shares of 1001. each; and it was stated that an actual capital of 650,000l. would probably be required. On the 8th of April 1846, a general meeting of the shareholders was held, at which a resolution was passed, "That such sum, not exceeding 500,000l. as the court of assistants shall think fit, be raised by the issue of preference shares of 251. each in the stock of the company, the holders of such shares to be entitled for each half year to such preferential dividend as may be agreed on by the court of assistants (not exceeding the rate of 37s. 6d. per annum on each share paid up in full) before the payment of any dividend for the same half year to the other shareholders, but not to be entitled for any half year to a dividend beyond the preferential dividend, unless or until a dividend to the like amount shall have been paid for the same half year to the other shareholders; after which the holders of the preference shares and the other shareholders shall take rateably any excess of dividends which may be declared. That a condition shall be annexed to such preference shares, that it shall be lawful for the company, at any time after the expiration of a term not exceeding ten years, to require the surrender of such shares on payment of such sum, not exceeding 30l. per share, as may be agreed upon by the court of assistants on the issue of the share. That the court of assistants be authorized to take such means for confirming and giving effect to the issue of such shares, by a deed to be executed by the shareholders, by application to parliament or otherwise, as they may be advised. That for the purpose of carrying on the affairs of the company pending the issue of the preference shares, the court of assistants shall have power from time to time to borrow on mortgage of all or any of the hereditaments and property of the company, such sum and sums of money as they shall from time to time deem necessary for the carrying on the business of the company, and that the common seal of the company may and shall be affixed to such assurances or documents as may be required for that purpose." The court of assistants came to certain resolutions in order to carry the plan into effect, which resolutions were confirmed by an extraordinary general meeting of the shareholders, held in June 1846, and in pursuance thereof 16,000 preferential shares of 251. each were issued, and a sum of 400,000l. was raised thereby. Of these shares the plaintiff took 200, on which he paid the deposit and all the calls, and for which he received scrip certificates. The bill alleged that the title of the plaintiff to these shares was completed upon his receiving the scrip certificates, and that there never was any general registry of the shareholders or corporators, but that all the persons who had been registered as such shareholders or corporators had been so registered at their own instance, and on their own application only; and that such persons constituted a very small minority of such shareholders or corporators. Another special general meeting of the shareholders was held on the 13th of October 1847, at which it was stated that the court of assistants had made an arrangement with the Bank of England, who had agreed to advance them 270,000l. upon the security of the property of the company in Wales. 150,000l. was to be applied in payment of a debt which they had already contracted with the Bank, and the remainder was to be paid by the Bank to the company; and a resolution was passed confirming this arrangement, and immediately afterwards the common seal of the company was duly affixed to an indenture already prepared, being an indenture of mortgage of the mining property of the mining company in Wales to the Bank of England to secure a sum of 270,000l. Two of the directors of the Bank of England were then members of the court of assistants of the mining company. Since that time the plaintiff had been duly registered as the holder of his preference shares, and also of some original shares. Several of the preferential shares or scrip which entitled the holders thereof to such shares, had been commuted at par for debentures or loan notes under the seal of the company, payable at the expiration of ten years, and bearing interest in the mean time at 51. per cent. In December 1847, the plaintiff sent a letter to the court of assistants, protesting against the payment of any interest to the holders of debentures or loan notes created by the conversion of preferential shares or scrip. At another meeting of the shareholders, held on the 11th of February 1848, a resolution was passed to the following effect :"That the court of assistants be authorized to affix the common seal of the corporation to a deed to be prepared under the advice of the company's solicitors, vesting the property of the company in trustees, with power of sale of all or any part of the property from time to time for the liquidation of debts, and to protect the interests of all concerned." The bill insisted, that by the constitution of the co-partnership there was no power for any one or any number of the shareholders or corporators at large to call a general meeting of proprietors, but that such power resided wholly in the court of assistants; and that the said court refused to call any meeting for the purpose of taking into consideration the matters therein before mentioned, or any of them, and the plaintiff was wholly ignorant of the names and places of abode of the great majority of the