, they have long since ceased to exist either by disuse or by legislative action. Chap. III.] CORPORATIONS. 33 The substantial identity of the English and Scottish law of similarity of corporations is strongly evidenced by their respective histories. Both may be traced back to a period when the laws of the two countries were extremely similar (a). In both, corporations could originally be erected only by the Legislature, or, within certain limits, by the royal authority (5). In both, this power came to be assumed by powerful subjects, as feudalism culmi- nated in the appearance of extensive palatinates (c). In both, the Sovereign made similar attempts to do by prerogative what could only be done by Act of Parliament — investing corporations with monopolies and exclusive privileges (d) ; authorizing indi- viduals or corporations to erect other corporations (e) ; empower- ing corporations to make bye-laws, binding not only on their own members, but on the public (/). In both, these irregularities and usurpations came ultimately to be resisted, and were brought to an end either by legislative action, or by the silent but resist- less pressure of constitutional government. In Scotland, their disappearance was slower and less marked, because the shade of a despotic government, which received its death-blow at the Union, still continued to haunt our tribunals to a much later period. The principles of corporation law have never in Scotland been scotch elaborated by the same endless variety of application, nor sifted '™*'^°"'"^'^- with the same minute accuracy of research, as in England. Hence the existing materials available for ascertaining the Scottish law on this subject are far more meagre than could be desired ; and much remains in this country shadowy and indistinct, which has long since in England assumed clearness and precision, by the assiduity (a) EegiamMaj. Quoniam Attachia- First Report of Corporation Com. menta ; Ersk. i. 1, 33. App. 1511. (&) Year-B. 49 Edw. ni. fol. 4, per (d) See stat. 1641, c. 76 ; 1 Bell's Candish, J. ; Com. Dig. Franchise, Com. 109 ; Grant on Corp. 34. F. 2 ; Madox Firma. Burg. 26 ; Ersk. (e) ' Seals of Cause,'' Ersk. i. 7, 1. 7, 64. 64, Ivory's note; BeU's Prin. s. 2183 ; (c) Erections of corporate bodies by Ross's Bell's Diet. 744 ; Grant on Lords of Regality, Ersk. i. 4, 30 ; and Corp. 12. by Lords of Palatinate, ujU 1 T. R. 582 ; (/) See University of Glasgow v. and Goodyer v. Shaw, Styl. 298. See Physicians and Surgeons, 1840, 1 Rob. Grant on Corp. pp. 11 et seq. ; see also App. 397 ; Grant on Corp. 76-7. 34 CORPORATIONS. [Book I. Mercantile corporatioiis. Creation of corporationB. Royal charter and special act. Seals of cause. of the tribunals in working out and applying the maxims of the constitutional law. Yet the few and scattered dicta of our insti- tutional writers, coupled with the decisions in reported cases, can leave no doubt in the mind of the impartial inquirer, that, as might be expected, the outline and general principles and spirit of the Scottish and English systems are identical. In unimportant de- tails, in technical phraseology, in manner of remedy, differences of course present themselves. But in all other respects they seem to differ no further than any two systems will differ, where, principles and spirit being identical, the one has carried them out by logical sequence to their necessary results in an immense variety of practical details, while the other, labouring in a more circumscribed field, has hitherto left much of this process unac- complished. These observations apply principally to corporations aggre- gate; and are more especially applicable to corporations of this kind formed for the purposes of gain, which alone fall within the limits of this treatise. When understood with these limitations, their accuracy would seem well established ; for whatever differ- ences may be conceived to exist between the English and Scottish laws as applicable to corporations erected for municipal, legal, scholastic, or social purposes, no differences seem discoverable in the law applicable to incorporated joint-stock companies beyond technical details, phraseology, or modes of remedy. A corporation is a body politic created by public authority for special purposes, and endued with certain capacities, in virtue of which it is in contemplation of law a proper person, capable in many respepts of willing and acting like an individual. In modern times, corporations can be constituted in one of two ways only, — viz. by charter from the Crown, or by Act of Parlia- ment. Formerly, both in England and Scotland, the Crown was in use to delegate its powers to certain of the nobility to erect cor- porations ; but this practice, as being obviously incompatible with pubhc pplicy, has long since been abandoned. It was also usual to empower royal burghs, universities, and the like, in their charters of erection, to constitute subordinate corporations. This in Scot- land was done by a ' seal of cause' But for similar reasons this custom has long since gone into complete desuetude, and could not Chap. III.] CORPORATIONS. 35 now be competently exercised (a). Corporations are erected by the Legislature either directly or indirectly, — directly by special act, indirectly by public general statutes, which confer the benefits of General incorporation on such associations as comply with their provisions. Of this the Registration Acts may be instanced as examples. Corporations are also sometimes erected by the joint authority both of the Legislature and the Crown, — as, e.g., where the Crown grants a charter under direct authority of a statute (b). Many corporations now exist whose instruments of erection are Prescription. no longer extant. In such cases they are sometimes said to exist by prescription (c). There is, however, an inaccuracy of theory lurking in this statement. No public right can ever be acquired by usurpation, however long continued. It is more correct to say, that where a body is found exercising the powers and privileges of a corporation time out of mind, the law presumes that it had originally been duly incorporated by competent authority, though the instrument has since fallen aside (d). Corporations are also said to exist by implication. Thus a implication. body constituted by proper authority may be held to be a cor- poration, though its instrument of formation does not bear this per expressum, if the purposes for which it was formed cannot be carried into effect without implication of the corporate cha- racter (e). Corporations are either sole or aggregate. Corporations sole Corporations- reside in and infer a perpetual succession of single persons. The aggregate. most familiar examples of these in the law of Scotland are the Sovereign, the minister of a parish, and some public officials (/). Corporations aggregate, sometimes also, though improperly, styled communities, include a number of persons known as the corporators (a) Ross's Bell's Diet. 744; Bell's .Dempster y. Masters and Sea. of Dun- Prin. 2183 ; Brown's Synopsis 315, dee, 1831, 9 S. 313, and authorities 404 ; M. 2007 ; Mowat v. Tailors of there quoted ; Skirving v. Smellie, Aberdeen, 1825, 4 S. 53 ; supra, p. 33 ; 1803, M. 10921 ; and More's Lect. 212. Grant on Corp. 12. (e) Jefferys v. Gurr, 2 B. and Ad. (6) Governor and Company of the 841; Att.-Gen. v. Davy, 2 Atk. 212; Bank of England, 5 W. and M. c. 20, University of Glasgow v. Phys. and charter dated July 27, 1694; Royal Sur., 1840, 1 Rob. App. 397. See Bank of Scotland, 1727. Grant on Corp. 6. (c) Grant on Corp. 6. (/) Shaw's Bell's Prin. 2176 ; Grant (d) Shaw's Bell's Prin. s. 2177 ; on Corp. 6. 36 CORPORATIONS. [Book I. Corporate name. Seal. Oorporation property. or members, and often, in trading corporations, as the shareholders. It is said in England, that a corporation aggregate may consist of two members only (a). But it is very doubtful if this is law in Scotland. Without three the corporate will cannot be expressed by a majority ; hence the maxim of the civilians, Tres faoiunt col- legium (&), a principle apparently recognised in the law of Scot- land (c). Corporations sole and corporations aggregate are en- tirely distinct from each other. A corporation sole cannot become a corporation aggregate by assuming additional members ; nor can a corporation aggregate become a corporation sole by diminution of numbers (d). A corporation ought to possess a name under which it does all corporate acts, and in which it sues and is sued, in the absence of a provision to do so in the name of an official (e). The possession of such a name is strong evidence of the corporate character, and is conferred by the charter or act of incorporation. The want of this will not, however, in Scotland be fatal to an old society claiming corporate privileges (/) ; it may be acquired by reputation (g) apparently even in England. The right to possess a common seal by which to authenticate their deeds, conveyances, acquittances, etc., is one of the naturalia of a corporation (h). As this mode of authentication has now fallen in Scotland into great disuse, the privilege is of little import- ance. Its use has, however, of late years been rendered imperative in some instances by Act of Parliament (i). Corporations, being in law proper persons, are entitled to hold not only moveables, but lands, in the corporate name — in which name also they are infeft. The members have no right in the corporate property, either joint or several. It is vested solely and exclusively in the person of the corporation, and cannot be attached (a) Grant on Corp. 48. (6) Dig. 1. 50, t. IB, de verb, signif. 85. (c) See Chapter on Suing and being Sued, and Rankeillar v. Mag., of St Andrews, 1693, 4 Brown's Sup. 64 ; London and Edinburgh Shipping Co., 1841, 3 D. 1045. (d) Anderson v. Campbell, 1786 (Eloh. Jur. No. 9), wasaoaseof circum- stances, and is of doubtful authority. (c) Whitehaven and Furness Ra., 1848, 10 J). 1127. See Grant on Corp. 50. (/) University of Qlasg. v. Fac. of Phys. and Sur., supra. (j) Vin. Abr. Corporations, E. pi. 14 ; Ayray^s case, 3 Salk. 108. {h) Brsk. i. 7, 64. (i) Companies Clauses Act, and some special acts. Chap. III.] COKPORATIONS. 37 in any way whatever for the debts of the corporators (a). Such as contract with the corporation must look for payment solely to this property, or its proceeds, as the case may be. The members are in Limited liability. no sense its sureties or guarantees, as in the case or a partnership, unless they choose voluntarily to assume that character. So deeply rooted is this principle in the law, that it required a special statute to enable the Crown to erect corporations in which the members should individually incur liability for the acts or debts of the corporation (6). It has sometimes been thought that companies erected into corporations by royal charter in Scotland do not possess limited liability. Such a view is entirely opposed to the theory of corporations, can be supported by no decided case, and seems to have arisen from confusing the proper person of a cor- poration with the quasi person of a firm (c). The will of the majority, duly expressed at a meeting legally Will of constituted, and acting within the sphere and in accordance with the provisions of the constitution, is the will of the corporation, and binds dissenting members (d). Corporations have the power of making bye-laws, where this is Bye-laws. necessary for accomplishing the purposes of formation. These laws bind the members and servants of the corporation (e). To render them binding on the pubhc, would now seem to require the intervention of the Legislature, either directly by special act, or indirectly by statute in aid of a charter. The members are not in general the agents of the corporation ; Officials. nor have they, as in partnerships, any implied authority to bind it. The corporate affairs are carried on by officials specially charged with that duty; and their number, character, and mode of elec- tion are in general very specifically prescribed in the instrument of erection. Endurance in perpetual succession appears to be of the essence Perpetual succession. (a) Sh. Bell's Prin. s. 2178 ; Brsk. Prin. 2178 ; Grant on Corp. 68 ; supra. Rodgers v. Tailors of Edinhurgh^ (b) Sh. Bell's Prin. s. 2177. See 1842, 5 D. 295; Balfour y. Edin. Lindley 309. North. Ra., 1848, 10 D. 1240 ; Scottish (c) 1 More's Lectures 212. Centr. Ra., 1848, 10 D. 1317. (d) Hill T. Fairweather, 1823, 2 S. (e) Ersk. i. 7, 64 ; Hill v. Fair- 491; Gray v. Smith, 1836, 14 S. weather, supra; Corstorphiney. 7'rades 1062; Howden v. Corp. of Gold- of Calton, 1834,12 S. 397; Gray v. smiths, 1840, 2 D. 996 ; Sh. Bell's Smith, supra. 38 CORPORATIONS. [Book I. Natvjralia of coj-porations. Special priyileges. Dissolution. of a corporation. The ideal being constituting the person of the corporation is a continuous identity: the composing units vanish, and are succeeded by others, but the legal entity remains ; just as, in a living organism, the substance is continually wearing out and being renewed, while the identity of the individual continues uninterrupted and unimpaired. This is so necessary an attribute of a corporation, that without an Act of Parliament the Crown appears incapable of fixing a term of duration in the incorporating charter (a). ' There are certain incidents so natural to corporations, that the incorporating instrument is held to include them without express mention. These appear to be : endurance in perpetual succession ; the power of acting and transacting, suing and being sued, in the corporate name ; the right of holding property ; the power of ex- pressing the corporate will by majorities ; that of making internal regulations for its members ; and limited liabihty. There are, again, certain rights and privileges which are not naturalia of a corporation, but which, when necessary to be possessed, can be obtained only by statute. Among these may be mentioned aggressive powers, monopolies and exclusive privileges, jurisdiction, and the exercise of any rights or powers trenching on the common law. Corporations being created not by the will of their members, but by public authority, cannot be dissolved, like partnership, by the resolution of their members. To effect a dissolution, a surrender of the corporate rights, when these were created by charter, must be duly made to and accepted by the Crown ; unless an Act of Parliament is obtained, which will operate a dissolution in what- ever way the corporation may have been erected. Corporations may, however, be extinguished by becoming incapable of fulfilling the purposes of their institution, e.g. by the total loss of their mem- bership, or by becoming reduced to so small a number as to be incapable of effective management; and by forfeiture, in conse- quence of abuse of powers, or breach of the implied conditions of their erection. This last mode, however, requires the intervention of the tribunals, to declare the forfeiture and to wind up and dissolve the corporation. A corporation may also be dissolved by mere (a) Grant on Corp. 30 ; 1 Vict. c. 73, s. 29. Chap. III.] CORPORATIONS. 39 expiration of time, if by Act of Parliament a limited period has been set to its duration (a). On dissolution, the donors of the corporation property are Consequences • 1 1 • • • 1 c 1 c 1 • 1 • • T r^ °^ dissolution. entitled to its resumption, in default of which it vests in the Crown. The creditors are, however, generally entitled to insist for sale and distribution in payment of their claims. But in no case can they proceed against the members as such for its debts or obligations, however inadequate the corporation funds may prove for their liquidation (b). Having thus given a general view of the simple partnership and Partnerships o o o r r r and oorpora- the proper corporation respectively, we shall conclude by pointing tions con- out the salient points of difference. A partnership is created by the mere will of the partners ; a corporation by public authority. A corporation possesses a proper person, a partnership a quasi person. The former holds property, acts and transacts, sues and is sued, in the corporate name ; the latter, by the intervention of its partners. Limited liability is unattainable by a mere partnership ; it is the natural attribute of a corporation. A partnership terminates at the will of its members, generally at that of a single partner, or by his death ; a corporation endures in perpetual succession, and can be dissolved only by public authority, by inanition from loss of its com- ponent parts, or by elapse of the prescribed period of its existence. (a) See Grant on Corp. 295 ; Sh. Bell's Prin. s. 2179. (J) See More's Leot. 212. [ 40 ] CHAPTER IV. OF THE FORMS ASSUMED IN SCOTLAND BY ASSOCIATIONS CONSTITUTED FOR PECUNIARY PROFIT. General classification. Associations for the purposes of gain assume in Scotland a great variety of forms suitable to the nature of the undertakings with which they are concerned ; yet, in so far as regards their legal character and import, they may be conveniently classed as follows: — 1. Private partnerships, including common law companies. 2. Companies erected by public authority, but not vested with full corporation privileges. 3. Proper corporations. 4. Proper corporations with peculiar privileges and powers. I. PRIVATE PARTNERSHIPS AND COMMON LAW COMPAOTES. Private firms. These are formed at common law by the mere will of the members, and may in like manner be dissolved. Of private part- nerships or firms we have already given a general description. They consist of few members, and realize the idea of the Roman Societas. Where the partners are associated for a single adventure or transaction, the copartnery is sometimes called a joint adventure, and has been treated of by some writers as a separate contract. But after mature consideration, we have come to be of opinion that there is no good reason for maintaining this distinction, and that, so far from elucidating, it tends rather to obscure the legal principles which necessarily regulate the partnership relation, whether it is applied to a single adventure or to a series of trans- actions (a). (a) Per Lord Eldon in Davidson's Appeal, 1815, 3 Dow 218; 2 Bell's Com. 649. Chap. IV.] COMPANIES. 41 Common law companies are essentially partnerships, and differ Common law companies. from private firms in so far only as the rules applicable to the latter are necessarily modified and adapted to meet the requirements of associations with a numerous and fluctuating membership. This is so much the case, that it is not always easy to determine whether a given association should be designated as a partnership or as a company. It may, however, be taken as a general rule, that a partnership deserves the name of a company when it possesses most of the following characteristics : When it is managed by directors, trustees, managers, or other special ofiicers, and not by the whole body of partners ; when the shares are of equal value, and transfer- able at the will of the holder ; and when the profits and losses are apportioned with reference to the shares, and not to the partners. Where common law companies differ from partnerships, they Common law approach the nature of corporations ; and in the law of Scotland, approach the it may be said that they stand midway between the two, being somewhat more than mere partnerships, and somewhat less than corporations. It is their occupying this intermediate and debate- able ground that has made them the subject of many legal ques- tions. Under the denomination of common law companies, it is intended to comprehend all such associations as, though possessing a more numerous membership than private firms, exist merely at common law, and possess neither the privileges of complete cor- porations by charter or special act, nor such more restricted rights as may be enjoyed by letters patent or registration, — all such associations, in fact, as are not included under the three remaining classes. Since common law companies are fundamentally part- nerships, they will be throughout this work treated of under one category ; but care will be taken to point out in the proper places such distinctions in their management and legal consequences as shall be found to exist. II. COMPANIES ERECTED BY PUBLIC AUTHOEITY, BUT NOT VESTED WITH FULL COEPOEATION PEIVILE&ES. Under this category are included companies formed under the imperfect or Eegistration Act of 1862, but without limited liability ; companies Tons.''"'^"™" formed under the Letters Patent Act, 1837, 1 Vict. c. 73, without 42 CORPORATIONS. [Book I. the full corporate privileges ; and companies whose special act withholds from them some of the naturalia of a corporation. They are generally termed qimsi corporations. III. PROPER CORPORATIONS. Proper cor- porations. A general description has been already given of such associa- tions. They can only be formed by charter or special act. IV. CORPORATIONS WITH PECULIAR PRIVILEGES AND AGGRESSIVE POWERS. Privileged corporations. Such corporations can only be created by Act of Parliament, and are now generally formed by combination of their special acts with the provisions of one or more of the Consolidation Acts, under which, by their special acts, they are brought. The Consolidation Acts have been enumerated in the Introduction (p. 11). Order of treatment. It was originally intended to treat of each of these four classes seriatim, exhausting the one before entering on the other. But as the work advanced, it was found that this method would involve much repetition, and a continual reference to earlier chapters ; and that the important object of showing how the fundamental prin- ciples of the two primary types — viz. the simple partnership and the corporation — have been by legislative aid expanded, limited, or supplemented, so as to meet the requirements of every kind of undertaking, could not in this manner be satisfactorily attained. What is deemed a more commodious method has accordingly been adopted. The four classes will be examined under each division of the subject, carrying them on abreast from their formation to their dissolution, and thus, while avoiding repetition, rendering the one illustrative of the other. ' [ 43 ] CHAPTER V. FORMATION OP THE PARTNERSHIP RELATION IN PRIVATE COPARTNERIES AND COMMON LAW COMPANIES. Paetnekship is one of those contracts which do not require A¥ritmgnot T- necessary. writing for their constitution. It is constituted by mere consent, and may be proved not only by written contract, but by facts and circumstances (a). In all cases, however, when practicable, the contract should be Writing '•'■'•' _ important. reduced to writing; for, though this will not in general avail in questions with the public, it will obviate many difficulties which may otherwise arise in determining the rights, duties, and liabilities of the partners among themselves. The written contract of part- nership generally assumes the form of a contract or of partnership articles. Such documents are at best only limitatory of or auxiliary to the common law, which is always ready to break in when it has not been effectually excluded by contract. What ought to be contained in them will therefore fall to be considered at a subse- quent part of this work, after the operation and effect of the rules of the common law have been explained. When the contract of partnership has been embodied in a Difficulties . ... when the document properly authenticated, the fact that the relation exists, relation has to „ . 1 » . 11 1 1 beinfen-ed as well as the date of its commencement, can generally be deter- from facts and mined without much difficulty ; but when, as frequently happens, the existence of the partnership relation has to be inferred from facts and circumstances, the problem becomes very complicated and embarrassing. (a) 2 BeU's Com. 622 ; 1 More's Leot. 1830, 9 S. 90, aff. 5 W. and S. 468 ; 198. Stevenson v. Wright, 1687, M. Livingston v. Gordon, 1755, M. 14551. 12732 ; Logan v. Brown, 1824, 3 S. 15 ; Such also was the Roman law. Dig. lib. Thomson v. Campbell's Trustees, 1831, xvii. t. 2, s. 4; Story on Part. s. 86-7. 5 W. and S. 16 ; M'Kinlay v. Gillon, It is so also in English law, Coll. p. 3. circumstances. 44 PRIVATE PARTNERSHIP. [Book I. No test of the partnership relation. No practical definition. These difficulties will be understood, when it is borne in mind that the inquiry is not merely as to the date of the commencement or the termination of a particular firm or company, but frequently extends to such questions as the following : Are A. and B. partners of a particular concern ? When did they become so, or when did they cease to be so ? Does the partnership relation exist between A. and B., though neither is in connection with any ostensible company or firm? Are B. and C. dormant partners, though admittedly they do not appear to take any concern in the business of the firm? Furthermore, persons who have not con- stituted partnership inter se, not unfrequently find themselves in- volved in liabilities to the public to the same effect and extent as if they had ; and this state of matters is often denominated quasi partnership, — a phraseology which, though it may be con- ducive to brevity of expression, is often productive of great confusion of thought. The complication and embarrassment to which these various circumstances have given birth are familiar to every student of the law of partnership ; and it must be admitted that neither in England nor Scotland have the courts succeeded in laying down practical rules for their effectual removal. In one sense, it is no doubt a question of fact to be ascertained by a jury or its equivalents, whether, in the absence of a written contract or equivalent admission, the partnership relation is estab- lished by the facts and circumstances of the case. But this pre- supposes the possibility of distinctly ascertaining what is of the essence of the contract, or at least of fixing upon some test which shall serve as a means of deciding in all cases whether the facts, as established, are to be taken as evidence of the existence of partnership. The difficulty as to the law of the question would be removed, if the Legislature had arbitrarily defined what constitutes partnership, or if lawyers could have fixed on a definition of that contract at once exhaustive and practical. But such has not been the case. The Legislature has not as yet spoken authoritatively ; and no definition has ever been given of partnership, which is either sufficiently exhaustive or sufficiently exclusive to be adopted as a practical rule. In the absence of a practical definition, the tribunals have Chap. V.] PRIVATE PARTNERSHIP. 45 endeavoured to meet the difficulty by fixing on certain elements, the presence or absence of which has been supposed to furnish a test of the partnership relation. Sharing of profits, contribution to Various tests losses, mutual agency, etc., have been all assumed as tests of this kind, and have been more or less in vogue at different periods. When judiciously applied, they are undoubtedly of excellent use in the interpretation of evidence ; but their application is often accompanied with great embarrassment, and they cannot be taken as unfailing tests. The reason of this becomes apparent when the nature of part- Partnership nership is considered. It is not a simple contract, but one which contract. combines in itself the principles of many contracts, e.g. agency, suretyship, guarantee, co-ownership, loan, etc., all of them form- ing elements which receive more or less prominence, according to the nature and purposes for which the society is formed. Now, sharing of profits, contribution to losses, agency express or im- plied, are elements which afford strong indications of the part- nership relation, and in certain circumstances, and in the absence of proof to the contrary, often irresistibly lead to that conclusion. Yet, taken separately, they may frequently be nothing more than consequences of other contracts; e.g. loan, suretyship, simple mandate, and the like. In short, while they are consequences of partnership, they are also consequences of other contracts ; and whether they evidence the one or the other, must be judged of from the extent to which they are in combination, and the com- plexion of the surrounding circumstances. We must not there- fore be surprised, if, in reviewing the decisions on this important subject, we find dicta seemingly, and sometimes actually, at vari- ance with each other; nor should we look so much for absolute rules, as for indications of how evidence is most likely to be dealt with. In prosecuting our inquiries into this branch of the subject, ^e shall consider first, the constitution of partnership properly so called, i.e. of the contract whereby the parties to it are on the one hand en- titled to the rights, and on the other incur the liabilities of partners. We shall then proceed to examine those cases in which they who are either not partners, or have not been proved to be such, are never- theless subjected in liability to the public as though they were. And 46 PRIVATE PARTNERSHIP. [Book I. lastly, we shall endeavour to point out the differences between formed and contemplated partnership. CONSTITUTION OF PARTNERSHIP PROPER. Evidenced by right to share profit and loss. Right to share profits. The contract of partnership is usually said to infer a community of interest in the profits and losses, and in the capital of the concern, and also a community of right to share in the management. Cases, however (as we shall afterwards see), are of continual occurrence, in which all of those elements are not found in combination ; but yet in which true partnership has been undoubtedly created. A more correct notion of the contract will be obtained if we take the following as a fundamental principle, that wherever persons agree to carry on a certain trade, business, or undertaking of a mercantile kind, on condition of sharing the profits and losses arising there- from, they constitute amongst themselves the contract and relation of partnership, and that without the necessity of making use of the term partnership or its equivalents (a). But when the fact of partnership is disputed, the evidence of a contract to share profit and loss is seldom so clear as this amounts to ; and accordingly, if an agreement to share profits as such be established, this has for a long time been taken as ex facie evidence of the existence of partnership. A right to share profits is of the very essence of partnership. Any agreement by which a man is rendered liable for the smallest share of loss without the chance of profit, may indeed form a valid contract, but it is not the contract of partnership. This principle holds good in every system of Euro- pean law, and is evident from the very definitions which are given of the contract ; all of which, how much soever they may differ in other respects, agree in requiring the right to participate in profits (b). It is in virtue of this principle, that societies and clubs, whose object is not the sharing of profits, are not regarded as partnerships ; as, for example, societies for the protection of trade (c), or clubs for political purposes, or for the convenience of their members (d). (a) Voet. Com. ad Pand. 1. xvii. t. (6) See Appendix. 2, pro socio, s. 1 ; Ersk. iii, 3, 18 ; (c) Caldicolt v. Griffiths, 8 Ex. 898. 2 Bing. N. C. 108 ; (d) Fleming v. Hector, 2 M. and W. Oray, 4 Irish Com. Law Green v. Greesham v. Rep. 501. 172 ; 3 Ross, L. C. 585 ; Slianlcs, 1840, 2 D. 699. Thomson Chap. V.] CONSTITUTION. 47 But it is only the riffht to share profits as such, that constitutes Difference ■' ° ., .. .1 between nfttt evidence of the partnership relation. A right to participate m the profits and , , . T T . . . gross returns. proceeds or an undertaking, adventure, or business, may exist quite independently of partnership. The distinction here indicated is that between sharing profits and participating in gross returns, and will require some explanation. Gross returns or gross profits, as they are sometimes styled, is Tiie distinction . . . . .. , 111 is delicate, but a phrase used among political economists to signify the whole actual important. proceeds of a transaction, or the income of a business without deduc- tion of outlay, expenses, or liabilities ; profits or nett profits mean what remains after such deductions have been made. This distinc- tion is not at first very easily apprehended, and cases occur where it can hardly be drawn with all the clearness that could be desired. Yet it is of great importance in practice, as it affords a good- test whereby in many instances the interest which agents, servants, etc., have in a partnership can be distinguished from that of the partners ' themselves, and whereby the contract itself can be. distinguished from others of an analogous or kindred nature. The rule may be stated as follows : An agreement to share profits is prima facie evidence of partnership ; an agreement to share gross returns is no proof of that relation. The force and application of this rule will be best understood by illustrations. In Wilson v. M'Dougal, 1682, where two men had contracted to purchase a quantity of grain, which the seller was taken bound to deliver to them equally, the Court held that there was no partnership, in respect that emptio rei facta a pluribus emeniibus did not infer society where there was no contributio lucri et damni (a). Long afterwards. Lord Mansfield gave a similar decision in Hoare v. Dawes (b) ; and in Finckle v. Staci/ (c), an agreement between workmen to divide their wages was held not to amount to a partnership. In these and similar cases, the contract- ing parties agree to sh^are, not the profits of the transaction, but the gross produce. But, on the other hand, when a victualling society was constituted for the purpose of purchasing and thereby supplying its members and the public, it was held to be a partner- (a) M. 14551. H. Blackstone 37. (3 Boss, L. C. 419, (6) Doug. 371. See also Gibson v. 407, 404.) Lupton, 9 Bing. 297; Coope v. Eyre, 1 (c) Select Cases in Ch. 9. 48 PRIVATE PARTNERSHIP. [Book I. Liability for losses ; not conclusive evidence. ship. Here the element of sharing profits obviously resulted from trading with the public, and removed the association from the ordi- nary category of clubs which share the gross returns among their members (a). Again, persons who receive remuneration for their services by payments out of the gross returns of a company, whether that remuneration be a fixed sum or a percentage on the gross returns, are not partners, — as, for example, teachers in proprietary schools, whose incomes in part depend on the number of their scholars; salesmen who receive a percentage on the price of the articles they dispose of in lieu of fixed salaries; sailors on whaling voyages, who are usually paid by obtaining a certain proportion of the pro- duce of the oil obtained, and the like (h). Liability for the debts and obligations due by a company or firm is strong presumptive, though by no means conclusive, evi- dence of partnership properly so called. Such liability may be the consequence of other contracts which, though they enter into, do not constitute, the partnership relation. A man may become surety or guarantee for a firm of which he is in no sense a member ; and one may be bound by the acts of his agent without being his partner. Indeed, as we shall afterwards see, it is quite common for persons, by acts, representations, or con- duct, to render themselves liable to the public for the obligations of a company in whose profits or management they have no right to share. On the other hand, it must be observed that liability to share losses is not, like the right to participate in profits, so essential to the partnership relation, that its absence is to be taken as conclusive evidence against the existence of partnership. No doubt it is impossible by any stipulation to eliminate that responsibility to the public, which is inseparable from all common laio partnerships ; but (a) Sawers v. Tradestmon Victualling Society, 24 Feb. 1815, 18 F. 0. 233 ; Anderston Vict. Society, 1828, 6 S. 928. See also AtKinlay v. Gillon, 30 Nov. 1830, 9 S. 90, aff. 5 W. and S. 468. (6) Geddes v. Wallace, 1820, House of Lords, reversing judgment of the Court of Session, 2 Bligh 270, and 6 Paton 643 ; Raivlinson v. Clarke, 15 M. and "W. 292 ; Stacker v. BrocUe- bank, 3 M'N. and Gor. 250 ; Barklie v. Scott, 1 Huds. and Br. 83 ; R. v. M'Donald, 7 E. Jur. N. S. 1127 ; Harrington v. Churchyard, 6 E. Jur. N. S. 576. Chap. V.] AaENCY. 49 it is quite competent for a partner to stipulate effectively with the others that he shall not be liable for a share of the loss. And this stipulation will receive full effect in a question inter socios. 'Now, in such a case, the partnership relation remains unimpaired, and neither his fellows nor the public could found upon this stipulation against loss (a) as evidence of no partnership. Another very important criterion of the existence of the part- Agency. nership relation is the element of agency. The importance of this criterion has only been lately brought into notice ; yet its consonance not only with legal principle, but also with equity, would seem to entitle it to great consideration. Agency is inseparable from the partnership relation. Mr Story says : ' Every partner is an agent of the partnership ; and his rights, powers, duties, and obligations are in many respects governed by the same rules and principles as those of an agent. A partner virtually embraces the character of both principal and agent' (6) ; and according to Pothier, ' Contractus societatis non secus ae con- tractus mandati' (c). It would seem, therefore, that in this we have a good negative criterion ; for where the circumstances of a contract or relation are proved to be such as to exclude the notion of agency express or implied, under what category soever it may fall, it cannot be classed as partnership. It is quite possible, no doubt, that a copartnery may be so constituted, that some of the partners shall contribute merely capital, and shall not have the power of binding the firm ; yet independently of the fact that such a stipulation would not avail with the public unless they had due notice, it is still obvious that the remaining partners continue to be agents, not only for themselves, but for all the others. So that in any view it is impos- sible to eliminate the element of agency from true partnership. It must be observed, however, that the presence of this element Not an unfaii- does not of itself afford a positive test of partnership ; for it is quite possible that two parties may stand to each other as agent and ing test. (a) Bond v. Pittard, 3 M. and W. (6) Story on Partnership,' p. 1. 357 ; and see per Lord Cranworth on (c) Pand. lib. xvii. tit. 2, Introduc- this case in Cox v. Hiclcman, 8 H. of tion. L. Cas. 310 ; Ersk. iii. 3, 19. D 50 CO-OWNEESHIP. [Book I. Co-owners not partners. Differences between. Important criteria. principal without being in any sense partners. Yet where, in any matter of gain or commerce, two or more persons stand mutually to each other in the relation of principal and agent, — that is to say, where each of them is capable of binding and being bound by the others, — it is very difficult to escape from the conclusion that the partnership relation has been constituted. Much valuable learning may be obtained on this question by referring to the case already quoted of Cox v. Hickman, not only as reported in the House of Lords, but also in the Courts of Common Pleas and Exchequer Chamber, in which courts the case had been successively con- sidered (a). Pro indiviso proprietors or co-owners are not necessarily part- ners, though in many cases they stand to each other in that relation. Co-ownership, as such, differs from partnership in some important particulars. There is no delectus personce ; and therefore the shares are transferable at the will of the owner : the part owners have no lien over the common property for their outlays thereon, they do not share nett profits but gross returns, and there is no implied agency. It may also be observed, that partnership is always created by agreement ; whereas co-ownership is seldom the consequence of special contract, but results from succession, bequest, joint purchase, or some other such accident (6). These differences are important, but it is far from easy to determine in a case of circumstances whether partnership or co-ownership is the actual state of matters. This arises from the fact that the two so often coexist, and also from their surrounding circumstances being generally so similar. The most important criteria where they can be made available are, that in co-ownership the gross returns and not the nett profits are shared, and that no implied agency exists. It must be admitted, however, that great practical difficulties arise in the application of these criteria. The decided cases in Scotland are few and unimportant. Such as they are, they will be found noted below (c). 3 ; Dig. 1. xvii. t. 2, (a) Hickman v. Cox, 18 C. B. 617, 3 C. B. N. S. 523 ; Cox v. Hickman, 8 H. L. Ca. 268. (6) See 2 BeU's Com. 655 ; Lindley, vol. i. p. 32 ; and supra, p. 3 ; Stair i. 16, 1 ; Voet. xvii. 2, 2 ; Story on Partnership, 1. 31 seq. (c) Qault V. M'Aulay, Jan. 13,1821, F. C. ; M'Givan v. Blackburn, 1725, M. 14625. Chap. V.] CONTRIBUTIONS. 51 In England the eases have been much more numerous ; and as English oases. the law of the two countries appears to be the same in this respect, it might be supposed that considerable advantage would be derived from consulting them. But the English courts appear to have done little else than reach the equity of the particular case, without establishing any clear rule by which in future the distinction might be determined. A note of the principal authorities is also sub- joined (a). There is a numerous class of cases in which one person contri- Contributions of skill and butes property, such as land, machinery, or money, and another contributions skill or business qualifications, and in which it is covenanted that one shall have the management of the property, and take the risk of the loss, while both shall have a share of the profits. The tendency in cases of this kind would be to hold that a partnership had been constituted, because the agreement to share profits is ex facie evi- dence of liability to the public ; and this accordingly appears to have been the ratio of the decision in the English case of Gilpin v. En- derley (h). But this presumption may be overcome by the nature and circumstances of the contract. The very common case of authors and publishers, in which it is agreed that the former shall contribute the manuscript and shall receive a share of the profits, while the latter shall defray the expense of publication and shall take the risk of loss, may here be adverted to. In England, such contracts are usually regarded as partnerships confined on the one side to profits only (c) ; but the law of this country, which holds that pubhshers and authors are not partners, appears to be more consonant to sound principle (d). (a) Lindley 81 ; CoUyer 793 ; (5) 5 B. and All 954. French v. Styring, 2 C. B. N. S. 857 ; (c) Lindley, p. 16. Oreen v. Briggs, 6 Hare 895 ; Camp- (d) Vembles v. Wood, 23 March belt V. Mullet, 2 Swanst. 551 ; Bentley 1838, M'F. p. 44 ; and 8 March 1889, V. Bates, 4 Y. and C. Ex. 182. 1 D. 659 ; 3 Ross L. C. 529. [ 52 ] CHAPTER VI. OP QUASI PARTNERS, OR PERSONS WHO INCUR LIABILITY TO THE PUBLIC, THOUGH NOT PARTNERS. Quasi part- Participation in proiits. Dictum of De Grey, C.J. We have already seen, that while Habihty for company obligations is inseparable from the partnership relation, many cases continually recur in which persons who have not constituted partnership amongst themselves are still liable to the world as though they had. Such cases are generally classed under the head of quasi part- nerships, or partnerships as regards third parties. The use of such phrases is convenient, but it must always be borne in mind that the notion they appear to convey is inaccurate, inasmuch as no one can be called a partner who is not so inter socios ; and that the cases under consideration involve liability not in virtue of the partnership relation, but in consequence of something which has taken place with the public, or in which the public creditor is concerned. The first class of cases may be stated to be those in which a person who has never contracted the partnership relation, has made himself liable to the public by participating in the profits of the concern. We have already observed, that sharing profits is an important criterion of partnership. It may now be added, that when it does not confer the privileges, it commonly involves the participant in the liabilities of that relation. The rule of law is generally stated to be, that a party who shares profits shall be liable to third parties as if he were a partner ; or, to use the words of Professor Bell, ' Participation of profits will make one a partner to the world, although he should not be so in relation to the persons with whom he is so engaged' (a). The reason of this doctrine is stated by Chief Justice De Grey as follows : That ' every one who has a share in the profits of a (a) Bell's Com. ii. 623. Chap. VI.] QUASI PARTNERSHIP. 53 trade, ought also to bear his share of the loss ; and if any one takes part of the profit, he takes part of that fund on which the creditor of the trader relies for his payment' (a). In Waugli \. Carver, two ship-agents agreed to allow each other certain portions of each other's profits, but without being affected by each other's acts or losses. The Court held that they were not partners, but that nevertheless they were answerable for the debts of each other, in a question with a creditor who sued both for goods supplied to one (b). In Boulton v. Mansfield, a copartnery was dissolved by the retirement of one of the partners, whose share of stock, etc., was transferred to the partner who continued to carry on the business ; but it was provided that the retiring partner should still continue to draw a share of the profits of the concern. It was held by the Court of Session, and affirmed on appeal, that the retiring party was still a partner, and liable as such (c). The same liability was extended to persons who were in the position of servants, but were paid a share of the profits instead of a salary (d) ; to such as were paid an annuity out of the profits made by others (e) ; and to the seller of the goodwill of a business, who was to have such share of profit as was in excess of the guaranteed amount (/). Ultimately this doctrine was carried so far, that where the property of a partnership was conveyed to trustees, in order that the trade might be carried on for behoof of creditors, such creditors were liable for debts incurred by the trustees in execution of the trust {g). And it has even been held, that executors and trustees investing trust funds in a copartnery become individually liable to third parties, though they were not partners even qvM trustees, and did not individually share any part of the profits (A). But, as in the case of actual partnership, a distinction must here Distinction be made between profits and gross returns. It is only the sharer of and^gros?™^'^ nett profits who can be made liable as a quasi partner ; the partici- "^"^'"^s- (a) Grace v. Smith, 2 Wm. Blaokst. Hamper, 17"Ves. 412, 3 Ross L. C. 456 ; 998 ; 3 Ross L. C. 400. ex parte Chuck, 8 Bing. 469. (b) 2 H. Bl. 235, and 1 Smith's (/) Barry v. Nesham, 3 0. B. 641. Leading Cases ; 3 Ross L. C. 426. (^r) Hickman v. Cox, 18 C. B. 617 ; (c) 1787, 3 Pat. App. 70. aff. 3 C. B. N. S. 523. (rf) Ex parte Digby, 1 Deac. 341 ; (h) Wightman v. Watson, 1 M. and ex parte Rowlandson,llioBeS9. S. 412; ex parte Garland, 10 Ves. (e) Re Colbeck, Buck 48 ; ex parte 119. 54 QUASI PARTNERSHIP. [Book I. pator in gross returns incurs no such responsibility. Thus a sailor employed in a whaling ship, was held not liable to third parties, though he received as wages a certain share of the oil brought home (a) ; and the same was decided in the case of a workman who was paid by a proportion of the gross gains (h), and of a captain who was to receive as wages one-fifth of the profits on an intended voyage (c). Origin of this When a party incurs hability to the public creditor in respect biitty" ^' 0^ ^is participating in profits, that liability arises not from any pre- sumption that, when he entered into the contract out of which the claim arose, the creditor had the personal responsibility of such party in view, but solely, as already stated, from the equitable consideration that no man shall share that fund out of which the creditor looks for payment, without becoming responsible for the claim. It is of no consequence, therefore, whether at the date when the claim or debt was contracted, the creditor knew that the party in question was a participator in the profits of the concern ; it is enough if he discover and can prove this fact when he seeks to render such party liable (cT). The same reasoning applies in this case as applies in that of dormant partners, who exercise none of the rights of ordinary partners, except that of sharing the profits, and who yet, when discovered, have always been held liable to the public creditor (e). In concluding our observations on this class of cases, it may be observed that the doctrine which we have been considering, though in the main it has worked well in the interests of substantial justice, is not always capable of being very clearly applied in prac- tice, and may in some cases produce results at least apparently harsh (/). It has been adopted in the American law {g), but was (a) Wilkinson v. Fraser, 4 Bsp. ITVes. 412; Barry v. Nesh.am,3C.B. 182, 3 Ross L. C. 453. 641. (6) Benjamin v. Porteoiis, 2 H. (e) Logy v. Durham, 1697, M. 14566 ; Blacist. 590 ; Dry v. Boswell, 1 Camp. Kinnear v. Cunningham, 1765, 2 Paton 330, 3 Ross L. 0. 455. 114 ; M'Leod v. Howden, 1839, 1 D. (c) Mair v. Glennie, 4 Maule and 1121 ; M'Kinlay v. Gillon, 1830, 9 S. Selw. 239. See Story on Partnership,' 90, aff. 5 W. and S. 468. See BeU's chap. iv. ; see also BeU's Prin. 363-4. Com. ii. 623, and Prin. 363-4. (d) Waugh v. Career, 2 H. Blackst. (/) See Lindley, p. 86. 235 ; ex parte Digby, 1 Deao. 341 ; re (g) Story on Partner, pp. 46 et seq. Colbeck, Buck 48 ; ex parte Hamper, It does not seem to have been carried Chap. VI.] AGENCY. 55 unknown to the civilians, and does not appear to have found its way into any continental code (a). More recently, the liability of persons not partners, or not Agency. proved to be partners, to be made responsible for company obliga- tions, has in cases such as those we have just been considering, been referred to the doctrine of agency, express or implied, rather than to that of sharing profits. And this view certainly appears more intelligible in itself, and more in consonance with legal principle. In the late case of Coss v. Hickman (b), Lord Cranworth stated: Lord Cran- ^ ^ worth s dictum. ' It is often said that the test, or one of the tests, whether a person not ostensibly a partner, is nevertheless, in contemplation of law, a partner, is whether he is entitled to participation in the profits. This no doubt is, in general, a sufficiently accurate test ; for a right to participate in profits affords cogent, often conclusive evidence, that the trade in which the profits have been made was carried on in part for, or on behalf of, the person setting up such claim. But the real ground of liability is, that the trade has been carried on by persons acting on his behalf. When that is the case, he is liable to the trade obligations, and entitled to its profits, or to a share of them. It is not strictly correct to say, that his right to share in the profits makes him liable to the debts of the trade. The correct mode of stating the proposition is to say, that the same thing which entitles him to the one makes him liable to the other, — namely, the fact that the trade has been carried on in his behalf, i.e. that he stood in the relation of principal towards the persons acting ostensibly as the traders, by whom the liabilities have been incurred, and under whose management the profits have been made.' Lord Cranworth then took occasion to review some of the more important decisions which have already been referred to, and in relation to them observed : ' I can find no case in which a person has been made liable as a dormant or sleeping partner, where the trade might not fairly be said to have been carried on for him, so far in America as in England. By toin.xvii.d« Societe, n.332; Duvergier, means~ of legal subtleties, its operation Droit Civil Franc, torn. xr. n. 45 ; Voet. has been apparently confined under ad Pand. lib. xvii. t. 2, s. 2 ; Pardessus, that system. Droit Comm. tom. iv. n. 969, and torn. (a) Dig. 1. xvii. t. 2, 1. 34 ; Pothier, ii. 506. Pand. lib. xvii. t. 2, u. 4, Id. Tr. de So- (J) 8 House of Lords Cases 309. ciete, n. 13 ; Duranton, Droit Franc. 56 QUASI PARTNEESHIP. [Book I. together with those ostensibly conducting it, and where, therefore, he would stand in the position of principal towards the ostensible members of the firm as his agents.' Lord Wens- Lord Wensleydale adopted the same view; and after stating that dictum. partnership was merely a branch of the law of principal and agent, and that it would tend to simplify and make more easy of solution the questions which arise on this subject, if this true principle were more constantly kept in view, he proceeded to say : ' A man who allows another to carry on trade, whether in his own name or not, to buy and sell, and to pay over all the profits to him, is undoubtedly the principal, and the person so employed is the agent ; and the principal is liable for the agent's contracts in the course of his em- ployment. So, if two or more agree that they should carry on a trade and share the profits of it, each is a principal, and each is an agent for the other, and each is bound by the other's contract in carrying on the trade as much as a single principal would be by the act of an agent who was to give the whole of the profits to his employer. Hence it becomes a test of the liability of one for the contract of another, that he is to receive the whole or a part of the profits arising from that contract by virtue of the agreement made at the time of the employment. I believe this is the true principle of partnership liability. Perhaps the maxim, that he who partakes the advantage ought to bear the loss, often stated in the earlier cases on this subject, is only the consequence, not the cause, why a man is made liable as a partner.' Upon the principle that agency is in such cases the ground of responsibility, and that in the case under consideration it did not exist, the House of Lords reversed the judgment of the Court below. No cases, in so far as we are aware, have yet occurred in which this decision has been either followed or commented on ; and it is there- fore premature to speculate on its probable effect on this branch of the law of partnership. It is, however, very plain, that while it professes to leave intact the equity of the former decisions, e.g. Waugh v. Carver, Barry v. Nisham, etc., it places them on a new foundation, and seems to inaugurate a principle of decision which is more intelligible in itself, and less likely to mislead or embarrass in the application, than the old doctrine of participation in nett profits being a ground of liability to the public. It cannot, how- Chap. VI.] HOLDING OUT. 57 ever, escape observation, that the test here proposed is in some respects as difficult of application as its predecessors ; that agency is often as much a result as a proof of the partnership contract ; and that many cases may be figured, in which agency, so far from leading to the inference of partnership obligations, can only be inferred after that contract has been established from other con- siderations. Persons may also incur the liabilities of partnership by what is Holding out. termed ' Jiolding out.' Here persons who are not partners, and who may not be entitled to share profits, or to exercise any of the other rights of the partnership relation, render themselves liable to creditors of a company or firm, by reason of their having, prior to the contraction of the debt for which they are responsible, held themselves out as partners, that is to say, done or permitted some- thing to be done, which naturally led to the conclusion that their credit was pledged to the concern — that they were its guarantees, or that it was their agent. This doctrine is indeed a necessary consequence of the law of principal and agent, whereby if any man hold out another as his agent, he is bound by that other's acts within the sphere of the agency. It is also a consequence of the principle, that the partners are guarantees for the company obliga- tions. The public, in the case of unregistered companies, have no means of knowing who are de facto partners— that is to say, whose credit is pledged to the company — except by judging from appear- ances ; and they are therefore entitled to assume those to be partners whose conduct plainly leads to that conclusion. The doctrine in question is thus a necessary consequence of the theory of private partnerships and common law companies, in which the credit of the concern depends on implied agency and implied guarantee, as opposed to t,he property of a corporation or the gua- rantee of a registered company. It would consequently seem, that while it is essential to the existence of common law partnerships, it is inapplicable in the case of such associations as are formed by registration, by charter, or by special act. The leading case in support of the doctrine of liability by hold- Waur/h v. ing out is Wcmgh v. Carver (a). In this case the law is very clearly "™"' (a) 2 H. Blaokstone 235 ; 3 Ross L. C. parte Matthews, 3 V. and B. 125 ; Ed- 426 ; ex parte Watson, 19 Ves. 461 ; ex mundson v. Thompson, 2 Fos. and Fin. 58 QUASI PARTNERSHIP. [Book I. Use of a party's name. Party's name must have been the ground of credit. Stated by C. J. Eyre, and it has always been regarded as an autlio- rity in this country as well as in England. In the late case of Cox V. Hickman, already referred to, the House of Lords took occasion to revert to the grounds of the decision in Waugh v. Carver, and the judgment of Lord Cranworth may be read with great advan- tage (a). It is of no importance to the question of liability on this ground, whether the party, holding himself out as a partner, does or does not share profits and losses ; for the point is not whether he is de facto a partner, but whether he has so acted as to lead others to that conclusion (6), or in other words, whether he is by his conduct estopped from pleading that he is not a partner (c). It has there- fore been held sufficient that the party has allowed his name to be kept on bills of parcels, or invoices, or to remain over the door (d). If a party's name has been introduced into a firm without his consent, he ought to take immediate steps to get it withdrawn, or otherwise to certiorate the public that he is not a partner ; for if he remain silent, and it can be proved that he knew that his name was used in this manner, he may be found responsible as a partner (e). But inasmuch as the ground of liability is, that credit has been obtained by means of the party's name, it is necessary that the holding out shall have taken place, and that the creditor shall have been in the knowledge thereof prior to his entering into the con- tract sued upon, otherwise it could not be said that he had been misled by the conduct of the supposed partner. See the judgment of Mr Justice Park in Dickenson v. Valpy (/), Vice v. Anson {g), and the other cases quoted below. It is the more necessary to attend to this important element by which the liability of alleged partners is ascertained and limited, inasmuch as it is apparently ignored in many treatises on partnership law. By parity of reasoning, it should seem that where a party's name appears in a firm as a partner, but when 564 ; Kirku'ood v. Cheetham, 10 W. R. 670, Ex. ; 2 Pos. and Fin. 798 ; Gard- ner, 1862, 24 D. 315. (a) 8 House of Lords Cases 309. (5) Ex parte Watson, supra. (c) Pickard v. Sears, 6 A. and B. 469 ; Freeman v. Cooke, 2 Ex. 654. {d) Williams V. Keats, 2 Starkie 290. (e) Gardner, 1862, 24 D. 315. (/) 10 B. and 0. 140 ; 3 Ross L. C. 570. (g) 7 B. and C. 409. Baird v. Planque, 1 Fos. and Fin. 344 ; Fox v. Clifton, 6 Bing. 776 ; Pott v. Eyion, 3 C. B. 32 ; Newsome v. Coles, 2 Camp. 617, 3 Ross L. C. 684. Chap. VI.] HOLDING OUT. 59 by a private stipulation he is declared not to be liatle as such in a question inter socios, he does not incur liability to third parties who, when the debt was contracted, were aware of this stipulation ; and it appears to have been so held in the case of Alder son v. Pope (a). But there are good reasons to doubt the soundness of this principle, both as giving facilities to the establishment of false credit, and because such a stipulation would after all amount to nothing more than a guarantee against loss in favour of one partner by the others. It is no defence against an action on the ground of habilitv ^^^^^ ^7 tliird ■ ° •' persons no from holding out, that the defender was induced so to do by the- ground of /• 1 1 . /. . , estoppel. iraudulent representations ot parties other than the pursuer (6). The doctrine of hability by holding out has never been under- Holding out stood so as to render the estate of a deceased partner liable for debts after death!^ ^ contracted subsequent to his death by the surviving members of the firm, even to old correspondents or customers, on the ground that his name was still allowed to remain in the concern. The reason of this is, that death, as we shall afterwards see, operates of itself as a dissolution of the partnership, and is a public fact requiring no intimation, and that the continuance of the name cannot be pre- sumed to be the act either of the deceased or his representatives (c). If, however, the name of the deceased partner be continued in the firm by his executor, the estate will be bound, and the executor will render himself liable to the beneficiaries (d). As persons intimating an intention to become partners are not Holding out, , , , ., 1 . . . 1 . , . as intending taken to be such until their intention has given place to perform- partner, not ance, so neither do those who hold themselves out as intending partners incur the liability which would attach to them if they held themselves out as partners de facto. Thus, one who had signed the prospectus of a contemplated company was found not liable as though he had held himself out as a partner (e). (a) 1 Camp. 404, note. 207 ; Christie v. Royal Bank, 1841, (S) Watson v. Smith, 17 Dec. 1806, 2 Rob. 118 ; Warner v. Cunning- Hume 756. See al^o the English ham, 24 June 1798, M. 14603, 3 Dow. oases of Ellis v. Smoeclc, 5 Bing. 521 ; 76. ex parte Broome, 1 Eose 69. (d) Vulliamy v. Nohle, 3 Mer. 614. (c) Webster v. Webster, 3 Swanst. (c) Bourne v. Freeth, 9 B. and C. 490 ; Devaynes v. Noble, 1 Mer. 616. 632 ; Beynell v. Leiois, 15 M. and W. See More's Stair, p. 102, Leot. ii. 517 ; Wyld v. Hopkins, ibid. enough. 60 QUASI PARTNERSHIP. [Book I. Effects of agency and guarantee "where no part- nership exists. Sub-partner- As in prefer partnership the liability of the individual partners for company debts rests upon the two principles of implied mandate and suretyship existing between the socii in virtue of the contract itself, so in like manner a man may render himself liable for the acts of others by one or other of these principles, not only where he is not a partner, and where he has never 'held himself out as a partner, but where no partnership has yet come into existence. Thus, when 'promoters' of contemplated companies pass resolutions that work is to be done or goods are to be supplied, they become liable for all expenses that may thereby accrue, though they are not partners, and though the company should never have any being (a). And it is not to be doubted, that if a man becomes cautioner for a firm, he incurs liability though ex hypothesi he is not a partner, nor presumed to be such. It is a principle of the law of partnership, that no one can be introduced into a copartnery without the consent of all the members. Yet there may be a contract formed with one of the partners by which a stranger is admitted to divide with him his share of the profits. The relation so created is termed a sub-partnership, and constitutes a binding obligation. But it does not make the stranger a partner with the other members of the concern, according to the maxim of the civil law, Sociua mei socii, socius mens non est (b) ; neither does he by sharing profits become liable for the debts of the company (c). (a) Douhleday v. Muskett, 7 Bing. 110 ; Braithwaite v. Skqfield, 9 B. and C. 401 ; Burls v. Smith, 7 BiDg. 705. (b) Pothier, Part. sec. 91. (c) See BeU's Mer. Law ii. 654; Lindley 52 ; Ersk. iii. 3, 21 ; Fair- holm V. Marjoribanks, M. 14558, and Ross's Le. Ca. 697 ; ex parte Barrow, 2 Rose 252, per Lord Eldon ; ex parte Dodgson, Mont, and M'Ar. 445 ; Bray v. Fremont, 6 Madd. 5 ; Killock v. Greg, 4 Russ. 285. [ 61 ] CHAPTER VII. DIFFERENCE BETWEEN A FORMED AND A CONTEMPLATED PARTNERSHIP. It is often difficult to determine whether a partnership really exists, or is only contemplated. In such cases, it is important to distin- guish between the mere indication of intention to enter into partner- ship, and an agreement to form this contract on the emergence of a given condition. Where nothing more is proved but intention, it is in the power Mere intention of either party to resile ^before perfecting the contract (a) ; and in complete the like manner, where a party agrees to enter into a partnership at a future period, but reserves to himself the option of departing from this agreement before elapse of the stipulated time, no partnership will be held to be created, if in the interim he declare that he has altered his intentions (6). Where the plaintiff agreed to enter into a partnership with the defendant, as to the working of a patent, provided he should be satisfied of its utility by the result of later experiments, which satisfaction he was to declare in writing, and he never expressed such satisfaction, it was held that no partnership had been constituted (c). Where, again, parties agree to enter into Agreement partnership on the emergence of a certain condition, and retain no ^ ""^ *'*'"'^' option, the contract will be held perfected by the mere purification of the condition, because the necessary consent, which before is supposed to be suspended, is on that event held to be adhibited (J). It is in virtue of this principle that allottees of scrip in companies to be incorporated by parliamentary authority, may be registered by (a)lfo!«eZZv.£TOAe, 6Bing.N.C.44. (c) Osborne v. Jullion, 3 Drew (J) Gabriel v. Evill, 9 M. and W. 596. 297 ; ex parte Turquand, 2 M. D. and (d) Battley v. Lewis, 1 Man. and Gr. De G. 339. 155. 62 CONDITIONS. [Book I. Condition must be purified. Condition must be essen- tial. Speoiiied pur- poses a condi- tion of the contract. the company as shareholders as soon as the special act is obtained, not only without their knowledge, but even against their express desire. But, e converso, it is equally. fixed law, that until the condition is purified, no partnership is constituted. Thus where persons associate with the view of forming a company in a particular manner, as by signing articles of association, or obtaining charter or special act, they are not held to be partners until the company has been formed in the manner contemplated. Many illustrations of this will be found under the head of Promoters (a). In like manner, when it plainly appears that the company was not to commence operations until a certain amount of capital had been subscribed, the subscribers will not be held bound as partners if the company start before obtaining subscriptions to the stipulated amount (b). Nor will it make any difference that the subscribers had paid deposits, and even calls, on the shares allotted to them ; but for these they will be entitled to an action of repetition (c). In such cases, however, it must clearly appear that the condition was of the essence of the contract — a condition precedent to the formation of the company. If this is not so, the non-purification will be disregarded, and the subscribers held partners (d). The same result will follow where it appears that the defender has expressly or by implication waived the non-implement of the condition (e). Again, when persons agree to become members of a company to be formed for certain specific purposes, and subject to certain regulations, they are not bound to take shares in a concern formed for different purposes or with a different system of management. In such a case an important condition of their contract has not been (a) See Keynell v. Lewis, and Wyld V. Hopkins, 15 M. and W. 517 ; Wood V. Argyll, 6 Man. and Gr. 928 ; Batard V. Hawes, and Batard v. Douglas, 2 E. and B. 287 ; Forrester v. Bell, 10 Ir. Law R. 555 ; Hutton v. Thompson, 3 House of Lords Cases 161. (b) Brown v. Frutli, 9 B. and C. 632 ; Vice v. Anson, 7 B. and C. 409. (c) Fox V. Clifton, 6 Bing. 776, oyerruling Perring v. Hone, 4 Bing. 28 ; Pitchford v. Davis, 5 M. and W. 2. (d) Turner v. Mollison, 30 May 1833, 11 S. 669 ; Caledonian Dairy Company V. Campbell, 4 Feb. 1834, 12 S. 394 ; MacAlister v. Alexander, 2 June 1837, 15 S. 1061, aff. 7 May 1839, M'L. and Rob. 353. (e) Tredwin v. Bourne, 6 M. and W. 461 ; Steigenherger v. Carr, 3 Man. and Gr. 191; London and Continental In- surance Company v. Redgrave, 4 C. B. N. S. 524 ; Peel v. Thomas, 15 C. B. 714. Chap. VIL] FORMALITIES. 63 purified (a). And It is no answer that deposits have been paid on the allotted shares, unless it can be shown that the defender was at the time aware of the alteration (h). It frequently forms a part of the articles of copartnery or other Presonbed , . lormaUties document by which the partnership is regulated, that certain con- ditions must be fulfilled, or certain formalities must be complied with, before a person can be made a partner either originally or by transfer of shares. In such cases the general rule of course requires that the regn- ™^^* ^'', ° T. o observed. latlons shall be observed ; but when they have been overlooked, the Court will not give effect to their non-observance so as to avoid the contract of partnership, unless it is pleaded at the instance of the party for whose interest and behoof they had been framed (c). When, again, the party interested in the observance of the "Waiver. stipulated conditions or formalities has waived them per ewpressum or by implication, or in other words, where such party has homolo- gated the irregularity, the objection cannot afterwards be taken (d). But such conditions or formalities will be very strictly enforced when they are pleaded by the party for whose benefit they were framed, and whose interest is affected by their non-observance (e). (a) Ward v. Matheson, 13 Feb. Robertson, 11 June 1828, 6 S. 950 ; 1829, 7 S. 409 ; Learmonth v. Adams Thomson v. Fullarton, 23 Dec. 1842, 5 and Co., 23 June 1831, 9 S. 787 ; D. 379 ; Robertson v. Thorn, 29 Dec. Blackburn's case, 3 Drew 409. 1848, 11 D. 353. (b) Ex parte Rye, 3 B. Jur. N. S. (d) TurnbuU v. Allan and Son, 1 460 ; and Fox v. Clifton, 6 Bing. 776 ; March 1833, 11 S. 487, aff. 8 April Galvanized Iron Co. v. Westoly, 8 1834, 7 W. and S. 281 ; Drummond Exoh. 17. V. Thomson's Trustees, 22 May 1834, (c) Weatherly v. Turnbull, 3 June 12 S. 620. 1824, 3 S. 61 ; and East Lothian Bank (e) Sir James Gibson Craig v. Aitken, V. Turnbull, ibid. 63 ; Macandrew v. S Feb. 1848, 10 D. 576. [ 64 ] CHAPTER VII I. EVIDENCE OP PARTNEKSHIP. We have already endeavoured to show what in law will be deemed sufficient to establish partnership and its liabilities. It is now neces- sary to consider briefly the kind of evidence which is admissible. Partnership is a consensual contract, and may be proved prout de jure ; that is to say, if the statements averred be relevant, they may be proved in any way which the law allows to prove facts and circumstances. Distinction In Considering what is necessary or relevant to be averred, denoe of pro- regard must be had as to whether the action is brought with the partnershi*^* view of establishing actual partnership on behalf of the pursuer, or whether the object be to fix responsibility against the defender at the instance of some third party ; in other words, whether actual or merely quasi partnership is sought to be made out. If actual partnership is sought to be established, this must be averred, and the proof must amount either to a distinct contract to that effect, or at least to an agreement to share profit and loss in some specified business or sphere of action. If, again, quasi partnership, or in other words, responsibility to third parties, is all that is endeavoured to be made out, it does not seem necessary in every case to libel or prove actual partnership, but such facts and circumstances as plainly infer the required responsibility. The reason of this difference will appear when it is remembered that liability to third parties arises not only from actual partnership, but from such a line of conduct on the part of the defender as affects the fund available to creditors, or leads them to contract on the faith of his credit being pledged to the concern — e.g. sharing of profits, agency, or holding out. No doubt there are cases in which a latent partner who has not as yet shared profits, and whose existence was not known at the date of Chap. VIII.] EVIDENCE OF PARTNERSHIP. 65 the contract, can only be made responsible by proving him to have been an actual partner. When such is the case, actual partnership must be libelled and proved. Documentarv evidence, when it can be obtained, is undoubtedly Documentary ■■ , , evidence. the best ; e.g. written contracts, prospectuses, advertisements, cor- respondence, office-books, registers, and the like, whose meaning is unequivocal, and which are either properly attested, validated rei interventu, or connected with the alleged partner in an unmistake- able manner. In the absence of or in supplement of such evidence, the testimony of clerks, agents, servants, strangers, or of the alleged copartners themselves, may be resorted to. It must be observed, however, that the statements, acts, or Admissions. admissions of the alleged copartners stand in a very different posi- tion from their evidence on oath. It is only after the trial has proceeded so far that the pursuer has made out a prima facie case, or has at least shifted the onus prohandi, that these adminicles of evidence are admissible (a). Admissions by the defender are entitled to great weight, and are often conclusive (b) ; yet their effect may be entirely taken off if it can be shown that they were made under a misapprehension, or have been misconstrued (c). It is hardly necessary to observe, that a witness cannot be asked whether he believes that a partnership exists ; he must give facts and circumstances from which the jury may draw that inference (d). In conclusion, it may be observed that the question of what evidence is admissible to prove partnership must be solved by the common rules of evidence as applied in the investigation of any matter of fact ; since, according to the law of Scotland, it is one of those contracts in which the proof is unfettered by special rules. " As, however, it may be useful to the practitioner to have before (a) Smith v. Puller, 1820, 2 Mur, 342 ; Norton v. Seymour, 3 C. B. 792 Nicholls v. Dowding, 1 Stark. 81 Campbell v. Macfarlane, 1840, 2 D, 663, M'F. 200 ; Dickson on Ev. sec (c) Vice V. Anson, 7 B. and 0. 409 ; Ridgway v. Phillip, 1 Cr. M. and R. 415 ; Brockbank v. Anderson, 7 Man. and Gr. 295 ; Smith v. Puller, 1820, 2 Murray 342 ; Venables v. Wood, 1465 ; 2 BeU's Com. 899, n. 4. 1838, M'F. 44. (6) Clay V. Langslow, 1 Moo. and {d) Chatto and Co. v. Pyper, 1827, Mai. 45. 4 Mur. 354. 66 EVIDENCE OP PARTNEESHIP. [Book I. him the kind of evidence which has been given effect to in our courts, the following lists of the more important cases have been prepared : — Oases in which actual partnership was sought to be proved : — Cunningham v. Kinnear, 1764, H. of L. 1765, 2 Pat. App. 114 ; Mach V. Cleland, 1832, 10 S. 851 ; M'Taggart's Representatives, 1834, 12 S. 338 ; Fergusson v. Grahame, 1836, 14 S. 871 ; Fraser V. Hair, 1848, 10 D. 1402 ; Fraser v. Hill, 1854, 16 D. 789. Oases in which partnership as regards third parties was sought to be proved :—PFi7fa'e v. Johnstone, 1808, 5 Paton's App. 191; Sawers v. Tradeston, 1815, 18 F. 0. 233 ; Smith v. Puller, 1820, 2 Mur. 342 ; Learmonth and Co., 1825, 1 S. App. 481 ; Logan v. Brown, 1824, 3 S. 12 ; M'Kinlay v. Gillon, 1830, 9 S. 90, aff. 1831, 5 W. and S. 468 ; Dundee Ra. Co., 1832, 10 S. 269 ; Wright V. Arthur, 1832, 11 S. 212 ; Venahles v. Wood, 1838, M'F. 44, and 1839, 1 D. 659; Baxter v. Aitchison, 1841, 3 D. 391; Blackwood v. Hay, 1858, 20 D. 631 ; Aberdeen Bank v. Clark, 1859, 22 D. 44. [ 67 ] CHAPTER IX. DIFFERENT KINDS. OF PARTNERS. It is usual, in treatises on partnership law, to make use of certain phrases in order to distinguish from each other the different kinds of partners. These phrases will be here enumerated and explained as they are generally understood. 1. Active or managing partners are such as are in reality Active part- members of the firm, and act both as its agents and sureties. They are also sometimes styled ostensible partners; but this phrase is ambiguous, as it is often used to indicate nominal partners. 2. Nominal partners are they who appear or are held out to the Nominal world as partners, but who have no real interest in the business. 3. Dormant or sleeping partners are properly such as, whether Dormant known or unknown, have no power of agency to bind the firm ; but, while liable for its obligations and entitled to share profits, are passive as to its management. The phrase is often, however, used in the sense of latent or quasi partners. 4. Latent partners, sometimes also called secret or silent part- Latent part- ners, are persons whose existence as partners is not known to the world ; but who, sharing profits, are either de facto partners, or are liable to the world as though they were. Generally speaking, latent partners take as much share in the conduct of the concern as they whose names appear in the firm. 5. Quasi partners, or partners as to the vjorld, are such as, not Qmsi partners. being partners inter socios, — that is, partners in the proper sense of the word, — are nevertheless liable for the company obligations by reason of something which they have done, or permitted to be done. This terminology is useful as conducing to brevity of expres- imperfection sion; but the phrases employed are not in themselves the most oiogy. '^™"" felicitous to express the true import of the legal relations in which 68 DIFFERENT KINDS OF PARTNERS. [Book I. the various classes of partners stand to themselves and the public ; and, what is still more to be regretted, they have never been defined with any accuracy, and are used in very different senses by different writers. In these circumstances, little use will be made of them in the present treatise ; but it is hoped that the explanation given will be sufficient to render their meaning, when they do occur elsewhere, intelhgible. C 69 ] CHAPTER X. PUBLIC COMPANIES. PRELIMINARIES TO FORMATION. Common law companies are formed in the same way as partner- Formation of . r,^.... . common law snips, VIZ. by agreement. To this writing is not an essential; companies. they may be proved rehus ipsis et factis. In the general case, however, the company is formed by means of a deed, styled com- pany articles, articles of association, deed of settlement, etc. This instrument is signed by all the members, and is supposed to contain the constitution of the company. Incorporated companies are formed by their charter, special iloimation >■ r J J r of moorporated act, or by registration; and until these have been obtained, the companies. company does not come into existence. Before, however, a public company is formed, whether it be a common law company, a company privileged by letters patent, or incorporated by charter, special act, or registration, a good deal of procedure takes place, which may be called preliminaries to formation. When a company is projected, its promoters generally endeavour Prospectus. to obtain support by publishing to the world in as favourable a manner as possible the nature of the proposed undertaking, the amount of capital required, the number of shares, and the return which the shareholders may expect from their contributions. This is ordinarily done by means of advertisement, circulars, preliminary notices, etc., but principally by issuing a prospectus, which may be regarded as containing the terms upon which the promoters agree to contract with the public. Those who desire to support the undertaking, request the managers to allot them a certain number of shares, and sign the application, which is generally in a printed form. 70 PRELIMINARIES TO FORMATION. [Book I. Letter of allotment. Suspensive conditions. Scrip-certi- tioate. If the company be already formed before the prospectus has been issued, as was often the case with common law companies, and is almost always now with registered companies, and if the apphcant receive a letter of allotment imposing no new condition, and leaving nothing open for future acceptance or rejection, the application on the one hand and the allotment on the other form a contract based on the prospectus, and the applicant is converted into the shareholder (a). If, however, the letter of allotment be not a simple acceptance of the application, but something more, something less, or something different, it is a new offer which the applicant may either accept or decline (b). An offer not accepted within a reasonable time is held as declined (a). If again it appear from the prospectus, or be otherwise proved to be the intention of the promoters, that the company shall not be formed until something which yet remains to be done shall have been accomplished, the acceptance, which in that case is sub con- ditione, does not create partnership until the condition has been purified. Thus, in common law companies, it has often been made a suspensive condition, that a certain amount of capital shall be subscribed, certain inventions found workable, or that certain advantages shall be secured before the company is formed; and in undertakings requiring privileges, it is often conditioned that the association shall be formed under royal charter or special act. In such cases the applicant generally receives an acknowledg- ment, usually termed a scrip-certificate, to the effect that he is entitled to receive a certain number of shares when the company has been duly formed. This certificate does not constitute the holder a partner in the company, but creates a right to acquire, and an obligation to take, a certain number of shares (d) ; so that when the company is formed, he may compel it to receive him as a shareholder, and it may render him such against his will (e). Scrip-certificates, when stamped, are transferable by mere de- livery, and seem to require no indorsement. They therefore often (a) Pulsford v. Richards^ 17 Beav. 87 ; Jennings v. BrougJUon, ibid. tiU. (b) Fox V. Clifton, 6 Bing. 776 ; ex parte Rye, 3 B. Jur. N. S. 460 ; Duke V. Aridrenv, ? Ex. 290. (c) Carmichael, 17 Sim. 163 ; Mathew, 3 De G. and S. 284. (c?) Jackson v. Cocker, 4 Beav. 59. (e) Kidwelly Canal Co., 2 Price 93 ; Midland Great Western Rail. Co., 16 M. and W. 804. Chap. X.] SCRIP. 71 pass through many hands before the company has obtained its special act, or has otherwise been formed (a). When this takes place, the company may register the original J/fj^™''°° allottee, if the scrip-transferree does not come forward (6) ; and whether he does so or not, the company are entitled to register the original allottee, if they are not satisfied with the solvency of the scrip-transferree. For the contract was made with the allottee, and the company were not parties to the' subsequent transferences (c). The company, moreover, may register the scripholders who present themselves, without inquiring whether they are allottees or trans- ferrees {d). If, however, after transfer of scrip, the original allottee be registered without the consent of the sciip-transferree, he becomes a trustee for the latter, and accountable to him for the proceeds of the shares (e). If the company register the scrip- transferree, they thereby pass from all claims against the original allottee (/). Scripholders are in no sense of the word copartners, any more Scripholders , , .»,..„ not partners. than promoters are ; yet the possession oi the scrip-certmcates vests the holders with certain rights. Thus they may apply to the Court to interdict the promoters from misapplying the funds of the concern (g) ; and where the company is wound up as abortive, the scripholders have been found entitled to share the dividend (K). The issuing ' of scrip-certificates, however convenient for some Disuse of the purposes, is attended with many disadvantages, and has often oate. given occasion to fraudulent transactions. It has accordingly very much fallen into disuse. In the case of railway companies Sutsoribers' and other associations formed by special act, the procedure for forma,tion now generally begins by an agreement, popularly called a subscribers' contract, which is drawn up by the promoters, and (o) Hodges 128. (e) Lauder v. Orr and Others, 1853, (b) East Lothian Rail. Co. Y.Peffers, 15 D. 670; Beckett v. Bilborough, 8 1849, 11 D. 1184. Hare 188. (c) Ross V. East Lothian Rail. Co., (/) Bunten v. Barclay, 1854, 16 D. 1848, 10 D. 1284; Midland G. W. 1002. Rail, 5 Eail. Cases 76. (g) Bagshaw v. East Union Rail. (d) Birmingham and Thames Rail. Co., 7 Hare 114. Co., 1 Q. B. 256 ; Lauder v. Orr and (h) Madrid and Valencia Rail. Co., Others, 1853, 15 D. 670 ; Edin. and 16 E. Jur. 809. Leith R. Co. v. Manson, 1842,4 D. 865. 72 PRELIMINARIES TO FORMATION. [Book I. Conditions of contract must be fulfilled by the company. This some- times waived in the contract. Effect of special act. subscribed by such persons as agree to become shareholders when the special act has been obtained. This agreement contains a statement of the nature of the undertaking, the amount of con- templated capital, and the number of proposed shares. It also generally contains the appointment of a managing committee or other office-bearers ad interim, a law-agent, engineer, etc. No scrip-certificates are issued, the only evidence of being entitled to receive shares being the entry to that effect in the deed of agree- ment. When the special act has been obtained, the subscribers to the agreement become shareholders by being registered ; the subscrip- tion to the agreement in this case creating a contract, by virtue of which both the intending shareholder and the company can compel registration. But it must be observed, that the power of the company to compel registration of scripliolders, allottees, or subscribers, rests entirely on the contract, however entered into, whereby the appli- cant undertook to accept of so many shares in a company created for certain purposes, and of a certain description. Any change, therefore, in the objects or character of the company, by which it is made to differ in essentials from that projected, and in reference to which the contract was made, will deprive the company of the power to enforce registration (a). But from necessity, or expediency, the subscribers to under- takings which are to be formed under charter or special act gene- rally confer great powers on the promoters to alter or modify the scheme, to meet the views of the Crown or the Legislature ; so that, though the company, when incorporated, may greatly differ from the original conception, the subscribers can seldom take advantage of this circumstance to escape from being registered as share- holders (b). Sometimes it happens that the special act renders persons nominative shareholders in a company which is essentially different (a) Duke v. Andrews, 2 Ex. 290 ; Fox V. Clifton, 6 Bing. 776 ; ex parte Rye, 3 B. Jur. N. S. 460; Galvanized Iron Co. V. Westdby, 8 Ex. 17 ; Sclan- ders V. Kennedy, 1833, 11 S. 279 ; Lear- month v. Adams and Co., 1831, 9 S.787. (J) Fife and Kinross Ra. Co. v. GentU, 1861, 23 D. 891 ; Midland R. Co., 16 M. and W. 804, and 5 Ea. Ca. 76 ; Nixon v. Brownlow, 2 H. and N. 455 ; Norman v. Mitchell, 5 De G. M. and G. 648. Chap. X.] WAIVER. 73 from that contemplated in the prospectus, or that they had cove- nanted to join. There does not appear to he any remedy short of a new application to the Legislature in such a case (a). It must be observed, moreover, that in all cases where a sub- scriber seeks to be relieved from his liability to be made a share- holder on the ground that some condition has not been fulfilled, or that some variance exists between the company as formed and that contemplated at the time of his subscription, he must show that the condition or variance is of substantial importance, and touches the essence of the contract (b). As a general rule, it is only when all the regulations and for- To convert the . , , I . . „, subscriber into malities required by the constitution of the company have been the share- fulfiUed, that subscribers are to be deemed shareholders. Thus, malities must where in a common law company it is a condition that the contract or articles of association shall be signed by intending partners, the partnership relation is not formed until this has been done (c). This rule, however, is a purely equitable one. Hence it wiU This mie must ••11111 p 1 iic^® equitably only receive eftect where it is pleaded by the party tor whose behoof understood. the formalities alleged to have been disregarded were introduced (d), though in such a case its enforcement will be very rigid (e). But it cannot be taken advantage of by the party who has neglected to observe the formalities, whether that party have been the company (/) or the alleged partner {g). It is in virtue of this principle that Waiver. companies are estopped from calling in question transactions by which parties have been entered on the register and treated as (a) ReidY. Edinburgh Gas Light Co., (d) Weaiherly y. Turnbull, 1824, 3 S. 1823, 2 S. 257. See Kidwelly Canal 61 ; East Lothian Bank v. Turnbull, Co., 2 Price 93; Spackman v. Latti- ibid. 63; MacAndrew v. Robertson, more, 3 Giff. 16 ; Badness Canal Co. 1828, 6 S. 950 ; Thomson v. Fullarton, V. M^ Alpine, Fleming, and Co., 1791, 1842, 5 D. 379; Robertson v. Tliom, Hume 751. 1848, 11 D. 353. (6) Turner v. Mollison, 1833, 11 S. (e) Sir James Gibson Craig y. Aitken, 669 ; CaUdonian Dairy Co. v. Camp- 3 Feb. 1848, 10 D. 576. bell, 1834, 12 S. 394 ; MacAlister y. (/) Weatherly v. Turnbull, 1824, 3 Alexander, 1831, 15 S. 1061, aff. 7 May S. 61 and 63 ; Drummond v. Thomson's 1839, M'L. and Rob. 353. Trust., 1834, 12 S. 620. (c) Ward Y. Matheson, 1829, 7 S. (g) MacAndrew v. Robertson, 1828, 409 ; Learmonth v. Adams and Co., 6 S. 950 ; Turnbull v. Allan and Sons, ISS1,9S.1S7; New Brun.'fwickR. Co.y. 1833, 11 S. 487, aff. 1834, 7 W. S. 281. Muggeridge, 4 H. and N. 160. See Irish See also Sir J. Gibson Craig v. Aitken, Peat Co. Y. Phillips, 1 B. and Sm. 598 ; 1848, 10 D. 576. Mossy. Steam Gondola Co., 17 0. B. 180. 74 PRELIMINARIES TO FORMATION. [Book I. Non-applica- tion of the doc- trines of quasi partnership. Provisions for registration of members in incorporated companies. Case of common law companies. Effect of r tration of shareholders, without observance of the proper formalities, when it is clear that these formalities have been waived by the directors (a). And, in Uke manner, a party who has by his conduct evidently waived the formaKties required according to the constitution of the company to render him a shareholder, will be estopped from plead- ing such irregularity, either when sued by the company for calls, or sought to be made a contributory on its being wound up (b). The doctrines by which persons who are not properly members are held in private partnerships to be liable to the public for the liabilities of the concern, viz. those of ' holding out,' implied agency, sharing profits, all of which are generally covered by the phrase quasi partnership, have little or no application in public companies. In companies formed by registration under the Act 1862, the names of the members originally forming the company appear in the memorandum or articles of association, and that of every mem- ber for the time being appears on the j-egister of members which the company is required to keep. In companies formed under the Letters Patent Act, a return must be made to the Lord Clerk Eegister or his deputy of the names of all the members, and of such changes of membership as occur. In chartered companies, similar means are always provided by the charter for ascertaining the names of members ; and in companies formed by special act, the Companies Clauses Act requires that a register of shareholders be kept, from which it may appear who at any given time are members. In the case, again, of common law companies, when their mem- bership was numerous enough to distinguish them from private firms, it was always the practice to provide in the articles of asso- ciation or deed of settlement that a register of the shareholders should be accurately kept ; and in the few cases where common law companies with a membership not exceeding twenty persons (beyond which they are illegal) still exist, the same practice ought to be, and generally is, adopted. It does not, however, follow that the register of common law (a) Bargate v. Shortridge, 5 House of Lords Cases 297. See cases in the two preceding notes. (5) Forth Mar. Insur. Co. v. Barnes, 1848, 10 D. 689, aff. 1849, 6 Bell 541 ; New Brunswick and Canada R. Co., i H. andN. 160; BirmingTiam and Bristol R. Co., 1 Q. B. 256 ; Cromford R. Co., 3 Y. and J. 80 ; Sheffield R. Co., 7 M. and W. 574. Chap. X.] PROMOTERS. 75 companies is to be taken as conclusive evidence of membership or shareholders in ^ common law non-membership in a question with the pubUc. Qn the contrary, companies. , it is easy to conceive cases where, from inadvertence or fraudulent design, the register might be a most erroneous test of membership. All that can be said is, that the register, if apparently fairly kept, ought to be received as prima facie evidence, but that it will still be open to be redargued by counter evidence of facts and circum- stances. As before mentioned, the public, in the case of unin- corporated associations, have no public register to examine before transacting with the concern so as to ascertain who really are and who are not members. The private register is not intended for their inspection. It therefore seems just, that when persons by their conduct lead the public creditor to believe that they are members of unincorporated associations, they should be found liable as in simple partnership, unless it can be shown that the creditor had access to and inspected the private register before entering into the contract on which he sues. Yet in a question between the com- pany and its members, the private register, particularly if kept in accordance with the formalities and regulations of the company, will generally be held to be conclusive, unless it can be shown that the name of a party who denies membership had been placed on the register without authority (a). Even as regards incorporated companies, unless the Act of Par- Effect of regis- ° . ^ . . . trationin liament or other instrument of erection plainly renders the register incorporated conclusive evidence, the mere fact of a party's name appearing therein will only amount to prima facie evidence of membership, which may still be redargued by counter proof. No general rules upon this subject can here be laid down, but it will be considered in detail when treating of each class of these associations. PKOMOTEES. Under this term aire included provisional or interim directors. Promoters. provisional committee-men, and in general all such as have the direction, conduct, management, or superintendence of the affairs of an inchoate company. Very important and difficult questions (a) Blackburn v. Finlay, 1848, 10 D. 590 ; and Blaclcbiirn v. Buchanan, 1818, 20 Jur. 199. 76 PRELIMINARIES TO FORMATION. [Book I. Promoters are not partners. have frequently arisen on the relation of the promoters to each other, to the allottees, to the company when formed, and to the public. Such questions, however, generally admit of an easy solution, if we be careful to keep in mind the true character of promoters — what they are not, and what they are. Promoters may be regarded as pei'sons who have agreed to assist at the formation of a company, and who expect to be remunerated by the success of their scheme when brought into operation ; who are not bound to themselves or the public by any implied contract of partnership, but are liable for their individual acts and engage- ments only ; and who, as they are not the company, have no power to bind it by acts or engagements before it comes into existence (a). These principles have been evolved and illustrated by a great variety of cases, both in this country and in England. Promoters of companies are not partners, either in relation to themselves or the public. They cannot, it is obvious, be partners in the company of which they are promoters, for it has not yet come into being ; neither can they be said to be partners in the endeavour to bring such company into existence, for that would be to con- found the agreement to enter into partnership with the contract itself. It was at one time indeed supposed in England, on the authority of Holmes v. Higgins (b), Lucas v. Beach (c), and one or two similar cases (d), that in some respects promoters were to be considered partners. But these decisions either proceeded upon specialties, or have since been overruled; and the principle that promoters are in no case to be deemed partners, has been conclu- sively settled by a series of authorities which fix the law on this subject (e). In Scotland this principle appears never to have been doubted, and it received the solemn sanction of the Supreme Court in the well-known cases of Campbell v. Lauder's Representatives and Others (/), and Johnston v. Scott (g), the former of which was aflfirmed in the House of Lords (A) 19 Feb. 1857. One of the most important consequences of this doctrine is, that other by acts or as the promoters are not partners, they do not possess the power of agreements. x ./ i j. (a) Wordsw. 24. (e) Lindley 26-7. (6) 1 B. and C. 74. (/) 1852, 15 D. 117. (c) 1 Man. and Gr. 417. (g) 1860, 22 D. 393. ((f) Bartleit v. Lambert, 10 E. Jur. (A) 1867, 19 D. 12, H. L., 2 Macq. 416, 4 Ra. Ca. 308. 499. Promoters do not bind each Chap. X.] PROMOTERS. 77 binding each other by implied agency ; but are liable only for their individual acts and engagements, or for proceedings of their co- promoters, which they have afterwards plainly homologated. Of this the English cases of Reynell v. Lewis (a), and Wyld v. Hop- kins (b), may be referred to as illustrations. In the former of these, an action was brought against a provisional committee-man by an advertising agent for the cost of advertisements, some of which were necessary to enable the company to apply to Parliament for their special act ; and in the latter a geographer sued a provisional committee-man for the expense of work done in making maps, plans, and sections of the projected line of railway. In both cases it was held that the defendants were not liable, inasmuch as they had not individually given the orders ; and not being partners, could not be bound by the acts of their co-promoters. In the case of Capper (c), it was stated by Lord Oran worth, V. C, that 'if they (the promoters) incur expense in endeavouring to effect their object, and seek to render any one liable to any part of that expense, the question always is, whether the person whom they seek to charge did or did not authorize them to incur that expense on his account^ or did or did not agree to indemnify them if they incurred it on their own account.' The English case of Norris v. Cottle (d), House of Lords, may also be referred to in illustration. In this case, the whole subject was discussed, the previous cases were reviewed, and the law was stated to be as follows : That ' the committee-man was not liable for the acts of his fellows, — the law not implying from his mere consent to be a provisional committee-man, either an authority from hiln to make contracts by the committee-man with other persons, or by the solicitors with the committee, or to the solicitors to make contracts on behalf of the committee, but merely a promise to act with these others to carry the scheme into effect.' The same principle has been given effect to in this country, as will appear from the case of Campbell v. Lauder's Representatives (e), in which the English cases were specially referred to. There an (a) 4 R. Cases 351, and 15 M. and (c) 1 Sim. N. S. 178. Yf_ 517. (c?) 6 R. Oases 317 (1850). (5) 4 R. Cases 351, and 15 M. and (e) 1852, 15 D. 117. W. 517. 78 PRELIMINARIES TO FORMATION. [Book I. action was brought by the solicitors employed by the provisional committee of a projected railway company. Their employment had been recognised by several members of committee, but repudiated by the others. The action concluded that the committee-men were jointly and severally liable for the pursuers' accounts. It was dismissed on the plea of want of relevancy, in respect that employ- ment was not averred to have been authorized, or adopted and homologated by each of the defenders ; and that although it was set forth that they had all allowed their names to be published to the world as members of the provisional committee, that they had been warned to attend the meetings of committee, and that, in regard to one of them, his name had been put on the commit- tee at his own request, and that he had for some time attended meetings and had advised and acted as freely as any of the other committee-men, yet that it was not averred that he had been present at any meeting where the employment of the pursuers had been recognised. On appeal, the House of Lords affirmed the judg- ment of the Court of Session (a), the Lord Chancellor remarking that the case of Bright v. IIutfon(b) had settled the law on this point. • To the like effect was the more recent case of Johnston v. Scott, 18 Jan. 1860, already referred to. There several members of a provisional committee were sued for the expense of ' preparing plans, etc., 'being, work done by the pursuers for behoof of the defenders on their employment either directly or through others for whom they were and are responsible.' The Lord Justice-Clerk Inglis stated, that whatever doubts might at one time have been entertained in England, it had always been the law of Scotland, ' that a provisional committee is not a partnership to the effect that one member can be held to be the mandatary of another, or that a majority can bind a minority.' And the Court unanimously held, in conformity with this principle, that a member of a provisional committee is not liable for obligations, incurred at meetings from which he was absent, even though they had been entered into in the ordinary prosecution of the undertaking ; and that the minutes » (a) This case is reported under name (&) 1852, 3 House of Lords Cases of M'Ewan v. Campbell, 19 D. 12, H. 341. L., 2 Macq. 499. Chap. X.] PROMOTERS. 79 of a meeting of a provisional committee are not the writ of a member who does not sign them. From this principle it necessarily follows a fortiori, that ' pro- Promoters not moters are in no case liable for acts done or obligations contracted done previous , . °_ to their beoom- berore they became promoters, unless they have plainly homologated ing such. such transactions. No question of this kind appears hitherto to have occurred in Scotland ; but in England they have been very numerous (a). Nor has it been found sufficient in that country to infer homologation, that goods which had been ordered prior to a man's becoming a promoter, had been delivered subsequently to that event (b). In one case, indeed, the goods were both ordered and delivered subsequently to the defendant joining the committee ; but still liability was successfully resisted, on the ground that he had not individually been concerned in the transaction (c). From the same principle that co-promoters are not partners, it ^'^ ^'^^ '^- '■ '■ '- '■ ' missions of follows that the acts, letters, or statements of one promoter are not co-promoters evidence against another, unless they can be shown to have been against each specially authorized ; and the same rule applies to admissions as to liability made by one promoter, which can have no effect to bind others, unless such admissions have been made under their special authority. These rules are necessary deductions from the principle under consideration, and they have been established and illustrated by numerous English decisions (d). In the Scotch case of Johnston v. Scott, etc., already mentioned, the opinions of the judges plainly indicate that upon this point the law of Scotland is the same with that of England. But while it may now be held as settled law, that no implied Promoters may '' _ •^ _ render them- agency exists between promoters such as exists between partners, it selves KaHe ... .HP ^ . for each other's must be observed that it is quite possible for promoters to authorize acts by special each other to act as mutual agents ; and that this may be done either by giving a special authority for each act, or by conferring a general authority for all acts in the line of business. Such authority may (a) Bremner v. Chamberlayne, 2 (d) Drouet v. Taylor^ 16 0. B. 671 ; Car. and Kir. 560 ; Kerridge v. Hesse, Burnside v. Dayrell, 8 Ex. 224 ; Wat- 9 C. and P. 200 ; Newton v. Belcher, son v. Charlemont, 12 Q. B. 856 ; 12 Q. B.|^21; Whiteliead v. Barron, Newton v. Belcher, 12 Q. B. 921; 2 Moo. and Eob. 248. Newton v. Liddiard, 12 Q. B. 925 ; (6) Beak v. Mouls, 10 Q. B. 976. Rennie v. Wynn, 4 Ex. 691. (c) Beech v. Eyre, 5 Man. and Gr. 415. 80 PRELIMINARIES TO FORMATION. [Book I. be proved not only by written mandate, but also by facts and circumstances. This was distinctly laid down by the Court of Exchequer in the English cases of Reynell v. Lewis (a), and Wj/ld V. Hopkins (b). And reference may also be made to the other English cases of Douhleday v. Muskett (c), Braithwaite v. Skofield {d\ and Burls v. Smith (e), in which it was held, that if promoters pass resolutions that work shall be done or goods supplied, they authorize whatever may be done in pursuance of such resolutions, and render themselves personally liable. Promoters may Though, as we have seen, promoters are not partners, yet if sXeTconS' in ^ny of ^^ ways mentioned above two or more of them have rendered themselves joint obligants to a third party, and one of them has been compelled to make payment of the sums for which they were jointly liable, such promoter is entitled to relief against all the other co-obligants. This has been settled in England by a series of decisions. In the case of Boulter v. Peplow (/), three provisional committee-men hired rooms for a projected company. The rent not being paid, the landlord sued the three committee-men. Two of them allowed judgment to go by default, but a verdict was obtained against the third, who was compelled to pay damages and costs. He was found entitled to bring an action for contribution to the extent of one-third of what he had paid against each of his co-obligants. In like manner, in Batsed v. Hawes, and Batsed v. Douglas {g), the promoters of a projected railway company employed an engineer, who afterwards recovered payment against one of them. In an action for contribution at the instance of the latter against the other joint obligants, he was found entitled to recover. Edgar v. Knapp (K), Mant v. Smith (i), and Prole v. Masterman (k), may also be referred to as illustrating this principle. Though no case exactly in point appears to have occurred in this country, yet, from the general principles of our law, there seems no reason to doubt that the same doctrine would be given effect to. In our law the promoters who had incurred the joint obligation would (o) 4 Ea. Ca. 351. (/) 9 0. B. 493. (b) 15 M. and W. 517, and 4 Ra. (g) 2 E. and B. 287. Ca. 351. (V) 7 Jur. 583, C. P. * (c) 7 Bing. 110. (0 4 H. and N. 324. (d) 9 B. and 0. 401. (k) 21 Beav. 61. (e) 7 Bing. 705. Chap. X.] DUTIES AND LIABILITIES. 81 be termed correi debendi, and would incur a joint and several liability. Though promoters are not partners, yet as they are all engaged Promoters not in the prosecution of a common design, from the successful issue to eacii other of which they expect to be mutually benefited, they have no claim "' seivioes. against each other for services which they may have rendered in furthering their common enterprise, or bringing the company into existence. This has been settled in England by the cases of Holmes V. Higgins (a), Wilson v. Curson (b), Milhurn v. Codd (c). But this being a mere presumption, will not avail against a specific con- This may tract or provision to the contrary. Hence it has been decided in express pro^ England, that when promoters employ any one professionally, he ^^'°°' will be entitled to remuneration, even though he afterwards becomes an allottee of shares (ct). As promoters look for the reward of their exertions to the sue- Promoters cessful formation of the company, it may be unnecessary to state against'the'™ that they have no implied claim against the company when formed '^^^IJ ^ "" for what they may have done prior to that event. This, however, may be elided by the insertion of a clause in the special act or other instrument of constitution, providing for the remuneration of those who have expended their services in the formation of the company. See as to this the English cases of Garden v. General Cemetery Co. (e), Tilson v. Warwick Gas Co. (/), Clowes v. Bret- tell (g), Hitchins v. Kilkenny R. Co. (h). However loosely promoters may be associated together, still, by Duties and holding themselves out to the world as seeking to bring into exist- promoters to ence a company for certain purposes, in support of which they seek the Future ^" public assistance, they virtually enter into an implied contract with '=°™P*°y- the public, that whoever may be induced to subscribe for shares will find their representations substantially correct, and that they will not seek to make profit at the expense of the future company. Hence it has been decided in England, that where a person, by Liability for false and fraudulent representations, has been induced to subscribe taW™^^'^ (a) 1 B. and C. 74. Jur. 416, and 4 Railway Cases (6) 15 M. and W. 532. 308. (c) 7 B, and C. 419. (e) 5 Bing. N. C. 253. (d) Lucas Y. Beach, 1 Man. and (/) 4 B. and 0. 962. Gr. 417 ; Caldicott v. Griffiths, 8 (g) 10 M. and W. 506. Ex. 898 ; Barnett v. Lamhert, 10 E. (/;) 9 C. B. 636. J? 82 PROMOTERS. [Book I. Liability of promoters to return deposits. Promoters cannot benefit at the expense of the company. to a company in the course of formation, he can maintain an action against any of the promoters who may have caused such representa- tions to be published (a) ; and that it is not necessary to prove any direct communication between the plaintiff and the defendants (b). In virtue of this contract with the public, promoters are bound to apply deposits for the purposes only for which they were made. Hence, in the case of abortive companies, it has been held that the promoters were not entitled to retain any portion of the deposits or subscriptions, as having been laid out in expenses incurred in attempting to start them. See the case of Nockels v. Crosby (c), which is valuable as containing the judgment of Littledale, J., upon this point, and numerous other cases noted below (d). If, however, it appears from the contract, or subscribers' agreement, that the deposits were intended to be applied to cover the expenses necessary for starting the company, they will not be held return- able, if de facto they were employed in this manner (e). But it will be observed, that as promoters are not partners, and conse- quently not liable for the acts of each other, the action for recovery of deposits on any of the grounds above referred to must be directed against such of them as really received the money, or authorized its being paid into a particular bank (/). Upon the same principles, it follows that promoters cannot make any profit by transactions into which they enter on behalf of the future company. In the case of HicJiens v. Congreve {g), the three principal promoters of a mining company purchased the lease of a mine at £10,000, and afterwards re-sold it to the company for £25,000. They were compelled to pay into court the balance that remained in their hands. Upon this subject, the English cases of Fawcett v. Whitehouse (h), and Bech v. Kmitorowicz (i), may be consulted with advantage. (a) Gerhard v. Bates, 2 E. and B. 476. (b) See Bedford v. Bagshaw, 4 H. and N. 538 ; Lindley 726. (c) 3 B. and 0. 814. (d) Clarke v. Chaplin, 1 Ex. 26 ; Mowatt V. Londesburgli, 3 E. and B. 307 ; Vollans, 1 Ex. 20 ; Steadman, 15 M. and W. 587 ; Willey, 3 Ex. 211 ; Walstab v. Spottiswoode, 15 M. and W. 501. («) Garwood, 1 Ex. 264 ; Vane v. Cobbold, ibid. 798 ; Baird v. Ross, 2 M'Queen 61 ; Jones, 2 Ex. 52 ; Cle- ments, 1 Ex. 268. See Lindley 66. (/) Watson V. Charlemont, 12 Q. B. 856 ; Drouet v. Taylor, 16 C. B. 671 ; Burnside v. Dayrell, 3 Exch. 224. (g) 1 R. and M. 150. (h) 1 R. and M. 132. (0 3 K. and J. 230. Chap. X.] DO NOT BIND COMPANY. 83 In both these cases, companies were got up for the purpose of working mines, and the promoters contracted for the purchase of the mines, on what was represented as favourable terms. But after the formation of the companies, it was discovered that a private agreement existed with the sellers of the mines, whereby the promoters received a part of the purchase price as a premium or bonus for carrying through the transaction. In both cases the Court held that the promoters were to be regarded as trustees for the company, and as such liable to account to it when formed, for any advantages they might have received in the management of its affairs during its inchoate state. Although, as we have just seen, promoters are in some re- company not spects to be regarded as trustees for the future company, yet this ont^ pro-*" ^ must be understood only in a passive sense, or as the exponent of ^°^''^- the principle that they cannot be benefited at the expense of the future company. So far from having any active title as trustees, it may now be laid down as the general rule, that promoters have no power by their acts and deeds to bind the company when it comes into existence. This doctrine may be rested on the technical ground, that no corporate body can undertake obligations until it has a legal being ; but its intrinsic justice and propriety become more apparent when we reflect that the public are led to become shareholders on the faith of the instrument, whether deed, charter, or special act, by which the company is constituted ; and if they were to be held bound by stipulations or liabilities other than those appearing on the face of such instrument, the most iniquitous con- sequences might ensue. The law of Scotland, when properly understood, appears to have given full effect to this equitable doctrine. Thus, in the case of the Monklands Railway Company v. " The Glasgoio, Airdrie, and Monklands Railway Company (a), it was held that an agreement entered into by the provisional committee of a contemplated rail- way company to lease the line was not binding upon the company when incorporated by the special act — the act containing no such provision. At a subsequent period, impressed seemingly with the hardship arising in particular cases, the Court was led to relax the stringency of the rule, to an extent that was not altogether com- (a) 11 D. 1395 (1849). 84 PROMOTERS. [Book I. patible with public safety or confidence. Thus, in the case of The Trustees of the Harbour of Helensburgh v. The Caledonian and Dum- bartonshire Railway Company (a), it was held that the company when formed was bound to implement the contracts which had been entered into by its provisional committee, when these had for their object the interests of the company in the matter contem- plated by the special act, when without them the act would not have been obtained, or when the contracts were such that the com- pany, if in existence, could competently have gone into them. In that case, the stipulation sought to be enforced was in fact the price at which the promoters obtained the support of the pursuers to their projected scheme. The case of Rutherford v. The North British Railway Company (b) was soon after decided on the same grounds, and avowedly on the authority of the Helensburgh case. There a body of road trustees had been got to withdraw their opposition to the bill of a projected railway company, by the pro- moters agreeing to pay a certain proportion of liabilities for which the trustees were responsible. The bill passed, and the undertaking was purchased by another company. The Court held that the purchasing company was bound to implement the obligations undertaken by the promoters of the first company. Similar decisions had been also given in England. The most celebrated of these was the case of Edwards v. The Grand Junc- tion Railway Company (c), in which it was held that a company was bound by an agreement made with its promoters, in conse- quence of which opposition to its special act had been withdrawn. But the authority of the Scotch cases, and of this as well as of all the other English cases proceeding upon a similar principle, must now be held to be overruled by the judgment of the House of Lords, reversing the finding of the Court of Session in the Helens- burgh case (d), on the broad ground that those who take shares on the faith of a company's special act cannot be subjected to any liabilities not embodied therein. The same decision had been given by the House of Lords in the previous English case of Preston v. Liverpool and Manchester Railway Company (e). In both these (o) 1852, 15 D. 148. (rf) 19 D. H. L. 6 ; 2 Macq. 391 (6) 1855, 17 D. 1110. (1856). (e) 1 M. and Or. 650. (e) 5 House of Lords Cases 605. Chap. X.] RULES AS TO LIABILITY. 85 cases the decision in the case of Edwards was founded upon, and in both its authority was disregarded (a). It is, however, to be observed, that the expression of Lord Chancellor Cranworth, in giving judgment in the Helensburgh case, must be taken in a reasonable sense ; for his Lordship afterwards remarks, that if the agreement with the promoters, 'though not incorporated in the Act, had regard to something, the doing of which fell within the powers and objects of the Act,' a different decision might be expected. The company, when formed, may of course always render itself Company may /• 111- be bound by liable for the acts or engagements of its promoters by homologation, homologation. Thus, in the subsequent English case of Williams v. The St George's Harbour Co. (b), this element was made the ground of decision. There an owner of land agreed to withdraw his opposition to the bill, in consideration of the promoters undertaking that the company should purchase his land on certain terms. On obtaining the special act, the company refused to fulfil the contract made with its promoters, but was compelled to do so, in respect that it had recognised the validity of the contract by allowing judgment to be entered up against itself in an action for its alleged breach. There can be little doubt that effect would be given to this principle were a similar case to occur in this country. The following may therefore be stated as the general result of General rule the decisions hitherto pronounced. A company is not bound by of company for the acts, stipulations, or engagements of its promoters, unless these meters.^™ be distinctly set forth in its special act or other instrument of constitution, be obviously implied therein, or have been in some unmistakeable manner homologated or adopted by the company after its formation. It need scarcely, perhaps, be remarked, that though the com- When com- pany when formed may not be found liable for implement of the boun^the pro- engagements of its promoters, this has no effect to release the pro- u^^ie^^ remain motors, or such of them as have incurred liability (c). (a) See Lindley 321, whose views (6) 2 De G. and I. 547 ; S. C, 24 on this subject are somewhat different Beav. 339. See Browning v. Grt. from those submitted in the text. But Cen. Min. Co., 5 H. and N. 856. see Spademan v. Lattimore, 3 Giff. 16. (c) Cal. and Dumb. R. Co., ut supra. [ 86 J CHAPTER XL FORMATION OF REGISTERED COMPANIES UNDER COMPANIES ACT, 1862,' 25 and 26 Vict. c. 89. THE Number of members. Since the second day of November 1862, no company, association, or partnership consisting of more than ten persons can be formed for the purpose of carrying on the business of banking, unless it is registered as a company under 'The Companies Act, 1862,' or is formed in pursuance of some other Act, or of letters patent ; and no company, association, or partnership consisting of more than twenty persons, can be formed for the purposes of mercantile gain, unless so registered, or formed under some other Act, or by letters patent, or in England be a mining company within the jurisdiction of the Stannary Courts of Cornwall and Devonshire (sec. 4). But any seven or more persons associated for a lawful purpose may, by registration in accordance with the provisions of the Act, form an incorporated company (sec. 6). The company may be formed with or without limited liability ; and in the former case, the limitation may be either by shares or by guarantee (sees. 6, 7). Three Muds of companies. The statute therefore contemplates three kinds or classes of associations, viz. 1. Companies limited by shares. 2. Companies limited by guarantee. 3. Companies with unlimited liability. It is important to keep these distinctions in view, as they mate- rially affect the formation and the subsequent management of the company. Chap. XI.] COMPANIES ACT, 1862. 87 I. COMPANIES LIMITED BY SHAKES. These compaiiiies proceed on the principle of limiting the liability Companies of the members to the amount (if any) unpaid on their shares, shares. They are formed by a memorandum of association. This instru- ment must contain, 1. The proposed name, with the addition of the word ' limited^ 2. The part of the United Kingdom — England, Scotland, or Ireland — where the registered office is to be situated. 3. The objects of the company. 4. A declaration of limited liability. 5. The amount of proposed capital, divided into shares of a fixed amount (sees. 7, 8). Each subscriber must take at least one share, and must write opposite his name the number of shares he takes (sec. 8). For the form of this instrument, see Form A, Sch. 2. It must bear the same stamp as a deed, and must be signed by every subscriber in presence of and attested by one witness at least (sec. 11). In addition to the memorandum of agreement, there may also be articles of association providing such regulations as the sub- scribers may deem advisable. These articles must be expressed in separate paragraphs, numbered arithmetically, and may contain all or any of the provisions contained in Table A of Schedule 1. The articles must be printed and stamped, signed and attested in the same way as the memorandum (sees. 14, 16). If the memorandum of association is not accompanied by articles, and in so far as the articles do not exclude or modify the regulations of Table A, Sch. 1, these regulations, so far as applicable, form the rules of the company (sec. 15). Banking companies registering as limited by shares, do not attain limited liability in respect of their issue (sees. 182-8). II. COMPANIES LIMITED BY GUARANTEE. These companies are based on the principle of having the liability Companies of the members limited to such amount as they respectively under- guarantee. take to contribute to the assets of the company in the event of its 88 FORMATION OF COMPANIES [Book I. being wound up (sec. 9). Their memorandum of association must always be accompanied with articles of association (sec. 14). The memorandum consists of four articles, the three first being the same as those in the previous class of companies, and the fourth being a declaration that each member undertakes to contribute a specified amount to the company assets in the event of its being wound up (sec. 9). The company may or may not have a capital divided into shares (sec. 14). If it have a capital divided into shares, each subscriber must take at least one share, and must state in the memorandum the number of shares he takes (sec. 14). The articles of association may adopt all or any of the provisions contained in Schedule 1, Table A, and such others as may be deemed expedient ; and if the capital is divided into shares, they must state the amount of capital proposed. If, again, the company has not a capital divided into shares, they must state the number of members, to enable the registrar to determine the fees payable on registration (sec. 14). If the company have a capital divided into shares, the memo- randum and articles of association will take the Form 0, Sch. 2 ; if the company have not a capital divided into shares, the memoran- dum and articles will assume that of B, Sch. 2. Banking companies registering as limited by guarantee, do not attain unlimited liability in respect of their issue (sees. 182-8). III. OOMPASriES WITH UNLIMITED LIABILITY. Companies These companies require in like manner both a memorandum with unlimited , . , „ . . , , . , liability. and articles of association (sec. 14). The memorandum of association contains, 1. The name of the company. 