returned nulla bona: (Hitchins v. The Kilkenny Railway Co., 8 & 9 VICT. C 16. supra. See, however, Devereux v. Kilkenny Railway Co., 5 Exch. 834; 20 L. J. (Exch.) 37; and the case of Nixon v. Kilkenny Railway Co., 25 L. J. (Exch.) 249; 1 H. & N. 47, which decided that it is not necessary that the affidavit should show that due diligence has been used to discover the property of the company, and that it is enough to show that goods of the company cannot be found whereon to levy. The writ of scire facias must allege that the party is a shareholder, and the amount unpaid, and that execution has issued against the company, and been found unavailing, all of which is traversable (Devereux v. Kilkenny Railway Co., supra.) In this case the Court of Exchequer granted a writ of sci. fa. against a director, upon proof of his declaration at a meeting of the company, that they had no funds to meet the claims against the company, one of those claims being the judgment debt of the plaintiff. But it was also held that all due pains must have been shown to have been taken to obtain satisfaction from the property of the company in Ireland before the Court granted execution in this country. As to the sufficiency of the affidavits, see Rastrick v. Derbyshire, de, Junction Railway Co., 9 Exch. 149; Wyatt v. Darenth Railway Co., 2 C. B. N. S. 110. same creditor. A creditor will not be deprived of his remedy against the share. Sci. fa. after eleholders, by the fact that he first issued an elegit against the lands git sued out by of the company, which proved unproductive: (Reg. v. Derbyshire, &c. Railway Co., 3 E. & B. 784; see also Addison v. Tate, 11 Exch. 250,) nor because there are funds belonging to the company in the hands of the official manager under the Winding-up Act: (M'Kenzie v. Sligo & Shannon Railway Co., 4 E. & B. 119; 24 L. J. (Q. B.) 17; 3 W. R. 10: Guest v. Cowbridge Railway Co., 3 W. N. 235.) The 27 & 28 Vict. c. 112, gives priority to the writ first in the Writ first with hands of the sheriff, and an elegit issued in the hands of the sheriff, sheriff has after a writ of fi. fa. not in the hands of the sheriff, will thus have priority. the priority. It is not necessary that the sheriff's returns to abor- Returns to tive writs issued against the company should have actually been abortive writs. filed at the time of the motion: (Ilfracombe Railway Co. v. Devon holders. de, Railway Co., L. R. 2, C. P. 15.) As to serving notice on the Serving of noshareholders, see Edwards v. Kilkenny, &c., Railway Co., 1 C. B. N. S. tices on share409; Ilfracombe Railway Co. v. Devon, &c., Railway Co., supra. The time at which persons must be shareholders, in order to be- Shareholders come liable under this section, is the date of the return of nulla sued must be bona; hence pleas to a scire facias, that defendant was not a share- return of nulla holder at the time of the issuing of the writ of sci. fa., and that he bona. was not a shareholder when the rule nisi for a sci. fa. was made absolute, are bad: (Nixon v. Green, 11 Exch. 550; 3 H. & N. 695; shareholders at 25 L. J. (Exch.) 209.) A shareholder cannot escape from this lia- Defence to sci. bity to the company's creditors except by virtue of some act of fa. theirs, and nothing but fraud on their part, or some contract or conduct of theirs precluding them from treating him as their debtor, will afford him a defence; for nothing is admissible as a defence to a fa, which might have been relied on as a defence to the action on which the judgment was founded: (Per Lord Mansfield, in Cook v. Jones, Cowp. 727.) To a declaration in scire facias an equitable defence, that the de 8 & 9 VICT. o. 16. company, and if there cannot be found sufficient whereon extent of their to levy such execution, then such execution may be issued shares in capital against any of the shareholders (b) to the extent of their not paid up. Bond creditors' section. shares respectively in the capital of the company not then paid up: Provided always, that no such execution shall issue against any shareholder except upon an order of the court in which the action, suit, or other proceeding shall have been brought or instituted, made upon motion in open court after sufficient notice in writing to the persons sought to be charged; and upon such motion such court may order execution to issue