shareholders or corporators, and the defendants refused to discover who such shareholders or corporators were, and where they resided respectively. nership beyond the sum of 650,000%. mentioned in the prospectuses; but that the court had, in excess of their authority in that behalf, increased such stock to a very great extent; that the plaintiff did not know any person, except the Bank of England, who was in possession of any security of the company, or who could claim against the company in respect of any monies borrowed or raised by the court of assistants, in excess of the sum which such court had authority to raise as lastly thereinbefore charged, and that the defendants ought to set forth who all such persons were; but the plaintiff charged that there was no such person who was not a defendant, though the plaintiff did not know which of the defendants were such persons; that the resolutions passed at the general meeting in April 1846 gave the court of assistants authority to raise no more money than the sum of 500,000l., and by no other method than the issue of the preferential shares, and that the plaintiff and the other preferential shareholders accepted such preferential shares on the faith and understand not exceed the sum of 500,000l., and that all such preferential shareholders would continue alike on the footing of shareholders or corporators of the co-partnership; but that the court had raised a large sum of money in excess of their last-mentioned authority. The bill charged that the court of assis-ing that the amount raiseable thereby would tants had issued, at a heavy discount, to the defendants constituting the court, and also to the four other defendants, divers loan notes or promissory notes, sealed with the common seal of and purporting respectively to be promises by the Governor and Company of Copper Miners in England to pay the monies therein mentioned, and that the court had represented and treated such loan notes or promissory notes as negotiable instruments, and as transferable by delivery only, and that some of such notes had been transferred to and were then holden by the Bank of England, which claimed to be the owner thereof, and the residue of such notes were then holden respectively by those of the defendants to whom the same were issued respectively, and who claimed to be the respective owners of the same. The bill then charged that the court had no authority to issue such loan notes or promissory notes, but that the same were unlawful in their creation, and were invalid, and ought to be delivered up to be cancelled: that the court of assistants had no authority (excepting such authority as was conferred by the meeting of April 1846) to increase the capital stock of the co-part The bill further charged that the court of assistants had no power or authority whatever, and that the company had no power or authority whatever without the consent and sanction of every individual shareholder or corporator, to convert any of the preferential shares or any of the scrip certificates into debentures or promissory or loan notes of the Governor and Company of Copper Miners in England, or to mortgage or charge their property; and that the consent of the meeting of the 13th of October 1847 to the arrangement with the Bank of England was obtained under the circumstances of concealment and coercion set forth in the bill. The bill also charged that the defendants had full notice of the several charters; and that the court of assistants were the officers of the company, and trustees for the plaintiff and the other shareholders and corporators; and that the court were acting contrary to their duty, and in derogation of the rights of the plaintiff and the shareholders or corporators in the premises; and that it was the duty of the Bank of England, and all such other persons as lastly aforesaid to ascertain the extent of the powers and authorities of the court of assistants. The bill prayed for an account of all monies raised or borrowed by the court of assistants, purporting to be for the use of the company, and that what should be found to have been due from the company to the Bank of England, but which was previously to the meeting of October 1847 payable at some future time, might be declared to be payable at such future time; and that every loan note, promissory note, and debenture holden by any of the defendants, and issued without due authority, might be delivered up to be cancelled, and that the court of assistants might be decreed to make good to the plaintiff and the other shareholders all losses occasioned by the breaches of trust committed by the court of assistants; and that it might be declared that the mortgage to the Bank of England was improperly obtained, and that it might be delivered up to be cancelled; or if it was a good security for 120,000l., then that it should stand as a security for that amount only. The company and the court of assistants demurred separately to this bill for want of equity; and the Vice Chancellor Knight Bruce overruled the demurrers, expressing himself in the following terms: - I have read the bill in this cause, which, as it stands, does not appear to be defective in point of parties. I think that a case for equitable relief is made, and that part at least of the relief prayed is proper on the facts alleged and charged. The resolution of the 11th of February only may be thought enough of itself to support the bill, which contains however, as I conceive, much more to