2. The part of the United Kingdom, whether England, Scot- land, or Ireland, where the office is to be situated. 3. The objects of the company (sec. 10). These companies' may or may not have a capital divided into shares. If the company has a capital so divided, each member must take at least one share, and must state in the memorandum of asso- Chap. XI.] UNDER ACT 1862. 89 ciation the number he takes (sec. 14). The memorandum of asso- ciation must always be accompanied by articles of association, which may contain such regulations as are deemed expedient, together with all or any of those in Table A, Sch. 1. In companies with capital divided by shares, they must state the amount of capital proposed ; and in companies not having a capital divided by shares, they must state the number of members (sec. 14). The Act only gives one form for the memorandum and articles of association of unlimited companies, viz. that applicable to com- panies with a capital divided into shares — Form D, Sch. 2. But the form for such as have not a capital limited by shares appears to be similar to Form B in the same schedule intended for companies limited by guarantee, omitting the 4th section in the memorandum, and making such obvious alterations as the nature of an unlimited company requires, and also adopting such of the articles of Table A, Sch. 1, as may be deemed advisable. The articles of association must state the number of members of the proposed company, in order to determine the fees payable on registration (sec. 14). GENERAL EULES APPLICABLE TO THE THREE KINDS OF COMPANIES. The memorandum and articles of association, when duly Registration of . . c n 1 memorandum stamped, signed, and attested, are, in the case or a ocotch com- and articles. pany, delivered to the Registrar of Joint-stock Companies for Scotland, who retains and registers the same. The fees payable to the registrar in the case of companies with a capital divided into shares are those marked in Table B, Schedule 1, or such smaller fees as the Board of Trade may from time to time direct ; and in the case of companies not having a capital divided into shares, those in Table 0, Schedule 1, or such smaller fees as before (sec. 17). The memorandum and articles of association (if any), when Memorandum stamped, signed, and attested, bind the company and the members when properly thereof to the same extent as if each member had subscribed his a covenant. name and affixed his seal thereto, and there Vere in such memo- randum and articles a covenant on the part of himself, his heirs, executors, and administrators, to conform to all the regulations 90 REGISTRATION OF COMPANIES [Book I. Eegistration creates incor- poration. Alterations ' after regis- tration. Identity of name. and conditions contained therein, subject to the provisions of the Act (sees. 11-16). Upon registration of the said memorandum and articles (if any), the registrar certifies under his hand that the company is incor- porated ; and in the case of a limited company, that it is limited. The subscribers of the memorandum, and such other persons as may from time to time become members, are thereupon constituted into a body corporate by the name contained in the said memo- randum, and capable forthwith of exercising all the functions of an incorporated company, having perpetual succession and a common seal, with power to hold lands, and with liability limited or un- limited (a) on the part of the members, as the case may be (sees. 17 and 18). The registrar's certificate of incorporation is conclusive evidence of the statutoi-y provisions having been complied with (sec. 18). After registration, no alteration on the memorandum can be made, except in the two following cases : — 1. Companies limited by shares may so far modify their memorandums of association (sec. 12), if authorized to do so by their regulations as originally framed, or as altered by special reso- lution (sees. 50 and 51), as to increase the capital by issue of new shares, to consolidate and divide the capital into shares of larger amount, and to convert paid-up shares into stock (sec. 12). 2. Any company may, with the sanction of a special resolution and the approval of the Board of Trade, change its name ; and the registrar then enters the new name, and issues a certificate of in- corporation altered to meet the circumstances (sec. 13). Articles of association may be changed by special resolution, subject to the provisions of the Act and the conditions of the memorandum of association (sees. 50 and 51). No company can be registered under a name identical with that of a subsisting company, or so closely resembling it as to be calculated to deceive. Where this is the case, it must be altered with the sanction of the registrar (sec. 20). Every member is entitled to receive a copy of the memorandum of association and of the articles (if any) on payment of one shilling, under a penalty of one pound (sec. 19). (a) Unlimited companies are, properly speaking, only quasi corporations. Chap. XI.] UNDER ACT 1862. 91 APPLICATION OF THE ACT TO COMPANIES ALREADY EXISTING. Not only does the Act apply to companies formed under its provisions ; but companies already existing, whether corporate or unincorporate, may, with some exceptions, obtain by registration the benefits of its provisions. In the statutory provisions applicable to this matter, the expres- Application of T • 1/4 • k f , ' ^ , ^ , . the Act to sion Joint-stock Companies Acts frequently occurs. Under this existing com- expression are included the Joint-stock Companies Acts of 1856 and 1857 (19 and 20 Vict. c. 47, and 20 and 21 Vict, c. 14), 'The Joint-stock Banking Companies Act' of 1857 (20 and 21 Vict. c. 49), and the Act to enable joint-stock banking companies to be formed on the principle of limited liability (21 and 22 Vict. c. 91); but it does not apply to 8 Vict. c. 110, intituled 'An Act for the Registration, Incorporation, and Regulation of Joint-stock Companies' (sec. 175). Companies previously formed and registered under the ' Joint- stock Companies Acts,' as limited companies, when registered under the present Act, are deemed to be companies limited by shares (except as to the provision of Table A); and companies other than limited, as unlimited companies. The power to alter regulations by special resolution given in the present Act is declared to extend to any provisions contained in the Table marked B annexed to 'The Joint-stock Companies Act, 1856,' and to any regulations as to amount of capital, or its distribution into shares, even though these should be contained in the memorandum of association (sec. 176). The present Act applies to companies registered but not formed under the former Joint-stock Companies Acts, in the same way as to companies registered but not formed under its provisions (sec. 177). Whenever reference is made to the date of registration, it means the date at which the company was registered under the former Acts (sees. 176-7). As a general rule, every company in existence prior to Nov. General rule as 2, 1862, including companies registered under ' The Joint-stock ° ^^^'^ ^^ ^°"' Companies Acts,' any company formed subsequently to that date by special act or letters patent, and any company within the juris- diction of the Stannaries, or otherwise duly constituted by law, 92 PREREQUISITES TO [Book I. provided it consist of seven or more members, may register under the present Act as an unlimited company, as a company limited by shares, or as a company hmited by guarantee. The fact that registration has been resorted to for the purpose of winding up, is no objection to its validity (sec. 180). LimitationB of ^]^g. application of this general rule is, however, subjected to the following regulations : — 1. No company can register when the liability of its members has been limited by special act or letters patent, unless it be a joint- stock company in the sense of the Act. 2. No company formed with limited liability by special act or letters patent can register as an unlimited company, or as a company limited by guarantee. 3. No company that is not a joint-stock company in the sense of the Act can register as a company limited by shares. 4. To warrant registration, the resolution of a majority of the members at a general meeting specially called is necessary. 5. To warrant an unlimited company to register as a limited ~ company, the majority must consist of at least three-fourths. 6. When a company is about to be registered as limited by guarantee, the consent to registration must be accompanied by a resolution that each member undertakes to contribute towards the liabilities of the company to a certain specified amount. Majorities are to be computed with reference to the number of votes to which each member is entitled according to the res;ulations of the company (sec. 179). Definition of In SO far as concerns the purposes of registration, the expres- oompanyintiie siou 'Joiut-stock Company' is defined in the Act to mean a Act. company having a permanent paid-up or nominal capital of fixed amount, divided into shares, also of fixed amount, or held and ' transferable as stock, or divided and held partly in one way and partly in the other, and formed on the principle of having for its members the holders of such shares or stock, and no other persons (sec. 181). Such companies, on being registered with limited lia- bility, are deemed companies limited by shares (sec. 181). Banking No banking company issuing notes can attain limited liability in respect of such issue; but though registered as limited com- panies, and de facto so in other respects, they continue to subject Chap. XL] REGISTRATION. 93 their members to unlimited liability for the whole amount of their issue (sees. 182 and 188). Previously to the registration of any existing joint-stock com- Prerequisites pany, there must be delivered to the registrar the following docu- of existing ments : — 1. A list showing the names, addresses, and occupations of companies. all persons who, on a day named not more than six clear days ^before the day of registration, were members of such company, with the addition of the shares held by such persons respectively, distinguish- ing in cases where the shares are numbered, each share by its num- ber : 2. A copy of the special act, charter, letters patent, deed of settlement, contract of copartnery, cost book regulations, or other instrument constituting or regulating the company : 3. Joint-stock companies intending to register as limited companies, must, in addi- tion to the above, lodge a statement specifjdng their nominal capital and the number of shares ; the number of shares 'taken, and the amount paid on each ; the name of the company, with ' limited ' as the last word thereof ; and in the case of companies to be limited by guarantee, the resolution declaring the amount of the guarantee (sec.' 183). Previously to the registration of existing companies other than prerequisites joint-stock companies in the sense of the Act, there must be delivered of eating to the registrar a list showing the names, addresses, and occupations other^ftan of the directors or other managers (if any) of the company, a copy j,o^^pa;^es. of the special act, charter, letters patent, deed of settlement, con- tract of copartnery, cost book regulations, or other instrument con- stituting or regulating the company, with the addition, in the case of a company to be limited by guarantee, of the resolution declaring the amount of guarantee (sec. 184). When the capital of the joint-stock company has been in whole or part converted into stock, the statement to be delivered to the registrar must specify the amount of stock instead of the number of shares, and the names of the persons holding such stock, as in the former case (sec. 185). The lists and statements required to be delivered to the registrar Authentication must be authenticated by a declaration of the directors, or any two of them, or of any two other principal officers of the company, made in terms of 5 and 6 Gul. iv. c. 62 (sec. 186) (a). (a) For form of declaration see Appendix. 94 EFFECTS OF EEGISTRATION [Book I. Notice in registration of existing bank- ing companies registering with limited liability. Exemption from payment of fees. Certificate of registration incorporates. Conclusive evidence that statutory requisites have been complied with. Property vests in the cor- poration. Esgistration does not affect debts previous- ly incurred. The registrar may require such evidence as he thinks necessary to satisfy himself whether the company seeking registration is or is not a joint-stock company in the sense of the Act (sec. 187). In the case of existing banking companies intending to register with limited liability, thirty days' previous notice at least must be given ftf such intention to eveiry customer who has a banking account with the company. Service may be made either personally, or by putting the notice in the post directed to the last known address of the customer. The consequence of not serving such notice, is to render the certificate of limited liability a nullity in all questions between the company and the customer who did not receive due notice (sec. 188). No fees are exigible for the registration of existing companies not registering as limited companies, or of companies previously limited by Act of Parliament or letters patent (sec. 189). When the requisites for registration have been duly complied with, the registrar certifies under his hand that the company apply- ing for registration is incorporated under the Act 1862, and in the case of a limited company that it is limited ; and thereupon it is incorporated, with perpetual succession, a, common seal, and power to hold lands. Banking companies in Scotland so incorporated are deemed to be incorporated by or under Act of Parliament (sec. 1*91). The certificate of incorporation is conclusive evidence of all the requisites of the statute having been complied with, and that the company is authorized to be registered as a limited or unlimited company. The date of incorporation mentioned in the certificate is the date of incorporation under the Act (sec. 192). This, it will be observed, differs from the date of registration, which, as already mentioned, means the date when that took place under a former Act by virtue of which the company had been originally formed or registered (sec. 177). All property, whether personal or real, and all rights attaching thereto, which belong to the company at the date of registration under the present Act, vest by that registration in the company as a corporation (sec. 193). Registration under the Act has no effect on obligations or lia- bilities previously incurred (194); and all existing actions or suits by or against the company, or the public officer, or any member thereof, Chap. XI.] ON EXISTING COMPANIES. 95 continue in the same manner as if such registration had not taken place. But execution cannot, after registration, issue against the effects of individual members for the company debts ; if the corpo- ration property or effects prove insufficient to satisfy the judgment or decree in such actions or suits, the only remedy is an order to wind up (sec. 195). When an existing company registers under the Act, all provi- Effects of regis- sions contained in its special act, charter, letters patent, deed of the Act. settlement, contract of copartnery, or other instrument of formation, including in the case of companies limited by guarantee the resolu- tion declaring the amount of guarantee, are deemed to be conditions and regulations of the company, in the same way as if they were contained in a registered memorandum and articles of association ; and all the provisions of the Act apply to the company, and its members, contributories, and creditors, in the same way as if it had been formed under the Act (sec. 196). This rule must, however, be taken with the following limita- Limitation to ° _ general rule. tions : — 1. Table A, Schedule 1, does not apply to companies pre- viously existing, when they are registered under the Act, unless adopted by special resolution. 2. The statutory provisions as to numbering of shares do not apply to any joint-stock company whose shares are not numbered. 3. No company has power to alter any provisions contained in its special act. 4. No company can alter provisions contained in letters "patent without the sanction of the Board of Trade. 5. In the event of the company being wound up, all persons liable for company debts or liabilities contracted prior to registration, and their representatives, may be made contribu- tories. 6. The company cannot alter such provisions contained in the original instrument of its constitution as would, if the company had been formed under the present Act, have been contained in the memorandum of association, and have been unalterable (sec. 196). This, however, does not affect such powers of altering its con- stitution or regulations as may be vested in the company by the original instrument of its constitution (sec. 196). [ 96 ] CHAPTER XII. FORMATION OF COMPANIES BY ROYAL CHARTER AND LETTERS PATENT. Anoieiit state ACCORDING to the ancient laws of the United Kingdom, associa- 01 the law. ° ' tions erected by royal charter could be nothing less than full cor- porations possessed of all the naturalia of a body politic, and in particular of endless endurance and limited liability (a). This, which had come to be a fundamental principle of corporation law, affords a striking proof of the sagacity of our ancestors, who at an early period had discovered that associations for carrying on under- takings of a public nature could only work safely and prosperously when they formed bodies whose term of existence was unlimited, and who were something entirely distinct from the varying units of which at any time they might be composed ; and that they would never be formed on a scale sufficiently large to ensure successful operation, unless their members were secured against that personal liability which attaches to the members of ordinary copartneries. Changes, But in later times, when plausible theories were more regarded than the lessons of experience, these principles came to be overlooked or forgotten ; and it was imagined that the benefits of combined action in carrying on public undertakings might be secured, whUe the fundamental conditions of its successful working were ignored. 6 Geo. IV. 0. 91. Accordingly, in the year 1825 an Act was passed, empowering the Crown to grant charters of incorporation, and at the same time to declare that the persons incorporated should be personally respon- sible for the debts of the association. The total want of success which attended this piece of legislation, instead of showing the 4 & 5 Gui. IV. unsoundness of its principle, led in 1834 to the passing of another (a) See preambles to 6 Geo. iv. c. 1, 73 ; Shaw's Bell's Prin. s. 2177 et seq. ; 4 and 6 Gul. iv. c. 94, and 1 Vict. c. and Grant on Corp. pp. 30 et seq. Chap. XII.] CHARTERED COMPANIES. 97 Act, enabling the Crown, without incorporating at all, to confer on a company by means of letters patent certain privileges, such as that of suing and being sued in the name of a public officer. Both these Acts being found unsuccessful, were repealed by the Act of 7 Gui. iv. and ° .... 1 Vict. c. 73. 1837, known as the Letters Patent Act, which is still in force. By this statute many useful provisions are enacted, and the Effects of principle of registration is introduced; but in other respects its provisions are characterized by the same unsoundness of principle that proved fatal to the two preceding Acts, inasmuch as it allows associations to be erected into quasi corporations with a limited term of duration, and with the members subjected in personal liability for the company debts as in ordinary partnerships — ^thus permitting associations to come into existence unprovided with those privileges which experience has indicated to be important conditions of suc- cessful operation. The Letters Patent Act has accordingly veri- fied the prognostications of practical men ; and its main object of creating associations for public undertakings, with limited privileges, has been almost entirely frustrated. Yet it must be examined in a work of this kind, as companies may still be formed under its provisions, and as it has a very important bearing on all corporations now erected by prerogative. All Crown charters are letters patent, the last being the genus Distinction of which the former is merely a particular species. But since the ciiarters and passing of the Letters Patent Act a distinction is made between ^ ^^^ ^^ ™ ' companies incorporated by royal charter and companies privileged by letters patent, the former being proper corporations, the latter being mere privileged partnerships hardly deserving the name of quasi corporations. I. CHAETEEED COMPANIES. Coriipanies established by royal charter are proper corporations. Chartered and until the passing of the Letters Patent Acts were necessarily oo^oratfons™ possessed of all the naturalia of these bodies politic, insomuch that it exceeded the prerogative to derogate from them in the incorpo- rating charter. Hence it would seem that all associations erected by royal charter prior to 1825, with the exception of such as received their charter under the provisions of an Act of Parhament limiting their privileges, possess ipso jure all the naturalia of a cor- G 98 FORMATION OP [Book I. Effects of charter. Obtaining of charters. poratlon proper. Provisions, it is said, were sometimes introduced into Scotch charters, bearing that the members of the company should, notwithstanding incorporation, be liable personally for the company debts, as in a common partnership; but there is great reason to believe that such provisions are either absolute nullities, or may tend to affect the validity of the charter. Since 1825, the date of the first Letters Patent Act, the law is somewhat altered. If in charters granted since that period no pro- vision is contained to the contrary, the company is a full corporation as of old, with all its rights and privileges ; but if the charter contain clauses limiting the period of duration to a fixed term, and eliminat- ing in whole or in part the element of non-liability of the members for the company debts (a), these limitations will be effectual. The charter provides rules and regulations for the management of the association ; and in so far as these extend, they form a code of laws binding on it and its members. Within the limits defined in the charter, the members may pass bye-laws for the management of the corporation ; but in other respects they cannot in the least degree modify or innovate the constitution and rules laid down in the incorporating instrument (b). An Act of Parliament may alter or detract from the provisions of a charter, as it may entirely subvert the corporation; but the Crown has no power to vary the terms of a charter once accepted, or to force a new one on an unwilling corporation (c). Without a formal surrender, the Crown may in general alter or modify the terms of an old charter, provided this be consented to by the will of the corporation, which is that of a majority of its members (d) ; but if the charter have once been confirmed by statute, it cannot afterwards be varied without the authority of the Legislature (e). To obtain a charter it is necessary to petition the Queen in Council, and to lodge the petition and a draft of the desired charter (a) 1 Vict. c. 73, ss. 4, 29 ; and see 6 Geo. IV. c. 91 ; and Charter of Na- tional Bank of Scotland; Pari. Pa. Estimates and Accounts for 1831. (b) Hill V. Fairweather, 1823, 2 S. 491 ; Corstorphine v. Trades of Calton, 1834, 12 S. 397. See antea, p. 37 ; and Somes v. Currie, 1 K. and J. 605. (c) Grant 18 et seq.; Dr Askew^s case, per Yates, J., 4 Burr. 2200. (d) Grant 18 et seq. ; BuU. N. P. 212 e. ; R. v. Haythorne, 5 B. and C. 410 ; R. V. Hughes, 7 B. and C. 708. (e) Royal Ex. v. Vaughan, 1 Burr. 155 ; Grant 10 ; R. y. Miller, 6 T. R. 268. Chap. XIT.] CHARTERED COMPANIES. 99 at the Council Office. These documents are afterwards laid before the Board of Trade, and any other Government officials whose advice may be deemed of importance. But before any report has been made thereon, it is necessary that notice of the application be inserted by the parties applying, three several times in the London Gazette, and in one or more of the newspapers circulating within the county in which it is proposed that the company's principal place of business shall be established, at intervals of not less than a week (a). If the report prove satisfactory, and it be resolved to accede to the prayer of the petition, the charter as finally adjusted is issued under the seal appointed to be used in Scotland in place of the Great Seal, and is duly registered. The Crown cannot incorporate persons against their will ; and therefore, to render a charter valid and binding, it must not only be duly granted by the Crown, but accepted by those in whose favour it is issued. The members of the corporation are such persons only as are Who are '■ . members. declared to be so in the charter, or are subsequently admitted members in terms of the provisions contained in it, or authorized by it to be made for that purpose (V). Charters, however formally obtained, are not necessarily of any y^Mity °^ ' J ' J J onartere. legal value. If in granting them the Crown has exceeded its pre- rogative, — as by seeking to confer rights or privileges which could only be conceded by the Legislature ; or if they have been obtained under a misconception — induced, for example, by false and fraudu- lent representations, — they maybe reduced as nullities by the supreme tribunals (c). This may be done in England by the prerogative writ of quo warranto, or by an information in the nature of that writ filed by the Attorney-General, or by scire facias, at the instance or with the concurrence of the Crown (d). In Scotland, the proper form of procedure would seem to be by action of declarator and reduction, at the instance or with the concurrence of the Lord Advocate (e). Those at whose instance and petition (a) "Wordsworth on Mining and {d) See Reg. v. East. ArcJii. Co., other Companies 235 ; Lindley 115 ; 4 De Gex, M. and G. 199, and 1 Ell. ^ 1 Vict. c. 73, s. 32. and Bl. 310, and 2 ibid. 856 ; Whar- (6) See per Yates, J., 4 Burr. 2200; ton's Law Lexicon 768; Grant on Lindley 114. Corp. 89 et seq. (c) Mason v. Mag. of Montrose, (e) See Act 1567, c. 18, which gave 1821, 1 S. 136; Act 1567, c. 18; Mac- extraordinary powers to the Co)irt of bride v. Lindsay, 1852, 9 Ha. 574. Session ; Bishop of Dunkeld v. Balme- 100 FORMATION OP [Book I. the charter was obtained cannot insist for its reduction, however objectionable its provisions may be, or whatever irregularities may have attended its concession : from this they are barred by their own acts of application and acceptance (a). The same rule would seem to apply to those of the public who have contracted with the corporation on the basis of its validity, at least in so far as their engagements with it are concerned. But as regards acts done by a body pretending to be a corporation, when its charter was in fact invalid, these may seemingly be resisted and called in question by the public, without the necessity of formal proceedings to annul the charter (6). It must hs confessed, however, that much obscu- rity hangs over this branch of corporation law in Scotland. II. LETTERS PATENT COMPANIES. Letters patent companies not corporations. How obtained. Formation of company. Companies formed under the provisions of the Letters Patent Acts are not corporations, but are mere common law companies or partnerships possessed of such privileges as are contained in their letters patent. Letters patent are obtained in the same way, and by adopting the same procedure, as in the case of a royal charter;, but the company is not formed by them : their effect is merely to super- induce certain privileges on the company when it has been formed as now to be explained (c). A company obtaining the privileges of letters patent must be entered into and be formed by a deed of partnership or association (sec. 5). This instrument contains the number of shares into which the undertaking is divided, the name or style of the company, and the names of the members, the date of commencement, the business or purpose, and the principal place of business. These five last particulars may be contained in a schedule attached to the con- tract. The contract must also contain the appointment of two or more officers to sue or be sued on behalf of the company (sec. 5) (d). (b) See Grant on Corp. 40 ; Lindley 115. (c) 7 Gul. IV. and 1 Vict. c. 73, ss. 2 and 5. (d) See PUlipson v. Earl of Egre- mont, 6 Q. B. 587. rino, 1630, M. 9892 ; and compare 15 and 16 Viot. o. 83, s. 43, with Gillespie V. Young, 1861, 23 D. 357. (a) See Mill v. Mag. of Montrose as revd., 1825, 1 W. and S. 570. Chap. XII.] LETTERS PATENT COMPANIES. 101 Within three months after the grant of the letters patent, the company must make a return to the General Registry Office at Edinburgh (in the case of a Scotch company), containing the date of the grant, the name of the company, the business and the principal place for carrying it on, the total number of shares regularly numbered in succession, the amount to which each share renders its holders liable, the names and (except in the case of corporations) the places of abode of all the members, and the distinctive number or numbers of shares held by each member. A return must at the same time be made of the name and descrip- tion of the officers appointed to sue and be sued on its behalf. A form is given in Schedule A attached to the Act (sees. 6 and 16). After this registration, no change can be made on the company name ; and if the principal place of business is changed, a corre- sponding return, in the form of Schedule B (sec. 7), must be made within three months. When persons cease to be members of the company, except by transfer of shares made by deed or in writing, or when any addi- tional shareholder is added thereto, a return must in like manner be made ; and when a member's name is changed by marriage or otherwise, a return must in like manner be made, setting forth the alteration in terms of Schedule (sec. 8). All returns must be signed by one of the officers, and verified by a Authentication °. •' ' •' of returns. declaration of such officer, in terms of 5 and 6 Gul. iv. c. 62. In de- fault of such officer, the return must be signed and verified by some member of the company (sec. 14). The form of declaration is given in the Appendix. The return is not rendered invalid by uninten- tional error, provided a correct return be transmitted within one month thereafter in the form of Sch. F, appended to the Act. The returns are registered by the Lord Clerk Eegister or his deputy, in books kept for the purpose; and any one is entitled to their inspection on a fee of one shilling, and to a certified copy on payment of a small sum (sec. 17). These certified copies are received as evidence (sec. 18). No person becoming a member by transfer or otherwise is enti- Creation and tied to recover any share of profits, until duly entered on the register membershj." (sec. 20) ; and persons ceasing to be members, whether by transfer, death, or otherwise, continue liable as members till the transfer or other fact by Avhich membership ceased has been registered (sec. 21). [ 102 ] CHAPTER XIII. Special act. Parliamentary contract. FORMATION OF COMPANIES UNDER 'THE COMPANIES CLAUSES CONSOLIDATION (SCOTLAND) ACT, 1845' (a). A COMPANY formed under this statute is incorporated and brought under the general provisions of the statute by its special act, which at the same time provides for such peculiarities in its con- stitution and managemeht as the Legislature deems necessary to enable it to prosecute successfully the ends and purposes of its creation. The clauses and provisions of the general st&,tute are held to be incorporated with and to form part of the special act, except in so far as they are specially varied or rendered inappli- cable by the latter. When the expression '■prescribed' occurs in the general statute, it means something prescribed in the special act for the purpose referred to (preamble and sees. 1, 2, and 5). In order to obtain a special act, the promoters must of course satisfy the Legislature of the public utility of their proposed under- taking. An instrument must be executed termed a parliamentary contract ; and certain rules and formalities prescribed by the Standing Orders must be observed and carried out. These orders are published annually, and frequently vary in their details, so that the last edition only can be relied on. The parliamentary contract is an agreement entered into by the subscribers, whereby each undertakes to pay a sum set opposite his name. The total amount subscribed must equal three-fourths of the expense which has been estimated as the cost of the pro- posed undertaking. The ' parliamentary contract ' is not to be confused with the ' subscribers' agreement,' which, as already explained, is a private contract entered into between the promoters and those who agree to take shares in the company when formed. Both are, however, sometimes embodied in the same instrument. (a) 8 Vict. 0, 17. Chap. XIII.] COMPANIES ACT, 1845. 103 Until the special act has been obtained, the company does not come into existence, and the partnership relation between the sub- cribers is not constituted. In the meantime they are not partners, but merely persons associated for the purpose of obtaining an act to create a corporation for the prosecution of a certain undertaking (a). When the act is obtained, the company is incorporated, and the subscribers and others applying for shares may become its members by registration. Companies incorporated by special act prior to the 8th of May 1845, are governed exclusively by their special acts ; but all joint-stock companies in Scotland, incorporated, or to be incorporated, by Act of Parliament, for carrying on public under- takings since that date, are governed by their special acts, in com- bination with the provisions of the general Act which we are now considering (preamble) (b). The capital of a company formed under this general Act is Distribution T -1 1 • 1 J. 1 I 1 ., , of capital. aivided into shares oi the number and amount prescribed in its special act, and they must be numbered in arithmetical progression (sec. 6). As to who are to be deemed shareholders, or, in other words, shareholders. what constitutes membership, the following are the statutory pro- visions : ' The word shareholder shall mean shareholder, proprietor, or member of the company' (sec. 3). 'Every person who shall have subscribed the prescribed sum or upwards to the capital of the company, or shall otherwise have become entitled to a share in the company, and whose name shall have been entered in the register of shareholders, shall be deemed a shareholder of the company' (sec. 8). This register of shareholders is a book which the com- Eegister of pany is required to keep, and inwhich must be entered from time ^ *'^ " to time the names of the shareholders, together with the number of shares they are entitled to hold. The names must be in alphabetical order, and the shares must be distinguished by their numbers. The book must be authenticated by the company seal, adhibited at the first ordinary meeting, or at the next, and so forth from time to time (sec. 9). When so authenticated, it is declared to (a) See chap. x. p. 76. of the corresponding English general (6) "When a part of a Scotch line of Act 8 and 9 Vict. c. 16, quoad such railway runs into England, the com- part of the line. See Wilson v. Cal. pany is brought under the provisions Ba., 5 Ex. 822. 104 FORMATION OF [Book I. Shareholders' address book. Certificate of proprietorship. Evidence of membership against share- holders. Eegister^rmffi facie evidence. be prima facie evidence of membership against a person whose name stands registered therein (sec. 29). And creditors have a right to its inspection (sec. 38). The company must also keep a 'share- holders' address book,' which may be perused by any shareholder at convenient times (sec. 10). Any shareholder is entitled on demand, and on payment of a small fee, to a certificate of proprietorship from the company, having the common seal affixed (sec. 11) ; and provisions are made for having it renewed when worn out or damaged (sec. 13). This certificate is declared to be prima facie evidence of the title of the shareholder, and of his executors, administrators, successors, and assigns, to the share therein specified ; but the want of this docu- ment does not prevent a sale of shares by the holder (sec. 12). These statutory provisions appear to have for their object, 1. The supplying of evidence of membership against persons sued as shareholders ; and 2. The furnishing of evidence of proprietorship in favour of parties claiming the rights of members. (1.) Evidence of membership as against persons sued as share- holders. The register is prima facie evidence of membership against any person whose name it bears. But to entitle it to this statutory privilege, it must have been kept and authenticated in accordance with the statutory provisions contained in sec. 9. Hence it was rejected as prima facie evidence in favour of the company, where it did not contain the correct number of shares belonging to each person, and the amount of subscriptions paid upon such shares (a). A rough share-book is not entitled to the statutory privilege (6). And the register, however accurately kept, is not prima facie evidence that one whose name it bears was a shareholder at any time prior to the date when the seal was affixed (c). But it will be received as prima facie evidence if duly sealed, though it may not have been kept with perfect regularity, and may in some respects be inaccurate and imperfect (d). If the register is in several (a) Cal. and Dumb. Ra. Co. v. Lockhart, 1855, 17 D. 917. (6) Ijirkenliead, Lancashire, Ra. Co., 4 Ex. 426 ; ClieUenham and Grt. West. Mid. Rail. Co., 9 C. and P. 55. (c) Ihid. (d) Whitehaven Ra. Co. v. Bain, 1850, 12 D. 829, aff. 3 House of Lords Cases ; 7 Bell's Ap. 79 ; London Gr. .Tun. Ra. Co., 1 Q. B. 271, 2 M. and Chap. XIII.] COMPANIES UNDER ACT OF 1845. 105 volumes, the last of which contains a recapitulation, it is sufB- ciently authenticated by the seal being affixed to such recapitula- tion (a). And if the seal be de facto affixed, it is not necessary to prove the time or place at which, or the authority by which, it was appended (b). The register, though prima facie, is not conclusive evidence of eonoiusive" membership against a party whose name appears thereon. It is evidence, provided by sec. 8, that a person shall be deemed a shareholder, if by subscription or otherwise he has become entitled to a share in the undertaking, and has been entered in the register. Hence a party whose name has been registered, may rebut the prima facie evidence so created, by showing that his name was inserted on the register, while he had not acquired the right to be a shareholder (c). But if a person has dealt with the company as a shareholder, and has been registered as such, he cannot set aside the effect of such registration, on the ground that certain conditions or formalities strictly requisite to confer on him the right to become a shareholder had not been observed. Such objections are personal to the com- pany, and will in any view be held as waived by the conduct of the party (d). The register is not the only evidence by which a party may be Register not proved a member at the instance of the company. The statute, evidence, though declaring the register to be prima facie evidence, nowhere excludes other evidence. Hence, when the register, from its irre^ gular character and want of proper authentication, may not be prima facie evidence, it is still admissible as evidence pro tanto to be supplemented by evidence prout de jure (e). But it should seem that a party cannot be made liable as a shareholder to the com- pany, when his name has not been registered at all (/). G. 606 ; Birmingham Ra. Co., 1 Q. B. . Carmarthen Ra. Co., 1 Fos. and Fin. 256; Southampton Dock Co., 1 Man. 282. See per Lord President in and Gr. 448; Gr.Nor. Ra. Co.y. Inglis, Cat. Ra. Co. v. Lockhart, 1854, 17 13 D. 1315, aff. 1852, 1 Macq. 112. D. 30. (a) Grt. Nor. Ra. Co. v. Inglis, (d) Sheffield and Man. Ra. Co., 7 1851, 13 D. 1315 ; aff. 1852, 1 Macq. M. and V. ,574 ; Thomson y. Fullar- 112. ton, 1842, 5 D. 379. (6) North-West. Ra. Co., 5 Ex. (e) Cal. and Dumb. Ra. Co.,l^hi, 855 ; and see Cat and Dumb. Ra. Co. 17 D. 25 and 917. V. Lockhart, 1855, 17 D. 917. (/) See as to this under the head (c) Waterford Ra. Co., 8 Ex. 279 ; ' CalU: 106 FORMATION. [Book I. Evidence of membership in favour of share- holders. Certificate. Cotupulsitorg to register. (2.) Evidence of membership in favour of parties claiming the rights of shareholders. The certificate of proprietorship is prima facie evidence of the title of the person whose name it bears ; but as the want of such certificate is not conclusive against one claiming to be a share- holder, if he can establish that character aliunde, so the mere possession of the certificate is not conclusive evidence in his favour, but may be rebutted by proof prout de jure. The entry of a party's name on the register, as it affords prima facie evidence against him if sued for calls, would also seem to be good evidence in his favour when claiming dividends or other rights of a shareholder. But since it is not declared that those only are to be deemed shareholders whose names appear on the register, it should seem that persons whose names are not on the register may vindicate their rights of membership by evidence prout de jure (a). A person entitled to shares may compel the company to register ■ him as a shareholder. This is done in England by mandamus (b) ; in Scotland the remedy would seem to be by action of declarator, with conclusions ad factum prcestandum. Refusal or unreasonable delay to register a party entitled to shares, will ground an action of damages against the company (c). (a) See Great Nor. Ra. Co. v. Inglis, 1851, 13 D. 1315 ; aff. 1 Macq. 112. (6) R. Y. General Cemetery Co., 6 E. and B. 415 ; Copeland v. North- East. Ra. Co., 6 B. and B. 277. (c) Catchpole v. Ambergate Ra. Co., 1 El. and Black. Ill; Stewart v. Anglo-Cal. Gold Min. Co., 18 Q. B. 736. BOOK 11. CONSTITUTION AND MANAGEMENT OF PAKTNERSHIPS AND COMPANIES. CHAPTER I. GENERAL RULES. The purposes for which a partnership or company is formed, the manner in which it is to be managed, and the machinery to be em- ployed in the management, are generally laid down with tolerable clearness in the instrument of formation, whether this be partner- ship articles, deed of settlement, etc., or Act of Parliament, charter, or memorandum and articles of association. These must be rigidly adhered to while they remain in force; and every attempt to depart from them may be effectually resisted by any partner or share- holder who deems himself aggrieved (a). Unless it be otherwise provided in the contract, the powers of Private firms. the members of an ordinary partnership are in all respects equal ; and therefore any attempt on the part of some of the partners to exclude others from the management will be at once checked on application to the Court (b). Indeed, so jealously are the rights of (a) See, as illustrative of this, Max- 11 D. 571 ; Hill v. Edin. and Glasgow ton V. Brown, 1839, 1 D. 367 ; Flem- Ra. Co., 1849, 21 Jur. 445 ; Graham ing V. Campbell, 1845, 7 D. 935; v. North Brit. Bank, 1^4.9,111). 1165; Williamson v. North Brit. Ra. Co., Wilson y. Glasgow and S.-W. Ra. Co., 1846, 9 D. 255 ; Brown v. Adam, 1848, 1850, 13 D. 227 ; Pollock v. Ritchie, lOD. 744 ; Balfour's Trust v. Edin. and 1851, 13 D. 640 ; Blackburn v. Stewart, Northern Ra. Co., 1848, 10 D. 1240 ; 1851, 13 D. 1243 ; Western Bank v. Wedderburn v. Scot. Cent. Ra. Co., Bairds, 1862, 24 D. 859. 1848, 10 D. 1317 ; National Ex. Co. (b) Dickson v. Dickson, 1323, 2 S. v. Glasgow and Ard. Ra. Co., 1849, 413 ; Roive v. Wood, 2 Jac. and W. 108 MANAGEMENT. [Book II. partners guarded in this respect, that when, by the provisions of the contract of copartnery, shareholders were prohibited from access to the books, the Court held that this did not prevent a shareholder from insisting on their exhibition when he accused the directors of fraud (a). Arrangements by which the management is exclusively entrusted to a few of the partners, receive effect only inter socios, and do not affect the pubhc while they remain ignorant of such restrictions (b). COMPANIES. Directors, appointment of; In companies, as contradistinguished from private firms, the ordinary and executive management is entrusted exclusively to managers or directors, who are chosen by the body of shareholders or partners, while the latter retain only the right of general super- vision, and the direction of such extraordinary acts of administration as require the approval of majorities. The shareholders or partners are therefore in no sense the agents of the company, nor is it bound by their acts or representations. Even when the company is not incorporated; the public are presumed to be aware of this feature in the management (c). When the company is unincorporate, the constitution and powers of the managing body are determined by the articles of association ; when incorporate, they are regulated by the provi- sions of the incorporating instrument, whether special act, charter, or registered memorandum and articles of association. The regulations of the company generally prescribe the manner in which the directors or other managers are to be appointed, and also the qualifications necessary for the office. Any substantial infringement of these rules will invalidate the election, and entitle dissentient shareholders to have officials so appointed interdicted from acting, provided the irregular appointment has not been homo- logated by express or implied acquiescence (d). But the acts of Whitcomb, 1 Jac, 558 ; Goodman v. and W. 589. (a) Collins v. North British BanJc, 1850, 13 D. 349. (b) See Powers of Partners. (c) Burnesv. Pemiel, 184-9, ^ler Lord Campbell, 6 Bell's App. 562, and 2 H. of Lords Cas. 520. (d) Blackburn v. Finlay, 1848, 10 D. 590 ; Blackburn v. Buchanan, 1848, 20 Jur. 199. Chap. I.] GENERAL RULES. 109 such irregularly appointed office-bearers will bind the company in all contracts into which strangers have bona fide entered with them as the company's accredited agents (a). The number of those composing the managing body is also number of. generally fixed by the company's partnership articles, or by its in- corporating instrument. And when this is so, the number cannot, as a general rule, be varied. "When, however, the company is unincorporate, it would seem that an alteration may be made by a resolution of the shareholders, passed at a meeting specially con- vened. Yet it would appear the resolution must be unanimous (b). But where the number has been fixed by special act or royal charter, it will, it is thought, remain unalterable (c), unless the pro- vision has been merely directory or permissive (d). Acts done by a less number of directors than that specially required by the com- pany's regulations, will in general be held invalid (e), unless adop- tion or acquiescence can be established (/). All duly appointed directors are such, whether they choose to act or not. But whether they cease to be so in consequence of bankruptcy or other supervening disqualification, depends on the rules of the com- pany {g). The body of shareholders exercise their right of controlling and Control by . meetings. regulating the management of the company, by resolutions at meet- ings duly convened. The company contract, whatever it may be, usually contains provisions for the calling of such meetings ; but if those who are entrusted with this function refuse to do so, the Court will on application interfere where this is necessary for the interests of the shareholders (7i). To the validity of these resolutions it is in general necessary Eesoiutions. that due notice shall have been given to every one entitled to (c) Edin. and Leiih Ra. Com. v. (d) Thames Haven Dock Co. v. Rose, HeWewhite, 6 M. and W. 707 ; Swan- 4 Man. and Gr. 552. sea Dock Co. v. Levien, 20 L. Jour. (e) Bosanquet y. Slwrtridge, 4 Ex. Ex. 447 ; Miles v. Bough, 3 Q. B. 845 ; 699 ; Ridley v. Plymouth Grinding Co., Hill y. Edin. and Glasgow Ra. Co., 2 Ex. 711 ; Brown v. Andrew, 13 E. 1849, 21 Jur. 455. Jur. 938, Q. B. (b) Smith v. Goldsworihy, 4 Q. B. (/) Tham,es Haven Dock Co. Y.Rose, 430 ; Davis v. Hawkins, 3 M. and 4 Man. and Gr. 552. S. 488. See Maxton, 1839, 1 D. (jr) PM;3s v. ij/Ze, 10 A. and E. 113 ; 367. Wilson v. Wilson, 1839, 6 Soott 540. (c) Lindley 466. (A) Foss v. Harhottle, 2 Ha. 461. 110 MANAGEMENT. [Book II. attend (a) ; and what amounts to due notice will be determined by the provisions to that effect contained in the company's regulations. Nothing can, without notice, be transacted at an adjourned meeting, except what was left unfinished at the previous one {b) ; but those present at the original meeting do not require to receive notice of the adjournment (c) ; and shareholders de facto attending a meet- ing cannot afterwards object to its proceedings, on the ground that the notice they received was informal or insufficient (d). Meetings, ordi- Meetings are either ordinary or extraordinary. Ordinary nary and extra- ^ ■' i -y ordinary. meetings are for the transaction of general business, and are held at stated times ; extraordinary meetings are held pro re nata, and the matter to be considered should be specified in the notice. Re- solutions passed at extraordinary meetings, in relation to matters for which they were not convened, are mere nullities ; and they cannot be validated by subsequent ordinary meetings, unless the latter might have dealt with the subject-matter of the resolution in the first instance («). The same meeting may be both ordinary and extraordinary (/) ; but if an ordinary meeting is held and ad- journed, it still continues to be an ordinary meeting, though notice is given that special business will be transacted at it (^). Majorities rule. The resolution of the majority of those present at a meeting duly called, is in general the resolution of the company ; except where it affects matters which, by the company's constitution, it is beyond the province of majorities to deal with, e.g. a change in the purposes for which the company was formed (h). Vote by proxy is not allowed, unless the company's contract contain a special provision to that effect (i). Voluntary absentees are bound by the resolutions of a meeting duly convened and acting within the sphere of its competency (k). Minutes of Minutes of meeting are generally required, by the special act, (a) R. V. Langhorn, 4 A. and E. Co., 1 H. and N. 541 ; Cutbill y. King- 538. dom, 1 Ex. 494. (i) R. v. Grimshaw, 10 Q. B. 747. (g) Wills v. Murray, 4 Ex. 843. (c) Wills V. Murray, 4 Ex. 843, Qi) See Chapter on Powers of Ma- 862. jorities ; and Plimnix Life Association, (d) British Sugar Co., 3 K. and I. 2 J. and H. 441 ; Ernest v. Nicholls, 408. 6 H. of L. Ca. 401. (e) Lawes''s case, 1 De G. M'N. and (i) Grant on Corporations 256, n. q; G. 421. Lindley, p. 471. (/) Graham v. Van Diemen's Land (h) Norwich Yarn Co., 22 Beav. 165. Chap. I.] GENERAL RULES, HI to be entered in a book and signed by the chairman. It is a common, though by no means a safe practice, for the secretary to enter the minutes after the meeting is over, to be authenticated by the chairman at the next meeting (a). Partnership books are usually evidence against every partner ; Partnership for all have access to them, and do or may take part in their for- mation. But the books kept by the ofHce-bearers of companies are no evidence against ordinary members, who are excluded from any share in their preparation (6). This is sometimes declared to be otherwise by the special act. Minutes of meetings and the books of the company are not evidence for the company as against third parties, unless expressly declared to be so by statute (c). (a) Miles v. Bough, 3 Q. B. 845 ; LongworiK's case, 1 De G. F. and 1. 32 ; Lindley, p. 472 ; Cornwall Consoli- and also per Lord Campbell, p. 27. dated Mining Co., 5 H. and N. 423. (c) Hilly. Manchester Water Works, See Great Nor. Ra. Co. v. Inglis, 1851, 5 B. and Ad. 866 ; Maguire's case, 3 De 13 D. 1315 ; aff. 1 Macq. 112. G. and S. 31 ; Alderson v. Clay, 1 (6) Per Lord Justice Turner in Stark. 405. [ 112 ] CHAPTER II. CONSTITUTION AND MANAGEMENT OP COMPANIES REGISTERED UNDER THE ACT 1862. When a company, which had no previous existence, is formed under the Act 1862, its constitution is to be found in its registered memorandum and articles of association, coupled with the general rules and provisions contained in the Act. The memorandum of association fixes the character and purposes of the company, and these remain unalterable. The regulations applicable to the man- agement are contained partly in the memorandum, but chiefly in the articles of association, and may be altered as occasion requires by special resolution. registration. When a Company already formed by Act of Parliament is, by registration, brought under the operation of the Act 1862, the con- stitution it received from the Legislature remains intact, except in so far as changes may be made by the company, in accordance with powers to that effect contained in the special act. Companies already formed by royal charter, or privileged by letters patent, retain in like manner the constitution given them by the Crown, except in so far as it may be altered with the sanction of the Board of Trade. Private companies, again, already existing, retain after registration the constitutions originally defined in their deeds of settlement, con- tracts of copartnery, or other instruments of formation, except in so far as they may be changed, in pursuance of provisions to that effect in their instruments (sec. 196). It must be observed, how- ever, that all provisions contained in the letters patent, deed of settlement, contract of copartnery, or other such instrument of for- mation, remain for ever unalterable, when they would have been contained in the memorandum of association, and could not have Chap. II.] ACT 1862. 113 been changed if the company had been formed originally by regis- tration under the Act 1862. When alterations are competent, they are made by special resolution (sec. 196). When registration has taken place, all the provisions of the special act, letters patent, deed of settlement, contract of copart- nery, or other instrument of formation, are deemed to be conditions and regulations of the company, in the same manner as if they had been contained in a registered memorandum and articles of associa- tion ; and all the provisions of the Act 1862 apply in the same way as if the company had been formed originally by registration (sec. 196). All companies registered under the Act are said to be incor- porated, but it is only such as are formed with limited liability that can be deemed proper corporations. Companies registered with unlimited liability are, strictly speaking, quasi corporations (a). Except certain provisions of the most wholesome, and indeed statutory necessary description, the Act may be said to have prescribed association. ' nothing as to the constitution and management of projected com- panies, but to have left these matters to be fixed by the good sense of the promoters. It has however, in Table A, Schedule 1, fur- nished the public with a body of regulations admirably conceived and adapted to all the exigencies of management. These may be adopted in whole or in part as the articles of association ; and it need scarcely be said, that, except in very peculiar cases, promoters will evince their discretion by adopting them in their entirety, or at least in departing from them to as small an extent as possible. We shall now proceed to consider the general rules which the Act lays down for the management of all companies coming under its operation. Some of these provisions are intended to apply only in the absence of special regulations for the same purposes in the company's instrument of formation ; but others are in all cases per- emptory, and cannot be set aside either expressly or by implication. Every company under the Act must have a registered ofiice Registered to which communications and notices may be addressed, under a penalty not exceeding £5 for every day during which this regula- tion has not been complied with. Notice of the situation of this (a) Antea, pp. 41-2. H 114 MANAGEMENT OF COMPANIES [Book II. Name. Begister of mortgages. Certain com- panies must publish state- ment in schedule. List of directors. office, and any change therein, must also be given to the registrar, and recorded by him (sees. 39, 40). Every company limited either by shares or guarantee must have its name affixed outside every office in which it carries on business, under a penalty not exceeding £5 for every instance of omission, exigible not only against the company, but against its directors or managers who have knowingly or wilfully authorized or permitted such default. The name must also be engraven on the company's seal, and must appear in all notices, advertisements, etc., issued by the company, and in all mercantile documents signed on its behalf: the director or other official infringing these rules subjects himself in a penalty of £50, besides being liable personally to any one who suffers loss in consequence of a company obligation not being bind- ing from the want of these formalities (a) (sees. 41, 42). Limited companies must keep registers of all mortgages and charges specifically affecting company property. In these must be entered a brief description of the property mortgaged or charged, the amount of the charge, and the names of the mortgagees. Offi- cials through whose fault this regulation has been infringed, incur a penalty not exceeding £50. The register is patent to creditors and members at all reasonable times, and any refusal of access subjects the offender in heavy progressive penalties (sec. 43). Every limited banking company, and every insurance company, and deposit, provident, or benefit society under the Act, must, before commencing business, and also on the first Mondays of February and August in each year, make a statement of the amount of its capital, how much has been subscribed for, and how much has been called up and received, — what are its liabilities, and what its assets. The Act provides a form which must "be adhered to as closely as possible. A copy of this statement must be conspicuously displayed in the company's registered and other offices, and wherever it carries on business. The provisions of this section are guarded by heavy progressive penalties, both against the company and the officials personally (sec. 44). Creditors 'and members are entitled to a copy of this statement for a sum not exceeding sixpence. Every company not having a capital divided into shares must keep at its registered office a register of the names, addresses, and (a) See Penrose v. Martyn, El. Bl. and El. 499. meeting. Chap. II.] UNDER ACT 1862. 115 occupations of its directors and managers, and send a copy of it to the Eegistrat of Joint-stock Companies, notifying from time to time such changes as may occur. Heavy progressive penalties are incurred both by the company and its directors infringing this pro- vision (sees. 45, 46). Bills and promissory-notes are deemed to have been made, ac- Bills and notes. cepted, or indorsed on behalf of the company, when they have been signed in the company's name, or on its behalf, by any person acting under the authority of the company (a) (sec. 47). The liability of limited banking companies issuing notes is unlimited in relation to such notes (sec. 182). No company under this Act can carry on business for more Loss of than six months after the number of members has fallen under seven, without subjecting every member to liability for the whole company debts contracted after that period ; and any one of them may be sued for the same without joinder of the others (sec. 48). One general meeting at least must be held every year (sec. 49). General In the absence of special regulations, the following provisions are made for general meetings. They may be summoned by five members. They will be held duly summoned if seven days' notice in writing has been served on every member in the same (a) This section is somewhat diffe- promise to pay A. or order £600 for rent from the corresponding provision value received in stock on account of of the Act 1856 (sec. 43), which runs the London and Birmingham Hard- as follows : ' A promissory-note or ware Co., Limited.' It was held by a biU of exchange shall be deemed to majority that the directors signing it have been made, accepted, or indorsed were not personally liable in the note, on behalf of any company registered — Lindus v. Melrose, S H. and N. 177, under this Act, if made, accepted, or 27 L. J. Exch. 326. See also 2 H. ahd indorsed in the name of the company N. 293. In Penrose v. Martyn, 6 E. by any person acting under the ex- Jur. N. S. 362, 28 L. J. Q. B. 28, the press or implied authority of the com- secretary of a limited company, and pany.' But the following cases which who had authority to accept bills for arose under the Act of 1856 may be the company, accepted a biU drawn referred to as illustrative of the pro- on the company, in which he was de- visions of the present Act. A promis- scribed as ' secretary to the said com- sory-note was signed by three persons pany.' On an action being brought, it describing themselves as 'directors ' of was held that the secretary was liable, a company with limited liability, and under sec. 31 of the Act 1856, in con- was countersigned by a party who sequence of the word ' limited ' having described himself as secretary of the been omitted in the name of the corn- company : ' London, Dec. 13, 1856. pany. In Eastwood v. Bain, 3 H. and Three months after date we jointly N. 738, 28 Law Jour., Ex. 74, a share- 116 MANAGEMENT OP COMPANIES [Book II. way as notices are required to be served by Table A, Schedule 1 ; every member has one vote ; and any person elected by the mem- bers present may preside (sec. 52). Special Very particular provisions are made as to what is necessary to resolution. ■' ^ -^ . "l constitute a special resolution ; and the reason of this appears when it is seen that by special resolution the greatest changes may be made on the company regulations, even to the extent of modifying its constitution. To the validity of a special resolution, it is necessary that it be passed at a general meeting, of which notice specifying the intention to propose the resolution has been duly given. It must have a majority of not less than three-fourths of the members present ; and it must be confirmed by a majority at a subsequent general meeting, of which due notice has been given, held not less than fourteen days and not more than one month from the date of the first meeting. It must be observed, however, that by due notice is merely meant notice in terms of the com- pany's regulations ; that unless a poll is demanded by at least five members, the chairman's declaration that the resolution has been carried is conclusive, without any proof of the number or propor- tion of votes ; and that when a poll is demanded (a), reference holder drew a biU on the company, and N. 222, the drawers of a bill of which was limited. It was accepted by exchange indorsed it to a registered ' A. B., secretary, by order of the Royal company, and the officer of the com- Surrey Gardens Company (Limited),' pany delivered it to the plaintiff for the acceptance having been granted by value, bearing the indorsation of two order of certain directors of the com- directors, '■per procuration.'' The ac- pany. On the company becoming insol- ceptor haying been sued by the plain- vent, action was brought by a second tiff, it was held, that whether the indorsee of the bill (but who did not indorsation was sufficient to ground show onerosity either as regarded him- an action by the plaintiff against the self or the first indorsee) against the company or not, there was such an directors who had authorized accept- indorsation as entitled the plaintiff to ance, alleging in one count accept- a verdict against the acceptor on a ance, and in another charging them traverse of the allegation of the in- with falsely representing that they had dorsation by the company to the plain- power to accept on behalf of the com- tiff. pany. It was held that the directors As to the necessity of the bin being were not liable as acceptors ; and that within the sphere of the company's even if there had been a false represen- business in order to render it binding tation, the plaintiff was not entitled to on the company, see Balfour v. Ernest, a verdict, in respect that he had not 6 C. B. N. 8. 601. proved that he had sustained damage (a) "When a poll is demanded, the thereby. In Smitli v. Johnson, 3 H. exclusion of any person entitled to Chap. II.] UNDER ACT 1862. 117 must be had to the number of votes to which each member is entitled by the company's regulations (sec. 51). By a special resolution which has been duly passed and con- firmed in this manner, the regulations contained in the articles of association, or in Table A, Schedule 1 (when this is applicable to the company), may be altered In whole or in part, by addition, subtraction, or substitution ; subject, however, to the provisions of the Act, and to the conditions contained in the memorandum of association (sec. 50). Even these last may be modified by special resolution, to the effect of changing the company's name (sees. 12 and 13), increasing the capital, issuing new shares, consolidating and dividing the capital into shares of larger amount, and convert- ing the paid-up shares into stock (sec. 12). A copy of every special resolution must be printed and for- Eegisteriug warded to the registrar of joint-stock companies, and recorded by resolutions. him. Failure to do this for fifteen days after confirmation of the special resolution, involves the company and such of its officers as are guilty of such omission in heavy penalties (sec. 53). When articles of association have been registered, a copy of every special resolution in force for the time being must be annexed to or em- bodied in every copy of the articles subsequently issued. Where no articles of association have been registered, a printed copy of every special resolution must be forwarded to any member requiring it, on payment of one shilling. Failure to comply with these provi- sions involves the company and its officials in appropriate penalties (sec. 54). By instrument under its common seal, the company may confer Powers of powers of attorney on any person to bind it by deed in places out * "'"'^' of the United Kingdom ; and deeds executed by him on its behalf, under his own seal, will be equally valid, as if they were under the company seal (sec. 55). The Board of Trade may appoint inspectors to examine into Examination .. . „ , 1 p 11 • T into state of and report on the aft airs or the company on the loJlowmg apphca- company tions : 1. In the case of a banking company with a capital divided into shares, on the application of members holding not less than vote seems a good ground for reduc- bell v. Maundy 5 Ad. and Ell. 865. ing an election. Reg. v. Rector of See White v. Steele, 8 E. Jur. N. S. Lambeth, 3 Nev. and P. 416 ; Camp- 1177. 118 MANAGEMENT. [Book II. Production of documents. Eeports of examination. one-third of the whole shares issued ; 2. In the case of other companies with a capital divided into shares, on the application of members holding one-fifth of the whole shares issued ; and 3. In the case of a company not having a capital divided into shares, on the application of at least one-fifth of the whole membership (sec. 56). The application must, however, be supported by such evidence as the Board may require, that it is made without malicious motives and on reasonable grounds ; and the applicants may be required to find security for costs (sec. 57). It is also competent for the company itself to appoint inspectors to examine into its affairs. This is done by special resolution (sec. 60). When an examination has been ordered, the company officers must produce to the inspectors all books and documents in their power ; and they must answer all questions relative to the business ; for which purpose they may be put on oath by any inspector. Their refusal to comply with these provisions involves them in heavy penalties (sec. 58). The inspectors make their report, either written or printed as may be directed, to the Board of Trade or to the company, as the case may be ; and a copy must also be sent to those members requesting the examination, if they so desire. Unless the Board of Trade direct the costs to be paid out of the company assets, they must be paid by those who demanded the inquiry (sees. 59, 60). The report of the inspectors, when authenticated by the company seal, is evidence of their opinion in any legal proceedings (sec. 61). [ 119 CHAPTER III. CONSTITUTION AND MANAGEMENT OF COMPANIES FORMED BY ROYAL CHARTER OR LETTERS PATENT. Companies incorporated by royal charter are proper corporations ; Chartered and whatever may be the language of their charters, they neces- sarily possess all the rights, privileges, and naturalia of corporations, if erected prior to the first Letters Patent Act. This is also the case with companies chartered subsequently to that period, provided the Crown has not in the charter detracted in any respect from these privileges in express terms. In all other matters the consti- tution of such companies, and the rules and regulations for their management, will be found in their charters, or in these taken in connection with deeds of partnership or association, referred to in such charters, or framed in conformity with provisions to that effect which they may contain. Matters of minor detail affecting the management are generally regulated by resolutions of the company, framed from time to time in virtue of the powers or provisions con- tained in the charter, or plainly deducible from its terms. Companies privileged by letters patent have their constitution Letters patent and mode of management regulated by that instrument, read in connection with their deeds of partnership or association, by which, as we have already seen, the companies are formed. In the case of companies whose privileges are derived from letters patent granted to them in virtue of the existing Letters Patent Act (1 Vict. c. 73), their constitution and rules of manage- ment are contained in their deeds of copartnery or association, taken in connection with their letters patent ; but the fact of their accepting these brings them under the operation of the Act, which contains certain provisions that are imperative and must be observed 120 MANAGEMENT OF COMPANIES [Book II. Eeturna. Objects of returns. in all cases. In this respect the present Letters Patent Act stands in much the same relation to the letters patent and instrument of formation of a company brought under its operation, that the Com- panies Clauses Act of 1845 does to the special acts of companies formed under its provisions. The distinguishing feature of the Letters Patent Act is the adoption of a system of registration by ' returns^ which must be made from time to time by the company to the Enrolment Office of the Court of Chancery in England, if the principal place of business is in England ; to the Enrolment Office of the Court of Chancery in L-eland, if the principal place of business is in that country ; and to the General Registry Office at Edinburgh, if the principal place of business is in Scotland (sec. 16). These returns must be registered for a small fee by the proper officers, who in Scotland are the Lord Clerk Register or his deputy, in books kept for the purpose, with an alphabetical index of the names of the companies. Any person is at liberty, on payment of a shilhng, to inspect these books and index, and may require a certified copy of any return on payment of one shilling and sixpence per folio. The day of registration of every return must be written thereon by the proper officers (sec. 17). Certified copies of these returns are declared to be evidence in all proceedings of what nature soever they may be (sec. 18). These returns embrace almost every particular in the constitution and management of a company brought under the operation of the Act. The first return, which must be made within three calendar months after the grant of the letters patent, must contain the date of the grant of the letters patent, the company name, its business, and principal office ; the total number of shares, the amount of liability attaching to each, and the number of shares held by each member. It must also contain the name of the officer appointed to sue and be sued on behalf of the company (sec. 6). Any change in the company's principal place of business must be made the sub- ject of a return within three months after such change takes place (sec. 7). When persons cease to be members, or when new mem- bers are assumed (unless these alterations take place by transfer of shares in writing), or when old members change their names by marriage or otherwise, a corresponding return must be made (sec. 8). Chap. III.] FORMED UNDER LETTERS PATENT. 121 When shares are transferred by deed or in writing, a written notice must be given to the company at its principal office, specifying the distinguishing numbers of the shares transferred, and the name and residence of the transferrer and those of the transferree. This notice must be signed by both parties (sec. 9), and a return in terms thereof must then be made by the company within three months (sec. 10). When the liability of members has been limited to a certain amount per share, any member who has made a payment for the company in consequence of a decree against it, may make a return thereof accompanied by the proper vouchers (sec. 11). And if the company afterwards repay the money so advanced or paid, they must make a corresponding return without delay (sec. 12). On the death, resignation, or removal of any officer appointed to sue and be sued on behalf of the company, another must be forth- with appointed in his place ; and a return containing the names and designation's of both must be made within three months (sec. 13). All returns must be sianed and verified by one of the company Authentication «. -1 1 , T , .„ . , of returns. officers appointed to sue and be sued — the verification to be m terms of the Act 5 and 6 Qui. iv. c. 62. In default of such officer, the return may be signed and verified by some member of the company (sec. 14). Returns relating to members and transfers of shares are not rendered invalid by unintentional error, provided a correct return be made within one calendar month (sec. 15). No person becoming a member of the company can sue for or Effect of not recover any share of profits, until a return of the transfer or other returns. fact whereby he became a member has been duly registered (sec. 20). And, in like manner, any one ceasing to be a member remains liable as &uch until the transfer or other fact by which he ceases to be a member has been placed on the register (sec. 21). Regulations as to forms of returns, and mode of keeping the Rules as to register, and other matters incidental thereto, may be made from ^^ ^°^' time to time by the Lord Chancellor in England, by the Lord Chancellor and Master of the Rolls jointly in Ireland, and by the Lord Cflerk Register and Lords of Council and Session jointly in Scotland (sec. 19). It will be observed, that, with the exception of requiring the Effect of the . Act on internal appointment of two officers in whose names the company may sue management. and be sued, and of the system of returns above detailed, the Letters 122 MANAGEMENT. [Book II. Patent Act does not in the least degree interfere with the internal arrangements of the company. These are left entirely to the provisions of the deed of copartnery, or to that in conjunction with the letters patent conferring the desired privileges. It would rather seem, however, though that is not expressly stated, that after obtaining the letters patent no alterations of importance can be made on the provisions of the original deed of association, since these must be taken as forming the conditions in respect of which the letters patent were conferred. It is remarkable that the Act contains no provisions for keeping of books by the company, nor for any system of internal registration. The system adopted is that of external registration, by means of returns made to and registered by Government officials. Bye-laws. The Act contains no provisions as to the making of bye-laws. But the company would seem to have the power of making these as required from time to time, provided they do not interfere with the provisions of its deed of association or letters patent, and pro- vided they do not contravene the regulations of the Act. Without this power, the internal management of the association would often be greatly impeded. Common seal The possession of a common seal is apparently taken for granted in the Act (sec. 27). Yet contracts to bind the company are not required to be under seal. There is no form specified for transfers of shares ; transfer by deed or in writing is mentioned, but other modes are nowhere excluded (sees. 8 and 9). transfers. [ 123 J CHAPTER lY. CONSTITUTION AND MANAGEMENT OP COMPANIES FORMED UNDER THE COMPANY CLAUSES ACT, 1845. All companies formed under the provisions of this Act are proper corporations in the fullest sense of the term. In other respects their constitutions are to be found in the provisions of the Act itself, except in so far as these may be varied or excepted by their special acts of incorporation, or may be amplified by the ' Lands Clauses Act,' or by the ' Railway Clauses Act,' as the case may be. We shall afterwards have occasion to advert to the provisions of these last two consolidation Acts ; but will in this place proceed to examine the provisions of the Company Clauses Act, in so far as they relate to management. The first general meeting of shareholders must be held at the Ordinai-y time appointed in the special act, and in the absence of such ™ appointment, within one month after the passing of the Act. If no time is prescribed for future general meetings, they must be held in February and August half-yearly, or at such other times as a general meeting may appoint. These general meetings are the ordinary meetings of the company. Both they and the extraordi- nary meetings must be held in the prescribed place ; and if none is prescribed, then in such place as may be appointed by the directors (sec. 69). No business other than that appointed by the general or special acts can be transacted at ordinary meetings, unless special notice have been given by advertisement (sec. 70). Every general meeting other than the ordinary half-yearly Extraordinary meetings is extraordinary, and it lies with the directors to call ™^^ "'^^' extraordinary meetings. Nothing can be done at these meetings 124 MANAGEMENT OP COMPANIES [Book II. Notice. Quornm. Chairman. Business. beyond what is set forth in the notice convening them (sees. 71 and 72). The directors may be required to call extraordinary meetings by a certain number of shareholders possessing a certain aggregate number of shares, as provided by the special act ; and in the absence of such provision, by twenty or more shareholders holding in the aggregate not less than one-tenth of the company capital. The requisition must be in writing under their hands, and must fully express the object of the meeting; it may, be left at the company office, or given to three directors, or left at their residences. If the directors fail for twenty-one days to call the meeting, the pre- scribed number of shareholders may call it themselves on fourteen days' notice (sec. 73). Ten days' notice at least of every meeting must be given by advertisement, specifying the place, day, and hour of meeting ; and every notice of an extraordinary meeting, or of an ordinary one, at which unusual business is to be done, must specify the business (a) (sec. 74). At any meeting, whether ordinary or extraordinary, the pre- scribed quorum must be present either personally or by proxy. And if no quorum be prescribed, then the quorum will be by share- holders holding in the aggregate not less than one-twentieth of the capital, and being in number at least one for every £500 of such proportion, unless this would give a greater number than twenty, in which case twenty shareholders holding one-twentieth of the capital will be sufficient. If no quorum be present for half an hour after the time of meeting, nothing can be done beyond declar- ing a dividend, if that be one of the purposes of the meeting ; and the meeting is held adjourned sine die, unless it has been called for election of directors (sec. 75). The following persons preside as chairman, one in default of the others respectively : 1. The chairman of the directors ; 2. Their deputy-chairman ; 3. One of the directors chosen by the meeting ; 4. Any shareholder so chosen (sec. 76). Nothing can be done at the meeting except the business for which it was convened. It may be adjourned from time to time, and from place to place ; but nothing can be done at an adjourned (a) Seo Swansea Dock Co. v. Levien, 20 L. J. Ex. 447. Chap. IV.] FORMED UNDER ACT 1845. 125 meeting but what was left unfinished at the original meeting (sec. 77). Shareholders vote according to the scale prescribed in the Mode of => -^ voting. special act ; and in the absence of such a provision, each share- holder has a vote for every share he holds up to ten, and an addi- tional vote for every five shares beyond this up to one hundred, and another vote for every ten shares above one hundred. No shareholder can vote unless all his calls have been paid (sec. 78). Votes by proxy are competent. The proxy must be in writing, in Proxy. the same or similar terms with those given in Schedule F, signed by the shareholder if an individual, and under the common seal if a corporation. The voting is by majorities, the chairman having a casting vote (sec. 79). The instrument appointing a proxy must be transmitted to the secretary within the prescribed period ; or if no time prescribed, not less than forty-eight hours before the hour of meeting (sec. 80). When several persons are joint holders of Guardians. shares, he whose name stands first on the register is deemed sole proprietor for purposes of voting (sec. 81). Shareholders incapaci- tated by lunacy or minority vote by their legal guardians, either in person or by proxy (sec. 82). Unless a poll be demanded, a Poii. declaration by the chairman that the resolution has been carried, is, when entered on the company books, sufficient evidence of the fact (sec. 83). APPOINTMENT OF DIEECTOES. The number of directors must be that prescribed in the special Number. act (sec. 84) ; but when power is given to increase or reduce the number prescribed, this power can only be exercised in general meeting after due notice. The order of rotation in which such increased or reduced number go out of ofiice, and what shall form, a quorum, may also be fixed in this manner (sec. 85). The directors appointed by the special act continue in office, Election. unless it is otherwise provided, until the first ordinary meeting held in the following year. The shareholders may then elect a new body of directors, or may continue all or some of the original directors in office, supplying the places of those not re-elected by the election of others (sec. 86). If, at a meeting for the election 126 MANAGEMENT OF COMPANIES [Book II. Qualification. Order of retiring. of directors, no election takes place by reason of no quorum being present within one hour of the appointed time of meeting, the meeting stands adjourned till the following day at the same time and place ; and if then, for the same reason, no election caji be made, the existing directors continue in office until new directors are appointed at the first ordinary meeting in the following year (sec. 87). No one can be a director who is not a shareholder possessed of the prescribed number of shares (a), or who holds an office or place of trust under the company, or is interested in any contract with the company (b) ; and no director can, during the term of his office, accept any other office or place of trust or profit under the com- pany, or become interested in any contract with the company (sec. 88). If any such disqualification supervene after election of a director, his office as director becomes vacant ipso facto (sec. 89) (c). A shareholder is not, howeyer, disqualified from being a director of the company because he happens to be a member of another incorporated joint-stock company, between which and the company of which he is or is sought to be made director, a contract exists (sec. 90). The directors retire from office at the time and in the propor- tions following — the individuals to retire being determined by ballot among their fellows, unless they agree otherwise. At the end of the first year after the first election, and at the end of the second and third following years, the number prescribed by the special act go out of office ; but if the special act is silent on this matter, one-third of those in office after the first election go out the first year, one-half of the remaining number the second year, and the remainder the third year. At the first ordinary meeting in any subsequent year, the prescribed nuniber, if any, and otherwise one- third of the directors, being those longest in office, retire. If, how- (o) See Hill v. Edin. and Glasgow Bail. Co., 1849, 21 Jur. 455. This requirement cannot be satisfied by nominally paid up shares. Llanharry Hxmatite Co., 1864, 10 E. Jur. N. S. 812. (6) Such contracts, to amount to a disqualification, must be made with the company in the prosecution of its undertaking. A company's banker may be one of its directors. See Sheffield and Man. Ra. Co. v. Wood- cock, 7 M. and W. 574. (c) Blaikies v. Aberdeen Ra. Co., 1851, 14 D. 66, House of Lords, June 1852. Chap. IV.] FORMED UNDER ACT 1845. 127 ever, the fixed number of directors be some number not divisible by three, and the number to retire be not prescribed, the directors de- termine what number, as nearly one-third as may be, are to retire, so that the whole shall go out of office in three years. The places of the retiring directors are supplied by -the election of an equal number of qualified shareholders; and every retiring director maybe re-elected, and is in that case considered to be a new director (sec. 91). When a vacancy occurs by death, resignation, or disquahfica- Vacancies. tion, and not by rotation as already described, another duly qualified person may be elected to fill up the vacancy ; and the person so substituted remains in office as long as the person whose place he takes would have been entitled to continue (sec. 92). POWERS OF DIEECTOES. The directors have the management of the company, and exercise all its powers, except such as are directed to be exercised by • a general meeting of the company. They must, however, exercise their powers in terms of the provisions of the general and special acts, and subject to the control of general meetings convened for that purpose. Yet the acts of directors done prior to any resolution passed by such general meetings are not rendered invalid thereby (sec. 93). Unless otherwise provided by the special act, the following General powers of the company can only be exercised at general meetings, and are not competent to directors : 1. The choice and removal of directors ; 2. The increasing and reducing of their number ; 3. The choice of auditors ; 4. The determination as to remuneration of directors, auditors, treasurer, and secretary ; 5. The determina- tion of the amount of money to be borrowed on mortgage ; 6. The determination as to augmentation of capital ; 7. The declaration of dividends (sec. 94). PEOCEEDINGS OF DIEECTOES. The directors hold meetings when and where they choose to Meetings. appoint ; and they may adjourn as they see fit. Any two of the directors may require the secretary to call a meeting. Their meet- 128 MANAGEMENT OP COMPANIES [Book II. Committees. Contracts. ings must consist of the prescribed quorum; and when none is prescribed, of at least one-third of their number. All questions are determined by majorities, and the chairman has a casting vote (sec. 95). At the first meeting of directors held after their original and annual appointments, the directors present choose one of their number as chairman for the following year, and they may also choose a deputy-chairman. If these die, or resign, or become dis- qualified to act, others are chosen at the next meeting of directors ; and the substitute remains in office as long as he in whose place he came would have been entitled to continue (sec. 96). When the chairman and deputy-chairman are both absent from any meeting, the directors present choose some one of their number to act for the occasion (sec. 97). The directors may appoint committees of their number, with power to do any acts within the sphere of their own authority (sec. 98). Such committees may meet and adjourn as they see fit. Their quorum, if not prescribed, is fixed by the general body of directors ; one of the members present is appointed chairman, and all questions are determined by majorities — the chairman having a casting vote (sec. 99). The directors or their committees may make contracts so as to bind the company as follows: 1. In contracts which require to be by deed, or by agreement in writing, and signed by the parties thereto, the directors or their committees may contract on behalf of and bind the company in writing, either under the company's common seal, or signed by the directors or their committee, or any two of either ; and such contract may in the same manner be varied or discharged. 2. In contracts valid by parole, the directors or their committees may contract on behalf of and bind the company by parole only, and may in like manner vary or discharge the same (sec. 100). The directors are bound to cause all proceedings of the com- pany, of themselves, or of their committees, to be entered in books provided for the purpose, and kept under their superintendence. Every entry must be signed by the chairman of the meeting, and is then to be received as ex facie evidence in courts of justice (sec. 101). Informalities in the appointment of directors or of their committees do not invalidate their proceedings (sec. 102). Chap. IV.] FORMED UNDER THE ACT 1845. 129 Directors, when acting in the lawful execution of their ofSce, Indemnity. do not incur personal liability ; but are entitled to indemnity out of the company funds for all payments made by them, and for all losses, costs, and damages incurred by them in the execution of the powers wherewith they have been entrusted. Calls on the capital remaining unpaid may be made for this purpose (sec. 103). AUDITORS. Unless otherwise directed, two auditors are elected at the first Auditors. ordinary meeting after obtaining the special act. One of them goes out of office each ensuing year, and another is appointed to supply his place ; but the retiring auditor does not go out until another has been elected (sec. 104). The auditors can hold no other office in the company, nor be in any way interested in its concerns, except as shareholders ; but unless otherwise prescribed, every auditor must hold at least one share in the undertaking (sec, 105). The auditors vacate office by rotation, determined in the first Vacancies. instance by ballot or agreement, and afterwards by seniority. Those retiring are immediately re-eligible (sec. 106). Vacancies occurring among the auditors in the course of the year may be filled up by election at any general meeting (sec. 107) ; and the same provisions apply to the election of auditors as to that of directors (sec. 108). The directors must deliver to the auditors the balance-sheet and Duties. other periodical accounts fourteen days before the ordinary meeting at which they are produced to the shareholders ; and it is the duty of the auditors to examine them, and either make a special report, or simply confirm them. This report is read together with that of the directors at the ordinary meeting. The auditors may em- ploy accountants to aid them in their labours, at the expense of the company (sees. 110, 111). The directors must take security from every officer entrusted Duty of with the monies of the company ; and they may demand from such account. officers an account in vnriting of all monies received, and how they were expended. These officials must produce the vouchers and receipts, and pay over to the directors or their mandataries the I 130 MANAGEMENT OP COMPANIES [Book II. remaining balance (sees. 112, 113). Summary proceedings mij be taken before the sheriff or two justices against parties failing to account. Officers refusing to produce vouchers, books, and other documents, may be imprisoned until they comply ; and officers believed to be about to abscond, may be summarily apprehended and detained in custody until they are tried, or give security for their appearance (sees. 115, 116). Proceedings taken against the company officers do not liberate their sureties (sec. 117). ACCOUNTS. The directors are required to keep full and accurate accounts of all monies received or disbursed on behalf of the company. The company books must be balanced fourteen days before each ordinary meeting (unless otherwise prescribed) ; exact balance- sheets must be made up, containing the property and the debts, the profit and the loss; and these balance-sheets must be examined by at least three of the directors, and signed by the then chairman Books. or his deputy. The books and balance-sheet must be open for the inspection of shareholders for fourteen days before and for one month after each ordinary meeting at the principal office, unless otherwise provided ; and the balance-sheet, and auditors' report thereon, must be produced at the meeting to the assembled shareholders. A book-keeper appointed by the directors enters the company accounts in books, which he is bound to submit to the inspection of any shareholder demanding it for fourteen days before and one month after every ordinary meeting, under a penalty not exceeding £5 (sees. 118, 119, 120, 121, 122). BYE-LAWS. The company has power to make bye-laws for the purpose of regulating their officers and servants, and generally for the proper management of the company affairs, provided these bye-laws do not conflict with the common law of that part of the kingdom where they are to have effect, and with the provisions of the general and special acts. Penalties may be imposed by these bye-laws on the officers and servants of the company, and they are all entitled to a Chap. IV.] UNDER THE ACT 1845. 131 copy of them. Such bye-laws are sufficiently proved by production of a written or printed copy under the seal of the company (sees. 127, 128, 129, 130). Every shareholder has a right to inspect the following docu- ments : 1. The shareholders' address book (sec. 10) ; 2. The register of mortgages and bonds (sec. 48) ; 3. The register of consolidated stock (sec. 66) ; 4. The company account books (sec. 120). Shareholders are entitled, moreover, to have copies of the shareholders' address book (sec. 10) and the account books, or of any part of these documents (sec. 122). The company is bound at all times, after six months from the date of its formation, to keep in the principal business office a copy of the special act printed by the Queen's printers. When the undertaking is a railway, canal, or the like, the works of which are not confined to one place, copies of the special act must in like manner be deposited in the offices of the clerks of the peace of the several counties into which the works extend, and in the office of the town or burgh clerk of any town or burgh within one mile of which the works extend. All persons interested may inspect these copies, and make extracts or copies from them (sec. 165). The special act of any company may at all times be purchased of the Queen's printers. [ 132 ] CHAPTER V. CAPITAL OP COMPANIES, AND ITS DIVISION INTO SHARES. The capital of a company is a matter of fundamental importance. If it is too small, the undertaking will not be carried on with much chance of success ; if too large, the shareholders will receive a very- inadequate return on their shares. The amount should therefore be determined after a very mature and deliberate consideration of all the circumstances and contingencies of the case. It is usually fixed at formation, and forms one of the fundamental conditions of the contract (a). Hence, persons agreeing to take shares in a company with a certain capital, cannot be required to become shareholders if the amount of capital be increased or diminished (b). The contract of copartnery may however be so framed, that the amount of capital originally agreed upon is not an essential con- dition (c) ; and persons may agree to take shares in a company when the amount of capital has not been defined. In such cases subscribers cannot escape from the agreement by pleading that the company as formed has a different capital from that originally contemplated (d). Subscribers may also be estopped from main- taining this plea, by conduct, acquiescence, or adoption (e). General rules. In commou law companies, the agreed-upon capital specified in the articles of copartnery or other instrument of formation cannot be altered without the consent of all the members. This arises (a) Monro v. Edinhurgh Cemetery S. 669; Caledonian Dairy Co., 1834, Co., 1851, 13 D. 595. See North 12 S. 394. British Bank v. Collins, 1852, 25 Jur. (c) Previous cases. 119, aff. 15 D. (H. L.) 29, 1 Macq. 869 ; (d) Nixon v. Brownlow, 2 H. and N. Electric Telegraph Co., 22 Beav. 471. 455 ; Norman, 5 De G. M. and G. 648. (6) See Turner v. Mollison, 1833, 11 (e) SturrocTcY. Thoms, 1851 , 13 D. 762. Chap. V.] CAPITAL. 133 from the consideration that the amount of capital in such asso- ciations forms the very basis and condition of the contract of copartnery. Not only may the profits be greatly affected by a change in the amount of capital, but the risk of loss where lia- bility is unlimited may be indefinitely increased (a). A power to increase capital may however be conferred in the instrument of formation, and its exercise will be effectual, provided the prescribed formalities are duly, observed (b). In the case of incorporated companies, where the capital has been fixed by charter, letters patent, or special act, its amount cannot be varied even with the consent of all the members, unless the incorporating instrument contains some provision to that effect (c). As to companies registered under the Act 1862, it is provided Eegistered -, ~ ^ T • 1 1 1 • • companies. by sec. 12, that a company limited by shares may increase its capital by the issue of new shares, if authorized to do so by its regulations as originally framed, or as altered by special resolution in terms of sees. 50 and 51. Notice of such alteration must be given to the registrar (sec. 34). The capital of companies divided by shares cannot be diminished (sec. 12). It does not appear whether any such restriction applies to companies unlimited, or limited by guarantee. In these cases the liability of members will not be materially affected by an alteration of the capital. Table A, Schedule 1, contains articles (26, 27, and 28) applicable to the increase of capital, which, if adopted in the articles of association, will give the following regulations : — On a special resolution of the company, the directors may increase the capital by the issue of new shares. The aggregate increase, and the number of new shares, are fixed by the general meeting, and in the absence of a special direction by the directors. If no direction is given to the contrary, the new shares must be offered to the members in proportion to the shares already held by them. Shares not so accepted may be dis- posed of by the directors as they think most beneficial for the com- pany. The capital so raised is considered part of the original capital, and is subject to the same provisions as to calls, forfeiture, etc. (a) Monro v. Edinburgh Cemetery 369 ; Electric Telegraph Co., 22 Beav. Co., 1851, 13 D. 695. See also North 471 ; Fisher v. Tayler, 2 Ha. 218. British Bank v. Collins, 1852, 25 Jur. (6) Ibid. 119, aff. 15 D. (H. L.) 29, 1 Maoq. (c) Lindley 522. 134 CAPITAL. [Book II. Chartered and letters patent companies. Companies formed under the Act 1845. Borrowing as distinguished from increas- ing capital. Division of capital. In chartered companies, whose capital has been fixed in their charters, no increase or diminution of the capital appears compe- tent, unless perhaps power to this effect has been conferred in the instrument of formation. And the same may be said of companies privileged by letters patent, where the capital has been specified in the contract or deed of association ; for in such a case the agreed- upon amount of capital must be held as forming a condition in view of which the letters patent were conferred. The Consolidation Act, 1845, contains no direct provisions for the increase or diminution of the capital fixed under the special act ; and therefore, unless the special act confer a power to this effect, no alteration can be made on the capital, even with the concurrence of all the members. Where, however, the company is authorized by its special act to borrow money, it is empowered by sec. 59 to raise the sums authorized to be borrowed by the creation of new shares, which are to be considered the same as the original capital as to calls, forfeiture, etc. (sec. 60), and which, if the old shares are at a premium, are to be offered to the then shareholders in proportion to the shares held by them respectively (sec. 61). The new shares vest in the parties accepting ; and if not accepted, are to be disposed of by the company as seems best for the interests of the company (sec. 62). If, at the time of this increase of capital, the existing shares are not at a premium, the new shares may be issued in such manner and on such terms as the company think fit (sec. 63). But though the capital of a common law company cannot be increased without the consent of all the members, and that of an incorporated company cannot always be enlarged even with this unanimous consent, a distinction must be made be- tween increasing capital and the mere borrowing of money to pay off debts already existing. The latter power may in general be exercised by majorities (a), and in some cases by the board of directors. The capital of companies, whether incorporate or at common law, is usually divided into shares. When the number and amount of shares have once been fixed, the general rule seems to be that (a) Bryon v. ISIetro. Saloon Co., 4 B. Jur. N. S. 680 ; Auxiliary Clipper Co., 4 K. and J. 783 (8 Vict. c. 17, ss. 40 and 41). Chap. V.] SHAKES. 135 they, like the capital, cannot afterwards be altered (a). It is an indictable offence to issue as good more shares than the prescribed number. This is, in fact, a fraud on the other shareholders (b). I. SHARES IN PARTNERSHIPS. The word ' share' has not been employed with much precision of meaning, and is often liable to ambiguity. Hence it is difficult, if not impossible, to give it a definition which shall be at once exhaustive and practically useful. Speaking generally, however, it may be said that by a share in an ordinary partnership is meant the interest of one of the partners in the concern, by reference to which his right to participate in profits while the partnership sub- sists, and to receive a proportion of the free assets when it is dis- solved, is determined, and in respect of which, in a question inter socios, his amount of contribution for company losses is in dubio to be ascertained. This share or interest depends entirely on agreement, subject to Amount the equitable rule of the civilians, that unless each partner have agreement. some participation in the profits, or the hope of it, there can be no valid partnership (c). When the contract is reduced to writing, it generally contains, Modeaof 1 • 1 T n • 1 ) 1 TiTi ascertaining. or ought to contam, a clause dennmg each partner s share. When this is so, any ambiguity of construction will be resolved by the Court. But it too often happens that the contract is not reduced to Variance in writing, or contains no provision on this subject. When, in these circumstances, disputes arise as to the amount of each partner's share, it seems to have been the former practice of the Court of Session to determine the matter without the intervention of a ju»y. In doing so, the Court proceeded on the principle, that once the fact of partnership was established, the presumption of law was for equality, but gave effect to any evidence or circumstances from which another arrangement might fairly be inferred {<£). (a)Smithv.GoldsworAy,4.Q,.BA&0; (d) Struthers v. Barr, 1821, 1 S. but see Ambergate Ra. Co., 4 Ex. 540. 122 ; M'Whirter v. Guthrie, 1822, 2 (6) R. V. MoU, 2 Car. and P. 521. W. and S. 153, 1 S. 296, Hume 760 ; (c) Ersk. iii. 3, 19 ; Djg. lib. xvii. Blair v. Rnssell, 1828, 6 S. 836, and t. 2, 1. 29, s. 2. 8 S. 72. practice. 136 SHAKES. [Book II. Presumptions. Joint adven- tures. Presumption from propor- tion of profits. In the case of Campbell's Trs. v. Thomson (a), the House of Lords remitted with instructions to have the question tried by jury ; but the Court appear still to have adhered to their former practice (b), unless the late case of the Aberdeen Bank has fixed the rule in favour of jury trial (c). This was always the custom in England (d). As to the principles upon which the amount of a partner's share is to be determined, the law both in England and Scotland appears to stand thus : If the contract be in writing, and contain a clause defining the amount, this will be conclusive. In the absence of writing, there is a presumption in favour of equality ; but this is merely a presumption, and may be rebutted by evidence to the contrary (e). As a consequence of this, when the question of the existence of partnership is sent to a jury, there being no deed of copartnery, the proportional interest of each partner ought to be put in issue (/). In consequence of the reversal of the judgment in CampbelVs Trustees v. Thomson, it has sometimes been supposed that the law of England differed from that of Scotland in reference to the pre- sumption of equality (g) ; but a careful consideration of the cases will lead to the conclusion that, when rightly understood, both systems are and always have been at one on this branch of the subject. The same rules are applied to joint adventures or partnerships in single transactions Qi), and also to shares in companies when it is doubtful to how many of them each partner is entitled (i). As a general rule, it may be stated that the amount of interest or share which a partner is ascertained to have in the profits of the concern, will also regulate the proportion of the capital and (a) 1829, 7 S. 660 ; reversed, 5 W. and S. 16, 7 BHgli 432. (6) Fergusson v. Graham, 1836, 14 S. 871 ; Buchanan v. Lennox, 1838, 16 S. 824. (c) 1859, 22 D. 44. (d) Lindley 573 ; Peacock v. Pea- cock, 16 Ves. 49 ; Binford v. Dom- mett, 4 Ves. 756. (e) Robinson, 20 Beav. 98 ; Pea- cock, supra ; Webster v. Bray, 7 Ha. 159 ; Stewart v. Forbes, 1 Mac. and G. 137 ; compared with Aberdeen Bank and other cases quoted supra. (/) Aberdeen Bank, 1859, 22 D. 44. (g) CoUyer 106. (h) Ferguson v. Graham, 1836, 14 D. 871 ; Buchanan v. Lennox, 1838, 16 S. 824 ; Mobinson v. Anderson, 20 Beav. 98 ; M'Gregor v. Bainbrigge, 7 Ha. 164; Hanslip v. Kitton, 8 E. Jur. N. S. 835. (0 See Somes v. Currie, 1 K. and J. 605. Chap. V.] SHARES IN COMPANIES. 137 stock to which he is entitled on dissolution. This, however, is a mere presumption, which may be set aside by evidence to the contrary (a). Shares in Companies. In the case of companies with a capital divided into shares, the Difference word shares means a definite portion of its agreed-upon capital, and interest and not the interest which a partner may have in the concern ; for he may possess one or many such shares, and his interest consists of the number of shares which he de facto holds. Shares in companies of this description are always equal, for they are the units into which the agreed-upon capital was divided at the formation of the company. The only exception to this is, when an addition to the original capital has been raised by the issue of a certain number of new shares. Here the new shares will all be equal to each other, but they may be of greater or less value than the old shares. When a company has not a capital divided into shares, the wiien capital word share has the same meaning that it has in common partner- into shares. ships, viz. each partner's interest in the concern. An example of this occurs in such registered companies as are formed- under the Act 1862, with a liability limited by guarantee and not by shares. Preferential or guaranteed shares differ from other shares in Preferential this respect, that their owners are entitled to share profits to a cer- tain extent in preference to other members of the company. This privilege does not, however, in the smallest degree affect the liability of such preference shareholders to the public. In that respect they are in pari casu with the others. They are creditors of the company for payment of the guaranteed amount of their dividends only after payment of all the company's public creditors has been made. Shares, whether in partnerships or companies, are in their nature Shares per- , 1 . 1 . . sonal property. personal property, because they are nothmg more than a jus exi- gendi ; and it makes no difference in this respect, that the company property may to a large extent consist of heritage (b). Bank stock, (a) Nelson v. Bealby, 8 E. Jur. N. v. Balfour, 1804, 13 F. C.839, M. App. S. 397. Her. and Mov. 3, aff. 1811, 5 Pat. (i) Corse v. Corse, 1802, 13 F. C. App. 525 ; Murray v. Murray, 1805, 162, M. App. Her. and Mov. 2; Sime 13 F. G. 441, M. App. Her. and 138 SHARES. [Book II. whether the bank be a corporation or not, is moveable (a). In the Company Clauses Consolidation (Scotland) Act (b), and in the Act of 1862, shares are expressly declared to be personal property (c). Act of 1862. When a company, formed under the Act 1862, is limited by shares, the capital divided into shares of a fixed amount must be specified in the memorandum of association (sec. 8). In the case of companies limited by guarantee or unlimited, and having a capital divided into shares, the capital so divided must be specified in the articles of association (sec. 14). The number and amount of shares must in like manner be stated in the memorandum or articles, ac- cording to the character of the company (sees. 8 and 14). The shares must be numbered in arithmetical progression (sec. 22). The company must keep at its registered office a register of members, containing the names and addresses of members, the shares held by each, and the amount paid thereon (sec. 25). A certificate under the company's seal, specifying any shares or stock held by a member, is prima facie evidence of title to such shares or stock (sec. 31). The shares or other interest of members are expressly declared to be personal estate (sec. 22). As soon as the company is registered the shares emerge, and the subscribers become converted into the shareholders. In the case of companies previously existing, and afterwards registered under the Act, it is not necessary to number the shares, if they were not so distinguished before (sec. 196). Royal charter. In chartered companies the incorporating instrument generally provides rules and regulations as to the numbers, amount, and registration, and also as to the mode in which their ownership is to be established. When they do not possess a capital divided into shares, the charter provides in like manner regulations for ascer- taining the interests of the members. lietters patent. In companies privileged by the Letters Patent Acts, the deed of association specifies the number of shares into which the capital is divided, the shares being numbered in succession (sees. 5, 6, and 7). Act 1845. Shares properly so called, in opposition to scrip, emerge in corn- distinguished panics formed under the Act 1845, when the original subscribers, rom scnp. ^^ those Otherwise entitled to shares, are duly registered after the Mov. 4; Minto v. KUpatrick, 1833, 5i78; Royal Bank v. Fairholme, 1770, 11 S. 632. M. App. Adjud. No. 3. (a) Dalrymple v, HalMt (1735), M. (ft) Sec. 7. (c) Sec. 22. Chap. V.] CONSOLIDATED STOCK. 139 special act has been obtained. Persons become entitled to shares, 1. By signing the parliamentary contract or subscribers' agree- ment ; 2. By taking scrip issued by the company ; 3. By purchasing scrip-certificates ; and 4. By transfer from a registered shareholder. Until registration, however, the proper character of shareholder in the statutory sense does not exist ; and liability for calls, and the right to vote or share dividends, do not emerge (a) (sec. 8). The special act prescribes the number of shares into which the Shares, etc., capital is to be divided, and the amount of each share. The shares the special act. must be numbered in arithmetical progression, and every share must be distinguished by its appropriate number (sec. 6). The shares are personal estate, and transmissible as such (sec. 7). The shares, shareholders, and the amount paid on each share, must be entered in the ' Register of Shareholders,' which must be kept in terms of the provisions of sec. 9. The company must deliver certificates of shares, in terms of sec. 11, to every shareholder on demand. This certificate is prima facie evidence of title to shares, but the want of it does not preclude a shareholder from disposing of his shares (sec. 12). If the certificate be worn out or damaged, on its being produced at a meeting of directors, a new one may be obtained, and so also if the old one be proved to the satisfaction of the directors to have been lost. In either case an entry of the substituted document must be duly made in the register of share- holders (sec. 13). Consolidated Stoch It is a common practice to convert paid-up shares into con- solidated stock, which is then divided among the shareholders according to the amount of their former shares. This practice has many advantages, and in common law companies it may be done by a vote of a majority. In incorporated companies it can only be done in accordance with the provisions of the instrument of" formation. In companies formed under the Act 1862, the capital may be Act 1862. consolidated and divided into shares of a larger amount, and paid- up shares may be converted into stock. But such changes can only (a) See as to this, ' rreliminari'es to Formation^'' p. 69. 140 CONSOLIDATED STOCK. [Book II. Notice. Cliartered and letters patent companies. Act 1846. be made in virtue of authority to that effect in the company regulations as originally framed, or as altered by special resolution passed in terms of sees. 50 and 51. If the provisions of Table I. are adopted as the articles of association, the regulations applicable to the subject will be found in E. 23, 24, and 25, which are very similar to the corresponding provisions of the Consolidation Act of 1845, to be afterwards noticed. By sec. 28, it is provided that the company must give notice of consolidation or conversion of capital into stock to the Registrar of Joint-stock Companies, specifying the shares so consolidated, divided, or converted. And by sec. 29 it is provided, that when such conversion has taken place with due notice to the registrar, all the provisions as to shares shall cease as regards such consolidated stock; and thenceforth the register of members, and the list of members to be forwarded to the registrar, shall show the amount of stock instead of the amount of shares, etc., as formerly. Chartered companies must be regulated as to this matter by the provisions, if any, contained in their charters. The Letters Patent Acts make no provisions on the subject, and do not seem to con- template the conversion of shares into stock. By the Companies Clauses Act, 1845, it is provided (sec. 64) that the company, with consent of three-fifths of the votes of the shareholders at general meeting, on due notice, may convert the shares paid up into a 'general capital stocky to be divided among the shareholders according to their respective interests therein. When this takes place, the regulations and provisions as to shares cease, and the several holders of the stock may thenceforth transfer it in the same manner as shares, and the company are required to enter any such transfer of stock in a book (sec. 65). The company must also from time to time enter in a book, called the ' Register of Holders of Consolidated Stocky the names of the holders of stock ; and this book must be accessible at all reasonable times to the several share or stock holders (sec. 66). The stockholders are entitled to dividends and all other privileges that would arise to them on shares of equal amount (sec. 67). Chap. V.] TRANSFER OF SHARES. 141 II. TEAJSrSFEE OF SHAEES. From the delectus personce, which is one of the characteristics Bdectus of ordinary partnership, it follows that no new partner can be P^"°^^' admitted into the society without the consent of all the partners. This is a settled principle in the Roman, English, and Scottish systems of law, and probably in every other where the principles of this contract have been elaborated (a). Hence, except of consent, no new partner can be admitted by alienation, either legal or volun- tary ; and on the death of a partner, his representatives cannot claim to be admitted as partners with the survivors. According to the Roman law, it was not even competent to Conventional . ^ provisions. stipulate in the partnership contract that the interest of a person deceasing should descend to his heir (h) ; but it is now settled in the English and Scottish systems, that the parties may validly agree that their heirs and their assignees shall be adopted in their room (c) ; and when this arrangement has been made, a partner may introduce whom he will into the concern, either by testamentary deed or by transference of his share during his own lifetime. It is not neces- sary that this agreement shall have been made in the copartnery contract ; it may be made at any time : nor is it invalid because informal, but appears to be proveable by facts and circumstances (cZ). Even where no consent to a transfer of shares has been given, a TJnauthorized o ^ transfers. partner may assign his share to a third party without consulting his copartners ; and the same may happen by legal diligence. But in this case the assignee acquires no right to become a partner ; he merely becomes entitled to payment of what may be due to his credit in the share (e). In like manner, a partner may, without the consent of his copartners, bequeath his share to whom he will. In this case the devisee acquires no right to enter the firm, but merely to what may at the testator's death be due him by the (a) Dig. lib. xvii. t. 2, 1. 59 ; Lindley grove v. Nelson, 3 M. and K. 20 ; 593 ; Bell's Com. ii. 620. Beniley v. Bates, 4 T. and C. 182. (6) Dig. lib. xvii. t. 2, 1. 59, and 1. (d) Bargate v. Shortridge, 5 House 65, s. 9. of Lords Cases 297. (c) Stair i. 16, 5 ; Warner v. (e) Glyn v. Hood, 8 W. E. 87 ; Cuningham (1798), M. 14603, aff. 8 Smith v. Parkes, 16 Beav. 115. Dow. 76 ; BeU's Com. ii. 620 ; Love- 142 TRANSFER OP SHARES. [Book II. Public com- panies. Modes of transfer. Formalities must be observed. Limitations. firm (a). If the testator during life receives his share, the legacy- falls (b) ; but it has been held in England not to be adeemed by any arrangement among the partners varying the amount of the share (c), converting it into stock, or amalgamating the company with another (d). In public companies, where there is no delectus personce, shares are presumed transferable at the will of the owners, unless the contrary appear from the instrument of formation (e). Sometimes it is made a condition of transference that the consent of the other shareholders or of the directors shall be obtained. In the latter case, the directors must consider themselves as trustees for the company, and must act fairly with a view to its interests alone (/). The mode of transfer is regulated by the constitution of the company, and by the statute or special act by which it may be incorporated. It is not unusual to find the power of transfer clogged with certain conditions, such as consent on the part of the directors, payment of calls already made, offer of pre-emption to the company, etc. ; and certain formalities are often prescribed as essential to complete the transaction, e.g. that it shall be by deed under seal (as in many English companies), that it shall be in writing, that it shall be duly entered in the company books, etc. As a general rule, these conditions and formalities must have been ful- filled before the transferrer is divested, and the transferree invested, with the rights and liabilities of a shareholder {g). This rule must, however, be understood in a reasonable sense, and is liable to some exceptions. In the first place, non-compliance with the prescribed formali- ties and conditions of transfer can only be pleaded by the party for (a) Ponton v. Dunn, 1 Rus. and Myl. 402. (b)Presb. of Kirkcudbright v. Blair, 1742, Elch. Legacy 10 ; Pagan v. Pagan, 1838, 16 S. 383. See Chalmers, 1851, 14 D. 57. (c) Ellis v. Walker, Amb. 309; Backwell v. Cliild, Amb. 260 ; Phillips V. Turner, 17 Beav. 194. (d) Oakes v. Oakes, 9 Ha. 666 ; Phillips V. Turner, 17 Beav. 194. (e) 2 Bell's Com. 620. (/) Taft V. Harrison, 10 Ha. 489 ; R. V. Liverpool and Manchester R. Co., 21 L. J. Q. B. 284; Poole v. Middleion, 29 Beav. 646. ((?) Ross V. East Lothian Ra. Co., 1848, 10 D. 1284 ; East Lothian Ra. Cn. V. Peffers, 1849, 11 D. 1184. Chap. V.] TRANSFER OF SHARES. 143 whose safety or advantage they were prescribed. Hence, in a question between the transferrer and the transferree, it is no objec- tion to the validity of the transfer that no offer has been made to the company, in terms of a condition to that effect in the company contract (a). And it was held jus tertii for an arrester in competi- tion with a prior onerous assignee of the shares of a railway com- pany, to found on forms provided in favour of the company as to completion of sales of their stock (b). Secondly, a party may be estopped from pleading want of com- Estoppel by pliance with prescribed formalities or conditions, if waiver on his part can be clearly made out. Thus, when the company contract ■provided that a partner could not assign a share unless certain stipulations were complied with, and a partner did assign without observing these stipulations, the company were held barred from objecting to the transaction in respect of homologation (c). So where a purchaser of shares had not complied with the provisions of the company's contract, but had nevertheless paid some calls on his shares, and was registered as a shareholder, he was found not entitled to resist payment of further calls on the ground that he was not a shareholder (d). So also when, in terms of an Act of Parliament, company shares required to be transferred by deed, a party who did not take a transfer in this form, but signed a paper describing himself as a shareholder, and procured himself regis- tered as such, was found liable for calls as a shareholder (e). Again, where by the constitution of a company certain solemnities were required to a valid transfer, and a shareholder had executed a transfer of certain shares, which was registered in the company books, it was held that the company could not repudiate the trans- ference, on the ground that the registration had not been made (a) Macandrew v. Robertson, 1828, S. 281 ; Bunten v. Barclay, 1854, 16 6 S. 950. D. 1002. (J) Thomson v. Fulkrton, 1842, 5 (d) Burness v. Fennel, 1849, 6 Bell's D. 379 ; Robertson v. Thorn, 1848, 11 App. Ca. 541 ; Affirmation of Forth D. 353 ; Weatherly v. Turnbull, 1824, Marine In. Co. v. Burness, 1848, 10 3 S. 61 ; East Lothian Bank v. Turn- D. 689. bull, 1824, 3 S. 62 ; National Ex. Co. (e) Sheffield Ra. Co. v. Woodcock, V. Easion, 1851, 14 D. 96. 7 M. and W. 574 ; London Grand (c) Drummond v. Thomson's Trs., June. Ra. v. Graham, 1 Q. B. 271 ; 1834 12 S. 620 ; Turnbull v. Allan, Cheltenham Ra. Co. v. Daniel, 2 Q. 1833,' 11 S. 487, aff. 1834, 7 W. and B. 281. 