accordingly; and for the purpose of ascertaining the names of the shareholders, and the amount of capital remaining to be paid up on their respective shares, it shall be lawful for any person entitled to any such execution, at all reasonable times, to inspect the register of shareholders without fee. (a) Not only the general creditors of the company, but also right under this bond creditors whose rights are otherwise provided for by s. 44, (post, p. 49,) have been held to be entitled to the benefit of this section, and to proceed against the property and effects of the company in common with the general creditors: (Russell v. East Anglian Railway Co., 3 M'N. & G. 125; 6 R. C. 501; and per Lord Cairns, L. J., in Gardner v. London, Chatham, and Dover Railway Co., L. R. 2 (Ch.) 201; 15 W. R. 325; 36 L. J. (Ch.) 323; 15 L. T. N. S. 552. Proceeding by Against shareholders. (b) It is a general rule that when a party out of the record is sci fa. generally. made subject to execution, the proper mode of procedure is by scire facias: (Cross v. Law, 6 M. & W. 217; Ranford v. Bosanquet, 12 Ad. & E. 813; 2 Q. B. 972;) and the shareholders of a railway company form no exception to the general rule; Hitchins v. The Kilkenny, &c., Railway Co., 10 C. B. 160; 20 L. J. (C. P.) 31; 1 L. M. & P. 712. It was, however, the expressed opinion of Pollock, C. B., in Devereux v. Kilkenny Railway Co., (5 Ex. 834; 20 L. J. (Ex.) 37,) that a less formal mode, by suggestion or motion, is equally competent. Suggestion or motion. Discretion of Court to issue writ. Evidence that defendant is a shareholder. Sci. fa after return of nulla bʊna to fi fa. The issuing of the writ is discretionary with the Court, and where a rule nisi had been obtained against a shareholder for a scire facias, the Court, on his application, made the rule absolute for execution without a scire facias: (Burke v. Dublin Trunk Connecting Railway Co., L. R. 3 Q. B. 47.) The Court, however, will not grant a scire facias against a party, as a shareholder in a company, unless the affidavits show reasonable grounds for believing that the party to be charged is a shareholder; and the fact that one has applied for, and received an allotment of shares, and paid a deposit thereon, is not enough: (Edwards v. Kilkenny Railway Co., 14 ̊C. B. N. S. 526.) So also a scire facias will not be granted on an affidavit merely stating that judgment has been obtained against the company, and that two writs of fi. fa. had been issued against them, and had been returned nulla bona: (Hitchins v. The Kilkenny Railway Co., 8 & 9 VICT. C 16. supra. See, however, Devereux v. Kilkenny Railway Co., 5 Exch. 834; 20 L. J. (Exch.) 37; and the case of Nixon v. Kilkenny Railway Co., 25 L. J. (Exch.) 249; 1 H. & N. 47, which decided that it is not necessary that the affidavit should show that due diligence has been used to discover the property of the company, and that it is enough to show that goods of the company cannot be found whereon to levy. The writ of scire facias must allege that the party is a shareholder, and the amount unpaid, and that execution has issued against the company, and been found unavailing, all of which is traversable (Devereux v. Kilkenny Railway Co., supra.) In this case the Court of Exchequer granted a writ of sci. fa. against a director, upon proof of his declaration at a meeting of the company, that they had no funds to meet the claims against the company, one of those claims being the judgment debt of the plaintiff. But it was also held that all due pains must have been shown to have been taken to obtain satisfaction from the property of the company in Ireland before the Court granted execution in this country. As to the sufficiency of the affidavits, see Rastrick v. Derbyshire, dr., Junction Railway Co., 9 Exch. 149; Wyatt v. Darenth Railway Co., 2 C. B. N. S. 110. A creditor will not be deprived of his remedy against the share. holders, by the fact that he first issued an elegit against the lands of the company, which proved unproductive: (Reg. v. Derbyshire, &c. Railway Co., 3 E. & B. 784; see also Addison v. Tate, 11 Exch. 250,) nor because there are funds belonging to the company in the hands of the official manager under the Winding-up Act: (M'Kenzie v. Sligo & Shannon Railway Co., 4 E. & B. 119; 24 L. J. (Q. B.) 17; 3 W. R. 10: Guest v. Cowbridge