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Having allowed Mr. Walker to have his say, we will now consider seriatim the specific charges we made against his book, and the reply he has to make to them.

(1) We adduced, as an illustration of the incompleteness of the book, the fact that all the information vouchsafed as to the question of when compound interest will be charged was contained in about two lines.

Mr. Walker does not deny this.

(2) We said that these two lines were taken verbatim from the head-note in Burdick v. Garrick (L. R. 5 Ch. 233).

Mr. Walker admits that they were.

Dec. 25, 1880.

Mr. Walker's two lines, for he does not attempt to quote any passages in the judgments corresponding to the singular statement he "adopted" from the head-note, viz., that compound interest will only be charged where the money has been employed in trade.

"For

(5) We said that on another point Mr. Walker had been misled by the head-note to Burdick v. Garrick into saying, in the exact language of the head-note in that case, that "there was no proof that a person in a fida. ciary position had made any interest or profit on money in his hands"; and we referred to the argument of counsel to show that the money was stated "to have been employed by the fiduciaries in their business, and had been mixed up with partnership funds." Mr. Walker's lofty remark, my facts, Sir, I looked to more authentic sources,' is somewhat unfortunate, for in return we will point him to a more authentic source even than the defendants' answerviz., the judgment of Lord Hatherley, where it is stated that "the Vice-Chancellor has directed interest to be charged at the rate of five per cent., which appears to me to be perfectly right, and for this reason, that the money was retained in the defendants' own hands and was made use of by them." In saying that Lord Hatherley expressly distinguished the business of a solicitor from trade, Mr. Walker mixes up the two totally distinct questions of compound interest and the rate of interest to be charged. What Lord Hatherley said was that a solicitor's business was not a business in which the partners could make compound interest.

(3) We said that these two lines were inaccurate in stating that "compound interest will only be given against an accounting party when he has employed money in business." "Surely," we said, "the author cannot be unaware of the cases in which it has been held that compound interest will be charged against a trustee or executor who, notwithstanding an express direction in the will to accumulate the income, keeps trust funds in hand without endeavouring to invest them-cases which were recognized by Lord Selborne in Vyse v. Foster (23 W. R. 355, L. R. 7 H. L., at p. 346)."

Mr. Walker does not deny that he was wholly unaware of these cases-which, by the way, include such a wellknown decision as Raphael v. Boehm (11 Ves. 92, 13 Ves. 407)-but he thinks it a sufficient answer to our remark

(6) We said that Mr. Walker had reproduced a portion of the head-note in Blogg v. Johnson (L. R. 2 Ch. 225).

Mr. Walker admits that he "followed" the head-note. (7) We further said that he had reproduced this head-note without regard to the question of whether it accurately represented the doctrine laid down in that case.

Mr. Walker does not allege that the head-note accurately represents the whole doctrine laid down in that case.

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Following" the head-note, he says in his book that "the court will not charge an executor who has been guilty

of delay in accounting with interest on arrears of income unpaid by him." We will simply ask whether that statement accurately represents the doctrine laid down in Blogg v. Johnson (p. 229) that "if the accounts had been taken immediately upon the death of Mary J. in October, 1861, the defendant would have been proved to be a debtor to her estate in a sum of £4,330 16. 1d.," and in that case the claim for interest would have been allowed, since, as Lord Chelmsford said, "it is immaterial how the sum [retained by the executor uninvested] has arisen, whether from a legacy, or a distributive share, or a residue, or the arrears of income. In the latter case the claim for interest is not made on account of the arrears, but for the improper keeping back of a sum of money, from whatever source derived, which the executor or the trustee ought to have paid over."

to raise a quibble as to whether the word "recognized" is a proper description of the notice bestowed on the doctrine by Lord Selborne in Vyse v. Foster. "Referred to" would have done just as well for our purpose, which was to show that the most cursory examination of a leading recent case might have led the author to the cases which he had overlooked. Unfortunately for Mr. Walker, how. ever, his quibble is wrong, for "recognized" was a perfectly accurate expression. Mr. Walker has apparently either not observed, or, at all events, has not stated, that in the observations he quotes from the judgment of Lord Selborre his lordship is not referring to the doctrine we mentioned at all, but to what he terms "a different ground"-viz., that "a trustee who suffers money, which he ought to call in, to be used in a business in which he has an interest, may be chargeable with compound interest. Of that," said his lordship, "I say nothing." Quite so; neither did we. If, as Mr. Walker says, he has re-read the report of Burdick v. Garrick, he must have seen the observations of Lord Selborne on the opposite page to those he quotes, which was, moreover, the page we mentioned in our review. These are the observations to which we referred. As Mr. Walker has not quoted them, we will do so:-"The trustee there [i.e., in Jones v. Foxall], being bound by the terms of his trust to call in the debt at a particular time, and being also bound, by reason of the infancy of the cestui que trust, to accumulate the income of the trust fund for the benefit of the infant plaintiff, was charged with compound interest, which the very existence and neglect of the obligation to accumulate might make perfectly proper." If this is not a "recognition of the doctrine we referred to, we do not know what would be such a recognition.