144 TRANSFER OP SHARES. [Book II. Questions with creditors. Notice of assignment. Form of transfer. Position of transferree. with the consent of the board of directors as required by their rules, in respect that this rule had not been for years before observed; and that they were bound by the acts of their own officers, who had permitted the irregular transfer (a). But where non-compliance with the regulations of transfer is pleaded by the party for whose behoof they were framed, they will be very strictly enforced (&). Creditors of the company, when seeking to proceed against alleged shareholders for company debts, have often in England been successfully resisted, on the ground that the regulations neces- sary to complete the transfer in favour of the alleged shareholder had not been complied with (c). These cases were, however, de- cided at law ; it is doubtful whether a court of equity would have enforced the regulations with the same rigour (d). When shares are assigned, intimation of the assignation must be made either to all the partners, or to the manager or directors em- powered to receive notices for the company. The mere fact that the manager is himself the assignee, is not equivalent to due intima- tion to the company (e). See a case of circumstances in which a party for whom shares were purchased in a company while he was abroad, and who repudiated the transaction on his retmm, but after^ wards withdrew his repudiation, was held still entitled to do so (/). In the case of incorporated companies, the form of transfer furnished by the instrument of incorporation is generally convenient and free from all unnecessary prolixity. It should always be adopted ; for although other modes may suffice, transfers differing from the prescribed form in essentials, and characterized by com- plexity, need not be registered by the company (g). A transferree is said to come exactly in place of his transferrer. (a) Shortridge v. Bosanquet, 16 Beav. 84 ; Bargate v. Shortridge, 6 House of Lords Cases 297 ; Turnbull v. Allan and Son, 1833, 11 S. 487, aff. 1834, 7 W. and S. 281. (J) Sir J. Oibson Craig v. Aitken, 1848, 10 D. 576. See also M' Arthurs V. M'Brair, 1844, 6 D. 1174. (c) Moss V. Steam Gondola Com- pany, 17 C. B. 180 ; Ness v. Angas, 3 Ex. 805 ; Ness v. Armstrong, 4 Ex. 21 ; Bailey v. Universal Prov. Asso- ciation, 1 C. B. N. S. 557. (d) See Bargate v. Shortridge, as decided by Lord St Leonards, 5 House of Lords Cases 297. (c) Hill V. Lindsay, 1846, 8 D. 472. (/) Brechin Gas Co. v. Whitson, 1854, 17 D. H. of L. 6, 26 Jur. 417. (jf) Copeland v. Norili-East. Ra. Co., 6 E. and B. 277 ; R. v. General Cemetery Co., 6 E. and B. 415. Chap. V.] PURCHASE BY BROKEES. 145 so that he is bound hy the past acts of his author as well as by their future consequences (a). There is nothing illegal in the sale of shares, or even of scrip (b) ; illegal but sales of either, made with the view of profiting by gambling on the rise and fall of the market, are illegal, as gaming and wagering contracts, under 8 and 9 Vict. c. 109, s. 18 (c) ; and if the company itself is illegal, so also will be the sale of its shares or scrip (d). It has been held in England, that a contract for the sale of Writing. scrip or shares is valid, though not reduced into writing (e). A parole agreement having been followed by a note subscribed and delivered at the time, agreeing to take a certain number of shares or any proportion of them, the contract was held completed by tender of a certain number, though there was no written accept- ance (/). A written contract for the sale of shares must be stamped (g). Brokers are generally employed in the purchase and sale of Sales by shares and scrip. They are regarded by the usages of the Stock Exchange as principals in their dealings with each other. Their employers are presumed to know this, and must therefore, in the absence of an agreement to the contrary, indemnify them for any losses incurred on their account. Such rules are, however, founded on proof of usage (h). A broker employed by a shareholder to sell stock is not bound either at common law or under the Company Clauses Act to see the transfer registered in the books of the company ; and is there- fore not liable to relieve the shareholder of payment of calls made (a) Ffooks V. South- West. Ra., 1 {d) Buck, 1 Camp. 547; Josephs y. Sm. and G. 142 ; Mayhem's case, 5 De Pebrer, 3 B. and 0. 639. G. M. and G. 887. (e) Tempest v. Kilner, 3 C. B. 249 ; (6) Ex parte Barclay, 4 E. Jur. Watson y. Spratley, 10 Ex. 222 ; Bligh N S 1042 : ex parte Grisewood, 5 E. v. Brent, 2 Y. and C. Ex. 268. Jur. 1191. (/) WiUon v. Walker, 1856, 18 D. (c) Grizewood v. Blane, 1851, 11 C. 673. B. 539. In the case of Foidds v. (,g) Knight v. Barber, 16 M. and W. Thomson, 1857, 19 D. 801, some doubts 66 ; 23 and 24 Vict. o. Ill . appeared to be entertained whether (h) Baylife v. Butierworth, 1 Ex. this applied to the broker who carried 425 ; Sutton v. Tatham, 10 A. and E. through the transactions ; but see the 27 ; Bayley v. Wdkins, 7 C. B. 886 ; later cases, ex parte Phillips, 1860, 2 Pollock v. Stables, 12 Q. B. 765 ; Broom De G. F. and J. 634, and Barry v. v. Hall, 7 C. B. N. S. 503. Croskey, 1861, 2 J. and H. 1. K 146 TRANSFER [Book II. Contracts to purchase shares. Obligations on buyer and seller. on him from the transfer not being registered and his name remain- ing on the register (a). A broker purchased certain railway shares for his constituent, upon which there was an unpaid call ; the constituent on notiiication acquiesced in the transaction, received delivery of the transfer, and retained it. The purchaser having failed to pay the call, the broker advanced the amount and sued his principal for indemnity. It was held that the principal was liable (&). A contract to purchase shares does not apply to such as are not of the stipulated description (c) ; but it has been held that an order to buy shares was fulfilled by a purchase of scrip, when it was proved that no shares existed in the particular company (d). And if the broker fulfils specific instructions to the letter, he is not liable if the shares or scrip turn out worthless, as being unwarrantably issued (e). While matters remain entire, the authority to purchase shares may be revoked (/) ; but not after the broker has by con- tract to purchase incurred personal responsibility (g). A broker undertaking to purchase shares in an illegal company, has no recourse against his employer (h). To sell shares in a company known not to exist is fraud (i) ; but this does not apply to an in- solvent company (k). As to brokers incurring liability for not adhering to their instructions, see cases noted below (I). When a purchaser sues a seller for not transferring shares, he must aver that he was ready to pay and had tendered a proper transfer for execution (m) ; and a seller suing a purchaser for not accepting shares, must aver readiness on his part to transfer (n). Sufficient time for the transfer is implied in the contract ; what it may be, is proved by the usage of the Stock Exchange (o). The (a) Marr v. Buchanan, 1852, 14 D. 467. (5) Howden t. Kennedy, 1865, 18 D. 246. See Mortimer v. Millar, 11 D. 1218. (c) Westropp T. Solomon, 8 C. B. 345. (d) Mitchell v. Newhall, 15 M. and W. 308 ; Wilkie v. Michie, 1849, 11 D. 1131. (e) Lamert v. Heath, 15 M. and W. 486. (/) Fletcher v. Marshall, 15 M. and W. 755. ((/) M'Ewen v. Woods, 11 Q. B. 13. (h) Buck, 1 Camp. 547 ; ex parte Neilson, 3 De G. M. and G. 556. (i) MacCallum v. Turton, 2 Y. and J. 183 ; Kempson v. Saunders, 4 Bing. 5. (k) Stray v. Russel, 5 E. Jur. N. S. 1295, and 1 E. and E. 188. (J) Hope V. Lyon, 1853, 2 Stuart 360 ; Cullen v. Kerr, 1857, 19 D. 969. (m) FranklynY. Lamond, 4C. B. 637, compared with Rait v. Primrose, 1859, 21 D. 965. (n) Hannuic v. Goldner, 11 M. and W. 849. (o) Stewart v. Cauty, 8 M. andW. 160. Chap. V.] OF SHAKES. 1^'^ seller is bound to do whatever is required to enable him to transfer ; his failure to- do so may subject him in damages or avoid the con- tract (a). It is doubtful whether this applies to a broker who bona fide makes a purchase in terms of his instructions (h). The pur- chaser, on the other hand, is bound to take the seller's place, and to indemnify him for calls made subsequent to the transfer (c). An auctioneer selling shares without giving the real owner's name, is liable personally for due implement of the sale (d). In actions of damages for not transferring, or for not accepting Damages for 55 o' r o non-implement transfers of shares, the damages are in England usually ascertained of contract. by the difference between the contract and market prices as at the date of the breach of contract (e) ; and when damages are claimed for non-delivery of shares for a certain time, or generally for non- delivery by the company of shares at the proper time, the English rule seems to be that the market price of the shares at the date of the trial is the measure of the damages (/). No fixed rules can, however, be laid down on this subject ; the question is properly one for a jury (^). It would appear that, in the absence of a specific agreement to the contrary, the purchaser is entitled to be satisfied that the seller can give a valid title to the shares, not only as regards himself, but as regards the company (A). In England the equity courts have decreed specific performance Specific per- of a contract for the sale and purchase of shares, with accounting against the seller, and indemnity against the purchaser (i) ; they have, however, declined to interfere in a similar way between sellers and purchasers of scrip (k). (a) Lloyd v. Crisp, 5 Taunt. 249 ; 1407 ; Baird v. Reilly, 1855, 18 D. Wilkinson v. Lloyd, 7 Q. B. 27. 734 ; Dickson v. Henderson, 1849, 12 (6) Stray v. Russel, 5 B. Jur. N. S. T>. 306. See Robinson v. M'Culloclis, 1295, and 1 E. and E. 188. 1808, 15 F. C. 74. (c) Wynne v. Price, 3 De G. and {g) Owen t. Roidli, 14 C. B. 327 ; S. 310 ; Walker v. Bartlett, 18 C. B. Cockerell v. Van Diemen's Land Co., 845 ; Shaw v. Fisher, 5 De G. Mac. 18 C. B. 454. and G. 596. (h) Stevens v. Guppy, 3 Euss. 171 ; (d) Franklyn v. Lamond, 4 G. B. Shaw r. Fisher, 2 De G. and S. 11 ; 637. MorrisY.Kearsley, 2Y. andG.Ex.l39. (e) Stewart v. Cauty, 8 M. and W. (i) Duncuft v. Albrecht, 12 Sim. 160 ; Shaw v. Holland, 15 M. and W. 189 ; Wilson v. Keating, 5 E. Jur. N. 136 ; Tempest v. Kilner, 3 C. B. 253 ; S. 815, 27 Beav. 121, 4 De G. and J. Howie V. Anderson, 1848, 10 D. 355. 588 ; Beckitt v. Bilhrough, 8 Ha. 188. (/) Watt V. Mitchell, 1839, 1 D. (fc) Columbine v. Chichester, 2 Ph. 1157 ; Dnnlop v. Higgins, 1848, 9 D. 27 ; Jackson v. Cocker, 4 Beav. 59. 148 TEANSPERS UNDER ACT 1862. [Book II. Transfers in blank. False repre- sentations. Transfer of shares under Act of 1862. In the share market it is common to transfer shares by instru- ments blank in the transferree's name. They may thus be passed from hand to hand through any number of purchasers, until at length one inserts his name. In England it has been held, that where the constitution of the company requires the transfer to be by deed, conveyances of this kind are at law mere nullities (a) ; but in equity it has been held, that though there was no sale, there was a contract to purchase, and specific performance has been decreed against the purchaser (b). This view has been given effect to even in a question with the seller's assignee in bankruptcy, who claimed the shares as still untransf erred (c). It does not appear that any question of this kind has yet arisen in the law of Scotland. The provisions of the Act 1696, c. 25, would not nullify the deed, as they apply only to bonds. When shares have been transferred by deed blank in the description of the shares, the English equity courts have refused to interfere to rectify mistakes or even frauds thereby occasioned (d). If a party is induced to purchase shares on false representations, this will avoid the transaction, if the company was a party thereto ; and will in any view ground damages against the seller by whose misrepresentations the fraud was brought about. But to make an action either of reduction or damages good against a company, it must be averred and proved that the misrepresentation was truly their act (e). As regards companies formed under the Act 1862, it is provided that transfers are to be made in accordance with the regulations of the particular company (sec. 22). Transfers of shares or other interests of deceased members may be made by their representa- tives, though they themselves are not members (sec. 24). A certi- ficate under the company's seal is prima facie evidence of the title of a member to the shares or stock there specified (sec. 31). Beyond this, the Act contains no general provisions as to the (a) Humble v. Langston, 7 M. and W. 517 ; Sayles v. Blane, 14 Q. B. 205. (b) Wynne v. Price, 3 De G. and S. 310 ; Cheale v. Kenward, 3 De G. and J. 27. (c) Morris v. Cannan, 8 E. Jur. N. S. 653. (d) Tayler v. Gt. Indian Ra. Co., 4 De G. and J. 559 ; Swan v. North Brit. Aust. Co., 7 H. and N. 603 ; ex parte Swan, 7 0. B. N. S. 400. («) See, as to this, ' Constitution of Company Obligations.' Chap. V.] TRANSFERS UNDER ACT 1862. 149 transfer of shares ; but if the regulations in Table A, Schedule 1, be adopted, the following rules will regulate the mode of transfer. The instrument of transfer must be executed both by transferrer and transferree, and the transferrer remains holder of the shares until the transferree's name is entered in the register (N. 8). The transfer should be in the form given in the table (a) (N. 9). The company may decline to register a transfer by a member who is indebted to them (N. 10). The transfer books are closed during the fourteen days immediately preceding the ordinary general meeting in each year (N. 11). The executors or administrators of a deceased member are the only persons to be recognised by the company as having a title to his shares (N. 12). Persons becoming entitled to shares by reason of the death, bankruptcy, insolvency, or marriage of a member, may be registered on production of such evidence as the company may from time to time appoint (N. 13). Such persons may, instead of being registered themselves, name some other persons to be registered in their place as transferrees (N. 14), by executing an instrument of transfer (N. 15). This instrument must be presented to the company, with such evidence to prove the title of the transferrer as the directors may require, and it will thereupon be registered (N. 16). When companies are incorporated by royal charter, the con- Transfer of ditions and modes of transfer are frequently specified in that instru- chartered ment. When this is not so, these matters will fall to be regulated """^P^"^® ' by the bye-laws of the company. In letters patent companies, the Act of 1 Vict. c. 73 appears to in letters contemplate transfers of shares, other than by death or marriage, panies. to be by deed or writing only. When the transfer has been executed, a notice in writing, specifying its date, the distinguishing number of the shares transferred, and the names and places of abode of the transferrer and transferree, must be given to the com- pany, by leaving the transfer, executed by both parties, or some note or memorandum thereof, signed by them, at the principal office of the company (sec. 9). Within three months after receiv- ing this notice, the company must make a return, in the form of Schedule D, to the General Eegistry Office, Edinburgh, containing (a) It rather appears that the adoption of this form is intended to he com- pulsory. 150 TRANSFERS UNDER ACT 1845. [Book II. the above-mentioned particulars specified in the notice (sec. 10), and this notice is then registered by the Lord Clerk Kegister or his deputy (sec. 17). When shares are transferred by opera- tion of law, as by death, marriage, etc., the company must, within three months after receiving notice of such transfer, make a corresponding return to the foresaid office, in the form of Sche- dule 0. Transfer of In the case of companies formed under the Act 1845, the fol- Aot of 1845. lowing are the statutory provisions : — The transfer of shares or of interest in consolidated stock is by deed duly stamped, containing the consideration truly stated. The form given in the Act may be adopted (sec. 14). The transfers may be executed according to the forms of English or Scottish law, or partly according to the one and partly according to the other (sec. 15). When the deed of transfer is executed, it is delivered to and kept by the secretary, who enters a memorial of it in the ' register of trans- fers,' and indorses that entry on the deed of transfer. The de- livery of the deed completes the transfer; and until this takes place, the vendor is still liable for calls, and the company may still pay him profits ; nor is the vendee entitled to vote (sec. 16). A new certificate, or, in the option of the vendee, the old one, with the fact of transfer indorsed and signed by the secretary, is delivered to the vendee (sec. 16). No transfer can be made until all calls are paid (sec. 17). The directors may close the register of transfers during the prescribed period ; and if none, then for a period not exceeding fourteen days before each ordinary meeting. Seven days' notice must be given in the prescribed newspaper; and if none be prescribed, then in one circulating near the company's chief place of business (sec. 18). Transfers made after closing of the register are considered as between transferrees and the company to have been made after the ordinary meeting (sec. 18). When the interest in shares has been transmitted by operation of law, or by other lawful means than the statutory transfer, the transmission must be authenticated by a declaration in writing, as provided in the Act. This declaration must state the manner in which, and the party to whom, the share has been transmitted, and must be made and signed by some credible person before a sheriff or justice. The directors may, however, require the authentication to be made in Chap. V.] RETIREMENT AND RENUNCIATION. 151 some other manner. The declaration is left with the secretary, who enters the name of the person entitled under the transmission in the ' register of shareholders ;' and for this entry, a small fee, not ex- ceeding the prescribed amount if any, and otherwise not exceeding 5s., may be demanded. It is the authentication which completes the transfer ; for until this takes place, the person in right of the transmission is not entitled to share in profits or to vote (sec. 19). When the transmission is by the marriage of a female shareholder, the declaration must contain a copy of the register of the marriage, or other particulars of its celebration, and state the identity of the wife with the holder of the share. If the transmission is by testa- mentary instrument or by intestacy, the probate of the will, the letters of administration, a testament testamentary or testament dative, as the case may be, or official extracts thereof, must, together with the declaration, be produced to the secretary, who thereupon makes an entry of the declaration in the ' register of transfers' (sec. 20). The company is not bound to see to the execution of any trusts, Trusts. whether express or constructive, to which shares may be subject ; but the receipt of the party in whose name the share stands in the books of the company, or when it stands in the names of more than one, the receipt of the party first named in the register of share- holders and then surviving, is a sufficient discharge, notwithstand- ing the existence of any trusts, and whether notice of them has or has not been given. The company is not bound to see to the application of money paid upon such receipts (sec. 21). III. RETIREMENT AND SURRENDER OF SHARES. Where a partnership is at will, and not for a fixed term, any of Partnership at • •11 !■ 1 1 /. •■ ^"11 ^^^ ^°'-' the partners may retire without the consent oi the others ; for he a term. may operate a dissolution at any time he sees fit (a). But if it be for a definite term, he cannot retire without the consent of his co- partners until the period of its agreed upon duration has elapsed, or a dissolution has been brought about in some other way. To obviate questions that might arise on the retirement of a partner, and which might involve the necessity of a dissolution, it is a usual (a) Marshall v. Marshall, 1815, 18 F. C. 178. 152 RETIREMENT AND RENUNCIATION. [Book II. and most convenient practice to make special provisions in the contract for this purpose (a). Eetiringby In all cases a partner may retire from the company, and a shareholder may surrender his shares, if he obtains the consent of his copartners ; and this consent may be express, as at a general meeting, or it may be implied from facts and circumstances, or from the company's known practice in similar cases (b). But it would seem that consenting to a member retiring or relinquishing his shares is a matter beyond the sphere of ordinary management, and one in which the directors have no power to bind the com- pany, nor a majority the minority of its members. The consent, whether express or implied, must be that of all the members (c). Directors, without special authority, cannot buy out shareholders by applying the company funds for that purpose ((I). If they do so, they are not only liable in repetition of the monies so mis- applied, but are held to undertake all liabiUties which the outgoing members may have incurred to the company (e). Of course directors, like other shareholders, may with their own money buy as many shares as they choose (/). And if a shareholder sells to a director, in ignorance of the fact that the latter is purchasing, not with his own but with the company's funds, the transaction will be good quoad the shareholder (g). A shareholder may at all times retire, when the objects of the company have been changed without his consent, express or implied (h). Acts of 1845 Neither the Company Clauses Consolidation (Scotland) Act, nor the Act of 1862, make any provisions for the retirement of a member by surrender of his shares to the company. (a) Wright v. Gardner's Trs., 1831, 1216 ; Hodgkinson, 5 E. Jur. K. S. 9. S. 721. 478 ; Burt, ibid. 612. (6) Bodmin IJnited Mines, 23 Beav 370 ; Bunten v. Barclay, 1854, 16 D 1002 ; and see Wilson v. Bruce, 16 D 171. (c) Munt's case, 22 Beav. 55 Richmond's case, 4 K. and J. 305 Stanhope's case, 3 De 6. and S. 198 ; (e) Biians v. Coventry, 2 E. Jur. N. S. 557. (/) Haddon v. Ayres, 5 E. Jur. N. S. 408. {g) Bagge's case, 13 Beav. 162 ; ex parte Nicol, 5 E. Jur. N. S. 205. liolCs case, 1 Sim. N. S. 389 ; Morgan's (li) Clarke v. Hart, 6 House of case, 1 De G. and S. 750. Lords Cases 633 ; Feather stonhaugh (d) Walker's case, 2 E. Jur. N. S. v. Fenwick, 17 Yes. 309. Chap. V.] EXPULSION AND FORFEITURE. 153 IV. However much a partner may misconduct himself, or however undesirable it may be to continue him in the concern, it is only by dissolution that he can be got rid of if he insists on remaining a partner. To meet cases of this kind, clauses of expulsion are sometimes inserted in the partnership contract, by which power is conferred on the partners, or a certain majority of them, to expel any of their number in certain specified circumstances. Clauses Clauses of of a similar kind are often introduced into the articles of associa- tion, or other instrument by which companies are formed, em- powering the company or its directors to declare the shares of a member forfeited on his failure to comply with certain regulations. Such clauses are construed strictissimi juris, because of the great facilities they afford for abuse (a). To be effectual, the power of expulsion must be exercised with the utmost bona fides, and with a minute attention to all the regulations and formalities pre- scribed (b). This power may be abused not only to the prejudice of an obnoxious shareholder, but in order to relieve a favoured member from liabilities. In either case, the forfeiture will be declared invalid if mala fides can be established (c). If the forfeiture is valid, the shareholder ceases to be a mem- Consequences ber of the company to all intents and purposes from its date. ^" He can no longer take any share in the management, or draw dividends ; and, on the other hand, though he may be sued for calls made prior to his forfeiture, he is liable for none made subsequent to that event, nor can he be made a contributory on winding up (d). The invaliditv of an alleged forfeiture may be established at the invalidity of JO J forfeiture. {a) Munrov. Cowan and Co.,1%1%^ (c) Richmond's ease and ParaJer's 17 P. 0. 854. case, 4 K. and J. 305. (6) Blissetv. Daniel, 10 Ha. 493 ; Smith (d) Beresford's case, 3 De G. and S. V. Mules, 9 Ha. 556 ; Clarice v. Hart, 6 175 ; Baib/s case, 15 E. Jnr. 29. See House of Lords Cases 633 ; Watson v. Great Nor. Ra. Co. v. Clark, 1856, -Eato, 23 Beav. 294; Richmond's case, 18 D. 660; Great Nor. Ra. Co. v. 4 K. and J. 305 ; Harris, 20 Beav. Inglis, 1853, 15 D. 532 ; Lindsay v. 384, Great Nor. Ra. Co., 1851, 13 D. 457. 154 FORFEITURE UNDER ACT 1862. [Book II. instance of the shareholder (a), at that of the company (&), and at that of creditors, whether they be those of the company or of the shareholder (c) ; for cases may easily be conceived in which all these may have an interest. An action of damages lies against the company for an illegal or unwarrantable forfeiture, and it is no answer to this that the forfeiture is invalid (d). A company may be interdicted from carrying into effect a declaration of forfeiture made de recenti (e). Clauses of forfeiture providing that shares may be forfeited for non-payment of calls, are intended for the benefit of the company, and do not enable shareholders to escape from the company by refusing to pay calls (/). Forfeiture of No Statutory provisions are made in the Companies Act of 1862 the Act 1862. for the forfeitdrc of shares ; but if the regulations of Table A, Schedule 1, be adopted as the articles of association, the company will be possessed of a body of regulations admirably calculated to ensure a fair and equitable procedure in this matter. The object of the powers of forfeiture contemplated in these regulations is to ensure payment of calls. If a call be not paid on the appointed day, a forfeiture of the defaulting member's shares may be declared. The procedure is as follows : — A notice must be served on the defaulter, as provided by the Act. This notice must contain a requisition to pay the call with interest and expenses on or before a certain day, at the registered office, or some other place where the calls are usually made payable, under penalty of forfeiture. If obedience is not given to this requisition, the shares may be forfeited by a resolution of the directors to that effect, passed sub- sequently to the day mentioned in the notice. The shares so for- feited become the property of the company, and may be disposed of as a general meeting shall direct. A declaration in writing, narrat- ing the steps of procedure up till the declaration of forfeiture, and the declaration itself, is sufficient evidence against the defaulter ; (a) Blisset v. Daniel, 10 Ha. 493 ; (d) CatcJipole y. Ambergate Ra. Co., Clarke v. Hart, 6 House of Lords Cases 1 E. and B. 111. 633 ; Munro v. Cowan and Co., 1813, (c) Watson v. Ealis, 23 Beav. 294 ; 17 P. C. 354. compare with Prendergast v. Turton, (b) Richmond's case and Painter's 1 Y. and C. C. C. 98. case, 4 K. and J. 305. (/) Richmond's case and Painter's (c) Barton's case, 4 De G. and J. case, 4 K. and J. 305 ; Moore v. ^^- Rawlins, 6 C. B. N. S. 289. Chap. V.] FORFEITURE UNDER ACT 1845. 155 and this document, and the receipt of the company for the price of the forfeited shares, constitute a good title to a purchaser, who, on receiving a certificate of proprietorship, is deemed the holder of them, free from all calls due prior to the purchase. He is not bound to see to the application of the purchase money, and his title is not affected by any irregularity in the proceedings. It will be observed that the whole procedure is very similar to that pro- vided under the Company Clauses Consolidation Act, to be after- wards noticed. No statutory provision exists as to forfeiture of shares in relation Forfeiture in . . . . ••Ill c.liartered and either to chartered companies or to associations privileged by letters patent letters patent. The exercise of such a power, therefore, seems """'P^'^^''^- ultra vires of such companies where it is not specially conferred in the charter, or where in letters patent companies it does not form part of the contract of association. Bv the Companies Clauses Consolidation (Scotland) Act, 1845, Forfeiture •' ^ . . ^ - under the Act it is provided that shareholders failing to make payment of calls of 1846. with interest for two months from the date when they became payable, may have' them declared forfeited by the directors, whether the company have sued for the amount or not (sec. 30). Notice of intention to forfeit must, however, be given by the directors twenty-one days before declaring the forfeiture. This notice may be left at or transmitted by post to the shareholder's usual or last place of abode ; and if his residence is not known, or if he be abroad, notice must be given in the Edinburgh Gazette (sec. 31), and in a newspaper circulating in the district where the company's principal place of business is situated (sec. 40). The forfeiture does not take effect till it has been confirmed at a general meeting held after expiration of the two months (sec. 32). The shares may be directed to be sold at that or any subsequent general meeting (sec. 32). The shares are sold either by public auction or private contract. Any shareholder may purchase (sec. 33). A declaration in writing, by some credible neutral person, before the sheriff, of the call, the notice, and the forfeiture in default of payment thereof, having been made and confirmed, is sufficient evidence of the facts set forth, and, together with the treasurer's receipt for the price of the shares, constitute a good title to the purchaser. He is then entitled to a certificate of proprietorship, 155 FOEPEITURE UNDER ACT 1845. [Book II. becomes the holder, and is discharged from all calls due prior to the purchase ; he is not bound to see to the application of the pur- chase money, nor is his title affected by any irregularity in the proceedings (sec. 34) (a). No more shares can be sold than are sufficient to pay the calls, interest and expenses of the procedure ; any surplus that may exist must be paid to the defaulter (sec. 35). If payment is made before sale, though after forfeiture, the shares revert to the quondam defaulter (sec. 36) (b). The Companies Clauses Act, 1863 (c), confers a power of can- celHng shares on companies incorporated either before or after that date, provided they obtain a special act incorporating Part 1 of that statute. In yirtue of its provisions, shares forfeited under the Act 1845 may, if the directors are unable to sell these for a sum equal to the arrears of calls, interest, and expenses, be cancelled by resolution of a general meeting (sees. 3 and 4). A written declara- tion by any sheriff or justice that such sale could not be effected on the Stock Exchange of Edinburgh,, if none in especial is prescribed, is sufficient evidence to warrant cancellation (sec. 5). This can- cellation divests the shareholder of all right and interest in the cancelled shares, but does not affect his liability for unpaid calls, interest, and expenses, as at the date of cancellation (sec. 6). Yet from this amount the value of the cancelled shares as this stands at the time must be deducted ; and if payment is made before can- cellation, the shares revert to their former owners (sec. 7). The company may also, when shares have been forfeited, or when sums payable on shares remain unpaid, cancel them with consent of the holders ; but in that case all liabilities attaching to them are at once extinguished (sec. 8). The company also accept surrenders of shares which have not been fully paid up (sec. 9) ; but no money is to be received either for cancellation or surrender (sec. 10). New shares may be issued in lieu of those cancelled or surrendered, provided their aggregate nominal amount does not exceed that of the latter (sec. 11). (a) See Lindsay v. G. N. Ra. Co. (b) Great Nor. Ra. Co. v. Clprk, 1851, 13 D. 457, 1 Macq. 112 ; G. N. 18 D. 660. Ra. Co. V. Inglis, 1851, 13 D. 497 ; (c) 26 and 27 Vict. c. 118. 1853, 15 D. 532. [ 157 ] CHAPTER VI. CALLS. The subscribers to joint-stock companies are not in general re- quired to pay up the full amount of their contributions at once, but only by instalments as called for by the company from time to time. The word ' call ' is used in three senses. It denotes — 1. The fact Meaning of that a demand has been made ; 2. The aggregate amount demanded ; 3. The proportion of this amount payable by each shareholder in respect of his shares or his guarantee. If the company is unlimitedj calls may be made upon the mem- bers not only to the extent of the nominal capital, but for as much beyond this as may be necessary to liquidate the company debts. If the company be limited, the members are not liable to pay calls beyond their shares or guarantee, unless it can be shown that they have agreed to do so per expressum or by implication, e.g. by allowing the directors to contract company debts which can only be met in this manner. I. MODE OF MAKING CALLS. By whom and in what manner calls may be validly made, can Who may only be ascertained by reference to the provisions of the act, charter, or articles of association, by which the company's constitu- tion is regulated. It may be observed, however, generally, that calls made by persons not empowered to do so are mere nullities (a) ; and that when calls are dii'ected to be made by a certain number of persons collectively, a call made by a less number will not in (a) South-East. Ra. Co.., 12 A. and 845; Edinhirgh Ra. Co.y. HeVbUwUte, E. 497. See Miles v. Bough, 3 Q. B. 6 M. and W. 707. 158 CALLS UNDER ACT 1862. [Book II. Act 1862. Eegulation of Table A, Schedule 1. Act 185G. Letters Patent Acts. Act 1845. general be held valid (a). All the prescribed formalities must be complied with ; for though their want may sometimes be supplied by equivalents, and defenders in actions for calls may sometimes be prevented from pleading informalities by conduct or acquies- cence, such contingencies are not to be relied on. When the power to make calls is lodged in directors, a call made by such as possess this character for the time being is valid, though objections may exist to the validity of their appointment (b) ; and the Court has refused to sustain the objection, that the whole directors by whom the call was made had not been elected at one meeting (c). No rules upon this subject are laid down in the body of the Act of 1862, and the company are left free to adopt such regula- tions as they choose in their articles of association. The following regulations are, however, to be found in Table A, Schedule 1; and as they are admirably suited for practice, they should always, if possible, be adopted in their entirety. The directors may from time to time make such calls in respect of unpaid monies or shares as they see fit. Twenty-one days' notice must be given of such call ; and the places where and the persons to whom calls are to be paid are fixed by the directors (Rule 4). The call is deemed to be made when the resolution is passed (Rule 5). Unpaid calls bear interest at 5 per cent. (Rule 6). The directors may receive from members willing to do so, the whole or any part of the monies due on their shares beyond the amount of the call; and the company shall in that case pay them interest, at such rate as may be agreed upon, on the excess of sums so paid over the amount called up (Rule 7). The provisions in the Companies Act of 1856 are very similar to those of the Companies Clauses Consolidation Act. They are to be found in Table B, No. 2 and No. 46. No provisions on this subject are to be found in the Letters Patent Acts. The provisions of the Act 1845 are as follows : Calls are directed to be made by the company (sec. 23) ; but (a) Kirk v. Bell, 16 Q. B. 290; Thames Dock Co., 4 Man. and Gra. 552. (6) Swansea Dock Co., 20 L. J. Ex. 447. At least such is the case in companies formed under the Act of 1845, which contains a clause to this effect. (c) Hutcheson v. Halkett, 1847, 10 D. 150. Chap. VI.] CALLS UNDER ACT 1845. 159 where the special act does not require calls to be made by general meeting, they are in practice made by the directors, whose act is held to be that of the company (a). It would also seem that they may delegate this power to a committee (6). Calls may be made as the company see fit, .and at such periods as they deem necessary. But in doing so, care must be taken that the provisions and restric- tions of the general and special acts are strictly complied with. The special act commonly fixes the amount of each individual call, the aggregate amount of calls to be made in one year, and the interval between successive calls; and by the general Act it is provided that in all cases twenty-one days' notice at least must be given of each call (sec. 23). The company also appoint the persons to whom, and the times and places at which, payment is to be made. It has ultimately been fixed in England, after some conflicting Calls payable judgments, that there is no legal objection to a call being made i^nts. payable by instalments (c). But it has been held, in Queen's Bench, that when the times of making and the amount of calls have been prescribed by the special act, it is irregular to make more than one call at a time (d). Unless prohibited by the special act, calls may be made prospectively ; that is to say, the resolution to make calls may be prospective («). When calls are made pay- able by instalments, no action can be maintained until the last instalment is due (/); and no forfeiture is incurred until there has been a failure to pay the last instalment (g). Calls must be made equally on all the shareholders (h). As regards making of calls, two separate acts are observable : jResoiution and 1. The resolution that a call shall be made; and 2. The notice notice. (a) Anibergate Ra. Co., 19 L. J. (if) Stratford and Moreton Ra. Co., Ex. 89, 4 Ex. 540; Southampton Ra. 2 B. and Ad. 518; Smithy. Ooldsworthy, Co., 2 Ea. Ca. 215 ; ex parte Toohe, 4 Q. B. 430, and 12 Law Jour. Q. B. per Erie, J., 6 Ea. Oa. 1. 192. (V) Great Nor. Ra. Co., 1850,12 (e) Sheffield, Ashton, and Manchester D. 1194 ; 1862, 24 Jur. 434, 1 Macq. Ra. Co., 7 M. and W. 574, 2 Ra. Ca. 112. 522. (c) London and North-West. Ra. (/) London and North-West. Ra. Co., 6 Ea. Ca. 494 ; and Birkenhead Co., 6 Ea. Ca. 497, per Martin, B. ■Ra. Co., 6 Ea. Ca. 498 ; overruling (g) Ihid. previous case of Ambergate Ra. Co., 14 (h) Preston v. Grand Collier Dock E. Jut. 625, and 5 Exoh. 459. Co., 2 Ea. Ca. 335. 160 Resolution. CALLS UNDER ACT 1845. [Book II. Notice. served In consequence on those liable. It has been ultimately decided in England, that the resolution, as evidenced by the minutes of meeting, is the ' caW in the sense of the general Act (a). This construction has accordingly been applied in determining questions of interval between calls, and liability for calls as be- tween seller and purchaser (b). Its application is not, however, in some cases, free from difficulty. The resolution to make calls must be entered in the minutes of meeting, and authenticated by the signature of the chairman (sec. 101). In practice, rough notes are taken at the time, which, being afterwards extended as minutes in the proper books, are signed by the chairman at the next meet- ing. If the same person be chairman at both meetings, this method of procedure appears unobjectionable (c). The resolution is generally, as appearing in the minutes, a bare statement that a call of a given amount per share, payable on a certain day, is made on the proprietors. It is not necessary that it should specify the place where, or the person to whom, payment is to be made, pro- vided these particulars be sufficiently set forth in the subsequent notice (d). Care should be taken, when the special act specifies different classes of persons as liable to pay calls, that the resolution be so worded as to embrace the whole (e). The resolution is followed by a 'notice' to the proprietors, which must specify the time and place at which, and the party to whom, payment is to be made. The notice need not bear the company's seal, but must either be signed by two directors, or by the treasurer or secretary. It may either be in writing or in print, or partly in both (sec. 141). It has been decided that the printed signature of the proper officer is a sufficient compliance with the statutory requirements (/). When not dispensed with by the special act. (a) Ex parte Tooke, re Londonderry, etc., Ra. Co., 6 Ea. Ca. 3, 13 Q. B. 998. (h) See North American Colon. Asso- ciation of Ireland, 19 Law Jour. Q. B. 427. (c) Southampton Dock Co., 1 Man. and Gr. 448 ; London and Brighton Ra. Co., 2 Man. and Gr. 674; Miles v. Bough, 3 Q. B. 846, and 12 Law Jour. Q. B. 74. (cZ) Whitehaven and Furness Ra. Co., 1850, 12 D. 829, aff. 7 BeU's App. 79, 22 Jut. 483. The affirmance was on a specialty, but the decision is sup- ported by many English cases. Newry and Enniskillen Ra. Co., 1848, 5 Ra. Ca. 278, and cases there referred to. (e) West London Ra. Co. v. Ber- nard, 22 Law Jour. Q. B. 68. (/) Great North Ra. Co. v. Inglis, 1850, 12 D. 1194, aff. 1852, 24 Jur. 434, 1 Stuart 749, 1 Macq. 112. Chap. VI.] LIABILITY FOK CALLS. 161 these notices must be served on the shareholders individually (a). The special act sometimes substitutes advertisement in the news- papers for personal service, and sometimes requires both forms of publication. The forms necessary to be observed in giving these notices will be found in the appendix. In actions for calls, it is necessary to prove that they were made Actions for at the period prescribed by the Act; and it would seem that a director, when sued for a call, may plead its illegality, though he himself was a party to its being made (b). Bat in some cases the defender will be estopped from pleading that the call has not been proved, as e.g., where he has expressly promised to pay the calls for which he is sued (c). It is correct pleading to set forth that the calls sued for were made by the parties (whoever they may be) authorized to make them, and that notice was duly given as pre- scribed ; but an objection to the relevancy, for want of specifica- tion in this respect, has been overruled {d), and it is too late to insist on it after verdict (e). II. LIABILITY FOE CALLS. As a general rule, it is only persons who have acquired the General rules. character of shareholders or members of a formed company who are liable for calls : for until it is duly formed, the company cannot be said to hold the character either of debtor or creditor ; and until a person has joined it, he cannot be said to be liable in contribution either to its capital or in liquidation of its debts. What is neces- sary to the formation of a company, and what to constitute mem- bership, has been considered in the earlier chapters of this treatise. But it must be observed that persons are sometimes rendered liable for calls even before they have become shareholders. When this happens, it arises from some contract to that effect, into which they have entered either expressly or by implication. Thus, allottees of shares have been in certain circumstances found liable in payment (a) See Edinburgh and Leith Ra. (c) Miles v. Bough, 3 Q. B. 845. Co., 6 Me. and W. 716 ; Painter, 3 Ad. (d) See Burgh v. Legge, 5 M. and W. and E. 433 ; Miles v. Bough, 3 Q. B. 845. 421. (6) Stratford Ra. Co., 2 B. and Ad. (e) Miles v. Bough, supra. 518. 162 LIABILITY FOE CALLS. [Book II. of calls before they attained the character of proper shareholders (a). Such questions, when they arise in companies not formed under statute, must be determined by the special circumstances of the case. Companies The Companies Act, 1862, declares calls to be debts due by "'' shareholders to the company, and to be in the nature of specialty debts in England and Ireland (sec. 16) ; but beyond this, it makes no provision on the subject. If, however, the regulations of Table A be adopted, the provisions will be as follows : Such calls as they see fit may be made by the directors from time to time on the members in respect of money unpaid on their shares, provided twenty-one days' notice be given of each call. Payment must be made at the times and places appointed by the directors (No. 4). The date of the call is the date of the resolution to make it (No. 5). The notice may be sent by post or served personally (No. 95). Interest at 5 per cent, is exigible on calls not paid on or before the appointed day (No. 6). Calls may be paid in advance ; and in that case interest may be allowed on the excess of such advance over the amount called up (No. 7). Shares may be forfeited for non-payment of calls; but for this purpose the prescribed procedure must be fully carried out (Nos. 17 et seq.). Letters Patent The Letters Patent Acts contain no provisions on the subject Acts. n n 01 calls. Companies By the Companies Clauses Act, 1845, all parties who fall 1846. under the statutory definition of shareholders are liable for calls (sees. 8, 22, and 23). The provisions of sees. 22 and 23 are peculiar, and it has been supposed that they were intended to render mere subscribers, in opposition to proper shareholders, liable for calls (b) ; but it is very doubtful if, upon a sound con- struction, this can be held to be the meaning of the Legislature. It would rather seem that the clauses in question merely mean that persons, by subscribing to the undertaking, render them- selves liable to be made contributories by being registered as shareholders. As the expression used is not subscribers for shares, but ' persons who have subscribed monies towards the undertaking,' it is possible that the Legislature meant not inchoate shareholders, but parties who had agreed to advance money by way of loan to (a) Duke v. Dive, 1 Ex. 36 ; AldJiam v. Brown, 6 E. Jur. N. S. 41. (6) Lindley 538. Chap. VI.] SEALING OF REGISTER. 163 the company on certain terms, but without the intention of becoming shareholders. Be this as it may, it is to be observed, that no one can be sued Requisites to ■^ (• • / \ ereate liability. for calls as a shareholder, whether he be transferree of scrip (a), transferree of shares (b), or even original allottee (c), unless his name has been entered on the sealed register of shareholders before the call was made {d). Neither can he be sued for calls made after a transfer in favour of another has been registered ; so that it is only for calls made while a person's name stands on the register that he is liable to the company (e). The Act, in fact, in authorizing calls to be made on shareholders, seems to assume registration to be neces- sary to give the character of shareholder (/) ; and apart from the statutory enactment, the reason of this rule is very apparent. Until registration, a person has no active title in the company : he can neither vote at meetings nor receive dividends (sees. 16 and 19). To render him liable, therefore, in calls made before registration, would be to subject him in what he had no voice in imposing, and to hold him bound to a company which was not bound to him. It is also necessary that the register be sealed before the call is Sealing of made ; for without this, registration creates no liability (sec. 9) (g). When the register consists of several volumes, and the last contains a recapitulation of their contents, the afHxing of the seal to this recapitulation is sufficient (A). The mere fact, therefore, of a transfer having been executed Naked transfer , not sufficient. does not relieve the seller from liability for future calls till that transfer has been entered on the sealed register (i). And in like manner, though an original allottee has disposed of his scrip before passing of the special act, but has then been registered by the (a) Newry and Enniskillen Ra. Co., Birkenhead Ra. Co., 4 Ex. 426, and 6 12 E. Jur. 101, 5 Ra. Ca. 0. 275 ; Ex. 626 ; Londonderry Ra. Co., 13 Q. Birmingham Ra. Co., 1 Q. B. 256; B. 998 ; Great Nor. Ra. Co., 18bl, IS London Grand Junction Ra. Co., ibid. D. 1315, aff. 1852, 24 Jur. 434. 278. (/) Compare sees. 8 and 23. (6) Sayles v. Blane, 6 Ra. Ca. 79. ((/) Cheltenham and Great West. Ra. See also Corden v. Universal Gas Light Co., 9 0. and P. 55 ; Great Nor. Ra. Co., 6 D. and L. 379 ; Birkenhead Ra. Co., supra. Co., 6 Ra. Ca. 47. CO Great Nor. Ra. Co., supra. (c) Previous cases. (0 Sayles v. Blane, 6 Ra. Ca. 79 ; {d) See Cal. Ra. Co. v. Lockhart, Corden v. Universal Gas Light Co., 6 1854 17 D. 25. D- and L. 879 ; Anderson v. Cullen, (e) Belfast Ra. Co., 1 Ex. 739 ; 1849, 11 D. 1264. 164 CALLS UNDER ACT 1845. [Book II. Consequence of non-regis- tration. Question be- tween sub- scriber and scrip- trans- ferree. Payment of previous calls. company in place of the scrip-transferree, he is liable for all calls made while the latter remains unregistered (a). When this is done, the transferrer ceases to be liable for all future calls (b). But his obligation to pay such as were made while his name remained on the register, would not seem to be devolved on his transferree in a question between himself and the company (c). The question has accordingly risen, whether a purchaser of shares, through whose delay to get himself registered liability has been incurred by the seller, is bound to relieve the latter, or indemnify him for payments made in such circumstances. In Anderson v. Cullen, the Court of Session decided this question substantially in the affirmative (d) ; and though in Humble v. Langston {e) the English Court of Ex- chequer took an opposite view, seemingly on the ground that in the contract notes no time for completing the contract was specified, it has frequently been decided in Chancery that the vendee is bound to pay calls made on the vendor since the sale, and generally to do all that is necessary to relieve him from subsequent liability (/). A similar question occurs between an original subscriber and a scrip-transferree, when the former has been rendered liable for calls in consequence of the latter not coming forward to register. In Jackson v. Cocker (g), it was held that a court of equity could not compel the scrip-holder in such circumstances to indemnify the original subscriber, because there was no contract express or implied to this effect. But in the later case of Jacques v. Chambers (h), Knight Bruce, Vice-Chancellor, expressed an opinion, that if no other liability attached to the vendee, it must be taken to have been part of the contract that he was to indemnify the vendor from the consequences of his name being placed on the register. When (as generally happens) it forms a regulation of the com- pany that shares shall not be transferred till all previous calls have (a) Midland Great West. Ra. Co., 5 Ra. Ca. 76, 16 L. Jour. 1847, Exch. 166 ; London Orand Junct. Ra. Co., 2 Ma. and Gr. 606 ; East Lothian Ra. Co., 1849, 11 D. 1184. (b) Same cases. (c) Mangles v. Grand Dock. Co., 2 Ra. Ca. 359. {d) 1849, 11 D. 1264. (c) 2 Ra. Ca. 533, 7 M. and W. 517. See also Burnet v. Lynch, 5 B. and C. 589. (/) Wynne v. Price, 13 E. Jur. 296, 5 Ra. Ca. 465 ; Sliaw v. Fisher, 5 Ra. Ca. 461 ; Cheale v. Kenward, 3 De D. and J. 27. ((/) 4 Beav. 59. Qi) 4 Ra. Ca. 499 ; and see Beckit V. Bilbrough, 8 Ha. 188. Chap. VI.] LIABILITY OF EXECUTORS. 165 been paid, the company are not bound to register the transferree until this regulation has been complied with ; and the seller will accordingly continue liable to the company, not only for all past calls, but for such as may still be made while the purchaser remains unregistered (a). Persons whose names appear on the register are presumed to Evidence or be shareholders, and liable for calls accordingly. Yet this pre- maybe sumption may be rebutted ; and therefore such as are not properly shareholders are not liable for calls, though the company may have chosen to treat them as shareholders, as by registering them, pro- vided this has been done without their consent, express or implied (b). But they may be barred from taking this defence by conduct, adop- tion, or acquiescence, though the prescribed formalities have not been strictly adhered to (c). If minors are registered as shareholders (which they may be, Minors. from having received shares by bequest or by purchase), they become de facto shareholders, and are entitled to vote by their guardians (sec. 82). Accordingly they cannot escape from the liability to pay calls, on the mere plea of being minors when the calls were made, unless they aver and succeed in proving that they had repudiated the contract either during minority or afterwards tempestive ; for otherwise it will be presumed that they had ratified the transaction on their coming of age (d). In like manner, if they are sued for calls while in minority, and seek to escape liability on that ground, they must state and establish facts and circum- stances relevant to take them out of the operation of the statute, e.g. fraud; being induced to purchase shares without the autho- rity of their curators, though they had such guardians; and the • hke (e). By sec. 22, the legal representatives of shareholders are made Executors. liable for calls. It has been held in England, that when an exe- (a) Aylesbury Ra. Co. v. Thompson^ Lords Cases 497 ; Birmingham Ra. 2 Ra. Ca. 668. Co., 1 Q. B. 256. (h) New Bruns. Ra. Co., 4 H. and (d) Cork and Bandon Ra. Co., 10 Q. N. 160 ; Galvanized Iron Co., 8 Ex. B. 935 ; Leeds and Thirsk Ra. Co., 4 17 ; Shropshire Union Ra. Co., 3 Ex. Ex.26; Birkenhead Ra. Co., b'Ex. 114; 401. See Constitution of Partner- Neiory and Ennis. Ra. Co.,B Ex. b6b. ship. (e) North-West. Ra. Co., 5 Ex. 114. (c) London Gr. June. Ra. Co., 1 Q. See also Stikeman v. Dawson, 16 Law B. 271; Btirnes v. Pennell, 2 House of Jour. (Chan.) 205. 166 DEFENCES AGAINST CALLS. [Book II. cuter or administrator is sued for calls made during the testa- tor's lifetime, and while he was registered, the short statutory declaration is not sufficient, but a special count must be framed to meet the facts (a). It is probable, therefore, that the averments required by sec. 27, would not in Scotland be held sufficient in such a case, but that the condescendence would have to contain a special averment that the calls sued for against the executor or other representative were made prior to the testator's death, and while his name stood on the register. It is sometimes a matter of difficulty to determine whether calls made on shares fall ultimately to be paid by the person to whom they have been bequeathed, or are chargeable against the deceased's executry generally. This will fall to be determined by reference to the terms in which the bequest is made (b). Defences. If a party is made a shareholder in terms of the provisions of an Act of Parliament, he cannot resist payment of calls on the ground that the special act was obtained by fraud (c), Nor is it any defence against an action for calls by a registered company, that the company ought not to have been registered (d). It is no defence against calls that a shareholder has been induced to become such by fraud on the part of the company. This would require to be established by declarator, or the shares must have been repu- diated before the call was made (e). Minors are liable for calls on shares to which they have succeeded in railway companies, unless they have repudiated tempestive — in Scotland, during the Quadri- ennium utile (/). Those who have once become shareholders con- tinue liable for all calls made while they retain that character, until payment, or until the liability has been terminated by agree- ment (g). The common rule, that transfers cannot be made till all previous calls are paid, is pleadable only by the company, and cannot be used as a defence against calls by the transferree who (a) Birkenhead Ra.Co.,QB,a..CsL.211. (/) Dublin and Wicklow Ra. Co., 8 (b) See the English cases, Jacques Ex. 181 ; Newry Ra. Co., 5 Ex. 565 ; V. Chambers, 4 Ea. Ca. 205 ; Oakes, 9 North- Western Ra. Co. v. MacMichael, Hare 666 ; Tanner, 11 Beav. 69. 1850, 5 Exch. 114. (c) Waterford Ra. Co., 14 Q. B. 672. {g) Bargale, 5 House of Lords Cases (d) Banwers Iron Co., 8 C. B. 406. 297 ; Bosanquet, 4 Ex. 699 ; Taylor, (e) See Deposit Life yl.'iitnr. Co., 6 Jones and La Tmiche, 2 Ir. Re. 24. E. and B. 761. Chap. VI.] DEFENCES AGAINST CALLS. 167 has been registered (a). When this rule exists, the seller remains liable for all calls made before the company chooses to register the purchaser (6). When shares are transferred and registered, after a call has been made, but before it is payable, it seems doubtful whether the company can enforce the call against either transferrer or transferree (c). It is no defence to an action for calls, that, according to statements made by directors, more than the subscribed capital will be necessary to complete the undertaking (d), or that the funds are being misapplied (e), or that a railway company has failed to complete a part of the line (/), or that the scheme of a railway as authorized by the special act is different from that contained in the subscription contract {g). Yet it is a good plea in defence, that the call was not made by persons duly authorized (h) ; and that it was made before the whole of the capital had been subscribed, where the special act provided that until this was done, the provision and powers of the act should not come into force (z). But it has been held, that when there is no provision of this kind in the special act, the plea cannot be taken on sec. 16 of the English Lands Clauses Act, which, though it requires the whole capital to be subscribed before the compulsory powers can be exercised, does not prevent calls from being made before that has taken place (Jc). (a) Howden v. Kennedy, 1855, 18 D. (/) Newry Ra. Co., 1850, 13 D. 246. 284. (i) Humble v. Langston, 7 M. and W. (g) Fife and Kinross Ra. Co., 1861, 517 ; London Ra. Co., 2Ma. andGr. 674. 23 D. 891. (c) North Am. Co. Association, 15 (h) Swansea Dock Co., 20 Law J. Jur. 187 ; Watson v. Bales, 23 Beav. Ex. 447. See p. 155. 294; AyUshury Ra. Co., 4 Ma. and Gr. (i) Norwich and Lowest. Nav. Co., 651, and 2 Ra. Ca. 668. 1 Moo. and Mai. 151. (c/) Edinr. and Newha. Ra. Co., (k) Waterford and Dublin Ra. Co., 1842, 4 D. 1459. 6 Ba. Ca. 753. The corresponding (e) Nat. Ex. Co., 1849, 11 D. 571. provision in tlie Scotch Act is sec. 15. [ 168 J CHAPTER VII. COMPANY OR PARTNERSHIP PROPERTY. Partnership property held in trust. "What it means. Undee this expression is included whatever is immediately liable for the debts and obligations of the company; and this may consist either of what was originally contributed to the common stock, or of what has stante societate been added thereto. As, according to the law of Scotland, a partnership or unin- corporated company is only a quasi person, and not a proper person, like an individual or a corporation, it should seem that it cannot hold property directly, any more than it can sue or be sued like a proper person. Whatever, therefore, by express contract, or by operation of law, becomes the property of the company, must be taken as held in trust for the uses and purposes of the company. Heritable property is held in the names of one or more of the partners, or in those of third persons as trustees chosen for that purpose ; moveables or personalty appear to be held by all the parties jointly or pro indiviso, as trustees for the concern. As regg,rds the mode in which moveables are held, there no doubt hangs a good deal of confusion, or rather obscurity, about the dicta of our institutional writers ; some loose expressions even appearing to indicate that personalty might be held directly by unincorporated companies. It is believed, however, that the theory here given is the only correct exponent of our law (a). CONVEYANCE AND VESTING OF COMPANY PROPERTY. Partnership The partnership contract operates as a direct conveyance of operates as a whatever is or has been undertaken to be contributed by a partner. conveyance. _ (n) Bell's Prinoip. sec. 358 ; Shaw's Bell's Comm. 214 ; Stair i. 16, 1. Chap. VII.] VESTING OF COMPANY PROPERTY. 169 But it operates as a conveyance merely, and does not supersede the necessity of such modes of transference as are required hy law (a). Moveable property, conveyed under the partnership contract, Personalty. or by subsequent agreement, and already in possession of a partner at the date of the conveyance, requires no delivery to complete the transference to the company, because no delivery is possible, every partner being prcepositus negotiis for the company, and the com- pany as a fictitious person acting only through its agents (b). But where commodities in the hands of third parties are con- Delivery and veyed by the owner as part of his contribution to the stock of the company, in order to ascertain whether delivery is necessary, it must first be considered in what character they are held by their possessors. If they are held by the latter merely as agents for the contributing partner, their delivery is not necessary, as possession by the agent is possession by the principal. If, on the other hand, having been purchased by the contributing partner, they still remain in the custody of the seller, deliveiy will be required (c). And this may be made to any one of the partners, or to a servant at the company's place of business. In order to prevent attach- ment of the contributed articles by the private creditors of the partner, intimation should, in the case under consideration, be at once made by the company to the seller, that the property had passed to the company, and that he must now make delivery to it {d). When a partner contributes liquid or illiquid claims which he holds against third parties (choses in action), the conveyance must be completed by intimation in the usual way. Ships are transferred in terms of the Registration Acts. Ships. Feudal property is held for companies by the intervention of Eeaity. trustees, who may be either one or more of the partners or third ™ * "^ ^' persons chosen for that purpose (e). It has been held that a dis- position to one partner nominatim and to the other members of the company was good, and that seisin and confirmation following thereon effectually vested the lands in the partners pro indiviso for the company (/). This is not, however, a precedent to be followed in modern conveyancing. (a) Stair i. 16, 1. (d) 19 and 20 Vict. c. 60, s. 2. (6) Sh. BeU's Com. 216. (e) Menzies' Leot. 46. (c) Sh. Bell's Com. 216. (/) Dennistoun, MacNah, and Co., 170 COMPANY PROPERTY. [Book II. Ijetssehold. Leasehold forming part of contri- bution. When feudal property previously belonging to a partner is contributed as part of the stock, the partnership contract will con- vey the jus ad rem, or, in other words, will operate as a general disposition ; but to exclude the diligence of the private creditors of the contributing partner, he must execute a disposition, or its equivalent, of the property in favour of the partners, or of some other person, in trust for the company ; or else the company must bring a declarator and adjudication in implement with similar conclusions, and the title must in all cases be completed by registra- tion in common form (a). The same rules apply as to acquisition of feudal property made, stante societate, for the company in name of a partner. In like manner, the right to leasehold property ought to be taken to all the partners nominatim, or to some other persons as trustees for the company (&). It is sometimes indeed loosely said that a lease may be held by an unincorporated association ; but if by this is meant that the quasi person of such an association can hold leasehold property, the proposition seems to be without foundation, and to be subversive of the distinction between mere partnerships and proper corporations. In the only case that might seem to countenance this view (c), the Court merely gave effect to a lease granted to a company socio nomine, for the same reason apparently that a title to sue socio nomine is sustained. It will be observed, however, that no countenance is given to the notion that unincorporated associations can hold leases in their descriptive names ; and it is worthy of consideration how far this decision can in the present day be held of authority, when it is remembered that leases of a certain endurance may be entered on the register of sasines, thereby giving them even greater facilities for transmission and mortgage than belong to proper feudal rights. When leasehold property forms part of what a partner under- takes to contribute, the partnership contract would seem to operate as an assignation to the whole partners, jointly and severally, for behoof of the concern, provided the lease contains a power to assign. 1808, M. App. Tack 15 ; compare with (c) Denviaiotm, J\['Nair, and Co. v. Morison v. ililler, 1818, Hume 720. Macfarlane, 1808, M. App. Tack 15. (a) Shaw's Bell's Com. 216. See 1 Hunter on Landlord and Ten- (ft) Bell on Leases i. 149 ; JSlnri-mj ant, 205. V. Hogarth and Co., 1835, 13 S. 453. Chap. VII.] SEPARATE ESTATE. 171 But possession by the company is still necessary to complete the transfer, and to render the right secure against a second assignee, or an adjudging creditor of the partner (a). When the lease is unassignable, the partnership contract would perhaps be considered as converting the tenant into a trustee for the company (b). To exclude, however, all risk on the part of the company, it Practical rules, is most prudent in such cases to obtain, when practicable, either a new lease from the landlord, or a sub-lease from the tenant, in favour of some one or more of the partners, or of strangers as trustees for the company (c). Adjudication may sometimes be found necessary as a means of making good the company's right to a lease contributed by a partner. When the lease has been registered, in terms of the late Act (d), Eegistration a notarial instrument in the form of Schedule C, appended to the statute, and setting forth the conveyance under the company con- tract, will, when registered, effectually complete the transference. A lease granted for behoof of a company, but excluding assig- Termination nees, expires on dissolution of the company, and can form no part of the separate estate of any of the partners (e). COMPANY PROPERTY AS DISTINGUISHED FROM SEPARATE ESTATE. Company property must be carefully distinguished from the Distinction . . . , between oom- separate estate or the individual partners, it is no doubt true that pany property every member of an association which has not attained limited estate. liability, is liable for company debts to his last shilling and his last acre ; yet the mere fact of his membership does not operate as a conveyance of any part of his separate estate which he has not agreed to contribute, so as to amalgamate it with the company pro- perty, to the effect of destroying his own rights as proprietor, and of liberating it from the diligence of his creditors. Company pro- perty is held in trust for the company, and is directly attachable by its creditors; separate estate remains the absolute property of the part- (a) Bell on Leases. (d) 20 and 21 Vict. c. 26. (ft) SeeM'7ea«,1864,2 M'Ph. 1150. (e) Campbell v. Calder Iron Co., 11 (c) See Borrmos v. Colquhoun, 1852, Dec. 1805, 1 Bell on I^eases 150, and 14 D. 791 ; reversed 1854, 1 Macq. 691. 1 Bell's Com. 82. 172 DIFFERENCE BETWEEN COMPANY PROPERTY [Book II. Distinction exists even in private firms. English law. Best mode of keeping the two kinds of property apart. ners, and becomes liable to be made available for company debts, by- reason of its owners being guarantees or sureties for the company. The distinction between company property and separate estate is very broadly marked in proper joint-stock companies ; but it also exists in all private partnerships, the nature of whose business requires the possession of common property. In England the same distinction prevails ; and as the law has been very much elaborated in that system on this branch of the subject, it may often be referred to with great advantage. At first sight it might be supposed, that as the English law ignores the separate person of the firm, its authority on this matter would not be a trustworthy guide. But, in truth, this difference in principle between the two systems — which in some other branches of part- nership law creates a wide divergence — produces here nothing beyond an evanescent distinction in the terras employed. In this country we consider company property to be held for the company ; in England it is regarded as held for all the partners as such. And whichever view be adopted, the practical result will generally be found to be the same. Even as regards the nomenclature, though ' joint-estate,' ' joint-stock,' and the like, are the proper English equivalents for the Scotch expressions ' company ' or ' part- nership property,' yet in both systems these phrases are used indis- criminately. To exclude questions as to what is company property and what is separate estate, all partnership articles, deeds of settlement, articles of association, or other instruments containing the com- pany contract, should distinctly specify what is contributed to the common stock by the several partners at the commencement of the association ; and a record should be kept and duly authen- ticated of all acquisitions subsequently made on behalf of the company from time to time. Whenever also a formal transfer becomes necessary, this should be completed without delay. Such precautionary measures, though they may avail little in questions with creditors, will be found of great use to determine any disputes that may arise among the partners themselves when the concern is dissolved (a). (a) Minto v. Kirkpatrick, 23 May 1838, 11 S. 1827, 4 Mur. 184. 632 ; Ewing v. Chrichton, Chap. Vll.] AND SEPARATE ESTATE. 173 When these or similar measures have not been adopted, it often General rules. becomes extremely difficult to determine what is company property and what is separate estate: and no absolute rule can be laid down for the decision of such questions, for they fall to be deter- mined by reference to the whole circumstances of each individual case. The following general principles may, however, be found useful as practical guides : — 1. When the question as to what is company property and what is separate estate arises between the partners themselves, inquii'y should first be made into what was arranged at the formation of the concern, and what arrangements, if any, were subsequently agreed upon during the continuance of the partnership. 2. When no definite arrangements can be established, or when the question arises between the company and strangers, inquiry should be directed to the following points : For what purpose the property in dispute was acquired ; what use was made of it ; whence it came ; and by whose money it was purchased (a). We shall now examine the practical application of these prin- ciples somewhat in detail. As every partner is the implied agent of the company, it is a Property got • 111-- r'" company general rule that personal property acquired by him m name ot name. the company becomes ipso facto company property, even though it should have been paid for by the partner with his own money (&). If, however, a partner, within sixty days of his bankruptcy, were to resort to a transaction of this kind with the view of defeating the claims of his creditors, or of conferring a preference on the com- pany, it would, it is thought, be challengeable at the instance of any one having interest. JS converso, property acquired by a partner in his own name, Property got will be presumed to have been acquired for the company, if it has name. been paid for out of the company funds (c). This, however, is only a presumption in law, though a strong one, and it may accord- ingly be rebutted by counter evidence ; as, e.g., if it can be shown (a) See Allan v. Allaii's Trs., 1837, (c) Ersk. iii. 3, 20 ; Wallace and Co., 15 S. 1058 ; Bruce v. Ogilvie, 3813, 1 supra ; Smith, 5 Vesey 193 ; Robley v. Dow 38, and 5 Paton's App. 706. Brooke, 7 Bli. 90; Morris v. Barrett, 3 (6) Wallace and Co. v. Campbell, Y. and J. 384 ; Forster v. Hale, 5 Ves. 1821, 1 S. 56 ; 1824, House of Lords, 308 ; ex parte Connett, 3 Deac. 201 ; 2 Sh. App. 467. ex parte Hinds, 3 De G. and S. 613. 174 DIFFERENCE BETWEEN COMPANY PROPERTY [Book II. Beneficial acquisitions. Vesting. Questions inter soHos. Property in ships. English rule as to connection with firm. that the price was advanced by the company in loan, or in satisfac- tion of a debt due by it to the partner (a). Even property acquired by a partner in his own name, and with his own means, if it be a beneficial acquisition for the company, and in its line of business, will be held to have been acquired for, and may be claimed by, the company (6). When, however, the acquisition is made in name of the indivi- dual partner, and not in that of the company, the property does not ipso facto vest in the company, or in the whole partners jointly as- trustees for the concern, but in the purchasing partner, who holds it in trust for the company. If, therefore, the partner sells the acquisition before the company has made good its claim, the pur- chaser is safe from challenge, and the company has only a claim of damage against the partner for his malversation (c). In a question inter socios, it does not seem to make any differ- ence whether the right acquired be personal or real, or even feudal, and the purchasing partner have been duly seised therein. If it be a right in the company's line of business, and plainly beneficial for the concern, it may be claimed by the company (d). An exception to the principles here laid down has hitherto obtained in the case of property in ships. From peculiarities in the Ship Registration Acts, it has been uniformly held, both in this country and in England, that unless the vessels appear in the register as company property, it is incompetent to prove them to be so, even though it could be shown that they were useful in the company's line of trade, had been bought with its money, and had even been used as company property (e). How far the provisions of the present Shipping Act, 17 and 18 Vict. c. 104, may allow other principles to come into plaj-, has not yet been determined. It is held in England, that whatever property a partner may acquire in consequence of his connection with the firm, and which, but for his want of good faith, would have been acquired for the (a) Smith v. Sviith, 5 Ves. 193. (6) Imjlisv. Austine, 1624,M. 14562 ; Ersk. iii. 3, 20 ; Campbell v. Calder Iron Co., 11 Dec. 1805, 1 Bell's Com. 82, u. 3 ; 1 Hunter on Laud, and Ten. 207. (c) Ersk. iii. 3, 20. (d) Minto V. Kirkpatrick, 1833, 11 S. 632. (e) Macartlmr v. M^Brair, 1844, 6 D. 1174; Ord v. Barton, 1846, 8 D. 1011 ;■ Curtis v. Perry, 6 Ves. 739 ; ex parte Hotigliton, 17 Ves. 251. Chap. VII.] AND SEPARATE ESTATE. 175 firm, must be treated in equity as company property (a). It would appear, however, that if the acquisition is unconnected with the company's line of business, or that, if so connected, it has ^een con- ceded to him by third parties for his own benefit solely, he will be allowed to retain it as separate estate (b). No case exactly raising these questions appears to have occurred in Scotland ; but there can be little doubt that the principles above stated would be given effect to by our tribunals, as they arise out of the very nature of the partnership contract, and arfe in close analogy with other principles that have been acted upon in our system (c). If, after dissolution, but before winding up, a partner continues Acquisitions T T • I- 1 1 . , after dissolu- to carry on the busmess or the concern, and acquires property tion. thereby, such property does not, in the absence of fraud, fall under the partnership estate (d). And even where profits were realized from the use of what was undoubtedly partnership property, they were not, in the circumstances supposed, held to belong to the com- pany assets (e). The case would be different if the surviving or continuing partner, and the representatives of his Tate partners, stood to each other in the relation of trustee and beneficiaries (/). It must be observed, however, that while the fact of any kind Use of property of property having been used for partnership purposes is a strong presumption in favour of its being company estate, this is by no means conclusive evidence of such a proposition. The property may in truth belong to one of the partners, who may only have given the use of it to the company during the continuance of the partnership, or for a specific period. In other words, the partner may have contributed the use or proceeds of the property, not the property itself. This is a case of daily occurrence (g). (a) Featherstonehaugh, 17 Ves. 298 ; (/) Cochrane v. Black, 1856, 17 Clements v. Ball, 2 De G. and J. 173. D. 321. (b) Campbell v. Mullet, 2 Swanston (g) Cox v. Stead, 1833, 11 S. 672, 551. " afE. 1834, 7 W. and S. 497 ; Smith v. (c) See Ersk. iii. 3, 20 ; Campbell Watson, 2 B. and C. 401, and 3 Ross V. Calder, 1805, 1 BeU's Com. 82, n. Lead. Ca. 442 ; Meyer v. Sharp, 5 3 ; Gibson v. Stewart, 1835, 14 S. 166, Taunt. 74; ex parte Hamper, 17 Ves. 1 Rob. App. 260. See also chap, on 404 ; Wedderburn's case, 4 My. and Powers of Partners, and Pothier de Cr. 41 ; compare with Reid and Hol- Soc. N. 123. lingshed, 4 B. and C. 867. See Sime (d) Minto V. Kirkpatrick, 1833, 11 v. Balfour, 1804, M. App. Her. and g. 632. Mov. 3 ; House of Lords, 1811, 5 Pat. (e) Same case. See Lindley 549. 625. 176 SEPARATE ESTATE. [Book II. Separate estate Further, property may be vested in the individual partners i^r-o Jndiviso.^" indiviso, and yet such property may be separate and not company estate. The following case is a good illustration of the principle here stated. Wilson V. Two partners of a fishcuring concern were pro indiviso pro- Threshe. prietors of the buildings in which it was carried on. On the bank- ruptcy of one of them, his trustee claimed half of the house property as the separate estate of the bankrupt. In an action of declarator at the instance of the other partner, to have it found that the whole was company property, it came out in evidence, that there had been originally another partner, who had retired from the firm; that this partner had made the offer for the property for behoof of the company, and had then stated that he intended to retire; and that the property had been fitted up and used for the pur- poses of the company. But, on the other hand, it was proved that the partners were not bound to each other for any specific period ; that though the partner who retired had remained in the concern for a year after the property was acquired, yet that the titles were taken to the other two partners pro indiviso, and to their heirs and assignees, without mention of him ; and that the partner who now contended for it's being company property had taken infeftment pro indiviso, and had granted a heritable security over it for his own private debt. Upon the whole, it was held to be separate estate (a). In this and similar cases, the property is held by the partners not as partners, but as joint-owners ; and what they contribute to the partnership is not the joint-property, but its use and proceeds. For illustration of the working of this principle, reference may be made with advantage to the English cases noticed below (b). Campheli ^* must be observed, however, that when property has been plainly acquired for company purposes, and has been used without objection as such, the mere fact that it stands in the name of one of the partners will not render it separate estate. Thus, in Campheli V. Calder Iron Company (c), a lease was entered into with David (a) Mnison y. Threshie, 1826, 4 S. 254 ; Morris v. Barret, 3 Y. and J. 366. See also Jeffrey v. Crightons, 384 ; Jackson, 9 Ves. 591. 1821, 1 S. 137 ; M'Vean v. M'Vcan, (c) 1805, 1 BeU on Leas. 150, 1 1864, 2 M'Ph. 1150. Bell's Com. 82. (J) Brown v. Oakshott, 24 Beav. V. Calder. Chap. VII.] CONVERSION OF ONE INTO THE OTHER. 177 Mushet, of the Calder Ironworks, for himself and partners ; but the lease was granted to 'David Mushet and his heirs, secluding assignees, legal or voluntary, and all sub-tenants.' On the bankruptcy of the company, the Court found that the lease had determined, though Mushet himself was not bankrupt, on the ground that it was truly granted to the company, and not to Mushet as a private individual. CONVERSION OF COMPANY PROPBETY INTO SEPARATE ESTATE. Whenever, at the formation of a company, the partners make contributions of property to the concern, they convert their separate estate pT-o tanto into company property; and when, at its dissolution, they divide the common stock among themselves, or each receives back his original contribution, they change company property into separate estate. The same conversion takes place when one partner retires from the concern, and receives a part of the company property ; when the company transfers to one of its partners, by sale or otherwise, what previously formed part of the joint-property ; when a partner throws into the common stock of an existing company that which was previously his own ; and when a new partner is introduced and contributes property. It is competent both to the partners and to the company to make such conversions at will, so long as they retain the full con- trol of their respective estates. The agreement or obligation to make such conversion may be proved prout de jure, except in the case of heritable property, where written evidence is required. The actual transfer, however, which completes the conversion, must, as we have already seen, take place in accordance with such solemnities as the law requires. In England, this free power of conversion is restrained in the EngUsh la-vr. few cases only where creditors have a lien over the property ; but in this country it ceases -whenever the estate sought to be converted is laid under restraining diligence. And a partner endeavouring to convert his separate estate into partnership property, in fraud of his creditors, would come under the provisions of the Act 1621, c. 18, as the company would be regarded as a conjunct and confi- dent person. At least this would be the case in private partnerships. M 178 NATURE OF PARTNERSHIP PROPERTY. [Book II. See, as examples of the conversion of company property into separate estate, the cases noted below (a). NATURE or PAETNEESHIP PROPEETY. The partnership property, or joint-stock, is, as we have already seen, held by all the partners jointly for the uses of the company ; and one of the consequences of this is, that all heritable property belonging to the company is moveable quoad succession, for the only right in it which any partner possesses is a mere jus crediti. This rule is firmly fixed both in the English and Scottish systems of law (6). In applying this rule, however, great care must be taken to distinguish between company property and separate estate. To the former only is the rule applicable. After what has been already stated as to the distinction between company property and separate estate, it is unnecessary to do more in considering this part of the subject than to state the following rules : — General rules. 1. Property, in its nature heritable, will be deemed moveable, and descend to the executors of partners, when it was acquired simply for partnership purposes, was intended to be thrown into the common stock in its entirety, and not merely for its temporary use, or was purchased with company funds, though for a temporary purpose only (c). 2. Property, in its nature heritable, is considered unconverted realty, and descends to the heirs of partners, if it has been acquired as separate estate by a partner, or by two or more of them as co-owners, and its usufruct only has been contributed for company purposes (d). (a) Baynev. Ferguson, ISn, bDo-w 632; Irvine v. Irrine, 1851, 13 D. 151 ; Cunningham v. Warner, 1824, 1367. The following English cases 2 S. App. 225 ; M' Cowan, 1852, 14 D. may also be referred to : Bell v. Pliyn, 901. 7 Ves. 453; Randall, 7 Sim. 271; (i) 2 Bell's Com. 613; Lindley 565. Cookson, 8 Sim. 529 ; Ripley \. Water- (c) Compare Sim v. Balfour and luorth, 7 Ves. 425 ; Darby, 3 Drew Others, 1804, M. App. voce Her. and 495 ; and Essex, 20 Beav. 442. Mov. No. 3, H. of L. 1811, 5 Pat. (rf) Compare the Scotch cases noted App. 525 ; Corse's case, 1802, 13 F. C. supra, with the English cases, Bal- 162, M. App. V. Her. and Mov. No. main v. Shore, 9 Ves. 500 ; Rowley v. 2; Miirray V. Murray, 1805, ibid. 'No. Adams, 7 Beav. 548; and Phillips, 4 ; Minto v. Kirkpatrick, 1833, 11 S. Bisset on Partnership, p. 50. Chap. VII.] PROPERTY HELD BY CORPORATIONS. 179 PEOPEETY HELD BY COEPOEATIONS. Corporations, being proper persons, are entitled to hold pro- Corporations perty, whether heritable or moveable, real or personal, directly ; perty directly. and do not require the intervention either of their members or of other persons as trustees for their behoof. The titles to heritable property may therefore be taken to the corporation in its corporate name, and the feudal right may be perfected by sasine or regis- tration in like manner (a). Yet, inasmuch as corporations never die, being possessed of Trustees endless endurance, the casualty of relief due at the entry of an ueceasary. heir can never arise, where the vassal is an artificial person of this kind. It has accordingly been fixed by a tract of decisions, that superiors cannot be compelled to give an entry to a corporation unless they have become bound to do so by special stipulation or compromise. And this holds good even in the case of adjudica- tions (b). To obviate this difficulty, it has accordingly become common to adopt a device originally suggested by Lord Stair (c), and to take the title in trust for the corporation to some person and his heirs, upon whose death or neglect to enter, the superior's casual- ties may arise and become exigible. This device has no doubt the Disadvantages merit of silencing the objections of superiors, but it is open to all the disadvantages usually found to be inseparable from the compli- cated machinery of continuous trusts, and it should therefore never be resorted to when any arrangement can be made with the superior by which an entry can be obtained for the corporation direct. Nor, in general, need any great difficulty be apprehended in bringing about such an arrangement. A sum of money sufficiently large to be an equivalent for the casualties may be agreed upon and paid at the outset, or else the superior may be got to accept of an agreed- upon sum at the expiration of certain fixed terms of years in lieu of the legal claims, whose periods of payment depend on the un- certain duration of human life. (a) Shaw's Bell's Princ. s. 2178. . C. 132 ; Sir H. Campbell, 1843, 5 D. (&) 2 Stair 3, s. 41 ; 2 Ersk. 7, s. 7 ; 1273 ; Gardner, 1845, 7 D. 286 ; Lear- Hamilton, as reversed, 1713, Rob. App. month, 1854, 16 D. 580. See Earl of 172 ; 2 Bell's 111. 36 ; Hill v. Mer- Mansfield, 1829, 7 S. 642. cJiant Company .of Edin., 1815, 18 F. (c) 2 Stair 3, s. 41. 180 PROPERTY HELD BY CORPORATIONS. [Book II. Often unnecessary. Statutory forms. Act 1845. Act 1862. There is great reason, however, to beheve that conveyancers, from being in the habit of preparing titles to land for unincor- porated associations, which can only hold real property through the intervention of trustees, frequently adopt the same method in the case of proper corporations, and take the titles not to the corporation itself in its proper name, but to its existing officials and their successors in office in trust for its behoof, even where such a course is neither prescribed in the incorporating instru- ment nor necessitated by the objections of the superior (a). Such a practice ought never to be adopted when it can be avoided : it is not only complex and cumbrous in itself, but may, in some cases, give rise to questions seriously affecting the validity of the title. In the case of companies incorporated by Act of Parliament for carrying out public undertakings, the proper procedure and forms for completing the company's title to land and other heritage will be found in the 'Lands Clauses Consolidation (Scotland) Act' (6), or in that taken in connection with the special act incorporating the company. These provisions will be fully considered at a future stage of the treatise. In the meantime it may be remarked, that the statutory forms and mode of procedure should in all cases where practicable be rigidly adhered to; for, though trifling deviations may not be productive of serious consequences, nothing short of necessity can warrant the conveyancer in deviating from prescribed statutory forms. All such additions, amplifiications, or repetitions as are sometimes introduced in majorem cautelam, after the fashion of the ordinary styles, are at least censurable as unmeaning super- fluities, and may subsequently produce effects or minister questions that cannot be foreseen. The maxim ' superflua non nocent' is a very dangerous guide in such cases. Companies formed under the ' Companies Act, 1862,' are en- titled like proper corporations to hold lands in the corporate name (sec. 18); and it is further provided, that all property, real and personal, belonging to a company previously existing, but after- wards registered under the Act, pass to and vest in the company as a corporation as soon as registration takes place (sec. 193). Of (a) Sir II. Camphell, 1843, 5 D. 1273. (h) 8 Vict. c. 19 (1846). CHAP. VII.] PROPERTY HELD BY CORPORATIONS. 181 course this does not affect the mode, tenure, or the form, as by- trustees, etc., in which the lands may have previously been held. The amount of land which may be held by incorporated com- Limitations as • p 1 • 1 1 • 1 mi • • 1 ^° amount of panics IS 01 ten specified m the charter or special act. This is always land. the case with companies formed under the Companies Clauses Act, 1845. The Act of 1862 makes no restriction of this kind in regard to companies formed for mercantile gain ; but it provides that no company formed under the Act for the purpose of promoting art, science, religion, charity, or other such objects not involving the acquisition of gain, shall, without the sanction of the Board of Trade, hold more than two acres of land (sec. 21). [ 182 ] CHAPTER VIII. DUTIES OF PARTNERS TOWARDS THE COMPANY AND EACH OTHER. Exuberant trust in part- nership. No claim beyond share of profits. Partnership is a contract of exuberant trust (a), and therefore the law expects and requires that the conduct of the partners towards each other shall be characterized by the most scrupulous good faith, that they shall zealously act and co-operate for the common good, and that they shall not place their individual in- terests before those of the company. In conformity with these principles, it is settled law that a part- ner can make no claim beyond his share of profit, whether in the name of salary, commission, or otherwise, on account of his trouble in conducting the partnership business, or for his services in behalf of the company; for, however eminent or indispensable these may have been, they are no more than what it was his duty as a partner to do (b). Nor in the absence of special stipulation does it make any difference that the claimant was put to an unusual amount of personal trouble or inconvenience on account of a casus improvisus (c), or that he was a managing partner (d), or that the services were of a purely pro- fessional kind (e). The same principles have been given effect to in England (/). But these rules do not apply where services have been rendered in carrying on the business of the firm after its dis- solution (g) ; for such services are then no longer prestable ea; con- (fl) In societatis contractibus fides exuberat, Cod. iv. t. 3, 1. 7, 3. (J) Brock V. Brown, Dec. 9, 1696, M. 14563 ; MacwUrter v. Guthrie, 14 Feb. 1822, 1 S. 295, and 26 Jan. 1821, Hume 760. See also Gibson v. Stewart, 16 Deo. 1835, 14 S. 166, 1 Rob. 260. (c) Campbell v. Beath, 3 May 1S26, as reversed in House of Lords, 2 W. and S. 25. (d) See Hamilton v. Geddes, 1805, 4 Pat. App. 657. (e) Duncan v. Union Canal Co., 8 Feb. 1831, 9 S. 398. See also Hunter V. Cochrane's Trs., 18 Feb. 1831, 9 S. 477. (/) Huicheson v. Smith, 5 Irish Eq. 117 ; Whitle v. Macfarlane, 1 Knapp 311 ; Bentley v. Craven, 18 Beav. 75. (r/) Berry v. Lamb, 7 July 1832, 10 advantage. Chap. VIII.] DUTIES OP PARTNERS. 183 tractu of the partnership, and may therefore be charged for. When, however, a surviving partner carried on the concern as executor of his deceased partner, he was held in England entitled to no remu- neration, as he did no more than was his duty as executor (a). It is always competent to stipulate that a partner shall be en- This may be titled to remuneration over and above his share of profits ; and such stipulation. stipulation, when proved, will be effectual (6). Another consequence of the exuberant trust inseparable from Partners can- the contract of partnership may be stated as follows : — Partners, for private in dealing with strangers, cannot stipulate for any private advan- tage at the expense of the company, which shall be available to them in a question with the company. Whatever a partner acquires with the company funds he is bound to communicate to the com- pany, though the acquisition has been made in his own name; and even when he purchases with his own money and in his own name, a right which is in the company's line of trade, or would be for it a beneficial acquisition, he will be held to purchase, not for himself, but for the company (c). In such cases, however, the company merely acquires a jus ad rem (d), the jus in re remaining with the partner who made the purchase in his own name ; or, as it is expressed in England, the purchasing partner being held to be a trustee for the benefit of the copartnery (e). The rules here referred to have been repeatedly enforced and illustrated in England. Thus, in the well-known case of Feather stonehaugh v. Fenwick (/), two partners who had obtained in their own names a lease of the partner- ship premises, dissolved the copartnery, and sought to exclude their copartners from all interest in the new lease. They were, however, found to be merely trustees of the lease for behoof of the firm (g). S. 792 ; Featherstonehaugh v. Turner, Work Co.), 1801, aff. 1805, 4 Fat. 25 Beav. 382 ; Brown v. Be Tastet, Jac. App. 657. 284 ; Crawshay v. Collins, 2 Russ. (c) Brsk. iii. 3, 20 ; Inglis v. Ausiine 347, 3 Ross Le. Ca. 622. and Others, 26 March 1624, M, 14562. (a) Burden v. Burden, 1 V. and B. 2 Bell's Com. 614. 172. See also Stocken v. Dawson, 6 {d) Ersk. ut supra. Beav. 371. («) See Sir WU. Grant's (M.R.) (V) MacwMrter v. Guthrie, 1822, 1 S. statement in Featherstonehaugh v. 295, Hume 760 ; Berrtj v. Lamb, 7 July Fenwick. See Dig. xvii. t. 2. 1832, 10 S. J92. See per Wigram, (/) Featherstonehaugh v. Fenwick, V.-c'., in Welster v. Bray, 7 Ha. 179 ; 17 Ves. 298. Geddes v. Hamilton (Glasgow Glass (g) See also Alder v. Fouracre, 3 184 DUTIES OP PARTNERS. [Book II. Application of rule in England. Questionable if tMs be law in Scotland. In England, the maxim, in societatis contractibus fides exuberat, has received a still more extensive application, and has given birth to the following rule : that a partner shall not be allowed to derive profit from any dealings between himself and the partnership, unless such right have been conceded to him by agreement. Thus it has been held that a partner, who deals in a certain commodity, and supplies therewith the firm of which he is a member, cannot make the ordinary profit of his trade thereon, but must supply it at wholesale price, or at the price at which he obtained it (a). It seems also to be an established rule, that a partner cannot carry on for his own benefit any business which would compete with that of the firm of which he is a member (h). It is very doubtful how far these rules, as applied to the mem- bers of private partnerships — not to directors in public companies — can be taken to be in accordance with the law of Scotland. A partnership in Scotland possesses, as we have already seen, a quasi persona distinct from the individuals of which it is composed ; and they accordingly may, like third parties, stand to it in the relations of debtors and creditors. It is difficult, therefore, to see why they should not be able to act and transact with it on the same footing as strangers, and why contracts entered into with them should not be equally binding. It may be said that they stand to each other or the company in the relation of trustees, and therefore cannot make profit by their mutual transactions. But it must be observed that they are trustees only quoad the funds which the society de facto possesses, not as regards such as it may be desirable for it to possess, but which it does not yet possess. It does not therefore appear that there is any good reason to hold that, according to the law of Scotland, a partner may not supply the company with an article of which it stands in need, on the same terms of advantage to himself as if he were dealing with strangers. In like manner, it appears foreign to the genius of our law to maintain that a man, by becoming the partner of a firm, must be held to have incapacitated himself from carrying on any business that might be in rivalry with the business of the firm. The firm Swa. 489 ; Clegg v. Fishiuick, 1 M. and G. 294; Clemevls v. Hall, 24 Beav. 333. (a) Bevtley v. Craven, 18 Beav. 75. (6) Lock V. Lynane, 4 Irish Ch. 188 ; Glassington v. Thtcaites, 1 Sim. and St. 124; England v. Curling, 8 Beav. 129. Chap. VIII.] DUTIES OF PARTNERS. 185 and he are separate persons ; and if a principle such as this were once assented to, it would seem to follow that a man could not at one and the same time be a member of two separate companies in the same line of business, — a doctrine that has never received the sanction of the courts either here or in England. Of course the case is very different where a partner has, in his transactions or contracts with the company, been guilty of fraudu- lent misrepresentation or concealment, or where, taking advantage of his connection with the company, he has fraudulently secured advantages for a rival concern carried on conjunctly with others or started on his own account. In such cases the transaction cannot stand ; not in respect of the partnership relation, but because it is vitiated by the element of fraud. It is also a consequence of the exuberant trust reposed in Partners oan- » , . . , . , not use corn- partners, in virtue oi which they are regarded as trustees oi the pany property partnership property for the benefit and uses of the partnership, purposes; that they cannot employ that property for their own private advan- tage. Thus in England it was held, that where the master of a vessel, who was part owner of her with others, traded with her on his own account, and made considerable profits, he was bound to account to his co-owners for their share of such profits (a). In like manner, it would appear that a partner cannot render nor the the influence or connection which he acquires by being a member connection. of the firm, a means of securing for himself advantages which he ought in honour to have obtained for the firm. This was decided in the English case of Russel v. Austwick (b) ; and if a similar question arose in Scotland, there is no reason to doubt that the equitable principle here mentioned would be given effect to. It is a consequence of the trust reposed in partners by each Bound to give other, that they are bound to give the best of their attention and attention and skill to the management and furtherance of the company's affairs. But if, from defect of judgment, or want of sufficient skill or pru- dence, they fall into error in management, they are not hable in the consequences, provided they have managed the company's affairs as they do their own (c). (a) Gardner Y. M'Cutclieon, 4 Beav. (&) 1 Sim. 52. 534. See also Bevxon v. HeatJiorn, 1 (c) Brsk. iii. 3, 21. See Dig. xvii. Y. and C. 0. C. 326. t. 2, 1. 52, s. 2, and 1. 72. [ 186 1 CHAPTER IX. POWERS OF MAJORITIES. Will of the According to the law of Scotland, when an association of indi- viduals is formed for the purposes of mercantile gain, whether it takes the form of a private firm, a common law company, a quasi corporation, or a fully incorporated body politic, a fictitious person is brought into existence for the prosecution of a certain under- taking, business, or line of trade. To enable this fictitious person to attain the ends of its creation, it must necessarily be endued with the attributes of willing and acting within the sphere of its prescribed operation. During the term of its subsistence, therefore, it is this fictitious person, and not the units of which it is composed, that must be considered as willing and acting. To its resolutions the individual wills of its members must be regarded as surrendered or subordinated ; and it is bound by their individual acts and deeds only in so far as these are in accordance with its volition, express or implied. The fact that it transacts with the public by the inter- vention of its partners or officials, does not in the least degree detract from the truth of this proposition. It is the principal of which they are the general or special agents ; and its will is as separate and distinct from theirs as the will of a merchant is dis- tinct from that of his clerks and assistants. They have no right to bind it beyond the limits of their agency : when they do so, they are liable in indemnity; and contracts made with them in the know- ledge that they are exceeding their powers are mere nullities. How it is to be The important question therefore at once presents itself. How is the will of a mercantile association to be ascertained ? Limited by Ii answering this question, the first consideration which arises action. ^^^ ° i^) ^^^^^ ^ mercantile association, as it is a fictitious person, cannot be conceived of as possessing any power of volition at all beyond Chap. IX.] POWERS OF MAJORITIES. 187 the purposes for the prosecution of which it was formed. Outside this sphere the members no longer cohere as an aggregation, but their individuality at once reappears. At the outset they agreed to be, bound together for a definite purpose only ; apart from this purpose, they were to remain free and independent of each other as before. Hence it follows, that in the instrument of formation, and in that alone, the purposes of the association and the limits of its sphere of action are to be found. That was the basis of the contract; that the matrix in which the person of the association was cast. In the case of incorporated associations this principle comes out in bold relief. There, as public authority presided at the creation of the association, it has never been doubted that any alteration of the sphere of its action could only be made by the creation of a new corporation, which might or might not be required to take up the obligations of the old. But even in the case of unincorporated firms and companies, the same principle exists when the matter is properly examined into. Here, when a change in the purposes of association is made, it does not seem theoretically correct to say that the old company has been modified, but rather that a new fictitious person has been formed, which has taken up the rights and obligations of its predecessor (a). But while it is thus evident, on the one hand, that the fictitious Unlimited person of a mercantile association can only exercise powers of voli- ^here. '^ tion within the sphere of the purposes for which it was brought into existence, it seems equally clear, on the other, that within this sphere these powers of volition are limited only by the common law. It cannot be presumed that men will associate for the prose- cution of an undertaking, and at the same time set obstacles in the way of its successful accomplishment. Limits of this kind may indeed be set by the promoters, or by the public authority by which incorporation is conferred ; but if this be so, they must be very distinctly specified in the instrument of formation. A mercantile association having thus free volition within the pinds ex- sphere of its prescribed purpose, the next inquiry is. How is this maforities?' volition manifested ? The general answer is, by majorities. The reason of this is apparent from the consideration that no other method would give effect to the principle, that every member is (a) See Miller v. Thorium, 1861, 23 D. 359. 188 POWERS OF MAJORITIES. [Book II. Majorities of different kinds. Rule of majo- rities cannot be eliminated. Euglish and iSootch law. entitled at common law to have a voice in the administration and management, — a principle not only necessary to prevent abuses, but plainly deducible from the mere fact of voluntary association, since it cannot in duUo be supposed that men would agree to combined action on any other terms (a). It must be observed, however, that this principle may find expression in other modes than that of majorities computed by the mere number of individual members. It may within certain limits have regard to the value as well as to the number of votes ; that is to say, it may look not only to the number of the individuals voting, but also to the value of the interest they respectively hold in the , concern. Thus, in companies with a capital divided into shares, or formed into consolidated stock, majorities are generally computed by reference not merely to the individual members, but in a greater or less degree to the number of shares or the amount of stock of which they are respectively possessed. Private partnerships are sometimes formed with the express stipulation that some of the partners only shall be entitled to share in the active management ; and it might be thought at first sight, that such cases formed exceptions to the rule we are now consider- ing. This, however, would be a great mistake. Stipulations of this kind refer to the executive management, or to agency as regards the public only, and will not be interpreted so as to deprive any member of a voice in the internal administration, and thus to defeat the principle of government by majorities. The principles we have now been endeavouring to explain are by no means peculiar to the law of Scotland ; but inasmuch as they arise out of the very nature of the partnership relation, they will be found permeating the English system quite as much as our own. In the law of England, as we shall afterwards see, they have been long since settled and elaborated into a distinct system when applied to corporations ; and they have also been in substance applied to unincorporated associations, though, from the non-recognition of the qiMsi person of the firm, they cannot always be referred to any very consistent theory. In the law of Scotland, which recognises the quasi person of a firm as well as the proper person of a corpo- (a) Mason, 1747, M. 1871 ; Maniab, 1803, M. Ap, App. 2; MeUdejolin, 1805, M. Ap. Burgh Pro. 6 Pat. App. 298. 17; aff. 1810, Chap. IX.] POWEES OF MAJORITIES. 189 ration, the principles in question receive full effect, and are capable of being expressed in all cases with more theoretical accuracy than in the English system. The practical consequences of the principles under discussion General mies. may, it is thought, be summed up in the five following propositions, in examining which seriatim the authorities both in English and Scotch law will be brought under notice : — 1. Where the instrument of formation has not otherwise pro- vided, the will of the majority is the will of the company in all matters within the sphere of its operations. 2. The will of the majority is not the wiU of the company to any effect beyond or in opposition to the purposes of its formation, and does not in such cases bind a dissenting minority, however small. 3. When the members are equally divided, the will of the com- pany is presumed to be in favour of the existing state of matters, which consequently remains unaltered. 4. The' will of a majority is only the will of the company when all the members have voted, or have had it in their power to vote, and when a bona fide opinion has been given after due consideration. 5. When in the instrument of formation rules have been pre- scribed for ascertaining the will of the company, it can only be declared by resolutions in the passing of which these rules have been observed. The above propositions have long been held as settled law in England in the case of corporations, in which the fictitious person is fully recognised (a). They have since been applied to unincor- porated associations, though in these the law of England does not recognise the quasi persona. And they are still more in accordance with the theory of Scotch law which recognises not only a person in corporations, but a quasi person in common law companies and firms. It will now be necessary to examine these propositions somewhat in detail. 1. Where the instrument of formation has not otherwise pro- First rule. vided, the will of the majority is the will of the company in all matters within the sphere of its operations. This rule applies in all cases where, from the nature of the con- (a) See Grant on Corporations, pp. 60 et seq. 190 POWERS OF MAJORITIES. [Book II. tract, the company is vested with a discretionary power, and where its exercise is not entrusted to certain individuals other than the majority (a). Thus, where the company was plainly intended to have the power of borrowing money, the majority was found en- titled to do so against the wishes of a minority (b). When, again, a single partner opposed a sale of company lands which was about to be made by the directors with concurrence of a majority of the shareholders, he was found not entitled to interfere, the Court holding that from the nature of the contract this power must have been conferred on the company (c). So also the majority have power to dissolve an unincorporated company, when they consider it likely to prove abortive, against the wishes of a minority (d). And, in like manner, a majority has been found entitled to assign the company property to trustees for sale, and distribution amongst the company creditors (e). It has even been held in England, that a majority may, contrary to the desire of a minority, make a division of profits before paying an outstanding debt (/). As illustrative of the principle that the will of the majority is the will of the company when acting within the sphere of the origi- nal contract, reference may be made with advantage to the case of joint-stock companies incorporated or seeking to be incorporated by Act of Parliament. In such cases, the parliamentary contract or the special act is held to contain the company's constitution ; and the will of the majority has always been allowed to prevail where it was exercised within the purposes for which the associa- tion was created (g). (a) Story on Part. s. 124 ; Stair i. (e) Lord v. Gov,ernor and Co. of 16, 4 ; Pothier de Society, n. 71, 90. Copper Mines, 2 Ph. 740. See also cases of directors representing (/) Stevens v. South Devon Ra. Co., the will of the company. 9 Ha. 313. (b) See Bryon v. Metropolitan Sa- (g) See Williamson v. North British loon Co., 3 De G. and J. 123 ; Aiis- Ra. Co., 1846, 9 D. 255 ; Wedderhum tralian Aux. Clipper Co., 4 K. and J. v. Scottish Central Ra. Co., 1848, 10 733. D. 1317 ; National Exchange Company (c) Fleming, 1845, 7 D. 935. of Glasgow, 1849, 11 D. 571; Graham (d) Logic v. Gordon (1725), M. v. North British Bank, 19 June 1849, UbSO; Mo?itgomery (1791), M.U583; 11 D. 1165; Blackburn v. Stewart, Kent V. Jackson, 14 Beav. 3.67. 1851, 18 D. 1243. Chap. IX.] . POWERS OP MAJORITIES. 191 2. The will of the majority is not the will of the company to Second rule. any effect beyond or in opposition to the purposes of its formation, and does not in such cases bind a dissenting minority, however small. In cases of this kind, the company as an artificial person cannot be said to have any volition at all, because they lie beyond the sphere of action for which it was created. The will of a majority, however large, does not therefore represent the will of the company ; for ex hypothesi it has no will to represent. This has also been long settled in the law of England; and though it does not in that system rest on the clear principle of the Scotch law, that the artificial per- son of the company cannot will or act beyond the sphere for which it was created, it is supported on those general grounds of justice and expediency of which, taken as a whole, the Scotch doctrine must be regarded as the artistic embodiment. In England each partner is entitled to say, ' I became a partner in a concern formed for a definite purpose, and upon terms which were agreed upon by all of us; and you have no right without my consent to engage me in any other concern, or hold me to any other terms, or to get rid of me, if I decline to assent to a variation in the agreement by which you are bound to me and I to you' (a). The cases of Natuch v. Irving (6), and Const v. Harris, 1824 (c), both the subject of elaborate decisions by Lord Eldon, have been always regarded as the leading authorities upon this question, both in England and in this country. In Natuch v. Irving it was pro- posed to turn a Fire and Life Insurance Company into a Marine Insurance Company. A single shareholder objected, and the com- pany offered to return him the deposits he had paid on his share, with interest. He declined to accede to this proposal, and filed his ' bill for an injunction to restrain the directors from effecting marine insurances, and the injunction was granted. In Const V. Harris, the partners of a theatrical company, eight in number, arranged by their original agreement that the profits should be exclusively appropriated for certain special purposes. Seven of the eight afterwards resolved that the profits should be applied in a different manner ; the eighth partner dissented, and, (a) Liadley 510. (c) Turn, and E. 496. (6) Gow on Part. App. 398. 192 POWEKS OF MAJOKITIES. [Book II. upon his filing a bill, Lord Eldon gave a judgment similar to that pronounced in the preceding case. In the case of Maxton v. Brown, 1839 (a), a joint-stock com- pany had been formed for the purpose of carrying goods and passengers between Great Britain and Australia. The directors, with the implied consent of a majority of the shareholders, em- barked in the trade of taking goods on commission from merchants in Britain, and guaranteeing the sales in Australia. In an action of declarator and damages at the instance of a minority of the partners, it was held that this innovation in the business of the company was incompetent, inasmuch as, though it was not prohibited, it was not contemplated in the original contract. Since these decisions the principle seems never to have been disputed, that a majority cannot, in opposition to a dissentient minority, however small, do anything beyond the purposes for which the company was constituted ; and though many decisions have since been given, both in this country and in England, embody- ing this principle in various forms, the question has always been whether, in the particular circumstances of the case, the resolutions of the majority were or were not within the limits of the company contract. Thus, in Bi'own v. Sir C. Adam (h), interdict was granted at the instance of a dissenting minority against a majority who wished to apply deposits on shares to the expenses of obtaining a special act after the first application had been unsuccessful. And an in- junction has been obtained against a majority who sought to apply the company funds for the purpose of altering the constitution of the company by a new act (c), against a majority seeking to transfer the company business and property to another company (d), and against a majority resolving to make a railway in a different locality from that for which the company was formed (e). A majority has also been restrained from making presents out of the company funds to (a) 1 D. 367. (d) Winch v. Birkenhead Ra. Co., {h) 1848, 10 D. 744. 5 De Gex and S. 562 ; Salomons v. (c) Munt V. Shrewsbury Ra. Co., Laing, 12 Beav. 377 ; Newcastle and 13 Beav. 1 ; Vance v. East Lanca. Ra. Carlisle Ra. Co., 5 E. Jur. N. S. 1096. Co., 3 K. and J. 50. Compare Black- (e) Simpson v. Dennison, 10 Ha. 51; hum V. Stewart, 1851, 13 D. 1243 ; Bagshaw v. Eastern Rail. Co., 7 Ha. Bright v. North, 2 Ph. 216. 114. Chap. IX.] POWERS OF MAJORITIES. ' 193 directors (a), from forfeiting shares (b), from making bye-laws (c), from reducing the capital of the company (d), and from purchasing stock in another company (e), when such proceedings were contraiy to, or not sanctioned by, the provisions of the original contract, or other instrument of formation. In the case of Wilson v. Glasgow and South-Western Railway Co., interdict was granted at the instance of a single shareholder against the company applying any sums raised by the issue of new shares to any other purpose than that of paying off the existing statutory debts, until they should be reduced to the amount which the company was entitled to • continue under its special acts (/). In all these and many similar cases, the ratio decidendi was, that the majority were seeking to extend their sphere of action beyond the limits within which, by the instrument of its formation, the company was entitled to act. It might at first sight be supposed, that when all the partners Power of one ° . . . . . dissentient or shareholders were, with a single exception, unanimous in a member. resolve to change the nature of the. concern, by restricting, extend- ing, or altering its sphere of action, they would be entitled to get rid of the opposition of the dissenting member by tendering him the value of his interest in the concern. But this is not competent, except when the copartnery may be dissolved at the will of any one of its members ; and when such is the case, the change can only be made by means of a regular dissolution, with all its attendant results. The following extract from the judgment of Lord Eldon, in the case of Natuch v. Irving, already referred to (jg), may be quoted, not only as settling this question, but as tending to show that the doctrine of the separate person of the firm, which receives such prominence in the law of Scotland, is sometimes tacitly implied even in the law of England : — ' It is not competent, I apprehend, to any number of persons in a partnership (unless they show a contract rendering it competent to them) formed for specific purposes, if they propose to form a (a) York and N. M. Rail. t. Hud- (e) Balfour's Trs., 10 D. 1240. Corn- son, 16 Beav. 485. pare also Nat. Ex. Co.., 11 D. 571. (6) Barton, 4 Drew 535. (/) 1850, 13 D. 227. (J)AdUyY.WhitstapleCo.,l'ilec.\OT. (g) Gow on Part. App. 398, 3d (d) Smithy. Goldsworthy, 4 Q.B.430. edition, and 411, 2d edition. N 194 POWERS OF MAJORITIES. [Book II. partnership for very different purposes, to effect that formation by calling upon some of their partners to receive their subscribed capital and interest, and quit the concern ; and in effect, merely by compelling them to retire upon such terms, so to form a new com- pany. This would, as topartnerships, be a most dangerous doctrine. When a partnership is dissolved (even where it can be in a sense dissolved the instant after notice to dissolve has been given, if there be no contract to the contrary), it must still continue for the pur- pose of winding up its affairs, of taking and settling all its accounts, and converting all the property, means, and assets of the partner- ship existing at the time of dissolution, as beneficially as may be, for the benefit of all who were partners, according to their respec- tive shares and interests ; and the other partners cannot say to him to whom they have given an offer of his deposit and interest. Take that, and we are a new company, keeping the effects, means, assets, and property of the old, as the property of the new partnership. The company will indemnify the plaintiff against loss by its trans- actions, already had or hereafter to be had, not for the specified purposes of the institution. But the right of a partner is to hold to the specified purposes his partners whilst the partnership con- tinues, and not to rest upon indemnities with respect to what he has not contracted to engage in. A dissatisfied partner may sell his shares for double what he originally gave for them. But he cannot be compelled to part with them for that reason; it may be his principal reason for keeping them, having the partnership concern carried on according to contract. The original contract, and the loss which his partners would suffer by a dissolution, is his security that it shall be so carried on for him and them beneficially, and with augmented improvement in the value of his shares and their shares.' Third rale. 3. When the members are equally divided, the will of the com- pany is presumed to be in favour of the existing state of matters, which consequently remains unaltered. An example of the operation of this rule will be found in the English case of Donaldson v. Williamson (a), 1830. There it was held that one of two partners could not dismiss a company servant against the will of the other. In this respect, the Roman law was (a) 1 Cr. and M. 346. Chap. IX.] POWERS OP MAJORITIES. 195 the same. In re communi neminem dominorum jure facere quicquam, invito altera, posse. Unde manifestum est prohibendi jus esse ; in re enim pari, potiorem causam esse prohihentis constat (a). It may be observed, however, that cases of this kind are of very rare occurrence ; for in the general case the proper course to be pursued will be found indicated either expressly or by implication in the original contract, so that very little room is left for the exercise of discretion within the limits of the company's sphere of action ; and the fact that a partner refuses to concur in acts plainly necessary for ordinary administration, forms, when the partnership is for a term, a good ground for applying for judicial interference to dissolve and wind up the concern (b). It must also be borne in mind, that where any antecedent obligation has been undertaken by the company, the will of that section of the members who wish to fulfil such obligation will pre- vail against the wishes of an equal number who oppose, and will be held to be the will of the company ; for it cannot be presumed that a company any more than an individual intends to escape from the performance of obligations which may be enforced by legal pro- ceedings (c). In such a case the dictum of the civilians would seem to apply: Sed etsi in communi prohiberi socius a socio ne quid faciat potest, ut tamen factum opus tollat cogi non potest, si cum prohibere poterat hoc pratermAsit (d). 4. The will of the majority is only the will of the company, '^oxath rule. when all the members have voted, or have had it in their power to vote, and when a bona fide opinion has been given after due con- sideration. The reason of this is, that in every partnership, whether it is expressed or not, all the partners are bound to be true and faithful to each other ; and, unless the contrary has been arranged, are not only entitled, but bound, to give due consideration to the common affairs, and to give the best of their advice and judgment. Hence, when any question arises as to company management, the proper course is to call a meeting of all the members, or otherwise to enable them all to express their opinion on the matter. And (a) Dig. lib. x. tit. 3, 1. 28. See (b) Butchart v. Dresser, 1853, 4 De also Story on Part. sec. ,123 ; Stair i. G. M. and G. 542. 16, 4 ; Bankt. i. 22, 9. (c) Butchart v. Dresser, supra. id) Dig. 1. X. t. 3, 1. 28. 