L. C. and L. JJ. 1873 CAMPBELL'S CASE. HIPPISLEY'S CASE. All the shareholders of the company must have imputed to them knowledge of the Act of Parliament, and also of their own memorandum and articles of association, and of the fact that the articles did not (as they stood before this resolution was passed) authorize the proposed increase of capital; and from the notices which convened the two extraordinary meetings it must have been clearly understood, that, without the sanction of those meetings, the proposed increase of capital could not be made. I entertain no doubt (nor does it seem to be that doubt was entertained on this point by any of the Judges in the Exchequer Chamber) that it was competent for two meetings to authorize an increase of capital, conditionally as much as absolutely, for a special purpose as much as for general purposes, and thereby to carry into effect an agreement the terms of which had previously been arranged, as much as to provide contingently for an agreement of any particular kind, if made at a future time. If I rightly understand the view of the Lord Chief Baron, it seems to have been, that the resolution was bad, as attempting to combine, uno flatu, two operations, viz., the authorization of the increase of capital by giving power to issue new shares, and the actual increase of such capital by the creation of such new shares—which by sect. 12 of the statute are contemplated as distinct, and the first of which under that section was a condition precedent to the second. But if this is the true interpretation of the judgment, I am obliged to say, with very sincere deference, that this view appears to me hærere in cortice and to lose sight of the substance. According to the terms of the Act of 1862 and the constitution of this company, it was not necessary that the second of these two operations should be performed by special or indeed by any resolution of shareholders at extraordinary general meetings. The authority to make the issue was indeed required to be given by a special resolution; but the power of issue when that authority was once given was capable of being exercised by the board of directors. The authority in this case being only for a special purpose, the capital was not really increased till the shares were issued and accepted pursuant to that authority. The words, therefore, of the resolution, "that the capital of the company be increased by the creation of 20,000 new shares," seem to me to be in truth L. C. and L. JJ. 1873 nothing more nor less than an authority for such increase by the board of directors, who proceeded on the faith of that resolution actually to issue the shares. Whatever would have been sufficient authority, if contained in the articles as originally framed, must CAMPBELL'S also, I think, be sufficient, if expressed in similar terms in any HIPPISLEY'S resolution by which the articles might, in effect, be altered. I put the question to counsel during the course of the argument, whether there would have been any doubt of the sufficiency of the authority, if the articles, as originally framed, had contained (in addition to what now appears in them) some such words as the following: "In the event of the directors succeeding in making an agreement for the purchase of the business and property of the Imperial Bank, after shares to the full amount of £2,000,000 have been issued, on the terms of paying for such business and property in shares of this company at £6 premium, to be issued to such shareholders in the Imperial Bank as may be willing to accept the same, the capital of this company shall be increased beyond £2,000,000, by the creation of such number of new shares, not exceeding 20,000 of £100 each, as may be necessary for the performance of such agreement; such shares to be issued to the persons and upon the terms stated in such agreement." I cannot discover any ground for doubting, that such a provision in the original articles would have been sufficient authority, under the 12th section of the Act, for the issue of new shares for the purposes of the supposed agreement, whenever made; and, if so, it seems to me that the equivalent words of the special resolution in the present case, though applicable to the fulfilment of an agreement already provisionally made, and not of a future and contingent agreement, are equally sufficient. The case of In re West India and Pacific Steamship Company (which I think was correctly decided) was substantially different. There the question was, whether the Court of Chancery could confirm a resolution (which to be effective must have been passed under the powers of the Companies Act, 1867) for the reduction of the capital of a company. Such a reduction, under sect. 9 of the Act of 1867, could only be effected by special resolution, (i. e. by a resolution adopted and confirmed at two extraordinary general meetings), which was not to come into operation until an order of CASE. CASE. L. C. and L. JJ. 1873 CASE. HIPPISLEY'S L the Court confirming it (after proof of certain notices to and consents of creditors) should have been registered by the Registrar of Joint Stock Companies. And no such resolution could be passed CAMPBELL'S unless (in language so far similar to that of the 12th section of the Companies Act of 1862) it was authorized "by the regulations of the company as originally framed, or as altered by special resolution." In the case