support it. In overruling both demurrers, I do not intend to contravene, nor do I think I contravene any decided case of which I am aware. I think the corporation plainly the proper defendants; and enough appears to me stated and charged to warrant the junction of the other demurring parties as defendants. The company appealed from this decision. Mr. Bethell and Mr. Willcock appeared in support of the demurrer, and contended that the injury which was complained of affected the company, and was not a personal injury to the shareholders in any manner except as members of the company, and therefore the company alone, as a general rule, could institute such a suit, and there were no special circumstances to take this case out of the general ruleFoss v. Harbottle(1), The Attorney General v. Wilson (2), Mozley v. Alston (3). The proprietors had power to convene a meeting, and to come to a resolution that such a suit as this was expedient, but no such step had been taken-The Exeter and Crediton Railway Company v. Buller (4). In the next place, the transactions which were complained of, took place before the plaintiff became a registered proprietor, and therefore he had not sustained any injury and, lastly, that the bill did not shew that any injury had arisen, or was very likely to arise, to the company from any of the acts which were mentioned; but a variety of transactions was stated by which loss might or might not be occasioned. Hichens v. Congreve (5), Adley v. the Whitstable Company (6), Ward v. the Society of Attornies (7), Blakemore v. the Glamorganshire Canal Navigation (8), were also cited. Mr. J. Russell, Mr. Rolt, and Mr. Hobhouse, contrà, insisted that there was no rule that a shareholder could not in any case file a bill as plaintiff to complain of an injury done to a corporation, and that the special circumstances of this case were sufficient to sustain such a bill. The managers of the company had shewn a determination to do certain acts which were beyond the powers conferred upon them by their charter, and by which the shareholders would sustain almost certain loss. They had exchanged certain 53. (1) 2 Hare, 461, 497. (2) Cr. & Ph. 1; s. c. 10 Law J. Rep. (N.s.) Chanc. (3) 1 Ph. 790; s. c. 16 Law J. Rep. (N.S.) Chanc. 217. (4) 16 Law J. Rep. (N.s.) Chanc. 449. (5) 4 Russ. 562; s.c. 6 Law J. Rep. Chanc. 167. (6) 17 Ves. 315; s. c. 19 Ves. 304; 1 Mer. 107. (7) 1 Coll. C.C. 370. (8) 1 Myl. & K. 154; s.c. 2 Law J. Rep. (N.S.) Chanc. 95. shares for debentures, thereby increasing the amount of their debts, and giving the holders of those debentures an unfair preference over the other shareholders; they had issued loan notes and debentures, which they were not empowered to do; and the borrowing of money from the Bank of England, which was aware of the powers of the mining company, and the steps taken to secure its repayment, were all ultra vires. The resolution also to vest their property in trustees was one which would sustain the bill. All these transactions inflicted a common injury upon the general body of shareholders, and therefore the plaintiff was entitled to file this bill on their behalf. Ware v. the Grand Junction Waterworks Company, 2 Russ. & M. 470; s. c. Mr. Bethell replied. -- Dec. 5. The LORD CHANCELLOR. This is one of those experiments which are now frequently made to bring the various questions arising out of the transactions of join t-stock companies within the jurisdiction of this Court. I have had occasion before to observe upon the duty of the Court to adapt its practice to the varying wants of the public; but I am not insensible to the dan ger of carrying this principle too far, and assuming a jurisdiction which this Court may not have the means of exercising, so as to promote the object of the suitors. There is great difficulty in drawing the line. Cases of this kind are therefore attended with great difficulty; and I have in this instance to regret that in executing the duty of reviewing the decision of the Vice Chancellor Knight Bruce, I have not the benefit of being informed of the grounds on which it was founded; his Honour having merely stated that in his opinion there was no defect for want of parties, and that there was at least some grounds for the relief prayed, and that the resolution of the 11th of February only might be thought enough to support the bill. I postponed my judgment, not on account of any difficulty I felt in this particular case, but because I thought it important, so far as possible, to act in conformity with some recent cases, and to expound the principles on which the course of practice of this Court ought, in my opinion, to be founded. The object of the bill is, first, an investigation and correction of an alleged arrangement with the Bank of England, confirmed at a special general meeting of the shareholders or copartners, on the 13th of October 1847, and to set aside or reduce the mortgage made to the Bank by the company in pursuance of an arrangement; secondly, for the purpose of restraining the company from carrying into effect a resolution passed at a special general meeting on the 11th of February 1848, for vesting the property of the company in trustees for the purpose of sale, for the liquidation of debts, and to protect the interest of all concerned, and to prevent the payment of any debenture note or debt to any of the defendants, which may appear not to be a proper debt of the company; and for that purpose, as it would appear, to take an account of and investigate