196 POWERS OF MAJORITIES. [Book II. hence also it is the duty of every partner to form his opinion not only on a full consideration of the matter submitted to the meet- ing, but after fairly weighing the opinions and arguments of such of his copartners as may be disposed to entertain views differing from his own. As consequences of these principles, it may be observed that the resolutions of a majority will not be deemed those of the company when they have been passed in pursuance of a determination to thwart the views of the minority in spite of all that could be urged to the contrary ; and resolutions passed at a meeting where all the members were not present or duly warned to attend, will not be validated by evidence that, though all had been present, the ma- jority would still have been in favour of the resolutions ; for if the proceedings had been conducted regularly and in bona fide, it is impossible to tell how far the minority might by argument have changed the views of their fellows (a). Pifth rule. 5. When in the instrument of formation rules have been pre- scribed for ascertaining the will of the company, it can only be declared by resolutions in the passing of which these rules have been observed. This plainly follows from the consideration, that as the company owes its existence to the will of its members, it lay with them to determine at its formation in what manner its will was to be ascertained ; and that the rules laid down in the instru- ment of formation were conditions of the contract, in virtue of which the members agreed to form themselves into an associa- tion (h). (a) See, as to this, Const v. Harris, v. Andrew, 13 E. Jur. 938 ; Story 1824, Turn, and R. 518 ; ex parte on Part. sec. 123. Morrison, 1847, De Gex 539 ; Brown (b) See Story on Part. sec. 125. [ 197 ] CHAPTER X. POWERS OP PARTNERS. Private partnerships act and transact with the public or their own Private part- members as individuals; but being artificial persons, their inter- and transact by Course is carried on by the intervention of agents. These agents ^"^ "^^ are the partners. In England, where the separate persona of the English and firm is not recognised, the individual partners are regarded as the theories con- agents of each other in matters relating to the common under- taking. Hence it follows, that whatever is done by the individual partners as partners, is in Scotland said to be done by them as agents for the company ; but in England as agents for each other. In the great majority of cases this theoretical difference has no Practical practical effect, but instances do occur where its consequences are discernible. When any such require notice, they will be pointed out in the course of this inquiry. Since the partnership acts and transacts by means of its part- Agency. ners, the law which regulates the powers of partners must be taken to be a branch of the law of principal and agent, — a proposition which holds true not only in Scotland, but in every other country where commercial jurisprudence has assumed a systematic form (a). According to the civilians, the partnership contract did not Civil law. ipso jure invest all the partners with the power of agency ; but it was restricted to those of their number upon whom it was specially conferred, though its possession by the others might be inferred from facts and circumstances (h). But in the English, Scottish, (a) Pothier Pand. lib. xvii. t. 2, art. n. 96 ; opinions of Lords Cranworth 26 to 29 ; 1 Domat. B. i. t. 8, s. 4, art. and "Wensleydale in Cox v. Hickman, 16 ; Dig. lib. xvii. t. 2, 1, 68 ; Story 8 House of Lords Cases 306. on Part. sec. 109 ; Story on Agency, (6) Pothier, Domat., and Dig., nt s. 124, note (1) ; Pothier, & Societe, antea. 198 POWERS OF PARTNERS. [Book II. American, and modern French systems of jurisprudence, the part- ners are held to be prcepositi negotiis societatis, without any express stipulation, and by the mere fact of entering into the partnership relation (a). Agency is Agency is either implied or express. If a man appoint another impUed."' his agent to represent him in some line of trade, all such powers as are necessary to carry on the business in the ordinary way are pre- sumed to be conferred ; and the public are safe to deal with the ■ agent within that sphere of action as if he were the principal. But beyond this there are many things which the principal may, for reasons of his own, choose to do, though they are neither necessary nor usual in his line of business. As to these, an agent has no implied powers, and the public are only in safety to transact with him when they are satisfied that he has express authority from his principal (6). Hence powers This doctrine of agency forms part of the law of partnership, either implied* ^^^ divides the powers of partners into two classes : 1. Implied or or express. common powers ; and 2. Special or express powers ; — the former being such as arise out of the mere fact of partnership ; the latter being such as are specially conferred by the company. In the words of Mr Justice Story (c), ' each partner may enter into any contracts or engagements on behalf of the firm in the ordinary trade or business thereof ; as, e.g., by buying or selling or pledg- ing goods, or by paying or receiving or borrowing monies, or by drawing or negotiating or indorsing or accepting bills of exchange, promissory-notes, and cheques, and other negotiable securities, or by procuring insurances for the firm, or by doing any other acts which are incident or appropriate to such trade or business, accord- ing to the common course and usages thereof. So each partner may consign goods to an agent or factor for sale on account of the firm, and give instructions and orders relating to the sale.' (a) Lindley 192 ; Bisset 66 ; Stair i. Hoome and Co., 1834, 12 S. 810 ; 16, 4 ; Bankt. i. 22, 5 et seq. ; Ersk. Hampton v. Adam, 1839, 1 D. 500 ; iii. 3, 25 ; Story on Part. ch. vii. ; Ferm v. Harrison, 1 Ross Le. Ca. Code Civil, Act 1859 ; Pothier, de 350, 3 T. R. 757 ; Whitehead v. Tuc- Societe, No. 90 to No. 100 ; Pothier on kett, 15 East 399, 3 Ross Le. Ca. 140 ; ObKg. a. 83, 89. Robinsons v. Middleton, 1859, 21 D. (b) Rawson and Co. v. Johnstone, 1089. 1833, 11 S. 1011 ; Steel and Co. v. (c) Part. sec. 102. Chap. X.] POWERS OF PARTNERS. 199 In considering, therefore, whether any given power is implied or not, the real question is, Whether it is necessary for carrying on the business of the firm, whatever that may be, in the ordinary way, and in ordinary circumstances ? Hence there is no implied power to do what, though not necessary, is convenient or beneficial, or what, though unusual, may be defended on the h^ad of urgency. To do such things requires the authority of the principal, that is, in ■the case of partnership, of the whole or at least a working majority of the partners (a). It is by no means uncommon for the members of a firm or co- Private ■' _ arrangements. partnery to make a private arrangement among themselves, whereby the institorial power is limited or apportioned among their number. A firm of five may, e.g., agree that two only shall have the power of management, or that three shall have the sole charge of one department and two of the oth9r. Such private arrangements, though binding inter socios, are powerless in a question with the public while in ignorance of their existence, to avoid the operation of the implied agency (b). Thus a company of horse-dealers, who have agreed never to warrant a horse, are still effectually bound by the warranty of one of their number, because it is the general practice of the trade to give warranty (c). So a private arrange- ment by a mercantile firm not to grant bills or notes in the company name has been found no defence against the act of a partner who has transgressed the rule, in the case of a stranger who was not aware of its existence (d). So also a firm was (a) M^Nair and Co. v. Gray, etc., Ca. 561 ; Crellin v. Brook, 14 M. and 1803, Hume 758 ; Kennedy, 1814, 18 W. 11; RickettsY. Bennet, 4 C. B. 686. P. C. 122 ; Mattheson v. Fraser, 1820, These oases afford good illustrations of Hume 758 ; Clarke v. Shepherd, 1821, the doctrines here enunciated. See 1 S. 179; Turnhull v. M'Kie, 1822, 'Powers of Majorities.' 1 S. 331 ; Johnston and Co. v. Phillips, (J) See per Lord Tenterden in 1822, 1 S. App. 244 ; Royal Bank of Sandilands v. Marsh, 3 Ross Le. Ca. Scotland v. Greenock Bank, 1794, aff. 463, 2 Barn, and Aid. 677 ; Smith v. 1797, 3 Raton's App. 595 ; Tupper v. Jamieson, 5 T. R. 601 ; Craven r. Rowell and Co., 1858, 20 D. 758 ; Widdows, 2 Oh. Gas. 139 ; Hubert v. Balfour's Trs. v. Edin. and Nor. Ra. Nelson, Davies, B. L. 8, Coll. 260 ; Co., 1848, 10 D. 1240 ; Brettel v. Wil- Watson on Part. 168. Hams, 4 Ex. 630 ; jHawtayTie v. Bourne, (c) 2 Barn, and Aid. 679. 7M.a,ndW.b95; ex parte Chippendale, ((i) Turnbull v. Mackie, 1822, 1 S. 4 De G. M. and G. 19 ; Dickinson v. 831 ; Bruce and Co. v. Beat, Deo. 10, Valpy, 10 B. and C. 128, 3 Ross Le. 1765, F. 0., M. 4056, House of Lords, 200 POWERS OF PARTNERS. [Book II. Effect of notice. Eatification. Questions inter socios. Peculiar doctrine of English law. held bound by the act of a partner who chose to Interfere in a department of the business from which by arrangement he was excluded (a). But the partnership will not be bound when the creditor had express notice that the agency of the partner with whom he trans- acted was limited by private arrangement (b). And in like manner, a disclaimer by one partner of liability for future acts of his co- partners has been held to constitute a withdrawal of agency in a question with those who received such notice (c). It must be observed, however, that even though a partner plainly exceed his authority, his acts may be rendered binding by ratification. And this does not require any formal procedure, but may be inferred from facts and circumstances (d) — e.g. subsequent knowledge of the act without repudiation (e). The consequences of unauthorized acts, when the question arises between the company and its own partners, are verj' different. If a partner transact with another of several partners, in relation to a matter as to which the agency of that partner has been with- drawn, the transaction is simply null as regards the company, because all the partners ought to know the rules of their own con- cern. If, however, it could be shown that the particular partner had been kept in ignorance of a rule which had been adopted by his copartners, the case might be different. Of course, any partner transgressing a known rule of the company is always liable to indemnify his fellows. It may here be proper to advert to a peculiarity in the law of England, which, in so far as we are aware, has never been recog- nised in this country. It appears to be settled law in England that 3 Dow 318 (1768); South Carolina Bank, 8 Barn, and Cress. 427, 3 Ross Le. Ca. 508. (a) Morans v. Armstrong, Arm. M'Artn. and Ogle, Irish Nisi Prius Reports 25. {h) Miller v. Douglas, 1811, 16 F. C. 154; Minnet v. Whitsey, 5 Bro. P. C. 489 ; Vice v. Fleming, 1 Younge and Jerv. 227 ; ex parte Harris, 1 Mudd. 588 ; Hope v. Oust, 1 East 51 ; Sheriff V. Wilkes, 1 East 48 ; Pudley v. Taylor, 13 Bast 175, 8 Ross Le. Ca. 486-507 ; Swan v. Steele, 7 East 209, 8 Ross Le. Ca. 459. (c) Wyllis V. Dyson, 1 Stark. 164 ; Booth V. Quin, 7 Price 193 ; Galway V. Matthew, 1 Camp. 438, 3 Ross Le. Ca. 507. (d) Crellin v. Brook, 14 M. and W. 11 ; ex parte Bonhonus, 8 Yes. 540, 8 Ross Le. Ca. 470. (e) Bo'ness Canal Proprietors v. M'Alpine, 1791, Hume 751, M. 14572. Chap. X.] POWERS OF PARTNEES. 201 one partner has no authority to bind his copartners by deed, unless he be expressly empowered to do so by another deed (a). And it has accordingly been held, that a bond for payment of duties on goods belonging to the partnership does not bind the firm, but only the partner by whom it has been executed in name of the firm (b). This peculiarity in the law of England has led to much practical inconvenience, and has in America been put an end to by an Act of Congress (c). The technical reason for its existence is the rule that all deeds must be under seal ; and as unincorporate companies have no common seal, nothing short of the adhibition of all the partners' seals, either to the deed itself or to another deed authorizing its execution, will satisfy the requirements of law. It has also been equitably defended on grounds of public policy, as being a safe- guard against the exercise of too great power by individual partners. But, in truth, it seems to be one of the consequences of the non- recognition of the qttasi person of the company firm. If this were recognised, the company would either have its own seal, or each partner would be entitled to make use of his private seal, so as to bind the firm under his implied agency. So far as we are aware, the question has never been raised in Scotland, whether a deed — that is to say, a formal document in con- tradistinction to a bill or note — can be executed by one partner in the social name, so as to bind the firm. This mode of execution appears, however, to be not unusual in practice ; and it would pro- bably be held effectual, if the deed were in the line of the company business (d). Where from the form of the instrument creating the obligation Onus of fixing it is doubtful whether the credit of the company, or merely that of against com- the signing partner as an individual, was intended to be pledged, ^ °^' the onus of showing that the contract is binding on the company will in general lie on the party seeking to make it effectual. Thus, where the name of a firm was the name of a partner, and the business was carried on in his name only, the holder of a bill granted (o) Harrison v. Jackson, 7 T. R. (c) Story on Partnership, sec. 119, 207, 3 Ross Le. Ca. 557. note 1. (b) Metcalf v. Rycroft, 6 Maule (d) See Christie v. Reid, 1826, 4 S. and Selwyn 75 ; Story, Fart. sec. 119 ; 372. Lind. 223. 202 POWERS OP PARTNERS. [Book II. by that partner was held bound to show that it was granted by the partner as representing the firm, and not by himself as an indivi- dual (a). (a) South Carolina Bank v. Case^ 5 H. and N. 513 ; Story on Part. sec. 1828, 3 Ross Le. Ca. 508, 8 B. and C. 139 ; U. S. Bank r. Burney, 5 Mast. 427 ; and see also per C. J. Cockburn 176, and Etherton v. Burney, 1 Pick, in Nicholson v. Ricketts, 6 E. Jur. N. 274, American cases, and both quoted S. 422. See also Stephen v. Reynolds, in Ross Le. Ca. 516-17. [ 203 ] CHAPTER XI. POWERS AND DUTIES OF DIRECTOES. Joint-stock companies differ from private partnerships in having Difference a large and fluctuating body of members, in relation to whom there stock oom- is no delectus personce, and who can in no sense be regarded either firms. as the agents of the company or of each other. What they contri- bute is not ability, skill, or industry, but money. The affairs of such associations are accordingly carried on, not by the partners or shareholders, but by directors, managers, or other officials specially appointed for that purpose. These, and not the partners, are the agents of the company. This doctrine applies not only to corporations, but to all joint- stock companies whatsoever deserving the name ; and it is so based in equity and even necessity, that in all transactions with such associations the public are held entitled to deal with the proper officials only (a). As a general rule, it may be assumed that the managing officials Officials as of a joint-stock company hold the same kind of agency in relation with partners. to it that partners do in relation to a private firm ; and it will be found that the principles which regulate the special and implied powers of both are very similar or analogous (b). Much of what has been already said in regard to the agency of partners, is there- fore applicable to managing officials. There arej however, some peculiarities or points of difference Points of which it is of importance to notice. In the case of private firms, the^poweVS the sphere of implied agency includes all that is usual and necessary ^senoy. in the particular line of business prosecuted ; but this is not always the case in joint-stock companies. If the company is a corporation, (a) Forth Marine Insurance Co., re- (h) Macalister {Caledonian Dairy ported in House of Lords as Si/raess V. Company) v. Alexander, 1843, 5 D. Pennel, 6 Bell's App. 541, and 2 House 580. of Lords Oases 497 (1849). 204 POWERS OF DIRECTORS. [Book II. Com*ion law companies. fiatiflcation. Onus of proof. its sphere of action may be greatly restricted by its charter or special act, within what would naturally be implied from the character of its business. In such a case the directors have no power to bind the company beyond the limits of its constitution ; and any transac- tion beyond the prescribed sphere of action, entered into by them as for the company, will be a mere nullity as regards the company, though it may subject such officials in damages to the party aggrieved. Nay, so much is this the case, that no ratification of an act ultra vires of a company incorporated by charter or special act will be of much avail towards rendering it valid (a). Even as regards joint-stock companies which are not incorpo- rated, but exist only under the common law, the leaning of the tribunals is towards the adoption of a similar principle. When, in such a case, the articles of association restrict the company's sphere of action within what would be implied from the nature of the undertaking, the public have been held bound to make them- selves acquainted with the restriction (b). But the soundness of this view has been questioned (c) ; and a person employed by directors to do ordinary work has been held not bound to inquire whether they were acting within the limits of their power (d). However this may be, there seems no reason to doubt that trans- actions entered into by directors in unincorporated companies, beyond the prescribed sphere of operations, are always capable of being ratified by the whole body of shareholders, or even by m interventus, provided it has been sufficiently marked, and of suffi- ciently long duration to involve their acquiescence (e). But the Court will never compel the company to implement a contract which was plainly ultra vires of the directors, and had not been validated by ratification (/). When transactions of this kind have actually been carried out, the onus of showing that they were ultra vires of the constitution of Siniiott, 8 (a) Keene's Executors, 3 De G. M. and 0. 272 ; Soc. of Practical Know- ledge, 2 Beav. 559 ; Eastern Union Ra. Co., 7 Ha. 114. (b) Per Lord Wensleydale in Ernest V. Nicholls, 6 House of Lords Cases 4:19; Maxton v. Brown, 1839, 1 D. 867 ; Dickinson v. Valpy, 1829, 3 Koss Lo. Ca. 561. (c) London Dock Co. v. E. and B. 847. (d) Green v. Nixon, 22 Beav. 580. (e) Maxtonv. Brown, supra; Fleming y. Campbell, 1845, 7 D. 935; Re Rich- mond, 4 Kay and J. 305 ; Morgan's case, 1 De G. and S. 750 ; Lawes' case, 1 De G. M. and G. 448. (,/■) Ellis V. Colman, 25 Beav. 662. Chap. XI.] POWERS OF DIRECTORS. 205 the company appears even in the case of incorporated associations to lie on those challenging their validity ; for it is not to be pre- sumed that the transaction was beyond the sphere of the company's power until this has been plainly made to appear (a). The case is different when directors are sought to be interdicted from doing something not yet accomphshed, on the ground that it is ultra vires of the company. Here the onus would seem to lie on the directors to show that the contemplated act is within the powers of the com- pany as defined in its constitution, particularly if that constitution has been conferred by charter or special act (h). If the directors have power by the constitution of the company Non-obsery- to do certain acts in its name, the company will be effectually maiities, etc. bound, though' the acts in question have not been carried through with all the formahties, and in the manner required by the deed of constitution. So, where directors were empowered to borrow money, the company was held bound, though the money had been bor- rowed without fulfilment of a condition precedent, which required a general resolution of the shareholders before this power could be exercised (c). And where a protracted litigation had been engaged in by officials on behalf of the company, in which the company was ultimately found liable in expenses, allegations to the effect that the officials had no right to involve the company in the litigation were disregarded, as it appeared the company had homologated their proceedings by acts, and at least by silence (cZ). The present state of the law on this subject may be perhaps best indicated by the following quotations from the opinions of two eminent English judges. ' All persons,' said Lord Wensleydale, ' must take notice of the Lord Wena- deed and the provisions of the Act (referring to a Registration Act), dictum.^ (a) Per Lord Cranworth in SArewsZiMrj/ (5) Colman r. Eastern Co. Ra. Co., Ra. Co., 6 House of Lords Cases 118. 10 Beav. 1 ; Bagshaw v. East. Ra. SeeahoBostockv. N.Stafford Ra. Co., Co., 7 Ha. 114; Simpson v. West 4E. and B. 798; South Wales Ra. Co. v. Palace Hotel Co., 1 De G. F. and J. Redmond, 10 C. B. N. S. 675. See, as 141. to this matter generally, ffreaiiVbr.iJa. (c) Royal British Bank v. Tur- Co., 1 Dr. and Sm. 154 ; Phcenix Life quand, 5 EU. and Bl. 248, and 6 Ell. Assur. Co., 2 J. and H. 441 ; Manchester and Bl. 327 ; Athenxum Life Ins. Soc. and Sheffield Ra. Co., 7 E. Jur. N. S. v. Pooley, 5 E. Jur. N. S. 129. 887; West Cornwall Ra. Co., 2 B.. and (d) Ramsay r. Smail, 1840, 2 D. N. 70S. And see Lindley, Sup. 43. 1336. 206 POWERS OP DIRECTORS. [Book II. V.-C. "Wood's dictum. Officials are special agents. If they do not choose to acquaint themselves with the power of the directors, it is their own fault ; and if they give credit to unau- thorized persons, they must be contented to look to them only, and not to the company at large. The stipulations of the deed which restrict and regulate their authority are obligatory on those who deal with the company ; and the directors can make no contract so as to bind the whole company of shareholders, for whose protection the rules are made, unless they are strictly complied with. The contract binds the persons making it, but no one else (a).' In a sub- sequent case (b), Vice-Ohancellor Wood approved of these observa- tions, but explained and qualified them as follows : ' There is no doubt an important distinction to be drawn between that which on the face of it is manifestly imperfect when tested by the require- ments of the deed of settlement of the company, and that which contains nothing to indicate that those requirements have not been complied with. Thus, where the deed requires certain instruments to be made under the common seal of the company, every person con- tracting with the company can see at once whether that requisition is complied with, and he is bound to do so ; but when the conditions required by the deed consist of certain internal arrangements of the company, — for instance, resolutions at meetings and the like, — if the party contracting with the directors finds the acts which they under- took to do to be within the scope of their power under the deed, he has a right to assume that all such conditions have been complied with. In the case last supposed, he is not bound to inquire whether the resolutions have been duly passed, or the like; otherwise he would be bound to go further back, and to inquire whether the meetings have been duly summoned, and to ascertain a variety of other matters into which if it were necessary to inquire, it would be impossible for the company to carry on the business for which it was formed.' Furthermore, the position of managing officials differs from that of partners in this respect, that whereas the authority of part- ners to represent the firm is implied by the mere fact of partner- ship, that of managing officials to represent the company is the result of direct appointment. The agency of the one may there- fore be taken as implied, that of the other as special. Now, if a (a) Per Lord Wensleydale in Ernest (J) Ex parte The Eagle Company, V. Nicholls, 6 House of Lords Ca. 419. 4 K. and J. 549. Chap. XI.] POWERS OF DIRECTORS. 207 man entrust the management of his affairs not to one person, but to several, the general rule is ' that they proceed by majorities ; but he may make it a rule that certain acts shall only be binding on him when they are agreed to by the whole body of his agents, by a certain majority, or by a sine quo non. From this it would seem to follow, that when the management of the affairs of a joint-stock company is entrusted to a board of officials, the pre- sumption is for management by majorities, but that when it forms a condition that their acts shall only be binding when the whole or a certain number concur, no act will be valid which has not obtained the concurrence of the required number (a). When, how- ever, the assent of the required number has been obtained, the observance of merely formal conditions, such as that it shall be given at a board meeting, does not seem to be of importance (b). And when the number of directors was fixed by the special act at twelve, of whom five should be a quorum, the fact that the number had been reduced to seven was not found to invalidate their pro- ceedings (c). Officials specially appointed to represent the company in certain departments do not bind it in relation to matters which do not fall within these departments (d). ■Managing officials who exceed the power committed to them, officials not ' and consequently do not bind the company, are nevertheless liable p^y bind"^ in indemnity to such of the public as have been misled by their ^^^^ ^^'' ' misrepresentations. Yet, seeing they are not agents for each other, they do not bind such of their number as were not parties to the acts in question (e). It seems too obvious a proposition to require argument, that Eatification directors cannot render binding on the company contracts or trans- ^ ^^ "* ' actions into which they had originally no right to enter, by any subsequent ratification by themselves, however formal ; for what it exceeded their authority to do, they could not, when done, render valid. And this, no doubt, is the general rule. Yet it must be (a) Kirk v. Bell, 16 Q. B. 290 ; ibid. 327 ; Bargate v. Shortridge, 5 Ridley v. Plymouth Grinding Co., 2 House of Lords Cases 297. Ex. 711 ; Fife and Kinross Ra. Co. (c) Thames Haven Dock Co. v. V. Deas, 1859, 21 D. 187 ; Brown v. Rose, i Man. and Gr. 552. Andrew, 13 B. Jur. 938. (0 Nat. Exch. Co., 23 D. 1. (6) See The Royal British Bank v. (c) Iladdon v. Ayers, 5 Jur. N. S. 408, Turquand, 5 Ell. and Bl. 248, and Q. B. ; Ellis v. Colman, 25 Beav. 662. 208 DUTIES OF DIRECTORS. [Book II. Strangers appointed to act as agents. Directors are trustees and special agents for the com- pany. observed, that as the company transacts only by its directors as its agents, the will of the company can in many cases be discoverable by the public through their actings alone, which are therefore in dubio to be presumed in conformity with that will. Hence, when contracts originally invalid from having been ultra vires of the directors, have nevertheless been for a sufficiently long period acted upon by the directors as valid and binding, they will be held ratified by the company. The contrary doctrine would involve the untenable proposition, that a company could not ratify by acquies- cence, or even by rei interventus, nor indeed in any other way than by formal resolution (a). It must be noticed, however, that this does not apply where the transaction has been tainted with fraud in the shareholders, to which the party or any in his right seeking implement has been privy (b). When a company or firm appoints a stranger to act as manager, he is a mere officer or servant of the company, and has no right to object to their resolutions (c). But where some of the partners are specially appointed to act for the company, the case is different. They do not by such appointment cease to enjoy their rights as partners ; so that even when it was provided by the articles of copartnery that the agents should find security, partners who had been appointed agents were held not bound by this provision (d). Those office-bearers by whom the management of joint-stock companies is carried on, are, as we have already seen, the agents of the company specially constituted for that purpose. They are also in a great measure to be considered as trustees for the interests of the whole body of the shareholders (e). Hence they are bound in a much higher and stricter sense than mere partners to do their utmost to further the prosperity of the association, to promote its interests even at the expense of their own, and to discharge the duties of their office with the diligence and assiduity expected from regular mercantile agents. In most cases they receive direct re- muneration for their services out of the company funds ; yet the (a) See Smith v. Hull Olass Com- pany, 11 0. B. 897 ; Renter v. The Electric Telegraph Company, 6 E. and B. 341. (6) Athenssum Life Insur. Co. v. Pooley, 5 B. Jur. N. S. 129. (c) Paid V. Taylor, 1826, 4 S. 580. (d) Edinr. and Leith Shipping Co. V. Downe, 1832, 10 S. 557. (e) Williams v. Page, 24 Beav. 654 ; 4 E. Jur. N. S. 102 ; Charitable Corpo- ration V. Sutton, 2 Atk. 400. Chap. XL] DUTIES OP DIEECTORS. 209 circumstance of their agreeing to act gratuitously does not abate their obligations and responsibilities, for if they had declined to accept office upon these terms, the company would have adopted some other arrangement for having its interests properly attended to (a). When the company is incorporated by special act or crown charter, the duties of the directors or other managers become still more onerous, for they then partake of the nature of those with which public officials are charged. The consequences of these principles are as follows : 1. Directors being trustees for the company can derive no per- Directors life I'll •111/' cannot benefit sonal benent irom contracts entered into by them on its behalf, by company Thus, a director who had purchased a ship on his own account, and afterwards sold it at an advance to the company, charging a com- mission on the sale, was found guilty of a breach of trust (b). So, when one of the directors of a railway company was a member of a firm of ironfounders who entered into a contract for the supply of railway chairs to the company, it was found that the contract could not be enforced against the company (c). So, where a rail- way company furnished a director with money to enable him to purchase the concession of another line, and he purchased it from himself, he being the concealed owner, it was found that the trans- action could not be enforced against the company, but that they were entitled to adopt it or repudiate it altogether (<^). So also, where, in acquiring property for the company, the directors made the purchases at a less price than they were empowered to pay by the company, they were compelled to communicate this difference, and were allowed to retain nothing to themselves as a remuneration for services or alleged risks (e). 2. Directors being trustees cannot retain for themselves any Directors profits or advantages which they could not have obtained except advantages (^a) Benson v.Heathorn,lY. and C6Q.. (c) Aberdeen Ra. Co. v. BlaiJcie, C. C. 326 ; York and North Mid. Ra. 1854, 17 D. H. of L. 20, 1 Macq. 461. Co. y. Hudson, 16 Beay. 495 ; Hudson (^d) Great Luxembourg Ra. Co. v. T. lb., 18 Beav. 70; Great Luxembourg Magnay, 4 E. Jur. N. S. 889. Ra. Co. V. Magnay, 4 E. Jur. N. S. (e) Hichens v. Congreve, 1 R. and SS9 ; AberdeenRa.Co.Y.Blaikie,18b4:, M. 150; Faucet v. WMtehouse, ibid. 17 D. H. of L. 20, 1 Macq. 461 ; Bank of 132 ; Beck y. Kantorowicz, 3 K. and London y. Tyrrell, 5 E. Jur. N. S. 924. J. 230 ; Society of Practical Knowledge (6) Benson y. Heathorn, 1 Y. and y. Abbott, 2 Beay. 559 ; Maxwell v. Coll. C. C. 326. The Port-Tennant Patent Steam Fuel O 210 DUTIES OF DIRECTORS. [Book II. with the company. gained by theii- for their connection with the company, or which, if obtained at all, connection should have been secured for the company. Thus, when a quantity of railway shares, on which deposits and calls remained unpaid, were placed at the disposal of the directors, and one director who had great influence succeeded in getting a number of them sold to friends of his own at a considerable advance, and then proposed to retain the balance of the purchase money after accounting to the company for the amount of the un- paid deposits and calls, it was held that he was bound to make the entire amount forthcoming to the company ; and his allegations that he was entitled to retain the balance or any part of it as a present or remuneration for his great services to the concern, were entirely disregarded (a). So, where the directors of a company which had amalgamated with another, received from the latter considerable sums apparently for bringing about the amalgamation, the money was held prima facie to belong to the shareholders of the first com- pany, and ordered to be paid into Court pendente processu ,(b). It has been decided in England, that acquisitions of property made by partners for themselves when they ought to have obtained them for the company, will be deemed to vest in the partners as trustees for the concern (c). Whether this would be held to be law in Scotland in the case of partners may be questioned ; but there can be little doubt that the principle, of which it is the consequence, would be applied in the case of directors making similar acquisitions. The company, however, cannot claim from the directors either the pro- perty they have thus acquired, or its beneficial use, without tender- ing them full repayment of what it actually cost them (d). In calling directors to account for breaches of duty, it must be borne in mind that they are the servants of the company, and not of the individual shareholders ; and therefore, if a shareholder con- How directors may be called to account. Co., 24 Beav. 495 ; ex parte Perrier, 7 Irish Chan. Rep. 256 ; Foss v. Har- bottle, 2 Ha. 489 ; Ellis v. Colman, 25 Beav. 662. In these cases the trans- actions complained of were more or less tainted with fraud, however in- geniously it might be attempted to be concealed. (a) York and North Midland Ra. Co. y. Hudson, 16 Beav. 485. (6) Gaskell v. Chambers, 26 Beav. 360. (c) Carter v. Home, 1 Eq. Ab. 7 ; Featherstonehaugh v. Fenwick, 17 Ves. 298 ; Clegg v. Fishwick, 1 Mao. and G. 294 ; Clements v. Hall, 2 De G. and J. 173 ; Alder v. Fouracre, 3 Swanst. 489. (d) Great Luxembourg Ra. Co. v. Magnay, 4 B. Jur. N. S. 839. Chap. XI.] DUTIES OF DIRECTORS. 211 siders himself aggrieved by their misconduct, his proper course is not to proceed against them at his own instance, but to call upon the company to bring them to account, and afterwards to obtain relief from the company itself (a). It may be noticed in this place, that directors are entitled to no Eemuneration. remuneration for their services in the absence of a special agree- ment or provision to that effect (b). (a) Orr and Others v. Glasgow, House of Lords 10, 3 Macq. 799, 32 Airdrie, and Monklands Ra. Co.\ Jur. 486. 1857, 20 D. 327 ; aff. 1860, 22 D. (J) Dunstan v. Imperial Gas Co., 3 B. and Ad. 125. [ 212 ] CHAPTER XII. POWERS OP PARTNERS, DIRECTORS, AND OTHER OFFICIALS. Having thus reviewed the general principles by which the powers of majorities, of partners, and of directors of companies are regu- lated, we shall now proceed to consider in detail the more common instances of the exercise of such powers in the course of the company management. BUYING AND SELLING. Buying and It seems never to have been doubted, that every partner of a selling. _ ^ . ' . . firm has the implied power of purchasing either with the funds or on the credit of the company such goods as are necessary for carry- ing on the business. In an old case the Court held this to be so clearly fixed, that they found a partnership liable for goods bought by a partner, although the seller did not know of the partnership, and the other partner had settled with his copartner for them (a). And similar decisions have frequently been given in England (h). Nor is it necessary that a stranger who sells to a single partner shall show that the goods are de facto applied to partnership pur- poses, in order to enable him to recover the price against the com- pany. Thus it was held in England, that where a party sold a quantity of bits to one partner of a firm of harness-makers, who pawned them for his own purposes, the seller was entitled to sue both partners for their price (c). The goods supplied must be of the kind required by the partnership business ; but if this be so, it (a) Logy v. Durham, 1697, M. Main. 31 ; City of London Gas Com- 14566. See also Monach's Trs., 1804, pany v. Nicholls, 2 Car. and Payne M. 14614. 365. (6) Russell v. Roberts, 4 Nev. and (c) Bond v. Gibson, 1 Camp. 186. Chap. XII.] BUYING AND SELLING. 213 is of no consequence whether the firm be of a trading description or not (a). From the very nature and object of trading partnerships, it necessarily follows that every partner has the implied power of seUing the partnership goods. What limits (if any) are to be set to this implied power, does not appear from any decision or authoritative dictum in the law of this country, so far as the writer is aware. In England it was held in one case, that a single partner could even make a valid sale of the company books (b). How far this can be taken as the law of Scotland may be doubted. In the absence of any decision, it is also open to question, whether a partner, without the express consent of his fellows, can dispose of the company's stock, by means of which alone its business could be carried on. This would in effect amount in some cases to a total dissolution of the concern ; and anything leading to such a result could hardly be considered as falling under implied powers, which, as we have already seen, mean authority or agency to do what is necessary for carrying on, not terminating the business. Yet in the English case of Wilson V. Miers, where the directors of a steamship company, whose affairs were in a very unsatisfactory state, had entered into a contract for the sale of its whole shipping, and the purchaser demurred to completing the contract on the ground that general powers to buy and sell did not authorize the directors to sell off the whole of the company vessels without a special resolution to dissolve the concern, it was held by the Court of Common Pleas that the transaction was within the powers of the directors (c). General powers of buying and selling in the course of manage- ment do not include the power of amalgamating the company with another ; for this would infer a power to buy and sell the company business, with all its liabilities. To carry through such a transac- tion requires a special resolution of all the partners of an unincor- porated company, and in the case of proper corporations can only be effected by the intervention of public authority (d). (a) Gardiner v. Childs, 8 Oar. and (J) Dove v. Wilkinson, 2 Stark. 287. P. 345 ; Wilson v. Whitehead, 10 M. (c) 10 C. B. N. S. 348. and W. 503 ; Athenmum Life Assur. (d) Anchor Insur. Co., 2 J. and H. Soc. V. Pooley, 3 De G. and J. 294 ; 400 ; Ernest T. Nicholls, 6 House of Wood^s case and Brown's case, 9 W. Lords Cases 401 ; Anglo- Austr. Insur. R. 366, and 10 W. R. 662. Co., 8 Jur. N. S. 628. 214 BUYING AND SELLING. [Book II. Purchase of real property. Sale of real property. As regards the purchase of real property by a partner or director for the company, this power will be held to be implied where the acquisition is one in the company's line of trade, e.g. stances for a building society, or where it may fairly be presumed to be a bene- ficial purchase, as for instance premises for carrying on the busi- ness (a). But it is thought one of the public would not be safe in relying on the company's responsibility for extensive purchases of land made by an individual partner, which might involve a diversion of the partnership funds from their legitimate purposes, or which would not likely be an acquisition of any. value to the concern. The same principle would seem to regulate the power of selling real property. Unless the nature of the partnership business be such as to render the sale of its real property a thing likely to fall under the scope of the partnership contract (as in the case of building societies), it is probable that the power of selling this kind of property would not be considered as coming under the implied agency; for otherwise the affairs of the company might at any time be thrown into confusion by the sale of its premises by one partner without the knowledge of the others. The circumstance that the property is held in trust by a third party for the firm, or that it is conveyed to the partners pro indiviso for that purpose, would not avoid the sale ; for if a single partner had the power of transferring the jus ad rem, the purchaser could complete the con- veyance by adjudication in implement. Nor would the fact that the law requires writing in obligations relative to land affect the question ; for if the partner has power to bind the company at all, he has power to sign socio nomine. It must, however, be admitted that this question has never, in so far as the author is aware, been judicially determined either in this country, in England, or in America (b). (a) Sorley^s Trs. v. Grahame, 1832, 10 8. 319 ; York Buildings Co., 1779, 2 Paton's App. 541. (6) See, on this subject, Story on Part. 124, and 154-6; and Bisset 45, note. From certain dicta in English and American authorities, it might be supposed that partnership realty could in no circmnstances be alienated by the act of a single part- ner (Story, Part. sees. 101 and 119 ; Bisset 45, n. e). Such dicta, how- ever, appear merely to mean, that since no partner has implied power to bind his copartners by deed under seal, he cannot convey the legal titles Chap. XII.] LEASING — BORROWING. 215 LEASING. As in the general case the granting of leases of partnership property does not fall under the ordinary business of a firm, it should seem that such a power is not covered by the prcepositura of a partner. But if a partnership were formed for the purpose of acquiring houses or other tenements, in order that they might be let to tenants, there seems no reason no doubt that each partner would be held entitled to bind the firm in transactions of this kind. On the other hand, the acquisition of leasehold property for partnership purposes is not a transaction of such urgency as to require to be entered into without the express concurrence of the company ; and accordingly it has been held in England, that one partner has no implied authority to contract for a lease of premises in behalf of the firm (a). BORROWING. It is worthy of remark, that there is a very material difference between a power to borrow money on the company's credit, and a mere authority to incur company debts by ordering work or goods on its behalf. In the latter case the transaction is generally carried on more openly, and produces something tangible; in the former, a partner may easily abuse his powers by incurring unnecessary obligations, or may even defraud his copartners by applying the proceeds of the loan to his own purposes. Still it is obvious, that unless partners of trading companies possessed the power of borrow- ing money, it would often happen that the exigencies of commerce could not be met, and the common undertaking would be involved in ruin. The rule accordingly seems to be, that this power will in company real estate without the make an order vesting the estate in concurrence of his copartners. But it the vendee de piano. Now, whether a must be observed that, in the ordinary court of equity would, in the case of a case, a valid agreement to sell land partner entering into an agreement of may be made by writing, though not this kind, decree specific performance, under seal, and that a court of equity is the real question ; and it has never, will often enforce this by a decree for in so far as we are aware, been deter- specific performance, which, if the mined, vendor refuse to obey, the Court will (a) Sharp v. MilUgan, 22 Beav. 606. 216 BORROWING. [Book II. Knowledge by lender of pro- hibition. JJatification. Public companies. be held to be implied, wherever its exercise is necessary for the transaction of the partnership business in the ordinary way (a). It must be observed, however, that the power to borrow is merely implied from the circumstances of the case ; and is not to be inferred where its exercise is neither ordinary, in the line of trade, nor justified by necessity. If, therefore, the creditor knows, or ought to have known, that the loan was intended not for partner- ship but for private purposes, he will have no recourse against the company (b). So also, a fortiori, where borrowing is prohibited by the ^constitution of the partnership, and the lender is aware of this prohibition (c). Even where the lender is not aware of any direct prohibition, and where the purpose appears reasonable, he is not entitled to infer that this power is implied, when the business is of a kind usually carried on on ready money principles (d). Increasing partnership capital is not an act within the scope of ordinary busi- ness, and therefore the company is not bound by loans contracted in their name by a partner for such a purpose (e). Ratification by all the partners will always validate such trans- actions, however ultra vires or irregular they may have been (/). But it must be observed, that in the absence of power to borrow, either express or implied, and in default of ratification, the mere circumstance of the proceeds of the loan having been applied in rem versam of the partnership will not of itself validate the trans- action, unless the case amounts to one of adoption (^). Where the articles of association of a common law company (a) Dewar v. Millar, 1766, M. U569 ; Glass v. Hutton, 16 Jan. 1794, F. C, M. 2587; Selkrig v. Dunlop, 1804, Hume 277 ; Turnlull v. M'Kie, 1822, 1 S. 331 ; Anderson, 1828, 6 S. 928; Blair Iron Co., 1855, 18 D. 49, House of Lords Cases, and 27 Jur. 614 ; Boihwell v. Humphries, 1 Esp. 406 ; Lloyd v. Frenclifield, 2 Car. and Pa. 333. See Shaw's Bell's Com. 217 ; Lindley 213 ; CoU. 268. (i) Johnston v. Phillips, 1822, 1 S. App. 244 ; Blair v. Bryson, 1835, 13 S. 901 ; liPLeod v. Tosh, 1836, 14 S. 1058. (c) Worcester Corn Ex. Co., 3 De G. M. and G. 180. (d) Hawtayne v. Bourne, 7 M. and W. 595 ; Kicketts v. Bennet, 4 C. B. 686 ; Arden v. Siiarp, 2 Esp. 524, 3 Ross L. C. 605. (e) Fisher v. Taylor, 2 Ha. 218 ; Greenslade v. Dower, 7 B. and C. 655. See Bryon v. Metro. Saloon Omnilnts Co., 4 E. Jur. N. S. 680. (/) Pare v. Clegg, 29 Beav. 580 ; Athenieum Insurance Company v. Par- ley, 3 De G. and J. 294 ; Galway v. Matthews, 10 East. 264, 3 Ross L. C. 507. (g) Johnston, Sharp, and Co. v. Phillips, 1822, 1 S. App. 244; Bur- mestro v. No7-ris, 6 Ex. 796 ; Hawtayne V. Bourne, 7 M. and W. 596. Chap. XII.] BORROWING. 217 contain no provision to the contrary, the power of borrowing money by the company is implied ; and the same principle appears to hold good even in incorporated companies, when the exercise of such a power is necessary for the success of the undertaking, or obviously within the company's line of business (a). When borrowing is not expressly prohibited by the company's constitution, this power may be exercised by a majority of the shareholders even though the company is limited, provided the object of the loan be not to increase capital, but to supply means for the existing wants of the company (b). When this power is possessed by a company, the question How power to '■ ^ _ '' . borrow may be whether and in what manner it may be exercised must be deter- exercised. mined by reference to the articles of association or other instru- ment of constitution; and all provisions and regulations which they contain must in general be adhered to and carried out in their entirety. In the absence of any provisions on the subject, the authority of a general meeting, or at least of a majority of the shareholders, Avould seem in the ordinary case necessary to the valid exercise of this power. This rule, however, will not be rigidly adhered to when money has been borrowed by the directors to meet necessary purposes in the company's line of business, and when it has been bona fide applied accordingly. Thus, when direc- tors had without authority borrowed and applied money in con- structing works necessary for carrying on the company business, they were found entitled to reimbursement from the shareholders (c). And the power of borrciwing money has been deemed so necessary for carrying on the business of a banking company, that the exer- cise of this power by directors has been held to bind the company, even though they have not complied with all the provisions of the deed of constitution (d). But where directors have borrowed money without authority, and have applied it for purposes not within (a) Royal British Bank v. Tur- Omnibus Co., supra; Australian Aux. quand, 5 BU. and Bl. 248; Bank of Sfcam CTzp^jer Co., 4 E.Jur. N. S. 1224. Australasia, 12 B. Jur. 189 and 407 ; (c) Troup's case, 29 Beav. 353 ; Morgan's case, 1 Hall and T. 820 ; Pare v. Clegg, 29 Beav. 589 ; Hoare's Norwich Yarn Co., 22 Beav. 143 ; case, 30 Beav. 225. Bryon v. Metropolitan Saloon Omnibus (d) Royal British Bank v. Tur- Co., 4 E. Jur. N. S. 1262. quand, 5 BU. and Bl. 248, 6 ibid. 327 ; (J) Bryon v. Metropolitan Saloon Agar y. Athen^umAssur. Society, 3 C.B. 218 BORROWING. [Book II. the prescribed sphei'e of the undertaking, they , have no claim of reimbursement against the shareholders (a). Two companies A and B were amalgamated by a deed which was afterwards found to be null and void as ultra vires and illegal. Before the amalga- mation, company A had become indebted to a third party; and after the amalgamation, the directors of the company B granted him a bill drawn by them upon their cashier for the amount of the debt due by company A. It was held that company B was not liable, seeing the bill was not drawn for the legitimate purposes of the company (b). "What if diiec- Where directors are specially prohibited from borrowing money, tors are speci- /. i ... . , - o j ? ally prohibited or from borrowmg it m a particular manner, acts done by them in ing? contravention of these provisions will not in general bind the com- pany, as the lenders will be held bound to acquaint themselves with the contents of the company's instrument of formation (c). But this rule will not be interpreted in a judaical manner ; so, when directors were prohibited from granting bills, but had authority to borrow on mortgage, and having notwithstanding granted bills to secure an existing debt, and at the same time executed a mortgage under the seal of the company, which was made subject to redemp- tion on payment of the bills, it was held that the mortgage was valid, as it must be taken as intended to secure the debt, and not to pay the bills (d). The existence of the power to borrow does not authorize either the directors or the company to issue debentures for any other pur- pose than in security of cash advances (e). Informalities. Whatever irregularities or informalities there may have been in originating or carrying through the loan by the directors, these may all be remedied by ratification, — particularly if the company has had the benefit thereof, — provided always that borrowing has not been prohibited by charter or special act (/). N. S. 725 ; Bank of Australasia, 12 (b) Balfour v. Ernest, 5 B. Jur. N. E. Jur. 189 ; Maclae v. Sutherland, S. 439, 5 0. B. N. S. 601. 3 Ell. and Bl. 1. (c) See Balfour v. Ernest, supra; (a) Kent Benefit Building Soc, 1 Dr. Eastwood v. Bain, 3 H. and N. 738. and Sm. 417. See also London and (d) Scott v. Colburn, 26 Beav. 276. County Assur. Co., ex parte Wood, and (e) West Cornwall Baihvay Co. v. ex parte Brown, 30 L. J. Ch. 373 ; Scl- .^/owatt, 12 E. Jur. 407. u'ljn V. Harrison, 2 Johns, and H. 334. (/) Plmnix Life Insur. Co., 2 J. and Chap. XII.] BORROWING. 219 It does not, however, follow, that because the company has had What if oom- ' ' ' . . pany receive the benefit of money borrowed by one of its partners or by its the benefit of 1111 ■ 1- ■ the loan? directors, the lender shall have recourse agamst the company vpso jure. The real question in such cases is, whether the loan was or was not made to the company. The fact that it received the benefit of the proceeds is certainly strong, but not conclusive, evidence of its being a party to the contract ; for the lender may have dealt with the partner or the directors on their own credit solely, and the partners or the directors may have gone into the transaction in order to enable them to pay a debt due by them to the com- pany, or to enter into a transaction with it on their own account. The onus, therefore, of proving that the loan was made to the company rests on the lender (a). Strangers cannot enforce irregular debentures as valid, if they irregular de- have accepted of them with notice that the conditions precedent to Effects of their issue had not been fulfilled ; and shareholders who accepted of such debentures, after being present at the meeting where their irregular issue was sanctioned, and thus in the knowledge of the irregularity, cannot enforce payment of their contents. Even hona fide transferrees for value from such shareholders appear to be in no better position (b). Bona fide purchasers of debentures are not, however, affected Want of ..... . . notice. by their invalidity if they received no notice, and were encouraged by the company in the belief that they were valid (c). Yet where debentures have been issued in fraud of the company, a purchaser is held in England to be subject to all the equities attaching to them, even though he received no notice ; nor does it make any difference that the transfers have been duly registered and that interest has been paid on them to the purchaser, provided these facts have not been communicated to the shareholders {d). H. 441 ; Magdalena Steam Nav. Co., Bourne, 7 M. and W. 595 ; ex parte 1 Johns. 690 ; Pare v. Clegg, 29 Beav. Chippendale, 4 De G. M. and G. 19 ; 589 ; Wood's Claim and Brown's Claim, Homersham v. Wolverhampton Water- 9 W. R. 366, and 10 W. R. 662. works Co., 6 Ex. 142, per Parke, B. (a) See Evily v. Lye, 15 Bast 7, (b) Magdalena Steam Nav. Co., 1 3 Ross L. C. 552 ; Beckham v. Drake, Johns. 690, 8 W.R. 329, 2 J. and H. 306. 9 M. and W. 99 ; Sevan v. Lewis, 1 (c) South Essex Gas Light and Coke Sim. 376 ; Smith v. Craven, 1 Or. and Co., 31 L. J. Ch. 293, 2 J. and H. 306. J. 500 ; Worcester Com Ex. Co., 3 (rf) Atlienxum Life Assur. Soc. v. De G. M. and G. 180 ; Hawtayne v. Pooley, 5 E Jur. N. S. 129. 220 PLEDGING— MORTGAaiNG. [Book II. PLEDGING. The power of borrowing seems to infer that of impignorating the partnership property for the advances required. In England, it appears never to have been doubted that pledging of the com- pany chattels fell under the partners' implied agency (a) ; and the same would seem to be law in this country, though, from the con- tract of pledge being less extensively used with us than in Eng- land, examples of its operation are less common. It has been said by the Court, that one authorized to sell can effectually pledge the goods of his constituent (b). MORTGAGING. A more difficult question presents itself, when it is asked whether the granting of a heritable security over the company's real property falls within the implied agency of an individual partner. The point does not seem ever to have come up for judi- cial determination in Scotland. English law. According to the law of England, one partner cannot mortgage the real property of the firm (c). But the value of this rule as a precedent throwing light upon the law of Scotland depends on whether it is to be considered as founded simply on the technical rule of the common law, that one partner cannot bind another by deed under seal ; or whether it is in part at least founded on con- siderations of public policy, e.g. the danger of one partner giving a favourite creditor an undue preference over the company pro- perty. Now, in Scotland the granting of security over the company's heritable property is not attended by any technical difficulties, such as those presented by the English mortgage ; and as cases may often occur where the absence of this implied power would be ruinous to the partnership (as when one of two part- ners is abroad, and an immediate advance of money is required), (a) Raba v. Ryland, 1 Gow 132 ; ex ferred to. See also Attwood v. Kin- parte Bonbonus, 8 Ves. 540, 3 Ross L. nears, 1832, 10 S. 817. C. ; Lindley 229 ; 2 Bell's Com. 618. (c) See Harrison v. Jaclson, 7 (6) See Colquhoun v. Finkiy Duff Term. Rep. 203, dictum of Lord ami Co., 1816, 19 F. C. 208, and 1 Kenyon, 206, 3 Ross L. C. 557; Lind- Bell's Com. 484, and oases there re- ley 229. Chap. XII.] MORTGAGING. 221 it may well be questioned whether such a power does not exist where the emergency calls for its exercise. That the English rule is founded in mere technical reasons, seems to be indicated by the fact that one partner has power to mortgage ships belonging to the company (a) ; and that an equi- table mortgage, which does not require to be by deed, is held, it would seem, to be within the implied agency (b). The provisions of the Companies Clauses (Scotland) Act, Provisions of 1845, with respect to borrowing of money by the company, are as follows : — If the company be authorized by their special act to borrow on Mode of 111 1 . 1 . 1 exercising mortgage or bond, they may borrow m this manner such sums not the power. exceeding the sum prescribed by their special act as shall from time to time be authorized by order of a general meeting. They may even mortgage the undertaking itself, as well as the future calls on the shareholders (sec. 40). On the original debt being paid off, the company may again borrow as before, and so on from time to time as may be required ; but unless this power of re-borrowing be exer- cised in order to pay off an existing debt, it requires the authority of a general meeting. That is to say, while the directors may make such arrangements as they see proper with reference to a loan already existing, they can do nothing towards creating a new debt without the authority of a general meeting (sec. 41). Where it forms a condition precedent to the exercise of the power of borrow- ing, that a certain amount of the capital shall have been subscribed or paid up, or that the authority of a general meeting shall have been obtained, the certificate of a sheriff that the prescribed amount of capital has been subscribed or paid, and a copy of the order of a general meeting to effect the loan, are declared to be sufficient evi- dence that the foresaid conditions precedent have been implemented. The sheriff is required to grant the certificate on production to him of the company's books, and of such other evidence as he may think sufficient (sec. 42). The mortgages or bonds granted by the com- pany must be by deed under the company seal, duly stamped and bearing the consideration truly stated. They may be in the forms (a) Australia Steam Clipper Co., 4 (6) See ex parte Lloyd, 1 Mont. K. and J. 733 ; ex parte Howden, 2 M. and Ayr. 494. See Lindley 229. D. and D. 574. mortgages, etc. 222 MORTGAGING. [Book II. of Schedules C or D annexed to the Act, or to the Hke effect ; and they have the full effect of assignations in security duly completed (sec. 43). The mortgagees are respectively entitled to rank pari passu with each other in their proportional shares of the tolls, sums, and powers contained in the mortgages, and of the calls on the shareholders, if these also have been mortgaged, both as" regards principal and interest, without any preference by reason of priority of the date of a mortgage, or of the meeting at which it was authorized (sec. 44). No mortgage, unless the contrary is expressly provided, precludes the company from receiving and applying to company purposes any calls thereafter made (sec. 45). All mort- gages and money lent to the company are declared to be personal and not real estate (sec. 46). Bondholders, like mortgagees, rank pari passu without preference by reason of the dates of their bonds or of the meetings at which they are authorized, or otherwise (a) Eegister of (sec. 47). A register of mortgages and bonds must be kept by the secretary ; and within fourteen days after the date of each mort- gage or bond, an entry or memorial specifying the number and date of the deed and the sums secured thereby, together with the names and additions of the parties thereto, must be made in this register. The register may at all reasonable times be perused gratuitously by any shareholder, mortgagee, or bond creditor of the company, or any person interested in a company bond or mortgage (sec. 48). Mortgagees or bondholders may transfer their rights at any time. The transfer must be by deed duly stamped, stating the actual con- sideration; and it may be either in the form of Schedule E annexed to the Act, or to the like effect (sec. 49). Within thirty days after the date of any such transfer, or within thirty days after its arrival in the United Kingdom, it must be produced to the secretary, who causes an entry or memorial of it to be made in the same way as in the case of the original mortgage. The transferree thereupon becomes entitled to the full benefit of the mortgage or bond, and the transferrer becomes incapable of affecting the right by release, formal discharge, or otherwise. A small fee may be de- manded by the company for the entry ; and until such entry is (a) This provision cannot be de- gage. De Winton v. Brecon, etc., 26 feated by the device of giving one Beav. 533 ; Legg v. Mathieson, 2 Giff. debenture-holder an additional mort- 71, and 6 E. Jur. N S. 1010. Chap. XII.] MORTGAGING. 223 made, the company is not responsible to the transferree in respect of the mortgage (sec. 50). The interest on the borrowed money is payable half-yearly, Payment of unless otherwise provided in the bond or mortgage, and in prefer- ence to dividends (sec. 51). The interest can only be transferred by deed duly stamped (sec. 52). The company may, if they think fit, fix a period for repayment Time for pay- of the principal and the interest of the money borrowed, and in that case they must insert it in the mortgage deed or bond. At the expiration of this term the principal and all arrears of interest become payable to the creditor, at the company's principal office or place of business, if no other place of payment be inserted in the deed (sec. 53). If no term is fixed for repayment, the creditor may demand the principal and the arrears of interest at or subsequent to the expiration of twelve calendar months from the date of the deed, upon giving six months' previous notice to that effect ; and in like manner, the company may at any time pay off the same on giving the like notice. The notice may be in writing or print, or in both ; and if given by the creditor, must be delivered to the secretary, or left at the principal office of the company; and if given by the company, it must be given either personally to the creditor or left at his residence. If the creditor be unknown to the directors, or cannot be found after diligent inquiry, the notice may be given by advertisement in the Edinburgh Gazette, and in the- prescribed newspaper; and if none be prescribed, or if the pre- scribed newspaper cease to be published, in a newspaper circulating in the district where the company's principal place of business is situated (sees. 54 and 140). On expiration of notice to pay off the debt duly given, interest ceases to run, unless on demand the com- pany fail to make payment of the principal and interest (sec. 55). The books of account of the company must be open to the Books of inspection of the mortgagees and bond creditors, with liberty to take *''°°™ ' , extracts free of any charge (sec. 58). The company have the option (unless it be otherwise provided Conversion of in the special act) of raising the sums authorized to be borrowed, capuS ° or any part of them, by the creation of additional shares. This, however, can only be done when the authority of a general meeting has been previously obtained (sec. 59). The shares so created are 224 MORTGAGING. [Book II. to be considered in all respects the same as original shares, with respect to payment of calls and forfeitures, except only as to the times of making calls and their amount, which may be fixed as the company from time to time see fit (sec. 60). If the existing shares are at a premium or above far, the new shares must (unless otherwise prescribed) be of such an amount as will allow them to be conve- Aiently apportioned among the existing shareholders in proportion to the shares held by them respectively ; and it is provided that they shall have the offer of them in the first instance, which offer must be by letter, under the hand of the secretary, addressed to each shareholder, or left at his usual or last place of abode (sec. 61). These new shares vest in the shareholders accepting them, and pay- ing the value thereof at the time and by the instalments fixed by the company. But if a shareholder fails for a month to accept and pay as above, the shares tendered him may be disposed of by the company as they see fit (sec. 62). If the old shares be not at a pre- mium, the new shares may be of such an amount, and may be issued in such manner and on such terms, as the company choose (sec. 63). Act 1862. The provisions of the Act of 1862, as to borrowing, are similar to those we have just been considering. By sec. 43, it is provided that every limited company must keep a register of all mortgages and charges specifically affecting the property of the company, and must enter in such register a short description of the property affected by each mortgage or charge, the amount of charge created, and the names of the creditors or mortgagees. If any company property is mortgaged or charged without this entry being made, every director or other official who knowingly and wilfully permits it to be done, incurs a penalty of not more than £50. The register of mortgages and charges must be made patent to creditors under heavy progressive penalties. The articles of association ought to contain provisions and regulations as to the mode in which the power of borrowing is to be exercised; but their silence on this subject will not prevent the exercise of the power, if it is plainly necessary for the purposes of the society as appearing in the memorandum of association (a). This power, however, should, in the absence of a provision to the (a) See Bryon v. Metropolitan Saloon Omnibus Co. {Limited), 4 E. Jur. N. S. 680, 1262. Chap. XII.] ISSUE OP NEW SHARES AND STOCK. 225 contrary, be exercised by a resolution of the shareholders in general meeting. Yet where, by the articles of association, the directors were empowered to exercise all powers which the company might exercise in general meeting, it was held that the power of borrow- ing was covered by this general provision (a). The Companies Clauses Act, 1863 (b), gives further facilities Act of 1863. for raising additional funds by the issue of new ordinary or prefer- ential shares. Its provisions are as follows : — When a company, New ordinary incorporated either before or after the passing of the Act of 1863, is stock ^""^ authorized by a special act passed after that date to raise additional sums by the issue of new ordinary shares or of new ordinary stock, or (at the option of the company) by either of these modes, the com- pany may, with the sanction of the prescribed proportion of the votes of members present personally or by proxy, at a meeting specially convened for the purpose in terms of the special act, and (if no pro- portion is prescribed) with the sanction of three-fifths of such votes, raise the additional sums by creating and issuing from time to time new ordinary shares or stock, as the case may be, of such an amount and subject to such provisions as to calls as they may see fit (sec. 12). In like manner, the company, when so empowered, may raise New privileged such additional sums by creating and issuing from time to time, stock. with the like sanction, such new shares or new stock, either ordi- nary or preferential, and either of one class with like privileges, or of several classes with different privileges, and of the same or of different amounts, and respectively with any fixed, fluctuating, contingent, preferential, perpetual, terminable, deferred, or other dividend or interest, not exceeding the rate prescribed, and other- wise not exceeding the rate of 5 per cent, per annum, as they may, acting within their prescribed power, see fit, and subject to such provisions as to amount of calls and times of payment as they may deem proper. Such new issue must not, however, affect the rights of holders of preference shares or stock already existing (sec. 13). The preference shares or stock so issued are entitled to a preference over the ordinary shares or stock, in so far only as the profits of each year are concerned ; and if in any year ending on the pre- scribed day, or otherwise on the 31st of December, there are no (a) Australian Aux. Steam Co., 4 E. Jur. N. S. 1224. (b) 26 and 27 Vict. c. 118. P 226 ISSUE OF NEW SHARES AND STOCK. [Book II. profits available for payment of the full amount of preferential divi- dend or interest in that year, the deficiency cannot be made good out of the profits of any subsequent year, or out of the company funds (sec. 14). The terms and conditions to which any preference share or stock is subject must be clearly stated in the certificate of such preference share or portion of preference stock (sec. 15). Regulations as Unissued new shares or stock may be cancelled if the company of issue. see fit (sec. 16). If, when new shares or stock are issued, the ordinary shares or stock are at a premium, then, unless the com- pany determine otherwise, the new shares or stock must be of such amount as will conveniently allow them to be apportioned among the existing shareholders of ordinary shares or stock in proportion as nearly as may be to such ordinary shares or stock as they then respectively hold, and the same must be offered to them at par in that proportion. The company, however, is not required to appor- tion or offer the new stock in this manner unless the amount of every new share or portion of stock would, if so apportioned, be at least the sum prescribed, or otherwise ten pounds (sec. 17). The offer must be made by letter under the hand of the treasurer or secretary, delivered to every share or stock holder, or sent by post addressed to him according to his address in the share or stock holders' address book,- or left for him at his usual or then last known place of abode in England, Scotland, or Ireland, as the case may be. All offers made by post are considered as made on the day when the letter should be delivered in the usual course of post (sec. 18). The new shares or stock vest in the share or stock holders or their nominees by acceptance (sec. 19). If, for the prescribed time, or otherwise for one month after offer, the share or stock holders fail to signify their acceptance in whole or part, they are deemed to have declined, and the new shares or stock may be disposed of by the company either in whole or part, as the case may be. Yet, on cause shown to the satisfaction of the directors, the time for accept- ance may in special cases be enlarged (sec. 20). In all other cases than those above mentioned, the directors may from time to time dispose of new shares and stock to such persons and on such con- ditions as they deem advantageous to the company, provided only that the new shares or stock are not disposed of for less than their full nominal amount (sec. 21). Chap. XII.] DEBENTURE STOCK. 227 Where any company, incorporated either before or after the Debenture passing of the Companies Clauses Act of 1863, is authorized by any special act subsequently passed and incorporating Part III. of the Act of 1863 to create and issue debenture stock, the company may, with the same sanction as that just specified in the case of issuing new shares, create and issue debenture stock in such amounts and manner, on such terms and conditions, and with such rights and privileges as may be deemed proper, instead of and to the same amount as the whole or any part of the money for the time being owing by the company on mortgage or bond, or which they have power to raise by mortgage or bond, and may attach to the stock so created such fixed and perpetual preferential interest not exceeding the prescribed rate, and otherwise not exceeding four per cent, per annum, as is thought fit. The interest may be made payable half- yearly or otherwise, and may be made to commence at once or at any future time or times as the debenture stock is issued (sec. 22). This debenture stock and the interest thereon is a charge on the undertaking of the company prior to all other shares or stock ; but in other respects it is transmissible and transferable in the same manner and under the same provisions and regulations as the other company stock. It is personal estate (sec. 23). The holders of debenture stock have no. preference among themselves ; but the interest accruing thereon has a preference over all dividends and interest on other company stock or shares, whether ordinary, pre- ference, or guaranteed, and ranks next to the interest payable on mortgages or bonds granted before the creation of the debenture stock (sec. 24). If the interest on this debenture stock is not paid within thirty judicial factor, days after it becomes payable, any one or more debenture-holders, holding individually or collectively the sum in nominal amount prescribed, and if none prescribed, then a sum equal to a tenth of the aggregate amount which the company is for the time being authorized to raise by mortgage, bond, or debenture stock, or the sum of £10,000 sterling, whichever of the two last-mentioned sums is the smallest, may (without prejudice to the right to sue for the in- terest in arrear) require the appointment of a judicial factor (sec. 25). This application is made to the Court of Session, who, after hearing parties, may, if they see fit, make the appointment. The judicial 228 DEBENTURE STOCK. [Book II. Ordinary action. General rules as to deben- ture stock. factor, on being appointed, receives all the tolls or sums liable for the interest until the arrears then due on the debenture stock, with all costs and charges, are paid ; and distributes the same rateably and without priority among all the debenture-holders whose interest is in arrear, after applying a sufficient part thereof towards extinc- tion of the interest on the mortgages or bonds, if any, according to their priorities. As soon as the full amount of interest and costs has been paid, the powers of the judicial factor cease, and he is bound to account to the company for his intromissions, and to pay over to them any balance in his hands (sec. 26). Without prejudice to his power to apply for a judicial factor, any debenture-holder may recover the arrears of his interest by action against the company (sec. 27). The debenture stock must be entered in a register kept for that purpose, with the names and addresses of the holders, and the respec- tive amounts to which they are entitled. This register is accessible to any mortgagee, bond-holder, holder of debenture stock or shares, and to any shareholder, free of charge (sec. 28). Debenture-holders are entitled to certificates from the company, stating the amount of the debenture stock held by them. These certificates are framed in conformity to the regulations as to certificates of shares in force for the time being, mutatis mutandis (sec. 29). Existing mortgages or bonds are not affected as to priorities, rights, and privileges, by the issue of debenture stock (sec. 30). Money raised by debenture stock must be applied exclusively either in payment of existing mortgages or bonds, or else for the purposes to which it would be applicable if it were raised on mortgage or bond (sec. 32). Separate accounts must be kept by the company, so as to distinguish money borrowed on debenture stock from that raised by mortgage or bond, and to show how much money raised in the latter form has been paid off by the former (sec. 33). Whatever powers of borrowing and re-borrowing may be possessed by the company are extinguished, in so far as they are exercised by the issue of debenture stock (sec. 34). The holders of debenture stock are in the same position as mortgagees, and are not, in virtue of their debentures, entitled to be present or vote at meetings like other stockholders (sec. 31). The provisions of the Act as to debenture stock are declared to apply to mortgage preference stock, and funded debt, as the case may be, in Chap. XIL] BILLS AND NOTES. 229 all respects as if these latter phrases occurred whenever the former is used (sec. 35). BILLS AND NOTES. These documents are of such general use in mercantile transac- General rule, tions, that it has been long settled that any partner of a trading firm has implied power to draw, accept, grant, or indorse bills and notes in the company name (a). But it is very doubtful whether this rule applies to firms that Does not apply ■1 T * 1- -n T to firms other are not properly mercantile or trading. According to the English than trading. authorities, it seems that the power of granting and accepting such documents is not presumed where its existence is not necessary or usual in carrying on the particular business in which the company is engaged (&). And it has accordingly been held not to exist in com- panies of solicitors (c), farmers (d), quarriers (e), and the like, where no usage or necessity to support its exercise could be shown (/). For a similar reason, this power will not be held to exist in Nor without relation to matters plainly without the line of business pursued by ness. the firm (gr). Whenever, again, it can be made to appear that the creditor Whatif exer- C1S6 01 XDIS knew the bill was granted for a private and not for a company power is pro- debt, it will not be effectual against the company (K), even though the company have been benefited by the transaction (i) ; and the (a) 2 Bell's Com. 615. Selkrig v. (e) Thicknesse v. Bromilow, 2 Cr. Dunlop, 1804, Hume 277 ; Turnbull and J. 425. V. M^Kie, 1822, 1 S. 331 ; Anderston, (/) See, on this subject, Proudfoot Vict. So., 1828, 6 S. 9^8 ; Blair Iron v. Lindsay, 1825, 3 S. 310. Story on Co., 1855, House of Lords, 18 D. 49, Part. s. 102a, and ss. 126-7 ; Coll. 27 Jur. 614 ; Gordon v. Sutherland, 269 ; Lind. 214 ; Bisset 67. 1761, M. 14677 ; Naughton v. Ritchie, (g) Kennedy, 1814, 18 F. C. 122. M. 1490 ; Dewar v. Miller, 1766, M. Here the bill bore to be for value in 14569 ; Smith v. Jarves, Lord Ray- soda, but the company did not trade mond 1484 ; Lane v. Williams, 2 Vern. in such wares. Compare Turnbull 277. , V. M'Kie, 1822, 1 S. 331 ; Stein v. (6) Dickinson v. Valpy, 10 B. and Galder, 1794, 1 Bell's Com. 402, n. 8. C. 128, 3 Eoss L. 0. 561. Chitty on Qi) Miller v. Douglas, 1811, 16 F. Bills p. 35. C. 154 ; Mattheson v. Fraser, 1820, (c) Hedley v. Bainhridge, 3 Q. B. Hume 758 ; Blair y. Bryson, 1835, 13 316. S. 901. (rf) Greenslade v. Dower, 7 B. and (i) Johnston and Co., House of 635. Lords, 1822, 1 S. App. 244. 230 BILLS -AND NOTES. [Book 1L company will not be bound by the signature of a partner socio nomine when he was prohibited from accepting for the company, and the creditor had notice of this restriction (a). But if the creditor had no notice that a restriction of this kind existed, and if the nature of the company business implied the power of drawing bills, the company will be bound (h). If, however, it be proved that the bill was issued by a partner in fraud of his fellows, it has been held in England that the holder will have to show that he gave value (c). This rule is extremely equitable, and there seems no reason to doubt that it is law in Scotland {d). In one case a firm consisted of two partners, viz. Charles Archer and Son, who were also partners of the Perth Foundry Company, which consisted of four partners. The first firm were indebted by promissory-note to one Proudfoot for £1000 ; and having fallen into difficulties, they prevailed on the manager to concur with them in granting a promis- sory-note for the same amount, in name of the Foundry Company, in consideration of which Proudfoot cancelled his note by the firm of Charles Archer and Son. This was done without the knowledge of the other partner of the Foundry Company, which was after- wards sequestrated. Proudfoot claimed on the note, but his claim was rejected on the ground that the note was ultra vires of even a majority to grant (e). E converso, a partner of a bank, who dis- counted a bill as an individual, was held not to be identified with the agent of the bank of which he was a partner, so as to subject him to exceptions pleadable against the bank agent, and so prevent his recovering on the bill (/). Directors, etc. Directors, managers, and other officials of public companies, stand in a somewhat different position from partners in a private firm as to the power of binding their companies by bills and notes. According to the old common law of England, corporations could (a) Galway v. Matthew, 10 East (i) Per Ijord Chancellor, ex parte 263, 3 Ross L. C. 507 ; Willis v. Bonhonus, 8 Ves. 542. Dyson, 1 Stark. 164 ; Vice v. Flem- (f) Grant v. Hawkes, Chitty 32, ing, 1 Yo. and Jer. 227. See M'Leocl No. 9. V. Tosh, 1836, 14 S. 1058. Here the (d) See, however, Wilson's Thorn- company was dissolved, and the credi- son on Bills, p. 159. tor knew that the partner who signed (e) Proudfoot v. Lindsay, 1825, 3 was only empowered to wind np the S. 310. concern. (/) Domes v. M'Fic and Co., 1829, 8 S. 246. Chap. XII.] BILLS AND NOTES. 231 contract only by deed under the corporate seal. Hence their office- bearers were held to have no power to bind them by negotiable documents (a). The tendency, however, in modern times has been towards a relaxation of this rule in incorporated mercantile com- panies, where the interests of commerce seemed to require it ; and this is particularly to be observed in the American branch of English law (b). In Scotland, the rule requiring contracts by corporations to be under seal has not, at least in modern times, been much in- sisted in ; but agreements or obligations by such associations have been held valid when subscribed by their office-bearers for the time being (c). Hence in this country the question whether an incorporated company can be bound by bills or notes signed by its directors or officials, does not seem to have been complicated by the same technical difficulties as in England. As regards unincorporated joint-stock companies managed by directors or other officials, it has more than once been decided in England, that as these officials are to be considered special agents, they do not bind the company by signing bills or notes, unless this power has been specially conferred ; and that even as regards unincorporated associations, the public are bound to make themselves aware of the regulations of the company in this respect (d). In Scotland, the tendency would seem to be to hold the power as implied both in corporate and unincorporate asso- ciations, whenever its exercise is plainly necessary for the manage- ment of the company business, though the articles of association or even the incorporating instrument do not bear it per expressum, so long at least as they contain no regulation to the contrary. And this will hold, a fortiori, when the power in question has been exer- cised practically without objection for a considerable time (e). It is even a matter of doubt whether this is not also the drift of the English decisions in modern times (/). (a) Chitty on Bills 9. British Bank v. Ayrshire Iron Co., 15 (ft) Story onBiUs,s. 79 ; Bayley 78-9. D.782; Wilson'sThomson on Bills 142. (c) Menzies' Lectures 209. But see also Telford v. James, etc., \d) See Thomson v. Un. Salvage Co., 1822, as reversed 1824, 2 S. App. 220. 1 Ex. 694 ; Brown v. Byers, 16 M. and (/) See Gordon v. Assur. Co., 1 H. W. 262 ; Bramah v. Roberts, 3 Bing- and N. 599 ; Thompson, 8 C. B. 849 ; ham N. C. 963 ; Dickinson v. Valpy, Allen, 9 C. B. 574 ; Aggs, 1 H. and 10 B. and C. 128, 3 Eoss L. C. 561. N. 165 ; Lindus, 2 H. and N. 29Sj; (e) See Sminhurne v. West. Bank of Halford, 16 Q. B. 442 ; Edwards, 6 Scotland, 1856, 18 D. 1025 ; North Ex. 269. But see also Lindley 215. 232 BILLS AND NOTES. [Book II. Mode of Even when full power is possessed by partners or officials to binding the , . , , .,..,.,, , , , company. bind their companies by signing bills and notes, these documents may be signed in such a manner as to bind not the company, but the partner or official alone. To bind the company, the bill or note must purport to be the paper of the company. This may be effected by adhibiting the signature of the firm by which it grants obligations, signing per procurationem, or otherwise ea; facie indicat- ing that it is the obligation of the company (a). The company must appear on the document in its proper style. Thus, it has been held in England, that where the style of a firm was ' John Blurton' merely, it was not bound by a bill signed 'John Blurton and Oo.'(6). If, however, the variation be not essential, the firm is bound. Thus, where the firm was 'Seymour and Ayres,' a note accepted thus, Thomas Seymour and Sarah Ayres, was held to bind the firm (c). Trading firms possessing a name containing the names of one or more partners, e.g. John Smith and Co., are bound by bills or notes signed for them in this manner (d). But when the company uses a descriptive name, such as the ' Blair Iron Company,' the adhibition of this per se will not be sufficient ; the document ought to be signed per procurationem of the partner or official, thus, ' The Blair Iron Company, per Alexander Alison.' Yet it has been held that any form of signature from which it appears that the note is granted by a party entitled to sign for the company in that character, is sufficient to bind the company (e). It has some- times been doubted whether signature by an agent is sufficient to warrant summary diligence against his principal, which in the pre- sent case is the company. But such mode of signature would appear to be as valid as any other for this purpose (/). Partners may It is to be observed, however, that in order to bind the com- seives and not P^ny? the signature of the agent must be expressly as agent or pro- e company. g^j-g^^Qj, f^j, jj^g company ; if he merely signs his individual name, the company will not be liable, though he himself will remain effec- (a) Telford Y. James, etc., 1822, as reversed 1824, 2 S. App. 220 ; Wixon V. Demis, 1849, 11 D. 1188 ; Murray, 1827, 6 S. 147 ; Johmtone v. Cliftov- JiiU Co., 1852, 15 D. 84. (h) Kirk V. Blurton, 12 L. J. Ex. 117. (c) Norlon v. Scymmn; 3 C. B. 792. (d) Thomson v. Liddell and Co., 2 July 1812, 16 F. C. 721; Wixon v. Nicoll, 1849, 11 D. 1188. (c) Blair Iron Co. v. Alison, 1855, 18 D. (House of Lords) 49. (./) See TurnbuU v. M'Kie, 1822, 1 S. 353. Chap. XIL] BILLS AND NOTES. 233 tually bound (a). And it does not necessarily make any difference in such a case, that the proceeds of the bill or note have been used for company purposes (b). Upon this principle, it has been held that a bill accepted by one of a firm of two partners in his in- dividual name does not bind the partnership, that is, the other partner (c) ; and it has even been questioned in Scotland whether a bill accepted by all the partners as individuals, bound the com- pany (d). In relation to this matter, it has been settled in England that, a bill drawn per expressum on the firm, and accepted only by a single partner in his individual name, binds the company (e) ; but that if a partner adhibits his name to a note without promising to pay for the company, he binds only himself, though the note may be granted for a partnership debt (/). And this would appear to be the law of Scotland when rightly understood. But it is held, e converso, that a bill drawn on a partner as an individual, and accepted by him for the firm, does not bind the firm, apparently on the principle that to allow this would be to enable a partner to interpose the credit of the firm for his private debts (g). And in like manner, a bill drawn on the directors or other officials of a company as individuals, and accepted by them as on behalf of the company, has been found to bind only the individual accep- tors, and not the company (A). Again, a bill drawn on a company and accepted by its officials or agents, binds the company and not the individual acceptors, except in so far as they may be responsible as members of the concern (i). But it has been very justly decided, that persons who sign a promissory-note as the office-bearers of a society which has no existence and therefore cannot be sued, or of which they were not the proper representatives, may themselves be proceeded against individually (k). It has been held, that a bill (a) Telfordv. James, etc., 1822, 1 S. (/) Siffkiri v. Walker, 2 Camp. 308; 290, as revd. 1824, 2 Sh. App. 219. Murray v. Somerville, 2 Camp. 99, n. (6) Hogg v. Weir, 1748, Elchies, No. (g) Nicholls v. Diamond, 9 Ex. 154 ; 10, voce Society. See Emly v. Lye, Mare v. Charles, 6 E. and B. 978. 15 East 7 ; ex parte Emly, 1 Rose 61. See Serrell v. Derbyshire Ra. Co., 9 (c) SiffkinY. Walker, 2 Camp. 808. C. B. 811. See Naughton v. Ritchie, 1712, M. 1490. Qi) Bult v. Morrell, 12 A. and E. 745. {d) Johnstone v. Cliftonhill Coal Co., (i) Eastwood v. Bain, 3 H. and N. 1852, 15 D. 84. 738 ; Cameron Coalbrook Co., 6 Ex. (e) Masons. Rumsey, 1 Camp. 384; 269, and 16 Q. B. 442. Owen V. Van Uster, 10 C. B. 318 ; ex (k) Rossy. Young and Others, 1831, parte Harris, 1 Madd. 583. 9 S. 275. 234 BILLS AND NOTES. [Book II. accepted by the secretary of a company 'for the directors' did not bind the company, there being no general authority in the secretary of a company as such to negotiate bills for it (a). Bills drawn on a company in the wrong name, and accepted in the proper one, bind the company (b). And where a firm has been in the habit of using a name other than its correct or existing appellation, it will be bound by bills or notes bearing such name (c). Where two firms have one and the same name, and some of the partners are mem- bers of both firms, a bona fide onerous holder of a bill bearing the common name, and who has had no notice of what firm was the true debtor, has recourse against all the members of both firms (d). And where a firm carries on business in the name of an individual, bills bearing his name will bind both himself and his dormant partners (e). It need hardly be observed that single individuals, trading as companies, will be liable for such bills as they accept in the name of the supposed firm (/). There is no authority for the proposition, sometimes maintained, that a partner has power to authorize a stranger to indorse bills as agent in the company name, so as to bind the company. Here the maxim applies, Dele- gatus non potest delegare (g). Even where a partner went abroad, and gave his copartner a power of attorney to manage his affairs, and to draw, accept, and indorse bills in his name, this was held to have no connection with the right to sign partnership bills (h). English rule, It has been held in England, that directors who had no power wnicli appears o > i not to be law in to render the company liable for bills, had still power by indorse- ment to transfer the contents thereof, so as to enable the indorsee to sue the acceptor. It may be doubted whether this is the law of Scotland (i). Scotoii rule as When, in Scotland, the royal charter or general or special to incorporated a r companies. (a) Neale v. Turton, i Bing. 149. 8 B. and C. 427 ; ex parte Law, 3 (i) Lloyd v. AsUij, 2 B. and Ad. Deao. 541. 23. (/) Bootli V. Commercial Bank Co., (c) Williamson v. Johnson, 1 B. 1833, 2 S. 273 ; and see Rose v. Moore, and 0. 146. 1833, 11 S. 334. (d) M'Nair v. Fleming, 1805 and {g) The case of Tennant y.Strachan, 1807, 2 Bell 670, n. 2, aff. 3 Dow. 1 M. and Malk. 377, quoted in support 229; Daddson v. liohertson, 1815, as of this proposition in Wilson's Thomson aff. 3 Dow 218 ; Baker v. Charllon, on Bills 160, is not in point. Peake 80; Swan v. Siccle, 7 East (h) Attwood v. Mitmiinr/s, 7 B. Skud 210. C. 278. (e) South CnroUnn Bank v. 'Cnw, (0 'S'nn'(/j v. /o/oi.wn, 3 H. andN. 222. Chap. XII.] BILLS AND NOTES. 235 act by which a company is incorporated contains no provision as to the mode in which bills or notes are to be executed on its behalf, such documents, like other obligations, are made binding on the company by the subscription of the proper officials for the time being (a). But any provisions or regulations relative to this matter which may be contained in the incorporating instrument ought to be rigidly adhered to, as a deviation from them in essentials may liberate the company. The provisions of the Companies Act, 1862, are as follows : — Companies Act ' A promissory-note or bill of exchange shall be deemed to have been made, accepted, or indorsed on behalf of any company under this Act, if made, accepted, or indorsed in the name of the com- pany or by any person acting under authority of the company, made, accepted, or indorsed by or on behalf or on account of the company, by any person acting under the authority of the company' (sec. 47). It would seem that the party taking the bill or note from the company, is bound to see that it is signed by a person having authority to bind the company in terms of the statute. This authority must have been conferred by resolution, or must be contained in the articles of association. The mere fact of the persons signing being directors is not enough (b), imless the duties with which they, are charged plainly involve the exercise of this power (c). ii The provisions of the Companies Clauses Consolidation (Scot- Companies Act land) Act are as follows : — The directors are empowered to ap- point one or more committees of their own number, with power to do any acts which they themselves could lawfully do, and with which they may from time to time think proper to entrust them (sec. 98). And it is declared, that with respect to any contract which, if made between private persons, would be by law required to be by deed or by writing, and signed by the parties charged therewith, the directors or their committee empowered to do so may make such contract on behalf of the company, either under the (o) Bowie v. Wilson, 1695 ; Ander- v. Ernest, 5 E. Jur. N. S. 439 ; Lindns son V. Morton, 1779, M. 2510, and v. Melrose, 3 H. and N. 177. other cases there reported. (c) Balfour v. Ernest, supra ; Lin- (6) Bull V. Morrell, 10 L. J. Q. B. dus v. Melrose, supra. See Wilson's 52 ; Bramah v. Roberts, 6 L. J. C. P. Thomson on Bills 144. 846, and 3 Bing. N. C. 963 ; Balfonr 1846. 236 GUARANTEE. [Book II. common seal or signed by such committee, or any two of them, or any two of the directors (sec. 100). From this it follows that bills or notes may be signed on behalf of the company by any two of the directors. BANK CHEQUES. Bank cheques may be drawn in the name of the firm by an active partner, otherwise the business would often come to a stand. This has been expressly decided in England (a). The same would seem to apply to managing oflScials. GUARANTEE AND SURETYSHIP. As it forms no part of the ordinary business of a firm to become surety for the debts or obligations of third parties, a partner is not presumed to have power to bind the firm by contracts of this kind, unless such power is expressly conferred, or plainly implied from the nature of the business, as in the case of guarantee associations (6), and companies who buy and sell on del credere commissions. After some indications of a contrary doctrine (c), this appears to have become settled law in England (d) ; and the same principles seem to be recognised in the law of Scotland, as may be inferred from the cases noted below (e). It must be admitted, however, that the question has not yet been raised in its pure form in this part of the kingdom. Private debts. It is fixed that a partner cannot pledge the credit of the firm in security of his private debt (/); unless, perhaps, where the debt for which the guarantee was granted was plainly in the company's line (a) Laws v. Rounds i E. Jur. N. S. 475, and 8 Camp. 478 ; Crawford v. 74, 0. P. Stirling, 4 Esp. 207 ; Story, Part. s. (6) See a case where a bond of can- 111 ; and in particular, Brettel v. Wil- tion by a guarantee association was Hams, 4 Exch. 623. See also Ridley refused, the risk not being within the v. Taylor, 13 East 178. ordinary business of the company. (e) M'Nair and Co. v. Gray; and Donaldson v. Findlay and Co., 1860, Hunter v. Speir.s, 1803, Hume 753; 22 D. 1471. Kennedy, 1814, 18 F. C. 122 ; Donald- (c) Hope V. Cust, 1 East 53 ; ex son v. Findlay and Co., 1860, 22 D. parte Gardom, 15 Ves. 286. 1471. (ri) i7n.sZe/jam V. l'o?m5, 5 Q. B. 833 ; (/') See the preceding cases of Duiicav V. Lowndes, 3 Eoss Lead. Ca. M^Nnir and Kennedy. Chap. XII.] UUAEANTEE. 237 of business, and the receiver of the guarantee was ignorant of its being a private transaction of the partner's. In such a case, the firm, it is thought, would be bound, but of course with indemnity against the offending member (a). A letter of guarantee by the managing partner of a company for behoof of one of the partners, ' to the extent of the value of the stock which he may have in our house, subject to 4he liquidation of our debts and engagements,' has been held valid pro tanto against the company (b). Of course every guarantee irregularly or improperly granted by Homoioga- partners may be rendered binding by homologation on the part of the company (c). And it has been thought that power to guarantee in a particular instance may be safely inferred, where in a previous course of dealing similar guarantees had been given in the partner- ship name with the privity of all the partners (d). Proper guarantee must, in relation to this question, be distin- Difference guished from granting, accepting, or indorsing bills and notes, guaranteeing Thus it has been held in England, that though a partner has no bfflsretcf '"^ implied power to bind the firm by guaranteeing bills, except by drawing and indorsing them (e), a promise made by a partner that the firm will put a party in funds to meet a partnership bill when due, in order to induce him to accept it;^ is not a guarantee trans- action, and will be given effect to (/). And it has been held that a letter of guarantee by a managing partner under the company firm, of the bill of a partner to the extent of his share in the stock, was binding on the firm (g). A person carrying on business under an ostensible firm, of Sole partner. which he is the sole partner, binds himself by a guarantee in the company name (/*). Directors, managers, and other officials of joint-stock companies. Directors, etc. being special agents, their powers to bind the company cannot be (a) See Sh. Bell's Com. 219. (d) Per Lord BUenborough in Diin- (b) Buchanan v. Dennistoun, 1835, can v. Lowiides, 3 Camp. 478. 13 S. 841. («) Duncan y. Lowndes, supra. (c) Robertson and Co, v. Galloway (/) Johnson v. Peck, 3 Stark. 66. and Reid, 1821, 1 S. 196 ; Sandilands (g) Buchanan v. Dennistoun and Co., V. Marsh, 2 B. and A. 673; Buchanan 1835, 13 S. 841. v. Dennistoun and Co., 1831, 9 S. (h) Rose v. Moore, 1833, 11 S. 344. 557 ; Paterson v. Calder, 1808, 14 F. See also Booth v. Commercial Bank, C. 235. 1823, 2 S. 278. 238 LENDING. [Book II. Personal liability. stretched by mere implication. It has accordingly been held in England, that directors have no implied power to bind the company by granting indemnities (bonds of relief) (a). But it must be observed, that directors as well as partners giving guarantees or indemnities as on behalf of the company, are held personally bound, where their acts do not bind the company (h). LENDING. In companies established for the express purpose of lending money, as e.g. pawnbroking companies, every partner is necessarily presumed to have this power ; and the same will also hold true in the case of banking and insurance companies, when their business is known to be carried on in this manner. But in partnerships, where lending money does not fall under the scope of the ordinary business, it is probable that such a power would not be held to be implied. In no case would a partner be entitled to lend partnership funds as a favour to the borrower, and on the understanding that no interest was to be paid. It has never been decided, so far as the author is aware, either in this country or in England, whether a partner is entitled to lend the partnership funds in such a way as to prevent them being immediately available for the requirements of the business ; as, for example, to invest them for a term on heritable security, on deben- tures, or the like. Reasoning from analogy, it should seem that no such power is implied in ordinary partnerships ; for, if it were, the whole purposes of the copartnery might at any time be defeated. Besides, this would be an application of the company funds never contemplated, and probably entirely at variance with the objects of the contract ; nor could it be defended on the ground of urgency. LETTING AND HIRING. Letting. As in the preceding case of loan, this power of letting will be implied where such transactions form part of the ordinary business (a) Ridley v. Plymouth Grinding Co., 2 Exoh. 711; Kirk v. Bell, 16 Q. B. 290. (b) Haddon v. Ayers, 5 E. Jur. N. S. 408, Q. B. ; Barker v. Allan, 5 H. and N. 61. Chap. XII.] LETTING AND HIRING. 239 of the firm : e.g. in the case of a firm of horse-jobbers or livery- stable men. But it is very doubtful whether such a power would be implied, when letting for hire forms no part of the company business (a). Hiring would seem to stand in a different position. It must Hiring. often be of essential importance to the business of the firm to obtain the assistance of professional persons, of skilled artisans, or even of ordinary servants, and in like manner to secure the use of ships, conveyances, or articles of machinery. Nor are the public in a position to judge of when such assistance or use is necessary. It would therefore seem that, except in extreme cases, every partner must be held to have the implied power of hiring for the firm. Thus it has been decided that one partner may hire servants for partnership purposes (h), and the same power was held to exist in the committee of a trading association (c), and one partner may bind the firm by chartering a ship on its behalf (d). Where, however, a coach office was taken by a partner on his own credit, and was not used entirely for company purposes, the firm was not held liable for the rent (e). Though a trading firm should be reduced by death or otherwise to one partner, a contract of service entered into with the firm does not terminate, provided the surviving partner carries on the business (/). INSURANCE. Mercantile agency by itself does not imply the power of bind- ing the principal by insurance, nor has a co-owner, as such, power to bind the other co-owners by effecting an insurance in their name (g). Yet it has been held in England that a partner, as distinguished from a part-owner, may, without special authority (a) See as to letting a shop, Brown (d) Thomas v. Clarke, 2 Stark. V. SmitJi, 1821, 1 S. 286. 450. (b) Beckham v. Drake, 9 M. and (c) Jardine v. M'Farlane, 1828, 6 W. 79. See also Batard v. Hawes, 2 S. 564. E. and B. 287 ; Edger v. Knapp, 7 E. (/) CampUll- v. Baird, 1827, 5 S. Jur.58S, C.P. See CoMJOK V. M'Mc/c- 311. ing, 1846, 19 Jur. 91. {g) French v. Backhouse, 5 Bur. (c) Batchelor v. M'GUvray, 1831, 9 2727. Abbott on Merch. Ships, etc., S. 549. 10th ed. p. 73. 240 INSURANCE. [Book II. from the others, bind them by insurances ordered in the name and on account of the firm (a). If one partner insures for the company, he would seem to have the power of abandonment for the com- pany (6). From the reason of the thing, the same rule would seem to apply to managers and boards of directors. In the cases referred to, the insurance was effected for behoof of the company or firm ; but it may be asked whether partnership property may be insured for behoof of and in the name of one partner. As to this, Kent, 0. J., said : ' There can be no doubt that a partner has such interest in the entirety of the cargo (belonging to the firm) as to enable him separately to insure it, and that an averment that he had an interest in the property to the amount of the insurance is supported by proof of a partnership interest to that amount' (c). It has been doubted whether a partner in a particular adventure could insure the whole property in his own name. Obvious reasons might be suggested against the policy of conceding such a powerl (a) Hooper v. Lusby, 4 Camp. 66 ; aff. 6 Dow 116 ; Lindley 226 ; CoU. Rohinson v. Gleadow, 2 Scott 250 ; 289. Rouih V. Thompson, 13 East 274 ; (6) Hunt v. Roy, Ex. Insur. Co., 5 Armitage v. Winterhottom, 1 Man. and M. and S. 47. Gr. 130. See also the Scotcli case, (c) American case. See Phillips on Campbell v. Stein, 1813, 17 P. C. 456, Insurance 62. [ 241 ] CHAPTER XIII. CONSTITUTION OF COMPANY OBLIGATIONS. Companies, partnerships, and firms, being according to the law Nature of company of Scotland quasi persons, are capable of incurring obligations both obligations. to the public and their own members ; and these must be regarded as the proper obligations of the association, viewed as a separate person, and not as the joint and several obligations of the partners. Such obligations, when validly contracted, do indeed infer liability against the partners individually ; but, according to the theory of Scotch law, this arises not from the partners being direct obligants, but by reason of their being bound singuli in solidum as sureties for the company. The company being, however, an artificial and not a natural Peculiarities 1 , . . , J- • 1 . , arising from person, mcurs obligations by means ot its agents, who are either element of the partners of a firm, or the managers or other ofiicials of a com- pany. In considering, therefore, the law applicable to the consti- tution of company obligations, regard must always be had to the doctrines of agency, of which the principles now about to be considered are merely a particular adaptation. Obligations, viewed in reference to their origin or constitution, Origin of , , n . .,. . , -, /^, 1. . Obligations. were divided by the civihans into two great classes : 1. Obligations arising ex contractu, or quasi ex contractu; and 2. Obligations arising eoo delicto, or quasi ex delicto. This division may with advantage be followed in discussing this branch of the subject. I. OBLIGATIONS ARISING FROM CONTRACT AND QUASI CONTRACT. Contract and quasi contract. An obligation arising from contract or quasi contract is an General engagement or undertaking to do or refrain from doing something, p™"P ^^• and vests in the obligee a right to demand performance. To a Q 242 WRITTEN CONTRACTS. [Book II. valid obligation, consent on the part of the obligor is absolutely- necessary. It may be proved by writ, by acts, or prout de jure, according to the nature of the contract. Sometimes the contract is not completed at once, the consent being suspended. In this case it is technically said that there is locus pcenitentice. If, however, in this state of matters anything important is per- mitted by the obligor to be done by the obligee, on the faith of the inchoate contract, so that matters no longer remain entire, then rei interventus is said to take place, and there is no longer locus pceni- tentice. If, again, while the contract still remains incomplete from defect or informality, something is done by the obligor in respect of which it is confirmed or adopted, homologation is said to take place, and the contract cannot afterwards be repudiated or resiled from (a). These principles are all of them applicable to contracts entered into by a firm or company, and in their application sometimes give rise to important questions. Modes in which the Company is hound. ■Written As regards unincorporated associations, whether they be mere uninooi-porated firms or common law companies, the proper mode of binding the a&sooia 1 ns, (.Qjiggj-ji jg jjy q\\ the members signing their names individually (&). And this rule, which arises from the fact that such associations are not corporations, should be rigidly adhered to in all contracts of im- portance, particularly such as do not fall within the ordinary sphere of the company's line of business— e.^. where a cash credit bond is signed by a company as sureties. But it is not rigidly enforced in the case of mercantile documents plainly falling within the com- pany's sphere of operations, where a partner has implied powers of ' agency to bind the concern (c). In such cases the company will be bound by any partner subscribing the social name when it includes the name of one or more individuals (d). It will also be bound by his signing his own name per procurationem for the company, and in so doing he may designate the company by a descriptive name (a) Shaw's Bell's Prin. p. 12. 839 ; Forsytli v. Hare and Co. 1834, (h) Christie v. Reid, 1826, 4 S. 368 ; 13 S. 42 ; MI'Lean v. Rose, 1836, 15 Melliss V. The Royal Bank, 1815, 18 F. S. 236. C. 454. (d) Selkrig v. Dunlop, 1804, Hume (c) See Robh v. Forrest, 1830, 8 S. 277. Chap. XIIL] WRITTEN CONTRACTS. 243 which does not include the names of individuals, provided such name is that by which the company is generally known (a) ; but signa- ture by the descriptive name without joinder of the signing partner as agent would not, it is thought, be enough (b). Care must be taken, however, in thus signing per procurationem, that the fact of agency plainly appear ex facie of the signature, otherwise the obli- gation may be held to be that of the partner as an individual, and not of the company (c). All such compendious modes of binding the company depend for their validity on the fact of the transaction being within the company's known line of business, and therefore covered by the agency of the partner signing the document. If this is not so, the partner may indeed be bound personally, but the company will, unless upon other grounds, incur no obligation what- ever (d). As to corporations, it would rather appear that the ancient by corpora- common law of Scotland resembled that of England in requiring contracts of importance to be evidenced by deed under the common seal (e). If, however, this were so, the custom has long since gone out of use ; and it has become the rule, that corporations may be bound by the signature of their officers duly appointed for that purpose, and signing j)er procurationem (/). But as regards incorporated mercantile associations, it may be incorporate 11 Ml 1 1 IT 11 1 1 3,ssociations. laid down as a general rule, that they will only be effectually bound when the formalities have been duly observed which are contained in the instruments of their incorporation, whether charter or general or special act (g). The provisions of the Company Clauses (Scotland) Act, 1845, Act of 1845. with reference to this matter, are as follows : ' With respect to any contract which, if made between private persons, would be by law (a) See Blair Iron Co. v. Alison, v. Shepherd, 1821, 1 S. 179 ; Kennedy, 1855, 18 D. H. of L. 49, 27 Jur. 614 ; 1814, 18 F. 0. 152. Fleming v. Ballantyne, 1842, 5 D. 305, (e) Ersk. i. 7, 64 ; Act 1555, c. 29 ; (6) Culcreuch Cotton Co. v. Mathie, Act 1579, c. 80 ; Reg. Maj. 1. 3, c. 8 ; 1822, 2 S. 47, Sh. Bell's Pr. 399. Karnes' Eluc. Art. 24. (c) See Aberdeen Brew. Co. v. (/) Bowie v. Wilson, 1695 ; Mag. Gray, Wil. Thorn. Bills 164 ; M' Gavin of Pittenweem, 1752 ; Livy v. Mudie, v. Ogilvie, 1854, 16 D. 540 ; Johnston 1774 ; Anderson v. Morton, 1779, all V. Cliftonhill Coal Co., 1852, 15 D. in M. 2511 et seq. 84_ (g) See Great Nor. Ra. Co. v. Inglis, (d) See, as to this, M'Nair and Co. 1851, 13 D. 1315, aff. 1852, 24 Jur. V. Gray, etc., 1803, Hume 753 ; Clarke 434. 244 WRITTEN CONTRACTS. [Book II. required to be by deed or by agreement in writing, and signed by the parties to be charged therewith, then such committee {i.e. a committee of the directors) or the directors may make such contract on behalf of the company, in writing, either under the common seal of the company, or signed by such committee or any two of them, or any two of the directors, and in the same manner may vary or discharge the same' (a). Act of 1862. The Companies Act of 1862, unlike that of 1856, makes no provision dispensing with the use of the common seal in the exe- cution of deeds ; but, on the contrary, it expressly mentions the possession of a common seal as one of the incidents of incorporation under its provisions (b) ; and provides that powers of attorney may be granted to persons abroad to execute deeds on its behalf under their own seals, on condition that such power of attorney shall be in writing under the common seal (c). Bills and promissory-notes may however be made, accepted, or indorsed on behalf of the company without the use of the common seal, if signed in the name of the company by any person acting under the authority of the company, or if signed on behalf of or on account of the company by any such person (d). Act 1864. ' The Companies Seals Act, 1864' (e), gives certain facilities for sealing deeds executed in foreign countries, to such registered com- panies as choose to kdopt its provisions in their articles of associa- tion or by special resolution (sec. 6). According to these provisions, a company under the Act of 1862, and carrying on business in foreign parts, may cause an official seal to be prepared fac simile of their common seal, but having in addition inscribed on the face thereof the name of each and every place, district, or territory abroad, where it is intended to be used, and may from time to time break up and renew such seal or seals, and vary the limits within which it is intended to be used (sec. 2). The company, by in- strument under its common seal, may empower agents, boards, managers, etc., to affix this official seal to all documents requiring such attestation ; and the powers so given continue in force for the time specified in the instrument, or until notice of revocation (sec. 4). The person affixing the seal must, by writing under his (a) 8 and 9 Vict. c. 17, s. 100. (6) Sec. 18. (e) Sec. 55. (d) Sec. 47. (e) 27 Vict. c. 19. Chap. XIII.] VERBAL CONTRACTS. 245 hand on the document sealed, certify the date and place of sealing ; and the company will be thus as effectually bound as if the docu- ment had been under the common seal (sec. 5). The Letters Patent Acts contain no provisions relative to this Letters Patent ^ Acta. matter. As to contracts perfected otherwise than by writing, the rule Contracts 11 11 ■ -n 1 other than IS that the company, whether corporate or unmcorporate, will be by writing. bound by the proceedings of its accredited agents acting in that character, and so that they themselves would be bound if acting as principals. The provisions of the Companies Clauses Consolidation (Scot- ^<^^ °^ 18^^. land) Act, 1845, in relation to this matter, are as follows : — ' With respect to any contract which, if made between private persons, would by law be valid, although made by parole only, and not reduced to writing, such committee (i.e. a committee of the directors) may make such contract on behalf of the company by parole only, without writing, and in the same manner may vary or discharge the same ' (a). If a contract be merely pending between the firm and a stranger. Perfecting of ...,.,,, .. contract m any one of the partners may rivet it indissolubly rei interventu, e.g. interventu. by accepting on the part of the company delivery of goods in rela- tion to which the sale had not been formally completed. It is often a matter of difficulty to determine whether, in con- Whether a partner binds tracting, a partner has bound the company, or merely himself, or the company 1 1 • 1 Till 1 • • 1 °'' liiiiiself. both ; m other words, whether he acted as a prmcipal, as an agent, or in both characters. To determine such questions, recourse must be had to the law of principal and agent, the principles of which, both in the English and Scottish systems, may be briefly stated as follows : — If an agent discloses his principal, and represents himself as Principles of . ... agency. acting factorio nomine, he binds not himself, but his principal (b). If he does not disclose his principal, he binds himself (c). If a (a) 8 and 9 Viet. c. 17, s. 100. 1 D. 500 ; Millar v. Mitchell, 1860, (6) Brown v. M'Dougall and Co., 22 D. 838. 1802, 13 F. C. 146, Mor. App. Factor 1 ; (c) RoUrtson v. Gillespie, 1823, 2 S. Cowan V. Davidson and Co., 1814, 17 375; Edin. and Glasgow Bank y. Steele, F.C. 505; JoftsoKV.J'ord, 1815, Hume 1853, 25 Jur. 245. 1 Bell's Com. 492. 354; Findlayv. Fleming and Co., 1832, See Ferrier y. Dodds, 1865, 3 Macph. 10 S. 739 ; Hampton v. Adam, 1839, 561. 246 CONTRACTS BINDING ON THE CONTRACTING [Book II. Application to companies. General rules. contract be made with a man on his own credit, he cannot escape from personal liability, by showing that it was known at the time that he was acting as agent for another (a) ; and if, in such a ease, the transaction was specially concluded on the credit of the agent alone, the principal will not be bound, even though his existence was disclosed at the date of the contract (b). The case is a fortiori where the existence of the principal is only discovered after the date of the contract. If, again, an agent contracts ostensibly for a disclosed principal, and also adjects his own credit, both will be liable (c). If an agent disclose his agency, but conceal the name of his principal, the latter, on discovery, will be held liable. If a man induce another to contract with him on the representation that he acts for another party to that effect, and this afterwards turns out to be untrue, the party making the false representation cannot, in general, be compelled to specific performance, but he will be held liable in damages to the party he has deceived (d). When these rules are applied in questions arising between com- panies, their members, and the public, and when it is borne in mind that in partnership agency is more frequently implied than express, the following would seem to be the results : — 1. If a partner contract with a stranger in his character of partner, he binds the company, and is himself liable only as a mem- ber thereof (e). He may, however, in this case render himself directly liable, e.g. by representing himself as sole partner (/), or by contracting not only as a partner, but as an individual (g). 2. If a partner contract not as a partner, but as an individual, he binds not the firm, but himself ; and even though the firm should (o) Lang and Co. v. M'Leod, 1880, 8 S. 323 ; Sorley's Trs. v. Graham, 1832, 10 S. 319. 1 BeU's Com. 492. (V) Young v. Smart, 1831, 10 S. 130 ; Stevenson v. Campbell, 1836, 14 S. 562. (c) See previous cases, and Wood- side v. Cuthbertson, 1848, 10 D. 604. (d) Millar v. Mitchell, 1860, 22 D. 833; Brown v. M'Dougall, 1802, M. voce Factor, App. No. 1 ; Burgess v. Buck and Co., 1829, 7 S. 824. See as to English law, Addison on Contracts, 4th ed. ; Bacon's Abridgment, voce Merchants and Merchandise ; Smith's Mercantile Law ; Livermore's Treatise on Agency ; Story on Agency ; Lindley 261, 294 ; and the cases and authori- ties quoted in Millar v. Mitchell, supra. (f) Ex parte Buckley, 14 M. and W. 469 ; ex parte Wilson, 3 M. D. and D. 57 ; Millar v. Mitchell, supra ; Brown v. M'Dougall, supra. (/) De Mautort v. Saunders, 1 B. and Ad. 398 ; Cittj of London Gas Co. Y. NlchoUs, 2 Car. and Pa. 365 ; Whit- vell V. Perrin, 4 C. B. N. S. 412. {g) Higgins v. Senior, 8 M. and W. 834; ex parte Wikon, 3 M. D.andD. 57. Chap. XIII.] PARTNER AND NOT ON THE COMPANY. 247 de facto receive the entire benefit of the transaction, the creditor would seem to have no recourse except against the partner on whose individual credit he had contracted (a). 3. If a partner contract avowedly on behalf of the firm, and it afterwards turns out that the firm is not liable, in respect that he had no authority, either express or implied, to bind it by such a transaction, he will be liable to indemnify the creditor for whatever loss may have been sustained, whether it may be attributable to fraud or an innocent mistake (b). Such appear to be the principles which the law will apply in Questions cases of the kind under consideration. But it may be observed, that the question, whether a man transacted as an individual or as a partner, and whether he disclosed or concealed the names of his copartners, and the like, are questions of fact, are aided (at least in modem practice) by no presumptions of law, and are properly within the province of a jury or its equivalents to determine (c). In the common case of principal and agent, the powers of the Occasional latter are in general express ; but in the case of partnerships the powers of the partners are for the most part left to be implied from the nature of the business. This circumstance gives rise to special- ties, which it will be necessary to examine somewhat in detail. In the absence of notice to the contrary, the public are entitled ^^ regards J 1 • 1 1 f n strangers. to deal with every known partner of a firm on the assumption that he is vested with such powers as are necessary or usual in carrying on the business in the usual way. The consequences of this may be stated as follows (d) : If a stranger bona fide contracts with a partner acting ostensibly for the firm, in a matter which may fairly be presumed to be within the implied agency, the company will be bound, though in point of fact the partner may have had no such authority, or may have been expressly prohibited from transacting for the company in the matter in question (e). But if, on the other (a) Emly v. Lye, 15 East 6, 3 Ross (c) Millar v. Mitchell, 1860, 22 D. L. C. 552 ; Crum and Co. v. M'Lean, 833. 1858, 20 D. 751 ; Tupper and Carr v. (d) See Powers of Partners. Rowell, 1858, 20 D. 758. (e) M'Nair and Co. v. Gray, etc., (h) Finlayson v. Braidhar Quarry 1803, Hume 753 ; Kennedy, 1814, 18 F. Co., 1864, Macph. 1297; ex parte 0.122; MilkrY. Douglas,l%l\,l&¥. Agace, 2 Cox 312 ; Lloyd v. Fresh- C. 154 ; Blair v. Bryson, 1835, 13 S. field, 9 Dowl. and Ry. 19. 901 ; MLeodY. Tosh, 1836, 14 S. 1058. 248 CONTRACTS AFFECTED [Book. H. Effects of notice. Po-wers never presumed. Fraud. hand, the stranger knows, or by ordinary reflection might know, that the partner was overstepping his powers, the firm will incur no liability (a). The partners may indeed, by arrangement among themselves, limit the sphere of this implied agency in any way they choose ; and such provisions or regulations will receive effect inter socios, so as to found indemnity against the partner who transgresses them (b) ; but they will have no effect whatever in a question with the public, unless it can be shown that they were within the know- ledge of the person who transacted with the partner by whom they were infringed (c). If, however, it can be shown that the party had notice of the restriction, then the firm will not be bound (d). This notice may be by circular-letters to the correspondents of the firm (e), or by advertisement in the public prints ; but in the last case there must be evidence that the notice reached the creditor (/). It is not necessary, however, that notice shall be proved scripto. If know- ledge of the restriction can in any way be fixed against the creditor, it puts him in mala fide, and estops him from proceeding against the firm {g). There are some powers which, from the nature of the company business, the law will not presume to appertain to the partners, and which a little consideration might satisfy any one the partners were not likely to possess, e.g. power to guarantee strangers (/i), to sell real property (i), to submit to arbitration {k), etc. If a third party contract with a partner in matters of this kind he will have no claim against the firm, unless he can prove that such power actually existed, or that by former acts and deeds of the firm he had been led to believe in its existence. Cases of gross fraud too often occur, in which it cannot be said that a partner has exceeded the limits of his agency, but rather 1825, 3 (a) Proudfoot v. Lindsay. S. 310 ; and previous oases. (6) See Indemnity. (c) Shaw's Bell's Com. 218 ; Dewar V. Miller, 1766, M. 14569 ; Gleadon y. Tinkler, Holt N. P. Cas. 586 ; Morans V. Armstrong, Arms., M. and 0. Irish N. P. Rep. 25. (d) Galway v. Matthews, 10 East 264, 1 Bell's lUus. 242, and 3 Ross Lead. Ca. 507 ; Blair v. Miller and Douglas, 1811, 16 F. C. 154. (e) Willis V. Dyson, 1 Stark, 164. (/) Rooth V. Quin, 7 Price 193 ; Galway v. Matthews, supra. (g) Alderson v. Pope, 1 Camp. 404. (70 See p. 225. 0') See p. 214. (^■) Seejios^., Arbitration. Chap. XIII.] BY FRAUD. 249 that he has exercised it for purposes for which it was never intended. Thus a partner may order goods on the credit of the firm, and when received apply them to his own private purposes (a). He may accept a bill in the company's name, and having discounted it put the proceeds in his own pocket (6). In these and similar cases the company is liable ; for the acts done we're plainly within the implied agency, and the party with whom the transaction took place was under no obligation to see that its proceeds were properly applied. There are, however, some transactions which, though they fall obvious fraud, within the limits of implied agency, are of such a nature that they carry fraud, or at least grave suspicion, on their very face. Thus, if a partner grants a note or accepts a bill in the company name, and afterwards tenders it in payment of "ftis private debt, the creditor may fairly presume fraud, if he is aware that the signature of the firm is in the handwriting of his debtor. And accordingly, in such circumstances, the creditor has been found not entitled to recover against the firm. But as a partner may be a creditor of the firm, the mere fact of his tendering a bill accepted in the company name, in payment of his own debt, does not, in the absence of other cir- cumstances, establish fraud ; and therefore the firm will in such a case be bound, if the creditor can prove that he acted in perfect bona fide (c). In conclusion, it may be observed, that while the rules as to General what infers and what excludes company liability for the unautho- rized acts of its partners or other agents are as above detailed, their practical application often depends on a mere balance of circum- stances more fitted for the consideration of a jury than any other mode of decision (d). But in every case it is well for partners to (a) Bond v. Gibson, 1 Camp. 185. 