The directors in their half-yearly report to the shareholders on the 2nd of June 1848, stated, that the branch to Harwich had been contracted for; that part of the materials were already on the ground; that the line would be immediately under construction; and that the amount remaining to be paid on calls and borrowed on debentures, together with other available assets of the company, made up the sum of 898,000l., applicable to the liquidation of outstanding claims for works executed before the calls had become due, and for the opening of the lines from Norwich and to Harwich. The plaintiff having ascertained, in December 1848, from the solicitor of a landowner, on whose property more than half the railway from Manningtree to Harwich was to be constructed, that the company had indefinitely postponed all negotiations for land, wrote to the chairman upon the subject, and received from him the following reply : "Dec. 21, 1848. "My dear Sir, I assure you, that you quite mistake me if you suppose I do not think your letters of sufficient importance to demand my immediate attention, for the subject of them has my most anxious consideration. But non omnia possumus omnes, and the circumstances which have occurred to delay our proceeding with the Harwich line as I wished to have done, no one living could have foreseen. I quite acquit you of writing with any other than friendly feelings in what you say with reference to our subscribers' just expectations; but even they will think it our first duty to secure them a remunerative return for their investment, without reference to any particular line. With respect to any alleged misapplication of funds to which you refer, I am sure you will admit that any complaints should rather be addressed to the board collectively (either through me as chairman or otherwise) than to me individually. I have now a notice from one of a body which I have to combat, that no. money be laid out on the Harwich line, or on any other line until the Norwich is opened. I hope, however, that the agreement with your company is in progress, and will shortly be perfected. Under the circumstances which have occurred in other "John Chevallier Cobbold." The plaintiff thereupon filed the present bill, stating the above facts, and alleging, inter alia, that the sums of 200,000l. and 100,000l. were by the acts authorizing the same to be raised, directed to be considered as part of the general capital of the company, for the purpose of entitling the holders to attend meetings and exercise the rights of shareholders, but not for the purpose of making the same liable to the general purposes of the company. It also alleged that the remainder then unexpired of the three years for making the line from Manningtree to Harwich was not more than sufficient for the completion of it, and the company was not entitled to any extension of time, under the powers of the general act of parliament in that behalf (7); that the directors had determined to misapply, and had already misapplied, a great part of the money raised under the first two acts of 1847, by employing it in the construction of an extension line to Norwich, and for other purposes not authorized by those acts; that the directors had personally large interest in the completion of the Norwich extension line; and that they and the company had done nothing with reference to the construction of the line from Manningtree to Harwich, except marking out the centre of the line with pegs, sending a small quantity of rails to Harwich, and fencing off the course of the projected line across two or three fields near Manningtree; for which land so fenced off they had compensated the owner by giving him a promissory note for 2501., payable two years after date, with interest at 5l. per cent. per annum. The bill prayed that the resolution of the meeting on the 21st of August 1847 might be declared valid and binding on the company and directors, as a contract between them (7) 11 Vict. c. 3, "An Act to give further Time for inaking certain Railways." and the proprietors of the scrip certificates, and 61. per cent. perpetual stock, as to the application of such new capital; that an account might be taken of the money received under the Eastern Union and Harwich Railway and Pier Act 1847, and the Eastern Union and Hadleigh Junction Railway Sale Act 1847; that the application of any such money to other than the purposes specified in those acts might be declared a breach of trust; that the directors might be decreed personally to replace to the credit of the company any money which had been so misapplied; and that they and the company might be restrained by injunction from further misapplica tion. To this bill the company and the directors demurred, on the grounds of want of equity;-no right of suit; the interest of the plaintiff and those on behalf of whom he sued being only affected in matters which the corporation of the Eastern Union Railway Company, of which he and they were members, had power to approve