The Law Journal for the Year 1832-1949: Comprising Reports of Cases in the ...

stated and admitted to have taken place, and if the company choose to have the benefit of that trust, there was no option on the part of Mr. Taylor. The company, however, could not be bound, till the court of directors approved of what had been so done. And if it is rejected on the part of the company, if they do not choose to make it a part of the property, I have not the least notion that it can belong to the company. The Real del Monte Company, if called upon to sanction a new engagement, might very well say, "We will not take the Bolanos mine, and thereby incur the liability of paying instalments to the amount perhaps of 2,000l. when all that we agreed to pay was 4001."

Now, if the Bolanos mine could not become the property of the Real del Monte Company, unless it was approved and taken to by the company, by the effect either of conduct or of express adoption, it becomes important to see, whether the bill and affidavit contain sufficient allegations that the contract for it has been approved by the court of directors, or any statement of such circumstances as would induce me to say, that, though there has been no express approbation, a trust has nevertheless been raised, and exists. I believe it will be difficult to show, that such allegations or statements of circumstances are contained in the bill and affidavit of the plaintiff; and the affidavit of Mr. Taylor makes a strong case the other way.

It is remarkable, that we are left completely in the dark with respect to the contract which is the subject of dispute. This contract for the Bolanos mine is not set forth; the terms of it are not disclosed: nobody says, that he has seen it; we are not told with whom it is made. That may raise a difficulty with respect to the jurisdiction of that court.

March 29.-The Lord Chancellor delivered his final judgment upon the motion for an injunction. It was to the following effect::

The bill begins by stating, that, in or about the early part of the year 1823, the plaintiff became acquainted with Signor Don Juan Garcia, and General Paroissien, who came over to this country in the capa

city of envoys and ministers plenipotentiary of the government of Peru. And if the plaintiff's case were to depend upon the truth of those facts, I should dismiss the bill directly; because His Majesty's courts of justice cannot recognize the fact, that there was any such thing as a government of Peru in the year 1823. Nor am I aware at present, whatever matters may be in progress, that any of the King's courts can acknowledge or admit, that there is such a a government at this moment.

The bill then proceeds to state the origin and formation of the Real del Monte Company; the material clauses of the deed which regulates it; and the circumstances on which the plaintiff contends, that the Bolanos mine is a part of its property.

It appears, that the company was first formed on the 4th day of February, 1824; for the first of the resolutions passed on that day declared, that the company was then formed. It must, therefore, be taken as a fact, for and against all parties engaged in this undertaking, that this is a company which existed from the 4th of February, 1824, but was regulated by no deed till the following August. It appears, also, that, during that interval, shares in it were, in fact, transferred. Upon that 4th of February, also, certain authorities were given to Mr. Taylor; but these authorities were limited expressly to the mines of Count Regla and the Moran mine.

As to what passed between the 4th of February and the execution of the deed, I may observe, that if it becomes absolutely necessary to decide upon the legality or the illegality of the existing body, it would be necessary to know, who were the original subscribers ;-to know what the contract was,-what changes there had been in the subscribers between the month of February and the month of August,-who were the persons that executed this deed,— who were engaged in the undertaking at the time the deed was executed,-what the transactions of the company had been previous to the execution of that deed, how far the individuals composing the company had changed between the formation of the company and the regulation of it under this deed, and what had been done, either of a nature which any body could suggest to be per

fectly legal, or of a nature, the legality of which might be subject of argument, between the date of the formation of the company and the date of the execution of the deed.

The Lord Chancellor then went through the details and provisions of the deed of August, 1824.

That deed, said his Lordship, expressly states, that the object of the company was to "work such mines in Mexico as the court of directors, conformably with the interest of the company and the powers thereinafter contained, should think proper." These are the first words, in which powers of contracting for other mines are mentioned, (for, at the foundation of the company in February, 1824, its object was to take the benefit of the contracts with Count Regla and Murphy, and of these alone); and they, in unequivocal terms, confine the business of the company to working, not such mines in Mexico as the committee of management or any person authorized by them should select, but such mines in Mexico as the court of directors, conformably with their powers and the interests of the company, should think

proper.