1824, 2 S. App. 467 ; Turnhull v. (&) Lane v. Williams, 2 Vern. 277 ; Maclcie, 1822, 1 S. 331 ; Willet v. Ridley v. Taylor, 13 Bast 175, 3 Ross Chambers, 2 Cowp. 814, 3 Ross L. L. C. 492. C. 476. See an instance where a bill- (c) Wells V. Masterman, 2 Esp. N. granted in name of a company by a P. Ca. 730 ; Miller v. Douglas, 1811, manager and a majority of the part- 16 F. C. 154, 3 Ross Lead. Ca. ners was found not binding on the 500 ; Green v. Deakin, 2 Stark. 347. company, by reason of its having been See also .Hope v. Oust, 1 East 51, 3 granted for a private debt, Proudfoot Ross L. C. 486 ; ex parte Bonbonus, v. Lindsay, 1825, 3 S. 310. 8 Ves. jun. 540, 3 Ross L. C. 470 ; {d) Turnbull v. Maclcie, 1822, 1 S. Johnston and Sharp v. Phillips, 1822, 331 ; Millar v. Mitchell, 1860, 22 D. 1 S. App. 244 ; Wallace v. Campbell, 833. 250 RATIFICATION. [Book II. bear in mind, that to entitle the company of which they are mem- bers to the protection which the law gives against unauthorized acts, it is always essential that it shall have acted with perfect fairness and good faith. Nothing must have been done which could deceive the contracting party into the belief that the trans- action had been adopted by the company, or could induce him to delay proceeding against the partner by whom he had been misled. And in general it seems only fair, that as soon as the transaction comes to the knowledge of the company, intimation of its being unauthorized should be made to the opposite party (a), liatiiioation. When a contract is invalid against the company by reason of the transaction having been ultra vires of the partner with whom it was entered into, and ire having been known to be so by the party with whom the contract was made, it may generally be vali- dated by rei interventus, homologation, or adoption on the part of the company (b). But it must always be considered whether the particular transaction be one within the limits of the company's powers. If it be not, no ratification however formal by any num- ber of partners less than the whole will validate the transaction ; for what a majority could not do originally, they cannot ratify by any subsequent act (c). If the transaction lie within the scope of the company's sphere of action, it will be validated by the ratifi- cation of any partner possessing the necessary agency, express or implied, or by its proceeds being in rem versam of the company, whether this have taken place by a partner having the requisite agency or not ; for the mere fact that the firm has allowed the pro- ceeds of the transaction to be so applied, is the best proof of its ratification (^d). If again the transaction is invalid, as being beyond the company's sphere of action, the company, if they have taken the benefit of it, will be liable to indemnify the opposite party, and to restore him as far as possible to the position he occupied before entering into the transaction (e). As to ratification by companies of acts done by their directors or other officials, see ' Powers of Directors.' (a) Proprietors of Bo'ness Canal v. (c) See ' Powers of Majorities,' and HPAlpi7ie and Co., 1791, Hume 751. Proudfoot v. Lindsay, 1825, 3 S. 310. (J) Blaikie Brothers v. Aberdeen Ra. (rf) See Duncan v. Lowndes, 3 Camp. Co., 1851, 14 D. 66, House of Lords 478, 3 Ross L. C. 475. 1852. (c) Lindley, S. App. 71. Chap. XIII.] UNFULFILLED CONTRACTS. 251 Damages for Non-fulfilment of Contracts. If a firm or company fail to fulfil an obligation arisine from con- Contracts or ■■■ ■' I- 1 1 jtiOOT contracts. tract or quasi contract, but without fraud or fault, it becomes liable in damages to the creditor for that which he has directly lost or has been prevented from gaining, coupled with the costs of the proceed- ings for obtaining reparation (a). The expression ^without fraud or Damage, direct = _ Di \/x .... ^"^^ oonse- fauW is here used to mark the distinction between liability for inno- quential. cent breach of contract and liability for delict. The first measures the reparation by the direct damage merely ; the second by the highest advantage which, but for the delict, would have been enjoyed. It is sometimes difficult to determine what is exactly meant by the expres- sion direct damage, as opposed to that which is collateral or conse- quential. A few observations on this subject may not be out of place. In pecuniary obligations the damages take the form of interest ; Loss o! and when failure to implement has not arisen from delict, the inte- rest is not to be measured by what the creditor might have turned out of the principal by embarking it in his trade or in some for- tunate speculation, but at the rate of 5 per cent., which is still regarded as in such cases the legal rate of interest (6). Where, however, a special contract has been made to deliver a sum of money against a particular day in order to be employed in a par- ticular manner, it seems fair that the company should be held liable in interest commensurate with the damages which in similar circumstances would arise from the non-delivery of goods. When a breach of contract takes place from the non-delivery Engiisii of goods, it has been the custom in England to award damages according to the price at or about the day when the goods were contracted to be delivered ; while, when the breach of contract arises from failure to return stock lent, the damages have been assessed at a higher rate, because in this case the borrower has the lender's goods in his hands (c). (a) Stair i. 17, 16 ; Ersk. iii. 75, v. Caledonian lla. Co., 1858, 20 D. 86. See Smith on Reparation. It is 1102. essential, however, in all such cases, (h) See Smith, 1857, 19 D. 267. that the stipulation for breach of (c) Leigh, 8 Taunt. 540, Bell's 111. which damage is claimed plainly ap- 42 ; Oainsford, 2 Barn, and Cress, pears ex /a ez'e of the contract. Wnlker 624, do. 42. 252 OBLIGATIONS ARISING [Book II. Scotch practice. When both parties ar.e in fault. Stipulated In Scotland this distinction does not appear to have been ob- served ; but the practice seems to have been to take as the criterion of damage either the liighest price which might have been got for the goods at any time after the date of the sale, or the average value between the stipulated time of delivery and that of raising the action. A list of the more important decisions bearing on this subject is given below (a). As to damages arising from loss of profits, see cases noted below (b). If the loss arises from the fault of both parties under a contract of sale, the general rule was that it must be borne equally by both (c). Latterly, however, it has been laid down that there is no fixed rule as to the particular time at which the difference in the price of goods ought to be taken for the purpose of fixing the amount of damage sustained by non-delivery in breach of contract, but that each case must be regulated by its own circumstances, and determined by the verdict of a jury {d). Sometimes damages are stipulated in the contract, as exigible in the event of its non-fulfilment. If this be so, no inquiry into the actual damage seems competent (e). If, however, the obligation be merely fortified by a penalty, that is held the limit within which the jury may assess damages (/). II. OBLIGATIONS ARISING FROM DELICT AND QUASI DELICT. Delict. A delict is an offence committed with an injurious, fraudulent, or criminal purpose. Such an act involves all who are concerned in its commission in criminal penalties ; but independently of these, it also subjects them in civil damages. («) Morrin, 1806, M. Damage App. 1, aff. 5 Paton 649 ; Shirra, Dec. 11 1807, F. C. ; Kobison and Co., 1808, 15 F. 0. 74 ; Anderson, 1809, 15 F. C. 206; Dunloj], 1815, 18 F. 0. 382; Bell V. Leighton, 1819, 2 Mur. 74; Strachan v. Paton, 1824, 3 S. 259, N. E. 184, aff. 3 W. and S. 19 ; Ro- berts, 1825, 4 Mur. 3 ; Wait v. Mitchell, 1839, 1 D. 1157 ; Dickson v. Hender- son, 1849, 12 D. 306. (6) Watson v. Kidston, 1 D. 1254 (1830) ; Mags, of Montrose v. For- syth, 1834, 12 S. 429; Downe v. M^Kinlay, 1834, 12 S. 528. (c) Reid V. Steele, 1824, 3 S. 141. See also Scott v. Selbie, 1836, 14 S. 574. (d) Watt V. Mitchell, 1839, 1 D. 1157 ; Higgins and Sons v. Dunlop and Co., 1847, 9 D. 1407. (e) Mortimer v. Millar, 1849, 11 D. 1218. ( /■) See Bell's Prin. p. 17. Chap. XIII.] FROM DELICT AND QUASI DELICT. 253 A quasi delict may be defined to be that gross negligence or Quasi delict. imprudence, less than actual fraud or malice, in the doing of something, either obligatory or lawful, by reason of which another is injured in person, property, feelings, or character. This also involves all concerned in liability for reparation. In order to understand in what manner firms and companies Doctrines of . agency. incur liability for delict or quasi delict committed by their members or agents, it is necessary to advert again to the doctrines of agency. A principal becomes liable for the delict or quasi delict of his agent, when — 1st, he has authorized it to be done, either expressly or by implication ; 2d, when he has adopted it, either during or after completion ; 3d, when it has been done by the agent in the course of and as part of his employment. But, on the other hand, the principal is not liable when he has neither ordered nor authorized the thing to be done, and especially when he has forbidden it ; nor, again, is he liable for the act of his agent 'done maliciously, and not in the course of his employment or as part of his business. These rules, by which the liability of principals for the acts of Application •' >■ i- to companies. their agents is determined, are equally applicable to companies and firms ; it being borne in mind that the company or firm is the prin- cipal, and that the agents are either the partners or some other persons employed by the society to act on its behalf. Some illustration will now be given of the application of these' rules; and as it is quite the same whether the principal be an individual or the quasi person of a company, they will be taken indifferently from cases of both kinds. If an agent receive money or goods on behalf of his principal, Embezzlement , » , , . . 1 . by member of or in the course of the business m which he represents his company. principal, and embezzles or misapplies it, he renders the principal liable. A solicitor who was employed to recover the contents of a bill from a debtor, put it into the hands of a messenger to execute dili- gence, and to receive and remit the money. The messenger got the money, but failed to remit. The solicitor was found liable for it to his client (a). The same result would have followed if in this case the principal had been a company of solicitors instead of an individual, and the delict had been committed by one of their own number as (a) Brown v. Forsyth, 1790, Hume 318. 254 OBLIGATIOxNS ARISING [Book II. Money obtained in course of business. Ignorance of partners does not avoid liability. Money must have been received in the line of the com- pany business. agent for the firm. So, in the English case of Willet v. Chambers (a), a partner of a firm of solicitors having received money from a client to invest on mortgage, and misapplied it, the firm was found liable to the client. So, also, where one of a firm of solicitors fraudulently obtained money out of the Court of Chancery, ^but entirely without the knowledge of his partners, and handed it over to the client, the firm was found liable (h). In like manner, when a firm has, in the ordinary course of its business, received money or property belonging to others, if any one of the partners misapplies it while in the custody of the firm, the firm is liable. In Sadler v. Lee (c), the members of a banking company were authorized to sell out stock standing in the name of a customer. One of the partners did so, and the firm received the proceeds of the sale. Another partner afterwards misapplied them. The com- pany was found liable. It in no wise lessens the liability of the firm, that the money which was afterwards misapplied was originally placed in the cus- tody of the firm by a fraud of one of the partners of which the others were ignorant, or even that they knew nothing of the money having ever been in their custody. If the funds were placed to the credit of the firm by its partner or known agent, the firm was bound to know that it had received such funds, and was bound to see that they were properly applied (d). But in all such cases it is essential to ground liability against the firm, that the money or goods shall have been received by the partner or agent, or placed by him in the custody of the firm, while engaged in the business of the firm. In other words, the act which raises the liability must have been done within the limits of his agency, express or implied. If this is not so, then no liability is incurred by the partnership, and the maxim applies. Culpa tenet auctores suos. Thus, if money were to be entrusted to the partner or agent of a concern, in order to be laid out on security, and it (a) 2 Cowp. 814, 3 Ross L. 0. 476. (6) Brydges v. Branfill, 12 Sim. 369. (c) 6 Beav. 324. See also Devaynes V. Noble, 1 Mer. 575 ; Vulliamy v. Noble, 3 Mer. 593 ; Blair v. Bromley, 2 Ph. 354 ; ex parte Biddulph, 3 De G-. and Sm. 587 ; Devaynes v. Noble, 1 Mer. 611 and 624. {d) Keating v. Marsh, 1 M. and A. 582, 2 CI. and Fin. 250; Stone v. Marsh, 6 B. and C. 551. Chap. XIII.] PROM DELICT AND QUASI DELICT. 255 formed no part of the business of the concern to carry out transac- tions of this kind, the firm would not be liable if the partner after- wards should embezzle or otherwise misapply the money (a). It sometimes happens that a partner enters into transactions on Private acts of . /» Tff • 1 • partners. his own account, and not as agent for his firm. If, in such cir- cumstances, he commit a fraudulent act, such as misapplication of funds, he does not bind the firm ; nor does it make any difference in a case of this kind, that but for his connection with the firm he would not have been in a position to commit the delict (b). In like manner, the mere fact of a partner being a trustee will not render the firm liable, if he employs the trust funds in the business of the firm, or even in payment of its debts (c). It might be argued, indeed, that the knowledge of the partner who was trustee must be held to be the knowledge of the firm ; and this would be no doubt sound law, if the act was done in the line of the company's business. But in the supposed case it is not so. If, however, the firm can in any way be connected with the fraud, — if it can be shown, for instance, that the other partners know, or ought to know, that trust funds are being employed for the purposes of the firm, — liability at once attaches (d). Even though the firm is not identification liable for trust funds applied to its purposes by the fraud of one of its partners, yet if these funds can be identified in the custody of the firm, the beneficiary will be entitled to recover his own (e). If, within the limits of the company business, one or more Execution of partners execute an order which they know was intended for a for another third party, they by so doing render the firm liable in the conse- ™' quences (/). But to create company liability in such a case, it is necessary that the order has been de facto executed by the com- pany, and not by one of the partners as an individual. If one or more partners induce any one to contract with the Concealment . . or misrepre- firm under fraudulent pretences or misrepresentation, the firm is sentation of (a) Harman v. Johnson, 2 E. and B. (d) M^Farlane v. Donaldson, 1835, 61. See also Slater v. Henderson, 1822, 13 S. 725 ; Smith v. Jamieson, 5 1 S. 229 ; Sim v. Brutton, 5 Ex. 802. T. R. 601 ; ex parte Poulson, De (6) Bishop V. Countess of Jersey, 2 Gex 79. Drew 143 ; ex parte Eyre, 2 M. D. and (e) Lewin on Trusts 581 ; Lindley D. 66. 250. (c) Ex parte Heaton, Buck 386; ex (/) Dickson v. Dickson and Co., ■parteApsey,i'BTO.C.C.W^. SeeCoch- 1830, 8 S. 933; ibid. 1815, 1 Mur. rane, 17 D. 322 ; Laird, 1855, 17 D. 984. 55 and 58. 256 FRAUDULENT EEPRESENTATIONS. [Book II. important facts liable (a). Concealment of truth in such a case is as much a in relation to ^ ' •rpiiniic contract. ground of liability as an assertion or lalsehood ; and therefore, where a shipping company contracted to carry goods, and concealed from the shippers that their vessel was under detention for payment of duties, they were found liable to the shippers for loss in conse- quence of detention (6). In the English case of Rapp v. Latham (c). Parry and Latham were in partnership as wine merchants. Kapp contracted with them to purchase and sell wine for him on commission as they got opportunity. Parry, the active partner, obtained large advances from Kapp, which he represented were laid out in this way, and certain sums were paid him as the proceeds of the supposed sales. After a time it turned out that no purchase or sale had ever been made by the firm, and that the whole of Parry's representations were a tissue of falsehoods. The firm was held liable. Fraudulent representations, hbwever, only bind the firm when made within the limits of the implied agency ; and no one is entitled to take the word of a partner as to special powers having been conferred upon him, without making proper inquiries on the subject, either by seeing the partnership contract, or ascertaining the fact from the other partners (d). False Representations made to induce a Person to become a Partner. False repre- sentations to induce one to become a partner. It forms no part of the implied -agency of a partner to induce others to join the firm or company. If such a power exist, it must be specially conferred. In most private partnerships it is not com- petent for one partner or any number less than the whole to assume a new partner, or to assign shares in favour of a third party, without the consent of all the others. The question can therefore hardly ever arise in a private partnership, whether the firm is hable for the fraudulent representations of a member which have induced a third party to enter the concern. (a) Gibh v. Waihen and Co., 1829, 6 Mur. 60. (b) Paul V. Old Sliippwg Co., 1816, 1 Mur. 64 and 70. (c) 2 B. and A. 795. See also Blair V. Bromley, 2 Ph. 354 ; Lovel v. Hicks, 2 Y. and C. Ex. 46. (d) See antea, pp. 198 et seq. Chap. XIII.] FRAUDULENT REPRESENTATIONS. 257 If, however, such a question should arise in a private firm, and a stranger should be induced to join the concern on the fraudulent misrepresentation of a partner, it is evident that no liability would attach to the firm in consequence, because the partner could have no implied powers to make such misrepresentations. Before liability- could attach to the firm, it would be necessary to show that they had either made the misrepresentations as a body, or had somehow or other authorized one of their number to do so. In companies of larger membership with transferable shares, joint-stock each partner or shareholder is entitled to dispose of his interest in favour of whomsoever he will ; and as the matter is personal to himself, whatever misrepresentations he makes will bind himself only (a). These larger associations are, however, managed by boards of directors ; and a very important question has arisen, whether untrue representations made by any or all of such directors which have had the effect of inducing strangers to take shares in the con- cern, shall render the company liable. The real question in cases of this kind is, whether the parties Keai subject by whom the misrepresentations were made actually represented the company in so doing ; or, in other words, whether they held agency, express or implied, to get shares disposed of. When it is for the benefit of the company, or in the course of When acta of misrepresenta- its ordinary business, to obtain shares disposed of, the company will tion in line of be liable to such persons as purchase on the misrepresentations of those to whom it has committed the management. In the case of The National Exchange Co. of Glasgow v. Drew, National f , . J. , , Exchange Com- a partner of the company, which combined the business of bankers pany v. Brew. and sharebrokers, purchased additional shares of the company's stock, the price of which was advanced to him as a loan by the company. The company having sued the purchaser for the sum so advanced, he stated in defence that he had been induced to enter into the transaction by fraudulent misrepresentations of the position of the concern given him by the directors in their reports, and upon the urgent solicitations of the company's manager, who, at the date of the transaction in which the company had acted as brokers, was fully aware that the company was insolvent, and that the shares were value- (a) See Lothian v. Carron Iron Co., 1864, 2 Macph. 556 ; Keith v. Smart, 1832, 10 S. 514. K 258 FRAUDULENT REPRESENTATIONS [Book II. G-raham v. • North British Bank. . National Exchange Com- pany V. Drew and Dick, less. The defence was sustained, on the ground that the directors and manager, when they made the fraudulent misrepresentations which induced the defender to purchase the additional shares, were acting within their implied agency, and represented the company. The peculiarity in this case was, that the misrepresentations made were in reality made to the company, and the party deceived thereby was one of its own members. Nevertheless, Lord St Leonards said : ' I consider representations by the directors of a company as representations by the company, although representa- tions made to the company' (a). Graham v. TJie North British Bank (b) was a case of a similar kind. Here it was averred, that the holders of certain shares in a banking company being unable to meet its demands, the com- pany agreed that they would endeavour to procure responsible persons to purchase them ; and that with this view the company made fraudulent representations as to the value of the shares, and thereby induced the pursuer to become a purchaser. The conclusion of the action directed against the bank was for re- duction of the transfers made in favour of the pursuer. It was pleaded in defence, that the granters of the transfers were not called as defenders. But the Court held that the action was relevantly laid against the company itself, inasmuch as the bank was the party by whom the false representations had been made (c). In The National Exchange Co. v. Drew and Dick (d), a com- pany had been established for the purpose of lending money, more particularly on the security of shares or stock, either of itself or of other companies ; and for carrying on other branches of business, such as agency or brokerage. It had therefore an interest in pro- moting sales of its stock, not only as its profit consisted in lending money to parties who wished to deal in this mariner, but because it obtained commission as well as ordinary interest upon the monies so advanced, and participated in the brokerage of the transaction. The defenders were led into the purchase of shares and taking a corresponding loan through written statements made by the (a) 1850, 12 D. 950; aff. 1855, 18 D. (House of Lords) 6, and 2 Macq. 103. (J) 1850, 12 D. 907. See also /ardme's Trs.Y. Carron Co., 1864, 2 Macph. 1101. (c) See also the case of Brown v. Syine, 1834, 12 S. 536. (rf) 1860, 23 D. 1. Chap. XIII.I BY DIRECTORS. 259 directors in their report to the company, and also through mis- representations made by the manager of the company. In charg- ing the Jury, the Lord President laid it down as law, that, in making these statements, both the directors and the manager were acting as agents of the company and in the line of its business, and that the company was accordingly bound thereby (a). But, on the other hand, representations of a false or fraudulent When not in description made by directors or other office-bearers of a company pany business. in relation to matters in which they do not represent the company, or beyond the scope of their agency, will not bind the company. In Allan v. Wright and the Glasgow Commer-cial Exchange Allans. Company (b), a person purchased shares from the representatives ^ulgT of a partner. Soon after the directors resigned, and a com- ^"""P™^- mittee was appointed to wind up the affairs of the company, who made a call for contribution on all th« shareholders. The pur- suer brought an action of reduction of the transfer of the shares in his favour, on the ground that he had been induced to enter the company through fraudulent representations by tjie directors as to the property of the company, while in point of fact they knew that the loss already incurred was so great as, in terms of the com- pany contract, to amount to a dissolution of the concern. But it was clear that, neither in terms of the contract nor from the nature of the business, was it ever contemplated that the directors were to endeavour to get shares disposed of ; and it was not alleged that the partners had either authorized them to make the statements in question, or that they had in any way adopted them. The state- ments were, in fact, made to the company, and were not only not made for its benefit, but in opposition to its interests, and apparently to screen the directors themselves. In these circumstances it was held that the representations of the directors did not bind the com- pany. The case of Inglis v. Lumsden (a) is also instructive, as containing a good exposition of the same principle. The representations of a special officer, such as a law-agent, Law-agents will not bind the company, except in a matter within his sphere officers!"'* (a) See the English cases of Ranger Ayre's case, 25 Beav. 513 ; Gerhard's V. Great Western Ea. Co., 5 House of case, 2 Ell. and Bl. 476. Lords Cases 72; Brockwell's case, 4 (i) 1853, 15 D. 725. Drew. 205 ; Bell's case, 22 Beav. 35 ; (c) 1859, 21 D. 192. 260 FRAUDULENT KEPRESENTATIONS [Book II. Bumes v. Fennel. Eepreaenta- tions bind only when issued for the purposes for which they were made. of agency, and when they are made by him on behalf of the company. This is well illustrated by the case of Forth Marine Insurance Co. V. Bumes (a). Here the directors of a company had issued and published reports to the shareholders, — reports which were calculated to lead to an erroneous impression as to the prosperous state of its affairs. Dividends were likewise paid which were unwarrantable. The law-agent of the company being applied to by Burnes, he gave him to understand that its affairs were in a highly prosperous con- dition, and in evidence of this statement laid before him a copy of the directors' report. Upon this Barnes was induced to purchase shares, not from the company, but from one of its members who was unable to pay certain calls made upon him. Upon these he paid the balance of the instalments due. Additional calls having now been made, Burnes refused payment on the ground that he had been deceived by the false reports of the directors, and the equally false representations of the law-agent. The Court, how- ever, refused to sustain the defence, and on appeal the House of Lords affirmed the judgment (6). Here it was evidently no part of the business of a law-agent to induce the public to take shares in the company, or to make representations as to the state of its affairs (c). The same principle is still more clearly enforced and explained in the Lord President's (M'Neill) charge to the jury in the National Exchange Company of Glasgow v. Drew and Dick (d), already referred to. There his Lordship laid it down, that the representations of an individual director of a joint-stock company, not at the time acting in his official character, are not those of the company ; and, in like manner, that the representations even of the manager, made not in the discharge of his duty as manager, but as a private individual, do not bind the company. Representations made by officials will only bind the company when issued for the purpose for which they were actually used. Thus reports by directors, intended only for the shareholders, will not be held as misrepresentations made by the company if they (a) 1848, 10 D. 689. (J) July 16, 1849, 6 BeU 541, 21 Jur. 540. (c) See also the English case of Bigge, 5 E. Jur. N. S. 7 ; Worth's case, 4 Drew 529. (d) 1860, 23 D. 1. Chap. XIII.] BY DIRECTORS. 261 should afterwards fall into the hands of members of the public, and induce them to become shareholders, imless after they have been submitted to the shareholders they have been in some way adopted by them, or circulated by those who are officially entitled to bind the company (a). If regard, however, be had to the judgment in the House of Lords in the case of the National Exchange Company v. Drew, 1855 (6), it will be seen that very little will be held to make reports by directors the accredited representations of the company. It must also be observed, that mistakes on the part of the direc- Innocent, tors in making reports on the state of the company affairs, unless these amount to intentional fraud, will not be held to be such mis- representations on the part of the company as would vitiate and annul contracts entered into with them (c). Upon the whole, therefore, it should seem that the following Practical rules may be considered as settled in relation to the question of the liability of companies for the fraudulent representations of their directors or other officials. 1. Such representations will be held to be those of the company, when they have been made by officials in relation to matters within the sphere of their authority to represent the company, as estab- lished either by the letter of their instructions, or plainly deducible therefrom, by the nature of the company business, or by any other facts and circumstances which lead a jury to this conclusion. 2. They will also bind the company, when, after being made, they have been adopted and ratified by the shareholders. 3. They will not bind the company when made by oificials in relation to matters beyond the sphere, of their agency, express or implied, and never when in the character of private individuals. 4. No reports made by officials will bind the company, except when used for the purposes for which they were intended. It may be observed, however, in conclusion, that from a laud- Tendency of / ' ' . ' the courts. able desire to ensure the safety of the public, the tendency of the tribunals seems to be to impute liability to companies for the acts (a) Forth and Marine Insurance (c) National Ex. Co. v. Drew, 1860, Company v. Burnes, 1848, 10 D. 689, 23 D. 1. See also, on this subject aff. 1849, 6 Bell 541, 21 Jur. 540 ; generally, the late case of Graham v. Allan V. Wright, 1853, 1859, 15 D. Western Bank, 1864, 2 Macph. 559, 725. where all the authorities are quoted {h) 18 D. 7, and 2 Macq. 103. and fully discussed. 262 OBLIGATIONS ARISING [Book II. Personal liability of officials. of their directors, wlienever the state of the facts will at all warrant this conclusion. In all cases, the officials who make such fraudulent representa- tions are themselves liable in the consequences, whether liability attach to their constituents or not (a). Criminal Acts. Company nut liable for criminal acts and delicts. First exception. Must take place in line of employment. Though a principal is not in the general case liable for the cri- minal acts of his agent, yet two important exceptions exist to this rule. First, If the act is done in the course of carrying out an engagement which the principal has undertaken to fulfil, and the party with whom he has contracted is injured thereby. In cases of this kind the liability to the principal arises not from the delict of the agent, but from the fact that loss or damage has arisen to the obligee, from the obligor having either failed to fulfil his obliga- tion, or having carried it out in an improper manner; and the liability would be the same from whatever cause the failure arose, unless it could be attributed to a damnum fatale, or some event which the principal could, by the exercise of ordinary skill and attention, have neither foreseen nor prevented. Thus, if a firm receive funds to be kept or employed for a certain purpose, and they are stolen or em- bezzled by one of their agents, e.g. clerks, assistants, or the like, the firm is liable (J). So, if a company undertake to carry passengers, they are liable for such injury as the passengers may receive from the recklessness or other improper conduct of their servants in the course of carrying out the engagement : as, e.g., if the coach be over- turned by the reckless driving of the coachman (c) ; if an accident occur in a railway, through the recklessness or culpable negligence of the company servants (d), whereby the passengers are injured. In all such cases, however, it is essential to ground liability (a) See, as to this, chap, on Liabili- ties of Directors. (6) See Orr and Barber v. Uniim £ani;,asrevd.l7D. (H. L.) 24,lMaoq- 513, 26 Jur. 632 ; Cal. In. Co. v. Bri- tish Linen Co., 1859, 21 D. 1197, aff. 23 D. 3, 4 Macq. 107 ; RUnd v. Com. Bank, 1860, 22D. (H. L.) 2, 3 Macq. 643. (c) Drnmmond v. Macgregor, 1813, 17 P. C. 232 ; Allan v. M-Leisli, 1819, 2 Mur. 158; GreenY. Gardiner, 1820, 2 Mur. 194 ; Brash v. Steel, 1845, 7 D. 539 ; MacArthur v. Croall, 1852, 24 Jur. 170. ((/) Morton V. E. and G. Ra. Co., 1845, 8 D. 288; Macglashan v. Dundee and Perth Ra. Co., 1848, 10 D. 1397 ; CargillY. iliid., 1848, 11 D. 216. Chap. XIII.] PROM DELICTS. 263 against the company, that the delict was done in the course of, and as part of, the obligation undertaken (a). The second exception is when, in the course and as a part of Second . . . J exoeptiou. carrying out the directions of his principal, the agent has committed a delict whereby some of the public have been injured. Thus, where a man desired his servants to remove wood growing on his own property, and in doing so they applied fire, whereby wood growing on the property of another was destroyed, he was found liable (b). So, when a man employed another to deliver wood, which he did by his servant, and in doing so a shed belonging to a third party was thrown down, the master was found liable (c). So, when a party entrusts a servant with the charge of a conveyance, and in consequence of his culpable negligence one of the public is killed or injured, the principal is liable {d). So, when a company, in consequence of the culpable negligence of their servant, fail to give due warning to one of the public to keep out of the way of danger, they are held liable (e). In all these and similar cases, where not the person contracted implied with but the public is injured, the liability of the principal, whether a company or an individual, arises, it would appear, from that implied contract or obligation which every one is held to make with the public, whereby when he does or orders anything to be done, he undertakes that it shall be done with due regard to the safety and interests of the lieges. It is often difficult to determine whether the act causing the innocent injury or loss amounted to innocent mistake or delict ; but under whatever category it may fall, the result is the same as to the com- pany liability, so as it was done in the course and as a part of the employment for which the agent was retained. Firms or companies of carriers, seamen, and innkeepers incur Edict nautx, caupones, (a) Linwood v. Hawthorn, 1817, 19 (e) Anderson y. Brownlee, 1822, 1 «<"*«'«'•"• P. C. 827; aff. 1821, 1 S. App. 20. S. 442. See also M'iare)?, V. Rae, 1827, 4 Mur. (af) Baird v. Hamilton, 1826, 4 S. 384 ; Miller v. Harvie, 1827, 4 Mur. 797 ; M'Laren y. Rae, 1827, 4 Mur. 388; -DaZrj/mpZev.ilf'ffiZZ, Hume 387; 384; Elder v. Croall, 1849, 11 D. Thorium v. Ellis, 1811, 16 F. C. 246 ; 216. Waldie v. Roxburgh, 1822, 1 S. 367, (e) Hunter v. The Edinburgh and aff. 1 W. and S. 1. Glasgow Canal Company, 1836, 14 S. (6) Keith v. Keir, 1812-, 16 P. C. 17 ; Eraser v. Dunlop, 1822, 1 S. 679 ; Hillv. Merrichs, 1813, Hume 897. 243. 264 OBLIGATIONS FROM DELICTS. [Book II. Culpa lata cnuipi dolo. equiparetur doll Presumption of negligence. CoUaborateurs, liabilities under the edict tiautw, caupones, stabularii. In these cases, as is well known, it is enough to create liability that goods have been abstracted, although the delict have been committed by persons for whom they are otherwise no way responsible (a). There is a large class of cases in which companies, like indivi- duals, incur liability either to the public or to those with whom they have specially contracted, not on the ground of actual delict, but from such a degree of negligence as in law equiparetur dolo. In such cases it is important to observe, that whether the ground of liability be negligence on the part of the members of the company, or of those for whom it is responsible, it is necessary that negligence really exist, there being no presumption of negligence juris et de jure, as in the case of nautce, caupones, et stabularii. There is, however, a presumption of negligence, arising from the mere fact of the damage, loss, or injury being proved to have arisen in the course of the company business ; and when this has been estab- lished, the onus of showing that it was a damnum fatale, and that all due care and skill had been used, will lie on the company (b). At one period it seemed to have been taken to be law in Scotland, that a company incurred liability for reparation when one of their servants or workmen was injured by the carelessness, ignorance, or culpa of another also in their employment (c). In this matter the law of Scotland has now been assimilated to that of England, or rather, perhaps, the effects of its own principles have come to be better understood ; and it is now settled, that a company is not liable for injuries sustained by one of its servants through the fault of a collaborateur, provided the injury did not arise in consequence of failure on the part of the company to do something which by contract, express or implied, between them and the injured party they were bound to do (d). (a) Cockburn v. Richardson, 1820, 1 BeU 474, n. 6 ; Williamson v. White, 1810, 15 F. 0. 712. (h) Anderson v. Pyper and Co., 1820, 2 Mur. 261-271 ; Jones and Co.\. Ross, 1830, 8 S. 495 ; Rae v. Kay, 1832, 10 S. 303 ; Edin. and Glas. Union Canal Co. V. Johnston, 1832, 10 S. 505 ; Lyon v. Lamh, 1838, 16 S. 1188 ; Finlay v. Thompson, 1842, 4 D. 776 ; Weston v. Corporation of Tailors, 1839, 1 D. 1218. (c) Sword\. Cameron, 1839, 1 D. 493 ; DixonY. iJa)!fcen,1852,14 D.420; Gray V. Brassey, 1852, 15 D. 135 ; O'Byrne V. Burn, 1854, 16 D. 1025 ; JM'NaugMon V. Caledonian Ra. Co., 1857, 19 D.271. (d) Reid v. Bartonshill C'oid Co., as revd. 1858, 20 D. (House of Lords) 13, 3 Macq. 266, 30 Jiir. 957. [ 265 ] CHAPTER XIV. EXTINCTION OF COMPANY OBLIGATIONS. Obligations may be extinguished in some one or other of the modes following : — 1. Actual fulfilment ; — payment, performance, or satisfaction to the creditor; 2. Virtual fulfilment; — compensation, novation, or confusion ; 3. Release ; — discharge by the creditor, or by opera- tion of law ; 4. Presumed abandonment or satisfaction, including prescription and limitation. These modes of extinction apply to company or partnership Application to obligations as well as to those incurred by individuals ; but their application to the former class of obligations is often attended by peculiarities arising out of the contract of copartnery which require attention. We shall consider them in their order. I. ACTUAL FULFILMENT. When the obligation is one ad factum prwstandum, and it is Performance. performed by one of the partners, such performance will release the company quoad the creditor ; but if it has caused outlay, lia- bility, or loss to the partner, it will in general entitle him to indem- nity against the firm. In like manner, payment of a company debt made by a partner Payment, extinguishes the obligation in so far as the creditor is concerned, but founds a claim of indemnity at the instance of the partner against the firm, either at common law, or by reason of his having taken an assignation from the creditor whose claim he has paid. The obligation against the company is thus not extinguished, but 266 EXTINCTION OF OBLIGATIONS. [Book II. Payment by a stranger. transferred from the original obligee to the partner, minus the latter's share of contribution (a). If, again, a stranger, being either an individual or a firm, pay a debt due by a company, the party paying on obtaining an assigna- tion from the creditor comes exactly in his place, and may recover against the company. And this holds good even where a new firm, having succeeded an old in consequence of a change of partners, pays a debt due by the old firm, and so becomes assignee of the original creditor. Here the new firm becomes creditor of the old, and may recover against all who were its partners prior at least to the contraction of the debt (Ij). Application of Indefinite Payments. Indefinite payments. Creditor's right of election. Continuous open accounts. Englisli law. Where a partner makes an indefinite payment from the monies of the firm to a stranger who is creditor both of the firm and of himself as an individual, he will be held to have made such pay- ment on behalf of the firm (c). This is a consequence of the common principles of agency (d). When a payment is made by a debtor, the law generally gives him the right of designating the debt to which he wishes it to be applied ; but if he makes the payment indefinitely, the right of appropriating it among the debts as he may see fit is conceded to the creditor (e). The case is somewhat different when there is a continuous open accoiint between two parties extending over a tract of time, towards which indefinite payments have from time to time been made. Here it would seem equitable to apply the indefinite payments towards extinction of the various items of debt in the order of their dates, beginning at the earliest of the series, without regard to the wishes either of debtor or creditor when they happen to differ as to the mode of application. This, which appears to have been always the law of England, and has now been found to be that of Scotland also (/), produces, when applied to the case of (a) See Bell's Prin. s. 558; M'ln- (c) rAompsonv.Bro™?,M.andM.40. tyre v. Miller, 13 M. and W. 725. (cZ) Bell's Prin. 559. (V) Lucas V. Wilkinson, 1 H. and (e) Brsk. iii. 4, 2. N. 420 ; M'Intyre v. Miller, 13 M. (/) Per Lord Cowan in Lang v. and W. 725. Broion, 1859, 22 D. 113. Chap. XIV.] INDEFINITE PAYMENTS. 267 firms and companies, consequences of considerable importance, which we shall have to examine somewhat in detail. When so applied, the doctrine in question is known as ' the rule in Claytons easel that having been the first instance of its application to part- nership questions. Clayton's case (a) was that of a banking company consistins of Rule in •^ ^ ^ & r ./ o Claytons case. five partners. One of them, Devaynes, died; and the business was carried on by the surviving partners until they became bank- rupt. Clayton, a customer, had an open account with the concern, which was current both during the lifetime of Devaynes and after his death. At Devaynes' death the company were due Clayton a balance of £1713. Subsequently the company both received and paid out monies on Clayton's behalf ; and the account current between them was treated not as two separate accounts, one ending on Devaynes' death, and the other beginning from that time, but as being throughout continuous and unbroken. When the bank- ruptcy took place, it appeared that the company had, after De- vaynes' death, and before their bankruptcy, made- payments on Clayton's account, which were more than sufiicient to extinguish the balance of £1713, but that he had made deposits during the same period to an extent that left a still larger balance in his favour. In these circumstances, Clayton contended that he was entitled to impute the indefinite payments which the bank had made on his account subsequent to Devaynes' death, in extinction of the last- mentioned balance, and proceed against Devaynes' estate for the old balance of £1713. But the Court held that the whole course of dealing both before and after Devaynes' death must be treated as one account, and that the various payments made by the bank must be applied in the order of their dates towards extinction or reduction of the balance due Clayton at each of these dates respec- tively ; so that the balance of £1713 which was due at Devaynes' death having been extinguished by payments made subsequent to that event, Clayton could only claim in the bankruptcy for the new balance which had subsequently arisen. Subsequently many cases occurred where the companies were Extension of rule. (a) Devaynes v. Noble, 1 Mer. 572, is sometimes termed the rule in De- 3 Ross Le. Ca. 654, Bell's Illus. 336. vaijnes' o&se.' In Scotland the rule in Clayton's case 268 EXTINCTION OF OBLIGATIONS. [Book II. general merchants, not mere banking firms, and where the partner- ship was dissolved not by death, but by retirement (a) ; yet the rule in Clayton's case was equally applied in all. Statement of The rule in Clayton's case as to extinction of company liabilities rule as applied i <• i_ it. tc to companies, by indefinite payments, may thererore now be stated thus. Ir a customer have an open account with a company upon which both parties are in the practice of operating, by making deposits and honouring drafts, as in the case of banking companies, or by making consignments of goods and partial payments as in the case of ordi- nary mercantile firms, and on the dissolution of the company the open account is continued unbroken and continuously with their successors, if the balance be found ultimately to be in favour of the customer, he cannot impute indefinite payments on his behalf, whensoever made, during the existence of the new firm, in such a manner as to preserve recourse against the old firm for that part of the account which was incurred during its existence. This rule seems to apply in all cases of dissolution where the business is transferred to a new company or firm ; and therefore has place when a partner dies, or retires with due notice, quite as much as when an old firm is entirely broken up and a new firm comes in its place (b). Order of dates. The principle being that all indefinite payments in accounts current must be applied in the order of their dates, the rule is equally applicable when the company is creditor. Hence the debtor of a company is not entitled at settlement of an account current to insist that such indefinite payments as he has made throughout shall be applied to the later instead of the earlier items, if he should find that mode of application more suitable to his own views (c). But, on the other hand, it is equally incompetent for a company to invert the order of apportionment so as to serve its own purposes. Thus, when in an account current between a party and a company, a third party has become surety for a debt which forms an item in the account, the company will not be allowed to impute indefinite payments in extinction of such parts of the account as were not (a) Brooks v. Enderby, 2 Brod. and (J) Smith v. Wigley, 3 Moo. and Bing. 70 ; Simpson v. Ingham, 2 Barn. Sc. 174 ; Ncwmarsh v. Clay, 14 East and Cress. 65 ; Pemberton v. Oakes, 4 239. Russ. 154 ; Bodehham v. Purchas, 2 (c) Beak v. Caddick, 2 H. and N. Bar. and Aid. 39, 3 Ross Le. Ca. 661. 326. Chap. XIV.] INDEFINITE PAYMENTS. 269 covered by the security, if to do this would be to invert or change the natural sequence of the items (a). It must, however, be borne in mind that the rule in Clayton's Kuiein Clat/- tons case a case is a mere presumption of law founded on the apparent intention mere presump- of parties to treat the sequence of transactions between them as one unbroken and continuous whole. If, therefore, the various items do not form one account current, but resolve into distinct accounts, or if it can be shown that it was the intention of parties that they should not be taken as a whole, then the rule in Clayton's case will not be held to apply. If, for example, when a change takes place in a company, by death or retirement, the creditor refuses or with- holds his consent to his debt being transferred so as to form the first item in his account with the new firm, but keeps in fact his accounts with the two firms distinct, indefinite payments made by the new firm will not be applied to liquidate the debt due by the old (b). Even when the account is, ea; facie, continuous and unbroken, the intention of parties that the rule in Clayton's case should not apply, may be proved by facts and circumstances (c), and from the representations of the parties made when the payments were received (d). The rule in Clayton's case is not in accordance with the older Adoption of decisions of the Scottish courts, who seem to have gone on the Scotland. principle that the creditor was in all cases entitled to regulate the application of indefinite payments (e). But from the recent decisions, there can remain no doubt that in this matter the law in both countries must now be taken as identical (/) ; and indeed there is great reason to believe that in this, as in many other (a) Christie v. Royal Bank, 1839, 1 Bannatyne v. Brown's Trs., 1825, 3 S. D. 745 ; aff. 1841, 2 Rob. 118. See 407. aiso Allan Y. Allan and Co., 18S1, 9 8. (e) Cochrane and Co. v. Mathie, 519 ; Bodenham v. Purchas, 2 B. and 1821, 1 S. 82 ; Forbes v. Innes, 1739, A. 39 ; Pemberton v. Oakes, 4 Euss. M. 6813. 154. (/) Houstmi's Exec. v. Speirs, 1826, (6) Simpson v. Ingham, 2 B. and Or. 4 S. 573, reversed 3 W. and S. 392 ; 65 ; Jones v. Maund, 3 Y. and C. Ex. Christie v. Royal Bank, 1839, 1 D. 347. ' 745, aff. 1841, 2 Eob. 118. See pp. (c) Ta^jlor v. Kymer, 3 B. and Add. 212-13 of the Report, also 3 Ross' Lead. 320 ; Lysaght v. Walkers, 5 BH. N. Oa. 668. Lang v. Brown, 1859, 22 D. S. 1 ; Stoveld V. Bade, 4 Bing. 154 ; 113. See Lord Cowan's judgment, Thompson v. Brown, Moo. and M. 40. which was that of the Court, and is (d) Wickham, 3 K. and J. 478 ; most exhaustive and instructive. 270 EXTINCTION OF OBLIGATIONS. [Book 11. Instances, the laws were always the same when properly understood and applied (a). II. VIRTUAL FULFILMENT. 1. Compensation. As we shall afterwards have occasion to consider the import and effects of this very important doctrine in all its bearings on the partnership relation (h), it will be sufficient in this place to indicate the rules which are observed in applying its principles towards extinguishing obligations incurred by a company or firm considered as a separate person. In Companies and Firms unincorporate. Firms and 1. When a Company is sued by one of its creditors, it may common law .. -, .. plead compensation on a private debt due by the creditor to one of its partners (c), if it have the partners' consent to that effect (d). 2. When a partner sues a company creditor for a private debt, he may be met by setting off a debt due by the company to the creditor (e). 3. When a concourse of debit and credit takes place between two companies, or between a company and a private person, the same rules as to extinction by compensation have place as would apply if both parties were individuals (/). 4. When the rights and obligations of a company have come to centre in a single individual in his private character, and not as trustee for creditors of the former company, or for the representa- tives of its former partners, compensation has place between debts (n) See Bannatyne's Reps. v. Brown's (d) Thomson v. Stevenson, supra ; Trs., 1825, 3 S. 407. Raleigh v. Hughson, 1861, 23 D. (i) See chap, on Compensation. 352. (c) BogWs Cred. v. Ballantyne, (e) Hotchkis v. Royal Bank, 1797, 1793, M. 2581 ; Scott and Hall v. M. 2673, aff. 3 Paton 618. Bisset, 1809, 15 F. C. 811 ; Russell v. (/) Biglis and Co. v. Cuthhertson, M'Nab, 1824, 3 S. 41 ; Salmon v. 1809, Hume 122 ; Handyside v. Har- Padon, 1824, 3 S. 285 ; Thomson v. wood, 1812, 17 F. C. 29. Stevenson, 1855, 17 D. 739. General rules. Chap. XIV.] DELEGATION AND NOVATION. 271 which he is due as representing the company, and those in which he is individually creditor (a). In the case of Incorporated Companies. 1. When a concourse of debit and credit arises between two Corporations. General rules. incorporated companies, or between an incorporated company and an individual, the same rules apply as if both had been individuals. 2. An incorporated company with limited liability cannot set off the claim of one of its shareholders against a company debt, unless it be the special assignee of its shareholder. The theory and full exposition of these rules will be found in the chapter on Compensation. 2. Delegation and Novation. Delegation is the substitution of a new obligor, novation that Delegation of a new obligation, for the old. To the validity of such substitu- tions the full consent of the creditor is requisite. But it may be implied as well as express, and it is not dependent on the construc- tion of formal documents ; it is properly a question for a jury. The law of England appears upon this branch of the subject to be in most cases coincident with our own. Company obligations are frequently extinguished by delega- tion. In the first place, the creditor may agree to accept another Substitution of 1 • 1 • • 11 "'^^ company company as his debtor, m room of the company which originally for another. occupied that position. This will effectually release the latter. The firm of Somerville and Co. stood indebted to that of Buchanan and Co. Pending this obligation, Somerville and Co. dissolved, the copartnery contract having expired. From that time a new company, viz. Jamieson and Co., which undertook the debts and obligations of the former company, came into existence. The old company differed from the new in this respect, that one partner had retired, and another had been assumed. Soon after, the creditor applied to the new company for payment of the debt ; and (a) Slipper v. Stidstone, 6 T. R. 493 ; French v. Andrade, 6 T. R. 582 ; see also Golding v. VaugJian, 2 Chitty 436 ; Thomson v. Stevenson, 1855, 17 D. 739. 272 EXTINCTION OP OBLIGATIONS. [Book II. this not being convenient at the time, he ultimately took their bill for the amount. When this bill became due, the acceptors were bankrupt, and the creditor endeavoured to operate payment by proceeding against the old company. In the action no appearance was made for those members of the old company who were also members of the new. Somerville, however, the retiring partner of the old firm, defended, on the ground that quoad the old firm, of which he was a partner, the debt was extinguished by delegation ; and that he, being a partner only of the old firm, was consequently not liable. The Court sustained the defence (a). The late case of Pearston v. Wilson may also be taken as an example of the application of this principle (b). Substitution of In like manner, a company or firm may be discharged by the individual for . ' . ,. . , & J a company. creditors agreeing to accept an individual partner as a substitute for his original debtor, the firm. Of this the case of Davidson v. Ranken (c) may be taken as an illustration. There, the firm of Blyd and Eanken, being indebted to the firm of Davidson and Co., the latter agreed to charge the debt to Blyd's particular account, and advised the firm of Blyd and Ranken of their having done so. Blyd soon after became bankrupt, and Davidson and Co. endea- voured to fall back upon Eanken, as though the obligation against the firm still subsisted. The Court, however, sustained the defence of delegation. Delegation not Inasmuch, however, as delegation is not presumed, it is not presumed. 7 7 r) r 7 every circumstance, or combination of circumstances, that will suffice to prove that a company has been released by the substitu- tion of another debtor. There must have been something done on the part of the creditor which admits of no other construction than that of assent to the delegation. Thus the mere fact that a new company has agreed to receive the assets and pay the debts of a former firm, will not amount to delegation in a question with a creditor who has not acceded in some unmistakeable manner to this arrangement. The firm of Cuthbert, Mill, and Walker, while apparently (a) Buchanan v. Somerville, 1779, (c) 1783, M. 7061. See also Thom- M. 3402. son v. Percival, 5 B. and Ad. 925, (b) 1856, 19 D. 197. See also Hart and Evans v. Drummond, 4 Bsp. 89 ; V. Alexander, 7 C. and P. 746, and 2 Reid v. White, 5 Esp. 122. M. and W. 484. Chap. XIV.] DELEGATION. 273 solvent, was dissolved in 1857. A new firm of Mill and Walker was empowered to discharge all debts due to, and to pay all debts due by, the old firm. A bank had discounted for the old firm certain bills, which did not fall due for some months after the dissolution. When they fell due, the acceptors having become bankrupt, the new firm wrote a docquet, dispensing with notice of dishonour ; and, at the request of the bank, one of the partners of the new firm adhibited the signature of the old firm. The new firm of Mill and Walker having been sequestrated, recourse was had by the bank upon the estate of Outhbert, the partner of the old firm, on the ground that that firm had never been discharged. The defence of delegation was set up, but the Court held that it had not taken place, and that the old firm was still liable (a). The law of England affords numerous illustrations of the same English law. kind. The cases of Lodge v. Dicas (b), David v. Mlioe (c), and Thomas v. Shillibeer (d), were instances of dissolution or change of the firm by the retirement of one of the partners ; while Kir- wan V. Kirwan (e), Gough v. Davies (/), and Blew v. Wyatt (g), were instances of the same change by the retirement of some partners and the introduction of others. In all these cases, the circumstances were very strong in favour of the view that substitution of one firm for the other had taken place, so as to- release the old firm; yet the English courts refused to give effect to this defence, on the ground that the matter was not beyond doubt. It should be noticed, however, that if the cases of Lodge v. Dicas and David v. Ellice had occurred in Scotland, the finding would probably have been for delegation. The English court went greatly on the technical rule of that law, that the agree- ment to accept the new firm in room of the old was void for want of consideration, even if it were otherwise established. Now this rule is not observed in the law of Scotland ; and by a late decision (a) Muir v. Dickson, 1860, 22 D. ((f) 1 M. and W. 124. 1070. See also Milliken v. Love, 1803, (e) 2 Cr. and M. 617. Hume 754 ; Campbell v. Cruickshank, (/) 4 Price 200. 1845, 7 D. 548. (fir) 5 Car. and Pa. 397. See also (J) 3 B. and A1.-611. Harris v. Farwell, 15 Beav. 31 ; and (c) 5 B. and C. 196. Daniel v. Cross, 3 Ves. 277. S 274 DELEGATION. [Book II. Additional security differs from delega- tion. One finn succeeding another. English oases. Corporations. Effects of amalgamation. in England, it would seem that in future it will not be held to operate in questions of this nature (a). Care must be taken not to confound a mere agreement to accept of further security with a consent to delegation. Thus a creditor may be induced to give delay, in consequence of obtaining the security of a new firm ; and if in such a case he afterwards takes proceedings against the new firm, it cannot be said that he has thereby waived his claim against the old (b). Nor does the taking a bill from a partner for a company debt per se infer delegation, so as to release the firm (c). When one firm is succeeded by another, and the new company contains members who were also members of the old, the mere fact of the creditor taking proceedings against these persons for recovery of his debt is no proof that he had adopted the new firm as his debtor, so as to release the old ; for he was entitled to go against such persons in their character of partners of the old firm, irre- spective altogether of the relation they had contracted with the new company (d). In some English cases, where the creditor was proved to have been aware of an agreement between an old firm and a new, that the latter should take the assets and liabilities of the former, the elapse of many years, during which he had taken no steps to recover as against the old firm, but had received payment of interest arising on his debt from the new company, has been held to infer his assent to delegation (e). The same rules apply to companies incorporated by special act, charter, or registration (/), except in so far as their constitution may render adoption of the liabilities of another company invalid. It may be observed, that the amalgamation of two companies with each other does not produce delegation so as to release former shareholders of one of the amalgamating companies. It is very (a) Lyth v. Ault, 7 Ex. 669. (5) Thompson v. Percival, 5 B. and Ad. 925 ; David v. Ellice, 5 B. and C. 196; Heath v. Percival, 1 P. W. 682. (c) Wilson and Corse v. Gardiner, 1807, Hume 247 ; Bedford v. Deakin, 2 B. and Al. 210 ; Spencely v. Green- wood, 1 Fos. and Fin. 297. (d) Buchanan v. Adam, 1833, 11 S. 762. See also Percival v. Heath, 1 P. W. 682 ; Milliken v. Love, 1803, Hume 754. (e) Brown v. Gordon, 16 Beav. 302 ; Oahley v. Pasheller, 4 CI. and Fin. 207 ; Rodgers v. Maw, 4 Dowl. and L. 66. (/) See Saxon Life Assurance Society, 2 J. and H. 408. Chap. XIV.] DISCHARGE. 275 doubtful whether it even gives the creditor the benefit of additional security (a). There are eases to be found in the English authorities in which Merger. 'merger' (a species of novation) has been found to cancel a com- pany obligation by substituting another in its place, and that without any formal consent on the part of the creditor, but by the mere operation of law, in virtue of a principle peculiar to the English system. According to the law of England, if a creditor obtain an obligation of a higher order than he had before, the original obliga- tion is lost or merged in the new. Thus, if a company or firm incurs an obligation by simple contract, and one of the partners grants his bond for the debt, this at once releases the other partners ; and, in like manner, it is held that if the creditor obtains judg- ment against one of the partners only, his doing so destroys ipso facto his recourse against the others (b). In such cases, merger results from the simple fact of accepting the bond or obtaining the judgment. It is said that in equity this principle is not so strictly enforced. No such principle as this ever obtained in the law of Scotland ; Does not . obtain in but the new obligation has always (unless the contrary was expressly Scotland. stipulated) been held merely corroborative of the old (c). It is important to bear this difference between the two legal systems in mind, for otherwise a very erroneous inference might be drawn from numerous English decisions of which the doctrine of merger is the true ratio. III. RELEASE — DISOHAKGB BY CEEDITOR, AND BY OPERATION OF LAW. creditor. If a creditor chooses to discharge his debtor or obligant, the Discharge by release will be effectual, provided the fact can be established by legal evidence, whatever may have been the motive upon which the creditor acted ; and as to the kind of evidence which the law requires to establish a discharge, the same rules generally apply in (a) Previous case ; and see Hardinge and W. 494. See Lindley, p. 367, and v. Webster, 1 Dr. and Sm. 101. Sup. 78. (&) Basset v. Wood, 11 Vin. Ab. (c) Ersk. iii. 4, 22 ; M. 11518. Exting. B. 8 ; King v. Hoare, 13 M. 276 DISCHARGE BY CREDITOR. [Book II. the case of firms and companies as in that of individuals, and will be found in any work on evidence. When the discharge is required by law to be in writing, if the creditor be a copartnery, attention must be paid to the mode in which tlie firm signs obligations ; if it be an incorporated company, regard must be had to the forms laid down in its instrument of incorporation for this purpose. The modes in which company debtors may be effectually discharged will be afterwards more fully considered. English There is a doctrine of English law, as to the effect which the release by one release of one partner has to release the others, or, in other words, par ner. ^^ terminate the company obligation, which it is here necessary to consider, as some doubts have been entertained whether it was not, or at least has not now become, law in Scotland. According to the law of England, an absolute and unconditional release of a company obligation to one partner operates as a discharge to all the partners (a). This rule is, however, subject to certain limitations. In the first place, it is held that if it be expressly set forth in the release that it shall be limited to the benefit of the releasee, and shall not avail, even in his case, when he is sued jointly with his co-obligants, then it will not bar action against the company. Further, a dis- tinction is made between a release and a covenant not to sue, so that when the latter is made with one partner, it would seem not to liberate the others (b). But it has also been held, that if a creditor obtains judgment against the partners of a firm for a company debt, and arrests them, and then lets one of them go, the others are entitled to be discharged from custody (c). ^f s'^'tj?^!!^?^ "^^^ author has been unable to discover any express authority or dictum upon this question in the Scottish authorities ; yet it would seem never to have been doubted that in our law the discharge of one partner does not. operate as a release to the others. And if we attend to the origin of the English rule, it would appear to follow that the Scottish rule must always have been different. The English rule is nothing else than the application to part- (a) Bower v. Swadlin, 1 Atk. 294 ; 38 ; Price v. Barker, 4 E. and B. 760 ; Cheetham v. Ward, 1 Bos. and P. 630. Lacy v. Kinaston, 1 Lord Raymond See also Lindley 360, and CoUyer 690 ; Hutton v. Eyre, 6 Taunt. 289 ; 428. Clayton v. Kynaston, 2 Salk. 573. (6) Solly V. Forbes, 2 Brod. and Bing. (c) Ballam v. Price, 2 Moo. 235. Chap. XIV.] DISCHARGE BY OPEEATION OF LAW. 277 nership of the old doctrine of the common law, that where several persons are bound jointly, or jointly and severally, whether as principals or sureties, a release to one is a release to all (a). Now the law of Scotland upon this matter was always different. The discharge of one co-obligant had no effect to release the others, whether they were bound jointly, or jointly and severally (b) ; and the same rule formerly held good as to cautioners, except in so far as a discharge of one of them diminished the claim against the others to the extent of his share of the obligation (c). It must also be borne in mind, that in another respect the reason of the English rule fails when applied in cases of Scotch partnership. Company obligations are not in Scotland the joint and several obligations of the, individual partners, but the obhgations of the quasi person of the firm of which the partners are the guarantees. It may perhaps be argued that the recent alteration of the law of Scotland, whereby a discharge to one cautioner is now declared to be a discharge to all (d), has by implication introduced the English rule into our partnership law. But it must be observed that this enactment plainly applies to persons bound as cautioners eo nomine, and not to guarantees becoming such by implication of law. It would therefore seem that, according to the principles of the law of Scotland, a discharge to one partner is not a discharge to all ; and that the utmost effect which such a release could operate, would be to limit the obligation of the other partners by the amount of the contribution which would otherwise have been exigible from the partner obtaining the discharge. Sometimes an obligor finds himself released from his obligation Release by by the operation of law, without having himself done anything to o( law. contribute to that result. An instance of this has been introduced by the recent Mercantile Law (Scotland) Amendment Act (e), which it is of importance to notice, as it has a very important bear- ing on the obligations of guarantee societies. Sec. 7 of this statute is as follows: 'No guarantee, security, cautionary obligation, re- presentation, or assurance granted or made after the passing of this (a) Ex parte Slater, 6 Ves. 146 ; (c) Bankt. i. 24, 2 ; Sh. Bell's Com. Watson on Part. 227 ; CoUyer 428 ; 277 ; Ersk. iii. 3, 68. Lindley 850. {d) 19 and 20 Vict. c. 60, s. 9. , (J) Second Mercantile Report Law (e) 19 and 20 Vict. c. 60. Commission, 91. 278 DISCHARGE BY OPERATION OP LAW. [Book II. Discharge of one partner in cautionary obligations. Act to or for a company or firm consisting of two or more persons, or to or for a single person trading under the name of a firm, shall be binding on the granter or maker of the same, in respect of anything done or omitted to be done after a change shall have taken place in one or more of the partners of the company or firm to which the same has been granted or made, unless the intention of the parties that such guarantee, security, cautionary obligation, representation, or assurance shall continue to be binding, notwith- standing such change, shall appear, either by express stipulation or by necessary implication, from the nature of the firm or otherwise.' The provisions of sec. 9 also deserve attention. They are as follows : ' From and after the passing of this Act, where two or more parties shall become bound as cautioners for any debtor, any discharge granted by the creditor in such debt or obligation to any one of such cautioners shall be deemed and taken to be a discharge granted to all the cautioners ; but nothing herein contained shall be deemed to extend to the case of a cautioner consenting to the discharge of a co-cautioner who may become bankrupt.' This enactment is, in fact, an extension to the case of Scotch co- cautioners of the well-known rule of the English common law, that the release of one of several co-obligors is a release to all (a). What effect it may be held to have in the case of Scotch firms or unincor- porated companies which have undertaken cautionary obligations, is a question by no means free from difficulties. If the old Scottish doctrine, that the firm is a quasi person, distinct from the members of which it is composed, be maintained in its entirety, it may per- haps be successfully argued, that as regards firms and companies the provision has • no application ; for, according to the rigour of this doctrine, it is the quasi person of the firm, and not its members, which is the true obligant in the case supposed. It is by no means certain, however, that this doctrine, whose ancient rigour has been in modern times greatly abated, could be relied on as sufficient to shut out what appears to be the plain intendment of the Legisla- ture. Much may perhaps depend on the form of the instrument creating the cautionary obligation. If the members of the firm, as is generally the case, are taken bound individually and nominatim, (a) Coke on Lit. 232, a. This is also true of sec. 7. Bodenliam v. Piirchas, 2 B. and Al. 39, 3 Ross Leading Cases 661. Chap. XIV.] PRESCRIPTION OR LIMITATION. 279 there is reason to believe that the statutory provision will apply, so that what is intended to add to the stringency of the contract may be found to avoid the obligation altogether. IV. PRESUMED ABANDONMENT OR SATISFACTION. Prescription or Limitation. These terms are generally used as convertible, but a distinction Distinction .... . . tetween. is sometimes made as follows : — Prescription is said to extinguish the debt in virtue of a legal presumption that it has been paid or abandoned ; whereas limitation is said not to affect the actual sub- sistence of the debt, but after a certain time to bar action on the instrument or document by which the debt is evidenced. Perhaps more importance 'has been attached to this distinction than it deserves ; but be that as it may, it does not appear to be of much consequence in questions of partnership law. The law of Scotland recognises a great number of prescriptions Difeerent T ■ • 1 , , .. ^ f kinds of or limitations ; but to many of these it is unnecessary here to refer, prescription. as they have little or no application to the partnership relation, or if they have, do not operate differently in it from what they would do in the case of individuals. There are some prescriptions, how- ever, that raise diflScult questions in the case of firms and com- panies, and which will therefore require to be considered in this part of the treatise. These are the triennial, the quinquennial, and the sexennial. Their effect is to raise a legal presumption that the Effects of debt has been paid or the claim abandoned ; but this presumption ^""^ """' may be elided by proceedings, on the part of the creditor, during the prescriptive period, to constitute the obligation ; and even after the elapse of that time, the subsistence of the debt may always be proved by the writ or oath of the debtor. In considering how these principles apply in the case of firms Application ot and companies, it must be observed at the outset, that in the case compMTies! of correi debendi, and of persons bound jointly and severally for a * ™ *"^*' debt or obligation, the law is settled that neither the writ nor the oath of one or more of them will prove the subsistence of the debt or obligation against the others after the elapse of the prescriptive 280 PRESCRIPTION OR LIMITATION. [Book II. Difference between co- obligants and partners. Writ or oath stante societate. period (a). To produce this effect, the writ or oath must be those of the whole number. The reason of this is obvious. Although joint- obligants, they are not mutual agents for each other, and have therefore no authority either express or implied to bind each other. Besides, since the law requires the writ or oath of the debtor, it is plain that this can only be satisfied by the joint writ or the deposition of all. Now, the case of partners differs from that of co-obligants in this respect, that partners are, within the limits of the company business, agents for each other. But this agency terminates as regards the public as soon as a dissolution properly notified has taken place. After that event, therefore, the former partners stand to each other merely as co-obligants in relation to subsisting com- pany obligations ; and they should therefore have no power to bind each other in either of the ways mentioned. It would accordingly seem to have become settled law, that after dissolution properly notified to the creditor, a reference to the oath of one of the part- ners is incompetent ; and that the reference must be made to the oaths of all the former copartners (h). The question is somewhat difi'erent when it is asked, whether during the subsistence of the partnership a reference of resting owing of a company obligation can be made to one of the copartners so as to elide prescription. It does not appear that the question in its pure form has ever presented itself for decision. But here also the theory of law as well as practical considerations would seem to indicate a negative answer. It is no doubt true, that until dissolution the mutual agency between the partners continues ; and in so far as that is concerned, their position is different from that of correi debendi. But it seems very certain that the matter in question does not fall within the limits of implied agency. The law gives the creditor the right to refer the question of resting owing to the oath of the debtor only, not to that of the debtor's agent; and therefore if a reference to the oath of the (a) Allan v. Ormiston, 1816, 3 S. 208, note, and Hume 477 ; M'Indoe Y. Frame, 1824, 3 S. 207 ; Houston v. Yuill, 1822, 1 S. 417, 20 F. 0. 614 ; M'Neill V. Blair, 1823, 2 S. 155 ; Laidlaw v. Hamilton, 1826, 4 S. 644. (i) M'Nah V. Lockhart, 1843, 5 D. 1014, specially the opinion of Lord Medwyn, p. 1020; Nisbet's Trustees, 1829, 7 S. 307 ; Easton r. Johnston, 1831, 9 S. 440. See Stewart v. Stewart, 1823, 2 S. 558 ; Mill and Co. v. Camp- bell and Hopkirk, 1849, 11 D. 979, and 1850, 12 D. 618. Chap. XIV.] PKESCEIPTION OR LIMITATION. 281 agent is competent, it can be so only in virtue of some very special contract to that effect, and one sufficient to take the case out of the operation of the statute. Now it cannot be said, that by enter- ing a company or firm a man makes a contract with all who may chance to be its creditors — that he is to be bound in- questions of this kind by the oaths of its agents, viz. his copartners. No doubt when every partner depones, the joint deposition of all must be taken as the oath of the company ; but that does not arise from their being the company's agents to that effect, but from the fact that, taken together, they really constitute the company. Furthermore, it must be observed, that the question referred in these cases of prescription to the oath of the debtor, is not merely the constitution of the debt, but the fact of its subsistence. Now, as any one of the partners is entitled to make payment of a company debt in whole or in part, and may in the hurry of business, or even from improper motives, have concealed his having done so from his copartners, it is impossible to ascertain whether payment has not been made without examining all the partners. If, indeed, the effect of the prescription could be elided by the oath of one or more partners chosen by the creditor, he might perpetrate a gross fraud on the concern, by selecting such partners as referees as he knew were in ignorance of payment having been made ; and it is even conceiv- able that a pretended creditor might collude with some of the part- ners for this purpose (a). E converso a creditor is not limited to the oath of one partner (b). Where the entire management of the business of a firm is Managing entrusted to one partner, his oath will be taken to be that of the firm ; and the same holds true of the managers or other officials in joint-stock or incorporated companies as to all transactions within the sphere of their management. In such cases, the only proper person to whose oath a reference should be made, would seem to be the official who is charged with that part of the business to which (a) See Gilmour v. Stewart's Repre- M'Cleland, 1851, 13 D. 504. See sentatives, 1797, M. 12042. See opi- Kerr y. Bryson, nil, M. 14667. See nions of judges in Nisbet's Trustees, DicksononEvidence, sees. 1572 efsey.; 1829, 7 S. 310, and also in Duncan v. and per Lord Justice-Clerk in Brown Forbes, 1829, 7 S. 821. See also per v. Edgley, 1843, 5 D. 1014. Lord Justice-Clerk in WNab v. Lock- (b) Berrys v. Wight, 1822, 1 S. Aart,' 1843, 5 D. 1021; Cleland v. 402. 282 PRESCRIPTION OR LIMITATION. [Book II. Writ of single partner. Writ of directors. the particular transaction belongs. Where this department of the business is committed to several persons, such as a board of direc- tors, the oaths of all should in general be taken (a). When the reference has been made to the oaths of all the part- ners, it will not be held to be exhausted by the deposition of one of them (b). Yet, on a reference to the oath of two partners as to certain facts respecting a bond due to one of them only by name, but alleged to be for the firm, it was held competent to take the oath of only the creditor named, the other partner being abroad (c). The same observations would seem to apply generally to the writ of partners less than the whole number ; and the following remarks may also be noted in addition. If during the continuance of the copartnery one of the partners execute a writing which is properly a renewal of an old by the creation of a new obligation, it will bind the firm after the original obligation has undergone prescription ; for this is not to be taken as an acknowledgment of a subsisting debt, but as an exercise of the institorial power to bind the firm by contract (d). If, again, a partner retires from a firm, while certain company debts remain unpaid, the writ of the remaining partners would seem sufiicient to elide prescription not only as against themselves who continue to carry on business, but as against the retiring partner : for it must be presumed, that when he left the concern he empowered the re- maining partners to transact for him in relation to unpaid com- pany obligations ; and it cannot be supposed that he had himself paid such obligations, seeing he had ceased to take any share in the management (e). In like manner, the writ of the managing partner of a firm, or the writ of the board of directors or other officials of a company, ought to be taken as the writ of the concern so as to interrupt prescription, for such officials are in reality their factors specially appointed (/). (a) See^jer-LordMedwynin ISrNah V. Lockhart, 1843, 5 D. 1020 ; Gow v. M' Donald, 1827, 5 S. 445 ; M'Gregor V. McGregor, 1860, 22 D. 1264; Campbell v. Ballantyne, 1839, 1 D. 1061 ; Kendal v. Campbell, 1766, M. 12351. See Duncan v. Forbes, 1831, 9 S. 540 ; Fleming v. Ballantyne, 1840, 3 D. 242. (i) Cleland v. M^Cleland, supra. (c) Earl of Traquair v. Burrows, 1815, 6 Paton's App. 99, afiirming judgment of the Court of Session, which is not reported. (rf) See Treacher v. Galloway, 1844, 17 Jur. 55. (e) MiUlkcn v. Lore, 1803,Hume754. (/) Per Lord Medwyn in HPNab v. Chap. XIV.] PRESCEIPTION OR LIMITATION. 283 The books of the firm or company have always been regarded as Company the writ of the concern in questions of this kind; and entries found in them will bind the company, unless forgery can be established (a). The writ or oath of a surviving partner is in general to be taken as that of the copartnery (b). The currency of all prescriptions may be interrupted by action ; inten-uption of ■' ^ '■ •' '■ " prescription. but in the case of partnership, it would seem that the proceedings must be taken against the company as such, and not merely against a partner individually. In the case of Grant v. The Creditors of the York Buildings Company (c), a claim haying been lodged on the company's estate, it was objected to on the ground that it had under- gone the long negative prescription, and that a summons, decree, and horning which were relied on as interrupting prescription were inept, because these had been directed not against the company in the corporate name, under which by its special act it was entitled to sue and be sued, nor even against the directors, who subscribed the contract, but against the governor and directors at the date of the action, some of whom had ceased to hold office before the hom- ing was given. The Court of Session held, by a majority, that the intimation thereby given to one or more of the partners was effectual to save the debt from prescription. On appeal, however, the House of Lords remitted to reconsider the question, but the matter was finally compromised without being judicially determined (d). In this department of partnership law, little assistance can be English law. obtained from the law of England,^the late Mercantile Law Amendment Act, 19 and 20 Vict. c. 97, which does not apply to Scotland, having introduced certain special provisions by which the old rules as to ' limitations ' have been greatly modified. The previ- ous law was, however, in principle at least, not materially different from our own. It may be seen by referring to Collyer, p. 282 ; Lindley, p. 370 ; and Story on Partnership, sec. 324. Lockhart, 1843, 5 D. 1020 ; Smith v. Magistrates of Kirkwall, 1827, 5 S. Falconer, 1831, 9 S. 474. See also 802. See Admissions ; Dickson on Gow V. Macdonald, 1827, 5 S. 445. Evidence, 509 et seq. and 1465. (a) Leslie Y. Magistrates of Brechin, {h) ' Fyfe v. Carfrae, 1841, 4 D. 1808, 15 F. 0. 2 ; Muirhead v. 152. Town of Haddington, 1748, M. 2507 ; (c) 1784, M. 11288. Buchanan v. Magistrates of Dun- {d) 3 Paton's App. 17 (1785). See fermline, 1828, 7 S. 35 ; Ker v. M. 11285. [ 284 ] CHAPTER XV. LIABILITIES OF PARTNERS AND SHAREHOLDERS FOR THE COMPANY OBLIGATIONS. Advantages of a correct theory. Englisli theory. The numerous and important questions which present themselves in this branch of partnership law render it extremely desirable that some consistent and easily intelligible theory should be adopted by which they might be solved, and to which all the principles found in operation might be referred. Many difficulties, however, beset the evolution of such a theory. The partnership relation embraces the elements and principles of many other contracts ; the legal notion of the firm presents important differences in different systems of law ; and it cannot be said that the decisions of the courts have been characterized by unbroken uniformity. It is therefore very doubtful whether, in the absence of a code, any theory of partnership liabilities can be constructed which shall in all cases afford a safe and unerring guide. At the same time, much will have been gained if a theory can be formed which harmonizes with the genius of the legal system to which it is applied, explains the authorities consistently with each other, and thus serves to indicate what is likely to be the view which the courts will adopt in dealing with questions not hitherto determined. According to the theory of the law of England, in so far as any consistent theory can yet be taken as evolved in that system, the liabilities of partners for the company debts and obligations is said to arise out of the doctrine, that they are agents and sureties mutually for each other within the company's sphere of action ; so that as each may bind all, each is liable for the debts and obliga- tions of all. Such a theory is the only one perhaps that can be adopted in a system which ignores the quasi persona of the firm ; Chap. XV.] LIABILITY OF PARTNERS. ^ 285 but although it is capable of being reasoned out to equitable results, it labours under the great disadvantage of being cumbrous and embarrassing in practical operation. The law of Scotland in all probability adopts the same prin- ^^°^^^^^ ciples of agency and suretyship ; but inasmuch as it recognises the separate quasi persona of the firm, it is capable of finding expres- sion in a theory less cumbrous and more easy of application. Ac- cording to our system, the partners are agents and sureties, not of each other, but of the firm ; and the obligations which it contracts by means of their agency bind them individually as its sureties. The Scottish theory is that applicable tp incorporate associa- tions in both systems, with this qualification, that in incorporated associations the guarantee of the shareholders is generally, though not always, restricted within definite limits. But whichever of the two theories be adopted, the practical General aimi- 1T-1T11-- larity of prac- results appear to be the same ; and therefore the English decisions tioal results. on the subject of the liabilities of partners, though not to be taken as decisive, ought to receive great weight in discussing such ques- tions as have not yet received an authoritative solution by our tribunals. Once an obligation has been validly incurred by the company General rales. or firm, it may, after being constituted against the concern, be enforced against the members as guarantees bound conjunctly and severally with their principal. When the obligation is ad factum prcestandum, and can be performed by another, specific performance may be decreed against all or some of the partners. When, again, the firm ought as a person to perform the act, or where performance becomes impossible, damages will be awarded instead of specific performance. An obligation to abstain from acting when that is the nature of the obligation, may be enforced by interdict, as in England, by injunction. Whenever decree has been obtained against the firm, any one of the partners may, at the option of the creditor, be proceeded against for the whole amount of debt or damage decerned for, leaving him to find indemnity against his copartners as best he may (a). And any one of the partners may be charged on decree or diligence directed against the firm (6). (a) See Contribution and Indemnity, and Diligence. (&) See Diligence. 286 UNLIMITED LIABILITY. [Book II. UNLIMITED LIABILITY OP PARTNERS AND SHAREHOLDERS IN FIRMS AND UNINCORPORATED ASSOCIATIONS. Ancient Scottish law. Adoption of English rule. No principle can be said to be better fixed in the laws both of Scotland and England, than the doctrine that every partner of a private firm, and every shareholder of an unincorporated association, incurs unlimited liability to the public for all the debts and obliga- tions of the company. It has sometimes been thought that the common law of Scot- land was originally different from that of England in this respect, and that it recognised a power in trading associations other than such as were incorporate by charter or special act, to limit the liability of their members to the subscribed capital, or even to the amount of their respective shares, after the fashion of the sociitSs en commandite of French law. This opinion does not appear to be altogether without foundation. The old Scotch law of society was borrowed more from continental than from English sources ; and as it formerly gave great prominence to the quasi person of the com- pany, it is not improbable that principles analogous to those of the foreign sociStes en commandite were finding their way into this country, and might ultimately have become settled law had it not been for the infiltration of rules and precedents of English growth. This view receives countenance from the dictum of Lord Kil- kerran, which has not a little embarrassed modern jurists, that the creditor of a company ' cannot pursue one of the partners for a company debt : his action lies against the company only' (a) ; and also from the circumstance that, in the case of Stevenson and Co. V. Macnair, where the defence was stated that the contract limited the responsibility of each partner to his own share, the Court waived deciding on that point, but sustained the other defences (b). But be this as it may, there is no doubt that the English rule of unlimited liability has long been fixed as the law of Scotland. In the case of Douglas, Heron, and Co. v. Hair (c), where every available plea seems to have been stated to save from ruinous liability, the plea of limited responsibility was not again raised ; and (a) 1741, KUk. 518. (J) 1757, 2 F. C. 92, M. 14560 and 14667. (c) 1778, 8 F. 0. 57, M. 14605. Chap. XV.] UNLIMITED LIABILITY. 287 since that period numerous cases have occurred in which such a plea, if tenable, would undoubtedly have been urged. It would seem therefore that the principles of socUUs en commandite, if they ever obtained a footing in this country, have long since been aban- doned. In England, it appears that unlimited liability was always the rule. So much was this the case, that, as far back as 1719, the celebrated Bubble Act (a) declares the holding out of an assurance of limited liability to be a distinguishing mark of an illegal asso- ciation. On many occasions the inflexible nature of this doctrine has been laid down from the bench, and the cases are numerous where it has formed the ratio decidendi (b). The extreme hardship which its application to large trading asso- De-noes to ^ ^., . ° ° attain limited ciations has entailed on the mercantile community, has eventually liability. led to the restrictive provisions of the Registration Acts. But long before the Legislature thought fit to interfere, numerous attempts were made to evade the common law, and reduce the liabilities of shareholders within stricter limits. Such devices, since the Act of 1862 has brought limited liability within the reach of all com- panies consisting of more than six persons, are of less importance ; but they may here be briefly noticed, as, until the registration principle is extended to private firms, attempts will always con- tinue to be made to escape from the unlimited liability of the common law. These devices all depend for success on the principle that it is Piinoipie of. competent for those dealing with a firm to release the partners from unlimited liability, in so far as the transactions of the firm with them are concerned. And the most common form in which this principle is sought to be rendered available, is that of stipulating with, the creditor that he must look to the funds of the company only for payment, and shall have no claim beyond its subscribed capital. If an agreement of this kind can be satisfactorily estab- lished, limited liability as to such transactions as are covered by the agreement may be attained ; yet the onus probandi will rest on the company or partner seeking to found on it as a defence. But as it is evident that the success of such schemes to attain (o) 6 Geo. I. c. 18, s. 18. v. Codd, 2 Car. and Pa. 408 ; Greeu- (b) R. V. Dodd, 9 East 516 ; Keasley wood, 3 De G. M. and G. 459. 288 UNLIMITED LIABILITY. [Book II. limited liability turns solely on the validity of the special contract to shut out the operation of the common law, the special contract must fully cover the transaction or series of transactions it is intended to affect ; and it must be stipulated that the funds of the company as contradistinguished from the separate estate of the individual partners, or better still, some specified fund, shall alone be answerable, otherwise the contract may be held to mean nothing more than an affirmance of the common law, which holds the members to be jointly and severally liable for the company obli- gations (a). , When limited liability is attained in this manner, a court of equity, while giving effect to the special contract, will require the shareholders to pay up so much of the guaranteed capital as has not yet been subscribed (b). The question here under consideration does not appear, so far as the author is aware, to have come as yet under consideration of the Scotch courts ; but if it did, there seems no reason to doubt that effect would be given to the principles of the English decisions, and this all the more readily that the foundation for its application seems already to be laid in the recognition of the company's separate persona. Application of In an early part of the present treatise we endeavoured , to liabUity from explain the well-known doctrine, whereby a person, though entitled s anng profits. ^^ ^^^^ ^£ ^j^^ rights and privileges of a partner, has been held to have incurred all the responsibilities of that relation in a question with the public, by the mere fact of his having participated in the profits. Thus it has been held, that money could not be advanced to a trader on condition of receiving part of the profits as interest without the risk of rendering the lender liable as a partner ; that servants or agents receiving salaries which in any way varied with the returns of the business were in a similar position ; and that any one receiving an annuity out of the profits was in danger of incurring liability for all the obligations of the concern (c). The extent to (a) See the following English cases: M. and G. 180; Hassell, 4 Ex. 525; Halleit v. Dowdall, 18 Q. B. 2 ; Han- Aihenxum Life Soc, 1 Johns. 80. See cock v. Hodgson, 4 Bing. 269 ; Dur- Lindley 304. Mrn's case, 4 K. and J. 517 ; Halkett (6) Talhofs case, 5 De G. and Sm. V. Mer. Trades Association, 13 Q. B. 386. See Lindley 305. 960; Worcester Corn Ex. Co., 3 De G. (e) See p. 53 and p. 47. Chap. XV.] 28 and 29 VICT. c. 86. 289 which this doctrine was carried in some of the earlier cases pro- duced very great hardship, if not absolute injustice ; and as the liability thus incurred was unlimited, there can be no doubt that it operated most unfavourably as a check on commercial enterprise. These consequences of the doctrine, though not probably foreseen when it was first adopted by the courts, speedily made themselves apparent, and endeavours were made to obviate them by drawing a distinction between ' nett profits ' and ' gross returns ; ' but it was soon found that this distinction, which Lord Eldon characterized as ' extremely thin,' laboured under the serious disadvantage of being unintelligible to the great mass of the mercantile community for whose benefit it was introduced. The truth is, the doctrine itself, as commonly received and expressed, was radically unsound, and could never be relied on as a safe principle for decision. The right to share profits is not the reason of a partner's liability for com- pany obligations ; but both the right and the liability are equally consequences, as they are indications, of the existence of partner- ship. By degrees, as the principles of commercial law were more fully elaborated, this came to be better understood ; and as the existence of agency, express or implied, between the firm and an alleged partner came to be recognised as the most trustworthy test of the partnership relation, the old doctrine of liability from partici- pating in profits was gradually circumscribed in its operation, and was expressed in a less questionable form. There is even reason to believe that it would have been ultimately banished from the law in its more objectionable sense, or that at any rate the inequitable principles to which it had given rise would have been abandoned, without the intervention of the Legislature. While, however, the present treatise was going through the press, and after the earlier chapters had already been printed off, an Act was passed, which, though very far from supplying a remedy commensurate with the imperfections of the existing law applicable to private partnership, has at least the merit of removing or palliating some of the more glaring evils which the doctrine in question had been the means of introducing. The provisions of this Act (28 and 29 Vict. c. 86) (a) are Act of 1865. as follows: — In the first place, it declares that the advance of Sharing of money by way of loan to a person engaged in any trade or under- Cders'^and (a) Passed 5th July 1865. vendors of ^ ^ ■' goodwill. T 290 UNLIMITED LIABILITY. [Book II. Provision in lieu of regis- tration. Agents and annuitants participating in proiits. Definition of person. Observations. taking, on a written contract that the lender shall receive a rate of interest varying with the profits, or a share of the profits themselves, shall not of itself constitute him a partner, or render him respon- sible as such (sec. 1) ; and it further declares that the mere receiv- ing by way of annuity or otherwise of a share of the profits of a business in consideration of the sale of its goodwill shall not render the receiver a partner with, or responsible for, the liabilities of the person carrying on such business (sec. 4). These provisions appear to remove the worst consequences of the old state of the law ; but it is obvious that if they stood alone, they would enable unprincipled persons to collude with a firm or an individual trader, so as, under the pretext of participating in profits, to appropriate the only fund available for payment of bona fide creditors. The true safeguard against such abuses would seem to lie in the extension of the principle of registration to ordinary firms. This method, however, has not been adopted ; but the Act endeavours to meet the difiiculty by declaring that in the event of the trader becoming bankrupt, taking the benefit of any act for the relief of insolvent debtors, entering into an arrangement to pay his creditors less than twenty shillings in the pound, or dying in- solvent, lenders under its provisions shall not be entitled to recover any portion of their principal, or of the profits, or interest payable thereon ; and vendors of the goodwill of a business, under sec. 4, shall not be entitled to recover any share of profits, until the claims of the other creditors have been satisfied (sec. 5). By sec. 2 it is declared that no contract for the remuneration of a servant or agent by a share of the profits shall of itself render him responsible as a partner, or give him the rights as a partner with his employer ; and sec. 3 provides that no widow or child of the deceased partner of a trader receiving by way of annuity a por- tion of the profits made by such trader in his business, shall by reason only of such receipt be deemed a partner of or subject to the liabilities of such trader. Lastly, by sec. 6 the word ' person ' as used in the Act is declared to include a partnership firm and joint-stock company, and a cor- poration. In perusing this Act the following observations suggest them- selves : — It is noticeable, in the first place, that it contains no- Chap. XV.] 28 and 29 VICT. c. 86. 291 thing to detract from the power which previously existed under the old law, to make advances to a firm or company in such a way that the lender should stand to it as an ordinary creditor, with- out either incurring the liahilities of quasi partnership, or having the debt postponed in a question with other creditors. If, there- fore, a man chooses to make a loan to a firm, in consideration of receiving a fixed rate of interest instead of a return varying with the profits, he will now, as formerly, be entitled to all the privileges of an ordinary creditor. What the Act does is merely to enable a lender to receive a rate of interest varying with the profits, without thereby incurring the responsibilities of quasi partnership ; but it couples this with the condition that, in such a case, his claims to repayment, either of principal or interest, shall be postponed to those of other creditors who are not entitled to share profits. It is very questionable, however, how far this provision will be taken advantage of in practice. For it is to be observed, 1. That as the lender is expressly declared not to be a partner, he has no right to take an active share in the concern, so as to ensure its being pro- perly carried on, and he may even find it difiicult to ascertain with accuracy what amount of profits are de facto realized; and, 2. That if, from reckless or even fraudulent management, the concern should become bankrupt, his chance of payment may be entirely illusory. Persons lending money on such conditions are in fact most unfavourably situated ; they are very much at the mercy of the borrower, having neither the full privileges of partners nor the full rights of creditors. The provision as to the remuneration of agents and servants, and that as to annuities to the widow and children of a deceased trader, are eminently beneficial ; but the former, it may be observed, is little more than an afiirmance of what was perhaps always law in Scotland. The declaration, that the word ' person ' shall include firms, companies, and corporations, gives the Act a very wide application ; but, on the other hand, it may be questioned whether the use of the words ' trader' and ' trade ' throughout the Act, will not have the effect of restricting, in some respect, the benefit of its provisions within what would have been the case if it had been declared to apply to all undertakings for the purpose of gain, as is the case with the Act of 1862. [ 292 ] CHAPTER XVI. COMMENCEMENT OP THE LIABILITY OP PARTNERS FOR COMPANY DEBTS AND OBLIGATIONS. As the liability of partners for company debts and obligations depends upon their being its sureties for such debts and obligations as it has contracted as a quasi person through the instrumentality of one or more of them as its agents, it follows that such lijibility only commences from the date of its formation. Prior to that event there was no quasi person to contract, no agency by which it could be bound, and no sureties on whose guarantee the public could rely. Hence results the legal principle, that a partner is not liable for any obligations of his copartners, or for any acts they may have done, or any representations they may have made, before the company was formed. Partners liable In private partnerships it often happens that, before the partner- tracted since ship js formed, those who afterwards become partners agree among only. themselves that one shall contribute goods and another money when the concern is set agoing. If, in such circumstances, the goods are furnished or the money is lent by third parties, they have no claim against the partnership when it is formed, but are limited to their recourse against the individual partners with whom they had transacted (a). It makes no difference that the goods furnished or the money borrowed were applied to company pui'poses. The public creditor really contracted, not with the company, but with an individual ; (a) Smith v. Craven, 1 Or. and J. B. 720 ; Wilson v. Whitehead, 10 M. and 500 ; Greenslade v. Dower, 7 B. and C. W. 503 ; Barton v. Hanson, 2 Taunt. 49. GSb; Dickinson Y. FaZpj/, 10 B. and C. See White v. M'Intyre, 1841, 3 D. 141, 3 Ross L. C. 571; Fisher y. Tayler, 334, for opinions of judges adopting 2 Hare 218 ; Saville v. Robertson, 4 T. the English authorities quoted above. Chap. XVI.] COMMENCEMENT' OP LIABILITY. 293 and the company were only concerned to see that their partner made good his contribution, get it how he might. Nay, even if he had been a partner at the time when he entered into the transaction, the company could only be bound where the contract had proceeded directly or by implication on its credit (a). But if it appear that the transaction out of which the obligation Ezoeptions. 1 • • . , 1 11 T 1 • ■■ Agency before arose was entered into with the knowledge and approbation oi formation, those who afterwards became partners, so that they led the creditor to contract on the faith of their responsibility, they will be held liable (b). In such cases, however, the partners are not liable in virtue of the partnership contract, or as sureties for a company debt, but in respect of an agency, express or implied, existing between them before the partnership came into existence (c). Partners may also become liable for the debts and obligations of Ratifloation •' _ ° after forma- their copartners, though entered into before formation of the firm, tion. if after that event such obligations, or the transactions of which they are the consequences, have been adopted, ratified, or homolo- gated by the company. Thus, if the company grant a bill for a debt not contracted by itself, but by its promoters, the partners will be bound (d); and so, a person who became partner with the lessee of a house after the commencement of the lease, and jointly agreed with him to pay additional rent for additional accommodation, was found liable as a partner for the whole rent (e). One of the most important consequences and illustrations of the Promoters. legal principle now under consideration, will be found in the well- established rule of law, that the promoters of joint-stock companies, e.g. railway companies, etc., have no power to bind the company when it comes into existence by its special act or otherwise, for such debts or obligations as they may have contracted while it was yet in an inchoate state, and they were endeavouring to effect its formation. See many examples of this rule in the chapter on Promoters. It need scarcely be observed that the debts or obligations of a (a) White v. M'Intyre, supra ; Jar- (c) See per Lord Eldon in ex parte dine v. Macfarlane, 1828, 6 S. 564 ; Peele, 6 Ves. 602, Coll. 362. Venables v. Wood, 1839, 1 D. 659. {d) Lloyd v. Ashhy, 2 Car. and Pa. (6) Gouihwaite v. Duckworth, 12 138. East 421, 3 Ross L. C. 541. See (e) Hohy v. Roebuck, 2 Marsh. White V. M'Intyre, 1841, 3 D. 334, 434. opinions of judges. 294 COMMENCEMENT OF LIABILITY [Book II. partner joining a firm already formed, can never affect either the firm or its partners, unless guarantee or homologation in some form or other can be established. Do incoming The very important question, whether a pei'son joining an come liaWe for existing firm becomes liable for its debts and obligations already already exist- incurred, is attended vrith much more difiiculty; and it cannot be '"^ said that our tribunals have as yet authoritatively recognised any very distinct theory or set of legal principles of invariable applica- tion in the matter; for though cases in which the question was involved have occasionally presented themselves for decision, they have been so complicated with special circumstances, that the judg- ments pronounced can hardly be taken as exponents of abstract doctrine. If, in order to elucidate the subject, recourse be had to the law of England, numerous authorities will be found dealing with the question both in its pure form and as affected by circum- stances ; but it will be felt that the practical rules there enunciated, though extremely equitable in themselves, cannot be blindly fol- lowed as precedents in Scottish practice, as they are, to some extent at least, based on a theory peculiar to that system, and unknown in the law of Scotland. It is probable, indeed, that in this as in many other instances, a careful investigation will disclose the same equitable principles underlying the technical peculiarities of both systems, and leading by different theoretical processes of reason- ing to similar results in practice. Yet it is necessary, in a question of such importance as that now under consideration, to obtain, as far as possible, clear views of the theoretical principles recognised in both systems, before detennining how far and to what effect the practical rules of the one are precedents of authority in the other. We shall accordingly proceed with the investigation of this question by adverting, at the outset, to such equitable con- siderations as present themselves irrespective of technical reasoning ; we shall next refer to the theory and practice of English law ; and we shall then endeavour to ascertain what the decided cases point to as the Scottish theory, and what are to be taken as its practical consequences. Equitable con- If the mere fact of joining a firm or private company already in siderations. i i ii or^ ■ . , .,.,.,. operation were to be held as sumcient to mvoive a party in liability for all its debts and obligations previously contracted, it might be Chap. XVI.] IN PRIVATE FIRMS. 295 argued with great force, that persons would often be rendered Hable for obligations about whose contraction they were never consulted, and of whose very existence they were ignorant; that creditors would be furnished with a security for which they had never bargained, and which they could not possibly have had in view; and that as the entrance of new partners into the firm does not injure, so there is no reason why it should benefit, a previous creditor. Yet, plausible and equitable as these arguments appear, it may be fairly questioned whether they are not at least balanced by considerations on the other side. He who of his own accord enters an existing partner- ship, without ascertaining its liabilities,, or without obtaining suffi- cient security from the old partners against them, can hardly be acquitted of gross negligence. It must also be noted that, in some cases, the entrance of a new partner may really injure the position of a previous creditor. The new partner, by his very entrance, acquires a right to share profits, and thereby to participate in the very fund intended to meet the obligations of the firm. His contri- bution may indeed equalize this ; but what if he makes no pecuniary contribution, or one that is inadequate or illusory? Furthermore, it must be observed that a creditor's chance of payment often depends very much on the success with which the business is carried on, and this again obviously depends on the prudence and ability of those by whom it is conducted. Yet the incoming partner becomes an agent for the firm like the others ; and while its prosperity may be augmented by his exertions, its want of success or total ruin may be the results of his ignorance or recklessness. Now, as the creditor is never consulted as to the qualifications of the new partner, upon whose admission so much may come to depend, it seems rather inequitable that a stranger should be allowed to enter a firm on any other terms than those of adopting its existing liabilities in common with the other partners. In this conflict of equitable considerations, the law of England English law. has adopted the following rule as a general principle : — No person who is admitted as a partner into an existing firm, becomes by his entry liable to the creditors of the firm for anything done before he became a partner. In the words of Lord Kenyon, 'it would be carrying the liabilities of partners for each other's acts to a most unjust extent, if we suffered a new partner to be bound 296 COMMENCEMENT OP LIABILITY [Book II. Limited in its application. Tendency of the Englisli courts. in this manner for an old debt incurred by other persons' (a). But apart from equitable considerations, this rule is also said to be a consequence of the English theory of partnership ; for as in that system the partners are not considered to be agents for the quasi person of the firm, which indeed the law does not recognise, but are deemed to be agents mutually for each other, it is argued that an incoming partner is not bound by obligations which were contracted by the other partners before they had in any sense become his agents. By referring, however, to the decisions last noted, it will be seen that the rule here stated merely amounts to a presumption in law that the incoming partner had not agreed to undertake such obligations ; and that this presumption may readily be overcome by evidence of facts and circumstances to the contrary. Thus, pay- ment of old debts, accompanied by evident knowledge of the exist- ence of such debts, and benefit derived from the contracts on which they are founded, have been held sufficient to warrant the conclu- sion that the incoming partner had agreed to undertake such pre- vious obligations (b). The tendency of the English courts is undoubtedly to infer this agreement from apparently trivial circumstances (c). But a dis- tinction is made between an agreement to share liability inter socios, and an engagement to incur liability to the public ; and it is held that the former does not involve the latter. For it is argued, that as creditors look only to the credit of those who are partners when the debt is contracted, a private arrangement, whereby an incoming partner undertakes to assist the others in their difficulties, cannot infer liability to those who were no parties to the arrangement (d). Of covirse the signing of the company firm to any document acknowledging the debt will eifectually bind the incoming partner, if this be done with his consent or authority after his accession to (a) Per Lord Kenyon in Shirreff v. Willcs, 1 Bast 48, 3 Ross L. C. 488. See also Catt v. Howard, 3 Stark. 5 ; Young v. Hunter, 4 Taunt. 582 ; ex parte Jackson, 1 Ves. jun. 131, Coll. 362, Lindley 317 ; per Parke, J., in Vere v. Ashhy, 10 B. and C. 297. (6) Ex parte Jackson, 1 Ves. 181 ; ex parte Peele, 6 Ves. 602 ; Helshy v. Hears, 5 B. and C. 504 ; ex parte Whitmore, 3 Deac. 365 ; Cooke's Bank. Law 534 ; Lindley, p. 317. (c) Lindley 317; Coll. 362; Cooke's Bank. Law 534 (8th ed.). {d) Vere v. Ashhy, 10 B. and C. 298, per Parke, J. ; ex parte Williams, Buck 13 ; ex parte Freeman, Buck 471 ; ex parte Fry, 1 Gl. and J. 96. Chap. XVI.] IN PRIVATE FIRMS. 297 the concern ; but the granting of such docviment for an old debt without his knowledge will not bind the incoming partner, but will be held to be a fraud upon him by his copartners (a). According to the theory of Scottish law, the partners are agents Soottisii law. for the quasi person of the firra, and not mutually for each other ; and the liabilities they incur are not for the obhgations of each other, but for those of the firm, in consequence of their being its guarantees or sureties. It may therefore perhaps be argued, that as every man who enters a firm becomes ipso facto guarantee for its obligations, he incurs equal liability for past as for future engage- ments. And this view is probably taken by many as a correct exponent of the law of Scotland. Yet, when examined into, its soundness in theory appears to be as questionable as its results, if rigorously carried out, would appear inequitable in practice ; and we are not aware of any reported case in which it has been formally enunciated, or of which it has formed the ratio decidendi. There is no authority for the proposition, that the quasi person what appears . „ • Ti iU ' £ to be its true of a private firm or company is, like the proper person oi a corpora- theory. tion, possessed of endless endurance ; so that while the composing units change, the company itself remains a continuous legal entity. It would rather appear that every change of membership in a private firm involves, in contemplation of law, the dissolution of an old, and the simultaneous creation of a new, company ; and that consequently the question, whether an incoming partner is to be held liable for debts for which his copartners are responsible as members of the old firm, depends for solution on the previous question, whether the new firm brought into existence by his entry has, by implication or otherwise, taken over the obligations of the old. This view, which has much to recommend it in theory, appears to be the true ratio of the decided cases, to which we shall presently refer, and to lead to much the same practical results as the English rules to which we have just been adverting. To understand this doctrine and its mode of operation, it is best case of an to begin with the case of an individual, who, at first engaged succrededhy singly in the prosecution of some business or trade, afterwards ^fi™*- assumes one or more persons as partners, thereby constituting a (a) Shirreffv. Wilks, 1 East 48. Here one partner with the view of binding a bill for an old debt was accepted by an incoming partner. 298 COMMENCEMENT OV LIABILITY [Book II. firm, by which the business is thenceforth carried on. Here, there are clearly two distinct persons — the individual who originally carried on the business, and the firm by which it was afterwards continued. Now, whether, and to what extent, those joining as partners are liable as such for debts and obligations previously contracted by him with whom they have subsequently become partners, obviously depends on whether, and to what extent, the firm of which they are partners has incurred this liability. This is plainly a question of fact, to be determined by the general .com- plexion of the evidence. Yet there are some presumptions which seem to present themselves at the very threshold of the inquiry. Presumptions. In the first place, with respect to such debts or obligations as weve previously contracted by the individual trader, not in the line of his business, but as a private person, the presumption will be that they were not taken over by the firm. And the same presumption will hold true as regards liabilities contracted by him in some line of trade different from that for the prosecution of which the com- pany was afterwards formed, as e.g. where a man carried on busi- ness both as a merchant and as a farmer, and afterwards assumed partners in the former concern only. This follows from the con- sideration, that if the company had been in existence when such liabilities were contracted, they would have lain beyond its pre- scribed sphere of operation. To overcome this presumption, and establish the contrary proposition, it would be necessary to prove, either that the liabilities in question had been specially taken over, or else that the firm had in some way or other become a quasi partner with the primary obligor in relation to these liabilities. As regards again siich debts or liabilities as, contracted by the original trader before he assumed partners, would plainly have fallen within the sphere of the company's operations if it had then been in exist- ence, the presumption will be that they were taken over by the company at the date of its formation, and the onus of showing the contrary will lie on the company. By the. mere fact of its coming into existence in the supposed circumstances, the company received the benefit (whatever that might be) of the goodwill and of the connection already formed in the line of its business, so that the maxim applies, Qui sentit commodum sentire debet et orius. This presumption will be greatly intensified, if the partner who originally Chap. XVI.] IN PRIVATE FIRMS. 299 carried on the business singly has made other valuable contribu- tions; and in so far as the public is concerned, it may become altogether insurmountable, if it can be shown that the company took over the assets of the former business. In determining ques- tions of this kind, the partnership articles, or other instruments of formation, are entitled to great consideration ; but though conclu- sive inter socios, they cannot for obvious reasons be deemed so in a question with public creditors who had no share in their formation, and were never made aware of their provisions (a). Now if, instead of a company succeeding to an individual, we Case of one 11 c r< T 1 1 1 n • Ti firm sucoeed- take the case oi a new nrm succeedmg to an old, we shall m like ing another. manner have two distinct persons; the only difference being, that in the case supposed they are both qvasi persons. And this appears to take place in contemplation of law, not only where there has been a formal dissolution of an old company, and an equally formal creation of a new, but whenever a change of membership has taken place either by the addition of one or more new partners, or by the resignation of one or more old partners in favour of new (b). In this case, therefore, as in the preceding, the question whether, and to what extent, a new partner is responsible for liabilities contracted before he became a partner, will be solved by inquiring how far the new firm has become liable for the engagements of the old, — in other words, how far the quasi person of the former represents the quasi person of the latter. This, as in the preceding case, is a question of fact, and the same or similar presumptions will apply. Liabilities contracted by the old firm in a line of business other than that pursued by the new, will not be presumed to have been taken over ; and this would seem to apply a fortiori to liabilities arising out of transactions into which the old firm could not have entered without the consent of all the members ; for even if the new partner had been a member of the old firm, his consent would have been necessary to validate such transactions. But as regards all liabilities falling within the same line of business with that pursued by the new firm, the presumption is that they were taken over at formation ; and this presumption will be greatly strengthened, and perhaps rendered insurmountable, if the new firm has acted so (a) See Millar v. Thorburn, 1861, (b) See Kerr v. M'KecJinie, 1845, 7 23 D. 359. D. 494. 300 COMMENCEMENT OF LIABILITY [Book II. Liability in such cases not always in- ferred. as to lead the public to believe that it is still the same concern, as, for example, where it prosecutes the same line of business, and avails itself of the established connection and goodwill of its pre- decessor, and still more when it retains the name of the old firm. In such cases, whatever may have been the real intention, the new firm seems barred by its conduct from attempting to rebut the legal presumption. Where the liabilities of the old firm have been taken over per expressum, as by a clause to that effect in the contract of formation, it is of no consequence whether these liabilities were or were not within the line of trade prosecuted by the new firm ; and this rule would also seem to hold good where the new firm has plainly identified itself with the old, as e.g. by taking over the assets, or representing itself to the world as the same concern. Whenever liability can thus be fixed against the new firm for all or some of the debts and obligations of the old, the new partners will to that extent incur liability as its guarantees or sureties (a). But, on the other hand, it must be observed, that the mere fact of a new firm coming into existence simultaneously with the dis- solution of a concern previously carrying on business, does not per se infer that the one has taken up the liabilities of the other. Nor does the circumstance that the new firm prosecutes the same line of business with the old necessarily affect the question, since every one is free to follow what line of lawful trade he chooses ; and even though the same premises are made use of, this may be of no consequence, since they may have been acquired without the knowledge, and even contrary to the desire, of their former occu- pants. Even though some of the partners of the new firm were also partners of the old, this may go a very small way to infer representation ; since it is quite possible, and is indeed a matter of daily occurrence, for the same individual to be a member of two firms, without in the least degree rendering the one firm liable for the engagements of the other. Nay, it is quite possible that the new company may have the same business connection as the old without inferring representation as regards liabilities, for the (rt) See Ridgway v. Brock, 1831, 10 v. Rose, 1836, 15 S. 236 ; Mercer v. Peddie, 1832, 10 S. 405 ; Mair v. Dick- 1860, 22 D. 1070 ; Alexander v. 1862, 24 D. 323. S. 105 ; M'Keand v. Reid, 1860, 23 D. 846 : Pearston v. Wilson and Mac- lean, 1856, 19 D. 197 ; Buchanan v. ,'). But it must be observed that the share- holder can only be proceeded against by scire facias, which is a dili- gence by way of action, and must set forth the grounds upon which the defendant is sought to be made liable on the judgment obtained against the company. The shareholder may state any relevant defence he thinks proper, and on issue being joined, the case pro- ceeds to trial ; so that it is hardly possible that he can be subjected in payment of what either has been or might be obtained from the company funds (c). Following out this analogy, it should seem that if in Scotland the corporation is not possessed of heritable property, a charge followed by a poinding of the company goods, which proves insuffi- cient to satisfy the debt, will be enough to meet the statutory requirement, and to entitle the creditor to recourse against a share- holder. When the corporation possesses real property, adjudication Analogy in Scotland. (a) Rustrich v. Berhyshire Ra. Co., (J) See Addison v. Tate, 11 Ex. 9 Ex. 149 ; Hitchins v. Kilkenny Ra. 250. See Lindley 453. Co., 15 C. B. 459. See Lindley, p. (c) See previous cases, and Lindley 454. 