(8) We said that Mr. Walker must be unaware of the Indian Act 2 of 1874, relating to the non-allowance of commission to executors in India.

(4) We implied that in his two lines Mr. Walker had teen misled by the portion of the head-note which he "adopted" from Burdick v. Garrick. Mr. Walker does not expressly say that the portion of the head-note which he "adopted" is an accurate or "sufficient" statement of the law as to compound interest; he contents himself with affirming that, in his opinion, the whole headnote is "a correct note of the decision of the court." "The question of compound interest," he says, came formally before a strong court in Burdick v. Garrick (on which Jones v. Foxall amongst many other cases was cited), and the question [sic] was expressly decided in terms which, I submit, are accurately summed up in the head-note above mentioned." What question? Not the question stated in

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Mr. Walker admits that he was ignorant of the Act, and he also obligingly admits that "it has an important bearing on the subject." We should rather think it has. But he asks, Was he bound to know of the Indian Act? And he waxes eloquent on the "burden" which such an extravagant requirement would impose 'upon the shoulders of the profession." We have never said or implied that Mr. Walker was bound to know the Indian Acts. What we do say is that, before an author

66

tells his readers that " an executor in India is entitled here, out of deference to the practice of the Indian courts, to a commission of five per cent. on all assets of a testator collected by him there," he is bound to take some pains to verify the statement. Now let us see how much trouble it would have taken Mr. Walker to correct his erroneous statement. The Act of 1874 consolidated and amended former Acts relating to the same matter, enacted with reference to the Presidencies of Bengal, Madras, and Bombay respectively. Now, Mr. Walker quotes in a foot-note to the part of his book relating to this very subject the case of Matthews v. Bagshaw (14 Beav. 123). the end of the report of that case there is a note (ap. parently written by Mr. J. F. Leith, Q.C.) calling attention to these local Acts. If it is too much of a "burden" for the text-book writer of the present day to expect him to read the report of a case which he cites, we may say that in a

At

tolerably well-known book, called Lewin on Trusts, 7th ed., at p. 529, this very note is reproduced. If Lewin is so large a book as to be a "burden" to the text-book writer, we may refer him again to a smaller book, Godefroi on Trusts, where he will find the Bengal Act referred to at p. 199. If Mr. Walker had taken the trouble to look into these tolerably accessible sources he would have had sufficient warning to enable him, with the help of the chronological table prefixed to the Indian Revised Statutes in the Lincoln'sinn Library (which contains a statement of the subject-matter of each Act), and with the assistance (if necessary) of the ever-chliging and most intelligent librarian, to arrive in a few minutes at the general consolidating and amending Act of 1874. So much for the "burden' we are charged with attempting to impose on text-book writers !

We believe we have now, at a reckless expenditure of space, substantiated all the specific objections we made to Mr. Walker's book. It is happily the first time, we believe, for many years, that any review in the SOLICITORS' JOURNAL has been called in question; and we beg to give notice that we are not going to continue the practice of unravelling and exposing objections of the kind of those made by Mr. Walker.

[The following is a copy of the petition referred to, which is stated to have been signed by 466 articled clerks :

To the Council of the Incorporated Law Society. The petition of the undersigned, being articled clerks to solicitors in England.

Whereas at the intermediate examination for articled clerks there are at present no rewards in the shape of prizes, nor is there any distinction made as to the merit of the candidates who pass that examination.

And whereas your petitioners are of opinion that it would be a great incentive to study, and an encouragement to junior students, if some such rewards and distinctions were given and made.

Now your petitioners respectfully request that the matter may receive attention and consideration, and that, if possible, prizes may be awarded, as at the final examination; and that there may be some reasonable classification according to merit of successful candidates at the intermediate examination; and that, even if prizes cannot be awarded, such classification may be observed.]

The following advertisements from the Daily Chronicle have been forwarded to us:

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Non-Private and Confidential.-Messrs. LEWIS, of 123, Chancer-laze, give advice and legal assistance, and also undertake the settlement of the affairs of all those who are in debt or difficulties, without publicity or stoppage of business. Probate and Divorce casts attcuded to. Hours, 10 to 4; Saturdays, 10 to 1.

Mr. J. D. Rogers, late scholar of Balliol College, Oxford, bas been elected to the Stowell Law Fellowship in University College.