Another material clause is that which provides, that all contracts or engagements made by the committee of management, or by John Taylor under their direction, with their several officers, agents, &c. " or with any other person or persons whomsoever," and all contracts entered into for the purchase of quicksilver, &c. " and all other contracts, purchases, and engagements what soever, entered into by the committee of management, or by the said John Taylor under their direction, and all powers and authorities given or delegated by the said committee of management, to the commissioners of the company shall continue in full force and effect, and shall be as valid, binding, and conclusive upon the proprie tors, as if the same had been entered into or given or delegated by the court of directors," in pursuance of the authority vested in them by the deed. Now, I desire to know, whether it is possible to put such a construction upon this clause, that it shall mean more than this-that what Taylor and the committee of management had done under the powers given to them, should be

of as much force as if it had been done by the court of directors. But the powers given to Taylor and the committee, related only to the first contracts for Count Regla's mines and the Moran mine. It was only the court of directors, that could enter into contracts for other mines; and the extent of authority even of the directors went no farther than to the calling on the original subscribers to raise an additional capital of 50,000l.

The Lord Chancellor then went through the clauses of the deed, which related to the holding of courts of proprietors, the appointment of directors, officers, &c., the passing laws, &c. All these arrangements, he observed, were very like the constitution of some companies, who were acting, not as a corporation, but being a corporation : and if the Bank of England, the East India Company, or the South Sea Company, wanted a new charter, they could not do better than copy the deed of regulation of the Real del Monte Company.

In the cases which have been determined, continued his Lordship, no attempt was made to state what constitutes acting as a corporation. It is, undoubtedly, a very easy thing to say, that a great number of other bodies have acted like the body whose acts are under consideration: but I cannot find that any case ever has, either in argument or decision, defined, what it is to act as a corporate body. That that point may be most material, it is clear; because, if the acting as a corporate body can be taken to be a thing per se prohibited by the act of the 6th of Geo. 1. surely it is extremely material, that the first opportunity should be taken, in which a matter of this kind comes before a court of law, to determine the question. It is in a court of law that the question is most properly brought to a decision; for it is a pure question of law and it is only incidentally, that the Court of Chancery may determine it, for the purpose of giving or refusing the relief, which, if the law be the one way, the plaintiff may be entitled to have; and if the law be the other way, he ought not to have.

Supposing, on the other hand, that the acting as a corporate body is not within the 6th of George 1. as of itself, a distinctly

• 6 Geo. 1. cap. 18. s. 18.

prohibited act, I wish to know, if it can be considered by any lawyer as clear, that, if persons take upon themselves to act as a corporate body, assuming that character with respect to all others His Majesty's subjects, though they have not gotten the authority of His Majesty, or of an Act of Parliament for so doing is it clear that that is not an offence at common law? That is a point, which, at least, ought to be very well considered; for it has ever occurred to me, upon looking at this case, as one of the most difficult things in the world, to hold, and give a reason for holding, that bodies, like the Real del Monte Company, are not acting as corporate bodies.

Suppose this instrument had been what it is not, (although it is in a great part of it) a copy of the East India Company's charter: suppose also that the East India Company, not being a corporation, had been creating stock before the grant of their charter, and had been acting according to all the terms, conditions, and powers contained in the charter, or acting as a corporate body, (and let it be remembered, that it is not being a corporation that is prohibited, but it is assuming to act as a corporate body); would it not be a most singular and a most difficult thing to maintain, that, if the East India Company are acting, or can only act

a corporate body under the King's charter, or under an Act of Parliament; yet, if there be another body acting under terms and conditions precisely and exactly the same as those contained in the charter of incorporation, that other body is not to be said to be assuming to act as a corporate body? To carry this a little further, suppose that there is a corporate body existing for a particular purpose, which corporate body chooses, with respect to other purposes not within the scope of its corporate purposes, to apply all its corporate means, and, in fact, its corporate character, as far as its dealings with the public go, to purposes that are not described in their charter. It would be a most extraordinary thing to say, “you are not assuming to act as a corporate body, with respect to purposes for which you are not a corporation; because you are not a corporation, it must be argued that therefore you are not assuming to act as a corporate body, when every act you do, is acting as if the pur

and

poses, not within the charter, were, with re ference to what you are doing, purposes within the charter, and when the world, who does not see your charter, must suppose that you are acting in a corporate character with respect to purposes, which in truth are not corporate purposes; since you are acting exactly in the same way with reference to purposes not corporate, as you do with reference to purposes that are corporate."

