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The inducement held out to the shareholder to lend to the Company was to relieve him of his shares, and with them of his liabilities. By such an arrangement the Company got the benefit of his shares at a reduction of 25l. per cent. below their original value, got an advance of an equal sum of money in hard cash, and obtained no less accommodation than five years' time to pay off the debt. In the then condition of the Company's affairs this might have been for them a very advantageous bargain, and might easily have been stated in the requisition and circular in such terms as to be perfectly intelligible to the proprietors. I find, however, no such statement; and, therefore, I cannot say that, in my opinion, the terms of the deed have been complied with. It may also be observed, that the minutes of that meeting do not appear to have been signed by the chairman-at least, no such minutes have been found. I do not lay much stress upon this, because, being a document that ought to be in the possession of the official manager, its non-production ought not to be conclusive against the parties who contend that this meeting was in all respects regular. It cannot, however, be contended, that, under clause 57, the minutes in this case "are conclusive evidence that the proceedings were regular, and binding upon the proprietors." I have hitherto considered this resolution on the interpretation to be put upon the clauses of the deed as regards the regularity of the general meeting which passed it; and upon this part of the case alone there is quite enough to bring me to the conclusion that the resolution, and all that was done under it, is invalid. But further, I do not think any general meeting, ordinary or extraordinary, had power to enable the directors to purchase without limit the shares of the proprietors. The powers to be given to them by such meeting are sufficiently defined by clause 57. They might increase to any amount the capital of the Company, either by creating new shares, or by any other means they

1849.

In re
THE VALE OF
NEATH AND
SOUTH WALES
BREWERY CO.

MORGAN'S

CASE.

1849.

In re

THE VALE OF

NEATH AND

SOUTH WALES

BREWERY Co.

MORGAN'S
CASE.

might think advisable; they might make, alter, or repeal laws and regulations for carrying on the business of the brewery; they might altogether dissolve the Company; but no powers could be conferred on them by any general meeting to swamp the Company by extinguishing any portion of the shares, and to that extent relieving the holders from all future liabities, while to the same extent they increased the liabilities of all the remaining shareholders. The power of buying shares was expressly limited by the deed, and could not exceed the assumed surplus capital of 10,000l. If that capital never had an existence, the directors had no funds which they could properly apply to the purchase of the shares, with the exception stated in the deed, and expressly provided for-such, for instance, as a purchase from a husband of a female proprietor. But the deed gives no general power to purchase shares; and, looking at it in all its bearings, I do not think it provides any means whatever by which the directors could be empowered to purchase, except in the manner I have already pointed out. Some argument was urged, on the ground that the proprietors had acquiesced in these purchases, and could not now impeach them, particularly as the Company had had the benefit of the shareholder's money, and had made no offer to pay him back, so as to place him where he was before the sale and transfer. In the case of a joint-stock company composed of innumerable partners, wherein the deed of settlement is clear and intelligible, I feel bound to follow it. It is the only security the proprietors have. Unlike small partnerships, where each member is as much a manager and conductor of the business as his co-partners, the members of a joint-stock company entrust all the conduct of the concern to their directors, who are bound to manage according to the precise provisions of the deed. If they depart from them, any proprietor has a right to object, and, claiming the protection of his deed, to treat the irregular act as a nullity. So far as any of the

sales under the resolution of April, 1844, have been bonâ fide on the part of the vendors, their case may be perhaps one of hardship, as they must now contribute to the liabilities, and can only come in to prove on their loan notes; but they must be taken to have known the provisions of their own deed, and ought not to have sold their shares to parties who were not qualified to purchase them. Indeed, it has been stated to me, that not more than twelve or fourteen proprietors sold under the resolution of April, 1844; from which I conclude that the great bulk of the shareholders looked upon the resolution as a nullity, and preferred keeping their shares and remaining proprietors, although the Company, by the very terms of the requisition, was by no means in a prosperous state. For the reasons, then, that I have here stated, I shall place upon the list of contributories, without qualification, all persons who have sold their shares to the directors of the Company, unless such sales have been authorised by the provisions of the deed of settlement.

