1873 Teasdale's Case. L.JJ. stances, unless we can find that there has been a violation of the law in what has been done, the transaction must stand. We cannot introduce a new principle of law in order to benefit the creditors of the company. If we give the resolutions a fair construction, not as intended to effect a compulsory conversion of the shares of all the shareholders, but as giving the directors power to convert the shares of those shareholders who wished it, the case comes quite 59] within the principle of *Campbell's Case ('). Teasdale accepted shares in exchange for his old shares, according to the resolutions. He sold and transferred to the purchasers some years ago the shares which he received, and in my opinion he is free. I am well satisfied to find that a bona fide transaction which took place so long ago can be supported. SIR G. MELLISH, L.J.: I am of the same opinion. Snell's Case() and Campbell's Case are direct authorities that where the articles authorize the surrender of shares, such a surrender is valid if made bona fide, and with a view to the benefit of the company. Then was a surrender authorized by the articles? The articles originally contained no such provision, and the question turns upon this, whether the resolutions effectually altered the articles so as to give such authority. If the resolutions were to be construed literally, as by their own force converting the shares without the consent of the holders, then I think they would be ultra vires, and void. But, like all other documents, they ought to be construed reasonably, ut res magis valeat quam pereat, and they ought, I think, to be construed as only intended to give power to the directors to accept surrenders of old shares, and issue new shares in their stead. An article to that effect would have been valid. Teasdale acted on the resolutions, gave up the certificates of his old shares, got new shares, and transferred those new shares. I think that thereupon he ceased to be a member of the company. It is said that he was kept on the register of shareholders. If that was so--and the books of the company are in such confusion that it is hard to say whether it was so or not-he was kept there merely through a blunder on the part of the company. It is clear that the company never meant to hold him out as a member, and it is certain that he never assented to being held out as such. His position cannot be altered by the careless way in which the register was kept. Solicitors: Mr. Wynne, for A. S. Mather, Liverpool; Messrs. Sharpe, Parkers & Co., for Messrs. Harvey & Alsop, Liverpool. (1) Ante, p. 1. (*) Law Rep., 5 Ch., 22. L.C. & L.JJ. Maynard's Case. 1873 [Law Reports, 9 Chancery Appeals, 60.] L.C. and L.JJ., Nov. 19, 20, 1873. • *In re MATLOCK OLD BATH HYDROPATHIC COMPANY. [60 MAYNARD'S CASE. Contributory-Subscriber of Memorandum—Fully paid-up Shares-Payment-Set-Off. M. subscribed the memorandum of a company in November, 1865, for 100 £10 shares, and became a director and chairman. The 100 shares were registered in his name before March, 1866. On the 1st of March 1866, he signed a written agreement to sell certain land to the company for £1,000, and he afterwards conveyed it to the company, signing the usual receipt for the purchase-money. It did not appear that any money was ever paid to him, but his shares were treated as fully paid up. At a meeting of the company on the 28th of March, 1866, the directors stated that they had bought property on advantageous terms, the vendors having agreed to accept £1,000, part of the purchase-money, in fully paid-up shares. Some time after the agreement had been entered into, a minute was made in the directors' minute book stating that 100 paid-up shares had been allotted to M. in payment of his purchasemoney. No shares, however, were in fact allotted to him. The prospectus contained a statement similar to that in the report. The company having afterwards been ordered to be wound up, M. was found on the register for 100 paid-up shares, but the official liquidator applied to put him on the list of contributories for 100 other shares on which nothing had been paid. M. in his affidavits, stated that he had, during the negotiation for purchase, offered to accept the £1,000 in paid-up shares or to invest it in paid-up shares, and that on the completion of the purchase 100 paidup shares were allotted to him and received by him in satisfaction of the £1,000:. Held, (reversing the decision of Bacon, V.C.), that M. was to be treated only as the holder of fully paid-up shares, for that on the terms of the contract and conveyance the company were bound to pay him £1,000 in cash, and that by this his liability on the 100 shares for which he signed the memorandum of association was satisfied, and that the expressions in the prospectus, the report, the directors' minute, and M.'s affidavits, were not sufficient to lead to the conclusion that M. sold to the company for 100 fully paid-up shares distinct from the shares for which he signed the memorandum. THIS was an appeal by Mr. Maynard from a decision of Vice-Chancellor Bacon placing