The Washington Republic says that one of the most important duties the new President of the United States will have to perform will be the appointment of four associate justices of the Supreme Court of the United States in place of Justices Clifford, Hant, Swayne, and Strong.

CASES OF THE WEEK.

PRACTICE CLAIM BY DEFENDANT TO CONTRIBUTION OR INDEMNITY AGAINST THIRD PARTY LEAVE TO ISSUE NOTICE TO THIRD PARTY-DISCRETION OF JUDgeJUDICATURE ACT, 1873, s. 24, SUB-SECTION 3—Ord. 16, rr. 17, 18.-In a case of the Wye Valley Railway Company v Hawes, before the Court of Appeal on the 15th inst., a question arose as to the propriety of giving leave to the defendants to issue a notice, under rule 18 of order 16, to some persons, not parties to the action, from whom the defendants claimed indemnity against liability to the plaintiffs in respect of the claim in the action. The action was brought by a company, against their past and present directors, to recover certain moneys which it was alleged the defendants had improperly paid to the shareholders, out of capital, by way of dividend or interest on their shares. The defendants claimed to be indemnified against liability to the plaintiffs by the shareholders who had received the moneys in question, and they applied to Hall, V.C., for leave to issue a third-party notice and serve it upon all the past and present shareholders to whom any part of the moneys in question had been paid. It was stated that the shareholders were as many as 450 in number. Hall, V.C., refused the application (29 W. R. 120), on the ground that the proposed proceeding would materially embarrass the plaintiffs, and this decision was affirmed by the Court of Appeal (JESSEL, M.R., and COTTON, and LUSH, L.JJ.). JESSEL, M.R., said that the judge had a judicial discretion as to granting such an application, and in his opinion it was not in every case in which the question to be decided between the plaintiff and the defendant in the action would also be the question to be decided as between the defendant and some third person that, as a matter of course, the defendant should have liberty to serve a notice on that person. It must not be forgotten that, if the person served did not choose to appear, he would still incur a certain amount of costs, which, so far as his lordship could see, he would not be able to recover. If the judge could see that the claim for contribution or indemnity was prima fucie bad, he might, in the exercise of his discretion, refuse the application. All these rules were in favour of the defendant, subject to this, observation that it was not intended to embarrass the plaintiff in his action. It was intended to help the defendant as against third parties, but not to delay the plaintiff, or to subject him to further costs. If to allow the notice to be given would unfairly hamper the plaintiff, the leave ought not to be given. In the present case his lordship was by no means convinced that the claim to indemnity was well founded. But it was proposed to serve 450 people, every one of whom might be disposed to dispute the claim. There might be 450 new defendants, and 450 summonses for the direction of the judge as to the mode of trial. Each of them might ask for liberty to defend the action, and each of them would then be entitled to call his own witnesses. This was possible, though not probable, but, if only a tithe of the persons served came forward, the plaintiffs would be seriously embarrassed. Under the circumstances, his lordship thought that the discretion of the judge had been rightly exercised. COTTON, L.J., thought that the case was within rule 18, but that the judge had a discretion in the matter, and that the leave ought not to be given when the result would be to hinder or embarrass the plaintiff in the prosecution of his action. The rule was intended for the benefit of the defendant. The probability of the defendant's success in his claim (unless it was clearly impossible that he could succeed) ought not to influence the judge in the exercise of his discretion; but the Vice-Chancellor's decision was right, on the ground that the issuing of the notices would tend to embarrass the plaintiffs. LUSH, L.J., said that the court must be satisfied that there was a question in common between the plaintiff and the defendant, and between the defendant and the third party, which ought to be decided in the action. In the present case the benefit which would result to the defendants from deciding the question as against the third parties in this action would be infinitesimally small compared with the embarrassment which would be caused to the plaintiffs by bringing in all these parties.-SOLICITORS, Wilson, Bristows, & Carpmael; Newman, Stretton, & Hilliard.