442. Chap. XVIII.] IN INCORPORATED COMPANIES. 323 must be resorted to ; but if the subjects adjudged be so small that present payment cannot be obtained in this manner, it is probable that the creditor would be allowed to proceed against a shareholder for the balance of his debt without delay. When in Scotland a charge has been given to a firm or copart- Charge must nery, it forms a sufficient warrant for diligence against any one of new to share- the partners, and the only remedy is by suspension when the evil done is perhaps irremediable. Fortunately, there is no authority for extending this very loose and dangerous practice to the case of corporations ; and, therefore, if it be determined to proceed against a shareholder, in consequence of diligence against the com- pany having proved unproductive, a new charge must be given him individually. This procedure supplies, though in a somewhat im- perfect form, the place of the scire facias, by enabling the share- holder to ascertain in a suspension that the corporation property has been fully exhausted, and that he is not called upon to pay more than is really due, before diligence proceeds against either his goods or his person. This liability to contribute towards liquidation of the corpora- Limitation of n , . ,. . 1 . . , T . liability to tion debts is limited m various ways. 1. It is only available after contribute. exhaustion of the company property; 2. It cannot exceed the amount still remaining unpaid on the shares ; and 3. It applies only to the holder of shares, and ceases the moment he has de facto ceased by transfer or otherwise to be a shareholder. It has been decided in England, that it only attaches to such persons as hold shares at the time when execution against the company is found to be ineffectual, and therefore does not apply to such as had relinquished their shares before that time, even though they should have been shareholders both when judgment was obtained and execution had issued against the company (a). It has been Register not decided, however, that the register, though conclusive, is not the dance of only evidence of membership ; and therefore, when a creditor was prevented from inspecting the register, he was allowed a scire facias against a person who he swore was a shareholder to the best of his belief, that belief being founded on information received from the company officials (h). (a) Nixon v Green, 11 Ex. 550 ; {V) Rustrick v. The Derbyshire Ra. Nixon V. Brownlow, 3 H. and N. 686. Co., 9 Ex. 149. 324 LIABILITY OF MEMBERS OR SHAREHOLDERS [Book II. Winding up The mere fact that the company is in the course of being wound does not stop ■■. .n i i -i • i- recourse up, and that the creditor will consequently be paid m course ot shareholder. time, does not preclude him from proceeding against a shareholder as allowed by the statute (a). Companies Act The Companies Act of 1862 provides, as has been already seen, of 1862 for the formation by registration of incorporated companies, both with limited and unlimited liability. With respect to such as are registered with limited liability, it provides that where the limita- tion is by shares, no member shall be required to contribute beyond the amount unpaid on his shares (sec. 38, No. 4) ; and that where the limitation is by guarantee, no contribution shall be required from any member exceeding the amount of his guarantee (sec. 38, No. 5). If the company is not registered with limited liability, the members are liable to be made contributories to the full extent of its debts and obligations (sec. 38). It must be observed, how- ever, that even in this last case the members are in a very different position from that occupied by the partners of an unincorporated firm or company. The latter are liable singuli in solidum, and any one of their number may be proceeded against by a creditor for the whole of such debts as he has constituted against the concern ; whereas the former are only liable as joint contributories, and that liability can only be made available by winding up the con- cern. Therefore no decree against the company will warrant diligence against any of its members. In this respect, members of companies formed under this Act, whether limited or unlimited, are more favourably situated than shareholders in companies formed under the Companies Clauses Act of 1845. Lose of This important privilege may, however, be lost in certain cir- cumstances. 1. If the company carries on business for six months with less than seven members, every member aware of the fact becomes liable singuli in solidum for all debts contracted during that period (sec. 48). 2. Persons signing any bill of exchange, promissory-note, cheque, or order for money or goods, in which the full name of the company is not used as directed, become liable for the full amount unless relieved by the company (sees. 41 and 42). 3. Existing banking companies, which register as limited companies without giving due notice to the customers as required (a) Morisse v. The Royal British Bank, 1 C. B. N. S. 67. Chap. XVIII.] IN INCOKPORATED COMPANIES. 325 by the Act, remain liable to such customers as have not received notice, in the same way as if no registration had taken place (sec. 188). The liability of members to be made contributories does not Termination _ . of liability. terminate by the mere fact of their ceasing to be members. On this subject the statutory provisions are somewhat pecuhar. By sec. 38 it is declared — 1. That no past member shall be liable to contribute to the assets of the company, if he has ceased to be a member for one year or upwards prior to the commencement of the winding up. 2. That no past member shall be liable to con- tribution, in respect of a debt contracted after his membership ceased. 3. That no past member shall be liable to contribute, unless it appears to the Court that the existing members are unable to contribute the amount required to liquidate the com- pany liabilities. It must be observed, that when companies previously existing Liability of are registered under the Act of 1862, whether with or without companies limited liability, the liability of such of the members as were liable to registration. for debts contracted prior to registration is in no way diminished. The only alteration appears to be, that whereas the creditor might formerly have proceeded against them directly on constituting his debt against the company, he must now take the more orderly method of rendering their liability available in a winding up of the concern (sec. 196, No. 5). Companies governed by the Letters Patent Act, 7 Will. IV. 7 Will. iv. and 11 1. 1 • -1 IVict. 0. 73. and 1 Vict. c. 73, though possessed of some of the privileges, hardly deserve the name, of corporations. The liability of the shareholders is limited or unlimited, according to the letters patent conferred on the company (sees. 21 and 24) ; but the Act does not make provision for regular winding up and enforcing contribution by calls equally made. It would therefore rather seem that, in the absence of some provision in the letters patent to the contrary, a creditor who has obtained decree against the company may use diligence against any one of the members, as in the case of an ordinary partnership. [ 326 ] CHAPTER XIX. LIABILITY OF TRUSTEES HOLDINa SHARES IN A PARTNERSHIP OR COMPANY. In dealing with this question, a distinction must be made between private partnerships and public companies. In the former, the rights as well as the liabilities of a member attach to him as an individual specially selected as a socius by his copartners ; in the latter, they attach to the shares, by whomsoever they may chance for the time being to be held. Private fii-ms. In the case of private partnership, persons incur unlimited lia- the^pubUo.^^ bility to the public not only by being de facto partners, but also by holding themselves out as such, or otherwise assuming the respon- sibilities of quasi partnership. In a question, therefore, with the public creditor, there can be no doubt that trustees standing in any of these positions incur a full personal liability. The public have not in general the means of knowing, and they are not bound to inquire into, any latent equities which may exist in the case of persons occupying ostensibly the position of partners (a). Yet if it could be shown, in the case of a particular creditor, that at the time his debt was contracted with the firm he was aware that a partner was such in a fiduciary character only, it would seem equi- table to restrict the recourse to the trust funds. Questions inter When the question of liability arises inter socios, the liability of a trustee to contribute will obviously depend on what arrangement was made between him and his fellows, — whether, in short, they (a) Gordon v. Anderson, 1862, 24 711 ; ex parte Garland, 10 Ves. 110 ; D. 315. See^ej- Lord Kinloch in irons- ex parte Richardson, 1 Buoh. 202. den v. BucJianan, 1864, 2 Macph. 704; M'Laren on Trusts ii. 12. per Lord Justice-Clerk, same case, p. SOCIOS. socws. Chap. XIX.] LIABILITY OF TRUSTEES. 327 agreed to accept him as a partner in his personal or in his fiduciary character. The presumption of law would seem to be for the former, and the onus of proving the latter will lie on the partner (a). In public companies the liabilities of trustees taking shares will, Public com- in a question with the world, fall to be regulated by the same Questions with principles as we have already seen to be applicable in the case of private partnerships ; that is to say, they will be held to have bound themselves as ordinary shareholders, whatever liabilities that rela- tion may involve. When the question arises inter socios, the presumption for per- Questions inter sonal liability will be almost as strong as when it arises with the public creditor. The reason of this is, that in all that concerns transference of shares or admission of members, the shareholders have as little to do as the public. The management of such matters is committed to the directors, who must act in accordance with the constitution of the company. Now, the power to admit members with a liability limited to that of trustees, is in fact a power to admit some persons with privileges not possessed by the others, or rather with a right of indemnity against the others for all losses and debts of the concern beyond the amount of the trust funds, — a power which never can be presumed, and which could only be validly exercised where it was specially conferred in the instrument of formation. It would therefore seem that an arrangement by which the liability of certain shareholders is inter socios limited to that of trustees, can only be validly entered into when the directors have special powers to that effect, or when it has received the sanction of the whole body of shareholders, or at least of a general meeting (6). When shareholders are entered on the register as trustees eo nomine, this is intended merely to mark the property vested in them as belonging to the trust estate, and is quite consistent with their personal liability either to the company or its creditors (c). (a) See per Lord Justice-Clerk in principles involved in questions of Lumsden v. Buchanan, supra, and this nature, 1864, 2 Macph. 709. See opinions of the judges generally. also Redfearn v. Sommervail, 1813, 5 (5) Lumsden v. Buchanan, as revd. Paton 707, 1 Dow 50 ; and Allan v. on appeal June 22, 1865 ; and see, in Turnhull, 1834, 11 S. 487, 7 W. and S. particular, the opinion of the Lord 281. Justice-Clerk, which was adopted in (c) Per Lord Westbury, Oh., in the House of Lords, and which con- Lumsden v. Buchanan, supra. See tains a full exposition of the legal also, on this subject generally, Wight- 328 LIABILITY OF TRUSTEES. [Book II. Liability of cestui que trtistent. Liability to indemnify trustee. Statutory provisiona. It has been held in England, that the cestui que trust of shares in an unincorporated company is liable as a quasi partner to the creditors of the company (a) ; but in corporations, this liability, whatever it may be, attaches to the ostensible holder of shares only (b). Even in this latter case, however, the beneficiary may be made a contributory, if it can be shown that he procured shares to be placed in the name of nominees of his own, with the fraudu- lent purpose of saving himself from liability (c). Beneficiaries, or cestui que trustent, may in some cases be liable to indemnify the trustee, but with that the company have in general no concern (d). The latter may, however, incur this lia- bility by immixing themselves in the transaction, or by unreason- able conduct. Thus A. purchased railway shares, and took the certificates in name of B. He afterwards pledged them with a bank in security of advances, representing B. as merely his trustee. A. became insolvent, and B. being required by the railway company to pay calls, requested the bank either to pay them, or to deliver the certificates to him, so that he might sell them. The bank having refused to do either, it was held that they were identified with A., and liable to relieve B. (e). By the Companies Clauses Act, 1845, sec. 21, it is provided that the company shall not be bound to regard any trust, whether express, implied, or constructive, to which any of the shares may be subject ; and by sec. 30 of the Companies Act of 1862 it is provided, that no notice of any trust shall be entered in the register in the case of companies registered in England or Ireland. The provision, however, does not extend to Scotland, — a peculiarity much to be regretted. man v., Monroe, 1 Maule and Sel. 412 ; King V. Thorn, 1 T. R. 488 ; ChUds v. Morrins, 2 Br. and Bi. 0. 460 ; Bradley V. Heath, 3 Sim. 543 ; Appleton v. Binks, 5 Bast 148 ; Labouchere v. Tupper, 11 Mo. P. C. 198 ; Liverpool Bank v. Walker, 4 De Gex and G. 24 ; Newcastle Bank Co., 17 Beav. 203 ; Armstrong, 1 De Gex and Sm. 665; Hall, 3 De Gex and Sm. 80, and 1 M'N. and Gord. 307; Pluenix Life Assur. Co., Houre's case, 2 J. and H. 229. (a) See Goddard v. Hodges, 3 Tyrw. 209. (i) Newry Ra. Co. v. Moss, 14 Beav. 64. (c) Costeiys case, 2 De G. F. and J. 802; Alexander's case, 9 W. R. 410; Budd's case, 10 W. R. 51 ; Hatton's case, 10 W. R. 318 ; Be Pass's case, 4 De G. and J. 544. {d) See Buniis case, 2 De G. F; and J. 275. (e) Barron v. National Bank, 1852, 14 D. 565. [ 329 CHAPTER XX. LIABILITIES OF PARTNEES AND DIEECTOKS CONSIDEEED AS AGENTS AND TRUSTEES FOR THE COMPANY. We have now considered somewhat fully the liabilities which part- origin of this ners and shareholders incur for such obligations as are constituted against the firm or company of which they are members ; but there is another class of liabilities which may be incurred both by part- ners and managing officials, not only to the company but to the world, and which arise from the fact that partners in private firms and managing officials in larger associations hold the character of agents and trustees for the society. These liabilities have already been noticed as they incidentally presented themselves ; but as the subject is one of considerable importance, it is proposed to examine the principles by which it is regulated more connectedly and in detail in the present chapter. We shall first consider these liabili- ties as they arise in the case of partners, and shall then advert to the corresponding liabilities which may be incurred by directors and other managing officials. I. LIABILITIES OF PARTNERS. We have already seen that the partners of a private firm par- Twofold take of the characters both of trustees and agents for the concern : partners." Trustees, to whose care its interests are confided ; Agents, by the intervention of whom it acts and transacts with the public. The consequence of this is, that partners may incur a twofold liability ; inter socios on the one hand, and to strangers on the other. 1. If they abuse the powers of agency or trust with which they are charged, so as to sacrifice the common interest, or to involve the society in losses or liabilities ; if they set at nought the interests of 330 LIABILITY OF PAETNEES, ETC., AS [Book II. Liability to the company, or inter socios. Liability^of partners benefiting themselves at the expense of the company. the concern in order to further their own, or appropriate to them- selves that which either belonged to or ought to have been secured for the company ; if they neglect their duties as partners to such an extent as amounts to a fraud on their copartners, and thereby seriously injure the common interests ; — in these and the like cases they become liable to indemnify the company, and may be pro- ceeded against at its instance, or at the instance of any partner who deems himself aggrieved. 2. If a partner, taking advantage of his connection with the company, enters into transactions with a stranger, which, from being ultra vires of his agency, or for some other reason, do not bind the company, and the stranger thereby suffers loss or damage, the partner incurs a personal liability to the stranger, provided the latter have not been privy to a fraud sought to be practised on the company. 1. lAahility to the Company. — In the English case of Bury v. Allen (a), it was stated by the Court : ' Suppose the case of an act of fraud, or culpable negligence, or wilful default by a partner during the partnership, to the damage of its property or interests, in breach of his duty to the partnership ; whether at law compellable or not compellable, he is certainly in equity compellable to compen- sate or indemnify the partnership in this respect.' The case of Campbell v. Campbell (&) is also a strong example of the application of the principles here enunciated. In that case, one of the part- ners of a distillery company having been found liable in Excise penalties in consequence of the others having without his knowledge engaged in illicit distillation, they were held bound to indemnify him in full. And where, again, a partner exceeded the limits of his agency, and thereby involved the other partners in heavy respon- sibilities, .they were found entitled to relief in full against him (c). Partners have no right to take advantage of their connection with the company so as to obtain for themselves advantages, or make acquisitions which, if secured at all, ought to have been acquired for the company (d). If they do so, they must either communicate to the company the advantages or property so acquired, (a) 1 Coll. 604. 415 ; M'llreaili v. Margetson, 4 Doug. (by 1834, 12 S. 573 ; 1 Bob. App. 4. 278. (c) Robertson v. Southgate, 6 Ha. (d) See Wallace v. Campbell, 1. S. 640. See also re Webb, 2 B. Moore 53 and 509, 2 S. Ap. 467 (1824) ; 500 ; Stalsmidt v. Lett, 1 Sm. and Q. and antea, p. 183. Chap. XX.] AGENTS FOR THE COMPANY. 331 or else they must indemnify the company to the full extent. This was expressly laid down in the late case of Pender v. Henderson and Co. (a), in which the authorities, both Scotch and English, were fully examined. It was stated from the bench to be an in- disputable principle of partnership, 'that a partner is bound to communicate to his copartners any benefit or advantage obtained by him in the affairs of the copartnery ; ' and ' that a partner, in this respect, stands on the same footing with a trustee or tutor, or other person holding a confidential position.' In cases of this kind the offending partner or partners may be Modes of proceeded against not only at the instance of the company or redress. firm, but in the name of any single partner who considers himself aggrieved. If this were not so, a majority of wrong-doers might set a minority at defiance (b). If the offending partners are in the minority, it seems to be the proper course to raise the action in the company name ; if, again, those seeking reparation be a minority, the action should be libelled in their individual names. But it must be observed that the firm itself ought in no case to be made the defender, however numerous the wrong-doers may be ; for this would not only be incorrect in theory, but would render the pursuers themselves contributories in any decree for damages which might be obtained: in other words, the decree being obtained against the firm, the pursuers could only claim payment under deduction of their in- dividual liabilities to contribution as being themselves partners. 2. Liability to the Public. — If a person represent himself to be Liabffity to the agent of another, and in that character induce a third party to ^ "''sers. contract with him, and it afterwards turn out that the contract cannot be enforced against the alleged principal in consequence of its being ultra vires of the agency, it is plainly equitable, that the agent should indemnify the other party for any loss or damage which he may have thereby sustained ; and the case will be all the (a) Pender v. Henderson and Co., FawcettY.WMtehouse,l'R.a,ndM.lS2; 1864, 2 Maoph. 1428. See Feather- Beck v. Kantorowicz, 1857, 3 K. and J. • stoneliaugJi y. Fenwich, 17 Ves. 298 ; 230 ; HahTcin v. Hog, 1715, Rob. App. Alder v. Fouracre, 3 Swa. 489 ; Clegg v. 147. See antea, pp. 183 et seq. Fishwich, 1 M. and G. 294 ; Clements v. (&) Campbell v. Camphell, 1834, 12 Hall, 24 Be. 333 ; Inglis v. Austine and S. 573, 1 Rob. App. 1. See Tulloch v. Others, 1624, M. 14562 ; Ersk. iii. 3, Davidson, 1858, 20 D. 1045, aff. 1860, 20 ; 2 Bell's Com. 614 ; Coll. 118-122 ; 22 D. (H. of L.) 7, 3 Macq. 783 ; Leslie^ Bentley v. Craven, 1853, 18 Be. 75 ; Reps. v. Lumsden, 1851, 14 D. 213. 332 LIABILITY OP PARTNERS, ETC., AS [Book II. Bona fides not a complete defence. Liability foi* inducing others to enter the concern. stronger if it shall appear that the alleged agent was himself the principal (a). This doctrine applies in its fullest extent to the case of partners, or of persons representing themselves to be partners, and inducing the public to enter into transactions with them as acting for the company. In such cases the partner is generally- guilty of a fraud, intended to be practised not only on the public, but also on the firm, in order to obtain goods, money, or other ad- vantages for his own purposes, on the faith of a credit which he has no right to adhibit. On this ground alone he is justly liable in reparation ; and even if, in consequence of his implied agency, the firm should be held bound, this would not relieve him of personal liability ; it would only transfer the jus exigendi from the public to the firm (&). Yet it sometimes happens that a partner enters into a transaction of this kind in perfect bona fides, imagining, for example, that he possesses more extensive powers to bind the firm than is actually the case, or thinking that the firm will ratify or adopt his proceedings. In such cases, if the transaction is ulti- mately found not to be binding on the firm, there seems to be no good reason to suppose that a stranger who has suffered thereby shall not have his claim of indemnity against the partner. He was entitled to rely on the representatioij|S of the partner ; and though the latter may have committed an innocent mistake, he has his own precipitancy to blame for entering into a transaction without ascer- taining beforehand the limits of his authority. When the partner and the stranger with whom the transaction was entered into have been both engaged in seeking to practise a fraud on the company, the stranger will have no redress against the partner ; for it is a well-established principle in law, that there can be no contribution among wrong-doers. Persons frequently induce others to enter into partnership with them, or to join a firm or company of which they are members. When, in doing this, they make false and fraudulent representations as to the advantages to be derived from entering into the partner- ship or joining the concern, or conceal liabilities or other disadvan- (a) See pp. 245-6. (6) See, as to this, Finlayson v. Braidbar Quarry Co., 1864, 2 Macph. 1297 ; RossY. Young and Others, 1831, 9 S. 275 ; Hadden v. Ayres, 5 E. Jur. N. S. 408, Q. B. ; Barker v. Allan, 5 H. and N. 61. Chap. XX.J AGENTS FOR THE COMPANY. 333 tages under which the concern labours, the contract may in general be reduced at the instance of the party aggrieved (a). But in addition to this, he has also a claim against the partner by whose misrepresentations he was deceived, to be indemnified for all loss and damage he may have thereby sustained (&). TI. LIABILITY OF DIRECTORS. The principles which we have been now considering as regu- lating the liability of partners considered as agents and trustees for the firm, to be made responsible to their copartners and the public for the consequences of their malversation or unauthorized acts, apply with perhaps still greater force in the case of directors and other officials to whom the management of public companies is entrusted, u'hese functionaries are in a very special manner charged with the duty of watching over the interests of their com- panies, and are expected to do their utmost to further their wel- fare ; and in so far as the public are concerned, they are inexcusable if they do riot acquaint themselves with the nature and extent of the powers with which they are entrusted. The cases have accord- ingly been very numerous in which directors and other managing officials have been found liable to indemnify the company or the shareholders on the one hand, and the public on the other, for the consequences of their improper conduct. In examining these autho- rities we shall, as before, consider first the liability of directors, etc., to the company or shareholders, and next their liabilities to the world. 1. Liability of Directors, etc., to the Company or the Shareholders. Liability to —The nature of this Hability is similar to that which exists between '"^ ■ *=°'"P^°y- an agent and his principal, a servant and his employer, beneficiaries and trustees ; and it may be briefly stated as follows : — If by negligence, recklessness, dereliction of duty, or unwarrantable con- duct on the part of these officials, the company or the shareholders are involved in loss, or their interests are sacrificed, they become liable to be sued for indemnity at the instance of the company, or of any shareholder who is aggrieved thereby. In Campbell v. Campbell, before referred to, the manager of a liiustratious. (a) See 'Dissolution.' 556; Seddon v. Connell, 10 Sim. 58 (&) See Stainbank v. Fernky, 9 Sim. and 79, and previous cases. 334 LIABILITY OF DIRECTORS, ETC., AS [Book II. distillery company was found liable in indemnity to a partner for the liability incurred by him in consequence of the company having been engaged in illicit distillation ; and the fact that the other partners had approved of the act v(ras found to be no defence (a). The case of the North of Scotland Banking Co. v. Thomson (b) may also be referred to as an instance of a director of a bank being sued by the company for malversation in ofKce, on the allegation that he had taken advantage of his position as director to act pre- judicially to the interests of the company, on several occasions, when his own private interest was concerned. The report is important, as containing the form of issues adjusted to try the question. The following averments may here be instanced, as affording illustrations of what will be held relevant to maintain an action at the suit of the company or the shareholders against directors for malversation : — That they had been guilty of abuse of power and fraud in the management of the business ; that they had failed or neglected to perform the duties of management, and had delegated them to the manager, while by holding office they professed to be discharging these duties themselves ; that they had made reckless advances of enormous extent, by way of discounting bills to parties who were unworthy of credit (c). Charges must But it must be observed, that since much is necessarily confided and'specific. to the discretion and judgment of directors, every allowance will be made for mistakes or errors in judgment, where there is no good reason to suspect corrupt motives or culpable dereliction of duty. Hence it is not every proceeding or omission which, judging after the event, may appear to have been improper, that will ground liability. The acts or omissions complained of must be of a kind virhich plainly indicates fraud or culpable dereliction of duty; and to make the action relevant, their nature and the circumstances under which they took place must be clearly and specifically averred (d). Liability to 2. Liability of Directors, etc., to the Public. — As directors and other managing officials of public companies are not only their (a) 1834, 12 S. 573. See M'L. and (rf) Same cases jandsee/H^Zisv. Dom- Rob. 387, 1 Rob. 1. ylas, 1861, 23 D. 561 ; Tulloch. v. David- (h) 1854, 16 D. 1011. son, 20 D. 1045, 1319, aff. 1860, 22 D. (c) Western Bank v. Bairds, 1862, (H. of L.) 7, 3 Macq. 783 ; Nat. Ex. Co. 24 D. 859 ; Collins v. North British v. Drew, 1860, 23 D. 1 ; Leslie v. Lums- Banh, 1850, 13 D. 349, 1 Macq. 369. den, etc., 1856, 18 D. 1046 ; MacAlister the public. Chap. XX.] AGENTS FOR THE COMPANY. 335 accredited agents, but the parties to whom the whole of the execu- tive management is entrusted, the public as well as the shareholders are entitled to expect that these officials will faithfully discharge their duties, and make no representations regarding the company or the state of its affairs which are inconsistent with the fact. It has accordingly been held, that when directors published fraudulent reports as to the state of the company affairs, calculated to raise the credit of the concern, and to induce strangers to become share- holders, they were liable in damages to any one purchasing shares and suffering loss thereby, even although the shares should have been purchased neither from the company nor from any of them- selves who prepared the reports. And to this effect it was further held to be sufficient publication, that the reports in question were presented to or circulated among the shareholders (a). To ground this liability, it is not necessary that the directors shall be proved to have been guilty of direct fraud ; it is enough that they have been chargeable with gross neglect of duty in making proper in- vestigations into the state of the company affairs, and with reporting notwithstanding to the shareholders that a proper investigation had been made (&). Nor does it make any difference that the parties imposed upon were already shareholders, and had only been induced to involve themselves still further by the purchase of additional shares ; for the management of the company being entirely confided to the directors, a shareholder is in a matter of this kind as much a stranger as one of the public (c). It sometimes happens that directors or other managing officials enter into contracts with strangers as for the company, but which, from being ultra vires of their agency or of the constitution of the company, do not bind it. If, in such circumstances, the stranger suffers loss or damage, the directors by whom he was misled are justly liable to him in indemnity (d). This, however, would hardly V. Alexander, 1843, 5 D. 580; Maxton Johnstone, as revd. 1862, 24 D. (H. of V. Muir, 1845, 7 D. 1006 ; Graham v. L.) 10, 4 Maoq. 424. North British Bank, 1849, 11 D. 1165; (i) Nat. Ex. Co. y. Drew, 1860, 23 Baird v. Boss, 1855, 2 M'Q. 61. D. 1 ; Bobbie v. Johnstone, supra ; (a) Tulloch V. Davidson, 1858, 20 Inglis v. Douglas, supra ; Cullen v. D. 1046, aff. 1860, 22 D. (H. of L.) Johnstone, supra. 7 3 Maoq. 783. See also Dobbie v. (c) Cullen v. Johnstone, supra. Johnstone, 1859, 21 D. 624 ; Inglis v. (d) M'llwham v. Johnstone, 1852, Douglas, 1861, 23 D. 561 ; Cullen v. 14 D. 322. 336 LIABILITY OF DIRECTORS. [Book II. Company need not be made a party to the action. Directors "not copartners. All involved need not be called. Duties of directors after retirement. hold good in the case of shareholders ; for it might be truly said that they were bound to know the rules and constitution of their own company. Any shareholder or stranger who suffers from the malversation of directors has a title to sue them, and it is not necessary that the company should be made a party to the action either as pursuer or defender (a). Yet where, by the constitution of the company, the evils complained of may be redressed without judicial proceedings, a shareholder will not be allowed to single out individual directors and sue them, before availing himself of the other modes of remedy provided for this purpose (b). But as directors are not in that character partners with each other, they are not liable for each other's malversations or dere- lictions of duty, unless they can somehow or other be identified therewith, or have been guilty of such supineness or negligence as permitted the others without check to act in the manner complained of (a). All, however, who have joined in an act of fraud will be held liable (d). On the other hand, the party aggrieved, whether a stranger or a shareholder, is not bound to call as defenders all the directors who have been guilty of the acts complained of. They are each liable singuli in solidum, and if cast in damages must find their relief against their associates as best they may (e). It may here be noticed, that the duties of directors do not always terminate by their renunciation of office. This is especially true of such duties as are incumbent on them as trustees for the company. Thus a director, in whose name as trustee for the company its property had been vested, was held bound after his retirement from office to concur when required in a conveyance of such property, though he was found entitled to have the fact of his being no longer a director mentioned in the deed (/)• (a) Tulloch V. Davidson, Dohhie v. Johnstone, Jnglis v. Douglas, Cullen v. Johnstone, and Western Bank v. Bairds, supra. Qj) Orr V. Glasgow, etc., Ra. Co., 1857, 20 D. 332, aff. 1860, 3 Macq. 799, and 22 D. (H. of L.) 10. (c) Inglis v. Douglas, Cullen v. John- stone, Western Bank v. Bairds, supra. (d) Inglis v. Douglas, and other cases, supra. (e) Tulloch V. Davidson, supra ; Leslie v. Lumsden, 1851, 14 D. 218 ; Western Bank v. Douglas, etc., 1860, 22 D. 447. (/) Stewart v. Gloag, 1837, 16 S. 86 ; aff. 1839, M'L. and R. 721. BOOK in. EIGHTS AND OBLIGATIONS OF PAETNERS AND COMPANIES. CHAPTER I. PRELIMINARY. The rights and obligations of partners or shareholders, and of firms Division of or public companies, are of two kinds — those inter socios, and those obligations. with the world. They are likewise distinguishable into two classes with reference to their nature and origin : one class arising out of the very nature of the partnership relation, and being recognised and enforced as such by the common law; the other emanating directly from public authority, destined for some special purpose, and attaching to some particular association. When men associate themselves into private firms or public Principle of companies for the acquisition of mercantile gain, their object is to obUgations obtain the largest possible return for their contributions, at the least possible risk of liability or loss. This principle infers the existence of certain rights and corresponding obligations inter socios, of which it forms at once the ground and the measure; and if steadily kept in view, it affords a ready means of ascertaining what these rights and obligations are, and in what manner they are to be exercised and enforced. Thus, to shares in the management, and to have free access to the books of the company, to call his associates to account for their intromissions, to check their malversation, to terminate the partnership relation, and to apply for judicial aid to 338 RIGHTS AND OBLIGATIONS OF [Book III. In corpora- tions. protect his interests if other measures fail, are rights so necessary to secure a partner in his due share of profits and to protect him against loss or absolute ruin, that it is very plain no partnership which did not confer these rights on its members in some form or other, would ever be entered into by a man of ordinary prudence. But since, on the other hand, the success of the common under- taking, and consequently the profits of each member, depend in a most important degree on the mode in which these rights are exer- cised, and since they are capable of being abused so as to defeat the very ends they were intended to serve, the same principle points out the mode of their exercise, and requires that they shall be used with discretion, conformably to the nature of the undertaking, in accordance with the provisions of the contract, and in such a way as not to injure or compromise the general welfare. In unincorporated associations these rights and obligations are regulated by the common law, which is the ordinary form in which the principle above enunciated finds expression ; but independently of this, they generally form the subject of special provisions in the company contract, defining the manner in which they are to be exercised conformably with the nature, purpose, and constitution of the association. As we shall afterwards see, they are also sometimes limited both as to extent and mode of exercise; but when this is the case, the Courts will not enforce such limitations on the implied rights of a partner so as to afford a cover for fraud or to defeat the ends of the partnership. In corporations, the rights and obligations of the members are almost always regulated by the charter or special act ; but where the incorporating instrument is silent, they fall to be determined in all respects as in unincorporated associa- tions, except in regard to the power of dissolution. Eights and The rights and obligations of companies and their members in obligationa in ° • i i i • • i i relation to the relation to the public are determined by the same principles and rules of the common law as regulate the dealings of individuals with each other ; but in order to apply these properly, it must be borne in mind, that companies being possessed of a separate person, their rights and obligations are in many respects distinct from those of their members ; and that certain rights and obligations attach to partners or shareholders as such, which but for this character they would not possess. No conventional provisions in the instrument Chap. I.] PARTNERS AND COMPANIES. 339 of formation, extending, limiting, or modifying the rights and obli- gations of unincorporated companies or their members, are of the smallest avail in questions with the world ; the publicity necessary to form the basis of a contract to that effect being wanting. To give effect to such provisions, they must be shown to have been known and assented to by the party who is sought to be brought under their operation. The privileges, however, of companies and their members may be extended, and their liabilities restricted in relation to the public, to any extent, by the action of the Legislature, and within certain limits by that of 1;he Crown. Special acts, charters, and registration, are the familiar modes by which these ends are attained. But it must be observed, that as such privileges and exemptions are encroachments on the common law, and con- sequently on the general rights of the public, they will be strictly construed, and rather against than in favour of the corporation. When a company is vested with special powers or privileges by Exclusive public authority, certain corresponding obligations are necessarily aggressive imposed upon it, either expressly or by implication ; for as such P°^®'^^' powers and privileges are encroachments on the rights of the public at large, they are never conferred except for the purpose of benefit- ing the public in some special and important manner. In order to make good their rights, and to maintain their inte- Eights to sue • 1 i-ii> ••T-n and defend. rests, partners and companies have the right ot appearing judicially, and of suing and defending, not only in questions with the public, but also in matters arising inter socios. In this respect the laws of England as applicable to private firms and unincorporated associa- tions are highly defective, and often powerless to attain the ends of justice ; but from the recognition of the separate person, difficulties of a similar kind seldom present themselves in this country, though they may occasionally be found. In both countries, the rights and privileges possessed by corporations either at common law or by special statute prevent the occurrence of such anomalies. In proceeding with the examination of the various matters which Mode of treat- form the subject of the present book, we shall begin by treating ™^ ^™ ^^''' generally of the rights and obligations of partners and shareholders in questions inter socios, and in relation to the world ; we shall then consider the rights and obligations of companies in reference to their members and to the public ; and having thus given a general 340 RIGHTS AND OBLIGATIONS. [Book III. view of the subject, we shall proceed to examine more particularly and in detail, such rights and obligations as well as such doctrines as from their importance demand special attention. In conclusion, we shall endeavour to explain the doctrines applicable to exclusive privileges and aggressive powers, and examine the statutory provi- sions upon this subject furnished by the Consolidation Acts. The rights of companies and their members to sue and be sued, and the legal measures by which their rights and obligations may be enforced, will form the subject-matter of the following book. [ 341 ] CHAPTER II. GENERAL VIEW OP THE RIGHTS AND OBLIGATIONS OF ' PARTNERS AND SHAREHOLDERS IN RELATION TO THE COMPANY, TO EACH OTHER, AND TO THE PUBLIC. As we have already seen, the rights and obligations of partners or Division of shareholders are twofold, viz. those inter socios, and those in a ° '' question with the public. We shall proceed to consider them in that order. I. INTER SOCIOS. The principle which lies at the root of all such rights and Principle of obligations, and which must in dubio regulate and define them, is, oMgations as we have already stated, the following: that as persons associating for the piirpose of mercantile gain have for their object to obtain the largest possible return for their contributions, at the least possible risk of loss or liability, they must be held to possess, in I'elation to each other, all the rights, and to be subject to all the obligations, which the attainment of that object necessarily implies. The manner in' which this principle finds expression in the rules of the common law, in statutory enactments, and in conventional arrangements or usages, will be explained and illustrated in the present chapter, and generally throughout the remainder of the present book. One of the most important rights which a partner can possess, Eight to compel and one indeed which in itself may be said to embrace all the oontra™°of*° others, is that of insisting that the agreed upon conditions and *°™*'i°"- provisions of the contract, whatever these may be, shall be rigidly adhered to and faithfully carried out. It consequently forms a 342 EIGHTS AND OBLIGATIONS OP [Book III. Power to alter entrusted to majorities. Delectus persons!. Partners bound to contribute as stipulated. fundamental principle of partnership law in all its ramifications, that no change can be made in the original contract, whatever its form may have been, against the wishes of a single partner or member. Hence any partner may object to an alteration in the purposes of the undertaking, the nature of the business, the sphere of action within which it is to be carried on, the amount of capital, or the mode of management in essential points, and to any change of membership in private firms (a). Provisions are often contained in the instrument of formation, by which a majority of the members are empowered to make considerable alterations in some or all of the matters referred to ; and when this is the case, resolutions to that effect, passed in conformity with the prescribed rules, will bind dissenting minori- ties. Yet this does not form any exception to the principle above stated ; for the entrusting of such powers to majorities forms, in the case supposed, a part of the original contract to which all have assented. In private partnerships, the success of the company business often depends as much or more on the personal qualities of the individual partners, than on the amount of their pecuniary contri- butions; and whatever skill or aptitude for business a man may possess, the fact of his being personally disliked by his copartners would effectually prevent that harmonious working together which is an essential condition of success in all combined operations. It is therefore a fundamental principle of the law of private partner- ships, that no person can be introduced into the concern against the will of a single member {b). Hence heirs and executors have no right, as such, to become partners with the socii of a deceased partner (c) ; and death or bankruptcy of partners, and the marriage of a female partner, operate a dissolution in the absence of a stipulation to the contrary ; for the effect of such incidents would otherwise be to introduce a new partner without the consent of the others {d). Every partner must make good his stipulated contribution of (a) Sclanders v. Kennedy, 1833, 11 Company, 20 D. 327, aff. 1860, 3 S. 279. See ako ante, pp. 72, 191-4 ; Macq. 799. Edinburgh and Newhaven Railway (6) 2 Bell's Com. 620. Company v. Sprott, 1842, 4 D. 1459 ; (c) Ihid. Orrv. Glasgow, Airdrie, etc., Railway (d) See Dissolution. Chap. II.] PARTNERS INTER SOCIOS. 343 money, goods, property, connection, etc.; and every incoming partner, such premium or other consideration as he may have covenanted to pay. Stipulated deposits and calls, made in conformity with the provisions of the contract, form obligations against such as join public companies (a). Failure or refusal to fulfil such obligations will ground action against the offending partner at the company's instance, and may afford good reason for dissolution in private copartneries. In public companies, and also in ordinary trading firms, it Is often provided that offences of this kind shall warrant the company to exercise the right of expulsion or forfeiture of shares, or to withhold dividends until the obligation is fulfilled (6). The fact of entering into partnership may sometimes amount Waiver of pre- . . J. ./ vious claims to a waiver of all previous claims between those who become inferred from 1 c M • constituting partners, buch an arrangement may be a mode oi contribution ; partnership. or a discharge of his debt may have been the premium in respect of which the debtor agreed to become a partner with his creditor. When such questions present themselves, they ought to be deter- mined by a jury (c). All partners, whether active, latent, or dormant, are entitled Sharing in , . , T !• management. to take part in the company management, to have tree access to and inspection of the books and accounts, and to receive full information from their copartners on every particular relating to the affairs of the company. Even in public companies these rights can never be eliminated, though they may be subjected to such rules and restrictions as have been assented to by all for the general good. But in the exercise of these rights, shareholders no less than partners are entitled to do nothing which may compromise the interests of the company (d). In all matters relative to the common Interest, partners are Bmajides. bound to conduct themselves towards each other with the utmost fidelity and good faith. They are bound to the company as an agent is to his principal ; they must not benefit themselves at the expense of its interests, and they have no right to publish its affairs in a way detrimental to its welfare (e). (a) Rights and ObUgations of Com- 1831, 5 W. and S. 16 ; 7 Bligh N. S. panies. 432, as reversing 7 S. 650. (6) See p. 153 et seq. (d) See postea, ' Right to share in (c) Thomson v. CampheWs Trustees, Management,' p. 385. (e) See p. 329 el seq. 344 EiaHTS AND OBLIGATIONS OP [Book III. Improprieties of this kind subject the offending member in damages, and in private firms may perhaps form a good ground for dissolution (a). Partners are bound to communicate to the com- pany any profits or advantages which they may have secured by making use of its capital, interest, or connection (b). Accounting. Partners are entitled to call their fellows to account for their whole intromissions with the company property and assets, and are bound to answer in like manner at the suit of the company. In actions of this kind between the company and its partners, the difficulties and embarrassments which arise in the law of England from the non-recognition of the quasi person, are very little felt in Scotland (c). Contribution Partners are, moreover, entitled to be indemnified for all losses an m enmity. jjj(,,jj,j,g(j jjy tliem on account of the concern, under deduction of the share falling to themselves; they are likewise entitled to be relieved of all obligations which they have undertaken for the company with the consent or approval of their copartners ; and to be repaid all advances or loans which they have made to the company over and above their own stipulated amount of con- tribution (d). Rigtt to A partner is entitled to interest on advances or loans of money interest on , « p . . advances. made by him to the firm ; for he is entitled to deal with it as with a third party ; and it is said that he may demand interest on advances made in bona fide for partnership purposes, when this was done without the direct authority, and even without the knowledge, of his fellows (e). This would seem, however, to be law only in special circumstances (/). It would seem that a partner is entitled to interest on dividends not paid within a reasonable time, unless he has forfeited this claim by mora or acquiescence (g). This may, however, be otherwise fixed in the contract or incorporating instru- ment. It is very doubtful whether interest is due ea; lege on unpaid (a) See antea, p. 182 et seq., and (e) See Denton v. Rodie, 3 Camp. Pender v. Henderson and Co., 1864, 2 496 ; ex parte Chippendale, 4 De G. Macph. 1428. Mac. and G. 36 ; ex parte Bignold, (6) Last references, and p. 330. 22 Beav. 143 ; CoUyer, p. 231. (c) See ' Actions between Partners (/) See Stevens v. Cook, 5 E. Jur. and the Company.' N. S. 1415. (d) See ' Contribution and Indem- (g) Ballandene v. Glasgow Union nity,' and Shaw's Bell's Prin. s. 370. Bank, 1839, 1 D. 1170. Chap. II.] PARTNERS INTER SOCIOS. 345 money contributions until they have been constituted by action. This, however, is often regulated by the company contract (a). The right to share profits is so necessary to the very existence of Eight to profits the partnership relation, that, except in very special circumstances, it cannot be forfeited. The same is true of dividends in public companies; and therefore clauses and provisions of forfeiture, which are frequently inserted in the special acts or other instruments of formation (h), will be very strictly interpreted. Unless in the case of a special contract, partners are not entitled No right to mi • remuneration to any remuneration for services rendered to the company (c). This for services. rule, however, does not seem to apply to public companies formed into proper corporations. The company being a separate person, is alone entitled to demand Bights of part- • J. • J. • T 1 • f IT- TT ner to sue for satisfaction or its debts, rights, and claims. Hence no partner, nor company debts, any number of partners, are entitled to sue as individuals for that which is due only to the company (d) ; and hence, though partners are entitled to raise action in the company name, the action will be dismissed if it is found that they are doing so without' authority, or to serve their own purposes (e). This holds good not only in ques- tions with the public, but in questions between the partners them- selves. Thus, one of the two partners of a company was held not entitled in his own name, or in that of the company, to insist in a summary process against his copartner for removing him from a house, into possession of which he had been put as a partner and manager of the company, though the house was vested in the person of the partner pursuing for behoof of the company (/). For the same reason, if, pending an action by a company, dissolution takes place, a partner wishing to carry it on must show that he has been authorized to do so by the company (g). It must be observed, however, that when the ground of action When groimd of action affects is something which affects the partner personally as well as the the partner individually. (a) See last case, and ' Calls.' Matthews, 1834, 13 S. 94 ; Scotland v. (&) See ' Right to share Profits and Walkingshaw, 1830, 9 S. 25 ; Balfour Dividends,' p. 376, and p. 154. v. Kerr, 1856, 18 D. 619 ; Shotts Iron (c) See p. 414. Co. v. Hopkirk, 6 S. 399 ; Malcolm y. (d) Scottish Emigration Society v. West Lothian Ra. Co., 18d6, IBS. 8S7. Borland, 1855, 18 D. 239. (/) Rutherford v. Finlayson and (e)' See Scottish Emigration Society Finlayson, 1828, 7 S. 10. V. Borland, 1855, 18 D. 239 ; May v. (g) Gibsonr. Stewart, 1822,1 S.352. 346 RIGHTS AND OBLIGATIONS OF [Book III. Partner may- sue after disso- lution. Riglits of part- ner retiring without dis- solution. company of which he is a member, he will be entitled both to sue and defend in his own name, whether the company chooses to appear or not. Thus, when a libel reflects directly on one partner, and through him against the firm, he will be entitled to sue as an individual, without prejudice to an action at the instance of the company; but the conclusions of the first action must be for indivi- dual damage ; those of the second, for injury to the company (a). And it should seem that, though the libel affects a partner more particularly as such, he is still entitled to an action in his own name (h) ; and so also where a random charge is made against a company without specification of individuals (c). An action lies by a shareholder against a person who slanders the title to his shares, and thereby causes him damage (d). After dissolution of a firm by death, the survivor may sue in the company name for its outstanding debts (e) ; and if the executors of the deceased partner are dissatisfied with the fitness of the survivor for this duty, their remedy appears to be to apply to the Court for the appointment of a judicial factor (/). But the executors-creditors of a deceased partner have been found to have no right to sue for a debt said to be due the company, though the sole surviving part- ner was stated to have disclaimed all interest therein (g). When a partner retires without a dissolution, he is entitled to compel his former partners, who still continue to carry on the con- cern, to fulfil all the obligations which they undertook to him, as conditions of his retirement; e.g. payment of an annuity, and indemnity against liability for former or subsequent company obli- gations. These claims are not merely good against his former partners, but against any other firm coming in their place (h). (a) Harrison v. Bevington, 8 0. and P. 708 ; Haythorne v. Lawson, 3 C. and P. 196 ; Forster v. Lawson^ 3 Bing. 452 ; Solomon v. Medex, 1 Stark. 191. (V) Harrison v. Bevington, supra; Robinson v. Marchant, 7 Q. B. 918. (c) Le Fanu v. Malcolmson, 1 House of Lords Cases 637. See Blaikie v. Duncan, 1857, 19 D. 983; North of Scotland Banking Co. v. Duncan, 1857, 19 D. 881. {d) Malachy v. Soper, 3 Bing. N. C. 371. (e) Boyd's v. Fraser's Trs., 1822, 1 S. 231 ; 2 BeU's Com. 638 ; Fraser, 2 K. and J. 496; Allen, 4 Madd. 464. (/) See 'Judicial Factor,' and 'Con- sequences of Dissolution.' (g) Roger v. Jamieson, 1838, 16 S. 418. (h) Alexander v. Clark, etc., 1862, 24 D. 323. Chap. II.] PARTNERS INTER SOCIOS. 347 Though in general a discharge to the company is a release to claims between the partners, yet this applies only to company obligations; and ESiYWuals. therefore an agreement between partners to grant 'full and com- petent discharges to each other, in full of all bonds, etc., as indivi- duals or partners,' was held not to embrace a bond by one partner to another relating to a private transaction between themselves (a). It is often of great importance to partners that they should Eight to have the power of dissolving the company when they find that it is not working profitably, that a further continuance may involve them in heavy liabilities, or that the realization and division of the property is of importance for their individual interests. Hence, in all partnerships at will, every partner may operate a dissolution when he thinks fit ; and in partnerships for a term, there are cer- tain cases in which, for the common good of all, the Court will interfere to wind up the concern (6). When, as is frequently the case, the contract of formation provides that a joint-stock company shall be dissolved on the occurrence of certain circumstances, such as loss of a certain amount of capital, any partner is entitled to raise an action of declarator for this purpose, when the contemplated event has taken place (c). A partner may lose the power of insisting in his rights by Loss of rights. delay amounting to acquiescence, or by doing something which involves ratification of the acts of his copartners. Thus when a contract of copartnery provided that, on balances being struck and subscribed at certain times, they should be ' probative,' it was held in an action between representatives of partners, raised nearly thirty years after the last doquet, that as the subscriptions were admitted, though not adhibited at the times fixed, the balances were obhgatory (d). But the right of claiming an accounting between partners will not readily be held to have been passed from ; so an executoi: of a deceased partner was held entitled, fifteen years after the company accounts had been adjusted and settled, to prove that a certain heritable bond which had not been included in the accounting had belonged to the copartnery, and to claim a share (a) Crawford v. M'Cormick, 1827, 1850, 13 D. 349 ; aff. 1852, 15 D. 2 W. and S. 569. (House of Lords) 29, 1 Macq. 369. (5) See Dissolution. (d) Maclaren or Law, etc., v. Lid- (c) North British Bank v. Collins, delVs Trs., 1860, 22 D. 373. 348 RiaHTS AND OBLiaATIONS OF PARTNERS [Book III. Compensation and retention. therein (a). It is very doubtful whether any other than the long prescription applies to questions of accounting inter socios (b). A partner may lose his right to share profits by having disclaimed the transaction out of which they arose (c). Acquiescence, when clearly estabhshed, will prevent partners from availing themselves of the provisions even of a special act. Thus where the partners of a canal company authorized a committee to raise money on the security of the rates, which the committee did, and expended the money on the canal, they were afterwards held barred by acqui- escence from insisting that the rates should be applied primo loco in extending the canal in terms of their special act (d). In one case, where a partner was found liable in interest on unpaid instalments, no interest was allowed him on dividends which he had allowed to lie over without claiming them (e). The principle of this decision, apart from the special circumstances, admits however of grave doubts. Partners may plead compensation in mutual claims between themselves and their companies, and in some cases also in questions with the public. They have also a right of retention or lien on the partnership property, for the purpose of having it applied in pay- ment of the debts of the firm ; and also on the free assets, for having them applied in payment of what may be due the partners respectively, after deduction of what is due by them to the firm. Both these subjects will be afterwards fully considered (/). II. IN QUESTIONS WITH THE PUBLIC. Liability for company obligations. Not for debts of copartners. Partners and shareholders are liable to the public for obligations constituted against the company ; and where this liability is not limited by public authority, it extends to their whole means and estate (g). But it applies to company obligations only, and has therefore nothing to do with the private debts of the copartners. (a) Listers. Sutor, 1811, aff. 1815, 6 Pat. App. 78. (6) See M^Inlay and Co. v. M'Inlay and Co., 1851, 14 D. 162. (c) Pollock's Representatives v. Buchanan, 1824, 2 S. 581, and 1825, 4 S. 39; aff. 1826, 2 W. and S. 143. (d) Houston V. Lady Montgomerie, 1821, 1 S. 179. See also Dixons v. MonUand Canal Co., 1830, 8 S. 826 ; aff. 1831, 5 W. and S. 445. (e) Ballandene v. Glasgow Union Bank, 1839, 1 D. 1170. (/) P. 415 et seq. ; p. 424 et seq. (g) See antea, pp. 286 et seq. Chap. II.] IN QUESTIONS WITH THE PUBLIC. 349 Thus, when two parties engaged in a joint adventure for the pur- chase of real property, the title of which was taken to them jointly as pro indiviso proprietors, while the profits and burdens were to be shared equally between them, it was held that one of the partners who had made a super advance was preferable on the price of part of the property, which was sold to personal creditors of the other, although they had used inhibition (a). A person, however, cannot take advantage of this principle so A. partnership as to escape from liability for debts already contracted, by entering entered into so 1 . . 1 . n V 1 T as to escape into a partnership with conjunct and confident persons, in such from private cases the partnership is a mere blind. Thus, in a question with the poinding creditors of a husband, it was held that a contract of copartnery between his daughter, wife, and father-in-law, to carry on the business of a tavern formerly belonging to and carried on by himself, and an assignation by the father-in-law to the partners of an execution of poinding twenty years previously of the partner- ship effects, did not divest the husband of these effects in a question with creditors (b). When an obligation is undertaken by a company jointly with Partners liable other persons, whether companies or individuals, the company, in a attaching to . 1 . T T -Til 1 c • • T • 1 1 "^^^'' company. question with its co-obligants, is uable only tor its individual pro rata share, and hence the liability of the individual partners is limited to that extent. Thus, when a bond for a cash-credit was signed by a company firm and the two individual partners, and also by another party and the principal for whose behoof the credit was granted, it was held, in a question of relief, that there were only two cautioners, and that the individual partners and the company were not liable each in a separate share, but together only in one share (c). In their dealings with the world, partners must conduct them- Partners are ° _ -^ bound to deal selves with truthfulness and fairness. Thev must not represent honourably , 1 . ,, . with the the state of the concern as other than it really is, so as to induce public, strangers to become members (d), or to transact with it under (a)Keithr.Penn,lSiO,2Y).6'd3.See (c) Christie v. Keid, 1826, 4 S. alsoXocHartv.jFemer,1842,4D.1253; 372; and see Erskine v. Cormack, Pearson, Wilson, and Co. v. Broch, 1842, 1842, 4 D. 1478. 4D.1509;itisifcT.£Z&r, 1843, 5D. 1279. (d) DoMly. Stevens, 3 B. and C. (V) Breichan v. Muirhead, 1810, 623 ; Gerhard v. Bates, 2 E. and B. Hume 215. 476 ; Denton v. Great Nor. Ra. Co., 5 350 EIGHTS AND OBLIGATIONS OF PARTNERS, ETC. [Book III. erroneous notions of its credit or prospects (a) ; neither must they represent their agency as more extensive than it really is, so as to lead the public to enter into transactions with them which are not binding on the firm, or which it will not ratify or adopt (6). Such proceedings render them justly liable in reparation and damages. What partners undertake to do, they must to the best of their ability perform ; and therefore, if they assign their shares to third parties, neither they nor others in their right can treat the assigna- tion as a nullity, because some of the conditions of transfer which might have been required in a question with the company have not been complied with (c). On the other hand, if persons hold themselves out as being partners, by statements, by acts, or even in some instances by significant silence, and thereby lead the public to contract with the company on the faith of their credit, they become liable for its obligations, whether they be actually partners or not (d). E. and B. 860; Watson y. Charlemont, (c) See Hill v. Lindsay, 1847, 10 12 Q. B. 856. See antea, pp. 256 D. 78 ; Macandrewy. Robertson, 1S28, and 332. 6 S. 950 ; Drummond v. Hunter, 1884, (a) See p. 334. 12 S. 620. See antea, pp. 142-3. (6) See p. 331. (d) See pp. 57, 52-3-4. [ 351 ] CHAPTER III. RIGHTS AND OBLIGATIONS OF COMPANIES. AccOEDiNG to the laws both of Scotland and England, corpora- General tions are artificial but proper persons, and may therefore hold rights and contract obligations in relation not only to the public, but to their own members, irrespective of the units of which for the time being they may be composed. According to the law of Scotland, unincorporated associations formed for the purpose of gain, such as partnerships and firms, are also to certain effects distinguishable from their merabers, and are therefore said to be possessed of a quasi person, which is capable, though in a much more limited sense than the proper person of a corporation, of acquiring rights and incurring obligations. In England, those rights and obligations are said to be the joint and several rights and obligations of the partners. Practically, the English theory produces in the general case a mere peculiarity in the language employed ; and as regards this branch of the subject, will often be found a useful mode of testing the real state of questions inter socios, even in Scottish law. But there are some respects in which it produces legal rules essentially at variance with the Scottish system, and indeed with common justice. This is particularly the case in legal proceedings (a). EIGHTS AJSTD OBLIGATIONS IN EELATION TO FOEMATION. When two or more persons have agreed to enter into partner- Euforoementof ship, or where a firm already existing has agreed to receive a to eTterXto stranger as a new partner, an action ad factum prcestandum would generaUy'^'^ not lie in Scotland, nor, unless in some exceptional cases, would a ^'^''o^P^t™*- (a) See ' Actions between Partners and the Company.' 352 EIGHTS AND OBLIGATIONS [Book III. suit for specific performance be competent in England (a). The reason of this is, that as partnership is a contract of exuberant trust, and can only be carried on successfully when the partners give their best and united exertions for the furtherance of the common good, nothing but disastrous results could be looked for from compelling persons to become partners against their will, however groundless or fanciful their objections might be. Besides, in many cases an enforced partnership would be practically a nullity : if the agreement had been for a partnership at will, it would be dissolved by the recalcitrant partner as soon as formed ; and even where it was for a term, he would generally have it in his power to make his copartners only too glad to be free of the connection. The remedy, therefore, in all cases of this kind is by action of damages, in which the jury will award such reparation for breach of agreement as, in the whole circumstances, appear to meet the equity of the case. Exceptions. Some exceptions, however, appear to exist to this doctrine. The chief of these appears to be where parties have become bound to enter into a partnership, the effect of which, when formed, would be to produce important legal consequences to themselves or third parties, and without which these consequences could not be made to emerge (b) , Declaratory There is a class of cases where the existence of the partnership procedure . t ■ generally meets relation IS a necessary preummary to the enjoyment of certain rights such cases. , , . . or emoluments by one or more ot the partners. Thus, where profits have been realized on a joint adventure, or on an estab- lished business, and a party claims his share in the one, or seeks to be found entitled to participate in the management and emolu- ments of the other, it is plain that the establishment of the partner- ship relation must generally form a condition precedent to such claims. In England, where the action of declarator is unknown, such cases, if they do not resolve into mere claims of damage, are made the subject of suits in Chancery, in which specific performance of an agreement to enter into a contract of copartnery is decreed, (a) Downs v. Collins, 6 Ha. 418 ; Beav. 294 ; Stacker v. Wedderburn, 3 Ilervey v. Birch, 9 Ves. 357 ; Maxwell K. and J. 893. v. the Port-Tenant Co., 24 Beav. 495 ; Q>) Hill v. Wylie, 1865, 8 Macp. Sheffield Gas Co. v. Harrison, 17 541. See Warner v. Cunniiighame, 1798, M. 14603 ; and Lindley 796. Chap. III.] OF COMPANIES. 353 so as to form the basis for the after settlement of the respective rights of parties (a). In Scotland, the remedy in -such cases is generally by action of declarator, in which the nature of the part- nership is ascertained ; and this may be coupled with- conclusions of count and reckoning, of damages, or of interdict, as the circum- stances of the case may require. In the case of companies, whether corporations or not, in which Case of larger ., .7 Til 11 i> associations. the only contribution is money or credit, and where the element of delectus personce has consequently no existence, there does not ap- pear to be the same objection to enforce the giving or accepting of shares when an agreement to either effect has been established. Cases have often occurred in England, where a court of equity has decreed specific performance of a contract for the purchase and sale of shares (6). Since the Common Law Procedure Act of 1854 authorized the issue of mandamus to enforce implement of any duty in the performance of which the applicant is interested, this writ has been used to compel a chartered company to register as a shareholder a person entitled to be so registered (c). In Scot- land the same objects would be accomplished by an action of declarator, with conclusions ad factum prcBstandum, perhaps in some cases by summary petition to the Court (d). But while the Courts will thus enforce an agreement to receive Company not ° yet lormed. a shareholder in a company already formed, it would rather seem that they will not interfere to compel implement of a contract for the allotment and acceptance of shares or scrip in a company yet to be formed (e). The reason of this distinction is obvious. If a public company has been once formed and in operation, the addition of some members whose only contribution is money will make little if any practical difference ; whereas when the company is yet to be (a) England v. Curling, 8 Beav. (c) Norris v. Irish Land Co., 8 B. 129 ; Webster v. Bray, 7 Hare 159 ; and B. 512. Robinson v. Anderson, 20 Beav. 98 ; {d) See Brown v. Syme, 1834, 12 S. Dale v. Hamilton, 5 Hare 369. 536. (6) Shaw V. Fisher, 2 De G. and S. (e) See Bluck v. Mallalue, 27 Beav. 11 ; Wynne v. Price, 3 De G. and S. 398 ; Columbine v. Chichester, 2 Ph. 310 ; Duncuft r. Albrecht, 12 Sim. 27 ; Sheffield Gas Co. v. Harrison, 189 ; Wilson v. Keating, 5 E. Jur. N. 17 Beav. 294 ; New Brunswick .and S. 815, M. ■ R. ; Cheale v. Kenward, Canada Ra. Co. r. Muggeridge, 1 Dr. 3 De G. and J. 27. and Sm. 363 ; Oriental Steam Nav. Co. V. Briggs, 8 E. Jur. N. S. 201. 354 RIGHTS AND OBLiaATIONS [Book III. Forms and rules of admis- sion pleadable only by the company. Damages for breach of agreement to become a partner. formed, it may be of as much importance as in the case of ordinary partnerships to have the power of rejecting individuals whose influence or antecedents may prove seriously detrimental to the formation and prospects of the future company. Besides, to compel men to go on to form a joint-stock company in- common with per- sons whose connection they wish, rightly or wrongly, to avoid, appears as inequitable a proceeding as to force those into partner- ship who are distasteful to each other. When certain rules or forms are established by a company to be observed at the admission of new members, or at the transfer of shares by purchase or assignment, their non-observance can be founded on by the company only, and cannot be taken advantage of by the other parties to the transaction as a means of avoiding their contract (a). It is often made a rule in companies, that members intending to dispose of their shares must give the first offer to the company. This rule will be enforced where pleaded by the company (6), but cannot be founded on by the vendor or vendee (c). The company may, however, be estopped from founding on non-compliance with such regulations or conditions of admission or transfer, by waiver, by acquiescence, or by conduct inferring consent (d). Breach of agreement to become or assume a partner grounds a claim of damages to the party aggrieved (e) ; but he must libel and prove the nature and terms of the intended partnership (/). Failure to implement an agreement to get a man introduced into a firm forms also a relevant ground of action (g). An agreement to take shares in a company and pay deposits thereon gives a right of action for their recovery to the company itself, if it existed and was contracted with at the date of the agreement ; and to the pro- (a) Weatherly v. Turnbull, 1824, 3 S. 61 ; East Lothian Bank v. Turnbull, 1824, 3 S. 63. See antea, pp. 142-4. (J) Sir James Gibson Craig v. Aitken, 1848, 10 D. 576. See antea, pp. 142-3. (c) MacAndrew v. Robertson, 1828, 6 S. 950. See antea, pp. 142-4. (d) Craig v. Douglas and Co., 1781, 2 Paton's App. 575, in addition to cases on pp. 143-4. See also Morison V. Smith, 1719, Robert. App. 249 ; Drummond v. Hunter, 1835, 7 TV. and S. 564, aff. 12 S. 620. (e) Walker v. Harris, 1 Anst. 245 ; Gale V. Leckie, 2 Stark. 107 ; Andrews V. Garstin, 10 C. B. N. S. 444. (/) Figes V. Cutler, 3 Stark. N. P. 0. 139. ((/) M'Neill Y. Reid, 9 Bing. 68. See also Morrow v. Saunders, 1 Bred, and Bing. 318. Chap. III.] OF COMPANIES. 355 moters, or those of their number with whom the agreement was made, if the company was not then formed (o). A sum of money, termed a premium, is often stipulated to be Premiums, paid as a consideration for taking a man into partnership, or for assuming him into a firm already existing. Payment of this may be enforced by action, at the instance of the parties to whom it was covenanted to be paid, provided the agreement has been carried out, or the pursuers are ready and willing to do so (b). If the contract of copartnery be reduced on the head of fraud When contract on the part of those entitled to the premium, they cannot claim it mium cannot if unpaid, and if paid it must be returned (c). If the partnership must be ' were stipulated to be for a specified term of endurance, and it has been brought to a premature close by the fault of the party to whom the premium was to be paid, it should seem that payment cannot be enforced either by him or his trustee in bankruptcy, or at least the counter claim of damages may be set off against it pro tanto ; but if it has been already paid, the claim of the injured partner is not for repetition, but for damages, which will be assessed with reference to the whole circumstances of the case (d). In one case, however, where, after the partnership had continued for some time, the partner who had received the premium brought about a dissolution by making the other bankrupt, the latter was found" entitled to repayment (e). Where the partnership is terminated by mutual consent, or by circumstances which import no blame to either party, the English courts have latterly adopted the rule of apportioning the premium, whether paid or not, according to the ratio between the time which the partnership has lasted, and the term for which it was agreed to endure (/). If no term of endur- ance has been stipulated for, the receiver of the premium seems sufficiently to fulfil his part of the agreement by the mere constitution of the partnership relation, and will not be liable in (a) Woolmer v. Tohy, 10 Q. B. 691 ; (d) See previous cases. Duhe V. Forbes, 1 Ex. 356. (e) Hamil v. Stokes, Dan. 20. (6) See Walker v. Harris, 1 Anstr. (/) Hirst v. Tolson, 2 Mac. and G. 245. 134 ; Bury v. Allen, 1 CoU. 689 ; Astle (c) Pillans v. Harkness, CoUes 442 ; v. Wright, 23 Beav. 77 ; ex parte Clifford V. Brooke, 13 Ves. 131 ; ex Bayley, 9 B. and C. 691 ; Freeland v. parte Turquand, 2 M. D. and D. 339. Stansfield, 2 Sm. and G. 479. See CoU. 698, and Lindley 68. 356 EIGHTS AND OBLIGATIONS [Book III. Deposits. In what oir- camstances they must be returned. repetition, however early it may be brought to a close (a). Yet this does not apply to cases of fraud. ; and where a person has taken another into partnership, he cannot, as soon as he has received the premium, dissolve the concern and retain the money (b). If a number of persons make deposits in the hands of a com- mittee for the purpose of carrying out a proposed undertaking, such as the formation of a joint-stock company, some of their number cannot withdraw their deposits against the will of the others, until the undertaking in which they were all concerned has either been abandoned or become plainly impracticable (c) ; and even then they are only entitled to the balance which remains on their deposits, after deduction of the expenses or outlay already incurred in efforts to form the company (d). But if the deposits were made for the purpose of forming a company for certain objects and upon certain conditions, and no such company is formed, the subscribers will be entitled to recover the full amount of their deposits (e). In questions of this kind it is obviously a matter of primary importance to ascertain what were the exact terms of the agreement, and for what specific purposes the deposits were made. For if it appear that a company not differing in essentials from that proposed, or exhibiting greater variance than was within the discretionary powers entrusted to the promoters, has been de facto formed, a subscriber has no right to recover his deposit. And again, if expenses have been incurred in endeavour- ing to establish a company not differing from that proposed except in the degree mentioned, the depositors can only recover what balance remains (/). Hence the contract must be specifically libelled, and the documentary- evidence by which it is established and defined must be before the Court (g). (a) See Akhurst v. Jackson, 1 Swanst. 85. (6) Featherstonhaugh v. Turner, 25 Beav. 382. (c) Baird v. Ross, 1855, 2 Macq. 61, reversing judgmentof Court of Session. See Forth Marine Insur. Co., reported in H. of L. as Burness v. Fennel, 6 Bell's App. 541, and 2 H. of L. Cases 497 (1849). (d) Garwood v. Ede, 1 Ex. 264 ; Baird v. Ross, supra; Jones v. Harri- son, 2 Ex. 52 ; Aldham v. Brown, 7 E. and B. 164. («) Nochels V. Crosby, 3 B. and C. 814 ; Walstdb v. Spottiswoode, 15 M. and W. 501 ; Ward v. Londeslorough, 12 0. B. 252 ; Coupland, 2 Ex. 682. (/) Antea, p. 72. (jr) Vollans v. Fletcher, 1 Ex. 20 ; Steadman v. Arden, 15 M. and W. 587 ; Clarke v. Chaplin, 1 Ex. 26. Chap. III.] OP COMPANIES. 357 For the same reasons as those above stated, an agreement to When payment 1. 1 11.11111°^ deposits pay deposits on shares cannot be enforced when the scheme has cannot be proved abortive, unless where expenses for which the stipulated deposits were liable have been bona fide incurred (a) ; and where the company has not started by the stipulated time, a person who has agreed to pay deposits will not thereby necessarily escape liability, for the failure may be in part owing to his own delay to implement his agreement (h). Where a member of a corporation has made a payment to it Erroneous which was illegal in the office-bearers to exact, the mere fact of his having sanctioned its exaction from others, while in ignorance of its illegality, will not bar his right to have it returned when the impropriety is discovered (c). EIGHT TO DISPOSE OF COMPANY PEOPEETY. Unincorporated companies may dispose of their property in any Power of ,.. 1.11 1 companies to way they see fit, so long as this is not objected to by a member dispose of the founding on some prohibition contained in their contract of forma- property. tion. The case is different with corporations. These associations cannot alienate property which they hold in virtue of their incor- porating instrument, and the possession of which is absolutely necessary for the ends and purposes for which they have been incorporated. Thus it is ultra vires of a burgh to sell the patronage of a church forming part of the common good of the corporation (d). It would be in like manner incompetent for a railway company to sell the undertaking, or part of the lands which they have obtained under their aggressive powers, and which are necessary for the purposes of their traffic (e). For the same reason it was held incompetent for a creditor of the governor of the York Buildings Company to retain the seal and charter of the company in security of debts due by the company to him (/). (a) Duke v. Andrews, 2 Ex. 290. (e) Dundee Union Bank v. Dundee (b) Duke v. Forbes, 1 Ex. 356; and Newtyle Ra. Co., 1844, 6 D. Aldham v. Brown, 7 E. and B. 164. 521. (c) Porteous v. Cordiners of Glas- (/) York Buildings Co. v. Robertson, gow, 1830, 8 S. 908. 1805, Mor. No. 2, Hypothec, 13 F. 0. (d) Wallace v. Magistrates of St 492. Andrews, 1824, 2 S. 629. 358 RIGHTS AND OBLIGATIONS OP COMPANIES [Book III. EIGHTS AND OBLIGATIONS IN SUEETYSHIP AND GTJAEANTEE. Guarantee anel suretyship. When an indi- vidual trades as a company. "Where parties are really dis- tinct. The rights and obligations of companies in relation to guaran- tees and cautionary obligations are radically the same with those attaching to ordinary individuals. In some respects, however, dis- tinctions and peculiarities exist which must here be noticed. Where an individual trades under the name of a firm of which he is the sole partner, guarantees and cautionary obligations granted by him in the company name bind him individually (a). E converso, if a guarantee be given for furnishings to be made to the fictitious firm, it will cover furnishings made to the sole partner. Thus, where J. W. carried on business under the firm of J. W. and Co., of which he was the sole partner, it was held that a guarantee for furnishings to J. W. and Co. covered furnishings to J. W. (6). And it has even been decided that the cautioner in a cash credit for all bills on which the name of 0. F. appeared was liable for bills accepted by him under the firm of C. F. and Co., of which he was the sole partner (c). The soundness of this decision has, however, been doubted (d). If the parties are really distinct, the obligation will only apply to the one by whom or for whom it was granted. Thus, where a party granted a letter of guarantee addressed to Watson and Co., which the principal obligant delivered to Watson, M'Knight, and Co., who made furnishings to him on the faith of it, it was held that although a firm of Watson and Co. had existed and been dissolved only a few days before the date of the letter, and this dissolution was not known to the party, yet that the firm Watson, M'Knight, and Co. had no action against him on the letter, though consisting of the same partners as Watson and Co. with the addition of M'Knight, and carrying on the same business and in the same pre- mises as had been done by Watson and Co. (e). Where a person carries on business in his own name, but de facto in partnership with others, a cautioner for him in the line of trade prosecuted by (a) See p. 238. (d) More's Stair 107. (6) Hose V. Moore and Son, 1833, (e) Bowk v. Watson, M'Knight, and 11 S. 344. (c) Booth V. Commercial Bank, 1823, 2 S. 273. Co., 1840, 2 D. 1061. Chap. III.] IN SUKETYSHIP AND GUARANTEE. 359 the company is entitled to relief against the company, and all those composing it (a). Formerly the granter of a guarantee or cautionary obligation Former state to or for a company continued bound though a change took place in the membership, at least where the identity of the concern remained unaffected. This was a consequence of the Scottish principle of the quasi person of the firm (b). And where the price of goods bought by a company was guaranteed, and during their delivery, which extended over a fortnight, the company was dis- solved, the granter of the guarantee was found liable for the whole price, though the dissolution had appeared in the Gazette, and might have been seen by the sellers before the delivery was com- pleted, no special notice having been sent them (c). But now, by sec. 7 of the Mercantile Law (Scotland) Amend- Alteration by ment Act (d), it is provided, that 'no guarantee, security, cautionary Law Amend- obligation, representation, or assurance granted or made after the passing of this Act, to or for a company or firm consisting of two or more persons, or to or for a single person trading under the name of a firm, shall be binding on the granter or maker of the same, in respect of anything done or omitted to be done after a change shall have taken place in any one or more of the partners of the company or firm to which the same has been granted or made, or of the com- pany or firm for which the same has been granted or made, unless the intention of the parties that such guarantee, security, cautionary obli- gation, representation, or assurance shall continue to be binding, not- withstanding such change, shall appear, either by express stipulation or by necessary implication, from the nature of the firm or otherwise.' The statutory provision would not, however, it is thought, apply observations to a case such as the following. A bond was granted to a bank by a company and two cautioners, binding themselves to make pay- ment of whatever sums ' I the said Archibald Paterson shall draw out,' etc. The company was dissolved after granting the caution- ary obligation, and Paterson turned out to have been one of its (a) M'Leod v. Howden, 1839, 1 D. (c) Douglas v. Gordon and Co., 1121. 18U, 18 F. C. 127. (6) Elton, Hammond, and Co. v. (d) 19 and 20 Vict. c. 60, 1856. See Neilson, 1812, 16 F. 0. 699 ; Speirs p. 277. V. Royal Bank, 1822, 1 S. 478 ; Aytoun V. Dundee Bank, 1844, 6 D. 1409. 360 RIGHTS AND OBLIGATIONS OF COMPANIES [Book III. partners ; yet it was held that the cautioners were liable for all the sums drawn by him subsequent to the dissolution (a). It must also be observed, that the statute only applies to cases where the bond or obligation has been executed subsequent to the passing of the Act (b). Caution for in- A cautioner became bound to relieve a partner,, on retiring from tiX"/artner. a company, of all claims against him ' as a partner of M. B. and Co., preceding the said first day of October, or in any manner of way, as a partner of the foresaid concern.' The partner did not retire publicly till the 24th of October ; and he having been found liable for the price of goods contracted for, but not delivered to the com- pany till after that date, it was held that the cautioner was bound to relieve him (c). When com- When the company are granters of the cautionary obligation, pany IS granter i ./ o ./ o / oftheobiiga- ^j^q death of One of the partners does not release the surviving tion. _ -^^ .... partner although notified in the Gazette. Special notification in such a case is necessary (d). Eeiease by Cautioners are frequently liberated from their obligations by the creditor. conduct of the creditor. See, as to the application of this principle to obligations in which companies are concerned, the undernoted cases (e). A person gave a letter of credit in favour of a company, which was neither dated nor addressed by him, binding himself to guarantee ' the regular payment at the ordinary periods of credit, of whatever purchases they may make from you within twelve months from this date;' and a partner of the company filled up the date, and addressed and delivered it to a merchant who furnished goods on the conditions stipulated. It was held that the obligation was binding, and that notification of the furnishings was unnecessary (/). Consequences As the Company is a separate person, it follows that when it being a°sepa-°'*' grants a cautionary obligation along with others, the partners in a rate person. question of relief with the other cautioners are only liable for a single (a) Paterson v. Calder, 1808, 14 P. (d) Kemp v. Allan, 1824, 3 S. 104. C. 235. (e) Leith Bank v. Bell, 1830, 8 S. (6) Church of England Life and Fire 721, afp. 1831, 5 W. and S. 703 ; Clerk Assurance Co. v. Wink and Others, v. Russell, 1825,3 8.374; Ellice and 1857, 19 D. 1079. Co. v. Finlayson, 1832, 10 8. 345. (c) Walker v. Davidson, 1821, 1 S. (/) Eiving v. Wriglit, 1808, 14 F. C. 21. 172. Chap. III.] IN CONTRACTS OF SERVICE. 361 share, viz. that undertaken by the company. Thus, where A., B., and C. signed a bond for a cash credit, A. being a company signing by the company firm and the two individual partners, B. being a co-cautioner, and C. being the principal obligant, it was held in an action of relief that there were only two cautioners, and that the individual partners and the company were not liable each in a separate share, but together pnly in one share (a). This also appears from the case of Child v. Ferguson's Trustees (b). Here A., having obtained a cash credit from a bank on a joint and several bond by himself and others, entered into partnership with B. at a time when the credit was exhausted. Shortly after, the debt due to the bank was paid up by the new company on an assignation to the bond. The company having been dissolved by the death of A., who died largely in its debt, it was held that B., as surviving partner, was entitled, in virtue of the assignation to the bond in the company's favour, to recover from a co-obligant the full amount. With reference to what transactions are covered by bonds of Extent of caution, and guarantees granted to, for, or by companies, reference may be made to the cases noted below (c). obligation. CONTRACTS OF SERVICE. Contracts of service made with companies, or even with private Rights of firms, generally hold good notwithstanding a change in the member- questions of° ship, provided that the identity of the concern is not changed in so ^o^iogj ^ far as concerns the nature of the business and the mode in which it ci^ange of memDersnip. is carried on. Thus, the manager of a manufacturing business was found not entitled to leave his service merely on the ground that his employer had assumed his sons as partners (d). And where a party was bound apprentice to a company and the subsisting mem- bers thereof carrying on the business, and on its dissolution his (a) Christie v. Reid, 1826, 4 S. 1830, 8 S. 866 ; Bain v. Balfour and 372. Co., 1838, 16 S. 1097 ; Edin. Water (6) Child V. Ferguson's Trs., 1835, Co. v. Bell, 1838, 1 D. 21 ; Swan v. 13 S. 768. Bank of Scotland, 1839, 2 D. 78 ; (c) Dykes v. Watson, 1825, 4 S. 70 ; Thomson v. Bank of Scotland, 1822, Hunter and Co. v. Spens, 1826, 1 Bell 1 S. 257, revd. 1824, 2 Sh. App. 316. 374, n. 3; Alexander v. Scott, 1827, (d) Harkins v. Smith, 18il,WF.C. 6 S. 150 ; Forhes and Co. v. Dundas, 938, 13 Jur. 281. 362 RIGHTS AND OBLIGATIONS OF COMPANIES [Book III. Powers o{ dismissal. services were transferred to a new company formed by some of the former partners, and following out the old business, it was held that he was bound to serve the new company (a). Where a servant or managing official holds his office on condition that he may be removed by a given majority of the company, or of the committee of management, he may be dismissed by a resolution of the specified majority; and they are not bound to show cause for having done so, or liable in damages if they refuse to assign a suffi- cient reason (b). And where the directors of a bank dismissed their manager, who was engaged during pleasure, they were held not bound to justify their dismissal, and an issue on that point was refused (c). Where an agent is employed by a company and paid by a commission on the profits, he is not presumed to be engaged from year to year like a servant ; and the company are entitled to discontinue their trade without any previous notice to him, or any compensation for the loss of his situation (d). Where a railway guard, who held his situation at the pleasure of the company, and might be dismissed without reason assigned on receiving a fortnight's wages or a fortnight's warning, was dismissed on a charge made against him by an officer of the railway, which he alleged was unfounded, it was held that he had no claim of damages against the company (e). But a company improperly dismissing a servant is liable in damages (/). Where a workman holding himself out as bound with an English company for a term of years, entered into an agreement in England with a Scotch company, to exchange with another workman in their employment, and entered on service accordingly, he was held not entitled to plead the rule of the Scotch law, that a verbal contract of service is binding for one year only (g). Powers o£ When the power of a company's manager is fixed by contract, managers and i • i i i • -i • n other company no general evidence to show the practice as to the nomination of servants. (a) Young v. Brown and Co., 1785 ; aff. 1785, 3 Paton's App. 42. (6) Commercial Bank v. PollocFs Trs., 1822, 1 S. 428 ; aff. 1829, 3 W. and S. 430. (c) Mitchell v. Smith, 1836, 14 S. 358, 11 F. C. 292. (d) London, Leith, and Glasgow Ship. Co. v. Ferguson, 1850, 13 D. 51. See also, as to powers and circumstances of dismissal, Ivison v. Edinburgh Silk Yarn Company, 1846, 9 D. 1039 ; Tulk, Ley, and Co. v. Anderson, 1843, 5 D. 1096. (c) Fosdick V. North British Ra. Co., 1850, 13 D. 281. (/) Batclielor v. M'Gilvray, 1831, 9 S. 549. (ly) Dale v. Dumbarton Glassworh Co., 1829, 7 S. 369. Chap. III.] IN CONTRACTS OF SERVICE. 363 inferior servants by him is competent (a). And though the captain of a ship may be entitled to institute legal proceedings against a seaman for desertion in an inferior court, this does not entitle him to continue appearance if the case is taken by the seaman to a superior court, so as to render the company by whom he is em- ployed liable for such further litigation. To entitle him to relief against the company, it is necessary that he shall have intimated the state of matters to them, and have received authority to pro- ceed (b). See, as to general and implied powers of agents and managers for companies, the cases noted below (c). A bank having appointed one of its partners to be agent in exchanging its notes with those of another bank, and the agent having assented to a new arrangement, under which he opened an account with the other bank, and drew upon it for the amount of notes of his own bank which came into its hands, it was held that he did not in this way bind his own bank for the amount overdrawn in such account, but that another partner of his own bank to whom he communicated the arrangement might be bound (d). Companies are liable to the public and to their employers for acts of commission or omission on the part of their servants done in obedience to orders, or in the course of their employment, provided in the last case that they are not delicts, and relate to what the company was by express or implied contract bound to have seen done in a safe and proper manner (e). (a) Gye and Co. v. Hallam, 1832, Mur. 381, 384, and 388 ; minter v. 10 S. 512 and 710. See also 1 S. and Edin. and Glas. tJnion Can. Co., 1836, M'L. 747, 14 S. 199, 15 S. 950. 14 S. 717 ; Baird v. Graham, 1852, (V) M'-NaughtonY. Allhusen and Co., 140.615; Advocate-GeneralY. Grants, 1847, 10 D. 236. 1853, 15 D. 980 ; Little v. Nelson, (c) South Metropolitan Gas Co. v. 1855, 17 D. 310 ; Faulds v. Townsend, M. of Lothian, 1838, M'F. 13; Oliver 1861, 23 D. 437; Campbell v. Cale- V. Griew, 1792, Hume 319 ; Inches v. donian Ra. Co., 1852, 24 Jur. 155. Elder, 1793, iUd. 822 ; Dewar v. Cases of non-liability, by comparing Nairne, 1804, Hume 340; Nat. Ex. whicb with the foregoing, the principle Co. V. Drew and Dick, 1860, 23 D. 1 ; of law wiE appear : Linwood v. Haw- Cullen v. Thomson and Kerr, 1862, 24 thoriie, 1817, 19 F. 0. 327, aff. 1 S. D. (H. of L.) 10. App. 20 ; Waldie v. Duke of Roxburgh, {d) Moncrieff v. Dunlop, 1797, 3 1822, 1 S. 344, aff. 1825, 1 W. and S. Paton's App. 595. 1 ; Howey and Co. v. Lovell, 1826, 4 (e) Brown v. M'Gregor, 1813, 17 S. 759 ; Miller v. Harvie, 1827, 4 F. C. 232 ; Hill v. Merrichs, 18r3, Mur. 385 ; Lumsden v. Russell, 1856, Hume 397 ; Eraser v. Dunlop, 1822, 18 D. 468 ; Shieb v. Edin. and Glas. 1 S. 243 ; Anderson v. Brownlee, 1822, Ra. Co., 1856, 18 D. 1199. See also 1 S. '442; M'Laren v. Rae, 1827, 4 p. 2b2 et seq., and 262 e< sei;. 364 RIGHTS AND OBLIGATIONS OF COMPANIES [Book III. Companies bound to relieve agents. Companies are not liable for injuries caused to their workmen by the conduct of their collaborateurs (a). Companies are, like individuals, bound to relieve their agents of liabilities, and to indemnify them for outlay or loss incurred on their account. Thus, where a company employed agents to freight vessels, who accordingly did so in their own name, and the company failed to implement the charter-party, it was held bound to relieve the agents from damages awarded against them for non- implement (b). And where a society sanctioned and adopted the proceedings of an agent conducting a defence in name of the ofBce-bearers for their behoof, and decree went against them with expenses, the members of the society were found Jointly and severally liable for the expenses (c). HOLDING PROPERTY, ANT) CORRESPONDING RIGHTS AND OBLIGATIONS. Leasehold property. Ki^ts and obligations as tenants. The rights of companies and firms to hold real and personal pro- perty have already been considered in former parts of this treatise. It may here be remarked that leasehold property should always be taken to corporations in the corporate name. There being no casualties depending on the life of an individual, the intervention of trustees is unnecessary, and may create complications of title. As illustrations of the rights of companies, both as landlords and tenants of leasehold property, reference may be made to the cases undernoted (d). Where a farm was let to two tenants and the survivor of them, they divided the tenement between them. One of them then (a) Lerman v. Miller and Addie, as reversed 1859, 21 D. 1382 ; Bartons- Mil Coal Co. V. Reid, and Ibid. v. M^Guire, as reversed 1858, 3 Macq. 266, and 20 D. (H. of L.) 13. (6) W-Braire v. Hamilton, 1825, 4 S. 25. (c) Ramsay v. Smaill, 1840, 2 D. 1336. (d) Swan's Trs. v. Mvirlcirk Iron Co., 1850, 12 D. 622; Hurlet and Campsie Alum Co. v. Earl of Glasgow, 1850, 12 D. 704, aff. 1850, 7 Bell 100 ; Montgomerie v. Carrich and Napier, 1848, 10 D. 1387 ; Stewart v. Countess of Moray, 1772, M. 4392, 2 Pat. App. 317 : Keir and Others v. Duke ofAthole, 1815, 6 Pat. App. 130 ; Leek v. Fulton, 1855, 17 D. 408 ; Begbie and Co. v. Frame, 1857, 20 D. 81 ; Stewart v. Bell, 1788, 3 Pat. App. 158; Bald v. Alloa Coll. Co., 1854, 16 D. 870 ; Sinclair v. Mossend Iron Co., 1854, 17 D. 258; Croker V. Stevenston Coll. Co., 1856, 18 D. 496. ing partner. Chap. III.] UNDER CONTRACTS. 365 assigned his right under the lease to a nephew who, on the death of the cedent, continued in possession for a year, and paid his share of the rent. His name was also entered in the landlord's books as joint tenant. It was held, however, that the assignation and his apparent acquiescence could not bar the other tenant from vindi- cating his rights under the lease to be received as sole tenant (a). A tenant under missives of lease, excluding sub-tenants, assig- Tenant assum- nees, and creditors, having, after becoming bankrupt, assumed a partner, was held, reversing the judgment of the Court of Session, to have such a title of possession as rendered the summary removal of the partners incompetent ; nor was the fact that the trustee for the tenant's creditors joined with the landlord in the application for removal, found to affect the question (b). Where one railway company was found in 1856 to have been due rent to another for a lease from 1852, but the amount of the rent was not ascertained till 1856, it was held that interest was not due on each term's rent from the term when it fell due (c). Under a statutory agreement to lease a railway and its branches, on their completion, or on the completion of any part of them, the lease commences on the completion of any part of the main line, though it should be averred that the remainder cannot be com- pleted (d). EIGHTS AJTD OBLIGATIONS UNDER CONTRACTS. The modes in which companies enter into agreements or con- Rights and tracts with the public have already been noticed at pages 197 and companies 241. It may here be remarked, that if a company hold out an nJ^nte.''^''^^" individual as a partner who de facto is not, they will be liable to the public for the consequences of his implied agency to the same extent and effect as if he were a partner (e). It is sometimes a matter of difficulty to determine whether Whether pay- money paid or advanced for behoof of the company had been onbehaUof ^ (a) Robertson v. Menzies, 1857, 19 v. Edin. and Olas. Ra. Co., 1857, 19 D. 667. D. 598. (6) Borrows and Co. v. Colquhoun, (d) Edin. and Glas. Ra. Co. v. 1854, 17 D. (H. of L.) 31, 1 Macq. Stirling and Dunferm. Ra. Co., 1858, 691. 2 Stu. (H. of L.) 1853. (c) Stirling and Dunferm. Ra. Co. (c) Moyes v. Cook, 1829, 7 S. 793. 366 COMPETITION OF RIGHTS. [Book III. the company or of a partner. Not bound by acts of pro- moters. Trustees. SO paid or advanced by a partner. See cases of this under- noted (a). It has already been seen that companies, after formation, whether that takes place by contract or by incorporation, are not bound by the acts of their promoters, unless they are estopped from stating this plea by something done by them after formation, amounting to adoption, recognition, ratification, etc. (&). It is the general rule of law, that a trustee, a factor loco tutoris, or a curator bonis, is not entitled to charge for business done by him for the trust of a professional kind, because it is justly thought he might, in the absence of such a rule, be tempted unnecessarily to multiply legal or other professional expenses (c). Where there- fore a trustee employs a firm of which he is a partner to perform work of this kind for the trust, it seems now to be fully established that the firm, like its partner, can make no charge except for out- lays (d). This, of course, may be altered or modified to any extent by the terms of the trust deed or other instrument of appoint- ment (e). COMPETITION OP EIGHTS. Questions in competition. Latent trusts. In questions of competition in relation to rights or property, the rules applicable between individuals are generally applied where companies are concerned. Peculiarities arising out of the partner- ship relation do, however, occur in cases such as the following. An assignation of a share in a company, duly intimated, is not defeated by the cedent having held the share only in latent trust, the rules of the company not allowing such trust to appear in the books (/); and an intimated assignation of bank stock in security of a debt previously contracted, is preferable to the right of a party (a) Kenmj v. Walker, 1836, 14 S. 803 ; Low v. Lizars, 1838, 16 S. 1093. See M'Leod v. Tosh, 1836, 14 S. 1058 ; Wilson Y. Laidlaw, 1816, 6 Pat. App. 222. (V) See Wishaw and Coltness Rail- way Company v. Stewart's Representa- tives, 1837, 15 S. 703 ; and antea, pp. 83-5. (c) Lewin on Trusts, 216 et seq. (d) Lord Gray and Others, 1856, 19 D. 1 ; JSIackenzie, ibid. (e) Goodsir v. CarrutJiers, 1858, 20 D. 1141 ; Burge v. Burton, 2 Hare 373 ; Cradock v. Piper, 1 M'N. and G. 664 ; Broughton v. Broughton, 2 Sm. and Gif . 422 ; M'Laren i. 219, ii. 66. (/) Red/earn v. Somerville, 1805, 13 F. 0. 508, as reversed 1813, 1 Do-w 50, 17 F. 0. 681. Chap. III.] COMPETITION OP RIGHTS. 367 founding on a latent trust (a). It may be here observed, that the tendency of the Scottish courts appears always to have been to recognise trusts in matters of partnership, while that of the appellate jurisdiction, as well as of the English courts, has been to ignore such latent equities in all commercial associations. The Scottish tribunals have no doubt been inclined to adopt the course alluded to from a laudable desire to arrive at the equity of the individual case ; but there can be little doubt that the recognition of trusts in mercantile companies is opposed to the nature of commercial transactions, is often unfair to copartners and their creditors, and presents great facilities for abuse (b). Where trusts appear em facie of the register of even incorporated associations, they appear to have no other effect than that of fixing the right of the benefi- ciaries in a question with the trustee or those in his right (c). A decree was obtained in an action against an English com- Competition pany, and the individual partners, for a company debt which one of company and the partners bound himself as an individual to pay. The action partner?. ° proceeded on an arrestment jurisd. fund, causa against that partner, and an arrestment on the dependence of his effects. It was held in a competition with his creditors subsequently arresting, that the decree was effectual, and entitled the holder to a preference (d). A party conveyed property to a company in security of ad- vances to be made, and a partner of the company made advances and sold the property. A creditor of the party having arrested in the hands of the partner and of the company, it was held that the partner and the company were preferable for the advances (e). See, for many instances of competition between companies, their partners and the public, the chapter on Compensation, page 415 (/). Formal intimation is not necessary to complete the assignation Intimation of of the stock of a partnership by one partner to the other. Two necessary be- tween partners. (a) Burns v. Laurie's Trs., 1840, 1815, 18 F. 0. 202. See Ewing, May, 2 D. 1348 ; but see Dingwall v. and Co. v. Johnston and Macquoid, M'Comlie, 1822, 1 S. 431, and 1824, 1813, 17 F. C. 481. 2 S. 567, note ; Gordon v. Cheyne, (e) James, Wood, and James v. 1824, 2 S. 566. Downie, 1836, 15 S. 12. (b) See antea, p. 327. (/) See also Sandeman t. Scott, (c) See per Lord Cranwortli, in 1849, 11 D. 405, reversed 1852, 1 Lumsden v. Buchanan, as reversed Macq. 293, 1 Stu. 882; Lords of the 1865, June 22. Treasury v. M'Nair, 1809, 15 F. C. {d) Galloway v. Liddell and Reid, 183. 368 COMPETITION OP EIGHTS. [Book HI. Acceptance by company de- posited by a partner. Cases of con- signation. EigM of com- pany to rank parties were joint tenants of quarries, and sole partners of a com- pany for working them, and one of them became the landlord, and advanced a sum of money for the other, who, in security, granted an assignation of his share of the concern. There was no publica- tion of the deed or express intimation to the manager of the quarries till within sixty days of the granter's bankruptcy. It was held notwithstanding, that as this was an assignation of the share of a lease, forming part of the stock of a partnership by one partner to another, it did not require formal intimation against the creditors of the granter, but was sufficiently validated by having been acted on, and the assignee was preferred (a). A partner of a company obtained the acceptance of the com- pany for £400 at a time when his accounts were not settled, and he deposited it with a creditor in security of his own promissory-note, but he did not indorse the acceptance. It was held that the party with whom the acceptance was deposited was entitled to recover the full amount from the company, although it was alleged that not so much was due to the partner (6). The authority of this decision has been questioned, but it does not appear on sufficient grounds. It would seem that when a partner consigns goods, the property of the company, in his own name to an agent for sale, without mentioning that they are the property of the company, the con- signee is entitled to compensate with the proceeds of the goods debts due by the partner privato nomme, and that he cannot, after a settlement with the consigning partner, be called upon by the company to account for the proceeds. This has not been expressly determined in the case of partners and their companies; but as partnership is only a specialized form of the contract of agency, there can be no doubt that the doctrine here indicated would be given effect to (c). On the bankruptcy of a partner, the company is entitled to rank (a) Russell V. Earl of Breadalbane, 1822, 2 S. 54 ; remitted 1825, 1 W. and S. 620 ; 1827, 5 S. 827 ; aff. 1831, 5 W. and S. 256. See Hill v. Lindsay, 1847, 10 D. 78. (6) Hogg v. Muir, Wood, and Co., 1820, 2 BeU's Com. 23, note 5. (c) Johnston v. Scott and Son, 1818, 19 F. C. 561. See also Colquhoun V. Finlay, Buff, and Co., 1816, 19 F. C. 208; Ede and Bond t. Finlay, Duff, and Co., 1818, 19 F. C. 509 ; M'Call V. Black and Co., 1824, 2 Sh. App. 188; Stuai-t and Fletcher V. M'Gregor and Co., 1829, 7 S. 622. Chap. III.] OBLIGATION OF COMPANIES TO THEIR PARTNERS. 369 upon his sequestrated estate pari passu with his personal creditors ; on bankrupt and this right transmits to creditors of the company (a). In Eng- partner. land, company creditors can only rank on the estate of a partner when his personal creditors have been fully paid (b). In a competition for a sum due on business accounts by a LoCkkartY. ■*■ *" Ferrier, dissolved firm to a bankrupt, an individual partner of the firm, who was in right of a debt due by the bankrupt, was held entitled to the sum, in preference to a party who was trust-disponee of the bankrupt's heritable estate for behoof of his general creditors (c). A company consisting of a father and son, and another, having EosMm v. been dissolved by the death of the father, the surviving partners, in ignorance as was alleged of the dissolution, continued to carry on the business, and paid off the debts of the old company. The estates of the new company and its partners having been sequestrated within three years of the father's death, it was held in a competition between the creditors of the old company and of the father on the one hand, and the trustee on the estate of the new company and its partners on the other, for the proceeds of real property which had belonged to the father, and had been taken up by the son, that as the debts of the old company had been paid by the proper debtors, there was no room for adopting the principle of restitutio in integrum, as at the date of the father's death (cZ). When a partner has overdrawn his account in the company, and when partner the partners in winding it up after dissolution are, in consequence acoouut^^ ''^ of this overdrawing, obliged to borrow money, whereby interest is accumulated against the concern, the partner is to be considered not as a mere ordinary debtor, but as an intromitter with the company's funds, and as such liable in accumulated interest after the dissolu- tion, in the same way as had been the practice of the concern prior to its dissolution (e). OBLIGATIONS OF COMPANIES TO THEIR PARTNERS. Companies are as much bound to fulfil all engagements entered Companies into with their own partners,' as if they had been entered into with Sjigations to (a) Lusk V. Elder, 1843, 5 D. (d) Boskins v. Cliristk, 1845, 8 D. P^^"'^'^"- 1279. 167. (6) Lindley, p. 974. («) Blair v. Russell, 1829, 8 S. 72. (c) LocTchart v. Ferrier, 1842, 4 D. See Maclntyre v. Maxwell, 1831, 9 S. 1253. 284. 2A 370 RIGHTS AND OBLIGATIONS OF COMPANIES. [Book IH. Obligation transmits against new firm. the public. This doctrine depends in Scotland on the principle, that the company is a separate person, whether incorporate or not ; in England, it is a consequence of the same principle in corporations ; but in unincorporated companies it arises from the fact, that all the partners are joint and several obligors in such cases. No difficulty- is o-enerally found in enforcing such obligations in Scotland; in England, their enforcement has too often been found to be impos- sible (a). When a partner sues the firm, or its surviving partners, for implement of such an obligation, he is not obliged to deduct his own share as a partner, when it clearly appears that the obligation was undertaken by the other partners to him ; but when he makes advances to the firm for the common good of all, he can only recover his money under deduction of his own share. A partner in a manufacturing firm agreed to retire on an agree- ment by the remaining partners to pay him an annuity ' during such period as he shall survive, and they or their successors in the works and business shall carry on the same.' The whole works, machinery, utensils, and stock having been afterwards sold to another firm, it was held, that in the circumstances of the case, the firm so acquiring the works were the successors of the previous firm in the sense of the agreement, and that as such they were still bound to pay the annuity (b). Where a company, who along with the master were joint- owners of a ship, and as agents for it effected an insurance on it and the master's effects, failed, though desired by him to renew the insurance, which had been vacated by deviation, they were held, on the total loss of the ship, liable for the value of the master's effects (c). BILLS AND NOTES. Bills and notes. The modes in which bills and notes may be accepted by com- panies have already been explained when treating of the powers of partners (d). The legal effects of such documents in the case of companies must here be adverted to. (a) Lindley 718. (b) Alexander v. Clark, etc., 1862, 24 D. 323. (c) Petrie's Exrs. v. Aitchison and Co., 1841, 8 D. 501. (d) Antea, p. 229. Chap. III.] BILLS AND NOTES. 371 So distinct in the law of Scotland is the company from the Consequences partners, that bill transactions with the company as such on the person. one hand, or with a partner as such on the other, have little or nothing to do with other claims or obligations for or against the company, or for or against the partners. Thus, a party purchased from a company '■ good growing seed,' which was delivered to him in December. For this he granted his bill to one of the partners, and retired it in the subsequent February by another bill to the same partner, who indorsed it to another company of which he was also a partner. The seed having proved unfit for sowing, it was held that the claim of damages arising against the sellers did not form a good ground of defence against the holders of the bill (a). So, when a bill was accepted for the accommodation of a company who indorsed it to another company, of which the principal partner was a member of the indorsing company, it was held that the com- pany holding the bill were entitled to the privileges of onerous indorsees (6). So it was held not to be a relevant ground for sus- pending diligence by a company, onerous indorsees of a bill, that one of the partners was a member of a committee of creditors of the drawer, and as such participant in preventing delivery of the goods for which the bill was accepted, and that the acceptor had brought an action of damages against that partner and the other members of the committee (c). So, where a partner of a company obtained the acceptance of the company for £400 when his accounts were not settled, and he deposited it with a creditor in security of his own promissory-note, but without indorsing the acceptance, it was held that the party with whom the acceptance was deposited was entitled to recover the full amount from the company, albeit it was alleged that so much was not due to the partner {d). Though, as we have already seen, partners have implied power Praudnient to bind the company by accepting bills in its name, yet they have te^tween part- no right to abuse this power for their own purposes; and if, stranger 'do when this has been done, it can be shown that third parties suing the partnership on the bill were privy to the fraud, they will be (a) Bruce v. M'Kenzie, 1821, 1 S. (c) Lang v. Allan and Co., 1831, 9 78. S. 337. (h) Thomsons and Co. v. Craig and (d) Hogg v. Muir, Wood, and Co., Hunter, 1824, 2 S. 647. 1820, 2 Bell's Com. 23, note 5. not bind the company. 372 EIGHTS AND OBLIGATIONS OP COMPANIES. [Book III. Bills accepted after diBsolu- tiou. Davidson y. Roiertson. Joint adventure. held not entitled to recover. Thus A., one of two partners, having given notice of dissolution to B., the other partner, the latter inti- mated that he had accepted hills in favour of third parties, and among others of his father, in name of the partnership for alleged partnership dehts. A charge having been given to A. on one of the bills accepted in favour of B.'s father, by an indorsee who had indorsed it without recourse, but had afterwards reacquired it, the Court suspended the charge simpliciter {a). So the drawer of a bill on a company for a private debt due to himself by one of the part- ners, and accepted by that partner under the company firm in violation of their contract, was held not entitled to recover from the company (b) ; and when a creditor under an arrangement with his debtors drew a bill on a company as for value in an article in which the company did not deal, and the bill was accepted by one of the partners in name of the company, as guarantee for the debtor, which was out of the ordinary business of the company, and the bill was not entered in the books, the company was held not liable (c). It is to guard against abuses of this kind, as well as for more strictly technical reasons, that the general rule has been established which exempts the members of a dissolved company from liability for bills or notes granted in the company name by some of their; number after dissolution for debts which had not been constituted prior to that event {d). In such a case, however, the partner granting the bill is personally liable (e). When two bills were signed by a partner for the price of goods, the firm was held liable for both when in the hands of onerous indorsees ; and it was found that in such a case there is no ground for a multiplepoinding to ascertain what is to be paid (/). G., S., and A. entered into a joint transaction on condition that (o) Waddell v. Maclaren, 1851, 1 Stuart 17. See also Fortune v. Luke, 1831, 10 S. 115 ; Thomson and Co. v. Sharp, 1849, 11 D. 887. (b) Miller v. Douglas, 1811, 16 F. C. 154. (c) Kennedy, 1814, 18 F. 0. 122. See also Johnstone, Sharp, and Co. V. Phillips, 1822, 1 Sh. App. 244, 1 Bell's Com. 401, note 3 ; M'Nair v. Henderson, 1803 ; Blackwood and Cn. v. Bower, 1805 and 1806, 1 Bell's Com. 402, a. 8; Blair v. Bryson, 1835, 13 S. 901 ; North British Bank v. Ayrshire Iron Co., 1853, 15 D. 782. (d) Snodgrass v. Hair, 1846, 8 D. 390; Gordon v. M'CuUin, 1851, 13 D. 1154. (e) See Sutherland v. Gunn, 1854, 16 D. 339. See antea, p. 233. (/) Davidson v. Robertson, 1815, 3 Dow 218. Chap. III.] BILLS AND NOTES. 373 each should have one-third interest for profit and loss ; and that the funds should be provided by S. and A. drawing upon G., and dis- counting and remitting to him the proceeds. S. and A. drew each of them separately on G., who accepted ; and they separately dis- counted the bills and remitted him the proceeds. G. and S. having both failed, and the holder of S.'s bill having claimed payment of the contents from A., it was held, that as the proceeds of that bill had been applied to the prosecution of' a joint adventure in which they were all partners, A. was liable in payment (a). In bill transactions, as in other matters of contract, companies Companies are CI- Ti 111 tound by acts are bound by the acts or their accredited agents, whether they are of their agents. partners or not, in all matters within the sphere of their agency. Thus, where a bill was granted blank in the drawer's name, and thereafter discounted with a bank agent, who filled it up with his own name as drawer, and indorsed it to the bank ; and this agent, on the bank re-indorsing it for the purpose of his operating pay- ment, deleted his own name, and caused the party to whom it was originally granted to sign as drawer and also as indorser; it was held in an action at the instance of the bank against the acceptors, that the bank, being identified with the acts of their agent, could not recover (b). But the case is different if blame is to be imputed to the party transacting with the agent. Thus, a party at the request of a bank-agent gave him bills which the agent ostensibly discounted, but of which the party allowed him to retain the proceeds for his private accommodation. The agent having become bankrupt, it was held, that although the discount of the bills had been reported to the bank, they were not liable for the money (c). It is a rule of law founded on the most equitable considerations, Protestssiiouid that a protest of a bill taken by a notary who is the acceptor, notaries who indorser, or drawer, is inept (d). The principle of this rule obvi- ^^^^'^ '^^^' ously applies to partners, who being in the active management of the company's affairs, act as notaries in protesting bills in which the company is concerned. And accordingly it has been observed from the bench, that the managing partner of a bank ought not to (a) British Linen Co. v. Alexander, (c) Armstrong's Assignees v. Leith 1853, 15 D. 277. Banking Co., 1831, 9 S. 889. (6) Yoimg's Trs. v. Scott, 1881, 9 S. (d) Russell v. Kirk, 1827, 6 S. 133 ; 574. Leith Bank v. Walker's Trs., 1836, 14 S. 332. 374 EXTINCTION OF COMPANY EIGHTS AND OBLIGATIONS. [Book III. act as notary in protesting bills due to the bank (a) ; but it has been held to be no objection to the validity of a protest of a bill, that the notary, who was indorser without recourse, had some years before been a partner, of a company who were the drawers of the bill, and had been subsequently found liable, in respect of insuffi- cient notification of his retirement, for the debts of the company (&). EXTINCTION OF EIGHTS AND OBLIGATIONS. Extinction of The rights and obligations of companies in questions with their obligations. own members and the public may be extinguished by mora and taciturnity in the same way as those of individuals. Some cases illus- trative of the operation of this principle will be found noted below (c). PRESCRIPTION. Acquisition of rights by prescription. Corporations may acquire rights by prescription like indivi- duals (d) ; and therefore there can be no doubt that railway com- panies and the like may in this way acquire or amplify such rights as it is competent for them to possess, having regard to the instru- (a) Fames v. Smith, 1813, 17 F. 0. 360. (h) M'Kenzie v. Smith, 1830, 9 S. 52. (c) 1. Between partners or share- holders and their companies : Black- hum v. Finlay, 1848, 10 D. 590 ; BlacTcburn v. Buchanan, 1848, 20 Jur. 199 ; McLaren v. LiddelVs Trustees, 1862, 24 D. 577 ; Craig v. Douglas, Heron, and Company, 1780, aff. 1781, 2 Pat. App. 575 ; Flowerdew v. Laing, 1843, 5 D. 440. It may be re- marked, however, that in questions of accounting inter socios, delay unaccom- panied by something more significant will seldom avail to bar a fuU investi- gation at the instance either of part- ners or their representatives. See Lister V. Sutor, 1811, aff. 1815, 6 Pat. App. 78 ; Maclaren or Law v. Lid- delVs Trs., 1860, 22 D. 373. 2. Between companies and strangers : Craig and Co. v. Hamilton, 1823, 2 S. 305 ; Hunter and Co. v. Levy and Co., 1825, 3 S. 425 ; Watson and Co. V. O'Reilly and Co., 1826, 4 S. 480 ; Hutchison and Co. v. Scott, 1830, 8 S. 377 ; Harford and Co. v. Robertson, 1832, 6 W. and S. 1 ; Ogilvie v. Duff, 1834, 12 S. 857 ; Forbes v. Edinburgh Water Co., 1830, 8 S. 459 ; Armstrong V. Edinburgh and Leith Ship. Co., 1825, 3 S. 328 ; Mann and Co. v. Skin- ner, 1829, 7 S. 806 ; Hunter y. Fleming and Strang, 1829, 8 S. 234 ; Macallum and Co. V. M'Keand, 1847, 9 D. 630 ; Moir V. Alloa Coal Co., 1849, 12 D. 77. (d) See Ayton v. Magistrates of Kirkaldy, 1833, 11 S. 676 ; Magistrates of Hamilton v. Duke of Hamilton, 1846, 8 D. 844, aff. 1850, 7 Bell's App. 1, 22 Jur. 266 ; Greig v. Magis- trates of Kirkaldy, 1851, 13 D. 975 ; Waiichope v. York Buildings Co., 1781, M. 10706, House of Lords, 1782, 2 Pat. App. 595. Chap. III.] COMPANY OBLIGATIONS. 