of and confirm, and it not appearing that the corporation had not approved of and confirmed such matters;-inconsistency of relief; the rights and liabilities of the plaintiff as a registered shareholder being conflicting with his rights and liabilities as a proprietor of scrip certificates ;-and want of parties; the original proprietor of the scrip certificates, or the person from whom the plaintiff had purchased them, not having been made parties to the bill. Mr. Wood and Mr. W. T. S. Daniel supported the demurrers, and argued that the plaintiff had not shewn a case of abandonment of the Harwich line, but merely of postponement of it to the formation of the Norwich Extension: that the directors had not exceeded their authority, as the proposed application of the capital was within the scope of their powers, the purpose of the Harwich Act not being specific, but only one of other purposes committed to the company. The equity which the plaintiff claimed arose from that act, and if not found there he must resort to the resolution of the 21st of August 1847; but he was not then a proprietor, and the resolution was not a contract with the public. Hence it became important to observe the terms of the scrip certificate, for that only could form a contract between the plaintiff and the company. The present case was analogous to that of Garrard v. Lord Dinorben (8). Assuming that the directors had power to apply the capital as they intended, the shareholders might meet at any time and sanction their proceedings; and therefore the bill was demurrable-Foss v. Harbottle (9), The Attorney General v. Wilson (10), Mozley v. Alston (11), Lord v. the Copper Miners' Company (12). In the cases of Colman v. the Eastern Counties Railway Company (13) and Yetts v. the Norfolk Railway Company (14) there was a clear excess of authority on the part of the directors. It did not appear on the bill that the company had not approved of the proposed application of the new capital. In the next place, the plaintiff sued as holder, and on behalf of other holders, of registered and unregistered scrip certificates. The interests of those two classes were hostile; and the plaintiff who united both, could not marshal one interest or body or class against the other. Lastly, the person from whom the plaintiff purchased the scrip was a necessary party to the bill-Walburn v. Ingilby (15); because scrip was merely a chose in action not transferable or assignable at law. The Solicitor General and Mr. Grove, for the plaintiff, contended that the directors had no power to make the contemplated application of the new capital; and that if they had, they had entered into a contract with other parties not shareholders, which would prevent such an act. The cases of Foss v. Harbottle, Mozley v. Alston, and the other cases which had been decided on the same principle, were not applicable to the present case. The plaintiff and those on whose behalf he sued were, or were entitled to be, shareholders in certain preference stock; but they had nothing to do with the company. They were not within the provisions of the Joint-Stock Companies Winding-up Act 1848 (16), nor liable for the debts of the company; nor able to investigate its accounts or interfere with the conduct of its officers. Scripholders had an inchoate interest which might become perfected by registering, and then they would also become shareholders in stock; but neither class became shareholders in the company. The plaintiff, however, rested his case upon the contract and the inability of the company to divert the capital from the purpose for which it was originally intended. The principles decided in Natusch v. Irving (17) were precisely analogous to the present The assignor of the scrip was not a necessary party, as the certificate said that the holder was to be the person to claim, and the secretary had recognized the plaintiff as the holder. The following cases were also cited case. Preston v. the Grand Collier Dock Company, 11 Sim. 327; s. c. nom. Preston v. Guyon, 10 Law J. Rep. (N.S.) Chanc. 73. Gray v. Chaplin, 2 Sim. & S. 267; s. c. 3 Law J. Rep. Chanc. 161. Cunliff v. Manchester and Bolton Canal Company, 2 Russ. & M. 480, n. Ware v. Grand Junction Waterworks Company, Ibid. 470; s. c. 9 Law J. Rep. Chanc. 169. Taylor v. Salmon, 4 Myl. & Cr. 134. Tyrrell v. Woolley, 1 Man. & Gr. 809; s. c. 2 Scott (N.s.) 171, and 10 Law J. Rep. (N.s.) C.P. 5. Chapple v. Cadell, Jac. 537. Smith v. Goldsworthy, 4 Q.B. Rep. 430; s. c. 12 Law J. Rep. (N.s.) Q.B. 192; and 3 G. & D. 448. Blakemore v. Glamorganshire Canal Company, 1 Myl. & K. 154; s. c. 2 Law J. Rep. (N.S.) Chanc. 95. Mr. Wood, in reply, said that the whole question was, whether the directors had or had not the controul of the general capital. He admitted that the Hadleigh Junction Railway Sale Act contained no clause making the 100,000l. thereby authorized to be raised part of the general capital; but contended that such might be inferred from the 7th clause of the act. If the whole capital was left to the management of the company, the latter would be compellable by mandamus to apply it properly. He referred to The Queen v. the Eastern Counties Rail- Midland Great Western Railway Com- Knight v. Barber, 4 Railw. Cas. 674; s. c. 16 Mee. & W. 66; 16 Law J. Rep. (N.s.) Exch. 18. March 28.