RECEIVER IN BANKRUPTCY-REMUNERATION-PRIORITYAPPLICATION FOR PAYMENT-LOCUS STANDI-BANKRUPTCY

RULES, 1871, RR. 2, 3, 7.-In a case of Ex parte Browne, before the Court of Appeal on the 16th inst., a question arose as to the right of a receiver in bankruptcy to apply to the court for an order that the trustee should pay him the taxed amount of his charges. By rule 2 of the Bankruptcy Rules of 1871 it is provided that, "Where a receiver or manager of the property or business of a bankrupt shall have been appointed, he shall, upon the appointment of a trustee, deliver to such trustee all money and property which may have come to his hands, unless the court shall otherwise order"; and by rule 3, "A receiver or manager, in cases either of bankruptcy or liquidation, shall not have any lien whatever for his remuneration on any money or property which may have come into his bands"; and rule 7 provides that, "Where the receiver or manager is not continued as trustee, or is continued as trustee but without remuneration, he shall be allowed out of the estate such sum for his services as receiver or manager as the taxing officer of the court shall, having regard to the views of the trustee, and committee of inspection (if any) thereon, think fit." In the present case a liquidation petition was filed on the 2nd of April by a licensed victualler. On the 4th of April one Browne was appointed receiver of the debtor's property, and on the 10th of April he was appointed manager of the debtor's business. On the 5th of June the creditors appointed a different person trustee, and on the 12th of June the receiver delivered over the debtor's property to the trustee, and gave up possession of the business to him. The receiver's expenses out of pocket were paid to him. The trustee carried on the business for some time, and ultimately sold the public-house and other property, and out of the proceeds of sale he paid off some large mortgage debts on the house. In the following March the receiver applied to the court for an order for payment to him by the trustee of the amount of his charges as receiver and manager, which had been taxed at £60 15s. He alleged that the trustee had not realized the estate to the best advantage, and that, if he had done so, there would have been ample funds to pay the amount claimed. And he asked to have the trustee's accounts taken. The trustee said that he had in hand a balance of only £122 on account of the estate, and that he did not expect to realize anything more. And he said that there were still unpaid auctioneers' charges and solicitors' costs in relation to the realization of the estate which would more than exhaust the £122. The application was refused by the registrar, and his decision was affirmed by the Court of Appeal (JAMES, COTTON, and LUSH, L.JJ.). JAMES, L.J., said he thought it would be a monstrous evil if a receiver was entitled to come to the court to complain of the conduct of the trustee in the administration of the estate, either to prevent him from dealing with it in a particular way, or to make him account afterwards for an improper administration. If the receiver suffered by a mal-administration, he did so in common with the trustee himself, the solicitors, and the creditors, and if there was any ground of complaint it was much safer to allow the complaint to be made by the creditors, the persons who would really suffer. It was not desirable to allow the receiver to come to the court as a litigant party to question the propriety of the trustee's management of the estate. COTTON, L.J., said that the receiver had no lien on the assets for his charges; his right was only to be paid out of the net assets. And, in order to ascertain what the net assets were, the estate must first be administered for the benefit, not of the receiver, but of the creditors. If the trustee had acted improperly in the administration, the creditors were the proper persons to question his conduct. LUSH, L.J., said it would be setting a very mischievous precedent to allow the receiver to question the trustee's management of the estate, he being under the control of the creditors. The receiver could not come to the court to ask for payment unless he could show that there were net assets.-SOLICITORS, Nash & Field; Champion, Robinson, & Poole.

DIVORCE-VALIDITY-MARRIAGE BETWEEN FOREIGNER AND ENGLISH SUBJECT SOLEMNIZED IN ENGLAND-DissoLUTION BY FOREIGN COURT.-In a case of Harvey v. Farnie, before the Court of Appeal on the 20th inst., an important question arose as to the validity of a decree for the dissoluton of a marriage pronounced by a foreign court, the marriage between the parties having been solemnized in England. The decision of the court is of importance, as explaining the meaning of the well-known Lolley's case