375 ments and purposes of their formation. It is by no means certain whether the quasi person of an unincorporated company can acquire by the long prescription, though the decision in the case of a friendly society would seem to countenance the affirmative view (a). They may, however, acquire rights by acquiescence (5). EIGHT TO INTEEDICT. Interdict is competent at the instance of companies against interdict. their partners, and of partners against their companies, when it can be shown that either of them are doing, or intending to do, something injurious to the rights and interest of the other. Thus interdict was granted against the partner of a company, after he had been sequestrated, from selling by auction bills accepted by him in name of the company (c) ; and the instances are numerous of companies being interdicted by their partners from departing from the provisions of the contract of formation, applying the company funds in an improper manner, etc. (d). These matters will be fully treated of under the heading of ' Interdict ' in a sub- sequent part of the treatise. PUBLIC BURDENS. Companies are liable to be assessed for poor rates like indivi- Public ■^ '■ . burdens. duals, when they are possessed of means and estate liable to such assessment. The more important decisions on this subject will be found noted below (e). (a) Kirk-session of South Leith v. Ra. Co. v. Ahbey Parish of Paisley, Scott, 1832, 11 S. 75. 1;850, 13 D. 304 ; Edinburgh and Glas- {V) Moir V. Alloa Coal Co., 1849, gow Ra. Co. v. Adamson, 1853, 16 D. 12 D. 77. 537 ; Edinburgh, Perth, and Dundee (c) Taylor and Sons v. Taylor, Ra. Co. v. 4rthur, 1854, 17 D. 252 ; 1823, 2 S. 143. Glasgow and Barrhead Ra. Co., 1855, ((f) Learmonth v. Leadbitter, 1841, 17 D. 1148, aff. 1860, 22 D. (H. of L.) 3 D. 1192 ; Brown v. Sir C. Adam, 1 ; Edinburgh and Glasgow Ra. Co. v. 1848, 10 D. 744 ; Wilson v. Glasgow Arthur, 1858, 20 D. 677 ; CrollY. Scot- and South-Western Ra. Co., 1850, 13 tish Central Ra. Co., 1861, 23 D. 747 ; D. 227. Miller, 1859, 20 D. 975. (e) Railway Companies : — Edin- Canal Companies : — Anderson v. lurgh and Glasgow Ra. Co. v. Meek, Union Canal Co., 1839, 1 D. 648; ibid. 1849, 12 D. 153 ; Glasgow and Ayr 1847, 9 D. 402. 376 COMPANY OBLiaATIONS. [Book III. It may here be noticed that the valuation of subjects acquired by railway and canal companies is struck by the Assessor of Rail- ways and Canals. 17 and 18 Vict. cap. 91, sec. 3. See Forth and Clyde Canal Co., 1859, 24 D. 1453. Water Companies : — Hay v. Edin- Paisley v. Mags, of Paisley, 1836, 15 burgh Water Co., 1850, 12 D. 1240. S. 200 ; Adams v. M'Leroy and Co., Ordinary Companies : — Buchanan 1851, 14 D. 248 ; Walkinshaw v. Adams, V. Parker, 1827, 5 S. 362 ; Bakers of 1850, 13 D. 198. [ 377 ] CHAPTBE, IV. EIGHT TO SHARE PROFITS AND DIVIDENDS. The acquisition of gain and its division among the members form General the sole purposes of the mercantile partnership. Hence no one can be a partner in the proper sense of the term who is not entitled to share profits ; and the enjoyment of this right by any one is per- haps the strongest ground for subjecting him in company liabilities in a question with the public. The share to which each partner is entitled, and the periods at Shares and which a division of the profits is to take place, generally are, and sion ought to always ought to be, specifically fixed in the instrument of forma- contract. tion, or in some written agreement subsequently signed by all the partners. When this, as sometimes happens, has been neglected, questions of a very embarrassing kind are apt to present them- selves. In the absence of any written agreement, the proportion in in absence of which the several partners are to share profits is a question of fact sions, the pro- which it properly falls within the province of a jury to determine, partner's share having regard to the whole circumstances of the case and certain for\''ji^y!°° rules of law (a). As has been seen, it is a fixed principle of law, founded on the most equitable considerations, that wherever a partnership has been proved to exist, every partner is entitled to at least some share of the profits. Beyond this, there is a legal presumption for equality among all the partners, which, in duhio, ought to form thjp rule of division (6). But as this is merely a (a) Campbell's Trs. v. Thomson, Ogilvie, 1813, House of Lords, 1 Dow 1829, 7 S. 650, as revd. 5 W. and S. 38, 5 Pat. App. 706, remitting to take 16, 7 BUgh 432 ; Aberdeen Town and evidence of facts. County Bank v. Clark, 1859, 22 D. (ft) Fergusson v. GralianCs Tr., 44. See p. 135. See also Bruce v. 1836, 14 S. 871 ; Struthers v. Barr, 378 EIGHT TO SHARE PROFITS AND DIVIDENDS. [Book III. Suggestions which have been made on this subject. Jury trial the only feasible mode. presumption, it may be overcome by evidence prout de jure of an agreement to share profits in some other manner, as is often the case when the contributions of skill, of capital, or of connection and interest are unequal. In such cases it has been said that the extent of the partners' interests in the concern, or, in other words, their rights to share profits, ought in the absence of express stipulations to be measured by the amount of their respective contributions; and there can be no dispute as to the equity of this principle considered in the abstract (a). But in practice it will be found extremely difficult of application ; for in disputed cases it is often impossible to ascertain the propor- tionate value of the contributions made by the partners respectively. If, indeed, nothing were to be deemed contribution but money or goods, the problem would become one of great simplicity ; but it is evident that such a view would be fraught with absurdity and injustice, since connection, interest, skill, business habits, and many other personal qualifications, are often of far more importance than pecuniary contributions. It has also been suggested that the extent to which a partner is liable inter socios to defray partner- ship losses might be fairly taken as the measure of his right to share profits ; yet it is obvious that this cannot be relied on as an invariable rule, for it sometimes happens that a person possessed of great skill in a particular line of business, but of no capital, enters into a partnership with wealthy persons, on the express condition that, in consideration of his operative skill, he shall receive an equal share of profits, while the losses shall be entirely, or to a great ex- tent, borne by them (b). These considerations serve to show how peculiarly fitted such questions are for the determination of a jury, and how important it is that nothing calculated to throw light on the matter should be excluded from consideration. Hence the jury are entitled to look at every available kind of evidence, and ought to return their verdict on a sound construction of the whole circumstances of the case (c). 1821, 1 S. 122 ; 1825, 4 S. 119 ; House of Lords, 1826, 2 W. S. 153 ; M'WMr- ter V. Guthrie, 1822, 1 S. 295. (a) Struthers v. Barr, supra. (6) Robinson v. Anderson, 20 Beav. Farrar v. Beswick, 1 M. and Rob. 527 ; McGregor v. Bainhridge, 7 Ha. 16-1: ; Benford v. Dommett, i Yes. 756 ; Finlayson v. Eutherford, 1880, 8 S. 874. (c) See Stewdrt v. Forbes, 1 Mac. 98 ; Peacock v. Peacock, 16 Ves. 49 ; and G. 187, and preceding cases. for equality. Chap. IV.] RIGHT TO SHAKE PROFITS AND DIVIDENDS. 379 Yet it is important to observe, that they have no right to make a contract for the partners, or to apportion the profits according to any rule which they may consider equitable in the circumstances of the case ; neither are they entitled to give effect to what may have been the intention or understanding of some of the partners, however reasonable it may appear, unless they are satisfied that such intention or understanding was raised to a contract by receiv- ing the consent of the others (a). Their duty is to inquire, in the first place, whether any special contract or arrangement was ever made on the subject ; for, in the absence of this, the presumption of law for equality ought to be taken as the true exponent of the intentions of the partners at formation. But if they shall be satisfied that the matter was specially provided for, it will then become their duty to endeavour to ascertain what the special provi- sions were (b). It is sometimes said that, according to the existing law of Scot- Presumption land, there is no presiimption for equality in sharing profits ; and the case of CampbelVs Trustees v. Thomson (c), as reversed in the House of Lords, is appealed to in support of this proposition. But when the decision in that case is taken in connection with the other Scottish authorities, and the circumstances in which it was given, it seems merely to amount to this, that while there is a presump- tion for equality, that presumption is not juris et de jure, but may be rebutted by evidence to the contrary, and that the question is not one to be decided by abstract legal presumptions, but by laying the whole facts of the case before a jury {d). This view derives strong confirmation from the consideration that such is, and always has been, the law of England (e). The same rules hold good in partnership confined to a single transaction, commonly called a joint adventure (/). (a) Struthers v. Ban; 1821 , 1 S. 122 ; (c) See Lindley, p. 573 et seq. as revd. 1826, 2 W. and S. 153. (/) See Rohinson v. Anderson, 20 (&) See Steivard V.Forbes, 1 Mao. and Beav. 98 ; Webster v. Bray, 7 Ha. 159 ; G. 137 ; Webster v. Bragg, 7 Ha. 159 ; Hauslip r. Kitton, 8 E. Jur. N. S. 835 ; Coplandv. Toulmin,7 C]. a.nd¥m.H9. M'Gregor v. Bainbridge, 7 Ha. 164, (c) 1829, 7 S. 650 ; revd. and re- note ; Hoblcin v. Hog, 1715, Robert, mitted for trial by jury, 1831, 5 AT. Ap. 147, rev. judgment of Court of and S. 16, 7 Bligh N. S. 432. Session ; Keith v. Penn, 1840, 2 D. (d) 2 Bell's Com. 645-6. See antea, 633. p. 136. 380 RIGHT TO SHARE PROFITS AND DIVIDENDS. [Book HI. An arrange- If an agreement for division of profits in a particular manner is ment once • i • -ii i made is pre- established to have once existed, it will be presumed to continue continue. until the contrary is made out. Thus, where the shares of partners were originally equal, proposals made by one of them for an alteration in the proportions, but not definitely assented to, were held of no importance (a) ; and where partners retire, it is pre- sumed that their shares have been taken by those who remain, in the proportions in which these last previously held shares in the concern (&). When, however, a second contract altering the pro- portions in which profits are to be divided, is fairly established, full effect will be given to its provisions (c). Company debts Before division, or at least payment of profits, all debts due by before division the concem Ought to be paid off or properly provided for, and arrangements should be made to defray the current expenditure. This mode of procedure, which is only fair to the company cre- ditors, will be found in the end most conducive to the interests of the partners, and is consequently presumed in law to have been their intention. Thus a clause in the contract of a shipping copartnery, relative to the division of ' free profits,' was held to imply gross profits under deduction of repairs on the vessels, etc., and of a sum equivalent to the loss caused by their annual dete- rioration from age, although a limited sinking fund had been pro- vided ' for upholding the number of vessels necessary for carrying on the company's trade, and meeting any risks which the company may have incurred,' etc. (d). Partner must Furthermore, a partner cannot claim any share of profits while totiieran^pauy he remains debtor to the concern in contribution, indemnity, or any ciai°irpTOflt& other admitted claim, unless indeed some arrangement has been made by which such claims are to be allowed to lie over for the time. When his share of profits exceeds his liabilities, he will be entitled to the balance after deduction of the latter (e). Profits payable Trust funds are sometimes improperly invested by the trustees by trustees. (a) Struthers v. Barr, 1821, 1 S. 1518 ; Ballandene v. Glasgow Union 122 ; as revd. 1826, 2 "W. and S. 168. Bank, 1839, 1 D. 1170. (b) RobleyY.Brooke,7B]igh'S.S.20. (d) Flowerdew v. Dundee Ship. Co., (c) Buchanan v. Lennox, 1838, 16 S. 1831, 9 S. 373 ; aff. 1832, 6 W. and 824. See, as to the rigid construction S. 160. of contracts in relation to this matter, (c) Whytlaiu v. Coats, 1800, 4 Pat. Samnel and Co. v. Brown, 1842, 4 D. App. 148. Chap. IV.] RIGHT TO SHARE PROFITS AND DIVIDENDS. 381 in the business of copartneries of which they are members ; and when this is the case, they are hable in payment to the beneficiaries of the profits made upon such investments. In computing these, there must be taken into account not only the input capital of the partners, but all other funds obtained on loan or otherwise, and invested in the partnership business ; and the proportion which the trust monies bear to the whole funds so employed, regulates the share of profits to be made over to the beneficiaries. Periodical docquets, fixing the interests of the partners inter se, are of no im- portance (a). When no agreement has been made in the partnership contract Times of as to the particular time at which profits are to be divided, and the amount to be divided at any given time, it would seem that the will of the majority will determine such matters (b). But this only holds true within certain limits; for when all company obligations and debts have been settled, every partner would seem entitled to insist for at least an annual division of profits, and a refusal to comply with such a demand would seem to form a good ground for dissolution. As a general rule, it may be laid down that the right to share How partners profits is indefeasible in every partner, so long as the partnership ™ude/froiu relation continues. Provisions may, no doubt, be inserted in the P™'^'^- contract, empowering a majority to exclude a partner from his share of profits for a time, as a penalty for transgressing some specified rule, just as they may be empowered to expel him from the society altogether ; but the exercise of such powers will be very narrowly scrutinized by the tribunals, and will not be sustained where any of the prescribed provisions have not been rigorously adhered to, or where there is the least reason to suspect corrupt motives (c). Bye-laws imposing forfeiture of profits as penalties are only valid where they form part of the original contract, or where they have received the assent of every member after the company was brought into existence (d). (a) Cochrane v. Black, 1857, 19 D. Devon Ra. Co., 20 Beav. 384 ; Stubls 1019. V. Lister, 1 Y. and C. C. C. 81 ; Bar- (b) See Stevens v.. South Devon Ra. ton's case, 4 Drew 535, aff. 4 De G. Co., 9 Ha. 327 ; Browne v. Monmouth- and J. 46 ; Adley v. Whitstable Co., shire, etc. Co., 13 Beav. 32 ; Powers 17 Ves. 315 ; 19 Ves. 304. of Majorities, antea. (d) Adley v. Whitstable Company, (c) See, as to this, Harris v. North supra. 382 EIGHT TO SHARE PROFITS AND DIVIDENDS. [Book III. Disclaimer of transaction. A partner may, however, forfeit his share of profits by having disclaimed connection with the transaction or adventure out of which they arose. This not unfrequently happens where a partner, who considers a speculation proposed by his copartners to be more likely to result in loss than in remuneration, intimates to them that he will have no concern in carrying it out. In such a case he is indeed secure from all risk of loss in a question inter socios ; but he forfeits all share of profit. Thus, where, during the continental war, a British subject and an American citizen were in partnership, and one of them made shipments of goods to the continent of Europe, he was held exclusively entitled to the profits arising on the transaction, in consequence of the other having written letters disclaiming all connection with the goods, though he alleged that these letters had been written to deceive the enemy (a). In such cases, however, the disclaimer must be very unequivocal. PUBLIC COMPANIES. Equality of shares in pub- lic companies. Preference shares. Debts should be paid before dividends. In public companies, the interest of the members is determined by the number of shares which they respectively hold ; and where, as is usually the case, the shares are of equal value, there can be no difiiculty in apportioning the amount of profits or dividends (as they are generally termed) to which the holders are respectively entitled. The shareholders, quoad the shares held by each, rank pari passu ; and any attempt to give a preference or priority to some over others is illegal (b). Where, however, 'preference shares' have been issued under competent authority, the holders will be entitled to payment of dividends to the amount guaranteed, whatever that may be, before the other shareholders receive any share of the profits (c). No dividends should, as a rule, be paid until the existing debts and current expenses of the company have been either paid (a) PollocTc's Reps. v. Buclianan, 1824, 2 S. 581, and 1825, 4 S. 39 ; aff. 1826, 2 W. and S. 143. See also Bayne v. Kyd, 1817, House of Lords, 5 Dow 151. (6) See Adley v. WhiistaWe Co., 17 Ves. 315. (c) See Carry v. Londonderry Ra. Co., 29 Beav. 263 ; Coates v. Notting- ham Waterworks Co., 30 Beav. 86 ; Henry v. Great Nor. Ra. Co., 1 De G. and J. 606 ; Crawford v. North-East. Ra. Co., 3 K. and J. 723 ; Stevens v. South Devon Ra. Co., 9 Ha. 313 ; Sturge v. East. Counties Ra. Co., 7 De G. Mac. and G. 158. Chap. IV.] RIGHT TO SHARE PROFITS AND DIVIDENDS. 383 off or provided for ; but when the company creditors agree to allow their claims to stand over while the interest is regularly paid, it does not appear to be incompetent to declare a dividend on such surplus of revenue as may arise after the current expenditure has been defrayed. The propriety of adopting this course ought to be determined according to the views of the majority of the share- holders (a). It is a most reprehensible, though it has hitherto been a too Declaring divi- dends where common practice, for those charged with the management of com- no profits have panies whose affairs are in an embarrassed condition, to declare dividends when no profits have been realized, and to pay them out of the proceeds of loans, or even out of the capital of the company. Such dishonourable and fraudulent proceedings are usually defended as being necessary expedients to maintain the credit of the concern, so as to tide over some temporary crisis in the money market or in the affairs of the company ; but they are rarely if ever successful, and only plunge the company and its members in still greater embarrassments. Such practices are grossly illegal, and justly subject those who are concerned in their adoption in personal liability to the full amount of the dividends which have thus been fraudulently declared and paid away (&). It frequently happens that there are several classes of shares Shares not ■^ ■' -^ ■■ _ fully paid tip. on which unequal sums have been paid up. When this is so, the dividends should be apportioned not in proportion to the nominal value of the shares, but with reference to the sums actually paid up in each (c). Where a forged deed of transfer has been registered by the Forged ° •' transfers. company m ignorance of the forgery, the dividends must be paid to the true owner ; and, from the analogy of the law of England, a multiplepoinding would not in such circumstances appear com- petent to the company (d). When shares are registered in the name of a married woman, Manied the dividends can only be safely paid on the receipt of the husband (a) See Stevens v. South Devon Ra. 541 (1849). This -was expressly pro- Co., supra ; Browne v. Monmouthshire vided by the Companies Act of 1856, etc. Co., 13 Beav. 32 ; Carry v. Lon- 19 and 20 Vict. c. 47, s. 14. donderry Ra. Co., supra. (c) Somes v. Currie, 1 K. and J. 605. (6) Burnes v. Pennell, 10 D. 689, (d) Dalton v. Midland Ra. Co., 12 aff. 2 H. of L. Cases 497, 6 Bell's App. C. B. 458, and 13 ibid. 474. ^^^ RIGHT TO SHARE PROFITS AND DIVIDENDS. [Book III. or of both spouses ; a receipt by the woman will only avail where the jus mariti has been excluded (a). Times of The times at which dividends are to be paid are eenerallv payment. .... o j regulated by provisions in the instrument of formation. In the absence of such provisions, the will of a majority will govern. But it must be observed, that neither the board of directors nor a majority of the members will be allowed, contrary to the desires of a dissentient minority, to delay unduly to declare a dividend when free profits exist, or to apply them to other purposes than those contemplated by the instrument of formation (b). Provisions of The following are the provisions of the Companies' Clauses the Aotof 1845. ^ ,., . /on i\ * • i • t -t ■ n^, Oonsohdation (bcotland) Act m relation to dividends : — The com- pany may pay dividends on the receipt of the party in whose name the shares stand in the company books ; and if they stand in the names of more persons than one, then on the receipt of the party first named and surviving. No attention need be paid to trusts, though duly notified (c). Interest on mortgages or bonds must be paid in preference to dividends (d). No dividend shall be paid out of capital (e) ; and before apportioning the profits, the directors may set aside a fund for contingencies, or for repairs and improve- ments (/). Previously to every meeting at which a dividend is intended to be declared, a scheme must be prepared by the directors, showing the profits which have accrued since the last meeting at which a dividend was declared, and apportioning the same, or as much as they consider applicable to the purposes of dividend, among the shareholders, according to their respective shares, the amount paid thereon, and the periods during which the same has been paid. This scheme must be laid before the meeting; and if approved, the dividend is declared in accordance therewith {g). No dividend is payable in respect of any share until the calls payable on all shares held by the owner thereof have been paid (Ji). Observations In relation to these provisions, it may be noticed that after a divi- dend has been declared, each shareholder entitled to participate has a separate and independent right to recover his proportion, and may (a) See Gardners v. Royal Bank, (d) Sec. 51. 1815, 18 F. 0. 458. («) Sec. 124. (6) York and North Midland Ra. If) Sec. 125. Co. v. Hudson, 16 Beav. 485. (g) Sec. 123. (c) Sec. 21. (A) Sec. 126. Chap. IV.] RIGHT TO SHARE PROFITS AND DIVIDENDS. 385 make it good against the company by action at his own instance (a). The English courts have refused to restrain a company from paying a dividend on the mere ground that the directors had acted in violation of their duty to the public (h) ; and a lien on shares is supposed to give as an accessory a right to recover dividends accruing therefrom (c). If companies registered under the Act 1862 adopt Table A, Provisions of Schedule I./ as their articles of association, the following will be the provisions applicable to dividends : — The directors may, with the company's sanction in general meeting, declare a dividend to be paid to the members in proportion to their shares (No. 72) ; dividends can be paid out of profits only (No. 73). Before recommending a dividend, the directors may set aside out of the profits a sum to meet contingencies, to equalize dividends, or to repair and maintain the company works ; and they may invest this sum on such securities as they see fit (No. 74). The directors may deduct from the dividends payable to any member all sums due from him to the company in name of calls or otherwise (No. 75). Notice of any dividend that has been declared must be given to each member by personal service or transmission through the post, prepaid, and addressed to him at his registered place of abode (Nos. 76, 95, 96, 97). All dividends unclaimed for three years after having been declared, may be forfeited by the directors to the company (No. 76). No dividend bears interest against the company (No. 77). It is further provided by sec. 38, No. 7, as a rule applicable in General ,, 1.1 1-1 1 ■ 1 provisions. all cases, that m the event oi the company being wound up, no sum, due a member as such by way of dividends or profits, shall be deemed to be a debt due by the company, payable to such member in a competition between himself and any other creditor who is not a member of the company ; but every such sum may be taken into account in a final adjustment of the contributories among themselves (d). The provisions of the previous Act of 1856 are somewhat ^™X^^!°'J\gL similar. They will be seen by reference to Table B in the Schedule, Nos. 63 to 68. (a) See Carlisle v. South-East. Ra. (c) Hague v. Dandeson, 2 Ex. Co., 6 Ra. Gas. 670 ; Hodges, p. 79. " 741. (6) Browne v. MonmouthsUre Ra. (d) See, in connection with this, sec. Co., 20 Law Jour. (Chan.) 497. 101. 2 B [ 386 ] CHAPTER V. RIGHT TO SHARE IN MANAGEMENT. Eight to share This right is of such importance to protect the interests of the individual members, not merely against possible fraud on the part of their fellows, but against the consequences of their oversight, negligence, or dereliction of duty, that it is hard to conceive the existence of the partnership relation with any one who is not entitled to its exercise in some form or other. It is true that in a private firm the power of agency may be wholly or in part with- drawn from some of the copartners, and confided to others more fitted for its exercise; and that in public companies it never resides in the members generally, but is always committed to managing officials specially charged with the executive admini- stration ; yet this does not in the least degree affect the rights of a latent or dormant partner, or of a shareholder, to take part in the management of the concern of which he is a member, to discuss every proposed measure, to vote for or against its adoption, and to check any departure from the objects of the undertaking, and any abuse of power on the part of those charged with the active management, or of the members generally (a). Hence any attempt by some of the partners to exclude the others from taking part in the management, will at once be checked by the Court (&). It has been held in England, that though one of two partners mortgages all his share and interest in the concern to the other, the latter will not be permitted during the continuance of the partnership to (a) Dickson v. Dickson, 1823, 2 S. (6) See Dickson v. Dickson, supra ; 413 ; and Paul v. Taylor, 1826, 4 S. Marshall v. Colman, 2 Jac. and "W. 580. See also antea, p. 107, and 266 ; Goodman v. Whitconib, 1 Jac. Lloyd V. Loaring, 6 Ves. 777. and W. 589. Ghap. v.] right to share IN MANAGEMENT. 387 exclude the other from the management (a). And the fact of one partner being practically excluded from the exercise of this right, has been held to be a sufficient ground for the appointment of a receiver (b) (judicial factor) to manage the concern. This right is generally exercised by voting at meetings, ordinary Modes in or extraordinary, convened for the purpose of examining into the rfg^t is exer- management and of passing resolutions. Every partner is entitled "^^^ ' - to be heard, as well as to vote ; and the fact of his not being present, in consequence of want of due notice, may be fatal to the validity of the proceedings. In general, his power to affect the manage- ment is confined to the value of his vote ; but there are some cases in which his single refusal to concur in a proposed measure will render it incompetent. Of this kind are attempts to change the nature of the business (c), to travel out of the sphere of operation for which the company was formed (d), or to do something forbidden by, plainly at variance with, or obviously not contemplated in, the instrument of formation (e). EIGHT TO INSPECTION OF COMPANY BOOKS. The right which every partner possesses to take part in the Eight of access management of the company, necessarily involves that of making to'oka. himself fully cognizant of the state of its affairs. Deprived of this, his chances of sharing profits might be found very illusory ; and he might often be involved in ruinous liabilities and losses which he could neither foresee nor prevent. It has therefore come to be regarded as a fixed and fundamental principle of the law of partnership, that every partner is entitled to insist that the company books and accounts shall be accurately kept, and be at all times patent to his inspection (/). So important are these rights con- (a) Rowe v. Wood, 2 Jac. aild W. son v. Glasgow and South- West. Ba. 558. Co., 1850, 13 D. 227. See also Wil- (V) Wilson, 1 Swanst. 471 ; Ckgg, liamson v. North Brit. Ra. Co., 1846, 1 Mac. and G. 294. 9 D. 255 ; Wedderburn v. Scottish (c) Maxton v. Brown, 1889, 1 D. Central Ra. Co., 1848, 10 D. 1317 ; 367 ; Fleming v. Campbell, 1845, 7 D. National Ex. Co. v. Glasgow and Ard- 935. rossan Ra. Co., 1849, 11 D. 571. {d) Brown v. Adam, 1848, 10 D. (e) See Powers of Majorities, and 744 ; Balfour's Trs. v. Edin. and previous cases. Nor. Ra. Co., 1848, 10 D. 1240 ; Wil- (/) Per Lord Eldon in Rowe v. this right. 388 EIGHT TO SHARE IN MANAGEMENT. [Book III. sidered to be, that they are generally made the subject of special provisions in the partnership contract. In private firms it is usual to entrust the keeping and custody of the books to one of the part- ners, and it is not uncommon to delegate these duties to a paid assistant or bookkeeper ; but whatever arrangement of this kind may be made for purposes of convenience, it is quite settled law, that no partner is entitled to retain the books in his own exclusive custody, to remove them from the place of business, or to put any bar in the way of their being examined and scrutinized by his copartners (a). So fully, indeed, is this principle recognised, that if a partner chooses to enter the partnership accounts in a private book among his own personal matters, this, instead of excluding the scrutiny of his copartners, may entitle them to inspection of all that the private book contains (b). Eestrictions on Sometimes, when the nature of the business seems t.o require it, though this can be but of rare occurrence, it is made a provision of the copartnery contract, that the partners generally shall not have access to the books, but that they shall remain under the sole control of those charged with the active management of the con- cern. Such provisions are not favourites of the law ; and they will not be permitted to stand in the way of a rigid scrutiny, if a case calling for investigation is relevantly alleged (c). Case of putiio In public Companies with a large and fluctuating membership, the duty of keeping the books and accounts of the concern is necessarily entrusted, like other matters of ordinary management, to the managers or directors. This does not, however, derogate from the right of the shareholders to inspect and scrutinize them. Yet, as it could serve no good purpose, and might often be productive of mischievous consequences, to leave the company books and accounts continually open to the inspection of shareholders, it is usual to insert in the contract certain provisions fixing the times at Wood, 2 Jac. and W. 868, 359, and 148 ; Taylor v. Rundell, 1 Y. and C. .558 ; Ooodman v. Whitcomb, 1 Jac. C. C. 128 ; Stuart v. Bute, 12 Sim. and W. 593 ; Cameron v. M'-Murray, 460. 1855, 17 D. 1142 ; M'Gregor v. (b) Freeman v. Fairlie, 3 Mer. 43 ; M'Gregor, 1823, 2 S. 413. Toulmin v. Copland, 3 Y. and C. Ex. (a) Greatrix v. Greatrix, 1 De G. 655. and S. 692 ; Taylor v. Davis, 3 Beav. (c) Collins v. North British Bank, 388 ; Charlton v. Poulter, 19 Ves. 1850, 13 D. 349. companies. Chap. V.] EIGHT TO SHARE IN MANAGEMENT. 389 which they shall be open for inspection, and any restrictions on the exercise of this right which may be deemed advisable. Such pro- visions and regulations are binding (a) ; but they will be fairly construed by the Court, and will not be interpreted so as to afford occasion for fraudulent or even unjustifiable concealment (b). Thus, when the contract of a banking company proTiibited the shareholders from access to the books, it was held that this provi- sion was applicable only to the case of fair and ordinaiy manage- ment on the part of the directors, and did not bar a shareholder from insisting on exhibition when he had relevantly libelled an action of fraud against the directors (c). Restrictions of any kind on the common law right, which every Where restric- shareholder, in virtue of being a partner, has to inspection of the binding. company's books, are only effectual where they have received the assent of all the members of the association, adhibited in the instrument of formation, or at some subsequent period when that is competent. They cannot be imposed by resolutions of directors, or even, it should seem, by the will of majorities (d). Were this otherwise, shareholders might be deprived of a powerful means of checking malversation at the very time when i^s possession was of greatest importance. If directors are required to depone to the contents of the company books, they cannot plead ignorance on the ground of having been excluded from their inspection by their co-officials. They ought to have enforced the rights, since they chose to undertake the duties, of the office (e). Shareholders, like partners, are bound in all company matters Eight of in- to pay due regard to the common interests ; and hence they are not te^exeroi^d^ entitled to abuse their right of inspecting the company books by ^n. ^''''^' publishing their contents to strangers, particularly when the com- pany is involved in litigation (/). And for this reason, when, by a company's special act, shareholders were declared entitled to (a) Baldwin v. Lawrence, 2 Sim. the books and report. See Hall v. and Stu. 184 ; Williams v. Prince of Connell, 3 Y. and 0. Ex. 707. Wales Life Co., 23 Beav. 338. id) See Taylor v. Rundell, 1 Y. and (6) Hall V. Connell, 3 Y. and C. 0. C. 0. 128 ; Stuart v. Bute, 12 Sim. Ex. 707. 460. (c) Collins V. North British Bank, (c) See last cases. 1850, 13 D. 349. Here the Court re- . (/) Williams v. Prince of Wales raitted to an accountant to examine Co., supra. 390 RIGHT TO SPIARE IN MANAGEMENT. [Book III. inspection of the books at all seasonable times, the English courts have refused to enforce this right by mandamus, unless the peti- tioner could show that he had been denied inspection by the managing body, after alleging as a ground for his application a purpose which seemed reasonable to the Court (a). Modes of keep- j^ would be out of place in a work of this kind to enter into mg partnership '- books. any detailed examination of the different modes of bookkeeping which have been recommended for adoption in private companies and firms, or to pass any judgment on their respective merits. It may be observed, however, that in making choice of a particular method, attention should be given to the nature of the business, and the manner in which it is intended to be carried on. When it does not involve numerous details, and when the partners are not familiar with the refinements of bookkeeping, the more simple the method adopted, so that it have the merit of clearness, the more likely will it be to serve the purpose intended. If, again, the company transactions are numerous and complex, a more artificial and elaborate system of bookkeeping will be required, and the aid of a trained assistant may be advisable. But whatever may be the principles of the system adopted in other respects, it is of essential importance that the firm be treated as a separate person, and that the partners be dealt with as its debtors and creditors. This method of keeping partnership accounts will be found of excellent use in cases of dissolution, and of the death, embarrassment, or bankruptcy of a partner ; and it has the advantage of being in exact conformity with the Scottish theory of partnership law, which recognises the quasi person of the firm. Even in England its simplicity and practical utility have led to its general adoption among mercantile men. Arrangements It will often be f ound Convenient to entrust the duty of keeping as to keeping i • i i i. , i o and custody of the partnership books to some one of the partners in particular, the books, etc. . . , . i . p . t, sometimes to a paid assistant, subject or course in all cases to the supervision of the partners generally. Arrangements of this kind may well be introduced into the contract of copartnery, which should also contain a provision that the books are to lie at the ofiice of the company, and open to the inspection of every partner. This last (a) See Reg. v. Wilts and Berks Canal Co., 3 A. and E. 477 ; Reg. v. Clear, 4 B. and C. 899. Chap. V.] RIGHT TO SHARE IN MANAGEMENT. 391 provision, which is a mere affirmance of the common law, has the advantage of preventing misconceptions or disputes. A partner is not only entitled to a full inspection of the com- Partners . 11. .11 bound to keep pany books and accounts, but also to expect that his copartners will, accurate books. in so far as they are concerned, keep them in a fair and intelligible manner, and communicate to him all that they may know about the state of the company affairs. Hence, if a partner, knowing well the true state of the partnership accounts, should take advantage of this knowledge to make an advantageous agreement with his copartner who was not so well informed, such agreement would be liable to reduction on the head of fraudulent concealment (a). Hence, if in judicial proceedings for accounting between partners, it turns out that no books of accounts have been kept, that they have been destroyed, are wrongfully withheld, or have been so kept as to be unintelligible, every presumption will lie against the partner to whose negligence or misconduct this state of matters is imputable (b). And though it has been agreed, that when accounts have once been made out, examined, and signed, they shall not afterwards be disputed ; yet if a partner induces his fellows to sign a fabricated and untrue account in ignorance of its real character, it may be opened up at any time on this being established (c). In companies erected under public authority, special regulations Special pro- ■^ . ^ visions in are generally made by the charter or special act for the proper incorporated keeping of the company books and accounts, and for affording the members due opportunities of examining and making excerpts from their contents. These provisions are always construed by the courts in such a way as to prevent concealment on the one hand, and unnecessary or hurtful pubhcity on the other. The provisions of the Companies' Clauses Consolidation (Scot- Companies land) Act, in so far as they relate to the rights of shareholders to take part in the company management, and to inspect and examine the books and accounts, will be found noticed between pages 123 and 131. Their import and application will, however, be best apprehended by a careful study of the Act itself. Any further notice in this place would be a mere unnecessary repetition. (a) See Maddeford v. Austwick, 1 Walmsley v. Walmsley, 3 Iv. and Lat. Sim. 89. 556. (6) Gray v. Haigh, 20 Beav. 219 ; (c) Oldaker v. Lavender, 6 Sim. 239. 392 RIGHT TO SHARE IN MANAGEMENT. [Book III. Letters Patent Act. Companies Act of 1862. General provisions. Provisions of TableAjSch.!. The mode in which members of companies brought under the operation of the Letters Patent Act take part in the management and are enabled to inspect the whole proceedings, is explained at page 119 and the following pages. The provisions of the Companies Act of 1862, in relation to the matters now under consideration, are as follows: Every company under the Act must cause minutes of all resolutions and proceedings of general meetings, and of the directors and managers, where there are such officials, to be duly entered in books to be kept for the purpose. Every such minute, if bearing to be signed by the chair- man of the meeting to which they relate, or by the chairman of the next succeeding meeting, is to be received as evidence ; and until the contrary is proved, meetings and proceedings of which minutes have been so made, are to be deemed duly convened and transacted; and all appointments of directors, managers, or officials, and all acts done by them, are to be considered valid, notwithstanding any defect that may afterwards be discovered in their appointments or qualifi- cations (sec. 67). The company may by special resolution appoint inspectors to examine into the state of its affairs (sec. 60) ; and for still greater protection, the Board of Trade is empowered to order an inspection on being applied to by a certain proportion of the members (sees. 56, 59). See, as to this, antea, page 117. The members are also empowered by special resolution to alter the con- stitution and regulations of the company within certain limits, as explained at page 117; and to have it wound up (sees. 79 and 129), as will be more fully considered in the chapter on ' Winding up.' Beyond these provisions, the Act does not make any compul- satory regulations as to the manner in which the books and ac- counts are to be kept, the officials appointed, or the members are to participate in and control the general management. But if the provisions laid down in Table A be adopted as the articles of association, an admirable body of regulations will be obtained for these purposes. As the adoption of these regulations is not com- pulsatory, and as to appreciate and apprehend them properly they must be carefully studied as they stand in the Act, they were merely referred to in the chapter on Management. As, however, it is understood that they are generally adopted in their entirety where the company has a numerous membership, it has been thought Chap. V.] RIGHT TO SHARE IN MANAGEMENT. 393 that the following resum4 of these provisions may not be out of place. They assume that the management is by a board of directors, and in general complexion their provisions closely resemble those of the Companies Act of 1845, but are in some respects more perfect and complete. The first general meeting is held at such time and Meetings. place as the directors may appoint, and not later than six months after registration (No. 29). Subsequent general meetings are held as appointed by the company in general meeting, and in the absence of such appointment on the first Monday in February, at a place appointed by the directors (No. 30). These general meetings are styled ordinary, all others extraordinary (No. 31). The directors may, when they think fit, and must on a requisition of one-fifth of the members, call an extraordinary general meeting (No. 32). The requisition must express the object of the meeting, and must be left at the registered ofiice (No. 33). In default of the directors calling a meeting within twenty-one days, the requisitionists, or other members to the required amount, may convene it themselves (No. 34). Seven days' notice of the place, day, and hour, and the special Notice of, and 1 • •/■ c 1 • 1 • 1 •■ business at, business, ir any, or the meetmg, must be given to the members; but meetings. the non-receipt of notice by a member does not invalidate the pro- ceedings (No. 35). All business at an extraordinary meeting, and all at an ordinary one, is deemed special, except sanctioning a divi- dend, and considering accounts and reports of directors (No. 36). No business can be transacted without a quorum, which is five if Quorum. the company consists of ten members, adding one for every addi- tional five members up to fifty, and one for every ten beyond that number; but in no case can the quorum exceed twenty (No. 37). If within one hour a quorum has not assembled, the meeting is dissolved, if called on the requisition of members, and in any other case stands adjourned to the same day next week, when, if a quorum is still wanting, it is adjourned sine die (No. 38). The chairman Ohairman. of the directors is the chairman of the meeting (No. 39) ; but if he does not appear within fifteen minutes, the members choose one of their own number (No. 40). The chairman may, of consent, adjourn from time to time, and place to place; but adjourned busi- ness only can be transacted at an adjourned meeting (No. 41). Unless a poll is demanded by five members, the declaration of the Poll. 394 RIGHT TO SHARE IN MANAGEMENT. [Book III. Voting. Proxies. Directors. Vacating of office, and retirement. chairman and an entry in the book of proceedings form sufficient evidence of a resolution having been carried (No. 42). If a poll is demanded, it is taken as the chairman directs, and he has a casting vote in cases of equality (No. 43). Every member has one vote for every share up to ten, one for every additional five up to a hundred, and one for every ten shares above that number (No. 44). Lunatics and idiots vote by their legal guardians (No. 45). When shares have joint owners, he whose name stands first on the register is alone entitled to vote (No. 46). No one can vote whose calls are unpaid, nor can any one vote on a share which he has not held for three months, unless at a meeting held within three months from registration of the company (No. 47). Votes may be given by proxy (No. 48), provided it is in writing signed by the appointer, or under the seal of a corporation, and attested by at least one witness : proxies must be members (No. 49). The instrument appointing the proxy must be deposited at the company's registered office seventy-two hours before the meet- ing; and no proxy is valid after twelve months (No. 50). The Act gives a form (No. 51). The number and names of the first directors are determined by the subscribers, who act as directors till these officials are appointed (Nos. 52 and 53). Their rate of remuneration is fixed in general meeting (No. 54). They may act, notwithstanding a vacancy in their number, may pay the costs of getting up and registering the company, and can exercise all powers not confined to general meet- ings. They are subject to the control of general meetings. But subsequent regulations do not invalidate their previous acts (Nos. 55, 56). A director vacates his office by accepting a place of trust under the company, by bankruptcy or insolvency, and by being concerned in the profits of any contract with the company ; but not by being member of another company having contracts with that of which he is a director, though he cannot vote in relation to such matters (No. 57). At the first ordinary meeting after registra- tion the whole directors retire ; and at the first ordinary meeting in each subsequent year, one-third of their existing number, or if that is not a multiple of three, as near a number to one-third as possible (No. 58). During the first and second years after the first meeting the directors retire by ballot, afterwards the one- Chap. V.] RIGHT TO SHARE IN MANAGEMENT. 395 third who have been longest in ofEce (No. 59). These are re- ehgible (No. 60). The vacancies are filled up by the general Fiiiingup meeting at which the retirement takes place (No. 61). If the election does not take place, the meeting stands adjourned to the same day next week, at the same time and place; and if the vacancies still remain unprovided for, the former occupants con- tinue in office till the ordinary meeting in the ensuing year, and so on, till the vacancies are supplied (No. 62). A general meeting may increase or reduce the number of directors, and may deter- mine in what rotation they are to retire (No. 63). Casual vacancies may be filled up by the directors, but persons so chosen retain office no longer than would have been competent to those for whom they were substituted (No. 64). A director may at any time be Kemovai. removed by a special resolution, and his place may be supplied by any one appointed by an ordinary resolution ; but such substitute retains office for such period only as would have been competent to his predecessor (No. 65). The directors fix their own meetings, determine their quorum, Proceedings ^^ or QirpctorS' and nominate their chairman. They proceed by majorities, the chairman having a casting vote. Any director may call a meeting (Nos. 66, 67). They may delegate any of their powers to com- Committees. mittees, who are empowered to call meetings, transact business, and appoint chairmen in the same way as the directors (Nos. 68, 69, 70). The acts of directors, their committees, or of any one acting as a director, are valid, notwithstanding the subsequent discovery of some defect in their appointment (No. 71). [ 396 ] CHAPTER VI. RIGHT AND OBLIGATION TO ACCOUNT AS BETWEEN COM- PANIES AND THEIR PARTNERS OR MEMBERS. Mode of procedure in England and Scotland respectively. Origin of right The right to share profits and the liability to incur loss consequent to enforce an _ _ '' '■ accounting. on the partnership relation, necessarily involve mutual rights of accounting between the company and its partners, and between each partner and his fellows, in all matters relating to the partner- ship. Every person who is a partner in the proper sense of the word is entitled to exercise this right (a). When no settlement or discharge has taken place, it is not lost by retirement or dissolution, but transmits to executors and representatives (&), and seems to be determined by the long prescription only (c). In England this right is made good by a bill in equity for an account and discovery (d), and can seldom be rendered available by an action at law. In this country the mode of procedure is generally by action of count and reckoning ; sometimes a multiple- poinding may be found a more commodious method ; and conclu- sions of declarator or reduction may often be rendered necessary in aid of those for accounting. When the action is brought by per- sons alleging themselves to be partners, it ought to be preceded by or combined, with declarator (e); for until the fact of partnership is either admitted or established, the pursuer can have no title (/). And when a deed of settlement or discharge bars the way, a reduc- tion will be necessary. The right to compel accounting may some- times be made available by way of defence ; but unless the principal (a) 2 Ben's Com. 645 et seq. (c) Previous cases. (6) Lister v. Sutor, 1811, aff. 1815, {d) Lindley 803. 6 Pat. App. 78 ; M'Laren or Law, (e) Lindley 739. etc., V. LiddeWs Trs., 1860, 22 D. (/) Fraser v. Hair, 1848, 10 D. 373. 1402. Chap. VI.] ACCOUNTING BETWEEN COMPANIES AND PARTNERS. 397 action be one of count and reckoning, a defence of this kind will generally require to be pleaded by way of action (a). Of course, it may be pleaded by any of the claimants in a multiplepoinding to dispose of partnership property. The right to demand an accounting is competent to the com- To whom competent. pany against one or more; partners, or to one or more partners against the company ; or, in other words, proceedings to enforce it may be taken by any of the partners or their representatives against the others or their representatives. It is not, however, competent to or against quasi partners, that is, persons who are merely liable as such quoad the public, unless where they have been compelled to pay company debts, when it will take the form of an action of relief, reparation, or damages, or where they have shared or intromitted with company property. But by whomso- ever raised, and in whatsoever form, this action, like all others inter socios, must bring all the partners or their representatives into the field, either as pursuers or defenders. If the concern be still un- dissolved, it may appear in any of the three ways in which, as we shall afterwards see, mercantile copartneries may sue and be sued ; but if dissolution has taken place, all the late partners and the re- presentatives of those deceased must be made parties (&). The reason of this is, that whether the company sues a partner, or a partner the company, the action still resolves into a mutual accounting among the partners ; and unless all were in the field, the defender would not be in safety to make payment, and the share of an absent partner might be demanded, though it had de facto been already paid or compensated. The same rule obtains in England (c). It is held in England that a sub-partner has no right to an Sub-partners account from the principal firm, because between it and him there tollmxiM^^s is no privity of contract. His right lies against the particular ^^"^^tthe partner only with whom he is sub-partner (d). This, however, may be got over by assignation, legal or conventional (e). (a) See Fife Bank v. Holliday, {d) Brown v. De Tastet, Jac. 284 ; 1831 9 S. 693. Bray v. Fromont, 6 Madd. 5. See (6) Bell V. Willison, 1822, 1 S. App. Lindley, p. 804. 220 ; M'Intyre r. Maxwell, 1831, 9 (e) See Fawcett v. Whitehouse, 1 S. 284 ; Jardine's Trs. v. Carron Iron R. and M. 132 ; Bentley v. Bates, 4 Y. Co., 1862, 24 D. 443. and C. Ex. 182. (c) Hilk V. NasTi, 1 Ph. 594. 398 ACCOUNTING BETWEEN [Book III. Accounting may be limited. Enforcement of this right generally infers disso- lution. English practice. The accounting sought for does not require to include or have reference to the whole dealings or business of the company ; it may be confined to a single transaction (a). When the members of private firms or companies get into such a state of misunderstanding with each other, that nothing short of the interference of the public tribunals can set their affairs in order, a dissolution is almost always required, in order that equal justice may be done to all concerned. This obviously follows from the consideration, that until the concern is wound up it must always be difficult, sometimes impossible, to ascertain the profits to be divided, or to set these off and apportion them with reference to the claims of contribution and indemnity which partners may have against the company, or the company against individual partners. It is, more- over, highly undesirable, whether regard be had to the interests of creditors or of the partners themselves, that a company should be allowed to go on to contract further liabilities, when the management has been found so defective as to require judicial interference, and when that confidence which is essential to the success of combined action has been necessarily impaired, if not entirely destroyed, by some of the partners taking legal proceedings against the others. It must therefore be taken as a strong proof of the sagacity of the English Equity Courts, that they early laid down the rule not to interfere in taking accounts between partners, unless on condition that the concern should be wound up (b). In the later practice, it is true, this rule has been somewhat modified ; but the excep- tions are such as rather to elucidate the principle (c). Thus, the rule wiU not be enforced in the case of common law companies of large membership, managed by officials — here the reason of the rule fails ; nor in cases where a partner purposely misconducts himself so as to force a dissolution against the interest of his copartners (d.) ; nor where, from the partnership being for a term of years, it was not in the power of the partner seeking relief to bring it to termination, for if the Court refused the bill, all remedy would be denied (e). (a) Hunter V. Cochrane's Trs., 1829, 8 S. 171, and 9 S. 477 ; M'Intyre v. Maxwell, 1831, 9 S. 284. (6) Loscomb v. Russell, 4 Sim. 8 ; Forman v. Homfray, 2 V. and B. 329 ; Knehell v. White, 2 Y. and C. Ex. 15. (c) See Hutchinson v. Wright, 25 Beav. 444 ; Poole v. Masterman, 21 Beav. 61. (d) Fairthorne v. Weston, 3 Ha. 387. (e) Walworth v. Holt, 4 M. and Or. 619. Chap. VI.] COMPANIES AND PARTNERS. 399 In Scotland, where, from the forms generally assumed by Scottish actions between partners and their firms, the equitable jurisdiction of the Court can rarely come into play, it does not appear that any rule of this kind has ever been laid down ; but it is probable that a dissolution would be obtained by the intervention of the Court, if, from the legal proceedings between the partners, it was plain that the common interests were on the highway to ruin. Some cases may here be noticed as illustrative of the principles Miscellaneous by which the courts proceed in actions of accounting inter socios. Two parties, as a speculation, purchased an estate under an agree- ment that the portions remaining unsold after a certain date should be valued by neutral men mutually chosen. In the course of a process of accounting between them, one proposed to the other that the latter should name a price for a certain portion remaining unsold, which he would willingly either give or take for it, and he named a price accordingly ; the Court held that the party making this proposal was barred from thereafter resorting to the mode of settlement by valuation pointed out by the agreement (a). By the contract of copartnery of a company carrying on trade between Glasgow and Canada, it was provided that the partners in Canada should annually transmit to those in this country copies of their books docqueted, as balanced at the end of each year ; and that these, when approved of, should ' be deemed and taken as evidence in any question that might arise between the partners.' The books were regularly transmitted by the managing partner for twelve years. At the end of that time an agreement was entered into at Glasgow that he should retire on receiving £49,600, under deduc- tion of £5200, being the supposed balance due on his private account at the 1st of January preceding ; and that if that balance should be found to be more or less than £5200, the difference should be paid by or to him. In an action of accounting, it was held that it was not competent for the remaining partners to enter into an investigation of the books already transmitted to Glasgow, or to object to charges therein contained (b). A merchant and manu- facturer entered into a contract, by which they agreed to ship goods for sale to South America, in which each was to have an interest (a) Hunter Y. Cochrane''sTrs., IS29, (I) Pollock, Gilmour, and Co. v. 8 S. 171, and 9 S. 477. PdtcUe, 1851, 13 D. 040. 400 ACCOUNTING BETWEEN [Book III. night to account does not exist among wrong- doers. Defence against accounting. of one-half profit and loss, and the merchant wais to have an interest of one-fourth profit and loss of the goods manufactured and sent by the other, invoiced at the fair market price, and in the event of loss, to be stated at cost price. The manufacturer furnished goods made by himself at the market price, on which there had been a loss, though, if they had been stated at the cost price, there would have been a profit. In an action of accounting between the part- ners, it was held that the merchant could not insist on the goods being stated at cost price so as give him a profit (a). In an action of count and reckoning for the adjustment of partnership accounts, an unstamped acknowledgment of the receipt of money was ten- dered in evidence of which was the particular partner by whom a payment (which was admittedly made to a creditor) had been made. It was held inadmissible (b). The right to demand an accounting does not exist in societies of wrong-doers, or in partnerships whose business is carried on in violation of statutory enactments. Thus, when a joint adventure was formed for the purpose of carrying on the slave-trade, it was held that one partner had no right to raise an action of accounting against the other (c). And an action of accounting at the instance of a party alleging himself to be a partner of a pawnbroking com- pany who carried on business concealing the name of the pursuer and other partners, in violation of Act 29 and 30 Geo. iii. c. 99, was dismissed as incompetent (d). If, however, the illegality does not inhere in the nature of the business, or in the mode in which it is arranged to be carried on, but attaches to acts of some of the partners only, this will not bar an action of accounting at the instance of the others, who have not so compromised themselves (e). An action for accounting against an alleged partner, or against a company, may be met by a denial of the existence of the partner- (a) Samuel and Co. v. Brown, 1842, 4 D. 1518. (h) Scott V. Bird, 1845, 8 D. 25. See also Ewing v. Cliricliton, 1827, 4 Mur. 184 ; Flowerdew v. Dundee Sliip. Co., 1831, 9 S. 373, aff. 1832, 6 W. and S. 160. (c) Gibson V. Stewart, 1828, 6 S. 733, and 1835, 14 S. 166, 12 S. 683; aff. 1840, 1 Robin. App. 260. (d) Fraser v. Hill, 1852, 14 D. 336. (e) See Campbell v. Campbell, 1834, 12 S. 573, 7 CI. and Fin. 166, 1 Rob. App. 1 ; Gordon v. Howden, 1843, 5 D. 698, revd. 1845, 4 BeU's App. 254, 17 Jur. 329 ; Pearson v. Skelion, 1 M. and W. 504. See also antea, p. 344. Chap. VI.] COMPANIES AND PARTNERS. 401 ship relation between the pursuer and defender (a). To obviate objections of this kind, where the existence of partnership is not established scripto, and in an unambiguous manner, the conclusions of count and reckoning should be coupled with those of declarator, otherwise a summons of declarator may have to be repeated inci- denter. The want of the declaratory process in England has led to much embarrassment in suits for account and discovery (b). When the defender is not absolutely certain that the partnership relation has not been created, — a question sometimes attended with considerable difficulty, — he ought, while stating this defence, to plead at the same time to the conclusions of count and reckoning, and to state all facts and pleas in virtue of which, if the defence of no partnership is repelled, he conceives he is entitled on other grounds to object to the conclusions of count and reckoning either in whole or in part. The right to demand an accounting may be barred by acqui- Estoppel by escence (c) ; but this must be very clearly estabhshed, and will not acquTesce^^' be presumed from mere elapse of time, unless this is combined with * "' other circumstances (d). Accounts laid before the shareholders of public companies at a general meeting, and approved of, cannot in general be impeached in legal proceedings at the instance of dissent- ing or absent members, unless when they are sought to be reduced on the head of fraud, essential error, or of something which rendered the meeting or the proceedings which took place thereat legal nullities (e). Even where, by statute, a retiring shareholder's lia- bility to creditors of the company has been limited to a certain number of years after his retirement, this has not been deemed a bar to an accounting inter socios (/). A settlement of accounts up to a certain date, or in relation to Defence a certain transaction, is a good defence to an action of accounting °^ "'"^ ' (a) Fraser v. Hair, 1848, 10 D. (d) Lister v. Sutor, 1811, aff. 1815, 1402. See Harris v. Harris, 3 Ha. 6 Pat. App. 78; M'Laren or Law, 450 ; Sanders v. King, 6 Madd. 61 ; etc., v. LiddelTs Trs., 1860, 22 D. Somerville v. M'Kay, 16 Ves. 382; 373. Reade v. Woodroofe, 24 Beav. 421; {e) Ex parte Bignold,'22'&Qs,Y.\.&b; Blackly v. Rymer, 4l Drew 248. Kent v. Jackson, 2 De G. Mac. and G. (J) Lindley 819. 49 ; Stupart v. Arrowsmith, 3 Sm. and (c) Flowerdew v. Laing, 1843, 5 D. G. 176. 440. See also Buchanan v. Lennox, (/) GoutTiwaite's case, 3 Mac. and 1838, 16 S. 824. G. 187. 2C 402 ACCOUNTINa BETWEEN COMPANIES [Book III. fro tanto (a). The settlement must be proved scripto; but it has been held in England, that proof of acquiescence will supply the want of signature (b). Mere transmission of the proposed settle- ment or account, though unobjected to, is, however, no evidence of acquiescence (c). When a settlement has de facto taken place, the mere discovery of an error calculi will not entitle the account to be opened up in toto, especially after the lapse of time (d), unless the mistake is one which affects the whole; but where fraud is established in any item, the whole account will be opened up (e), whatever time may have elapsed (/). Where a regular settlement or discharge has been executed, conclusions of reduction must be conjoined with those of count and reckoning (^). Pay- ment, even when admitted, is no defence to an action for account- ing, for the object of the action is to ascertain the amount due (Ji). And on the other hand, the existence of an agreement to settle on certain terms is not necessarily a complete defence ; for if per- formance within a given time was a condition of the terms being accepted, the right to force an accounting will revive if the con- dition has not been purified (i). If the agreement is binding, it ought to be libelled, and the action should be for payment or performance. Decree- A decree-arbitral is a good defence to an action of accounting, provided it apply to and be exhaustive of the conclusions of the summons (Jo). It has been held by the English Equity Courts, that an agreement to refer to arbitration forms no bar to a judicial (a) Pollock, Gilmour, and Co. v. Allfrey v. Allfrey, 1 Mac. and G. 87 Ritchie, 1851, 13 D. 640 ; Hunter r. Clarke v. Tipping, 9 Beav. 284. Cochrane's Trs., 1829, 8 S. 171, and (/) BowmontY. Boultbee, 5 Yes. 68 9 S. 477 ; Taylor v. Shaw, 2 Sim. Stainton v. Carron Co., 24 Beav, and Stu. 12 ; Endo v. CaUham, You. 346. 306. (,g) See Fowler v. Wyatt, 24: Beav. (6) Morris v. Harrison, CoUes. 157; 232 ; Parker v. Bloxam, 20 Beav. 295 Willis v. Jernegan, 2 Atk. 252 ; but Wedderlurn, 2 Keen 722 ; Millar v. see Walker v. Consett, Forrest 157. Craig, 6 Beav. 438. (c) Irvine v. Young, 1 Sim. and (/t) See Brown v. Perkins, 1 Ha Stu. 333 ; Clements v. Bowes, 1 Drew 564. 692. " (i) Previous case. (d) Pitt V. Cholmondely, 2 Ves. sen. (k) Tittenson v. Peat, 3 Atk. 529 ; 565 ; Vernon v. Vawdry, 2 Atk. Ronih v. Peach, 2 Anst. 519 ; Far- 119. rington v. Chute, 1 Vern. 72 ; Spencer (e) Wharton v. May, 5 Ves. 68 ; v. Spencer, 2 Y. and J. 249. Chap. VI.] AND THEIR SHAEEHOLDERS. 403 accounting (a) ; it is very doubtful if this is law in Scotland, at least where an arbiter has been named (b). The period over which the right to accountine extends, is ordi- Period over ° . . wmoh aooount- narily from the commencement of the partnership relation down to ing should 1- ... .... extend. the time when the action is raised, or until dissolution, if that event has already taken place. Generally speaking, an incoming partner has no right to an accounting beyond the time of his entrance; because he has no right to share profits which accrued before he became a partner (c). Both these rules may, however, be altered by circumstances. If settlements or discharges have taken place up to a certain time, this will bar all inquiry previous to that period ; and it is quite possible that an agreement may have been made with an incoming partner, in respect of which he is entitled to an examination of the partnership accounts prior to the date of his entry, — as, for example, when he has undertaken liability for debts previously contracted. Companies formed by special act, royal charter, or registration, statutory ..... . . p » . provisions. contain provisions in their respective instruments or formation, which, taken in connection with the general Acts, regulate the modes in which the members are entitled to enforce the right of accounting against the concern, and serve to protect their interests from being sacrificed by carelessness or impropriety of conduct on the part of the officials in dealing with property of the company. The provisions of the Companies' Clauses Consolidation (Scot- 8 and 9 viot. land) Act in relation to these matters are as follows : — The directors are required to keep full and true accounts of receipts and expendi- ture (sec. 118). The books must be balanced at the prescribed periods, and if none be prescribed, fourteen days at least before each ordinary meeting. A balance-sheet must also be made up, exhibiting the stock, credits, and property of every kind belonging to the company, the debts due at the date of making the balance- sheet, and a distinct view of the profit and loss during the preceding half-year. This balance-sheet must be examined by the directors and (a) See Agar v.Macklew, 2 8iai.a,Tiid v. Wedderhurn, 1842, 4 D. 944; Stu. 418 ; Thompson v. CJiarnock, 8 Macdonald v. Macdonald, 1829, 7 S. T. R. 139 ; Michell v. Harris, 4 Bro. 765 ; Stewart v. Lang's Trs., 1839, 2 0. 0. 311 ; Street v. Rigby, 6 Ves. 814. D. 167. (6) Bell on Arbitration 20. Seeder (c) Gordon v. Rutherford, T. and R. Lord Justice-Clerk Hope in Hawkins 373. 404 ACCOUNTING BETWEEN COMPANIES [Book III. Act 1862. Books and accounts. Inspection by members. signed by the chairman previous to each ordinary meeting (sec. 119). The hooks so balanced and the balance-sheet must for the prescribed period, and otherwise for fourteen days previous to each ordinary meeting, lie open for inspection of members at the company's prin- cipal office or place of business. At other times a written order is required to allow shareholders to inspect (sec. 120). The balance- sheet, together with the auditor's report thereon, must be produced at the ordinary meeting (sees. 121, 109, and 111). The directors must appoint a book-keeper, charged with the special duty of enter- ing the company accounts in books provided for the purpose ; and he is bound, under heavy penalties, to permit any shareholder to inspect such books, and to take copies or extracts, at any reasonable time during the prescribed periods, or otherwise one fortnight before and one month after each ordinary meeting (sec. 122). If Table A be adopted as the articles of association, companies under the Act 1862 will be furnished with a set of regulations very similar to, though perhaps more perfect than, the foregoing. They are as follows : — The directors must cause true accounts to be kept (1) of the company's stock-in-trade ; (2) of the income and expenditure ; and (3) of the credits and liabilities of the company. The books of accounts must lie at the company's registered office ; and, subject to such reasonable provisions and restrictions as may be imposed by the company in general meeting, they must be open to the inspec- tion of the members during business hours (No. 78). Once a year at least the directors must lay before a general meeting a statement of the income and expenditure, made up to a date not more than three months before the meeting (No. 79). This statement must be arranged under convenient heads, and must show the amount of gross income, distinguished by its sources, and the amount of gross expenditure, distinguishing the different kinds of items. The year's expenditure must be fairly charged against the year's income, so as to bring out a clear balance of profit and loss ; and where any item of expenditure which ought properly to be distributed over several years has been incm^red in one year, the whole of such item must be stated, with the reasons why it ought so to be distri- buted (No. 80). A balance-sheet of the property and liabilities of the company, as nearly as possible in the form annexed to the Chap. VI.] AND THEIR SHAREHOLDERS. 405 table, must be made out every year, and laid before a general meeting (No. 81) ; and a printed copy must also be served on every member seven days before such meeting (No. 82). Still further to secure the interests of the members, the table Auditors. makes the following provisions for the appointment and duties of auditors : — The first auditors are appointed by the directors ; their successors by the company at their ordinary annual general meeting (Nos. 84-87). The auditors may be members, provided they are not directors or other officials, or are interested in transactions with the company (No. 86) ; and they are capable of re-election on quitting office (No. 89). On the occurrence of a vacancy among the auditors, the directors must forthwith convene a general meeting to supply the same (No. 90). The remuneration of the first auditors is fixed by the directors ; that of their successors by the com- pany in general meeting (No. 88). If no election of auditors is made as directed above, the Board of Trade may, on the appli- cation of five members, appoint an auditor for the current year, and fix his remuneration (No. 91). Every auditor must be fur- nished with a copy of the balance-sheet, which he is to examine, with the relative accounts and vouchers (No. 92). Every auditor must likewise be supplied with a list of all the company books, and has access to them and the accounts at all reasonable times. He may employ professional assistance, at the company's expense, to aid him in the investigation of the accounts ; and he may examine any director or officer in relation thereto (No. 93). The auditors must make a report to the members upon the balance-sheet and accounts, stating whether in their opinion the balance-sheet exhibits a true and correct view of the company affairs, and contains the particulars required by the regulations ; and whether, if they have found it desirable to examine the directors or other officers, they have received the required information in a satisfactory manner. This report must be read, together with that of the directors, at the ordinary meeting (No. 94). This examination of the accounts must be made, and the correctness of the balance- sheet ascertained, by one or more of the auditors, at least once in every year (No. 83). If one auditor only is appointed, all these provisions are held to apply to him (No. 85). [ 406 1 CHAPTER VII. CONTRIBUTION AND INDEMNITY (a). Under this heading it is proposed to consider the obligation inter socios which lies upon all the partners to contribute proportionally towards liquidation of the debts and making up the losses incurred by the company ; the cases in which a partner's claims against the company suffer abatement proportionably to his own liability to contribution ; and the right which a partner has to be indemnified by the company for losses sustained or obligations incurred by him on its account. I. LIABILITY OF THE PAETNER8 TO CONTEIBTJTE EATEAELY TOWARDS THE LOSSES AND DEBTS OE THE EIEM. Obligation to In the absence of special stipulations to the contrary, all the partners are bound to contribute towards the losses and debts of the company in proportion to the interest or share held by them respectively in the concern : i.e., if the right to share profits be equal, so also will be the liability to contribution ; and if some have a right to a larger share of profits than the others, the liability to contribution will be exactly proportioned in the same ratio (6). This rule may, however, be modified by special agreement. (a) The word originally selected was and Scottish law where the meaning ' EeHef ; ' but Indemnity was after- is the same. wards substituted, because it is doubt- (h) MacAlister v. Alexander, 18S7, ful whether Relief bears a meaning 15 S. 1061, aff. 1839, M'L. and Rob. co-extensive with the subject, because 353. See Aytoun, 1844, 6 D. 1409 ; Orr Indemnity is generally used by the and Co. v. Pollock, 1840, 2 D. 1092 ; Legislature, and because it seems Chray v. Douglas, Heron, and Co., aff. most undesirable to perpetuate a dif- May 10, 1779, 6 Pat. App. (Sup.) 800; ference in the phraseology of English Wilson v. Bruce, 1853, 16 D. 171 ; Chap. VII.] CONTRIBUTION AND INDEMNITY. 407 It must be observed that these remarks apply only to partners in Case of quasi the proper sense of the word. Persons who are liable to be sued as if they were partners, and who are generally though improperly termed quasi partners, or partners as regards the public, are not liable as such to contribute in a question inter socios (a). If they incur any such liability, it is not in consequence of their quasi partnership, but by reason of some other agreement between them and the socii. Partners or their representatives are liable to be made contri- For what debts . ,^, ... contribution butories for such debts or claims only as they could have been is due. compelled to pay as at the date when they "were contracted, unless liability has been incurred by subsequent conduct or adoption (6). Thus, where a partner who had retired, but did not advertise out, was called upon to pay a debt afterwards contracted by the company, it was held that he was not entitled to relief against others who had previously or at the same time retired, and had advertised oat, but only against such as were de facto partners at the time the debt was contracted (c). If, again, a partner or his representatives have, by delegation or otherwise, been discharged inter socios, no claim for contribution can be maintained against them (d). But where, after debts had been contracted by a firm of two partners, four others were assumed, and the new firm had plainly adopted the debts of the old, the four new partners were found liable in contribution for the original debts (e). And where a partner sold his shares to a third party, whom, however, the company did not accept as obli- gant in his room, he was still found liable to be made a contributory for company debts in a question inter socios (/). An action for contribution should be libelled as such ; and it Action for „ 1 , ■ r n i 1 jTi contribution. has been found that an action tor calls ex contractu cannot be aiter- wards insisted in as an action of contribution (g). Douglas, Heron, etc., 1800, 2 Bell's 1845, 8 D. 167; Craig v. Douglas, Com. 647, n. 3. Heron, and Co., 1781, 2 Pat. App. 575. (a) Geddes r. Wallace, 1816, as (e) Mercer v. Feddie, 1832, 10 S. revd. 1820, 6 Pat. App. 643. 405; and see M'Keand v. Laird, 1861, (&) Martin v. Hunter, 1835, 7 W. 23 D. 846 ; Drummond v. Holliday, and S. 574. 1831, 9 S. 284. (c) Wright v. Gardner's Trs., 1831, (/) Wilson v. Bruce, 1853, 16 D. 9 S. 721. 171. (d)£iW«ai/v. injifeV 7V«., 1832,11 {g) Watson t. Ayrshire Iron Co., S. 181. See also Hoskins v. Christie, 1859, 22 D. 167. 408 CONTRIBUTION AND INDEMNITY. [Book III. II. OASES IN WHICH A PARTNER'S CLAIMS AGAINST THE COMPANY SUFFER ABATEMENT PROPORTIONABLT TO HIS OWN LIABI- LITY TO CONTRIBUTION. General rules. As a partnership is a quasi person, it may become the debtor of one of its own partners. When this takes place, the question arises, whether the partner creditor is entitled to recover the whole of his debt against the company, or whether his claim must suffer an abatement proportioned to his own share in the concern. The decisions on this subject are few and unsatisfactory, but upon the whole the following rules would seem to be in accord- ance with equity and legal principle : — 1. If, after extinction of all subsisting debts due to the public, the company possess capital or property, the partner creditor will be entitled to payment in full out of such assets before any division of profits can be made (a). But (2) if, in consequence of there being no company assets, or not a sufficient amount, after payment of the public creditors, to meet the partner's debt, he is obliged to proceed against the other partners as contributories, it would seem that he can only demand payment of his claim, or the balance thereof remaining due, under deduction of what (if the creditor had been a third party) he must have contributed as his own share (h). The reason of this becomes more apparent, if we consider the case of a partner purchasing up a debt owing by the concern to a public creditor. Here, if the concern possessed no funds to meet the demand of the public creditor, every one of the partners would have to contribute rateably towards its liquidation. Now, the fact that one of the partners purchases up the debt cannot relieve him of his liability to contribute with the rest ; and therefore he can only demand payment from his fellows of the claim under deduction of such a proportion as, if it had still remained payable to a third party, he would have been bound to contribute. (a) 2 BeU's Com. 646. 1835, 13 S. 887. See Turner v. Mol- Q>) MalcolmY. West Lothian Ra. Co., lison, 1833, 11 S. 669. Chap. VII.] CONTRIBUTION AND INDEMNITY. 409 III. OF THE EIGHT WHICH A PARTNER HAS TO BE INDEMNIFIED BY THE COMPANY FOE LOSSES SUSTAINED OE OBLIGATIONS INCURRED BY HIM ON ITS ACCOUNT. The nature of this right will be best understood, and the ques- This right tions to which it gives rise will be most satisfactorily solved, by the dootriues keeping steadily in view the principles of agency and guarantee, of guafante!.*'^ which, as we have already seen, the law of partnership is in many respects only a special adaptation. According to the law of Scot- land, partners are the agents and guarantees of the firm ; according to the law of England, they are the agents and guarantees of each other. In so far as the present branch of the subject is concerned, this amounts to a mere difference of statement. The legal prin- ciples underlying the two formulce are substantially the same, and yield apparently the same practical results; so that the English precedents and authorities seem entitled to the same weight as our own. The principles of agency and guarantee, when applied to ques- General rules. tions arising inter socios, produce the following two general rules : — 1. Every partner is entitled to be indemnified by the firm for all losses incurred by him while acting bona fide for the concern within the sphere of his agency. 2. Every partner is entitled to indemnity against the firm for such payments as he has been compelled to make to third parties in consequence of company obligations. These general rules will require some consideration. To entitle a partner to indemnity against the company for Indemnity obligations, debts, or losses incurred, and for advances or outlays for obligations, made by him on its behalf, it is necessary to show that he acted in sustained ' bona fide and within the sphere of his agency ; for this is necessary within sphere to entitle an agent to indemnity from his principal (a). Hence ° ^S™"^' probable advantage, or even the apparent necessity of doing certain things to save the concern from ruin, will not always be sufficient (a)Storyoii Agency, s. 385; Smith's V. C. W. ; Brown v. GihUns, 5 Bro. Merc. Law 130 ; Gleadow v. Hull P. C. 491 ; Croxtori's case, 5 De G. and Glass Co., 13 E. Jur. 1020, V. C. E. ; S. 432 ; Stevenson v. Duncan, 1842, 5 Sedgivick's case, 2 E. Jur. N. S. 949, D. 167; Keith v. Penn, 1840, 2 D. 633. 4:10 CONTRIBUTION AND INDEMNITY. [Book III. to entitle a partner to indemnity (a) ; for a principal cannot be com- pelled to pay for advantages which his agent has chosen to secure for him without his authority (b). But it must be observed that the agency of a partner is implied as well as specific ; and therefore while a partner will not be entitled to relief in relation to such acts as he was prohibited from doing, however advantageous or neces- sary they might seem (c), his implied agency will receive a liberal construction when it has been exercised with ordinary discretion and in perfect good faith. Thus, if a partner contract for goods on behalf of the firm, but make the contract so that he alone can ' be sued upon it, he will be entitled to indemnity against the firm if the contract were within his agency (d). And he will also be entitled to indemnity for the expenses of defending an action brought against him on such contract, if he defended with the knowledge and consent of the firm (e). But if a partner act as for the company plainly beyond the limits of his agency, the case becomes very different. Here, as we have already seen (/), if the party with whom he transacted knew that the transaction exceeded the agency, it does not bind the company at all. But if the com- pany is bound in consequence of the party with whom the trans- action took place being ignorant of its exceeding the bounds of the partner's agency, the latter is himself liable to relieve the company. This is a consequence of the principles of agency (g). Of course, if the company homologate the partner's conduct, as by taking the benefit of his unauthorized acts, they will be bound to indemnify him (Ji). All such questions must be solved by having regard to the whole circumstances of the particular case; and, therefore, when a partner makes a claim for reimbursement or indemnity against the company, he ought to make his averments very specifically and in detail (i). (o) Hawtayne v. Bourne, 7 M. and E. Jur. 1020, V. C. E. ; Sedgwickh W. 595 ; Ricketts v. Bennet, 4 0. B. case, 2 E. Jur. N. S. 949, V. C. W. 686 ; Dickinson v. Valpy, 10 B. and (e) Brown v. Gibbins, 5 Bro. P. C. C. 128, 3 Ross Le. Ca. 561 ; Edmiston 491 ; Croxton's case, 5 De G. and S. 432. V. Wright, 1 Camp. 88. (/) See p. 245 et seq. (V) Stokes V. Lewis, 1 T. R. 20 ; (g) Child v. Morley, 8 T. R. 610 ; Child V. Morley, 8 T. R. 610. Stokes v. Lewis, 1 T. R. 20. See lindley (c) Thornton v. Proctor, 1 Anstr. ^ &29,a,ndEdmistonv.Wright,lCa.mTp.88. 94. (/i) See Story on Agency, s. 250. (rf) Gleadow v. Hull Glass Co., 13 (i) Stainton y. Carron Co., 24 Chap. VII.] CONTRIBUTION AND INDEMNITY. 411 The same rules are generally applicable where managers or Directors directors seek indemnity from the company for losses sustained or enWtieTto obligations undertaken on its account. But it must be observed, when ^rtaers that in some cases these officials will be entitled to indemnity from ^e°^^ "°' the company where a partner would have no such claim against the firm. The reason of this difference, and the cases in which it is likely to have place, will appear from the following considerations. A partner, as such, is not charged with the entire responsibility of management, except in very peculiar circumstances. This he shares with his copartners, with whom he ought to consult in all matters of importance. If, therefore, he undertakes personal obligations on account of the firm, vnthout the knowledge and approval of his copartners, his right to relief from them will, in a great measure, depend on their having subsequently adopted the transaction. To the board of directors, on the other hand, the whole management of the company is entrusted ; and their only mode of taking the instructions of the shareholders is by calling a general meeting, — a proceeding necessarily involving a considerable elapse of time. Yet such are the exigencies to which all mercantile companies are liable, that prompt and decisive action is often the only means of averting serious losses or absolute ruin ; and unless the board of directors were entrusted with a discretionary power of action greatly more extensive than that confided to a partner, the whole concern might be involved in irretrievable disaster before a general meeting could be even assembled (a). It is for this very reason, indeed, among others, that companies with a large and fluctuating membership are managed, not by the partners, but by managers or boards of direc- tors. These considerations seem therefore to lead to the conclu- sion, that whenever directors or other managers make advances or incur obligations for the company for purposes within its sphere of action, they are entitled to indemnity, though they have done so without special authority, and even in violation of regulations intended to be observed in ordinary circumstances, provided they can justify their conduct by what seemed to be the exigencies of Beav. 346 ; East India Co. v. Blake, 935 ; Maxton v. Muir, 1845, 7 D. Finch. 117 ; York and North Midland 1006 ; Nat. Ex. Co. of Glasgow, 1849, Ra. Co. V. Hudson, 16 Beav. 485. 11 D. 571; Blackburn v. Stewart, 1851, (a) Fleming v. Campiell, 1845, 7 D. 13 D. 1243. 412 CONTRIBUTION AND INDEMNITY. [Book III. But are never entitled to indemnity where they travel ont of the line of business. the time. Thus, where directors borrowed money on their own security to preserve mines belonging to a mining company from rapid deterioration and destruction, and afterwards repaid the same, they were found entitled to reimbursement from the company, though they had no power to borrow money on the credit of the company, and though it was admitted that the company would not have been bound to repay the money in a question with the public creditor (a). And, for the same reason, where, by the deed of settlement, it was provided that if additional funds were required, they should be raised by increasing the capital, or by borrowing on mortgage of the company's real property, and the directors notwith- standing borrowed the necessary sums from a bank, as required from time to time, they were found entitled to charge these advances against the company, although this rendered each shareholder liable to a considerable degree beyond his subscribed share (b). In Baker's case, 1 Dr. and Sm. 55, V.-C. Kindersley held, that though the director of a company was not entitled to stand as creditor against the company on a debenture issued to him by the company, because the contract wanted confirmation, still, that if he could show that the money had been duly applied in carrying on the business of the company, he should be entitled to recover it as an, ordinary debt. The same view was taken in two subsequent cases (c).. In these and similar cases the principle is, that direc- tors being necessarily invested with greater discretionary powers than ordinary partners, are not to be subjected in personal loss when acting bona fide and to the best of their ability for the Common interest. But, on the other hand, directors are not entitled to indemnity from the shareholders where they plainly contravene express con- ditions of the contract of association, or travel out of the scope of the company's line of business. Hence, where it formed a condi- tion of the contract that no more than a certain fixed sum should be expended, and the directors thought fit to expend a much larger sum, it was held that they had no claim of relief against the share- Ex parte Bignold, 22 Beav. (a) German Mining Co.'s case, 4 De G. M. and G. 19. See also lioustoun v. Montgomerie, 1821, 1 S. 179; M'Alister (Caled. Dairy Co.) v. Alex- ander, 1843, 5 D. 580. (b) 148. (c) Troup's case, 29 Beav. Hoare's case, 80 Beav. 225. 353; Chap. VIl.J CONTRIBUTION AND INDEMNITY. 413 holders quoad the excess (a). And where directors charged with the winding up of a company chose to expend considerable sums in supporting a public bill in Parliament for the better winding up of companies in general, they were found to have no claim against the company for such expenses, as the purpose was plainly beyond the sphere of their agency (h). Again, where the managing committee of a benefit society thought proper to purchase land, and borrow money to pay for it, it was found that they had no claim for reim- bursement against the society, as purchasing land formed no part of its purposes (c). When partners act plainly beyond the limits of their agency. Homologation. or even in contravention of an express provision, they will never- theless be entitled to contribution, if their proceedings have after- wards been approved of or homologated by the company; and ratification may be presumed by the company taking the benefit of such proceedings, or even by their silence {d). Hence, when the company do not intend to adopt the unauthorized act, they should at once object (e). The same rules apply as between directors and their companies (/). Illegal acts done by a partner will entitle him to no indemnity luegal acts. against the firm; for it cannot be presumed that such acts were either within the intended scope of the undertaking, or that they were approved of by the firm {g). If the purposes for which the company was formed were illegal, the case is all the stronger ; for as the concern was ah initio contrary to law, the law will give no aid to work out its transactions or their consequences (h). (a) Gillan v. Morrison, 1 De G. and 1843, 5 D. 580 ; Gillan v. Morrison, 1 S. 421 ; Worcester Corn Exch. Co.'s De G. and S. 421 ; re Worcester Corn case, 3 De G. M. and G. 180. Ex. Co., 3 De G. Mac. and G. 180 ; (5) Cropper^s case, 1 De G. M. and re Cropper, 1 De G. Mac. and G. 147 ; Q, 147. ex parte Chippendale, and ex parte (c) Kent Benefit Building Soc, 1 Dr. Bignold, supra. and Sm. 417. See also Selwyn v. (g) See Finlayson v. Braidbar Harrison, 2 J. and H. 334. Quarry Co., 1864, 2 Macph. 1297. (d) See Story on Agency, c. vi. ; ex Qi) Gibson v. Stewart, 1835, 14 S. parte Chippendale, 4 De G. Mac. and G. 166, 1 Rob. 260 ; Oiisvn v. Stewart, 19 ; ex parte Bignold, 22 Beav. 143 1828, 6 S. 733, aff. 1 Rob. 260 ; and 165. Eraser v. Hill, 1852, 14 D. 335. See (e) Cragg v. Ford, 1 Y. and C. 0. Gordon v. Howden, 1843, 5 D. 698 ; C. 280. revd. 1845, 12 CI. and Fin. 237, 4 (/) See M'Alister v. Alexander, Bell's App. 254. 414 CONTRIBUTION AND INDEMNITY. [Book III. When the partnership is not illegal, but where one of the part- ners is subjected in the penalties or consequences of an illegal act committed by one or more of his copartners without his privity, he will be entitled to indemnity against the wrong-doers to the full extent of his loss (a). When, as before, the partnership is not contrary to law, but an unlawful act has been done by all the partners in the knowledge of its illegality, and the loss conse- quent thereon happens to fall on one of their number, it is the general opinion that he has no claim of contribution against his fellows (6). The opposite view, though it has some semblance of authority (c), would seem objectionable on the mere ground of public policy. Loans. Loans made by a partner to the firm are, if properly con- stituted, in the same position as loans made by third parties ; for the firm is a quasi person, and may assume the character of debtor to its own members (d). Loans made bj^ directors to the company, or advances made by them on its behalf, are in a somewhat diffe- rent position. Directors are special oificers partaking of the nature of trustees, and it is not for the interest of the concern that they should stand to it in the relation of creditors. If the loan is one which, if it had not been made by the directors,, must have been obtained from strangers, it will entitle them to reimbursement (e) ; yet, as the transaction is open to suspicion, authority should always be obtained from the shareholders before it is entered into (/). I'ebts. When a partner is compelled to pay a debt constituted against the firm, he is always entitled to the benefit of contribution, unless the claim has been fixed against the firm, in consequence of his own improper conduct, as e.g. exceeding his agency, or having been guilty of fraud or culpable negligence (^). But a partner who (a) Campbell v. Campbell, 1834, 12 (/) Bluck v. Malalue, 5 E. Jur. N. S. 573, 7 01. and Fin. 166, 1 Bob. App. S. 1018 ; compare Murray's Exeeu- 1 ; Pearson v. Skelton, 1 M. and W. 504. tors, 5 De G. Mac. and G. 750 ; and (5) A. G. V. Wilson, Or. and Ph. 1, Teversham, 3 De G. and S. 296. per Lord Cottenham. (g) Cordon v. Howden, 1849, 12 D. (c) Baynard v. Woolley, 20 Beav. 253 ; Prole v. Masterman, 21 Beav. 583 ; ex parte Longworth, 1 Johns 465. 61 ; M''Owen v. Hunter, 1 Dr. and Wal. (i) Keith v. Penn, 1840, 2 D. 633 ; 347 ; Robinson's Executors, 6 De G. Sturrock v. Tlioms, 1851, 13 D. 762. Mae. and G. 572 ; Evans v. Yeatherd, (e) Ex parte Sedgwick, 2 E. Jur. N. 2 Bing. 133 ; Richardson, etc., v. Gavin, S. 949 ; ex parte Bignold, 22 Beav. 143. etc., 1853, 15 D. 434. Chap. VII.] CONTRIBUTION AND INDEMNITY. 415 pays a debt claimed, but not due, has no right to indemnity against the firm (a) ; and where a partner departed from a debt judicially found due to the firm, he was found liable to indemnify his co- partners (b). When losses arise to the firm, in consequence of the conduct of Fault of one one partner rather than of the others, the contribution will still be "^^^ ^^'^' equal, unless that which caused the loss is attributable to culpable negligence, or something more than mere error in judgment (c). The same rules apply to directors (d). It is a principle of the law of partnership, that a partner is not Services. , entitled to any remuneration for services rendered to the firm, or for loss of time incurred by him in carrying on the common busi- ness (e) ; and a managing partner is in the same position (/). No claim of indemnity, therefore, lies against the company on this score. The exceptions are where, after dissolution, the business of the firm is carried on by one of the partners for the benefit of the others or their representatives (g), and where an express agreement has been made to give remuneration (h). Directors of companies are in the same position, and are entitled to no claim for their services without express agreement, under any pretence what- ever (i). But partners as well as directors are always entitled to charge the company with expenses bona fide laid out or incurred in the conduct of its business (k). When by agreement the directors are to receive payment, they are entitled to their fees even if the concern proves a failure (J). (a) Re Webh, 2 B. Moore 500 ; (/) Hutchison v. Smith, 5 Irish Bq. M'nreath y. Margetson, 4 Doug. 278. 117. See Cavan v. Mackie, 1832, 10 S. (g) Brown v. De Tastet, Jac. 284 ; 550. Crawshay v. Collins, 2 Russ. 847 ; (J) Brand V. Kennedy, 1710, Robert. Gordon v. Howden, 1853, 15 D. 378 ; App. 8. Cameron's Trs. v. Cameron, 1864, 3 (c) Ex parte Letts and Steer, 26 L. Macph. 200. J. Oh. 455 ; Cragg v. Ford, 1 Y. and (^0 Berry v. Lamb, 1832, 10 S. 792. C. 0. C. 280 ; Lingard v. Bromley, 1 (i) Duncan v. Union Canal Co., V. and B. 114. 1831, 9 S. 398 ; York and North Mid- id) Evans v. Coventry, per Y.-G. land Ra. Co. y. Hudson, 16 Bear. 4S6 ; Kindersley, 2 E. Jur. N. S. 557. Evans v. Coventry, 2 E. Jur. N. S. 567. (e) M'Whirier v. Guthrie, 1822, (k) Geddes v. Hamilton, 1801, aff. Hume 760, and 1 S. 295 ; Beath v. 1805, 4 Pat. App. 657 ; Duncan v. Campbell, as revd. 1826, 2 W. and S. Union Canal Co., supra. 25 ; Hunter v. CocJirane's Trs., 1831, (0 Ex parte Johnson, 27 L. J. 9 S. 477, and 5 W. and S. 639. Ch. 803. [ 416 ] CHAPTER VIII. COMPENSATION. Natiire of. General principles of. Does not operate ipso According to the law of Scotland, where two parties are mutually debtors and creditors, their claims, if equal, extinguish each other ; and if unequal, leave only the balance due. This is called com- pensation, or set-off. It is founded on, and is indeed nothing else than, a special application of the equitable principle which operates in retention, though here as well as in England it; has been to a certain extent regulated by statute (a). Before considering the application of this doctrine between partnerships, their members, and the public debtor or creditor, it is desirable to obtain a distinct conception of the rules by which, in Scotland, its practical operation is regulated. In order to found compensation, it is necessary, — 1. That the parties be debtor and creditor each in his own right. Thus an agent cannot set off a debt due to his principal against a debt due by himself as an indi- vidual. 2. That the parties be mutually debtors and creditors at the same time ; so that it has no place where one has assigned his claim before concourse. ' 3. That the claims be both liquid and exigible ; hence there can be no compensation between a present debt and one that is future, much less contingent. Compensation does not operate ipso jure, but must be pleaded by way of defence ; yet, when sustained, it operates retro to the time of concourse (that is, when both claims first co-existed), and stops the currency of interest from that time downwards. Though, properly speaking, there is no room for compensation while one of the debts is not yet constituted, yet when this can be instantly (a) In Scotland by 1592, c. 41 ; in England by 2 Geo. il. c. 22, and 8 Geo. II. c. 24. Chap. VIII.] COMPENSATION. 417 done by writ or oath of party, or when the delay necessary for constitution by witnesses or otherwise is short and limited, it has beeii usual to stay procedure in the original action till the counter obligation can be constituted as a set-off. This is peculiarly the case in bankruptcy, where a solvent debtor will not be compelled to make instant payment of a liquid debt, and rank for his own illiquid claim on the bankruptcy assets. In applying these rules to claims arising between companies and Application of , . 1 . 1 T /,..,. doctrine in their debtors or creditors, and the debtors and creditors of their mdi- partnersiiip. vidual partners, questions of no ordinary difficulty have presented themselves; and their solution has, it would seem, been considerably embarrassed from a confusion of thought due to a misapprehension of English decisions, in which the ratio decidendi depends on peculiari- ties of that system from which the law of Scotland is happily free. The English common law courts have deemed themselves English law. entitled to recognise the doctrine of compensation, in so far only as it has been enunciated by statute; and even within these limits, they have, as in too many other instances, been greatly fettered by technical rules of pleading. The courts of equity, again, though they profess to apply the principles of this doctrine in conformity with what appears to be the substantial justice of the case, have nevertheless regarded themselves as bound by the peculiar form which obligations in England sometimes assume. It is also very apparent that, in the equity as well as in the law courts, the conse- quences of not recognising the separate persona of the firm have made themselves deeply felt in this as in other departments of partnership law, and have produced results which cannot always be reconciled with the ordinary ideas of justice. It would seem, there- fore, that in this branch of the subject the English authorities are not in general to be relied on as trustworthy guides, and that the law of Scotland is only to be ascertained by an attentive study of the decisions which have been given by our own tribunals, so as to extract the principles which they contain, and by working out these principles to their logical results. In dealing with such questions as present themselves, when the Scottish law. doctrine of compensation is in Scotland applied to partnerships and unincorporated companies, there is one principle of our legal system which must never be lost sight of. That principle is, that the 2 D 418 COMPENSATION. [Book 111. Compensation as between two companies. Handyside v. Harwood. Compensation between a company and an individual. company being a separate person, is capable of entering into con- tracts on its own account, and thereby assuming the relations of debtor and creditor both as regards the public and its own members. The consequences of this principle will now be examined in detail ; and we shall endeavour to show in what cases its operation is modi- fied or controlled by other principles which are brought into play from motives of convenience or equity. 1. When two companies are mutually indebted, compensation takes place between them in the same way as if they were indivi- duals ; and since they are persons distinct from their partners, it makes no difference though some of their members be at one and the same time partners of both companies. It is also of no import- ance that one or both of the companies are dissolved, provided the debts were contracted prior to dissolution ; for it is a rule of law, that the firm always subsists until its assets have been realized and its debts discharged. Hence, where a company consisting of three partners was at the time of its dissolution creditor of another company, and two of the partners, who continued to carry on the business, became in turn debtors to the other company whose estates were sequestrated, it was held that, in an action by the trustee against the two partners for payment of the debt due hy them, they were entitled to com- pensate that debt with the debt due to them as partners of the first company, the other partner having no longer an interest therein (a). In this case compensation took place in reality between two com- panies, whatever effect the retirement of the third partner may be supposed to have produced. For whether we say that after that event the old company still continued with the loss of one of its partners, or that a new company was formed taking up the claims and liabilities of the old, it is still true that there was a concourse of debit and credit between companies. 2. When, of the parties mutually indebted, one is a company and the other an individual, compensation will take place as before. This was found to be the case even where the company carried on two separate businesses under different firms. In Inglis, Gilchrist, and Co. V. Cuthbertson (b), a company consisting of two partners carried on business as bankers in one oflfice and as linen-drapers in (a) Handyside v. Harwood, 1812, 17 F. C. 29. (6) 1809, Hume 122. Chap. VIJI.] COMPENSATION. 419 another, and kept separate books applicable to each ; , yet it was found that they were entitled to set off a debt due by them as bankers to a party, against a debt due to them as linen-drapers by the same party. If this had been the case of an individual carrying on two separate trades, the decision would have been law wherever the doctrine of compensation is admitted. The fact of its being the case of a company may serve to show how fully the separate person of the company is recognised in the law of Scotland. But it must be observed, that in the general case there is no Effect of dis- room for compensation on the head of debts or claims arising out of contracts made with any number of the partners less than the whole, after the dissolution of the company has been properly noti- fied. The reason is, that after that event the company only subsists for the purposes of winding up, and the implied agency to enter into new contracts is withdrawn. The only exception to this would seem to be when the new transaction has been adopted by all the former partners ; or where, as we shall afterwards see, the partner to whom the debt has been contracted agrees to set it off against a claim made by his debtor against the company. 3. Compensation has place between debts due to the company bv Compensation p- 111111 r J J between the one of its partners, and debts due by the company to that partner, company and Examples of this occur when advances have been made between partners. companies and. their individual partners, and claims are made for contribution or indemnity, and whenever claims of contribution and indemnity are set off one against the other. See ' Contribution and Indemnity.' It must be observed, however, that, when the company is bankrupt, there can be no compensation between it and its partners ; as the claims of the partners only emerge after those of the public creditor have been satisfied. It may also be stated as a general rule, that there can be no compensation between debts due by one partner to the other, and debts or claims between these partners and the company. Thus, if a company consist of four partners. A., B., C, and D., and A. sue D. for £100 privaio nomine, this will not be compensated by a debt due by the company to D., or by a debt due by A. to the company. And in like manner, if the company sue B. for contribution, the claim cannot be met by a debt due to B. by another of the partners. Or, again, if B. sue the company for indemnity, or for a share of 420 COMPENSATION. [Book III. No compensa^ tion between the debts of the company, its partners, profits, or for a loan, the company cannot set off against B.'s claim a debt due by him to another of the partners. Here there is no concourse of debit and credit ; for the company being a separate person, there are in all the cases supposed three parties, and no two of them are mutually debtors and creditors of each other. The difficulty may sometimes be removed by assignation, but this cannot be resorted to in bankruptcy when the effect of the assignment would be to diminish the assets of the company avail- able to its creditors. Compensation may, how^ever, take place in the cases supposed where there are only two partners in the firm, or where, there being more, one partner is creditor of all the others bound conjunctly and severally. But if the company is bankrupt, compensation cannot even in such cases be pleaded. As a general rule, there is no room for compensation as to debts in which a company, its partners, and strangers occupy the relative positions of creditors and debtors to each other. Thus, 1. a and strangers, gtranger cannot set off against a debt due by him to the company a private debt due to him by one of its partners as an individual. In such a case there is no concursus dehiti et crediti ; for though a partner is personally liable for a company debt, the company is in no wise responsible for his private obligations. Nor does it make any difference that the partner, who is debtor to the stranger, may happen to be the sole surviving or solvent partner of the concern at the time when the company claim is sued for ; for in such a case the partner in qiiestion is in truth trustee for all those who have claims on the company, and holds in his person two separate and very distinct characters, viz. that of debtor to the company debtor as a private individual, and that of creditor to the same person as trustee for the company creditors. So that to allow compensation in such a case, would be in fact to allow an illegal preference to one company creditor over all the others. If, however, the concern, of which the partner who is debtor to the stranger is the sole survivor, have no creditors, compensation will have place, because the cha- racter of trustee in the surviving partner does not exist (a). 2. A partner cannot set off against his private debt a debt due by his creditor to the company. No case, in so far as the author is No compensa- tion between a partner's debt (a) Morrison v. Hunter, 1822, 2 S. 62 ; Kerr v. Scott, 1823, 2 S. 400 ; Thorn V. North British Bank, 1850, 13 D. 134. Chap. VIII.] COMPENSATION. 421 aware, has hitherto occurred in which this point has been decided ; and Ms oredi- but on the principles given effect to in the decisions last noticed the company. there seems no reason to doubt the accuracy of the proposition. The company, being a separate person, can in no case, except those of delegation or suretyship, be held liable for the private obligations of its members ; and e converso, a partner cannot be in right of a company claim, unless by transference. There is not, therefore, in this instance any more than in the last, a concursus debiti et crediti. Moreover, to allow compensation in the circumstances supposed, might, in the event of the company's bankruptcy, deprive its cre- ditors of one of its assets, thereby reversing the rule of the law of Scotland, that company creditors are entitled to a preference over its partners and their creditors. But, on the other hand, there are cases in whicli compensation Cases when . ^ this rule does has place between companies and the public by reason of private not apply, debts due by or to their partners. These cases may be stated as exceptions to the principle laid down at the outset, or rather as consequences of another principle by which the operation of the former is modified and controlled. This latter principle may be stated as follows : — Though the company be a separate person, yet as every one of Principle of • 1- 1 1 c • 11- ■ ■ Tj 1-1 these oases. the partners is liable for its obligations m sohdum, any one oi them may at the instance of a creditor be compelled to pay the whole of a debt constituted against the company, or he may step forward with the consent of the company and do so of his own accord. When either of these events takes place, the partner so compelled or offering to make payment may set off against the company debt, which has thus become his own, any constituted claim which he holds as an individual against the company creditor. This principle has accordingly found its exponent in the following rules : — 1. When a company is sued for a debt due by the firm, it may Rule i. plead compensation on a private debt due by the creditor to one of its partners, and that without any assignation from such partner. The first case in which this question was raised for decision was that of Bogles Cred. v. Bcdlantyiie, 1793 (a). There was some difference of opinion upon the bench, but the majority of the judges ultimately decided in accordance with the rule here stated, and on (o) M. 2581. 422 COMPENSATION. [Book III. Insolvency or dissolution immaterial. Consent of partner nocessaj'y ; and also that of the com- pany. the ratio- indicated above. Since that period several cases have occurred which will be found noted below, and in all of them deci- sions were given in accordance with this rule, which was regarded as fixed law (a). In the late case of Thomson v. Stevenson, 1855 (b), the same doctrine was again affirmed ; and the opinion of Lord Curriehill, containing as it does an admirable resumS oi the arrange- ment, may here in part be quoted : 'When a pursuer brings action against a company where the partners are liable singuli in solidum for all the sums sued for, each is debtor individually for the whole sum. ... If any individual partner has a debt owing to himself individually, he is entitled to plead compensation, and the company is entitled, with his consent, to insist that it shall be so applied. Assig- nation is not necessary, but consent of the individual is necessary; and he must concur in the application of his individual debt. But with his concurrence the company is entitled to say, " Our partner, who is individually liable, chooses to pay off our debt in this manner, and we apply his debt in this way." Tliat is the principle upon which the former decisions proceeded.' In the application of this rule, it makes no difference whether the company be solvent or insolvent, or whether it be dissolved or still in existence ; for in all these cases the partner is equally liable to be proceeded against for the whole company debt (c). It will be observed, however, that it is not in the power of the company to apply a debt due to one of its partners in this manner without his consent ; for so long as he is not proceeded against as an individual liable in solidum for the company debt, he may have good reasons for objecting to his own private claims being applied in this manner. This is plainly stated in the opinion of Lord Curriehill quoted above, and also in the opinions of the judges of the Second Division in the late case of Raleigh v. Ilughson and Dohson (d). In like manner, it seems equitable that when the company is ready and willing to make payment from its own funds, a partner should not have it in his power to adopt this mode of settling his (a) Scott V. Hall and Bisset, 1809, 15 F. C. 311 ; Salmon v. Padon and Vannan, 1824, 3 S. 285 ; Wood, James, and Wood v. Downie, 1836, 15 S. 12. See also Russell v. M'Nah, 1824, 3 S. 41 ; Hill V. Lindsay, 1847, 10 D. 78, and Bell's Com. vol. ii. p. 666 et seq. (6) 17 D. 739. (c) Same case. (d) 1861, 23 D. 352. Chap. VIII.] COMPENSATION. 423 private claims without their consent. In many cases this would be most undesirable, as it might afterwards give rise to much unneces- sary embarrassment in settling accounts between the partner and the company (a). 2. When a partner sues a company creditor for a private debt, Buie 2. he may be met by setting off the debt due by the company to the creditor. This rule is another consequence of the principle we are now considering, and proceeds on the following ratio, that since the partner is liable in solidum for the company debt to his own debtor, the latter may at once create the necessary concourse by using diligence against him as an individual (6). After a company has been dissolved, and the dissolution has No oompensa- been duly published, the quasi persona still subsists until the com- dissolution pany be fully wound up ; but the agency to bind the company sent of fonner formerly possessed by the partners ceases, and therefore new con- ^^^ ^^^^' tracts made with one of the former partners are not contracts made with the company, but with the partner as an individual. The consequence of this is, that no compensation can take place without the consent of all the former partners between a debt due to the dissolved company and a debt subsequently contracted by one of its former partners as if on its account (c). When a company is dissolved, but not bankrupt, and a debt Exceptions. due the concern may be apportioned among the former partners, any one of them may compensate a debt due by himself privately with so much of the company claim as falls to his own share (d). Here, however, there is not, properly speaking, a set-off between a debt due the company and the private debt of one of its partners, but between such partner's private debt and his ascertained share of the partnership estate. When by death, retirement, or otherwise, the rights and obliga- lights centre- , . .,.,..,,.,. ing in a single tions of a company have come to centre m a smgle mdividual m his individual. private character, and not as a trustee for creditors of the company, or for the representatives of his former partners, compensation may (a) See Hotchkis v. Royal Bank of (c) Anderson y. Rutherfurd, 1835, Scotland, 1797, M. 2678, aff. 3 Paton's 13 S. 488. App. 618. C'') Oswald's Trs. v. Dickson, 1833, (6) Bogle v. Ballantyne, 1793, M. 12 S. 156 ; Heggie v. Heggie, 1858, 21 2581. ' D. 31. 424 COMPENSATION. [Book III. Case where partner has been dealt with as an indmdnal. take place between debts due to or by the company, and those in which he is individually debtor or creditor. Here no injustice can arise to any one ; for the question no longer lies between a third party and one of the partners of a company, but between two private individuals who are mutually debtors and creditors of each other. This point has never, it is believed, arisen for decision in any reported Scotch casp ; but on principle, the solution given appears to admit of no dubiety, and it has been so decided repeatedly in English cases which presented no elements peculiar to that sys- tem (a). It has already been pointed out, that a partner may become debtor or creditor in a transaction in which, though he i-eally acted for the company, the opposite party dealt with him as an individual. When this takes place, compensation may be pleaded between the two contracting parties, altogether irrespective of the company. This proposition is a necessary consequence of the principle, that it is competent for any man to contract with another as a principal and entirely disregard his character of agent. It has been expressly affirmed in several English cases, and is indeed assumed in the Scotch case of Anderson v. Rutherford, before referred to (b). If, on the other hand, the party who contracted with the partner was aware that he was acting as agent, and transacted with him in that capacity, no concourse of debit and credit between them indivi- dually will avail against the claims of the company (c). (a) See Fletcher v. Dyche, 2 T. E. 32 ; Owen V. Wilkinson, 5 C. E. N. S. 526. (b) 13 S. 488. See also James v. Downie, 1836, 15 S. 12. (c) See James v. Downie, supra ; Son, 1852, 14 D. 647 ; Lumsden v. Allan, 1823, 2 S. 503 ; Dixon, 2 Barn, and Aid. 310 ; Dobson v. Christie, 1835, 13 S. 582. See as to what con- stitutes scienter, Fleming v. Findlay and Liddell and Co. v. Young and and Co., 1832, 10 S. 739. [ 425 ] CHAPTER IX. RETENTION OR LIEN. It is a principle of equity, that no one ought to be compelled to Nature of. part with the property of another, while that other retains property belonging to him. This principle, working in the English and Scottish systems of jurisprudence, has in the former evolved the doctrine of lien, and in the latter that of retention. These doctrines originally presented points of considerable difference in extent and mode of operation ; but gradually converging as each became more full and determined, they may now for practical purposes be said to coincide (a). Retention or lien differs from compensation in several important Difference • 1 1 • T_i 1 1 between respects. Retention merely entitles the possessor to withhold pay- retention and ment or delivery till the counter demand is satisfied ; compensation ^''"^^ '°°' operates an extinction of the mutual debts : retention gives security for debts, even though they may be future, contingent, or illiquid ; compensation applies merely between debts due and liquid. Re- , tention, moreover, ceases to operate as soon as possession is lost, provided this be not due to force or fraud. Retention may be either general or special. As a rule, a party can only retain effects in security of a debt or obligation with which they are immediately or directly connected, as a ship for the value of repairs made upon it : but in some cases there is a more general right of retention, as for a general balance of accounts, and over articles of the same kind transmitted in the general course of dealing (b). As a general rule, it may be stated that retention has place Eetention as between the persons of a private firm, of a company, or of a cor- con^ln'ies and the public, (a) More's Stair, oxxxi., 1 Lectures ('') See Bell's Prin., supra, and Bell's 402; Bell's Prin. s. 1431. Diet, and Dig. 721. 426 RETENTION. [Book III. poration, and the public, in the same way as between two indivi- duals. But inasmuch as these artificial persons can only transact with the public by means of agents who may be either their partners, office-bearers, or others specially employed for the purpose, questions of an embarrassing nature frequently present themselves. The solution of such questions is to be found in the principles of agency ; and when properly stated with reference to these principles, they will be found to present little difficulty. Cases where If the company's agent, be he partner, director, or a stranger place. specially employed, contract with one of the public as a principal, or, in other words, conceal his agency ; or if the other party choose to contract with the agent, not in that character, but on his indivi- dual credit, retention has place between the agent and such party, and the company has no right to interfere in the matter. Thus, where the owner of goods sent them and indorsed the bills of lading to a merchant for sale, who again delivered them to a broker for the same purpose, and the broker bona fide made advances to the merchant on their credit, it was held that the broker was entitled to retention of them against the true owner in security of his advances (a). So, when a party consigned goods in his own name, without mentioning that they were the property of another for whom he was acting, the consignee was found entitled to retain the goods for debts due by the consignor, although existing prior to the consignment ; and he was found not liable to account to the true owner for the proceeds (h). Cases where it But, ou the Other hand, when the party with whom the trans- is exc u e . action takes place has reason to know, either expressly or other- wise, that the person with whom he transacts is truly acting as agent for a company, no right of retention accrues between such party and the agent (c). Stuarts V. The Only case that might seem hostile to the principle here Co. laid down, is that of Stuarts and Fletcher v. M'Gregor and Co. (d). (a) Ede and Bond v. Findlay, Duff, Co. v. Black and Co., 1824, 2 S. App. ant/ Co., 1818, 19 F. 0. 208 and 509. 188. 1 Bell's Com. 485, n. 1. Farrar (J) Johnston v. Scott and Son, 1818, and Booth v. North British Bank, 1850, 19 F. C. 561 ; Attwood v. Kinnear and 12 D. 1190 ; Liddell and Co. v. Young Sons, 1832, 10 S. 817. and Son, 1852, 14 D. 647 ; Anderson (c) Stirling and Sons v. Duncan and and Co. v. Collier, 1829, 7 S. 466. Co., 1823, 1 S. App. 389 ; M'Call and (d) 1829, 7 S. 622. their members. Chap. IX.] RETENTION. 427 Here the consignee of goods was found not entitled to retain them against their true owners, for advances made by him to the agent who had consigned them ; but it must be observed that the advances were not made on the credit of the consigned goods, and had no relation thereto, and the contract was that of deposit, which never grounds retention (a). When goods are consigned, it seems doubtful whether any Case of con- right of retention exists for debts on a general balance previously gf(X.™ existing, even where the consignee was in ignorance of the agency. In Johnston v. Scott and Son (b), the Court seem to have' held that there was ; in Johnston and Manly v. Findlay, Duff, and Co. (c), a contrary view seems to have been taken; while in Reidv. Watson (d) the question was stated to be one of difficulty, and was left unde- termined. Similar rights exist as between partnerships or companies and qMosj retention their partners or members, to which the names of retention or lien nersMps and are also given, though they might be more properly designated by the terms quasi retention and qicasi lien. Since the company may be creditor of one of its partners, it has a lien over his share to that extent (e); but this does not exist over shares held pro indiviso by persons who are not both debtors (/). Since, again, all the partners are trustees of the company property, 1st, for the company creditors ; 2d, for partners who are its creditors ; and M, for the partners themselves in respect of their shares or other beneficial interest in the concern, — it follows, 1st, that all the partners, or the company, which is the same thing, have a right to see the company property applied for payment of the company debts, that is to say, have a right akin to that of hen or retention over the company property for this purpose (g) ; and 2d, that every partner has a right to have the company property applied in liquidation of his own claims against the concern, after the public creditors have been satisfied ; or, in other words, that he (a) Stair i. 13, 9. Appin's Credi- 1348 ; Houston v. Lady Montgomerie, tors, 1760, M. 749. See also Laurie 1821, 1 S. 179. V. Black, 1831, 10 S. 1. (/) Gardners v. Royal Bank, 1815, (b) 1818, 19 F. C. 561. 