all sums raised by the company. It will be found that all the acts complained of are acts of the whole corporation, and that each is authorized by the powers of the company specially given, if that be necessary, by the charter of 1691, as set out in the bill. The court of assistants are made the governing body: meetings of the shareholders are to be held for the purpose of election, and are to be consulted respecting the affairs of the company: power was given to hold lands to the amount of 6,000l. a-year, and goods and chattels to any amount; and to make and raise a joint fund of any value, and the same to order, manage, carry on, and receive the benefits derived, to the use of them, the company, according to such shares and proportions as they or any of them had or should have therein, and the same joint-stock to augment and increase, or reduce or diminish from time to time as the company should find most fitting and convenient. The bill alleges various schemes for increasing the capital of the company. A resolution was unanimously adopted at a general meeting on the 8th of April and the 10th of June 1846 for that purpose, authorizing the issue of preferential shares, and the borrowing of money on the property of the company. The bill alleges that the plaintiff in July 1846 obtained scrip certificates for 400 preferential shares, but which were not registered till after the 13th of October 1847, with knowledge, it must be assumed, of the resolution of the 8th of April, and of all the preceding transactions, and particularly the resolution of the 8th of April 1846, under the authority of which the preferential shares were issued, and by which they were made redeemable by the company, after the expiration of ten years, on the payment of not more than 30%. a share. The bill then states the meeting of the 13th of October 1847, at which the arrangement with the Bank of England for a mortgage of 270,000l. was unanimously agreed to. The bill then alleges that, upon the purchase of preferential shares, the plaintiff became and now is entitled to certain original shares; and thus alleging himself to be entitled to both descriptions of shares, and filing his bill on behalf of himself and all other the shareholders or corporators of the company, he assumes a unity of interest in all such shareholders in the object of his suit. The only other matter necessary to be observed on is the complaint made of the resolution of the 11th of February 1848, authorizing the vesting of the property of the corporation in trustees for the purpose of paying its debts. This is the allegation which the Vice Chancellor Knight Bruce is reported to have said was of itself sufficient to support the bill. But I have not been informed whether this was supposed to be an excess of authority, or an improper use of it. I cannot consider it is either. The bill indeed contains various charges of improper issuing of notes, debentures, and other securities by the defendants, but the allegation is much too general to be of any avail and although such securities are alleged to have been issued at a heavy discount, I do not find any allegation that such securities were worth more. The principal ground of complaint is the alleged conversion of preferential shares into debentures, and issuing debentures on account of preferential shares. No particular case is stated amounting to a fraudulent benefit conferred upon any individual by such means; but the objection is made to the system adopted. If this was fairly done, it does not appear what objection can be made to it. It can only be done with the concurrence of the holders of the preferential shares; and if the debentures given are not of more value than the shares, no injury is done. There is no charge that they are so. If the other preferential shareholders shall allege that they are injured by the creating of debts that come in before them, in lieu of the preferential shares that come in with them, the original shareholders cannot join in any such case. The creditors and preferential shareholders have a priority to them and yet the plaintiff makes this complaint on behalf of both sets of shareholders. This objection would be fatal to the bill in its present form. This is not, however, the point on which I decide this case. I find all the complaint made by the individual shareholders to consist of acts within the powers of the corporation, and all sanctioned by the general meeting of the shareholders; and no allegation raising any case for the interference of the court of equity with the exercise of such rights. If a court of equity were to assume jurisdiction in such a case, would it do so without opening its doors to all parties interested in corporations or jointstock companies, or private partnerships, who, although a small minority of the body to which they belong, may wish to interfere in the conduct of the majority? This cannot be done, and the attempt to introduce such a remedy ought to be checked for the benefit of the community. In Foss v. Harbottle Sir James Wigram acted on this principle, because the acts were capable of confirmation, and in Mozley v. Alston I expressed my strong approbation of Sir James Wigram's decision in that case. Here the acts have been actually confirmed, and are therefore the acts of the whole body. There is no case that calls upon this Court to entertain such a suit, and the evils of doing so, I think, would be very serious. I therefore think the demurrers must be allowed. |