a

(Russ. & Ry. 237). In Harvey v. Farnie a marriage was, in 1861, solemnized in England between a domiciled Scotchman and an Englishwoman who at that time was domiciled in England. Immediately after the marriage, the wife went with the husband to Scotland, where they lived together until the year 1863, when the wife obtained in a Scotch court a decree for a divorce a vinculo matrimonii, on the ground of the husband's simple adultery-a ground upon which a divorce could not have been obtained in England. In the year 1865, the husband was married in England a second time to another English lady. The petition was presented by the second wife, claiming a declaration of nullity of marriage, on the ground that the Scotch divorce was inoperative in England, and that, consequently, the husband had a wife living at the time when the second marriage was solemnized. It was contended on behalf of the petitioner that, because the marriage was celebrated in England it was indissoluble in Scotland, or indissoluble except for some cause for which it could be dissolved in England, reliance being placed on Lolley's case, in which it was said "that Do sentence or act of any foreign State could dissolve an English marriage a vinculo matrimonii for grounds on which it was not liable to be dissolved a vinculo matrimonii in England." In that case, however, the marriage which was in question had been contracted between two persons domiciled in England, and had been solemnized in England, and a divorce on the ground of the husband's adultery was decreed by a Scotch court on the application of the wife during a temporary residence in Scotland, where the parties were not domciled. Sir James Hannen held (24 SOLICITORS JOURNAL 507, L. R. 5 P. D. 153) that Lolley's case was distinguishable from, and did not govern, the present case, and that the decree of divorce by the Scotch court was valid in England as well as in Scotland, and, consequently, that the second marriage was valid. The decision was affirmed by the Court of Appeal (JAMES, COTTON, and LUSH, L.JJ.). JAMES, L.J., said that the judgment in Lolley's case must be coustrued with reference to the particular facts which were then before the court for its determination-viz., case in which the parties were domiciled in England at the time when the status of husband and wife was originally constituted, and continued domiciled there at the time when it was sought to dissolve the status. The application of the decision to a case like the present had been much questioned by the highest authority-by Dr. Lushing ton in Conway v. Beasley (3 Hagg. Eccl. 639), and by the lords who decided Shaw v. Gould (L. R. 3 H. L. 55), and there was an express decision by the Irish Lord Chancellor Blackburne in Maghee v. McAllister (3 Ir. Ch. Rep. 604), that Lolley's case did not apply to a case in which the facts were identical with those of the present case, substituting Ireland for England. No doubt, iu McCarthy v. De Cair (2 R. & M. 617, Lord Chancellor Brougham held that Lolley's case applied to a case like the present. when the facts of McCarthy v. De Caix were investigated, it appeared that the point did not really arise there for decision, and, therefore, what he said must be regarded as having fallen from him per incuriam, and could not be looked upon as an authority. On principle, JAMES, L.J., said that he could not doubt that Sir James Hannen's decision was right. If a foreigner domiciled in his own country came to this country for the purpose of taking an English wife, the moment the vinculum of marriage existed the wife acquired the domicil of the husband, and all the rights and consequences arising out of the status would have to be determined by the law of that domicil which became the domicil of both husband and wife-assuming, of course, that the domicil was a real bond fide domicil, and not a fictitious one, resorted to for the sole purpose of altering the status. When the domicil was the natural bonâ fide domicil of husband and wife, the forum of the domicil must determine whether the status was originally properly constituted, and whether any ground had since arisen for dissolving it. COTTON, L.J., said that a great deal of the difficulty had arisen from the use of the word "marriage in two senses, as meaning the solemnity, and also the status. The validity of the solemnity must depend on the law of the place where the marriage was celebrated. The country of domicil always (i.e., in the case of Christian countries) recognized the parties as married if they had followed the forms prescribed by the law of the country in which the marriage was solemnized. Bat the status must be determined by the law of the actual domicil, and the

But,

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domicil of a wife was always that of her husband. Divorce was not an incident of the marriage contract, in the sense that the lex loci contractus governed it; it was an incident of the status, and was to be determined by the law of the domicil. In the present case there was throughout a real domicil in Scotland, and the Scotch court bad jurisdiction to determine the status of the parties, not only in Scotland, but in every other country. The decision of the Court of Appeal in Niboyet v. Niboyet (27 W. R. 203, L. R. 4 P. D. 1) did not conflict with this view, for it turned entirely on the construction of the English Divorce Act. LUSH, L. J. said that in Lolley's case the marriage in question was called an English marriage." But that term might refer, either to the place where the marriage was solemnized, or to a marriage between persons who were domiciled in England. In that case the marriage was an English one in both senses; in the present case it was English only in the sense of having been solemnized in England. The decision under the circumstances of the present case, that the divorce by the Scotch court was valid in England, seemed to be a logical sequence of the decision of the House of Lords in Warrender v. Warrender (2 C. & F. 488). There a domiciled Scotchman was married in England to an English lady, and his Scotch domicil continued, and it was held by the House of Lords that a Scotch court could dissolve the marriage in Scotland. To hold that the dissolution extended to Scotland only, and that the divorced husband could, if he married again, be indicted in England for bigamy, would be a shocking thing. No doubt that consequence followed in Lolley's case. But that decision ought not to be extended. There were anomalies enough already in the law of marriage, and the court ought not to create another. The observations of Lord Brougham in McCarthy v. De Caix had been shown to be obiter dicta, and the decision of Lord Chancellor Blackburne in Maghee v. McAllister commended itself to one's sense of what was right and just.-SOLICITORS, S. A. Tucker; J. S. Ward.

