THE COURTS-YESTERDAY.

Evening Star, Issue 8267, 12 July 1890, Page 2 (Supplement)

THE COURTS-YESTERDAY.

SUPREME COURT—IN CHAMBERS. (Before His Honor Mr Jußtice Williams.) Re The Companies Act and re The Inch Valley Floor Mill Company, Limited.— Motion for taxation of official liquidator's solicitor's costs, and to fix liquidator's remuneration (Mr J. Macgregor).—Costs to be taxed, and remuneration to be referred to the registrar. Re John Leech BnTTERWORTH (deceased). —Motion for probate (Mr Brent). —Accordingly. Re Margaret M'Alister (deceased). — Motion for letters of administration (Mr Finch). —Accordingly. In re The Mining Companies Act, 1860, and in re The Nenthorn Consolibatkd Qcartz Mining Company, Limited. —Summons to remove the name of J. R. Clement from the list of shareholders of the Nenthorn Consolidated Quartz Mining Company. In thiß previously argued case His Honor gave judgment as follows :—" Mr Norman was the legal manager and broker of the company. He waß employed by the company to float the shares. For this he was to receive L 375, and was himself to pay all expenses. To carry out this arrangement he inserted in the 'Otago Daily Times' what purported to be a prospectus of the company. If a person took shares on the faith of a material representation contained in this prospectus, and such representation turned out to be untrue, clearly the person who was misled has a right to rescind the contract. Norman was the agent of the company to dispose of the shares, and if he induced persons to take shares by representations which are in fact untrue, the company cannot take advantage of hiß misstatements and hold such persons to their bargain. That the misstatement was innocent ia immaterial provided only there was amisstatement of a material kind. The prospectus published in the * Times ' states that it is intended to issue 20,000 shares, calling up 2s per share. Then there is an explicit 1 statement that tbia amount of L 2.000 will be devoted solely to the exploitation of the company's claims. No one reading this prospectus would for a moment conclude that out of the L 2.000 L 375 was to be paid to Mr Norman for floating the shares. This payment is indeed promotion money, and the prospectus states that not a Bingle penny will be paid us promotion money. At the time these statements were made the company had agreed with Mr Norman that out of this L 2.000 he was to receive L 376 commission. Here then is a statement of a material existing fact—viz., that the company had bo arranged matters that the full sum of L 2,000 would he available for working the mine, when, in truth, they had arranged to deduct from that amount no less a sum than L 375. Any person taking shares on the faith of this statement would be entitled, on discovering its untruth, to rescind his contract. Mr Clement took his shares on the faith of the statements in this prospectus. The question to be determined is whether anything has happened to deprive him of the right to rescind. The directors had issued a prospectus of the company different in some respectß from that published in the ' Daily Times.' Mr Clement, however, had not seen this when he applied for share 3. That prospectus states : ' The sale of these 20,000 shares will realise L 2.000, which amount (less commissions, etc., for placing them on the market) will, as the calls become due, be pcid into the company's account at the Bank of New Zealand, Naseby, and devoted solely to the exploitation of the company's claims.' The wording of the prospectus in the ' Daily Times ' is the same, except that the words in brackets are omitted. Mr Clement afterwards received from Mr Norman a copy of this other prospectus with the prospectuß of another company. He says ho put them away without reading them, and was not aware of the discrepancy between that prospectus and the one published in the 'Times.' There is nothing improbable in this statement, and Mr Clement's subsequent conduct is entirely consistent with its truth. In December the balance-sheet of the company wn.s isuued, and a sum of L3S9 133 appeared under the head of preliminary expenses. With this Mr Clement was dissatisfied, and after making inquiries discovered that the amount was for commission paid to get the company floated. Now, the discovery of this is not equivalent to the discovery that the prospectus published in the ' T.mes ' contained it misstatement of fact. It amounts only to the discovery that the directors had not carried out the undertaking in the prospectus that the whole amount of L 2.000 should bo available for working the claim. This would not of itself give him a right to rescind his contract. Mr Clement, on the 3rd of February, writes to the directors for an explanation, and in answer is forwarded on the 7th the prospectus issued by the directors, in which the words ' less commissionn, etc., for placing them on the market' appear. Then it is that he first becomes aware that the payment was made in pursuance of an arrangement and an intention on the part of the directors existing at the time of the publication of the prospectus in the ' Times' and inconsistent with the terms of that prospectus. Has Mr Clements then by larhts or acquiescence subsequent to the receipt of the letter of the 7th ot February deprived himself of the right to resciud? On the 11th Mr Clement writes to the directors saying that a comparison of the two prospectuses reveals a deliberate fraud and a wilful design to mislead the public, and asks either that the directors place to the credit of the company the L 389 13s, so-called preliminary expenses, or refund him the amount paid in respect of his 500 shares, when he will deliver them up or transfer them to the company's account. He concludes as follows :—' I enclose herewith cheque for L2 Is 8d for the seventh call, but it is only for the purpose of avoiding complications, and in the expectation that you will comply with the first of the above requirements, and not as a ratification of the contract for shares on any other terms, now that I have discovered what has been done. Ho receives no answer till the 28th of February, when the legal manager of the company writes that he is instructed by the directors to state that his letters had been read and received at a meeting of directors held on the 27th of February. Mr Clement received no further answer. On the 10th March he left Nenthorn and came to reside in Dunedin, and shortly after consulted Messrs Stout and Mondy. On the 26th March they write to the directors demanding the removal of Mr Clement's name from the register and the return of the moneys he has paid, and threaten legal proceedings in default of compliance with their request. On the 4th of April the legal manager writeß that the matter will be dealt with at the first meeting of directors, to be held on the 20th April, On the 30th the directors decline to comply, and these proceedings are commenced on the 22nd May. Messrs I Stout and Mondy's letter was dated from Dunedin, the 2Cth March. On the same day, at Nenthorn, there was a meeting of directors, and a call (the eighth) was made payable on the 9th April. This call Mr Clement paid without further protest, and he must have paid it therefore after Messrs Stout and Mondy had written their letter of the 26th March. Ab stated by Lord Cairns in Scholey v. Central Railway Company of Venezuela (L.R., 9, Eq. p. 267): —' The Court would be most careful to see in a company going on and trading, in which the rights of the shareholders and others varied from day to day, that a person coming to complain of misrepresentations of this kind, and coming to avoid a voidable contract, came within the shortest