This is no new-fangled idea; for if we look at what passed in this court, not long after the Act of 1720, in the case of Child v. The Hudson's Bay Company, (1) when this question arose, namely: the Hudson's Bay Company having powers for making bye-laws for their regulation and management, whether the bye-laws which were made, were good bye-laws within the charter; we find that my Lord Chancellor decided, that they could not make bye-laws and regulations not for corporate purposes; and he concludes his judgment by saying, that they could not make bye-laws in relation to projects prohibited by the 6th Geo. 1. c. 18. So that he seems to introduce the necessity of considering what it is that constitutes the acting as a corporate body.

Then that is a consideration which may divide itself into two heads:-first, what are the acts which a body, being actually a corporate body, can be said to do as a corporate body; and, secondly, what are the acts for purposes not corporate, in respect of which, if they affect to do them in the face of the world, in the same manner as if they act for corporate purposes, they can still be said to be acting as a corporate body. These points are the more material; because, in the act of the 6th Geo. 1., when we look at the clauses of exception, we find, that, even with respect to corporate bodies, the legislature thought itself obliged to except, by express provisions, legal existing bodies and acknowledged corporate bodies, out of the operation of the clause relative to raising transferable stocks.

Upon the clause relative to the increase of the capital of the company, his Lordship asked, whether it was possible according to the fair construction of the deed, for any person to insist, that, before the execution of that deed, the committee of management,

(1) 2 Pere Williams, 207.

or their officers in Mexico, could have contracted on behalf of the company for the Bolanos mine, and thereby obliged them to advance an additional capital of 200,000l. If the committee of management, or Mr. Taylor, could do that, what was there to hinder them or him from pledging the company to the extent of two hundred millions, as well as to the extent of two hundred thousand pounds? To whom is the power of increasing the capital of the company given? Not to the court of directors,not to the ordinary general court,-not to the committee of management,-not to Mr. Taylor, under the authority of the committee;but " to a special general court called for the purpose," and acting in the manner and under the restrictions provided by the clause on this subject. The capital therefore can be increased only by the means here provided; and if the increase should exceed 50,000l., it is compulsory on the company to take 50,000l.; but it is not compulsory on the company to take more than that sum; and they are to raise the rest, if they can, by taking in new subscribers, giving, however, a preference to the old subscribers.

By another clause of the deed, the members of the company do what, as among themselves, they have a right to do, namely, they confine their responsibility to the amount of their respective shares,-an obligation which they may certainly enter into, if it is an obligation affecting merely their own interests. But it may not be unfit to add, that persons should be aware, that, however they can limit the responsibility of shareholders in such undertakings as between themselves, yet, as to third persons, they cannot do it; and that every man who subscribes becomes, as to the third persons, liable to the extent of every shilling he has or will have in the world, every acre of land which he has or may have in the world.

In addition to what I have remarked on the liability of every shareholder, with respect to third persons, for the special engagements of the company, I may further say, that it may be well for those, who may hereafter form such companies, to take care, that the prospectus, held out to the public, may not make them liable, not only for the special engagements of the company, but

to the full extent of the capital stated in the prospectus to be subscribed for.

Another important clause in this deed, is the clause providing for a dissolution of the company; and upon it the question would be, whether it could apply in every case in which a dissolution is fit. If persons think proper to limit the powers of dissolving a partnership, when it is a partnership not for a given time, but a partnership which, upon the ordinary principle, would be capable of dissolution, because an individual insisted that it should be dissolved-if in such case, the partnership is so formed, as to subsist until a dissolution is worked by the consent of particular individuals, or of any special number of individuals, whose consent is thereby made necessary to the dissolution:

a very considerable question, (although it is not one that I should have any great difficulty in dealing with,) would be this: Is such a clause to be taken as a clause regulating a dissolution, which is to be brought about by the mere will and pleasure of a person seeking dissolution; or is the clause to be considered at all applicable to a dissolution, which is sought for upon the ground that a party is acting in a way in which he is not authorized to act under the deed forming the company or body? For instance, if men misconduct themselves, I apprehend they would have a great difficulty in applying such a clause as this to that case. there was any flagrant misconduct, I should have very little difficulty in saying, that this clause was not meant to regulate that state of circumstances; because, under such circumstances, the Court would not keep persons together for better or worse. I should think that a clause of that kind could mean, not that it should be applied in cases in which there is misconduct, but that it is to be applied only in cases in which the question of dissolution arises upon a fair view of what is for the interest of the company; and that in relation to the question of interest, the company is not to be dissolved by an individual arbitrarily saying, "I will put an end to the partnership;" but that it be dissolved or not dissolved, according to the determination of a body of persons selected for that purpose, in whose discretion the instrument has vested the decision of that particular question ;-at the same time not taking out of the reach of a court of equity,

to decree a dissolution in cases where misconduct or misappropriation of property would be a ground for such a proceeding.

