SALE OF PROMOTERS' SHARES.

Otago Witness, Issue 1892, 15 May 1890, Page 14

SALE OF PROMOTERS' SHARES.

JUDGMENT FOB PLAINTIFF.

At the Resident Magistrate's Oourfc on Friday morning, Mr B. H. Carew, E.M , gave judgment in the case of G. S. Brodrick v. Walter Hislop. The claim was for £50, moneys had and received in connection with the sale of shares in the Golden Oauieway Company, Nenthorn, It being alleged that consideration failed. Mr James appeared for the plaintiff, and Mr W. D. Stewart for the defendant.

His Worship said : "This is an action to recover back the sum of £50, the price paid for certain shares. The defendant was one of the owners of some mining property at Nenthorn, the holders of -which arranged to form and register a company under ' The Mining Companies Act 1886,' to take over and work the property. The number of shares was to be 50,000, of whioh 30,000 was to be allotted to the promoters for their interest in the property. A prospeotuß was issued in whioh the defendant -was named as a broker to the company, and a copy reached the plaintiff. Subsequently the parties met. There was a conversation between them, during whioh the prospectus was referred to. The plaintiff expressed a wish to procure some promoters' shares. The defendant offered to sell him 600 paid up to 3s, and the plaintiff subsequently accepted the offer, the price being 2s per share. The plaintiff paid £50. A transfer was drawfi up and signed and reads thus : — ' I, Walter Mislop, of Dunedin, in consideration of the sum of £50 paid to me by George Septimus Brodrlok, do hereby transfer to the said Q-. S. Brodriok 500 shares paid to 3s, numbered to in the Golden Dauseway Quartz Mining Company of Nenthorn (Limited), standing in my name in the books of tho said company, to hold unto the said Q. S. Brodrick, his exeoufcors, administrators, and assigns, subject to the several conditions in -which I hold the same at the time of the execution hereof; and I, the said G. S. Brodrlok, do hereby agree to take the said shareß subjeot to the conditions aforesaid. As witness our bands, the 14th day of August 1889— Walter Hislop, seller; Geo. S. Brodhick, buyer. Witness to seller's signature— Nathl. Patkrson. Witness to buyer's signature— Fbed T. Home. Scrip at office, Wenthorn — W. H." The plaintiff shortly aftprwarda forwarded the transfer to the address of the legal manager named in the prospeotus for registration, and after a considerable time the defendant informed him that he had lately found out that tho registration of the company had not been effected. The plaintiff now seeks to recover bick the money he paid for the shares. The defendant admits that he believed at the time of the sale of the shares that the company had been registered, and it has been proved that an application for registration was lodged trc the proper office in the month of July, but it seems that from no fault of the defendant the business was neglected, and some hitch prevented its subsequent completion. The defence is that tho plaintiff is not entitled to get the money back, but is entitled to a portion of defendant's interest in the mining property in the same proportion as 500 shares in the company would have borne to the full number of shares defendant was to receive in the company for his share in the mining property — namely, 1072 (that is, about one-half of it. The idea is an ingenious one, but I can «cc no groundt for this contention. Mr Hfslop admits he believed the company was a registered company, and Mr Brodrick had read the proipectus which affirms that it was registered, and no person reading the prospectus and believing it to be honest could form any other opinion. Plaintiff says he did believe it to be registered, and this is verified by the faot that the day following tho purchase he forwarded thf> transfer for registration to the address given in the prospectus, under the heading ' legal manngpr's office ' : and, subsequently on request being made, he forwarded a registration fee. He has, however, admitted that he had some idea that something further would have to be done ; perhaps the company would have to be registered over again— he did not know what — after the shares open to the public had been subscribed for. This would have weight if the true posit ion of affairs had bet-n known and discussed between the parties ; but; they were evidently both ignorant of the fact that the'eompany 'was not registered, and they dealt in what both believed to be shares in a registered company. If the company had been registered, then the transfer would have given the plaintiff what he hid bargained for, and he would have had to take his chance of whether a sufficient number of the 20,000 shares open to the public were subscribed for to enable the company to carry on. If there were not, then of course he ard the other Blmreluilders would only have hud the nssets ot tho ciunpnuy to fall back upon. That in very different to tho present cane, for the defendant Bold shan 3 in n registered company, and, finding that he ciiunot Rive what he sold, he mys 1 ' I will not return your money, but I will give you a share with me in somo raining olaims.' It ia u'lso very distinguishable from transaotions which probably some of tho witnesses had in their minds, which are not uncommon— where, say, the ownr rs of a mine agree to sell it to a company, conditionally upon a company being floated, for n certain number of shares partly or fully paidjup. If. pending an attempt to flout such a company, a shareholder in the mine agrees to sell, tay half ol hit Interest, the meaning of that woatf

be that, if the company floats, the buyer would be entitled to shares ia the company ; and if it. did not float, he would be entitled to a share in the mine. That is widely different from the present case, for the evidence is perfectly clear that the subject under eale was shares in a registered company, and nothing else. Judgment for plaintiff for £50 and costs £45b) ; witnesses, £4 10s,