Railway Co., 3 W. N. 235.) Sci. fa. after eleit sued out by same creditor. sheriff has The 27 & 28 Vict. c. 112, gives priority to the writ first in the Writ first with hands of the sheriff, and an elegit issued in the hands of the sheriff, after a writ of fi. fa. not in the hands of the sheriff, will thus have the priority. It is not necessary that the sheriff's returns to abor- Returns to tive writs issued against the company should have actually been abortive writs. filed at the time of the motion: (Ilfracombe Railway Co. v. Devon &c., Railway Co., L. R. 2, C. P. 15.) As to serving notice on the Serving of noshareholders, see Edwards v. Kilkenny, &c., Railway Co., 1 C. B. N. S. tices on share409; Ilfracombe Railway Co. v. Devon, &c., Railway Co., supra. holders. shareholders at The time at which persons must be shareholders, in order to be- Shareholders come liable under this section, is the date of the return of nulla sued must be bona; hence pleas to a scire facias, that defendant was not a share- return of nulla holder at the time of the issuing of the writ of sci. fa., and that he bona. was not a shareholder when the rule nisi for a sci. fa. was made absolute, are bad: (Nixon v. Green, 11 Exch. 550; 3 H. & N. 695; 25 L. J. (Exch.) 209.) A shareholder cannot escape from this lia- Defence to sci. bility to the company's creditors except by virtue of some act of fa. theirs, and nothing but fraud on their part, or some contract or conduct of theirs precluding them from treating him as their debtor, will afford him a defence; for nothing is admissible as a defence to a sei, fa, which might have been relied on as a defence to the action on which the judgment was founded: (Per Lord Mansfield, in Cook v. Jones, Cowp. 727.) To a declaration in scire facias an equitable defence, that the de 8 & 9 VICT. c. 16. sums of money as shall from time to time by an order of a general meeting of the company, be authorised to be borrowed, not exceeding in the whole the sum prescribed by the special act (b), and for securing the repayment of the money so borrowed, with interest (c), to mortgage the undertaking (d), and the future calls on the shareholders, or to give bonds in manner hereinafter mentioned. Borrowing exercised strictly. (a) The borrowing powers of the company must be exercised strictly powers must be in accordance with the provisions of the Companies Clauses Act, and the restrictions imposed by the special act; and debentures or bonds issued without due observance of those provisions will not be binding upon the shareholders: (Nowell v. Andover and Regbridge Railway Co., 3 Giff., 112; West Cornwall Railway Co. v. Mowatt, 17 L. J. (Ch.) 366; 12 Jur. 407; see also Athenæum Life Assurance Co. v. Pooley, 28 L. J. (Ch.) 119). See 7 & 8 Vict. c. 85, ss. 19-21 as to loan-notes. Directors were restrained from issuing shares, upon the authority on a stale resol of a resolution passed two years and a half previously, empowering them to raise money for a particular purpose: (Fraser v. Whalley, 2 H. & M. 10.) Raising money tion. Bill to restrain borrowing until capital paid up. Issue of debentures at a discount. Lenders should inquire whether powers are pro. perly exercised. Irregular exer powers. Estoppel. A bill, founded upon the ground that the borrowing powers are being improperly exercised by the directors, before such powers have come into operation, will be demurrable, if it do not contain distinct allegations that the prescribed amount of capital has not been paid up, and that the directors are about to issue bonds or mortages before such payment is due: (Nowell v. Andover and Redbridge Railway Co., 3 Giff. 112.) And a bargain, whereby debentures are to be issued to a person who has undertaken to take all the misappropriated capital at a discount, is invalid, and the directors are justified in repudiating it: (West Cornwall Railway Co. v. Mowatt,* 17 L. J. (Ch.) 366; 12 Jur. 407.) As to the position of the holders of debentures in cases where the issue of them is illegal, it seems from the case of Athenæum Life Assurance Co. v. Pooley, (28 L. J. (Ch.) 119,) that not only is the first obligee in the wrong in not having ascertained whether there was fraud, but his purchaser is bound by the same equity. There is one case, however, in which the company may be bound cise of borrowing by loans