cited, the regulations of the company as originally framed did not authorize any reduction of the capital; and no resolution had been passed to the effect of altering them, other than that for the actual reduction of the capital, to which the assent of the Court was then asked. But this resolution, until some order of the Court confirming it should be registered, was wholly inoperative under the statute; and, being inoperative, it could not itself authorize what it purported to do, or supply the want of that alteration of the articles, which was a condition precedent under the statute, independent of any order of the Court. Upon the whole case I am of opinion that these appeals must prevail, and that the Vice-Chancellor's orders must be discharged. SIR W. M. JAMES, L.J.: I desire only to add that we are of opinion that it is in the highest degree important for the safety of that large portion of mankind which has dealings in shares, and for the true interests of all shareholders, that the principle of the decision in Royal British Bank v. Turquand (1) should be adhered to and acted upon. SIR G. MELLISH, L.J. :— I entirely concur in the judgment of the Lord Chancellor. LORD SELBORNE, L.C.: ALISON'S CASE. I have now to deliver judgment in Alison's Case. The facts of that case have been sufficiently stated in the preceding judg ment. The appeal is from an order of Lord Justice James, sitting for he late Vice-Chancellor Sir John Wickens, by which he directed (1) 6 E. & B. 327. the sums which Alison had paid to the Bank of Hindustan when he took his shares to be repaid with interest out of the funds of that bank. Alison had paid part, but not the whole, of the premium payable according to the terms on which the shares were issued; he had never paid any calls; and in March, 1866, his shares had been declared forfeited for non-payment of calls; so that his connection with the Bank of Hindustan (if a shareholder) was finally dissolved nine months before the order to wind up that bank, under which he never was settled on the list as a contributory. The action at law was brought against him in the name of the company by the liquidators, to recover the unpaid premium and calls, and the judgment in that action was in Alison's favour, upon the ground that he never was a shareholder. The Lord Justice, sitting for the Vice-Chancellor, was of opinion that this judgment was binding as between Alison and the company, and that it was conclusive in his favour upon the question raised by him in the winding-up, whether the consideration for the payments made by him to the company had not wholly failed, and whether he was not therefore entitled to receive back those payments. In that opinion we agree. We cannot relieve the liquidators against the estoppel created by that judgment, on the ground that, if evidence had been given in the action which was not given, or if the special case had been stated otherwise than it was stated, the result might have been different. A company in liquidation, like any other litigant, must be bound by the manner in which it conducts its own case. The liquidators' appeal, therefore, will be dismissed with costs. SIR G. MELLISH, L.J.: I am of the same opinion. It is clear, I apprehend, that the judgment of the Courts of Common Law is not only conclusive with reference to the actual matter decided, but that it is also conclusive with reference to the grounds of the decision, provided that from the judgment itself the actual grounds of the decision can be clearly discovered. For instance, if in this case there had been an actual verdict declaring that Alison never was a shareholder, that would have been conclusive as between the parties in all future actions and suits, as establishing that he never was a shareholder. The L. C. and L. J. M. 1873 ALISON'S CASE. L. C. and L. J. M. 1873 ALISON'S only real difficulty in this case arises from the judgment not in form stating on which plea the Defendant should succeed, but only deciding that the company were not entitled to recover any portion of the sums they sought to recover in the action. And if the special case had left it open to the Court to decide in favour of the Defendant, upon several grounds I doubt whether technically we could have looked at what was said by the Judges for the purpose of discovering what were the real grounds of their decision. But upon reading the special case, it appears to me clear that the special case raised only one single question for the opinion of the Court, namely, the question whether Alison ever became a shareholder in the Bank of Hindustan, and that therefore the judgment that the company were not entitled to recover all, or any of the sums which they sought to recover in the action, is necessarily a decision also that Alison never had become a shareholder. Therefore, upon that ground, there is conclusive evidence in this case that he never became a shareholder in the bank. If he never became a shareholder, it appears to me that he is clearly entitled to recover back the sums which he paid for the purpose of becoming a shareholder, upon the ground that they were moneys paid upon a consideration which has wholly failed. Solicitors for the Liquidators: Messrs. Ashurst, Morris, & Co. Solicitors for the Executors of Mr. Sassoon: Messrs. Thomas & Hollams. Solicitors for the Respondents: Messrs. Gregory, Rowcliffes, & Rawle; Messrs. Flux & Co.; Mr. Pulbrook. |