The deed contains likewise a general clause concerning reference to arbitration; which, however, is not so constructed as to throw out the jurisdiction of this Court. (2)

(2) This clause of arbitration was expressed as follows:

"When and so often as any dispute or difference shall arise amongst or between the proprietors, or any one or more of the proprietors, and the husband of any female proprietor, or the executors, administrators, or legatees, or next of kin, or assigns of any deceased bankrupt or insolvent proprietor or proprietors relating to the affairs and concerns of the company, the same shall be submitted to arbitration in manner hereinafter mentioned; that is to say, in case the dispute or difference shall be between two parties, then one of the parties, whether consisting of one or more person or persons, shall name an arbitrator, and the other of the parties, whether consisting of one or more person or persons, shall also name an arbitrator, and the two arbitrators so named, shall, within ten days after their nomination, appoint a third arbitrator; and the award of any two of such three arbitrators shall be final and conclusive; and in case the two arbitrators so named shall refuse or decline, or cannot agree, within such ten days, to name a third arbitrator, then the Master of the Court of King's Bench shall, at his option, be the sole arbitrator, or shall be at liberty to name an arbitrator in his stead; and the award of such Master, or his nominee, shall be final and conclusive; and in case the subject of dispute or difference shall be between three or more parties, then each of the parties, whether consisting of one or more person or persons, shall name an arbitrator, and the arbitrators shall within ten days after this nomination appoint another arbitrator, and the award of such last-mentioned arbitrator, with or without any one or more of the other arbitrators, shall be final and conclusive; and in case the arbitrators so to be named by the third or more parties cannot agree in the nomination of the other arbitrators within such ten days, then the Master of the Court of King's Bench shall, at his option, be the sole arbitrator, or shall be at liberty to name an arbitrator in his stead; and the award of such Master or his nominee shall be final and conclusive; and the arbitrators or arbitrator, to whom for the time being any dispute shall stand referred, shall be at full liberty, if they or he shall think fit, to make one or more award or awards, touching all or any part of the subject of dispute or difference; and every such award shall be binding on all the parties, although the same may not be final and conclusive as to the whole subject of dispute or difference; and no suit or action shall be commenced or prosecuted by any of the proprietors, his, her, or their executors or administrators, against any other or others of them, his, her, or their executors or administrators in relation to the subject of any such dispute or difference, until such award shall have been made, or the arbitrator or arbitrators shall have declined or refused to make any such award; and all necessary books, papers, and VOL. III. CH.

With respect to the question, whether this is a company within the intent and meaning of the 6th of Geo. 1., this Court has undoubtedly a jurisdiction to decide upon the legality or illegality of an act, even if its illegality should be attended with highly penal consequences, where the civil effects of that act are before the Court, and in order to determine, whether, that civil relief ought to be given or withheld, which ought not to be given, unless the act, out of which the demand of relief arises, is legal. And though in some cases it would not be too bold to say at once, that no relief will be given, because the whole claim is founded on a contract which the law does not countenance; yet a judge in equity ought to be very sure that he is right, before he proceeds upon such a ground. And I admit, that this is not a case which I ought to decide upon that single consideration.

With respect to the cases at law upon the subject, and particularly the case of the King v. Webb, (3) the Lord Chancellor said, that the doctrine would require to be considered in many points of view, which had not in those cases been attended to sufficiently. In particular, the Courts had not explained or defined, what it was that constituted acting as a corporation. Now, the statute supposes, and he himself confidently believed, that to act as a corporation, not being a corporation, was an offence at common law. Indeed, in dealing with transactions of this kind, it should never be forgotten, that we have a common law as well as a statute law; and that what may not be within the comprehension of the statute, may, nevertheless, be within the prohibition of the common law.

The act of the 6th Geo. 1. (continued

writings shall be produced before the arbitrators or arbitrator; and all parties to the reference shall be examined before the arbitrators or arbitrator, if they shall think fit; and the submission shall be made a rule of his Majesty's Court of King's Bench, Westminster."

(3) 14 East, 406.

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