not raised in strict accordance with the statutory provisions, and that is when the money is bona fide raised and applied for the purposes of the company, binding the company by estoppel not to seek to set aside their own act, the benefit of which they have already received. This was decided in a case at law with regard to a company incorporated by act of Parliament: (Hill v. Manchester and Salford Waterworks Co., 2 B. & Ad. 544.) In equity the cases have been uniformly with respect to companies not established by statute; it may be, however, as well to cite them in this place. They are:In re German Mining Co., 4 De G. M. & G. 19; In re Magdalena Steam Navigation Co., Johns. 690; Baker's Case, 1 Dr. & Sm. 55; Troup's Case, 29 Bea. 353; Hoare's Case, 30 Bea. 225; Pare v. Clegg, * As to issuing stock at a discount, see Railway Companies Act, 1867, (30 & 31 Vict. c. 127,) ss. 27-29. Borrowing Powers-Lloyd's Bonds. 39 29 Bea. 589; and see Agar v. Athenæum Life Assurance Society, 8 & 9 VICT. c. 16. 6 W. R. 277; 27 L. J. (C. P.) 95. terest in these cases. As to the question of interest in these cases, it has been held Payment of inthat although the debenture-holders might not be able to recover upon the debentures themselves, acquiescence in the payment of interest would entitle them to be paid according to the rate stipulated for in the debenture: (In re German Mining Co., 4 De G. M. & G. 19; In re Magdalena Steam Navigation Co., Johnson, 690; Troup's Case, 29 Bea. 353.) bonds on mort gages to be Money borrowed by a company for the purpose of paying off, and Money borrowed duly applied in paying off, bonds or mortgages of the company, for paying of given or made under the statutory powers of the company, is by the Railway Companies Act, 1867 (30 and 31 Vict. c. 127), s. 26, to deemed not in be deemed money borrowed within and not in excess of such statu. excess of statutory powers. tory powers. See post. Lloyd's bonds are in the form of an acknowledgment, under the Lloyd's bonds : seal of the company, of a debt incurred and actually due by the their form. company to a contractor or other person for work done, goods supplied, (or otherwise, as the case may be,) with a covenant for payment of principal and interest at a future time : (White v. Carmarthen and Cardigan Railway Co., 1 H. & M. 786; 33 L. J. (Ch.) 93; 12 W. R. 68; 9 L. T. N. S. 439; Chambers v. Manchester and Milford Railway Co., 33 L. J. (Q. B.) 268; 5 B. & S. 588; 10 Jur. Ñ. S. 700; 12 W. R. 980.) In this form, issued bona fide, and not as a mere device for evading When valid. the provisions of the acts, by the issue of assignable bonds for securing money lent, there is no reason to suppose that Lloyd's bonds are an invalid security. If the bonds are only for the purpose of giving the contractor As evidence of a evidence of a debt coming due to him, the Court would not say that debt. the company had exceeded its powers, so as to justify its interference: (White v. Carmarthen Railway Co., ubi supra, per Sir W. P. Wood, V.C.; and see Fountaine v. Carmarthen Railway Co., L. R. 5 Eq. 316.) Containing as they do a covenant for payment, they constitute a They constitute a specialty debt upon which judgment may be obtained and execu- specialty debt. tion issued; thus placing the holder in the position of a judgment creditor, ranking with all other judgment creditors of the company, whose rights and remedies are explained below, (pp. 48, 49, post.) But where the issue of the bonds has not been for the payment when invalid. of a debt actually due, but as a security for advances to be made, they have been decided to be illegal at law. Chambers v. The Manchester and Milford Co., 33 L. J. (Q. B.) 268; 12 W. R. 980; 10 Jur. N. S. 700; where it was decided that the provision of this section coupled with 7 & 8 Vict. c. 85, s. 19, impliedly prevent the company from borrowing money in any other way than by mortgage. The special act of the company in that case empowered the company to raise a capital of £550,000, and a further sum not exceeding £180,000, when and not before the whole of the capital had been subscribed for, and one-half paid up. When part only had been subscribed for, the directors issued Lloyd's bonds to discharge the liability of their chairman on a promissory note signed by him, on the security of which a bank had advanced |