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IMPORTANT JUDGMENT.

LIABILITY OF DIRECTORS OF

COMPANIES

£ m ,RlMi Courfc yesterday Dr Giles, n w £ ohvered judgment in the case t n v nney. v< George Spencer and W. J. ualton, which had been argued ab the Pr?, vlous sitting of the Court by Mr Campbe 1 for the plaintiff and Mr Baume for the defendants.

The case raised a very.important question as to the porsonal liability of directors of companies in respect of promissory notes made by them. The plaintiff sued the defendants for £62 12a 6d, amount of principal antt interest due upon a promissory note made by the defendants in favour Oi the plaintiff. The defendants were directors of the South Pacific Trading Company (Limited) and the defendant, W. J. Ualton, waa also secretary of the Company. The promissory note commenced : Una month after date wo promise to pay, and was in the usual form. It was signed by the defendants, and opposite their signatures thore were the words, "Directors S.P.T. Co. (Ltd.)." The seal of the Company was impressed on the instrument over the words " we promise to pay.' and it was countersigned by the defendant, VV. J. Dalton, who had added "secretary " to the counter-signature. Ihe defence mainly relied on was that the promissory note was that of the South Pacific Trading Company (Limited) and not that of the defendants. Dr. Giles said in delivering judgment that he had looked into the cases quoted and found that they supported the contention of Mr Campboll. Mr Baumo argued that the case before the Court was dißtingui3hable from the authorities quoted on behalf of the plaintiff because in not one of them was the instrument countersigned by.^signatory party but in his (Dr. Giles') opinion that mado no difference. In the casoofDutton v. Marsh (L.K.6.Q.8. 361) ill was held that the affixing of a company's seal to a promissory note did not exempt directors from personal liability, and therefore he did not see how the cOuntersignatufo of the secretary, Mr Dalton, could do so in this case. By section 26, sub-section 1, of the Bills of Exchange Act, 1883, ib was enacted that " whore a person signs a bill as drawer, indorser, or acceptor, and adds words to his signature indicating that he signs for or on behalf of a principal, or in a representative character, he is not personally liable thereon ; but the mere addition to his signature oi words describing him as an agent, or as filling a representative character, does nob exempt him from personal liability." Dr. Giles said that it was difficult to construe the first and lattor portions of the sub-section so as to make them harmonise, but that ib was possible to give a construction to them that would reconcile them. Tho difficulty arose from the use of the words "indicating" and "describing." "Indicating" moant that the party signing used words plainly showing that he signed as agent, or as director, as the case might be. "Describing" meant that he used merely words of description which did nob prevent his porsonal liability from attaching. Moreover it Was provided by section 97 of the Companies Act, 1882, that "a promissory note orbill of exchange ehall bo deemed to have been made, accepted or indorsed on behalf of any company under the Acb, if made, accepted, or endorsed in the name of the Company by any person acting under the express, or implied authority of tho Compaoy." This promissory note he thought could not be said to bo made in the name of tho Company. Referring to the argument that had been addressod to him that ho should decide this case under the "equity and good conscience" clause of theR.M. Acb, 1867, ho said that he saw nothing special in the case to induce him to decide ib under that clause. It was very importanb that mercantile documents, especially promissory notes, should be upheld unless thore was some good reason for holding them invalid. Judgment would, therefore, be for the plaintiff with costs.

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Permanent link to this item

https://paperspast.natlib.govt.nz/newspapers/AS18930526.2.36

Bibliographic details

Auckland Star, Auckland Star, Volume XXIV, Issue 123, 26 May 1893

Word Count
669

IMPORTANT JUDGMENT. Auckland Star, Volume XXIV, Issue 123, 26 May 1893

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