-WIGRAM, V.C., after recapitulating the facts, and stating, that for the purposes of the demurrers, they must be assumed to be true, thus proceeded :Now, before noticing some of the objections which have been taken to the frame of this bill, I shall consider the general point of law which the demurrers raise. I give no opinion upon the right of the company to apply any portion of their general assets, including as part of their general assets the money raised under the powers of the Harwich Act, to the construction of the Norwich line. Those monies are declared to be part of the general assets of the company, and the works to be done under the Harwich Act are part of the general undertaking of the Eastern Union Railway Company. The legislature may have thought it right that the application of the general capital on the one side, and the construction of their general works on the other side, should be left to the unfettered discretion of the company; leaving it to the directors, in the first instance, and to a general meeting of the shareholders in the second, to determine in what manner and order the works should be done, and the general capital applied, as in the case of a private partnership; but the legislature may also have thought it right that the capital raised for a specific purpose should not be applied to any other purpose; and, if such a state of things existed as to any of the capital to be raised under any of the acts I have mentioned, the application of capital so appropriated to any other than the specified purpose must be unlawful. This appears to me to be very clearly the case with respect to the 100,000l. raised under the Hadleigh Act as purchased by the company; and as it is sufficient upon general demurrer for the plaintiff to shew that his complaint is to any extent right, I think the plaintiff in this case has shewn that the directors have misapplied, and are about to misapply the 100,000l. Assuming this to be the case, it will follow that no majority of the shareholders, however large, could sanction the act; a single dissenting voice would frustrate the wishes of the majority; and indeed in strictness unanimity itself would not make the act lawful. This appears to me to take it out of the case of Foss v. Harbottle, which does not I apprehend on this point carry it further than this that if the act (being the act of the directors only) be one which a general meeting of the company could sanction, the Court will not allow a bill to be filed by some of the shareholders on behalf of themselves and others to impeach that act; because a general meeting of the company might immediately have made that, of which the bill complains, lawful within the powers of the act of parliament. Upon the merits, therefore, I think the demurrers must be overruled. Some objections to the frame of the bill were taken, which require much consideration. It was not, I think, argued by the defendants that the proprietors and holders of scrip certificates in the perpetual stock had not such an interest in the application of the capital of the company as was necessary to enable them to sustain a bill properly framed to prevent a misapplication of it. It could not be so argued, clearly because there was an inchoate right to become general share holders. Nor was it argued that the proprietors of registered certificates had not a similar interest; but it was said that the interests of the proprietors and holders of scrip certificates and the interests of the proprietors of registered certificates conflicted with each other, and that as the plaintiff sued on behalf of both classes, the bill could not be sustained. I cannot take that view of the case. The holder of scrip has an inchoate right to become a registered holder of the perpetual stock, and it is the interest of both classes in that stock which entitles them to sue, and if the scripholder have performed his conditions up to the time of filing the bill, there is no such conflict as the argument suggested. suming this to be the case, and assuming as true the charges in the bill with reference to the number of persons who are proprietors or holders of scrip, and who are proprietors of registered certificates, and that one at least of the acts complained of is altogether illegal, I think the case is one in which one person interested in the registered stock may sue on behalf of himself and others by a bill properly framed for the purpose. As This Another objection, taken on the part of the company, was, that it ought not to be a party to the suit. That applies to the demurrer of the company. objection I have no hesitation in overruling. The acts of which the bill complains were the acts