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ACT OF BANKRUPTCY PROTECTED TRANSACTION APPOINTMENT OF RECEIVER IN BANKRUPTCY-EQUITABLE EXECUTION SUBSEQUENT APPOINTMENT OF RECEIVER BY HIGH COURT-BANKRUPTCY ACT, 1869, s. 95.-In a case of Salt v. Cooper, before the Court of Appeal on the 21st inst., a question arose as to the validity of an equitable execution on lands of a judgment debtor, by means of the appointment of a receiver by the High Court, as against the title of a receiver who had been previously appointed by the Court of Bankruptcy of the property of the debtor. Judgment was recovered against the defendant on a specially-indorsed writ in an action in the Queen's Bench Division, on the 2nd of September, and on the same day a writ of elegit was issued for the amount of the judgment debt and costs. The defendant's land was in mortgage and the mortgagee was in possession, and the sheriff made a return to the writ that there were no lands, nor any goods or chattels of the debtor which he could seize. The plaintiffs then obtained from Stephen, J., an ex parte order in the action appointing a receiver of the rents and profits of the de tor's lands, without prejudice to the rights or possession of any prior incumbrancer. This order was made at four p.m., on the 14th of September, without notice of any act of bankruptcy committed by the debtor. In fact a bankruptcy petition had the same day (without the knowledge of the plaintiffs) been presented against the debtor in a county court, founded upon an act of bankruptcy committed by him on the 13th of September, and at 3.45 p.m., an order had been made by the county court, appointing a receiver of the debtor's property. The bankruptcy proceedings afterwards resulted in a liquidation by arrangement, under which a trustee of the debtor's property was appointed. The mortgagee sold the mortgaged property, and the question then arose who was entitled to the surplus of the proceeds of sale after payment of the mortgage debt,the plaintiffs in the action or the trustee in the liquidation. Jessel, M.R., held (ante, p. 74) tha', as the receiver in bankruptcy had been first appointed, his appointment gave him a legal right against everybody except the mortgagee in actual possession. The subsequent appointment of a receiver by the High Court was therefore inoperative, and the trustee was entitled to the surplus of the proceeds of sale. This decision was affirmed by the Court of Appeal (JAMES, COTTON, and LUSH, L.JJ.). The argument on the appeal turned mainly on the effect of section 95 of the Bankruptcy

Act, 1869, which, it was urged, protected the appointment of the receiver in the action as being an equitable execution against the land of the debtor, executed in good faith and without notice of an act of bankruptcy. But the court said that on the appointment of the first receiver the property of the debtor came into the custody of the law, and therefore the subsequent execution could not affect it. The receiver appointed under the second order could not interfere with the rights of the receiver appointed by the prior order of the | Bankruptcy Court.-SOLICITORS, Stevens & Co.; Layton & Jaques.

COMPANY-WINDING UP - CONTRIBUTORY-POWER OF COMPANY TO PURCHASE ITS OWN SHARES-COMPANIES ACT, 1862, s. 12-COMPANIES ACT, 1867, s. 9.-In a case of In re The Dronfield Silkstone Coal Company, before the Court of Appeal on the 21st inst., the question arose whether a company limited by shares can purchase its own shares when the articles of association expressly authorize the purchase, but the memorandum of association contains no such power. The memorandum of association of the company in this case contained the powers usual in the case of a coal company, and there was also a general clause authorizing the doing of "all things conducive to the attainment of the above objects." The articles of association provided that "the directors may from time to time purchase for the company any shares in the company, at such price as the directors think reasonable, and such shares so purchased may from time to time, and at any time or times, be by the directors dealt with in the same way as if they had never been before issued, and the purchase-money payable by the company for any shares so purchased may be paid out of any assets of the company, and such shares may be transferred to the company or to such person or persons as the directors shall determine, and any profit arising on the re-issuing or subsequent sale of any shares purchased by the company shall be considered as profits of the year in which such shares shall be re-issued or sold for the company." In March, 1872, the company, in pursuance of the resolution of a general meeting, agreed to purchase 549 shares belonging to a Mr. Ward for £5,000, and Ward executed a transfer of the shares to the company. Ward's name was removed from the register of shareholders, and the company was registered as the holder of the shares, and was so returned afterwards to the Registrar of Joint Stock Companies. It was admitted that the transaction was bona fide. It took place in 1872, and in 1879 an order was made to wind up the company. The liquidator then sought to treat the purchase as invalid, and to place Ward on the list of contributories. Jessel, M. R., held (24 SOLICITORS' JOURNAL, 465) that this must be done. He was of opinion that the effect of the power was to authorize the company to traffic in their own shares, that this was inconsistent with the business of the company as defined by the memorandum of association, and that the provision in the articles, being inconsistent with the memorandum, was invalid. He also thought the transaction was invalid, on the ground that the company could not be a member of itself, and that the effect of the purchase was to diminish the capital of the company. This decision was reversed by the Court of Appeal (JAMES, COTTON, and LUSH, L.JJ.). COTTON, L.J., said that reliance had been placed on the fact that, by reason of the winding up, the rights of the creditors bad intervened, and that the liquidator represented them. But the right of the creditors was to make every present member of the company, and every past member who had ceased to be a member within a certain time, contribute to the payment of the company's debts. Their right was only against members of the company, and the question who was a member must depend on the memorandum and articles, and on the general law. The question was whether Ward had effectually ceased to be a member. The transaction in question did not make the company a member in respect of the shares; it could not be a member of itself. The transaction must be considered as equivalent to a surrender of the shares for the benefit of all the other shareholders, not a cance lation of the shares. The directors could have disposed of the shares again for money. The purchase was not justified by the general clause in the memorardam, but only by the provision in the articles. The difficulty of the Master of the Rolls seemed to have been that the article would allow trafficking in the company's shares. Of course, nothing in the articles could