18 P. C. 458. (c) 1826 4 S. 410. (g) Maccaul v. Ramsay, 1740, M. (d) 1836, 14 S. 223. 14608 ; Oswald's Trs. v. Dixon, 1833, (e) Brirns Laiirie'sTrs., 1840, 2 D. 21 S. 156. 428 RETENTION. [Book III. has a quasi right of retention over the company funds to that extent (a). Extent of this rpj^^ j.[^^ (,£ retention enures to a partner in security of his claims against the company over all the company property, in respect that the company is his proper debtor (b) ; but it does not extend to the separate estate of the other partners, so as to render one liable in solidum, which would be the case if the company creditor were a stranger, but only against each pro rata portionis (c). The right is not confined to the partner, but extends to his representatives or assignees, or trustee in bankruptcy (d). It lies over the company stock as such, and is therefore not lost by the substitution of new stock for old (e) ; and for the same reason does not attach to what is acquired by those who may continue to carry on the business after a dissolution (/). In like manner, it does not apply to subjects of which the company has only the usufruct, for that is not company property (g). As the legal or voluntary representatives of a partner acquire this right, so also do they take his interest or share in the company property subject to this nexus (Ji). But it does not extend to company property sold by a partner as agent for the firm (i). Available after j^. jiQ^gt bg observed that this right competent to a partner, in payment of o r r J creditors. security of his claims against the company, only becomes available after the creditors of the company have received payment, or at least after a full provision has been made for such payment. Hence a partner who had made advances and undertaken obliga- tions for behoof of the company, was found not entitled on that account to retain the final instalments of his share of the stock ; it not being alleged, that if the whole subscribed stock were paid up, it would be sufficient to liquidate the other debts due by the company (k). (a) Maglde v. Tail, 1785, M. 14668. (e) West v. Skip, supra. See also Corrie v. Calder, 1761, M. (/) .Sioci-er v. X>att'OT)z, 9 Beav. 239. 14596. ((/) Cox V. Stead, 1833, 11 S. 672, (6) West V. Skip, 1 Ves. 8, 239 ; aff. 1834, 7 AT. and S. 497 ; ex parte Stacker v. Dawson, 9 Beav. 239 ; Skip Gemmell, 3 M. D. and D. 198. V. Hardwood, 2 Swanst. 586. (h) West v. Skip, and Maghie v. (c) Maghie v. Tait, 1785, M. 14668. Tait, supra. (d) Ibid. See also per Lord Hard- (i) Langmead's Trs., 7 De G. M. and wioke in West v. Skip, 1 Ves. 244 ; G. 353. Skip V. Hardwood, 2 Swanst. 586 ; (k) Turner v. Maclaren, 1883, 11 Buckwall V. Royston, Pre. Chan. 286. S. 669. Chap. IX.] RETENTION. 429 Much valuable assistance may be obtained from the English English law. decisions in relation to this branch of the subject : some of them have already been referred to, and reference may further be made to Lindley on Partnership, p. 576 et seq., and CoUyer on Partner- ship, p. 77 et seq. But in making use of English precedents, it is necessary to keep in mind two respects in which the English law differs in principle from our own, and which are not without their effect in questions of this kind. 1. The law of England does not recognise the separate person of the firm. 2. In bankruptcy, the English rule is to apply the company property in the first place in payment of its creditors, and the separate estate of the partners in payment of their creditors (a) ; whereas, in Scotland, the company creditors are not only preferable over the company estate, but are entitled to rank pari passu with the private creditors of the part- ners over their separate estate (b). (a) Lindley 545. (6) Shaw's Bell's Com. 234 ; and postea, ' Bankruptcy.' [ 430 J CHAPTER X. GOOD-WILL. Nature of good-will. Must be sold on dissolution. Distinction between good- will in profes- sional and mercantile firms. The good-will of the business forms part of the company property, and is sometimes of great value. It is not easy to give it a definition which should be of much use in considering questions of partnership ; but, generally, it may be taken to mean all benefits or advantages arising out of the busi- ness connection. Sometimes it attaches to the persons by whom the business has been made or carried on ; sometimes to the stock, premises, or locality. When a company or firm is dissolved, the general rule appears to be, that, in the absence of special agreement, the good-will of the business must, like other company property, be sold for behoof of all concerned (a). To this rule, however, there are exceptions. If weight is to be given to the English authorities, it would appear that a distinction must be made between professional and mercantile firms. In the former, the good-will is almost personal to the partners, and therefore cannot be made the subject of a compulsory sale ; for an attorney, a surgeon, or a skilled artisan, cannot be forced into an agreement that he shall not prosecute his business within a certain area. In the latter, the good-will often depends on the fitness of the stock or the premises, or on the pos- session of a patent ; and in such cases it represents a tangible interest which may be valued and sold. This distinction appears founded in reason, and was recognised by Sir John Leach in Farr v. Pearce (b), and Spicer v. James (c). (a) Wedderburn, 22 Beav. 104 ; MacCormick v. M^Cubhw, July 4, 1822, 1 S. 496 ; MarKhallv. Marshall, 1816, 19 F. C. 101; M'Whaunell v. DoUe, 1830, 8 S. 914. ih) 3 Madd. 74-78. (c) Rolls M. T. 1830. Chap. X.] GOOD-WILL. 431 Even in proper mercantile firms, when a dissolution takes place, the good-will, in so far as it can be made the subject of sale, will often be found almost inappreciable. When the partnership is dissolved, any. one or more of the Dissolution does not pre- partners may, m the absence of a voluntary agreement to the con- vent partners 11- 1 • J 1 ,_! carrying on trary, carry on the business on their own account ; and tiiey are the same busi- quite entitled to make use of all the advantages incidental to their former connection with the partnership («). It has even been held, that, in the case of dissolution by death (b), the survivor may make use of the name of the late firm, though it would appear that the executors of the deceased partner have not this right (c). How- ever this may be, it seems settled law, that when the good-will of a business has been sold, the seller may recommence a similar busi- ness in the immediate neighbourhood of the old premises {d) ; the only restrictions on this right being, that in the case of a firm the sellers shall not assume the old name, or represent themselves as the successors of the former concern. Even, therefore, in the case of a mercantile firm, the good-will. Mercantile when a dissolution takes place, will, unless for some voluntary agreement restraining the late partners from prosecuting their business, amount to nothing more than such value as may, in the public mind, attach itself to the possession of the stock, machinery, or premises of the late firm. When a firm is dissolved by death, it would appear that the Dissolution by good-will, whether it be of real or speculative value, if it is sold at all, must be sold for the behoof of all concerned ; that is to say, the surviving partners cannot dispose of it for their own benefit, but must share its proceeds with the representatives of their late partner (e). When a partner retires from a firm, but without a dissolution Eetiiement. taking place, he cannot, it should seem, in the absence of express agreement, insist on receiving any consideration from the company (a) Farr v. Pearce, supra; Davien ton v. Douglas, 1 Johns. 174 ; Curtwell V. Hodgson, 25 Beav. 177 ; Hammond v. Lye, 17 Ves. 335; Kennedy v. Lee, V. Douglas, 5 Ves. 539 ; Wedderhurn, 3 Mer. 455; Shakle v. Balcer, 14 Ves. supra; Smith r. Everett, 5 B. Jur. N. 468; Harrison v. Gardner, 2 Madd. S. 1332. 198. (6) Webster, 3 Swanst. 490. (e) SmitTi v. Everett, supra; Wed- (c) Lewis Y. Langdon, 7 Sim. 421. derhurn ; MacCormick v. M'CuUin ; {d) Daviesy. Hodgson, supra; Chnr- MarsJiall Y. Marshall, supra. 432 GOOD-WILL. [Book III. for his share of the good-will. The company, being a separate quasi person, still continues to exist, and retains the good-will as part of its property. The retmng partner has himself to blame if he has left the concern without receiving compensation for this, among other interests, which he thereby resigned. This has been decided in England, though, from the non-recognition of the.firm as a separate person, it does not in that system stand upon such an intelligible principle. It has also been decided, that an agreement to take the retiring partner's share at valuation does not entitle him to get his (a) share in the good-will valued. But it may be questioned whether this decision can be taken as fixing a general rule. Even when a partner has received a compensation for retiring, this does not necessarily preclude him from starting a new concern, for the purpose of carrying on the same business (b). When, however, it has been arranged that a retiring partner's share in the good-will shall be purchased by the company, regard will be had, in fixing the price, to the length of time such partner was entitled to have continued a member of the firm (c). It is of course always competent for a retiring partner to bind himself that he shall not carry on business in opposition to the firm ; and this obligation has in England been held as implied, though not expressed totidem verbis, in the articles of partnership (d). English Such, it is humbly conceived, may be taken as the fair import of the decisions on the subject of good-will, considered as partner- ship property ; but it cannot be denied that the principles of this branch of partnership law are as yet far from being fixed or definite. Few or no decided cases can be found in the Scotch reports having a distinct bearing on the subject ; and the English authorities, it must be admitted, are ambiguous, and even conflict- ing (e). (a) Hall V. Beav. 139 ; Kennedij v. (d) Cooper v. Watson, 3 Dougl. 413. Lee, 3 Mer. 452. See also Harrison v. Gardner, 2 Madd. (b) M'Kirdy v. Paterson, 1854, 16 198. D. 1013. (e) See, on this subject. Coll. 102 et (c) Austen v. Bays, 24 Beav. 598; seq., and Lindley 709 et seq. Tudor's aff. 2 De G. and J. 626. Le. Ca. 313. authorities. [ ^33 ] CHAPTER XL EXTRAORDINARY PRIVILEGES AND AGGRESSIVE POWERS. It is the distinguishing badge as well as the fundamental principle General of constitutional government, that every citizen or subject has the ^f ^'t^'l^fthe full and absolute control of his person and propertv within the limits subject can JJ2111 .., I 1. J only be affected deiined by the existing laws, and that no alteration can be made on by Act of the these laws except by the Legislature, from which they originally emanated, and from which they derive their existing force. This principle of constitutional law, which is too well recognised and accepted to require either argument or illustration, appears to have received implicit assent in the earliest annals of the Teutonic races, however much in times of usurpation and political decadence it may have been obscured or forgotten. That it was recognised in Scotland as well as in England, in ages when the constitution was respected, is obvious to the most cursory if unbiassed student of British history ; that it did not accord with the maxims of the civil and other foreign systems of law, of which the Scottish lawyers were always too much enamoured, is a proposition that requires no comment ; and that it was often set at nought or ignored during the reigns of the later Stuarts, is unfortunately but too well established. At the Revolution, however, and more especially at the Union, it was again restored to its proper place in the con- stitution, and has ever since received such increasing prominence, that it now permeates the whole body not only of our constitutional but also of our municipal law, and distinguishes the British consti- tution from the arbitrary rule of a despotism on the one hand, and the fitful movements of a democracy on the other. Exclusive privileges and aggressive powers, monopolies, the Exclusive power to appropriate private property, that of making bye-laws ^^grelfive^^ 2 E 434 EXTRAORDINARY PRIVILEGES [Book III. powers can therefore be conferred in this manner only. How Legisla- ture may interfere. Exclusive pri- vileges and aggressive powers, etc., cannot be conferred by prerogative. Inference to be drawn. binding on the public, and of levying rates, together with other privileges of a similar kind, which are often enjoyed by public companies, are all infringements of those rights of the subject which the common law guarantees, and can therefore be conferred in no other way than by an Act of the Legislature. It is not necessary, however, that the Legislature should in every case interfere by spe.cial statute. It is enough that it gives authority indirectly, provided its having done so be clearly estab- lished. Thus, it may pass general statutes conferring certain privileges on all companies formed for certain purposes, and con- forming to certain conditions, as e.g. the 27th and 28th Vict. c. 120. Or it may enable the Crown to grant monopolies in certain cir- cumstances, and subject to certain provisions, as in the case of the Patent Acts. But it is observable that aggressive or compulsatory powers are always conferred by special acts. It has sometimes been supposed that the Crown could in Scot- land confer exclusive privileges, and the power of levying rates, by a mere exercise of prerogative ; and attempts have been made to trace a difference in this respect between the laws of Scotland and England. When, however, the subject is fairly examined, it be- comes difficult to discover any solid foundation for such a doctrine. It is no doubt easy to produce numerous instances in the past history of Scotland where the prerogative has been exerted to confer monopolies, and to invest favoured corporations with the power of imposing bye-laws, and even taxes, on the general public ; but the value of such acts as precedents is greatly impaired, when it is considered that they took place prior to the Eevolution, and at an era when the rights of the subject were little regarded, and the very principles of the constitution habitually violated. Numerous examples of the same exercise of prerogative occur in England at the same period of the national history ; but in both countries they were regarded as grievances, and were even to some extent checked by the Legislature (a). Now, the natural inference to be drawn from this state of matters appears to be, that in Scotland as well as in England such exertions of prerogative were at all times illegal, and that they ceased in both parts of the United Kingdom as soon as the constitu- (a) 21 James i. c. 8 ; 1641, c. 76. Chap. XL] AND AGGRESSIVE POWERS. 435 tion regained its original purity. But even if this were not so, and if it could be shown that the principles of the old Scottish monarchy- were radically different from those of the English constitution, it will hardly be maintained that this distinction survived both the Revolution and the Union, and has continued unabated to the present times. On the contrary, it will probably be admitted by the greatest admirer of Scottish nationality, that the principles of constitutional law are now identical in all parts of the island ; and that though a diversity still unhappily exists between the municipal laws of England and Scotland, this diversity does not affect the principles of the constitutional law, but merely the language and machinery in which these principles find expression. Upon the whole, therefore, it may be fairly concluded, that such powers and privileges as we are considering cannot now in Scotland, any more than in England, be conferred otherwise than by legislative action. It must be observed, however, that when a corporation or other Such rights conferred be- association has continued in the uninterrupted enjoyment of such fore the Union . . . will not now bo powers and privileges from a period anterior to the Union down rescinded. to the present time, they will not be rescinded by the tribunals, though it could be shown that they had been originally conferred by a mere exercise of prerogative. The reason of this is, that it cannot be affirmed with certainty that their creation was an exer- cise of prerogative altogether inconsistent with the principles of the constitution as it was understood while Scotland remained a separate kingdom ; and it must be considered that their enjoyment without challenge for so long a time infers ratification by public consent, and gives them that kind of quasi legislative sanction which supports many useful Acts of Sederunt, the legality of whose origin might otherwise admit of question (a). When a bill is brought into Parliament for the purpose of Agreements " o '■ ^ not to oppose a incorporating a company with aggressive powers, or of conferring ™J*J^''°* ^^ such powers on a company already formed, it is not uncommon for agreements to be made on the part of parties interested, that they will forbear to give opposition, or will withdraw such opposition as they have already offered, on condition of receiving a pecuniary (a) See, upon this subject generally, trates of Linlithgow, 1859, 21 D. 1215 ; Edin. and Glasg. Ra. Co. v. Magis- revd. 3 Macq. 691, 21 D. (H. of L.) 15. 436 EXTRAORDINARY PRIVILEGES [Book III. General prin- ciple applicable to construction of aggressive power. The statute is the measure and limit of aggressive powers and exclusive privileges. consideration. Such agreements have been found to be illegal, and cannot be enforced (a). When the Legislature confers exclusive privileges, aggressive powers, or powers interfering in any way with the rights and liberties of the subject, it is moved by considerations of public importance and general utility sufficient to justify the suspension of the common law which such a proceeding involves ; and it never confers such powers and privileges in a more ample form than appears neces- sary for fairly working out the purposes of the contemplated undertaking. From this it follows that such privileges and powers must be interpreted and defined by the Act of the Legislature by which they are conferred, and by that only; that they must be exercised for no other purposes than those for which they were conceded, in no other manner than that prescribed, and in such a way as to cause the least possible inconvenience to indi- viduals. A due appreciation of this principle appears to be of great importance to a proper understanding of the subject now under consideration. As the powers and privileges conferred are in their nature extraordinary, and involve a departure from or an infringement of the common law, and to that extent an interference with individual rights, they are to be taken as the mere creations of the statute, such and such only as the Legislature intended them to be. From this it follows, that when such powers and privileges are conferred on any association, their nature and extent, commencement, mode of exercise, and termination, can only be ascertained by reference to the special act taken by itself, or to that in combination with the Consolidation Acts which are held to be incorporated with it, as the case may be. All reference to the standing orders of Parliament, to plans or notices given in accordance with their provisions, or to documents which have not been incorporated with the special act, are excluded, even though it could be shown that in consequence of an inaccurate statement in some of these plans or other documents an intended opposition to the bill had been with- (a) Stewart v. Scottish North- Road Trs. v. North British Ra. Co., Eastern Ra. Co., 1859, 21 D. (H. of 1855, 17 D. 110. See also Graham L.) 5, 3 Maoq. 882, 31 Jur. 4,45, re- v. Garnkirh Ra. Co., 1847, 9 D. versing 18 D. 540 ; but see Roxburgh 1508. Chap. XL] AND AGGRESSIVE POWERS. 437 drawn (a). This is indeed nothing else than a consequence of the general and necessary principle, that the statute is the only authentic exponent of what the Legislature intended to do ; and that any other mode of arriving at that intention would involve the risk of allowing parties to exercise powers which the Legislature had withdrawn or had refused to concede. So firmly fixed is this principle in the law, that a private Act of Parliament has been held binding, though due notice had not been given of the intention to apply for it to a party whose rights under a previous Act it rescinded (b) ; and when a Railway Act provided that all persons should have liberty to use the line on payment of the rates specified, this was found to free the company from liability for tolls on goods carried through a burgh, which by its charter was entitled to charge tolls on all goods passing through its boundaries (c). Hence, also, where an inchoate contract was entered into, depending for its completion on a parliamentary sanction to be afterwards obtained, and the Act when obtained empowered the parties to enter into the agreement, it was held not to be binding on such as chose to resile ; for the Act, though it enabled the parties to complete their agreement, did not declare that such completion had taken place (d). Powers and privileges of the kind under consideration are How construed strictly construed, and do not, as in some other branches of law, preted. receive a liberal or favourable interpretation. In other words, the rights and liberties of the public are preserved as far as pos- sible, consistently with the words and purposes of the statute (e). Hence, exclusive privileges are never presumed. Thus, the cir- cumstance of a gas company having obtained a special act with the concurrence of the magistrates to supply a burgh with gas, was held to imply no exclusive right to carry their pipes through the (a) North British Ra. Co. v. Tod, 3 Macq. 691, 21 D. (House of I;ords) 1846, 5 Bell's App. 184, 12 01. and 15. Fin. 722, reversing 8 D. 726. (d) Monhlands Ra. Co. v. Glasgow (&) Edinburgh and Dalkeith Ra. Co. and Airdrie Ra. Co., 1849, 11 D. 1395. V. Wauchope, 1839, 1 D. 1151 ; aff. (e) Sir T. Moncreiffe v. Perth Har- 1842, 1 Bell's App. 252, 8 01. and Fin. hour Commissioners, 1843, 5 D. 879, 710. aff. 5 BeU's App. 333, 18 Jur. 631 ; (c) Edinburgh and Olasgow Railway Baxter v. North British Ra. Co., 1846, Company v. Magistrates of Linlith- 8 D. 1212 ; Buchanan v. Caledonian gow, 1859, 21 D. 1215; as revd. 1859, Ra. Co., 1850, 12 D. 778. 438 EXTRAORDINARY PRIVILEGES [Book III. Such powers must be applied to the intended purposes alone. Companies receiving such powers are trustees for the public. streets, or to prevent the magistrates from allowing a new company to do so (a). Aggressive powers cannot be applied to purposes different from those contemplated in the special act. Thus, where parliamentary trustees were empowered to take certain lands, etc., for the purpose of improving the navigation of a river, it was held that they had no power to effect a compulsatory sale of the feu-duties and ground- annuals of lands proposed to be taken for the purposes of the Act (6). The principle applicable in all such cases is, that the statutory powers and privileges must be interpreted and exercised in the way least injurious to the rights and liberties of the subject. Hence, a company possessed of aggressive powers to take land for the purposes of their undertaking are not entitled to take a portion of land manifestly insufficient for such purposes, nor to take the land belonging to one proprietor at different times (c). The Legis- lature always fixes a limited time during which only the aggressive powers it confers can be exercised (d) ; and, as a general rule, if these aggressive powers are once exercised, they cannot be again made available (e). • When companies receive rights or powers from the Legislature, which but for its intervention they could not have enjoyed, they cannot delegate them to other companies by lease or otherwise. This doctrine rests on the principle, that as such privileges are conferred for the purpose of canying out some special under- taking for the benefit of the public, they are only available when exercised for the purposes, in the manner contemplated, and by the parties with whose fitness and trustworthiness to exercise them in this manner the Legislature had been satisfied. By accepting such privileges, a company becomes in fact a trustee for the public interest in all matters within the sphere of its action, so that it (a) Dundee Gas Co. v. Magistraie.i of Dundee, 1847, 9 D. 1084. (h) Todd V. Clyde Trs., 1843, 6 D. 108. See also Edinburgh and Glasgow Canal V. Earl of Ilopetoan, 1856, 18 D. 655 ; Dodd v. Salisbury R(i. CT -ii 1 extent of their ferred on a company by Act ot I'arliament, it has been usual to jurisdiction. create or designate special tribunals for regulating the exercise of these powers and privileges, and for assessing compensation to such persons as have had their lands taken or their common law rights interfered with by the operation of those exceptional pieces of legislation. Several provisions of this kind are to be found in the Companies Clauses and the Railway Clauses Consolidation Acts, as well as in many special acts obtained before these general statutes had been passed. Such provisions have often given rise (a) Edin. and Glas. Bank v. Ewan, 11 ; Hamilton v. Dutch East Ind. Co., 1852, 14 D. 547. 1731, M. 4548, 1 Pat. App. 69 ; Frayes (J) Mathieson, 1857, 19 D. 917. v. Wor7ns, 10 0. B. N. S. 149. See (c) M'Cubbin v. Venning, 1859, 22 Chitty on Contracts 703-705. See, D. 164 ; Carron Co. v. Stainton, 1857, as to allegations that the foreign judg- 19 D. 318. ment is contrary to justice, or erroneous ((f) Wilson Y. Brunton, 1758, 2 Pat. in fact and law, De Cosse Brissac v. App. 11, rerersing M. 4549 ; White- Rathbone, 6 H. and N. 301. head v. Thompson, 1861, 23 D. 772; (e) See, upon this subject generally. Chanter v. Borthwick, 1848, 10 D. Ersk. i. 2 ; Stair ii. 3 ; Karnes' Equity 1544 ; Boe v. Anderson, 1857, 20 D. 480, 490 ; Ross' I.ectures i. 279. 2N 562 STATUTORY JURISDICTIONS. [Book IV. to questions of no little difficulty and importance: e.g<., "What are the extent arid limits of the jurisdiction so created ? — how far it is exclusive? In what cases the judgments of such special tribunals are final, and to what extent and in what circumstances they are subject to review? The reported decisions upon such matters are sufficiently numerous, both in this country and in England ; but though they will be found to contain general prin- ciples of great value, it can hardly be said that the subject has been exhausted, or that any set of rules has yet been elaborated which can be confidently relied on as decisive of every question that may arise in practice. This is partly attributable to the fact that the phraseology employed by the Legislature presents considerable variety, and is not always characterized by technical accuracy ; and partly to the circumstance that the Supreme Courts, in their anxiety to do substantial justice, have not always been very consistent in their interpretation of the statutory words. The following, how- ever, is submitted as the general import of the decided cases : — When statu- When a new civil jurisdiction is created by statute, with a h°aTe™xoiusive power of judging in special matters, the jurisdiction of the tribunal junsdiotion. formerly competent to that species of causes is not thereby held to be ousted, unless the statute expressly declares the jurisdiction of the new court to be exclusive (a). But the case is different where the subject-matter of the causes intended to be dealt with by the new jurisdiction is purely the creation of the statute, and could not, except for the interference of the Legislature, have had any existence. Here the statutory tribunals seem to have exclusive jurisdiction (6). Thus, the compensation due to persons whose lands are taken for the construction of railways in virtue of and in accordance with the provisions of the special act, can only be assessed by the special tribunals which the Legislature has appointed for that purpose (c). No enoroacii- On the other hand, no encroachment on the jurisdiction of the ordinary Ordinary tribunals is to be presumed ; but the jurisdiction of the iSerred,^ new statutory tribunals is limited to the purposes and sphere of (a) Ersk. i. 2, 7 ; Stair ii. 3, 32. Edinburgh, Perth, and Dundee Ra. Co., Bremner v. Huntly Friendly Society, 1850, 22 Jur. 673. 1817, 19 F. 0. 416. (c) See cases in note (a), p. 501. (J) Ersk., supra ; Stair, supra ; Chap. V.] STATUTOEY JURISDICTIONS. 563 operations specified by the statute. Hence it follows, that com- pensation cannot be obtained before the statutory tribunals for damage caused by railway companies in the completion of their lines, when such damage has not been caused by acts done in virtue of and in conformity with their statutory powers. Such proceedings, if illegal, must be remedied by having recourse to the ordinary courts (a) ; and if not illegal, as sometimes happens, found no claim for compensation in any court (6). When the Legislature gives a new special jurisdiction to an Existing . . •! 1 1 • 1 • ■(•(>• 1 tribunals existing tribunal, this does not m anywise aitect its common law receiving jurisdiction, which remains intact in all matters not specially regu- jurisdiction. lated by the statute (c). Even where special tribunals have been created with exclusive Exclusive ■ T-ciT •II- ... p, jurisdiction jurisdiction for dealing with claims arising in consequence of the of statutory . , , . , . courts may be exercise or special statutory powers, the parties may, by converting got over. the statutory claims into matter of agreement, bring themselves under the jurisdiction of the ordinary courts (d). All new statutory jurisdictions are presumed to be subordinate, Review of and therefore subject to the review of the Supreme Courts, unless oourt,°when the contrary is so expressed by the Legislature as to exclude all doubt (e). The mere use of words expressing finality will not exclude review, but will be held to mean that the statutory tribunal has power to exhaust the cause in the first instance; and the specific exclusion of one mode of review will not be held to imply the exclusion of others (/). If, however, the statutory words admit of no other interpretation, all review will be excluded (g). But however express may be the statutory provisions excluding Eevievir always . - 111* -J* competent review, they will not be interpreted to exclude the intervention of when there is the Supreme Court when the statutory tribunal has exceeded its jurisdiction. (a.)GoMiev.Oswald,lSU,2Dow53i; Campbell, 1811, 16 F. C. 207; Key Shand v. Henderson, 1814, 2 Dow 519 ; v. Stirling, etc., 1830, 9 S. 167; Sim v. Burnet v. Knowles, 1815, 3 Dow 280. Hodgert, 1831, 9 S. 507; MacLougllan (b) See cases in note (&), p. 501. v. Evans, 1859, 21 D. 582, aff. 1861, (c) Edin. and Glasgow Ra. Co. v. 23 D. (H. of L.) 1, 4 Macq. 89. Cadder Road Trs., 1842, 5 D. 218. ' (<;) Cldvas v. Buhe of Gordon, 1804, (d) Hutchison v. Edin. and Glasgow 13 F. C. 398, M. App. Juris. 12; Lang Ra. Co., 1848, 10 D. 760. v. Craig, 1833, 11 S. 424; Lindsay v. (c) Ersk. i. 2, 7. Orr, 1831, 9 S. 426 ; Tay Ferry Trs. (/) Guthrie v. Cowan, 1807, 14 F. v. Stewart and Merchant, 1824, 2 S. C. 43, M. App. Juris. 17 ; Anderson v. 550-1 and 622. 564 DECLINATURE OF JUDGE. [Book IV. Court of Session may interpret the statute prima mstantia. powers, or plainly travelled out of its jurisdiction (a). Where the question of competency and the merits are mixed up together, the Court will interfere (b) ; and where the proceedings of the statu- tory tribunal have been so irregular as to amount to a violation of the provisions of the Act, the Court may order them to be begun and proceeded with de novo (c). When a question is raised as to what claims are authorized to be made for compensation under an Act, it may be determined prima instantia by the Court of Session (d). DECLINATUEE OF JUDGE. Eules regarding. When a judge is interested as a partner or shareholder in a mercantile partnership or company, it is a good ground of declina- ture (e) ; but where the grounds of declinature apply to so many judges, that, were they to be sustained, the cause could not be decided, the declinator will be repelled ex necessitate (/). It has, moreover, long been fixed, that a judge may deliberate and vote in a cause affecting a corporation in which he holds stock (g). By Act of Sederunt 1st Feb. 1820, it was declared that the fact of a judge holding shares or stock in a chartered bank is no ground of disquahfication ; and the principle of this Act has been held to apply where a near relation of a judge holds shares in other char- tered companies (Ji). (a) Fraser v. Burnet, 1806, Hume 256 ; Grant v. Gordon, 1833, 12 S. 167 ; Brown v. Heritors of Kilherry, 1825, 3 S. 334, 1826, 4 S. 176, aff. 1829, 3 W. S. 441 ; TennmitY. Turner, 1837, 16 S. 192 ; Graham v. Caled. Ra. Co., 1848, 10 D. 495 ; Edin. and Glas. Ra. Co. v. Cadder Road Trs., 1842, 5 D. 218. See Scott v. Ander- son, 1832, 10 S. 760 ; Brown v. Rich- mond and Co., 1833, 11 S. 407; Guthrie V. Millar, 1827, 5 S. 663. (J) Edin. and Glas. Ra. Co. v. Earl ofHopetoun, 1840, 2 D. 1255. (c) Young v. Milne, 1814, 17 F. C. e64:;Fraserv. Burnet, 1806, Hume 256. (d) Macdonell v. Caled. Canal Comrs., 1830, 8 S. 881. (e) Shand's Frac. i. 60; Douglas, Heron, and Co. v. Earl of Galloway, 1774, 5 Brown's Sup. 424 ; Maclean V. Muness, 1776, 5 Brown's Sup. 455 ; Aberdeen Town and County Bank v. Scot. Equit. Insiir. Co., 1859, 22 D. 162. (/) Shand's Prao. i. 61 ; Friendly Insur. Co. v. Royal Bank, 1749, Elch. Jurisd. No. 50 ; Blair v. Sampson, 1814, 18 P. 0. 501 ; A. S. 22 July 1774, and 22 Jan. 1789 ; Hercules Insur. Co. v. Hunter, 1837, 15 S. 800. (g) Bank of Scotland v. Ramsay, 1738, 5 Brown's Sup. 206 ; Anderson v. Bank of Scotland, 1840, 15 P. C. 547. (h) Speirs v, Ardrossan Canal Co., 1823, 2 S. 221 ; Friendly Insur. Co. v. Royal Bank, supra. Chap. V.] DECLINATURE OF JUDGE. 565 It is a rule of the House of Lords, that a peer will not take Rule in House part in hearing an appeal in which a company of which he is a shareholder is a party ; and it has been doubted whether this rule could be altered otherwise than by statute (a). (a) London and North-West. Ra. Co. v. Lindsay, 1858, 3 Macq. 114. [ 566 j CHAPTER VI. CITATION OR SERVING OF PROCESS. I. FIRMS AND COMMON LAW COMPANIES. General rales. As has already been seen, there are three ways in which associa- tions of this kind may be called as defenders, viz. : 1. By making all the partners defenders ; 2. By calling the company in its de- scriptive name, with joinder of at least three partners ; and 3. By the social name in which the firm signs obligations. Whichever of these forms has been adopted, service must be made on the qiiasi person of the company. This is done by leaving a copy with one of the partners, or other known official of the company, at the company's place of business. The place of business is in law the home of the company ; and as an individual may have more than one residence, a company may have more than one domicile. This happens as often as a company has two or more offices in which it receives orders and transacts business with its customers. When this is the case, service may be made on the quasi person of the company at any of the offices lying within the jurisdiction of the Court (a). As to the person with whom the writ ought to be left, the ana- logy of service on an individual affords a guide. When they can be found present, a partner, or managing official, such as a secretary, is the proper person; but where these cannot be got after due inquiry, it should seem that service on an inferior assistant will suffice (b). With whom the "writ should be left. (a) Wordie, 1881, 10 S. 142; Bishop V. Mersey and Clyde Nav. Co., 1830, 8 S. b68; Aberdeen Ra.Co., 1854, 16 D. 422. (6) Young v. Livingstone, 1860, 22 D. 983. Chap. VI.] CITATION. 567 When tlie company, being a nominal firm, has been called as citation is such, i.e. in the social name, service would seem to be complete tiSmoieil when made as above described at the place of business (a). But TOmpany is where the company has been called either in the names of all its ^ ^ ' partners, or by its descriptive name with joinder of three partners, service, it appears, must be made not only on the quasi person of the company as above described, but also on each of the partners whose names appear in the writ (b). The reason of this require- ment is obvious enough, when it is found necessary to call all the known members of the association ; for, the same reason which rendered it necessary to call them individually, requires special service for each. It is not so easy to find a reason for this rigour, when it is sufiicient to call only three of the individual partners nominatim ; for in such a case the only reason for calling the three partners at all is the accident of the company trading under a descriptive instead of a social name. Nevertheless the practice has so run, and has now become too inveterate to be disturbed. When service has to be made on the individual partners, as in When service the cases mentioned, it must be done in the same way as if they on individual were defending individually ; that is to say, either by delivery of ^^ the writ to them personally, or in some of the modes which the law holds to be equivalents for personal service. Hence, leaving copies of the writ at the company's place of business, to be delivered to each of the partners, will not be sufficient. This rule must also be adhered to when the company is called in the social name, and one or more of the partners are also called as individuals. If a single individual has contracted an obligation as though he wtere single were a firm or company, and he is sued thereon as such, he cannot trades as a object to the validity of a citation which would have been effectual ""^p^^^' if he had been a company according to his misrepresentation (c). It may here be observed, that where a company sues one of its Actions inter own members or partners, he must be called as a defender, and service of the writ must be made on him in the same way as if he were a stranger. The company place of business is not to be taken as the residence of the individual partners. (a) Forsyth v. Hare, 1834, IS S. 50. (c) Young v. Livingstone, 1860, 22 (&) Cases last quoted. D. 983. 568 CITATION. [Book IV. II. CORPORATIONS. Companies Clauses Act, 1845. General rules. In citing sucli associations, attention must be paid to the provi- sions of the special act, charter, letters patent, or other instrument incorporating the company, or conferring on it the privileges of suing and being sued. If no provision has been made for citation, service must be made on the person of the company, by leaving a copy of the writ at its place of business in the hands of some of its principal officials, such as a manager, secretary, treasurer, or director. Perhaps, where these cannot be found, an inferior office-bearer may suffice ; but a mere partner or member, as such, will not be sufficient, as he can in no sense be considered an agent for the corporation. In the case of companies formed under the Act 1845, the writ is served either by being left at, or transmitted through the post directed to, the principal office of the company, or one of its prin- cipal offices where there are more than one, or by being given personally to the secretary, or in case there be no secretary, by being given to any one director of the company (sec. 137). In a summons against a railway company and the directors nominatim, of which the conclusions were directed against the ' said defenders,' and the warrant to cite was to summon ' the said defenders personally or at their respective dwelling-places,' and the company was cited by delivering a copy to the secretary personally, within their place of business ; it was held that this was a good citation of the company, the other parts of the warrant being held mere surplusage (a). Notices. Notices, but not summonses or other judicial writs, requiring to be served by the company on a shareholder, may, unless personal service is required, be served by being left at or posted in accord- ance with the shareholder's registered or other known address, in time to admit of delivery in due time. Service will be proved by showing that the notice was duly addressed and posted (sec. 138). Notice to joint proprietors of shares is sufficiently given when it is served on him whose name stands first on the register (sec. 139). V. 7'ennevt, 1848, (a) Stewart v. Midland Junction Ra. Co., 1852, 14 D. 594. See Glawjow and Airdrie Ra. Co. 11 D. 212. Chap. VI.] CITATION. 569 Notices requiring to be given by advertisement, must be inserted in the prescribed newspaper ; and if none be prescribed, or if it has ceased to be published, then in a newspaper circulating where the company's chief place of business is situated (sec. 140). It need hardly be observed, that when the company sues one of Actions its members, he must be called and cited in the same way as a members. stranger, the above compendious modes of service being applicable only to notices required to be given by the general or special act. The company may be represented by its secretary or treasurer in all proceedings connected with the bankruptcy or insolvency of its debtors (sec. 142). In the case of companies registered under the Act of 1862, Companies Act any summons, notice, order, or other document requiring to be served upon the company, may be served by leaving the same, or sending it through the post in a prepaid letter addressed to the company at their registered office (sec. 62) (a). Where in England a company is proposed to be wound up, but has no place of business, the Court, on an ea; parte application, is in use to direct service of the winding-up petition to be made on the chairman or general manager (6). Writs or other documents to be served by post on the company, Service by must be posted in time to admit of delivery within the required ^°^ ' period of service ; and in proving service, it is sufficient to show that they were properly addressed and posted as prepaid letters (sec. 63). The post-office mark, it may be observed, is not con- clusive evidence of the time when a letter was posted (c). If the regulations of Table A, Schedule I., be adopted as the Notices. articles of association, notices may be served by the company on any member, either personally, or by sending them through the post in a prepaid letter addressed to such member at his registered place of abode (No. 95). All notices directed to be given to members with respect to shares, to which more persons than one are jointly entitled, must be served on whichever of such persons is named (a) See, on this subject, the English 1862, 11 W. E. 161. See also Gas- case of Towne v. London and Lime- kell v. Chambers, 26 Beav. 252. rich Steam-ship Co., 5 C. B. (N. S.) (c) Stacker v. CoUi7i, 7 M. and W. 730. 515 ; Hawkins v. Rutt, Peake N. P. C. (J) National Credit and Exchange 186 ; Hilton v. Fairclough, 2 Camp. Co. (Limited), re Companies Act, 633. 570 CITATION. [Book IV. first in the register of members ; and notice so given is sufficient notice to all (No. 96). Any notice served by post will be deemed to have been served at the time when the letter containing it would be delivered in the ordinary course ; and in proving such service it is sufficient to establish that the letter was properly addressed and posted (No. 97). 8 and 9 Vict. The Lands- Clauses Act provides as follows in relation to all matters to which it applies. Summonses or notices, and all writs or other proceedings at law or equity, requiring to be served on the company, may be served by the same being left at or transmitted through the post, directed to the principal office, or one of the principal offices, where there is more than one, or by being given personally, or transmitted through the post, directed to the secretary, or in case there be no secretary, by being given to the solicitor of the company (sec. 128). 18 and 19 Vict. Copartneries registered under the ' Dwelling-Houses Scotland "' ■ Act, 1855,' are qimsi corporations, and are cited apparently in the same way as proper corporations (sec. 3). [ 571 J CHAPTER VII. PARTICULAR ACTIONS AND FORMS OP PROCEDURE. Having now considered the general principles and rules which govern the rights of companies and their members to sue and be sued, it will be necessary to examine some of the more special forms of legal procedure in which such associations or their mem- bers may be involved. INTBEMCT. When anything is in contemplation to be done which is contrary Form of to existing law or to the provisions of a binding contract, the Court ^ will generally interfere at the suit of parties having a proper interest to prevent its being carried into execution. This in England is done by injunction, granted by the Courts of Chancery or Exchequer; in Scotland by interdict granted by the Court of Session, or an inferior court having the requisite jurisdiction. When the application is made in the Supreme Court, it takes the form of a suspension and interdict; when in an inferior court, that of a petition for interdict. If the act complained of has been already done, the remedy by interdict does not apply; but recourse must be had to declarator (a). The interference of the Court by interdict is often sought when Pm-poses of „ T ... interdict. m private nrms partners are about to transgress the provisions, express or implied, of the partnership contract ; and in public com- panies when similar improprieties are contemplated by the directors or a majority of the shareholders ; and generally when anything is proposed to be done by the firm or company, or any of its members, (a) Per Lord Chan, in Fleming v. Jur. 229 ; Shand v. Henderson, 1814, Newton, 1848, 6 Bell's App. 175, 20' 2 Dow 519. 572 INTERDICT. [Book IV. Principles of granting, in private paitnerships ; in public companies. Interdict by strangers. whereby the rights and interests of the. others are injuriously affected. This remedy is also available to any of the public who can show that they will be injured by the intended acts of a firm, company, or corporation. But it must be observed, that no one is entitled to obtain an interdict against wrongful acts in the abstract, without at least showing reasonable grounds of apprehension, e.g. that they have been resolved upon, have been actually commenced, or are in course of completion (a). In general, the courts are slow to interfere between the members of private copartneries : for it is evident that unless the partners agree to bear and forbear with each other's infirmities of temper, peculiarities of disposition, or occasional deviations from what may be deemed the strict line of duty, all combined action is impossible ; and experience has shown that when disagreements of an important kind arise, and are likely to continue, a dissolution of the partner- ship will generally be found the most desirable, and perhaps the only effectual remedy. When, however, the improprieties complained of are of a serious kind, and would make themselves felt notwith- standing dissolution, or if that cannot be brought about, the inter- ference of the Court by interdict will generally be obtained. In public companies, whether corporate or unincorporate, the same objections to judicial interference do not exist, for the share- holders do not stand to each other in the same intimate relation as partners of a firm ; nor is the same exuberant trust in each other necessary for the successful prosecution of the undertaking, the management being entrusted to special officials or a board of direc- tors. While, therefore, the courts will not readily interfere with the management of the company's affairs, where the irregularities alleged to be in contemplation may be checked by other means, they will at once interdict any contemplated proceedings which are plainly contrary to or irreconcilable with the scope and purposes of the company as defined in its instrument of formation. When interdict is sought by strangers against acts contem- plated by firms or companies, the Court will interfere whenever such interference would be proper between private individuals. These general principles will be best explained and illustrated by reference to the decided cases ; and as the grounds upon which (o) King v. Hamilton, 1844, 6 D. 399. Chap. VII.] INTERDICT. 573 injunction is granted in England are for all practical purposes the same in relation to the present subject as those which warrant interdict in Scotland, the examples we are now to give will be taken indifferently from the practice in both countries. PRIVATE PARTNERSHIP. Injunction has been granted — to restrain a retiring partner Exampieeot •' o ° J- this remedy. from carrying on the business of the firm with new partners (Eng- land V. Curling, 8 Beav. 129) ; to prevent a partner from being excluded from his share of the management (Hall v. Hall, 3 Mac. and G. 79 ; Anon., 2 K. and J. 441) ; to restrain a partner from acting contrary to the conditions of the partnership articles (Morris v. Caiman, 18 Ves. 437 ; Glassington v. Thwaites, 1 Sim. and Stu. 124) ; to restrain a partner from obstructing the partner- ship business (Charlton v. Poulter, 19 Ves. 148, n,; Smith v. Jeyes, 4 Beav. 503); from abusing his powers of agency in granting bills, etc. (Jervis v. White, 7 Ves. 412; Williams v. Bingley, Coll. 233), and in recovering debts (Read v. Bowers, 4 Bro. C. C. 440); from keeping up partnership books (Greatrix v.Greatri^, 1 De G. and Sm. 692) ; from holding out another as partner with him (Troughton v. Hunter, 18 Beav. 470; Bullock v. Chapman, 2 De G. and Sm. 211); to enforce special agreements, such as not to recover debts or divulge trade secrets (Morison v. Mouat, 9 Ha. 241 ; Davis v. Armer, 3 Drew. 64) ; to protect a partner from interference by representatives of a late partner (Davidson v. Napier, 1 Sim. 297 ; Freeland v. Stansfield, 2 Sm. and G. 479 ; Alder v. Fouracre, 3 Swanst. 489) ; to restrain a late partner from carrying on a business in breach of an agreement not to do so (Churton v. Douglas, 1 Johns. 174 ; Whittaker v. Howe, 3 Beav. 383). Interdict has been granted against the partner of a company selling bills by auction, accepted by him in the company's name (Taylor and Sons v. Taylor, 1823, 2 S. 143) (a). PUBLIC COMPANIES. The reported cases in which the interference of the courts has General ' a minority of shareholders against tl (a) See Reid v. Maxwell, 1852, 14 D. 449. been sought by a minority of shareholders against the contemplated ° ^^^'^ ^ S'^'i INTERDICT IN PUBLIC COMPANIES. [Book IV. acts of a majority, or of those charged with the executive manage- ment, are very numei'ous both in this country and in England. Read one with another, they may be taken as embodying the following general rules : — Judicial interference will be obtained to restrain from doing that which is plainly beyond or irreconcilable with the purposes for which the association was formed, or which, if carried out, would in effect alter the constitution of the company, e.g. converting a railway company into a canal company, making a different railway from that for which the company was formed, and making important alterations on the internal management ; from depriving shareholders of their rights to share in the management and in the profits of the concern ; from misapplication of the com- pany credit or funds ; from holding meetings irregularly called ; and generally from doing anything manifestly unjust to the interests of even a single shareholder, or tainted with fraud on the share- holders or the public. But the courts will decline to interfere where the course proposed to be adopted by the majority or by the managing body is fairly within the limits of their discretionary- powers, either express or implied, even though that suggested hj* the petitioners appears to the Court to be more prudent or advis- able ; where interdict is' sought on grounds of a trifling or technical nature ; and, in general, where the proceedings complained of might be remedied by making use of the machinery provided for that purpose by the company's constitution, unless where imme- diate interference is necessary to prevent irremediable mischief. Mode of With the view of elucidating this branch of the subject, it was originally intended to arrange the more important decided cases into two great classes, viz. those in which interdict had been granted, and those in which it had been refused ; and lists were accordingly prepared for this purpose. On more mature considera- tion, however, the author was induced to abandon this intention for the reasons to be immediately given. When judicial intervention is obtained by injunction in England or by interdict in Scotland, the courts act in virtue of an equitable jurisdiction, and take into con- sideration the whole circumstances and specialties of the particular case. The consequence of this is, that while a cursory glance at the decisions, or an examination confined to the rubrics, may lead to the inference that the power of intervention has been anoma- arrangmg Chap. VII.] INTERDICT IN PUBLIC COMPANIES. 575 lously or capriciously exercised, this will generally be removed when the whole facts that were before the Court have been duly weighed and appreciated ; so that, in considering what will be done in a particular case, the practitioner is in continual danger of being misled by decisions which are precedents merely in superficial appearance, but whose true ratio decidendi was the pre- sence of an element which does not exist in the case with which he is concerned, or is neutralized by considerations of greater import- ance. It thus appears, that lists of cases in which interdict was refused on the one hand and granted on the other, would be more apt to mislead than to guide, unless they were to be accompanied with a statement of the circumstances of each case in much greater detail than could be admitted into a work of this kind. Instead, therefore, of following out the original design, the more important cases have been arranged under appropriate headings, and a particular perusal of the reports to which reference is made is specially requested. Improperly entering or continuing a person's name on the interdict in register of shareholders : Shortridge v. Bosanquet, 16 Beav. 84 ; companies Taylor v. Hughes, 2 Jo. and Lat. 24; Bulloch v. Chapman, 2 De ^''*^'- '""i"'- G. and S. 211. Issuing of preference shares : Edwards v. Shrewsbury Ha. Co., 2 De G. and Sra. 537. Issuing of shares for a different purpose from that intended: Fraser v. Whalley, etc., 11 Law T. K S. 175. Making improper transfers of stock or shares : Ardrossan Ra. Co. Y.' Glasgow, Kilm., and Ardrossan Ra. Co., 1850, 12 D. 687; Williamson v. NoHh British Ra. Co., 1846, 9 D. 255; Fife v. Swaby, 16 E. Jur. 49. Improper making of calls: Bailey v. Birkenhead Ra. Co., 12 Beav. 433; Preston r. Grand Coll. Dock Co., 11 Sim. 327; Orr v. Glasgow, Airdrie, etc., Ra. Co., 1860, 3 Macq. 799, aff. 20 D. 327; Hodgkinson v. Nat. Insur. Co., 26 Beav. 473; Harris v. North Devon Ra. Co., 20 Beav. ,384 ; Flay fair v. Bristol Ra. Co., 1 Ea. Ca. 640 ; Logan v. Courtown, 13 Beav. 22 ; Cooper v. Shropshire Ra. Co., 6 Ea. Ca. 136 ; Norman v. Mitchell, 19 Beav. 278. Improprieties in management. — Holding meetings without due notice to all entitled to receive it: Cargill v. Sir J. Forrest, 1851, 576 INTERDICT IN PUBLIC COMPANIES. [Book IV. 1 Stu. 91. Irregularities in appointment of directors: Blackburn V. Buchanan, 1848, 10 D. 590, 20 Jur. 199. Non-fulfilment of contracts : Ritchie v. Scottish Central Ra. Co., 1847, 20 Jur. 62. Illegal forfeiture of shares : Naylor v. South Devon Ra. Co., 1 De G. and Sm. 32; Watson v. Bales, 23 Beav. 294; Preston v. Grand Coll. Dock Co., 2 Ea. Oa. 335 ; Norman v. Mitchell, 5 De G-. Mac. and G. 648. Suspension of a shareholder's rights : Adley v. Whitstable Co., 1 Mer. 107. Granting leases of a railway in perpetuity : Wedderburn v. Scottish Central Ra. Co., 1848, 10 D. 1317. And delegating statutory powers : Beman v. Rufford, 7 Ea. Ca. 48 ; Great Northern Ra. Co. V. Eastern Counties Ra. Co., 9 Hare 306 ; Winch v. Birkenhead Ra. Co., 16 E. Jur. 1035, 7 Ea. Oa. 384; Simpson v. Denison, 10 Hare 51 ; London and North- Western Ra. Co. v. Scottish Central Ra. Co., 1847, 10 D. 215. Transferring of the company business to another company : Charlton v. Newcastle Ra. Co., 5 E. Jur. N". S. 1096 ; Winch v. Birkenhead Ra. Co., supra ; Hattersley v. Earl of Shelburne, 10 W. E. 881. t Changing the constitution of the company: Learmonth v. Leadbetter, 1841, 3 D. 1192. Changing the purposes for which the company was formed : Colman v. Eastern Counties Ra. Co., 10 Beav. 1; Natusch v. Irving, Gow on Part. 398 ; Salomons v. Laing, 12 Beav. 377 ; Simpson v. Denison, 10 Ha. 51 ; Bagshaw v. Eastern Ra. Co., 7 Ha. 114 ; Forrest v. Manchester Ra. Co., 7 E. Jur. N. S. 887 ; Sim,pson v. Westminster Hotel Co., 8 House of Lords Cases 712. Carrying out purposes of formation in part only : Hodgson v. Powis, 12 Beav. 392 ; Cohen v. Wilkinson, 12 Beav. 125. Misapplication of company funds : National Exchange Co. v. Glasgow and Ardrossan Ra. Co., 1849, 11 D. 571 ; Brown v. Adam, 1848, 10 D. 744 ; Stephenson and Co. v. Caled. Ra. Co., 1851, 23 Jur. 426; Wilson v. Glasgow and South-Western Ra. Co., 1850, 13 D. 227; Graham v. North British Bank, 1849, 11 D. 1165; Balfour v. Edinburgh and Northern Ra. Co., 1848, 10 D. 1240 ; Blackburn v. Stewart, 1851, 13 D. 1243. Amalgamation of companies : Gilbert v. Cooper, 10 E. Jur. 580. Chap. VII.] INTERDICT IN PUBLIC COMPANIES. 577 Misapplication of money raised on preference shares : Yetts v. Norfolk Ea. Co., 3 De G. and Sm. 293. Borrowing of money by a limited company : Bryan v. Metropo- litan Saloon Omnibus Co., 3 De G. and J. 123. Sale of company property : Fleming v. Campbell, 1845, 7 D. 935. Return of deposits : Kent v. Jackson, 14 Beav. 367. Illegal payment of dividends : Carlisle v. South-Eastern Ea. Co., 1 Mac. and G. 689 ; Sturge v. Eastern Union Ea. Co., 7 De G. Mac. and G. 158 ; Adely v. Whitstable Ea. Co., 17 Ves. 315 ; Craw- ford V. North-Eastern Ea. Co., 3 K. and J. 723 ; Henry v. Great Northern Ea. Co., 4 K. and J. 1. Payment of dividends before payment of debts or completion of company works : Stevens v. South Devon Ea. Co., 9 Ha. 326; Brown V. Monmouthshire Ea. Co., 13 Beav. 32 ; Fawcett v. Lawrie, 1 Dr. and Sm. 192. Issuing of reports by directors which are unwarranted or ultra vires: Stewart r. Blackburn, 1850, 12 D. 834. * Continuance in office of directors alleged to be unduly elected : Inderwick v. Snell, 2 Mac. and G. 216 ; Hatter sley v. Shelburne, 10 W. E. 881. Abandonment by a railway company of its works when it had not means for their completion : Logan v. Courtown, 13 Beav. 22. Assignation of company property to trustees to realize and pay its debts : Lord v. Governor and Co. of Copper Miners, 2 Ph. 740. Making of loans to directors : Bluck v. Mallalue, 5 E. Jur. N. S. 1018. Managing of company affairs by directors, no attempts having been made to control their proceedings before application for judicial interference : Foss v. Harbottle, 2 Ha. 461 ; Carlen v. Drury, 1 Y. and B. 154 ; Stevens v. South Devon Ea. Co., 9 Ha. 326 ; Mozley v. Alston, 1 Ph. 700 ; Waters v. Taylor, 15 Ves. 10 ; Yetts v. Norfolk Ea. Co., 3 De G. and Sm. 293. In some cases attempts have been made to obtain an interdict Interdict to against companies or some of their members applying to Parlia- cation to*^^ '' ment for special acts changing the constitution of the company, or ^*'^'^™™'! enabling it to do that which would otherwise be incompetent. To . grant interdict for such a purpose would seem to be a total perver- 2 o 578 INTERDICT IN PUBLIC COMPANIES. [Book IV. sion of that form of process, if indeed it ought not to be regarded as illegal, and therefore a nullity. The Court of Session have accordingly always refused such applications (a) ; and the same course has generally been followed by the Court of Chancery (b). A distinction, however, exists between the right to apply to Parlia- ment, which is the inalienable privilege of every British subject, and the right to do so at the expense of others. Accordingly, the Court of Chancery have, at the instance of a single dissentient share- holder, granted an injunction to restrain the application of company funds in defraying the expense of obtaining an Act to alter the company's constitution, or to confer powers not contemplated in the instrument of its formation (c) ; and , the Court of Session have granted interdict at the instance of a dissenting minority, against a majority applying the company funds towards the expenses of a new application to Parliament for a special act, after the first appli- cation had proved unsuccessful (d). to restrain legal Interdict wiU be granted against parties to an existing process proceedings. commencing new proceedings before another tribunal or in a foreign country, if it be made to appear that such restraint is necessary to attain the ends of justice, or to prevent oppression or embarrass- ment. — Dawson's Trs. v. Macleans, 1860, 22 D. 685 ; Todd v. Clyde Trs., 1843, 6 D. 108; Lindsay v. Paterson, 1840, 2 D. 1373. The Court refused to restrain a company proceeding with a jury trial under their act, on the ground that the required amount of capital was not subscribed. — Pliin v. Brisbane, 1839, 1 D. 1142. Interdict has been granted in Scotland, notwithstanding the de- pendence of an application for injunction in England. — Anderson V. M'Nair and Brand, 1859, 21 D. 257. (a) Wedderhirn v. Scottish Central (c) Munt v. Shrewsbury and Chester Ra. Co., 1848, 10 D. 1317 ; Anstruiher Ra. Co., 13 Beav. 1 ; Simpson v. Deni- V. East of Fife Ra. Co., 1849, 12 D. son, 10 Hare 51 ; Vance v. Eastern 127, aff. 1852, 1 Macq. 98, 24 Jur. 419. Lancashire Ra. Co., 3 K. and J. (6) Ware Y. Grand Junction Water 50; Attorney-General v. Andrews, Co., 2 R. and M. 470 ; Hattersley v. 14 E. Jur. 124 ; Cunliff v. Manches- Earl of Shelburne, 10 W. R. 881; ter and Bolton Canal Co., ^'R.w.dLyL. Bill V. Sierra Nevada Mining Co., 480, n. 1 De G. F. and J. 177. The appli- (d) Brown v. Sir C. Adam, 1848, cation in this case was to a foreign 10 D. 744. Legislature. Chap. VII.] INTERDICT IN PUBLIC COMPANIES. 579 INTERDICT IN QUESTIONS BETWEEN PUBLIC COMPANIES AND STRANGEKS. For the reasons given above, we shall classify the more im- portant cases according to their subject-matter, as was done in the previous section. Entry on lands by a company possessing aggressive powers interdict be- before a bargain has been concluded for the lands : Dalgliesh v. anlTtrangers. Stirling and Dunferm. Ma. Co., 1847, 9 D. 505 ; — or before paying the price : Hyde v. Great Western Ea. Co., 1 Ea. Oa. 277 ; Robert- son V. same, 1 Ra. Oa. 459 ; Jones v. same, ibid. 684. Proceeding with the works before settlement of claims for compensation, and arrangements as to accommodation works : Black v. Formartine and Buchan Ra. Co., 1861, 23 D. 600. Entry on lands not covered by the notice : Campbell Renton v. North Brit. Ra. Co., 1845, 8 D. 247. Interdict will not be granted unless it clearly appear that the company are about to commit a trespass : Standish v. Mayor of Liverpool, 1 Drew 1 ; Fooks v. Wilts, Somerset, and Weymouth Ra. Co., 4 Ra. Ca. 210. See Campbell Renton v. North British Ra. Co., supra ; Dalgliesh v. Stirling and Dunferm. Ra. Co., 1847, 9 D. 505. Carrying through a compulsatory sale of lands or interests not covered by the statutory powers : Todd v. Clyde Trs., 1843, 6 D. 108 ; River Dun Nav. Co. v. North Midland Ra. Co., 1 Ra. Ca. 135; Stone v. Commercial Ra. Co., 4 My. and C. 122 ; Mouchet v. Great Western Ra. Co., 1 Ra. Ca. 567. Taking lands or executing works contrary to previous agreement: Duhe of Norfolk v. Tennant, 16 E. Jur. 398 ; Lord Petre v. East. Counties Ra. Co., 1 Ra. Ca. 462. Formation of works not sanctioned by the special act: Buchanan V. Caled. and Dumbarton Ra. Co., 1850, 12 D. 778 ; — or contrary to the provisions of the Railway Acts : Coats v. Clarence Ra. Co., 1 Russ. and My. 181 ; Kemp v. London and Brighton Ra. Co., 1 Ra. Oa. .495 ; Attorney-Gen. v. Eastern Counties Ra. Co., 2 Ra. Oa. 823 ; Bell v. Hull and Selby Ra. Co., 1 Ra. Ca. 616 ; Manser v. North, and East. Counties Ra. Co., 2 Ra. Ca. 380 ; Baxter v. North British Ra. Co., 1846, 8 D. 1212. 580 INTERDICT IN PUBLIC COMPANIES. [Book IV. Acquiring lands by agreement in excess of the statutory powers : Cunningham v. Edinr. and North. Ra. Co., 1847, 9 D. 1469. Proceeding with injurious operations alleged to be intended when the company had previously done similar illegal acts : Hoyle, etc., V. Shaws Water Works Co., 1854, 17 D. 83. See Dawson v. Paver, 4 Ra. Ca. 81. Doing more damage in carrying on the operations allowed than the necessity of the case requires : Manser v. North, and East. Counties Ra. Co., supra. Acquiring land after elapse of the statutory time : Edinburgh and Glasgow Ra. Co. v. Monhlands Ra. Co., 1850, 13 D. 145. Interdicts in relation to roads proposed to be taken by a com- pany with aggressive powers. — See Campbell v. Edinburgh and Glasgow Ra. Co., 1855, 17 D. 613; and 1859, 21 D. 265; and 1861, 23 D. 1182, aff. 1863, 1 Macph. (H. of L.) 53. In relation to obstructing roads, see Semple v. London and Birmingham Ra. Co., 1 Ka. Ca. 480. Interdict has been refused, when applied for by a trader using a line of railway, against the company exacting higher fares than were contained in a table of tolls alleged to have been agreed upon between the railway and another company. — Finnie v. Glasgow and South-Western Ra. Co., 1855, 17 D. 1127; aff. 1857, 20 D. (H. of L.) 3, 3 Macq. 74. As to tolls generally, see same case, 1856, 18 D. 325. Interdict to restrain proceedings injurious to minerals. See Baird V. Monhlands Iron and Steel Co., 1862, 24 D. 1418 ; Eraser V. Edinburgh and Glasgow Union Canal Co., 1830, 9 S. 46 ; Irving V. Leadmills Mining Co., 1856, 18 D. 833 ; Caledonian Ra. Co. v. Buchanan, 17 D. 996. Interdict against nuisances. See M^Culloch v. Wallace, 1846, 9 D. 32 ; Magistrates of Edinburgh v. Edinburgh, Leith, and Granton Ra. Co., 1847, 19 Jur. 421 ; Broadbent v. Imperial Gas Co., 7 H. L. 0. 600 ; Attorney-General v. Sheffield Gas Co., 3 De G. M. and G. 304. Interdict in relation to the use of terminal stations jointly possessed by two companies. See North British Ra. Co. v. Edin- burgh and Glasgow Ra. Co., 1853, 16 D. 250. Matters connected with arbitration : Anderson v. Aberdeen Ra. Chap. VII.] INTERDICT IN PUBLIC COMPANIES. 581 Co., 1850, 12 D. 781 ; Wilson v. Caledonian Ra. Co., 1860, 22 D. 697. It has been held incompetent to interdict proceedings under a special act, which only provided the remedy of indemnity for loss sustained. — Douglas v. Dundee and Newtyle Ra. Co., 1827, 6 S. 329. It has been held in England, that when it clearly appears that a railway or other company cannot perform the undertaking con- templated by their special act, an owner of lands, through which the contemplated line runs, may obtain an injunction to restrain the company from taking them. — Agar v. Regent's Ra. Co., 1 Swanst. 250, n. ; Gray v. Liverpool and Bury Ra. Co., 10 E. Jur. 364. See also Lee v. Milner, 2 Y. and Coll. 611 ; Hodgson v. Earl Powis, 12 Beav. 529 ; Logan r. Earl of Courtown, 13 Beav. 22 ; Mayor of Kings Lynn v. Pemherton, 1 Swanst. 244. The Court will not interdict completed operations which have been acquiesced in for years. The remedy in such cases is by declarator. — Hoyle v. Shaws Water Co., 1854, 17 D. 83. In all cases, the remedy by interdict must be sought promptly. — Illing- worth V. MancJi. and Leeds Ra. Co., 2 Ra. Ca. 187 ; Semple v. Lond. and Birmingham, Ra. Co., 1 Ra. Ca. 120; Attorney-Gen. v. Mancli. and Leeds Ra. Co., 1 Ra. Ca. 436. Where the period for completing a line of railway under a con- tract had elapsed, and where, from the certificate of the Board of Trade, and the interlocutor of the arbiter named in the contract, it appeared that the line was ready for public traffic, the Court interdicted the contractor from retaining possession of the line, although certain operations still remained to be execijted, and certain claims were alleged to be still unpaid. — Castle-Douglas Ra. Co. V. Lee, etc., 1859, 22 D. 18. As to interdict under the Traffic Act, 17 and 18 Vict. c. 31, see Hosie v. Edin. and Glas. Ra. Co., 1856, 19 D. 65. Where a note of suspension and interdict had been presented in name of a projected railway company and others, and it turned out that the company was not incorporated, and had besides been dis- solved, the Court appointed the note to be amended by withdrawing the instance of the railway company. — Edin. and Perth Ra. Co. v. North British Ra. Co., 1846, 9 D. 307. See also Caled. Ra. Co. 582 INTERDICT IN PUBLIC COMPANIES. [Book IV. V. Buchanan, 1855, 17 D. 996. See, as to recall of interdict, Dundee Gas Light Co. v. Dundee New Gas Light Co., 1844, 7 D. 109. As to breach of interdict, Fleming v. Caled. Ra. Co., 1847, 9 D. 792; Hamilton v. Caled. Ra. Co., 1847, 10 D. 41; revd. in part, 1850, 7 Bell's App. 272, 22 Jur. 622. [ 583 ] CHAPTER VIII. JUDICIAL FACTOR (a). The Court of Session being in Scotland the Supreme Court of Appointed by Law and Equity, and coming in the place of the old Scottish Privy session. Council, has long been in use to appoint judicial factors for the management and administration of estates subject to litigation, or not protected by any one legally, entitled to their management. Anciently, it should seem, sequestration of the estate was in all cases required as a preliminary to the appointment ; but though this has been relaxed in modern practice, it would still appear that this is the proper course of procedure in the case of corporations or copartneries (b). In England, judicial factors are termed receivers, or receivers and ho-w^ termed managers, according to' the nature of their powers and duties (c) ; ™ '"S^n . and even in Scotland they have received this appellation (d). The appointment of a judicial factor on the estate of a firm or Principles of company, involves a much greater interference with the company ' affairs than the mere granting of interdict against certain proceed- ings complained of ; for it takes the management entirely out of the hands of the partners or shareholders, and thus operates as an interdict against their interfering in any way with the company affairs. The Court are therefore very chary in making such appointments, and will not do so unless a very strong case for such interference is made out. (a) Upon this subject generally, see (c) Bennet's Eeceiver, oh. ii. s. 2 ; Thorns on Judicial Factors. DanieU's Chancery Practice, 3d ed., (b) Beck, 1836, li S. 1056 ; Dixon, 978. 1832, 10 S. 209 ; Morrison, 1857, 20 (d) Duke of Roxburgli, 1824, 2 D. 276 ; Glasgow v. Barrhead Ra. Co., Shaw's App. 18. 1850, 12 D. 1014. 584 JUDICIAL FACTOR. [Book IV. in private firms, winding up. Misconduct, etc. Generally speaking, the Court will not appoint a judicial factor to manage the affairs of a private partnership, unless the applica- tion is made for the purpose of winding up the concern. The reason of this is, that it would serve no good purpose to perpe- tuate the existence of a concern which its own partners were unable to manage, and that no limit could well be set to the duration of the appointment (a). When the concern has not already been dissolved, misconduct on the part of some of the partners is the most common ground on which the appointment of a judicial factor is sought ; but if, apart from the alleged wrong-doers, there still remain a su£Scient num- ber of partners to manage the concern, the Court will not in general make such an appointment, the proper remedy being by interdict. Hence it is much more difficult to obtain the appoint- ment of a judicial factor where the membership is numerous, than where it consists of only two partners (b). It is presumed that when men enter into a partnership, they have full confidence in each other's honesty ; and therefore it is not mere squabbling or every piece of apparent misconduct that can be taken as sufficient to warrant the Court to take the management of the concern out of the hands of the partners, and thus break up the original agree- ment (c). When, however, it is plain from the conduct of some of the partners that all confidence is forfeited, a judicial factor will be appointed with the view of winding up the concern. The most common examples of such conduct as is here referred to are the following : Where an attempt is made to exclude a partner from his share of the management, by alleging that he is not a member of the concern, or has no interest in the company property (d) ; where a partner is applying the company property for carrying on a business of his own, or making away with it for unexplained pur- poses ; when he colludes with the company debtors, so as to enable them to escape or delay payment of the company claims ; and when, (a) Goodman v. WMteomhe, 1 Jac. and W. 589 ; Hall v. Hall, 3 Mac. and G. 79 ; Waters v. Taylor, 15 Ves. 10 ; Harrison v. Armitage, 4 Madd. 143 ; Oliver v. Hamilton, 2 Anstr. 453. (6) Hall V. Hall, supra. (c) Rowe V. Wood, 2 J. and W. 556 ; Roberts v. Eberhardt, K'a.j 148. (d) Peacock r. Peacock, 16 Ves. 49; Goodman v. WMteomhe, 1 J. and W. 589 ; Blakeney v. Dufaur, 15 Beav. 40 ; Wilson v. Greenwood, 1 Swanst. 481. Chap. VIII.] JUDICIAL FACTOR. 585 in such cases, the misconduct complained of and established cannot he remedied by interdict (a). When the partnership property, or the interests of the partners Mutual therein, has become the subject of mutual litigation, as e.g. where ' '^^ '™' one partner has brought an action of reduction of the contract of copartnery, a judicial factor may be appointed pendente pro- cessu (b). When, in an action by one partner against another, the defence is taken, that the alleged partnership is illegal, it has been doubted whether the Court will appoint a judicial factor, unless the application has been made in initio litis (c). Where a part- nership is sought to be judicially established, a factor may be appointed if the case has gone far enough to create a probahilis causa (d). When a partnership is dissolved by the death of one of the Death, partners, it survives for the purposes of winding up in the surviving partners; and the representatives of the deceased partners are not entitled to have a judicial factor appointed, unless they can make out neglect or improper conduct (e). But though the Court will not without special reasons appoint a judicial factor while one of the partners is in a position to con- tinue the management, the case is very different where the company estate has come under the control of persons other than the part- ners. When, therefore, all the partners are dead, and their repre- sentatives are in possession, a factor will generally be appointed as a matter of course (/). The fact that the last surviving partner had appointed trustees for winding up the concern is no reason why the representatives of the other partners should not obtain the appointment of a judicial factor ; for though a surviving partner is entitled to wind up the affairs of the company himself, he has no (a) Madgwick v. Wimble, 6 Beav. (d) Fairhurn v. Pearson, 2 Mac. 495 ; Evans v. Coventry, 5 De G. Mao. and G. 144 ; Chapman v. Beach, 1 J. and G. 911 ; Sheppard v. Oxenford, 1 and W. 594. K. and J. 491 ; Harding v. Glover, 18 (e) Collins v. Young, 1853, 1 Macq. Ves. 281. 385, reversing 14 D. 540 ; Harding v. (6) Ex parte Broome, 1 Rose 69 ; Olover, 18 Ves. 281 ; Lawson v. Mor- bnt see Macdougall v. MacLaurin, gan, 1 Price 303 ; Kershaw V. Matthews, 1839, 1 D. 1241 ; Drysdale v. Lawson, 2 Russ. 62 ; Kennedy v. Lee, 3 Mer. 1842, 4 D. 1061. 448. (c) Sheppard y. Oxenford, 1 K. and (/) Phillips v. Atkinson, 2 Bro. C. J. 491 ; Hale v. Hale, 4 Beav. 369. C. 272. 586 JUDICIAL FACTOR. [Book IV. Special instances. Powers of judicial factor in private firms. implied power to entrust this to others, so as to bind the represen- tatives of his former partners (a). For a Hke reason, an appoint- ment of a judicial factor will easily be obtained by a partner against the representatives of his late copartner by succession or in bank- ruptcy (b). Even where the partners on dissolution have agreed to appoint a stranger to wind up the concern, and to refrain from interference themselves, this does not always preclude the appoint- ment of a judicial factor. Thus, when an agreement of this kind had been made and had been partially carried out, but on the death of one of the partners disputes arose between his. representatives and the surviving partner who sought to interfere in the manage- ment, the Court of Chancery appointed a receiver on a bill filed by the executors of the deceased partners (c). When, on a dissolution, no extrajudicial arrangement between the quondam partners for winding up the concern could be agreed upon, and there was no provision on the subject in the contract of copartnery, the Court, on the application of one partner with consent of the others, appointed a judicial factor (d). And in one very special case of a joint adventure, a judicial factor was appointed of consent of both the adventurers, with the unusual powers of taking all steps necessary for the protection of the interests of the adventure, and either to wind up and sell the pro- perty or to carry on the business. This case, however, cannot be taken as a precedent (e). The partner of a dissolved firm, while in prison on a charge of forgery, of which he was afterwards convicted, granted a trust-assignation and a factory in favour of a certain party, for the purpose of collecting the debts and winding up the concern. The Court superseded the appointment, but nominated the same party to be judicial factor (/). As to the powers of judicial factors appointed on unincorporated associations, the following cases may be noticed : Where a judicial factor had been appointed on the estates of a solvent mercantile company, after the death of the last partner, to manage and wind (a) Dixon v. Dixon, 1831, 10 S. 178 ; FuUarton v. Dixon, 1834, 12 S. 750. (V) Freeland v. Stansfeld, 2 Sm. and G. 479 ; Candler v. Candler, Jac. 225 ; Fraser v. Kershaw, 2 K., and J. 496. D. 989 (c) Davis v. Amer, 3 Drew. 64. (d) Abercrombie, 1857, Thorns on Jud. Fact. 42. (c) Bell, 1857, 19 D. 704. (/) Marshall v. Anderson, 1841, 3 Chap. VIII.] JUDICIAL FACTOR. 587 up the concern, and all parties concurred in the expediency of selling the real property, but some opposed a sale by the factor, the Court held that as the real property must be viewed as part of the com- pany funds, the factor was entitled to make up titles to and sell it ; and authority was granted accordingly (a). When a judicial factor on the estate of a dissolved company brings an action for a debt due the company, and is met by the defence of set-off, he is entitled, on obtaining authority from the surviving partner, to plead recom- pensation against the counter claims of the defenders, in respect of a sum due by them to the surviving partner individually, though incurred after dissolution of the partnership (b). It is not unusual in England, when a receiver is appointed, to Appointment 1 . 11 • 1 1 . of partner. give the appointment to a partner actually carrying on the business, provided he is not chargeable with misconduct. He, however, receives no salary (c). In the case of joint-stock companies managed by directors, it is Public more difficult to obtain the appointment of a judicial factor than in the case of private partnerships. If the application is made at the instance of a minority, it is always very doubtful whether they have gpod cause of complaint, seeing the majority are satisfied with the management provided by the company's constitution ; and if at the instance of a majority, such an extraordinary exercise of the equitable powers of the Court seems unnecessary, since the majority have generally the power of remedying the evils complained of by chang- ing the management, and any immediate improprieties may be checked by interdict. When the company is incorporated, the appointment of a judicial factor is liable to this objection, that it amounts to a withdrawal of the management from the governing body to which the Legislature or the Crown had entrusted it (d). The case is different where the company has been dissolved, and the application is made for the purposes of winding up (e). When an application of this kind is made, all the partners or shareholders must be called (/). (a)FuUartonr.Dixon,1834:,12a.75Q. (d) Maxton v. Muir, 1845, 7 D. (5) Thomson v. Stephenson, 1865, 1006. 17 D. 739. See also Rae v. Candle- (e) Opinions of judges in same case; mahers of Edinburgh, 1858, 20 D. 461. and Southern Bank of Scotland, 1849, (c) Wilson v. Greenwood, 1 Swanst. 11 D. 1494. 471. See Liudley, p. 856. (/) Last cases. 588 JUDICIAL FACTOR. [Book IV. Statutory By the Companies Clauses Act, 8 and 9 Vict. c. 17, ss. 56 and provisions. . . ,, 57, and 20 and 21 Vict. c. 56, s. 3, the courts are specially em- powered to appoint judicial factors or receivers, to collect the tolls or other sums liable for the principal or interest of certain mort- gages or bonds granted by companies falling under the provisions of the statute. Similar provisions also occur in some previous private acts. It has been decided, that these special enactments do not take away the original powers of the Court of Session or the Court of Chancery to appoint such officials (a). The mort- gagee, it appears, may elect between the statutory and the ordinary .appointment (b). (a) Glasgow and Garnhirk Ra. Co., Jour. Ch. 1084. See, as to these ap- 1850, 12 D. 944 and 1014 ; Maxton pointments, Baird v. Caled. Ra. Co., V. Muir, 1845, 7 D. 1006 ; Dremry 1850, 13 D. 36 and 795 ; Primrose v. V. Barnes, 3 Euss. 94; Knapp v. CaUd. Ra. Co., 1851, 13 D. 1214; Williams, 4 Ves. 429; Dumville v. Wishaw Ra. Co.v.Caled.Ra. Co. ,1851, AshbrooJce, 8 Euss. 98. 13 D. 464 ; Glasg. and Barrhead Ra. Co. (6) Fripp V. Chard Ra. Co., 22 Law v. Caled. Ra. Co., 1850, 12 D. 1014. [ 589 i CHAPTER IX. CRIMINAL AND QUASI CRIMINAL PROCEDURE. By the law of Scotland, though criminal prosecutions are generally General 1 !• r-iTiAi 11- • observations. raised at the instance ot the Liord Advocate as public prosecutor, it is also competent to the private party who has sustained the wrong to prosecute criminally ad vindictam publicam ; but inasmuch as such a power is very liable to abuse, the law has made certain pro- visions which have generally been found sufficient to prevent its being exercised in a reckless or malicious manner (a). One of the most important of these is, that the unjust or calumnious prosecutor lays himself open to an action of damages at the instance of the accused ; and by certain statutes, the Court of Justiciary is em- powered, on the accused being acquitted, to subject the prosecutor in due reparation, which may be recovered by summary process. It seems even to be competent to raise a counter libel for calumny, and remit it to the same assize by which the accused had been tried (&). Now, it is obvious that the efficiency of such checks on reckless Criminal pro- or malicious prosecution depends entirely on the accused being generally ■■ rii--T-ii 1 competent to made aware ot who his individual accuser or accusers are ; and companies, consequently, before a private prosecution can proceed, it is required not only that the name of the individual or individuals prosecut- ing appear in the instance, but that they appear personally at the bar. For this reason, therefore, if for no other, such prosecutions cannot be raised at the instance of firms or companies prosecuting in the descriptive or social name. It may be said, indeed, that this reason would fail when the prosecution proceeds in the social name, (o) Hume's Criminal Law ii. p. 119. (6) Ihid. pp. 127-8. 590 CRIMINAL PROCEEDINGS. [Book IV. Distinction between com- panies and corporations. which includes that of individuals ; but it must be remembered that the social name often includes those of persons who are no longer partners. The difficulty would perhaps be got over if the prosecu- tion were to be raised in the names of all the partners or members of the company, and if they all appeared at the bar (a). In the case of a corporation aggregate, it was held that a private prosecu- tion might proceed in the corporate name, coupled with that of a factor or attorney specially appointed for the purpose, who appeared at the bar as representing the corporation. Yet in that case the factor not only produced his general commission of factory, but an extract from the company books, under the hand of the secretary, of a special order to him to carry on the process, and a formal mandate to prosecute under the corporate seal (b). An opinion has been hazarded, to the effect that the same kind of procedure would be competent at the instance of an unincor- porated association (c) ; but here the characteristic distinctions between corporations and common law companies appear to have been overlooked, — a distinction which greatly affects even civil pro- cedure. Isf, The will of a corporation is ascertained in accordance with the forms appointed for that purpose by public authority, so that there is little danger of its name being used by unauthorized persons ; whereas the same securities do not exist that the name of a mere firm or unincorporated association may not be employed by a minority of the partners, or even by strangers, for the purpose of a groundless or malicious prosecution. 2d, A corporation is a continuous entity, possessing corporate property, and not dissolv- able at the will of its members, so that in the event of his being wronged, the accused can be at no loss against whom and in what manner to obtain redress ; whereas the quasi person of a common law company or firm may be dissolved at any time, leaving the accused to find his remedy as best he may against such as he can prove to have been its former members (d). It would therefore seem, that while corporations may, by observing certain formalities, prosecute criminally in the corporate name, this is incompetent (a) Renfrewshire Banking Co. v. (6) York Buildings Co. v. Matliie, M'Kellar, 1816, Hume's Crim. Law 1727, Hume's- Crim. Law ii. 268. Aitken v. Sennie, 1810, 16 (c) Hume's Criminal Law ii. 268. (d) See Arbuckle v. Taylor, 1815, ii. 119; F. C. 78. 3 Dow 160. Chap. IX.] STATUTORY PENALTIES. 591 to unincorporated associations, unless all the members appear individually in the instance and attend at the trial. It has sometimes been given as a reason why unincorporated associations could not prosecute criminally, that they are not sus- ceptible of the sense of injury (a). As to this, it may be said that a desire to revenge vs^rongs, real or supposed, is not a motive for instituting a criminal prosecution, which ought to be recognised by the law in civilised times ; and it is to be hoped that the tribunals of this country would discountenance any other motives than those of reforming the criminal or securing the safety of the public. But apart from such considerations, it is very evident that in denying the right of criminal prosecution to unincorporated asso- ciations, the law has recognised no such principle as that suggested, seeing the right in question is competent to corporations, whose sense of injury cannot be supposed to have been implanted or preternatu- rally quickened by the intervention of a charter or special act. No criminal or quasi criminal proceedings can be taken against Criminal pro- ... cedure against firms, companies, or other associations of individuals, whether cor- associations is ,.,..,, , , , , incompetent. porate or unmcorporate ; the individuals only by whom the wrong is alleged to have been done can be so prosecuted. The reason of this is, that artificial persons cannot be conceived of as possessing moral attributes ; and that to punish as criminals the individual members of an association for its corporate acts, unless where they were Individually tried and convicted, would in many cases involve persons in the consequence of crimes of which they were morally innocent (b). STATUTORY PENALTIES. When companies are formed by special act for carrying on Modes of undertakings of a public nature, such as railways, canals, and the like, certain police regulations are often made by the Legislature for the protection of their interests and those of the public ; and the company are themselves frequently empowered to make bye- laws for the same purpose. When this is the case, summary and convenient modes of procedure are provided by the Legislature for (a) Hume's Crimmal Law ii. (h) Miles v. Finlay and Co., 1830, 119. 9 S. 18. 592 STATUTORY PENALTIES. [Book IV. 8 and 9 Vict, c. 17. Defects in form. Disposal of penaltieSj and appeal. the enforcement of such regulations or bye-laws before the sheriff or justices of the peace. The provisions of the Companies Clauses Consolidation (Scot- land) Act on these matters are as follows: — The company are required to publish on a board, set up in a conspicuous part of their principal place of business, short particulars of the offences for which penalties are imposed by their special acts or bye-laws on the public ; and unless this has been done and kept legible, the penalties cannot be recovered. When the penalties apply to offences committed in par- ticular localities, they must be posted in such localities (sec. 147) (a). Penalties are imposed on such as deface or obliterate the boards (sec. 148). A summary mode of recovering penalties is provided before the sheriff or two justices (sec. 149) ; and if not immediately paid, they are levied by poinding and sale (sec. 150). Offenders when convicted may be detained by order of the sheriff or justices until return is made to the warrant of poinding and sale, unless they can find security by recognizance or otherwise for appearance on such return ; and if, before issuing the warrant of poinding and sale, it appear that sufficient goods whereon to levy cannot be found within the jurisdiction, or if the warrant, when issued, prove in- operative, the offenders may be imprisoned for three months unless the penalties be sooner paid (sec. 151). When penalties or other sums have been levied by poinding and sale, the surplus must be paid on demand to the party whose goods have been seized (sec. 152) (b). No poinding and sale, nor summons, conviction, warrant, or other relative proceedings, are deemed unlawful from want of form ; but, at the same time, such defect or irregularity may ground an- action of damages in the Sheriff Court (sec. 153). When the disposal of penalties is not otherwise provided for, one half may be awarded to the informer, and the residue to the kirk- session (sec. 154). Penalties must be sued for within six months (sec. 155). Damages may be claimed in addition to penalties (sec. 156). Witnesses refusing to appear or to be examined on oath forfeit a sum not exceeding £5 (sec. 157). Offenders whose names and residences are unknown, may be summarily apprehended and (a) See Bye-Laws, supra. (b) See as to application of the ' Summary Procedure (Scotland) Act, 1864,' to cases of this kind, Craig v. Great North of Scotland Ra. Co., 20 Nov. 1865, High Court of Justiciary. Chap. IX.] STATUTORY PENALTIES. 593 proceeded against (sec. 158). The Sheriff proceeds summarily in all cases under the Act without abiding the course of the roll, and without written pleadings, or reducing the evidence to writ- ing, unless he see fit ; and proceedings so taken are not liable to review by suspension, advocation, or reduction on any ground whatever (sec. 159). A form of conviction is given in Schedule G. No proceedings under the general or special acts can be quashed for want of form, or removed into a superior court by suspension or otherwise (sec. 161). But when the proceedings have been in writing, an appeal lies to the Sheriff from his substitute, who may hear the parties viva voce, subject, however, to no further review (sec. 162). Appeal also lies from the Justices to the Quarter Sessions, if made within four months, and on ten days' notice in writing to the opposite party, provided the appellant enter into recognisances with two sufficient sureties, to prosecute the appeal, and abide the judgment (sec. 163). The Quarter Sessions may hear and determine the appeal at once, or may adjourn it to the following sessions, and may confirm, quash, or mitigate the sentence, dealing with sums already levied, costs, and damages as they see fit (sec. 164). Provisions are also made by the same statute for the more Damages effectual and speedy recovery of damages or expenses exigible from pa,ny. the company by reason of any irregularities, trespasses, or other wrongful proceedings done in the exercise of the statutory powers, and not otherwise provided for. These provisions are as follows : — The company, or any persons acting on their behalf, who have Payment into rendered themselves liable to prosecution for irregularities, tres- passes, or other wrongful proceedings under any of the provisions of the general or special acts, may prevent action being raised against them by tendering sufficient amends; and if action has already been raised, they may before the record is closed pay into Court such sum of money as they shall think fit, by leave of the judges, and the effect of this will be the same as in ordinary cases where this course is adopted (sec. 143). Where provision is not otherwise made for ascertainment of Howasoer- '^ • 1 1 A T tained and damages, costs, or expenses accrumg under the Act, they are de- recovered. termined by the Sheriff ; and if not paid within seven days after demand, they may be recovered under warrant of the Sheriff, by 2 P 594 STATUTORY PENALTIES. [Book IV. poinding and sale of the goods of the company or other party liable (sec. 144). In default of sufficient company goods on which to levy the amount decerned for, it may be recovered by poinding and sale of the goods of the treasurer, provided that it does not exceed £20, and that he has been served with a written notice and demand for the amount seven days previously. The treasurer is entitled to indemnity against the company for payments so made or levied, and he may make it good either by retention or action (sec. 145). Jurisdiction. When questions of damages, expenses, or charges fall to be determined by the Sheriff or two Justices, the defender may be summoned on the warrant of the Sheriff ^or any Justice ; and decree or award pronounced by the Sheriff or two Justices in foro or in absence is final (sec. 146). 25and26Vict. The Companies Clauses Act of 1862, though it refers merely to companies incorporated by registration, contains the following provisions for the summary recovery of penalties for offences inter socios : — All offences involving penalties may be prosecuted summarily in Scotland, before two or more Justices, or the Sheriff or Sheriff- depute of the county, in manner directed by 17 and 18 Vict. c. 104, or any Act amending the same (sec. 65), not being offences described as felonies or misdemeanours. The Sheriff or Justices may direct the whole or part of the penalties to be applied in pay- ment of costs or in rewarding informers ; but in default of such direction they are paid into Exchequer (sec. 66). [ 595 CHAPTER X. ARBITRATION. PRIVATE FIRMS AND COMMON LAW COMPANIES. Though individual partners have no implied powers to refer General t , . . oDservatdons. to arbitration matters in which their companies are concerned ; and though it is even doubtful whether such a power may on mere implication be competently exercised by majorities 'SO as to bind dissenting members, it is not unusual to confer it by the instrument of formation on majorities, officials, or managing partners. When this has been done, the powers so conferred will bind the company, provided they are exercised by the persons and in accordance with the provisions stipulated ; nor is it probable that the courts will in a question with third parties permit the company to take advantage of informalities, to escape from obligations so created. It would be jus tertii for a third party to found on such informalities. It is also a common practice to introduce into the articles of Clauses of . . ^ T o 1 TIT • ■ submission in association or deed or copartnery, clauses whereby disputes arising contract oi inter socios or between the company and its members or their repre- sentatives are required to be referred to the arbitration of certain specified persons. Such stipulations, when properly expressed, are binding, and will exclude to a great extent the jurisdiction of the ordinary tribunals (a). To be' effectual, however, they must be conceived in very explicit terms ; and they must contain a specific reference to persons named. Thus a clause in a contract of copart- nery, referring all future disputes to the chairman, etc., of the Glasgow Chamber of Commerce for the time, was held to be (a) Cooper v. Bertram, Shotts Friendly Society, 1825, 3 S. 454 ; Manson v. Doull, 1840, 2 D. 1015. 596 ARBITRATION. [Book IV. ineffectual, — the reference not being to an individual, and the reference as well as the point to be decided being indefinite at the date of the contract (a). In like manner, an obligation to refer to two neutral persons was held to be iiisufHcient to bar action (b). Rules as to Arbitration between companies and the public, or their own arbitration. ^ -^ partners, are in general regulated by the same rules as apply in cases of ordinary submissions, and will be found in any work on arbitration (c). There are, however, some peculiarities to which we shall briefly advert. An arbiter is in general disqualified by being a partner (d). It is no objection, however, to an arbiter, that as partner of a company he is creditor to a small extent of an insolvent party, in whose favour decree is pronounced (e). It was found to be no objection to a decree-arbitral against a company, that it was pro- nounced after the sequestration and death of the sole partner, notice having been given to the trustee and representatives, who declined to appear (/). It does not seem ever to have been judicially settled, but there can be no doubt that a submission may be pro- rogated by the acts of one active and known partner, such power plainly falling within the implied agency. In a judicial reference of an action against a partner for payment of two calls of stock, it was held that as the referee had decerned for payment of both calls at one time, whereas, by the statute constituting the company, an interval of one month should elapse, the decree was invalid, except as to the first call, and was in other respects conditional and inconclusive (g). It was held that a submission in a contract of copartnery, of any difference which shall arise between the partners themselves, did not apply to an action by one partner against the other for illegal, fraudulent, and malicious violations of the con- (a) Buchanan v. Muirhead, 1799, (e) M'Kessoch v. Drew, 1822, 2 S. M. 14693. 11. (i) Milne v. Magistrates of Edin., (/) Hamilton v. M'Gilp, 1826, 5 S. 1770, 2 Pat. App. 209 ; Hendrifs 129. See Grant v. Girdwood and Co., Trs. Y. Renton, 1851, 13 D. 1001. 1820, 20 F. 0. 156. See Hunter v. Cochrane, 1831, 5 W". (g) Edin. Oil Gas Co. v. Clyneh and S. 689 ; aff. 9 S. 477. Trs., 1832, 10 S. 723, alt. 1885, 2 S. (c) See Bell on Arbitration 109, and M'L. 243. See, as to this, North 370 sqq. British Ra. Co. v. Barr, 1855, 18 D. (d) Tennent v. Macdonald, 1836, 102 ; Finlay and Co. v. Campbell, 14 S. 976 ; M'Kenzie v. Clark, 1828, 1834, 12 S. 792. 7 S. 215. Chap. X.] STATUTORY ARBITRATIONS. 597 tract, such as attempting to destroy the partnership by creating a fictitious bankruptcy (a). The clerk to a submission between two partners raised an action against both for his account, and arrested the funds of one of them. A new submission was entered into between the clerk and that partner, and the amount claimed was consigned in the hands of the referees. They having differed in opinion, and decHned to act, a multiplepoinding raised by the clerk in their name for disposal of the consigned fund was held compe- tent, though the other partner had not been made a party (b). STATUTORY ARBITEATION. We have already seen that it is a matter of considerable doubt, Legislative ' enactments. whether at common law, and unless specially provided in their instruments of formation, associations for the purposes of gain, whether corporate or unincorporate, have the power of referring disputed questions to arbitration, so as to bind dissenting members. However this may be, the Legislature has by divers acts conferred powers to this effect upon companies incorporated or formed under certain general enactments, and has laid down certain rules by which such statutory arbitrations are to be regulated. It will be necessary to devote some space to the examination of these provisions. The Lands Clauses Consolidation Acts, and the Railway Clauses Consolidation Acts, provide that, in certain circumstances, the value of lands taken under the powers of a company's special act, and the loss or damage consequent on the company's opera- tions, shall be assessed by arbitration ;• and the mode in which such arbitrations are to be conducted is specially kid down and regu- lated. These provisions are declared applicable to railways formed under the Railway Construction Facilities Act, 1864 (sec. 51 of 27 and 28 Vict. C« x6\.- that Act). It is unnecessary to notice these provisions in this place, as they have been already fully examined and explained. By the Companies Clauses Consolidation (Scotland) Act, 1845, 8 and 9 Viot. it is provided that where any dispute directed by that or the special act, or any act incorporated therewith, to be settled by arbitration, shall have arisen, then, unless both parties concur in the appoint- {a) Lauder r. Wingate, 1852, U (b) M^Farlane v. Black, lSi2, 41). D. 633, and 24 Jur. 321. 1459. 598 STATUTORY ARBITRATIONS. [Book IV. ment of a single arbitrator, each party shall, on the written request of the other, nominate an arbitrator by writing under his hand. The appointments so made cannot be revoked except of consent, nor does death operate as a revocation. If for fpurteen days after the dispute has arisen, and after the request to name an arbitrator has been made by one party or the other, this last party fails to do so, the party making the request may appoint the person whom he has named to act on behalf of both, and his award is final (sec. 131). If, before the matters referred have been determined, an arbitrator die, become incapable, or refuse or neglect for seven days to act, the party appointing him may nominate another to supply his place ; and if for seven days after written notice to make a new appointment, he fail to do so, the other arbitrator may proceed ex parte. Substituted arbitrators have the same powers as those in whose place they came (sec. 132). The two arbitrators must, before proceeding to act, appoint an umpire (oversman) by writing under their hands to decide where they differ. If the umpire die, refuse, or for seven days neglect to act, the arbitrators must immediately nominate another. The decision of the umpire is final (sec. 133). On failure of the arbitrators to appoint an umpire, the Lord Ordi- nary is empowered to do so on the application of either party (sec. 134). The arbitrators or umpire may examine the parties or their witnesses on oath, and may order production of documents, or grant diligence for this purpose, or for citing witnesses. Letters in sup- plement, etc., are issued by the Lord Ordinary where necessary (sec. 135). Unless otherwise provided, the costs of the arbitration are in the discretion of the arbitrators or umpire, as the case may be (sec. 136). 22 and 23 Vict. By the Railway Companies Arbitration Act, 1859, and which extends over the United Kingdom, certain important provisions are made for the settlement of matters in which railway com- panies are mutually concerned. It provides as follows : — Any two or more such 'companies,' under which are included the owners or lessees of a line of railway worked by steam power, and all contractors working such lines, may from time to time, by writings under their common seals, refer to arbitration any exist- ing or future differences, and all matters in which they are mutually interested, and which they might lawfully dispose of by Chap. X.] STATUTORY ARBITRATIONS. 599 agreement between themselves, and may delegate to the referees such powers to determine the terms of any contract made between . the coinpanies as their directors might delegate to committees of their, own number (sec. 2). The reference may from time to time be added to, altered, or revoked, by a joint writing under seal (sec. 3) ; but subject to such alteration or revocation, its terms are binding, and must be carried into effect (sec. 4). Where the com- panies agree, the reference may be made to a single arbitrator ; but in default of such agreement, there must be as many arbiters as there are companies (sees. 5, 6). Where there are more arbitrators than one, each company appoints an arbitrator by writing under its common seal, and must give notice to the other companies (sec. 7). If, after such notice, any company fail for fourteen days to appoint an arbiter, the Board of Trade may do so on the application of any of the other companies (sec. 8). If, before final award, any of the arbitrators die, become incapable or unfit, or for seven consecutive days fails to act, the company that appointed him must appoint another ; and on their failure to do so, the Board of Trade will as before make the appointment (sees. 9, 10). Arbitrators appointed by the Board of Trade are deemed to have been appointed by the companies who failed to do so (sees. 8, 10). Appointments of arbi- trators once made cannot be revoked, except on the written consent of the other companies (sec. 11). The arbitrators, before entering on the business of the reference, must appoint a duly qualified umpire ; and on their failure to do so for seven days, the Board of Trade, on application, will make the appointment (sees. 12, 13). On the death, supervening incapacity, or failure for seven days of the umpire to act, another must be named by the arbitrators ; and if they fail to do so for seven days, it will be done by the Board of Trade (sees. 14, 15). Substituted arbitrators and umpires have the same power as their predecessors (sec. 16). If within the agreed upon time, or otherwise if within thirty days, the arbitrators do not agree on their award, the reference devolves on the umpire (sec. 17). The arbitrators or umpire, as the case may be, are empowered to call for documents and to examine witnesses on oath ; and to grant diligence for the recovery of documents or evidence, and for citing of witnesses. If required, the Lord Ordinary will issue letters in supplement or other writs in support of the dihgence (sec. 600 STATUTORY ARBITRATIONS. [Book IV. 18). Unless otherwise arranged, the arbitrators or umpire may proceed in the business of the reference as they think fit ; and after giving due notice, even in absence of the parties or any of them (sees. 19, 20). Instead of a single decree-arbitral exhaustive of the reference, the arbitrators or umpire may make separate or con- secutive awards ; and in such a case, each award, so far as it goes, will be binding, even though the whole matters referred should not ultimately be determined (sec. 21). To render the award or awards valid, they must be duly signed and ready to be delivered within thirty days from the date of the reference, unless some other time has been specified. The umpire, however, unless the contrary has been arranged, may, by written prorogation, extend the period within which his award ought to be made (sees. 22, 23). Awards cannot be set aside for informality, but must be fully carried out ; and the superior courts of law and ec[uity throughout the United Kingdom are required to give every aid by distress infinite on the property of the companies or otherwise for this purpose (sees. 24, 25, 26). Unless otherwise agreed on by the parties, or determined in the award, the costs of the arbitration and award are borne equally ; and in other respects each company bears its own expenses (sees. 27, 28). 27 and 28 The provisions of the Act we have now been considering are incorporated in the Railway Construction Facilities Act, 1864 (schedule attached to the Act). 25 and 26 By the Companies Act of 1862, any company registered under its provisions may, by writing under their common seal, agree to refer, and may refer to arbitration in accordance with the Railway Companies Arbitration Act, any existing or future difference, ques- tion, or matter whatsoever in dispute between themselves and any other company or person ; and such companies as are parties to the reference may delegate to the referees power to settle any terms or to determine any matter capable of being settled or determined by the companies themselves, or by their directors or other managers (sees. 72, 73). ObserTations. It will be observed that by this last enactment the provisions of the Railway Companies Arbitration Act receive a much wider application than that originally contemplated. Previously they had been applicable to no other than companies or others working lines Chap. X.] STATUTORY ARBITEATIONS. 601 of railway on which steam power was employed ; whereas they are, since 1862, rendered available in all questions whatever arising between registered companies on the one hand, and companies or persons of every description on the other. It must be noticed, however, that the provisions of the Eailway Companies Arbitration Act, whether taken in their original or more extended sphere of operation, are in no case compulsatory. The Act is merely en- abling, and binds no one who has not consented to a reference under its provisions. [ 602 J CHAPTER XL EVIDENCE (a). General obser- Tations. Evidence of partnership. The kind of evidence admissible in questions between companies, their members, and the public, as well as its import and legal effect, must be ascertained by referring to the rules and principles of evi- dence as these are generally applicable. At the same time, it must be observed, that from the peculiarities of the partnership relation, the common principles and rules of evidence frequently require a special adaptation when it forms the subject to which they are ap- plied. Already in the course of this work we have, under the heads Evidence of Partnership (&), Prescription (c), Eeference to Oath (d), and Admissions (e), somewhat fully examined certain cases in which this special adaptation is exemplified ; and when treating of Bank- ruptcy, Dissolution, and Winding-up, we shall have occasion to return to the same subject. It has, however, been thought advisable to bring together within the compass of the present chapter some of the more important principles and rules which the characteristic incidents of the partnership relation bring into operation. Evidence of Fartnership. — Generally, the declarations or deposi- tions of the alleged partners of another cannot be used against the latter to establish that he is a partner (/) ; but they may some- times be admitted as part of the res gestce, their effect being left to the jury (g). A witness cannot be asked whether he believed that two or more persons were partners, but he may be asked as to facts showing that they were so (A). In an action by a railway com- (a) See Dickson on Evidence. (/) Belch, 1806, 2 Bell's Com. 399, (^) P- 64. n. 4 ; Smith v. Puller, 1820, 2 Mur. 342. (c) P. 279. (<,) Same case. {d) P. 529. (/i) Oiatto and Co. v. Pyper, 1827, (e) P. 532. 4 Mur. 354. Chap. XI.] EVIDENCE. ' 603 pany for payment of calls, the defenders objected that their name had been improperly entered on the company's books, and the authenticity of the registers was challenged. At the trial, two books, said to be registers, were tendered by the company in evi- dence, and admitted by the judge, though their admissibility was objected to because it had not yet been determined whether they wer% registers or not, and also because they were not kept and authenticated in terms of the Act. It was held on a bill of excep- tions, that though statutory registers were conclusive evidence, the fact of membership might be otherwise established, and that the books, such as they were, were evidence for the jury (a). Allega- tions of partnership are different from allegations of trust, and may therefore be proved prout d& jure. Thus, an allegation that money , deposited in bank in name of a person deceased, belonged to a partnership of which the defender and the deceased were partners, was held not to be an allegation of trust, so as to be restricted to proof by writ or oath (b). See, upon this subject generally, Book I. Chapter VIII. Where certain shares of a ship were registered in the name of a Shares in party individually, it was held incompetent to prove that they were the property of a company of which he was a partner (c) ; and when, from the certificate of registry, a party appeared to be the owner of a ship, it was held incompetent for him to adduce evidence to contradict the certificate, and show that he was not the real owner (d). Extent of Partner' s Share (e). — Entries in the company books Extent of have been held as conclusive evidence on this matter (/) ; but sharef"^^ private books kept by a partner, and which it was not proved had - been seen by the other partner, were not admitted as evidence against the representatives of the latter, in an accounting at the -instance of the executrix of the former (^). At the same time, a partner is presumed to be cognizant of the contents of the books (a) Caledonian and Dumbarton Ra. (d) Morton v. Black, 1843, 5 D. Co. V. Lockhart, 1854, 17 D. 25 ; but 411. see 17 D. 917. (c) See, as to this, p. 377 et seq. (b) General Assembly of Baptist (/) Blair v. Russell, 1828, 6 S. Churches v. Taylor, 1841, 8 D. 1030. 836, and 8 S. 72. (c) Ord V. Barton, 1846, 8 D. (g) Smith v. Logan, 1826, 5 S. 29 ; 1011. afe. 1830, 4 W. and S. 47. 604 EVIDENCE. [Book IV. kept as company books (a) ; and in an action inter socios, a valua- tion of the company stock by one of the partners was admitted (b). mletin V* Mrawfes of Meetings. — When the company is incorporated or formed under a statute, the prescribed rules contained in the instrument of incorporation, or in the general Acts to which it refers, niust be regarded as regulating the mode of authenticating such documents (c). The minutes of the meetings of provisional committees, or of promoters, are not the writ of any member who does not sign them (d). And the provisions of the Companies Clauses Act, 1845, as to the keeping of minutes by the directors, do not apply to the minutes of provisional directors before incorpo- ration (e\ Generally, it may be said that where the resolutions of a meeting have been reduced to writing, it is incompetent to ask a witness what they were (/). In an action on a contract, between provisional directors and road trustees, the Court refused to admit evidence by letters to modify the terms of the contract (g). But in a question as to the intimation of an assignation of shares alleged to have been made at a meeting of shareholders whose proceedings were recorded in a minute, the Court allowed part of the res gestce which were omitted in the minute, and denied to have taken place, to be proved parole (Ji) ; and in an action of damages for non-im- plement of a contract said to have been embodied in a minute of the directors, but not signed, it was held competent to exhibit to the company's secretary the draft of the minute prepared by him, and to ask him if it contained a correct account of the res gestce (i). Act 1845. By the Companies Clauses Consolidation Act of 1845, it is required that all minutes of meetings shall be entered in books kept for the purpose, and shall be signed by the chairman ; and when (a) Kenney v. Walker, 1836, 14 S. D. 893. Bee, as to tHs, p. 75, ' Pro- 803. meters.' (6) Ewing v. Crichton, 1827, 4 (e) Wilson v. Glasgow and S.-W. Mur. 184. Ra. Oo., 1851, 14 D. 1. (c) See Whitehaven and Furness (/) Ivison v. Edinburgh Silk Co., Ra. Co. V. Bain, 1850, 12 D. 829, aff. 1846, 9 D. 1089. See also last case. 1850, 7 Bell's App. 79 ; Great Northern (g) Thomson v. Monklands Ra. Co., Ra. Co. v. Inglis, 1851, 13 D. 1315, 1852, 2 Stu. 50. aff. 1862, 24 Jur. 484, 1 Macq. 112. (h) Hill v. Lindsay, 1847, 10 D. See Companies Clauses Act, sees. 10, 78. 11,101. (i) Wilson v. Glasgow and S.-W. (d) Johnston v. Scott, etc., 1860, 22 Ra. Co., 1851, 14 D. 1. t Chap. XI.] EVIDENCE. 605 this has been done, they are legal and conclusive evidence of what they contain until the contrary is proved (a). By the Companies Act of 1862, it is provided that minutes of all Act 1862. resolutions, and proceedings of general meetings, and of the direc- tors or managers, must be duly entered in books kept for the purpose. These minutes, if purporting to be signed by the chairm£&i of the meeting or of the next subsequent meeting, are evidence in legal proceedings. Until the contrary is proved, all general meetings, or meetings of officials of which minutes have been so made, are pre- sumed to have been duly held, and their resolutions to have been duly passed ; and all appoSitments of officials made at them, and all acts done by such officials, are valid, though some defect may after- wards be discovered in their appointments or qualifications {b). The minutes of unincorporated associations enjoy none of the Minutes of un- •^' . a ./ ,- incorporated privileges of those of corporate bodies. In a question inter socios, associations. it is probable that any rules as to authentication laid down in the instruments of formation will be held obligatory, so that when they have not been adhered to, shareholders will not be held bound. But the question is very different when it arises with the public, who, knowing nothing of such private rules, cannot be supposed to be bound by them (c). In a discussion on the relevancy and com- petency of an action by the directors of an unincorporated company, the pursuers were allowed to found upon and read in support of the action, the minutes of meetings, and reports made by them to their shareholders, though these were neither admitted nor proved (d). Company Boohs. — ^Evidence of the handwriting of the secretary company of a private company is not sufficient to authenticate the books ; °° ' they ought to be authenticated by the secretary's evidence (e). The mode in which the books of an incorporated association are to be authenticated is generally fixed by the incorporating instrument. Partners of private firms are presumed to be cognizant of the con- tents of the company books, and are accordingly bound by them (/). (a) 8 and 9 Vict. c. 17, s. 101. (d) West of Scotland Malleable Iron (h) 25 and 26 Vict. c. 89, s. 67. Co. v. Buchanan, 1855, 17 D. 461. (c) See Ivison v. Edin. Silk Co., See Dickson on Evidence, s. 1169. 1846, 9 D. 1039 ; Hill v. Lindsay, (e) Auclimutie v. Ferguson, 1817, 1 1847, 10 D. 78 ; Inglis v. Cunning- Mur. 205 and 208. ham, 1826, 2 Mur. 77 ; Mansjkld v. (/) Kenney v. Walker, 1836, 14 S. Maxwell, 1885, 13 S. 721. 803. 606 EVIDENCE. [Book IV. Questions of privilege. Excerpts. Entries in books kept by a bank agent for the bank have been held to be his writ, and good evidence against him in a question with a private creditor (a). An entry in a pagK^book duly initialed by the officers of a bank to the credit of a depositor who had a current account, is merely prima facie evidence against the bank, and may be rebutted by evidence pTOiii de jure (b). In an action for the price of goods sold, it was held that, after a proof and production of partial excerpts from the pursuer's books, it was incompetent to refer to these excerpts as establishing payment (c). A general order for inspection of the books of a mercantile company has been refused (d). In an action of damages for non-delivery of railway shares, it was held that, though the company were not parties to the action, the secretary was bound to exhibit to the commissioner the company books, so that he might judge whether they instructed the price or not, under reservation of any special objections to their inspection arising from the nature of the transaction, which the secretary might state (e). When a law-agent who had bound up the scrolls of all deeds prepared by him, though affecting different clients, in one volume, declined to deliver up this volume, but allowed excerpts to be taken by the commissioner, and brought the original scroll with him to the trial for collation with the excerpts, it was held that the excerpts might be put in evidence, and that it was not necessary to lodge the original scroll eight days before the trial (/). Excerpts from the books of a mercantile company, defenders in an action made under a commission and diligence, and duly authenticated, may be produced at a trial, and it is not necessary to produce the books themselves {g). But, on the other hand, it has been held that the register and minute-book of a railway com- pany must in an action for calls against a shareholder be produced eight days before the trial, and that excerpts produced before that time which were not certified were not sufficient (A). Even when (a) Anderson v. Wright, 1840, 15 F. 0. 1187. (6) Ehind v. Commercial Bank, 1860, 3 Macq. 643, 22 D. (H. of L.) 2, reversing 19 D. 519. (c) Ralston, Goodwin, and Co. v. M'Lean, 1857, 19 D. 878. {d) Houldsworth v. Walker, 1819, 2 Mur. 85. (e) Graliam v. Sprot, 1847, 9 D. 546. (/) Wilson V. Glas. and S.- W. Ra. Co., 1851, 14 D. 1. {g) Thorn v. North British Bank, 1850, 13 D. 134. (K) Whitehaven and Furness Ra. Co. V. Macfadyen, 1849, 11 D. 846 ; Carrick v. Saunders, 1850, 12 D. 922. Chap. XI.] EVIDENCE. 607 the excerpts had been made at the sight of a commission, they were held inadmissible, and not sufficient to entitle the company to make the books from which they had ^een taken evidence, their not having been produced in due time, and no notice having been given of their intended production (a). A book tendered in evidence at a trial, and proved to be the Competency of writ of the company by the evidence of their law-agent, who denoe. deponed that he received it from them, but knew nothing of its contents, was allowed to be used in evidence against them (b). The transfer book of a bank, which made special reference to the com- pany's contract of copartnery, was allowed to be put in evidence at a trial to prove the price of the bank stock at a certain date, though the contract referred to was not produced (c). In an action of damages for libel, brought against two parties, Confideu- one as publisher and the other as editor and proprietor of a news- paper, the latter denied his connection with the paper in any way. A witness objected to produce the books of the paper, alleging that he was sole proprietor, and that an examination of the books would disclose his private affairs. He was ordained, however, to produce them for inspection by the commissioner, that such excerpts as were necessary might be taken therefrom (d). In an action of damages against the directors of a bank, on the ground of fraud, when the bank had been amalgamated with another^ it was held that the manager was not entitled to withhold production of the books of the amalgamated banks, on the ground that it might prove injurious to the interests of the customers (e). Miscellaneous. — In an action by an individual against a company Miscellaneous for executing orders intended for the individual, it was held incom- petent to put in evidence a letter written by the defender ten years before, acknowledging a similar offence against a company of which the pursuer was then a partner (/). See a case where the judicial examination of partners was allowed before answer (g) ; and the (o) ' Ch-eat Northern Railway Co. (d) Cadell v. Paul, 1799, aff. 4 Pat. v. Inglis, 1850, 12 D. 1194 ; H. of App. 89. L. 1852, aff. 1 Macq. 112, 24 Jur. (e) Dobbie v. Johnston, etc., 1860, 434. 22 D. 1113. (6) Thorn V. North British Bank, (f) Dickson and Sons v. Dickson and 1850, 13 D. 134. Co., 1830, 5 Mur. 223. (c) Same case. (g) Wihonv. Beveridge,\S31,QS. 485. 608 EVIDENCE. [Book IV. cases .under noted as to oath of reference to managers and part- , ners (a) ; as to evidence as to powers of a. company's manager (6) ; as to delivery of deed of conveyance by the company to one of its partners (c) ; and as to whether a bill had been indorsed by a com- pany pe?" procw/'afionem (d). (a) Gow V. Macdcmald, 1827, 5. S. 445 ; Stewart and Co. v. Telfer And Co., 1821, 1 S. 103 ; Ridpatli v. Forth Marine Insurance Co., 1844, 6 D. 1438 ; MacNab Y. Lockliart and Hendry, 184:3, 5 D. 1014 ; Neil and Co. v. Campbell and Hopkirk, 1849, 11 D. 979 ; Ckl- land V. M-Lellan, 1851, 13 D. 504. (b) Chje and Co. v. Hallam, 1832, 10 S. 512, 12 S. 311, 1 S. and M'L. 753, 14 S. 199, 16 S. 950. (c) M'Creath v. Borland, 1860, 22 D. 1551. (rf) Davison v. Robertson, 1815, 3 Dow 218.