him on the list of contributories for 100 shares on which nothing had been paid, in addition to 110 fully paid up shares. The company was registered on the 29th of November, 1865, as a company limited by shares. The nominal [61 capital was £25,000 in 2,500 shares of £10 each. The appellant subscribed the memorandum of association for 100 shares, was named, in the articles of association, one of the first directors, and became chairman of the company. These 100 shares appeared to have been registered in his name some time before March, 1866. The articles provided that at the first general meeting all the directors should retire, but should be eligible for re-election. The holding twenty shares was the qualification for being a director. The first general meeting took place on the 28th of March, 1866. The 1873 Maynard's Case. L.C. & L.JJ. appellant acted as chairman at that meeting, and was reelected a director. The object of the company was to set up a hydropathic establishment on the site of the Old Bath Hotel at Matlock. This site belonged, as to part, to the appellant and Messrs. Crompton, Hallewell, and Wigram, in undivided shares, and, as to the rest, to the appellant solely, and the company were put in possession in November, 1865. The appellant stated in one of his affidavits as follows: "Prior to the 10th of May, 1865, Messrs. Crompton, Hallewell, and Wigram, and I had proposed to sell the property to the company for £4,500, I offering to accept paid-up shares in the company to the extent of £1,000 in payment for that portion of the purchase-money which belonged exclusively to me, or to invest £1,000, part of the purchase-money, in paid-up shares of the company; and at a meeting of the persons who were intended to be the first directors of the company when formed, held on the 10th of May, 1865, it was resolved that the necessary steps should be taken to incorporate the company, and that the secretary should be and he was thereby authorized to enter into a contract for and in the name of the company for the purchase of the Old Bath Hotel property for £4,500, on the understanding that the vendors agree to invest £1,000, part of the purchase-money, in paid-up shares of the company." No agreement for purchase was signed till the 1st of March, 1866, when two contracts were entered into, one being for the sale to the company at the price of £3,500 of that part of the property in which the appellant had only an undivided share the other relating to that of which he was sole owner. The latter was a contract for sale to the com62] pany at the price of £1,000, with the *usual provision for payment of interest if the purchase-money was not paid on the day named for completion. The appellant, by his affidavit, stated: "Though it is not so expressed in the agreement, there was a verbal understanding between me and the company that I would invest the said £1,000 in paid-up shares of the company, as referred to in the said resolutions of the 10th of May, 1865, or accept the purchasemoney in paid-up shares." The prospectus, the date of which did not appear, stated that "The directors have made a satisfactory arrangement for the purchase of the well-known Old Bath Hotel, together with the premises and pleasure-grounds belonging thereto, the vendor taking £1,000 of the purchase-money in paid-up shares." L.C. & L.JJ. Maynard's Case. 1873 The report presented to the meeting of the 28th of March, 1866, stated that "The directors have purchased the Old Bath Hotel property for £4,500, on advantageous terms. The vendors have agreed to accept £1,000, part of the purchase-money, in paid-up shares of the company, and to take a. mortgage on the land for the balance, £3,500, at £4 10s. per cent. per annum.' In a minute of the proceedings of the directors of the same date, it was stated that 100 fully paid-up shares had been issued to the appellant in part payment of his purchasemoney. No such allotment, however, was made. Some time afterwards in the same year Maynard executed a conveyance to the company, giving the usual receipt for the purchase-money. No fresh shares were allotted to him, but he remained on the register for his original shares, which appeared to have been treated as fully paid-up. In April, 1867, ten other shares were allotted to him, and he paid up in cash all the calls on them. He never was placed on the register in respect of any further shares. He stated in one of his affidavits as follows: "The said sum of £1,000 was not, nor was any part thereof, ever in fact paid to me, but on the completion of the purchase 100 paid-up shares in the company of £10 each were allotted to me, and I accepted the same as £1,000 money's worth in payment and satisfaction of the purchase-money for the said property, of which I was sole owner as aforesaid, and in fulfilment of the understanding that I would invest £1,000, part of the purchase-money, in fully paid-up shares of the company." *No trace appeared of the appellant ever having re- [63 ceived any cash on account of his £1,000 purchase-money. The company having been ordered to be wound up, the official