Mr. Bacon, Mr. G. L. Russell, and Mr. Toller, for the motion. It is not necessary to discuss whether the rules contained in the deed of settlement authorised the purchase or not, because the shareholders at the meeting clearly sanctioned it. Sufficient notice was given of the purpose for which that meeting was called, and any shareholder might have attended it. The resolutions were afterwards forwarded to all the shareholders, and no objection was ever made to them. On the contrary, they were acted upon in several instances; and, after profiting by the proceedings of the directors, the other shareholders cannot, after five years' acquiescence, disavow the transaction. The transfer is recorded in the Company's ledger, to which all members had access, and which is binding as between the shareholders themselves. Taylor

VOL. I.

EEE

D. G. S.

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v. Hughes (a) is expressly in point. In that case, Sir E. Sugden says:-" In support of the first objection, it was said that a purchase by the Company was contrary to the 6 Geo. 4, c. 42, ss. 2 and 22, for all the individuals composing the copartnership were made liable by section 22, and they could only discharge themselves of the liability by a transfer to another, under section 22; and the assignee under that section must be a bonâ fide holder, and not a trustee for the Company. I think that the act of Parliament did not prevent or interfere with the bonâ fide retirement from the copartnership of any member; and, therefore, that the Company might buy out a partner notwithstanding this act. It was said, that such a purchase also struck at the deed of settlement of 1836. It was admitted that it was not expressly forbidden; but the context of the deed was resorted to in order to make out a case of exclusion; and the prohibition in clause 10, against any individual holding more than a limited number of shares, was relied upon. After an attentive consideration of the deeds, I do not think that they prohibit the Company from buying out a partner; and the mode in which they thought fit to execute this purchase is, I think, unimportant. The prohibition in clause 10 cannot apply to the Company; and other clauses which are referred to show that the Company might become possessed of a much larger number of shares. The power in the 87th clause, to the directors or consulting committee to act in cases unprovided for, in such manner as they should think best calculated to promote the welfare of the Company, would, I think, fully warrant the acts which they have done. Great numbers of shares were thus purchased; and the Company are not at liberty now to say that the directors were not authorised to make the purchase. They cannot claim a privilege higher than any

(a) 2 Jones & Lat. 24.

other copartnership. Lord Eldon, in Const v. Harris (a), to which I before referred, said, that articles which had been agreed on to regulate a partnership could not be altered without the consent of all the partners; but that, if alterations were made by some of the partners, and acquiesced in by all, the Court would hold that to be an adoption of new terms. This, I may observe, is a rule always acted upon. Now, in this case, purchases were openly made and regularly entered in the books; the stock accounts explain the transactions; and the purchases were adopted by the Company at large, after full notice. The reports which have been put in evidence expressly refer to the extensive purchases of shares by the Company; and, in 1837, a general meeting gave a direct authority to purchase, without complaining of previous purchases."

Mr. J. Russell, Mr. James Parker, and Mr. T. H. Terrell for the official manager. It is clear, that, independently of the meeting, the directors had no power to buy the shares, because the surplus fund, out of which such purchases could have been made according to the articles, did not exist. Then, did the general meeting confer any such power? In the first place, it is very doubtful whether any meeting could, without the consent of every shareholder individually, so alter the constitution of the Company as to enable the directors to buy up shares, especially when the

(a) 1 Term R. 517. See also Geddes v. Wallace, 2 Bligh, 270, which appears to have been the case of a Company in which there were at least eighty shares. Lord Eldon there said, "It appears to me, notwithstanding all the difficulties which belong to certain transactions, which are stated to have taken place while the part

nership existed, between 1786
and 1792, that the transactions
after 1792 are such in their na-
ture, that, consistently with the
safety and interests of mankind,
it is impossible to permit these
copartners, after those transac-
tions, in my judgment, to say
that Geddes was a partner with
them for loss."

1849.

In re

THE VALE OF SOUTH WALES

NEATH AND

BREWERY Co.

MORGAN'S

CASE.

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