of the directors, as the representatives of the company, and as such were the acts of the company itself. The object of this suit (amongst other things) is to restrain the company from doing the acts complained of; and the company would not be bound in this suit unless it were properly a party to it in its corporate character. The frame of the suit is admitted by this Court as the only means of binding the company in a case in which a question arises between some of its own members whether that which the company is about to do or has done is or is not a lawful act. In truth, the only regular way of suing the company is as a corporation. In a case where a dispute arises, and members of the company want to sue it, the Court dissolves the company into its integral parts, and allows some of its members to sue the others; but still it is the company against whom the question is raised. I do not think there is any doubt or question upon that in any of the cases. The last objection I need notice is this. The plaintiff was a purchaser of scrip shares, and the objection was that the vendors of the plaintiff's unregistered shares in the perpetual stock of the company are not parties to the suit. To this objection I was at one time disposed to yield; but looking at the language of the resolution of the 21st of August 1847, the form of the certificate entitling the original holder of the scrip and his assignee to the benefit of the right the certificate confers, and looking also at the recognition of the plaintiff's rights by the company and the acceptance of the payment of his calls, I think the plaintiff can sustain his bill without making the vendor of the scrip a party. It is perfectly true that the contract was, in the first instance, a contract between the company and the original subscriber; but that contract gave the latter a right to be discharged on transferring his scrip, with its liabilities, to another. The plaintiff became the purchaser of it, and is now, upon the allegation in the bill, the lawful holder of it. He, therefore, became entitled, on the 1st of January 1849 (performing the conditions of the certificate), to become a registered shareholder; and the company, being bound by the contract with the original scripholder, to discharge him from his liability in favour of his assignee, and having, by its recognition of the plaintiff's right, accepted him, has given him a right that, as between themselves and the company and upon the allegations in the bill, has, in my opinion, discharged the original scripholder from liability. In all these cases it is much too broad a proposition to say that a debt cannot be transferred at law. A debt or a liability may be transferred in point of fact where there are three persons dealing, as these parties did. If A. owes B. a certain sum of money, and B. owes C. and C. owes A, these three persons meeting and agreeing that they shall settle their account one between the other, and that the one who owes the most shall pay the difference to the one who is entitled to receive it, that payment would in law completely discharge the other, and be a transfer of the debt. In the present case a contract is made between a company and the original scripholder, and the subscriber stipulates that if it shall be transferred, he shall be discharged from his liability and the company shall accept the holder. This is the form of these instruments. Well, a transfer takes place, the holder of the scrip goes to the company, and the latter then acknowledges his right to it, accepts his payment of the calls, and promises to register his shares, or, at least, undertake to do so. Then, again, treating him as a scripholder, I think the other proposition is much too broad, that in none of these cases can you avoid the necessity of making the original holder a party. You may do it where there has been that sort of circuitous dealing between the three, and where the transaction has been completed by a recognition on the part of the company of the right of the original scripholder to assign his scrip and discharge himself from liability. I think, therefore, the demurrers must be overruled. There is one fact I have omitted to mention, which I cannot help thinking is deserving of attention, on the subject of parties only. The bill was filed in December and the demurrers were not filed until February, when the plaintiff, as a scripholder, had actually become entitled to have his shares registered in the books of the company. In the state of a case where a bill is filed in which time alone would operate a change in the rights of the parties, it may be a question on the subject of parties. I do not know that the fact of the bill having been amended makes the plaintiff's case stronger in this respect. If it were amended after the 1st of January 1849, he ought to have stated in the amendment that he was a registered shareholder. I take it that he was not registered. However, I think there is enough without it. Demurrers overruled. |