limit of time which was fairly possible in such a case.' The same learned judge makes a similar statement in Ogilvie v. Currie (37 L.J., Chan. 541). So also Lord Romily in Haymann v. European Central Railway Company (L.R. 7, Eq. 169) says:—'Obviously it is of the utmo3t importance in these cases that a shareholder should come at the earliest possible opportunity before other persons have entered into engagements with the company on the faith of his being a member of it.' The. same principle is illustrated by Taite's case, 3, Eq. 795. In the present case we have the broad fact that Mr Clement was fully aware o* the misrepresentation on or befpje I.lth of February, and took no steps t>> have his name removed from the register until the 22nd of AJay. Nor'during that, time had there been any i effectual recission of the contract. If,, in I the interval, the company h;,d, cQJjie. upon, & j

Mount Morgan, then, as Mr Clement had paid and the company had received and retained all calls on the shares, and aa his name way on the register as a shareholder, it is difficult to see how his claim to share the proceeds could have been successfully resisted. Mr Clement, in asking in his letter of the 11th February that the directors should in effect put their hands in their pockets and place L 389 13s to the credit of the company, must have known that there was not the remotest chance of his request being complied with, and yet he chooses to assume that ifc may be complied with, and on that baseless assumption pay 3 tho seventh call. Moreover, after Stout and Mondy's letier of the 26th of March, which mmpiy contains a demand that his name should be taken off the register and the moneys he has paid refunded, he pays another sail. Tho directors did nothing in response to Mr Clement's letter of the 11th'February, and I thiDk the letter of tho 2Sth of February to Mr Clement, coupled with their previous inaction, was quite a sufficient indication to Mr Clement that the directors intended to remain passive. Itthen certainly became his duty, if he wanted his name removed from the register, to take proceedings for that purpose forthwith. Instead of doing so, he did nothing until Stout and Mondy's letter of tho 26th of March. On the principle of the above cases it would, I think, have been too late even then to take proceedings ; but after that letter he paid a further call unconditionally. If a man's name appears on the register, aud it also appears that he has paid all calls, a person inspecting the register would conclude that he did not question his liability to be on the register. The question is not one simply between Mr Clement on the cm: hand and the company on the other. The share register is the legal record of the persons liable to contribute to the liabilities of the company. Everyone contracting w ith the company has u right to know exactly the names of those on whom the liability re6ts, and each shareholder has a right to know exactly the names of those who are jointly liable with him to contribute to the liability. Hence a man who assorts his right to have his name removed from tho register must not only protest, but must, with the utmost promptitude, take proceedings to get his name removed. Ho must certainly do nothing which oould bo construed as acquiescence in his namo remaining there. Promptitude is more risptciully necessary in the case of a mining venture, where values are subject to sudden and great fluctuations. Iu the present case I think Mr Clement is too late. Summons dismissed. Costs, L 5 fjs, and disbursements."

RESIDENT MAGISTRATE'S COURT. (Before K. H. Carew, Esq., R.IH.) Judgment was given far plaintiffs by default in the following cases :—Grefrg and Co. v John Laverty (Hyde), L 32 13s Gd, on dishonored prcmis-ory note ; R. Wilson and Co. v. Patrick Hanrahsn (.it. Bathans), 1,24 4s, on a dishonored promissory note ; and Tapper and t'v v. James Orbell (Hillgrove), 1,22 11a lOd, ou a dishonored promissory note. George dark and Johu Luun v. the Education Board.—The particulars of demand pet forth that on or about February 22, 1889, the plaintiffs entered into a contract to erJct a building at the Kaikorai according to certain, specifications attached to the contract; that during the progress of the said contract the defendants called on the plaintiffs to build a certain coccrete wall and to do certain asphalting work; that those works were " extras,'' not defined by the specifications, and we're not included in the plaintiffs' contract; tb-it thy cost of these works was 1.20 Ids 2d ; that the defendants'retained possession of L2B IN* bc-iiur tho amount of tho plaintiffs' deposit on (.Incontract; and the plaintiff* therefore claim to recover from the defendants these two r.n-ounls making L-19 8s 2d. Mr Fraser appeared forplaintiffs, and Mr Rims for defendant.-*.—Or. the closing of plaintiffs' case Mr Sim contended that Mr Romerville had ordered the work t« be done, and by virtue of tho powers Riven him under the contract ho could order defective work to bo removed or amended ; that plaintiff* could not recover without tho certificate of tho architect, which had not been given ; th-.fc the contract provided (hat the work should be ram pleted on 24th 3\tV.- t 1889, or the e.-.tr/rt r should pay LI for .very day ever that '.-..te whde the evidence showed that the i"e::tract w->s not completed till three r.r four day.";"iter 13th June; and that the claim was trior-ihau swamped by the penalties plaintiffs h:m incurred.