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156

authorize that, if the memorandum did not. What was actually done was authorized by the articles, and the question was whether it could be effectually done. His lordship thought the article was not intended to authorize any trafficking in shares for the purposes of profit, but only to authorize a purchase of shares, if for any reason the directors should think this desirable. It was not intended to add a new kind of business to that which was authorized by the memorandum and the making of profit thereby, though profit might incidentally arise. The principal argument in support of the proposition that the power could not be effectually given was that such purchase of shares was tantamount to a reduction of the capital of the company, which was an illegal thing. If it was equivalent to a reduction of the capital, his lordship failed to see how a surrender or a forfeiture of shares was not equally a reduction of capital, and yet it was admitted that shares could be forfeited or surrendered. If a company was to disable itself from carrying on the business for which it was formed, no doubt that would be illegal, and if the purchase of shares by the compa y was part of a general scheme for returning the capital, it would stand on quite a different footing. There was no such scheme in the present case, and it was admitted that the purchase was bona fide. No doubt the articles did not limit the power of purchase, and if it was used to an unlimited extent the exercise of it would be bad. But the exercise

Dec. 25, 1880.

was cured by the fact that the company had for seven years adopted the transaction and taken the benefit of it, and nobody thought of questioning it until the winding-up order. After the lapse of time the company could not have called the transaction in question, and if so, the creditors could not question it, for the liability of the shareholders was only a liability to the company, and the creditors could take only that which the company could legally or equitably have recovered from the shareholders. -SOLICITORS, Pilgrim & Phillips; Emmet & Son.

COMPANY-WINDING UP-JUDGMENT CREDITOR-DELAY IN ISSUING EXECUTION OWING TO REPRESENTATION BY THE COMPANY AS TO PAYMENT PAYMENT TO SHERIFF ON ACCOUNT OF DEBT-COMPANIES ACT, Ss. 85, 87, 163.-In a case of Re Firth House Paper Mills Company, before the Master of the Rolls on the 17th inst., a motion was made by certain creditors that the liquidator of the company might be ordered to pay to them a sum of £100, paid to the sheriff of Yorkshire on the 4th of June, 1880, and a sum of £383 5s. 6d., for which execution had been issued against the company on the 8th of June, 1880. The debt was in respect of the costs of an action of tort, and which were taxed at a sum of £483 5s. 6d., and on the 24th of May, 1880, the solicitors of the creditors applied to the solicitors of the company for payment. On the 28th of May the creditors' solicitors again wrote, stating that unless the amount were paid in the course of the next day, they should assume it was not intended to pay without further proceedings, and should act accordingly. On the 29th one of the firm of the creditors' solicitors met the managing director of the company, and he said to the solicitor it would be a great convenience to the company if the payment were allowed to stand over until the 7th of June, and on the faith of the director's statement that it would then certainly be paid, it was arranged that the matter should stand over until that day. On the 7th of June the London agents of the creditors' solicitors were instructed to issue a fi. fa. for the amount of the debt. On the 8th of June the managing director of the company wrote stating that he had been prevented from raising money on mortgage as he had anticipated, and that this would prevent his paying the above debt, as he had intended, but that he was going to London in the hope of effecting the mortgage there. On the 9th of June the deputy-sheriff entered on his fi. fa. for the amount of the debt. On the evening of the same day the managing director of the company went to the deputy-sheriff and paid him a sum of £100 on account of the debt, and asked him not to proceed to advertise a sale for a few days, as he should shortly be paid the balance, and by consent the advertisement was postponed. On the 10th of June the creditors' solicitors received notice that a petition to wind up the company had been presented by a creditor on the 8th of been presented on the same day by the company for a windingJune and, later in the day, notice that a petition had also up order. On the 4th of June the secretary had issued notices for a meeting on the 14th of June to pass a resolution for the voluntary winding up of the company. By an order made in the action on the 10th of June, ex parte, the sheriff was restrained, until further order, from proceeding with the execution. By another order of the 15th of June, 1880, made in the action, it was ordered that the plaintiffs should be in the same position as if the sheriff had sold, but without prejudice to any question. Notices to the deputy-sheriff not to pay over the £100 were given by the provisional liquidator and also by the creditors, and the question now was argued whether the official liquidator, who was also the deputysheriff, was bound to pay the plaintiffs' solicitors the £100 and the remainder of their debt on a preferential claim out of the assets, on the ground that the creditors, by the representation of the company, had been prevented from issuing execu tion, which they would have done had it not been for the promise of payment made by the company. They relied on the various cases commencing with Great Ship Company's case (12 W. R. 139, 4 D. J. & S. 63) and ending with Re Richards (L. R. 11 Ch. D. 676). JESSEL, M.R., said he had great difficulty in reconciling the cases both with one another and with the Act of Parliament. It had been decided that the 163rd section of the Companies Act, 1862, did not really avoid every "attachment, sequestration, distress, or execution" put in force against the company, and that all the section meant was that the "attachment, &c.," would be void unless the court otherwise directed. Moreover, the 85th and 87th sections enabled the court to say whether an execution