liquidator applied to put the appellant's name on the list of contributories for the 100 shares in respect of which he subscribed the memorandum in addition to the 110 shares for which he was on the register, and which were admitted to be fully paid up shares. Vice-Chancellor Bacon decided in favor of the contention of the official liquidator ('). (1) 1873. July 24. SIR JAMES BACON, V.C., after stating the facts, and referring to the above extracts from Mr. Maynard's affidavits, continued: That is the whole material evidence in this case; and in the written evidence, in which, if the arrangement spoken of by Mr. Maynard in his last affidavit had ever been come to, there ought to have been some mention of it, I find a total blank, and an entire 8 ENG. REP. absence of any statement of fact from which I can properly draw any conclusion that such arrangement existed. On the other hand, I find the facts plain; the memorandum of association is signed, and for months after that this gentleman, being a director of the company-upon which I lay no greater stress than the case positively requires me to do-he, as a director interfering with the management of the company, 92 1873 Maynard's Case. L.C & L.JJ. 64] *Mr. Amphlett, Q.C., and Mr. Graham Hastings, for the appellant. Mr. Kay, Q.C., and Mr. Ince, for the respondent. means of enforcing the performance of the undertaking or agreement which is referred to. His heir-at-law or devisee would not have been bound to sell for £1,000 if the shares in this company had increased greatly in value, as they might have done. He would not have been obliged to take the burthen on himself, if it was a burthen. If it was a benefit, he might have claimed it; but he was under no sort of obligation between November and March to do anything with this company in respect of the sale of his land when he did, in the very words which he himself uses on the completion of the purchase, have 100 shares allotted to him, and took them as paid-up shares. Fothergill's Case (Law Rep. 8 Ch., 270), which has been referred to, is a very valuable decision in my opinion, as it has established the principle on which alone the court can safely act. The Lord Chancellor, although he consid ered it to be his duty to examine the other cases, so far as they had any application to that which was before the court, relied wholly and entirely on the written testimony or the documentary evidence which was before him, and excluded from consideration--as in my opinion, if I may say so with deference, there ought to be excluded from consideration here-all that was said about the intention of the parties. I can collect no intention from what has been done by the parties, except the inten tion which the documentary evidence plainly expresses; and in my opinion, by signing the memorandum of association, Mr. Maynard became and is the holder of 100 shares not paid up, and is under all the liabilities and obligations which attach, under the Companies Act, to the holder of such shares in a joint stock company. The following cases were referred to: Migotti's Case ('); Drummond's Case ('); Pell's Case (); Forbes and Judd's Case ('); In re Bagdon Hall Colliery ('); Jones's Case (†); carries on the operations of the company from November, 1865, to March, 1866, without any suggestion that he was not the absolute owner of the 100 shares which had been his from the time he signed the memorandum; and against creditors who are asking to be paid by the shareholders in this company, am I to say that by this transaction, evidenced by such documents as I have referred to, this gentleman has acquitted himself of his obligation? He is a holder of 110 paidup shares; beyond all doubt, he is no less the holder of 100 shares which he contracted to take by signing the memorandum of association, and to hold otherwise would be to deny the plain facts of the case. It is not necessary to go into the various authorities which have been referred to. The circumstances which have given rise to the decisions that have been referred to have often been very embarrassing, and the particulars on which the judgment is founded sometimes very minute; but in no case has the court departed from that wholesome principle, that where the transactions of the parties are recorded in written documents you must rely on the written documents, and you must not rely on any suggestion of an understanding confirmed and corroborated by what has been done between the parties. Now what corroboration is there? I have observed on the absence of the mention of any material fact in the written documents. What corroboration is there of any part of this case? What is there inconsistent with the fact that after November, 1865, the 100 shares of which Mr. Maynard was the owner were his for all purposes, and might have been sold and dealt with by him, and were his property to all intents and purposes? There was no agreement binding anybody that he would sell for £1,000, or any other sum, his interest in that divided part of the property which is mentioned. If he had died, the company had no (1) Law Rep., 4 Eq., 238. |