to a limited extent would not necessarily be ultrà vires. It was said that the power was contrary to the spirit of the Companies Acts of 1862, 1867, and 1877. But this transaction was not expressly prohibited by the Acts. It was not really a reduction of the capital. The number of shares remained the same; there was power to re-issue them; they were not in any way cancelled. A reduction of capital, which did not involve an alteration of the memorandum, did not violate the Act. It was urged that the Act contemplated only one way in which a shareholder could get rid of his liability-viz., by a transfer of his shares to another person. But the power of transfer was given to enable a shareholder to retire from the company against the will of the other shareholders; a power to retire which had been assented to by all the shareholders ought not to be held illegal unless it was expressly prohibited by the Act. No doubt the power was a dangerous one; and might be so used by the directors as to enable the shareholders to escape liability, and to reduce the capital, so as to prevent the company from carrying on its busine-s. But the answer to the objection was that such an exercise of the power would be illegal. On principle his lordship thought that the power was not invalid, and that Ward was released from his liability by the transfer to the company. And his lordship could not help thinking that the opinion of the late Lord Justice Giffard in Zulueta's case (18 W. R. 778, L. R. 5 Ch. 444) was in favour of the validity of such a power, for he held that a purchase by a company of its own shares was not valid unless it was distinctly authorized by the articles. JAMES, L J., said that the fallacy of the judgment of the Master of the Rolls lay in supposing that the creditors had some peculiar right. A creditor qua creditor had no right against the shareholders. He had no right against the shareholders but through the company, and no right but such as the company would have had, with the exception of the statutory right against past shareholders. The case must be treated in exactly the same way as if the company itself had been applying to have Ward's name restored to the register of members, as having been improperly removed. To such an application by the company there would have been abundant answers. The articles directly authorized the purchase, and the purchase had been, in fact, made. It was said that the power was 30 large in its terms as to enable the company to traffick in its own shares, and that therefore it must be held bad altogether. If the directors had spent the company's money in any such business, it might possibly be open to the shareholders to make them personally liable. But there would be no other result. The person who had bought the shares could not escape liability, nor could the company get the shares back. The purchase of shares in the present case was authorized by the articles, it was made, and it was assented to by the great majority of the shareholders. If the transaction was in any way questionable, still it was a mere matter of internal management of the company-a domestic transaction between the shareholders. If it was ultrà vires the company, the illegality

per case. The difficulty was to sty
nd he must exercise some sort of
the matter. Now he considered there
ain to follow, neither of which were
de first was that under the Act the
harri pass; the second was that
cure Act the Legislature had said

company the Bankruptcy Rules
3r whether he looked at the rules in
the Winding-up Acts, he considered the!
=ght to be followed unless there was
doing so. In Re Richards Frv.
for previous decisions, had heli
had been induced by the company to
ld not be allowed by such for-
at which he would have Lid by
disdain. The reason suggested was
asked for indulgence they were
wif they had got judgment. It i
sch rule in bankruptcy, and he
The bald be more indulgence given to
the case of a private trader. Ia his
& soffrent guide to him in his
As the sider cases they were well
Companies, 3rd ed., p. 185. In
LG LB. 4 Eq. 681) there was a

d not appear to him to have much
m insolvent company. The next
ip Company (16 W. R. 689). It
e smpany was insolvent, but Turner,
that the company had been guilty of
dband, and it was such an extra-
he was entitled to interfere. That case
an in the present case. In the case of
RCE. D. 183) the company
24ther cases did not afford him any satis

case. As to the facts, he was of
resentation on the part of the com-
Demon had simply been induced to holl
The company to pay on the 7th of June.
ke the petitioning creditor of the

king at the state of the cirfor the exercise of his dial have ton of the principles on which vent companies should be carried lemast treat that as paid to the agent

mencement of the winding up, be therefore void unless he ctherwise ad o utice of the winding-up, and de same portion as a creditor in a case Aparment for value without notice of Ce the fremstances be thought the

the £100 after deducting the in relation thereto. There would of the motion-SOLICITORS, Layton

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