CHAN.] Re THE NEW ZEALAND BANKING COMPANY (LIMITED); SEWELL'S CASE means, acquiesced in the allotments. Mr. Sewell, | by these returns at ali events held out to the world by his affidavits and cross-examination in court, as a shareholder in the company. stated that he had signed the guarantee of the 11th March 1864 at the suggestion and request of the chairman, Mr. Hankey, and that he had done so in reliance on him and the other subscribers, and without knowledge that he was thereby becoming a shareholder, or incurring any liability.

Baggallay, Q.C. and J. Napier Higgins supported Mr. Sewell says, considered by him, during the the appeal of the official liquidator.

CHAN.] Re THE NEW ZEALAND BANKING COMPANY (LIMITED); SEWELL'S CASE. [CHAN. Now this allotment clearly per se would not have had the disposal of the shares. I asked him, and been sufficient unless in some way communicated to he answered the question in the affirmative, whether Mr. Sewell, or unless Mr. Sewell was made aware of what he meant by that was that, as the document it. Direct notice of allotment (in the sense in which provided that a transfer in blank of the shares that is generally understood) to Mr. Sewell there should be held by Mr. Hankey, that was what he was not; but it appears that the directors of the meant by saying he was not a shareholder having company, desiring to make some alteration as to its the disposal of the shares. He said that was his capital, which could only be done by a general view. Therefore his statement is, that getting meeting, summoned a meeting for the 2nd May these documents he knew he was a shareholder in 1864, which was to be at once the usual half-yearly this sense, that the shares were in his name; but he meeting and to be special, for the purpose of alter- knew also that another person who had the docuing the capital; and for the purpose of this meeting ment for the purpose which I have named had the the report of the directors was issued, and a notice ordering and the disposal of these shares. Attendstating the purposes for which the meeting was to ing thus by proxy, or being taken as attending by be made special was also issued. There is general proxy, at the meeting of the 23rd May 1864, resoevidence that this report and this notice were sent lutions to which I shall have to advert afterwards to Mr. Sewell, and there is not on his part, as I were passed. understand, any denial that they were received by him. My inference, if it was necessary from the evidence before me, would be that these documents reached Mr. Sewell; but inasmuch as no direct action is proved to have taken place by him upon these documents, I prefer to rest the case as against him not upon these documents, but upon others subsequently received. The meeting took place on the 2nd May, and at that meeting resolutions, which I shall have to advert to on the other part of the case, were passed professing to deal with the capital of the company. It was necessary that these resolutions, being special, should be confirmed by a subsequent meeting, and a subsequent meeting was called for the 23rd May." For the purposes of that meeting proxies were asked for in the usual way by the executive of the company from those who would not be able to attend, and there is evidence of the ordinary kind that proxies were sent out and posted, and sent to Mr. Sewell amongst others, and that the circular issuing those proxies was filled up with a statement of the number of shares to which each was entitled. The circular sent to Mr. Sewell and the proxy executed, if it was exccuted by him, are not produced; and I prefer not to rest any argument upon the statement which is said to have been in the circular as to the number of shares. But it appears by the books of the company as to the meeting on the 23rd May, that Mr. Sewell is entered as attending at that meeting by proxy, by which I understand that it is a statement that his proxy was sent in executed by him, and was either used, or was ready to be used, at that meeting on the 23rd May. I think, looking at the only evidence which Mr. Sewell can give in opposition to this (which is that he does not remember, but will not take upon himself to deny, very properly, these statements). I think the just inference must be, upon this state of things, that his proxy was executed and sent in, and either used or ready for use at the meeting. It is therefore obvious, from this part of the narrative, that, putting aside the question of whether the number of shares was before the mind of Mr. Sewell, he must have known that he was, and that he was treated as a shareholder in the company, and that, therefore, this document executed by him on the 11th March 1864 had been acted upon by those to whom it was given, and that he had to some extent or other been put upon the list of the shareholders of the company.

Mr. Sewell's own evidence upon this point seems to me, to a great extent, to admit the case. He draws a distinction which is matter of argument, in respect of which argument I am afraid his law is not very sound, between a shareholder who, as he says, has the control over his shares, that is to say, the beneficial interest and the actual power of disposition, and a shareholder as to whose shares some other person has the control and the beneficial interest. And he says he did not consider himself by getting these documents to be a shareholder who

The next document which comes to Mr. Sewell is one dated that same day, the 23rd May subsequent to the meeting, and it is in this form. It is from the secretary, addressed to Mr. Sewell :-"Sir, I am instructed to inform you that, in accordance with the special resolutions passed at the extraordinary general meeting of shareholders on the 2nd inst. (and unanimously confirmed at the meeting held for that purpose this day), firstly, the 1007. share in this corporation with 107. paid thereon is now subdivided into ten shares of 10. each with 17. paid thereon; secondly, that the remaining two thousand unallotted original shares will be issued as twenty thousand similarly subdivided shares at a premium of 5s. per share, and are now offered in the first instance to the existing shareholders in the proportion of one new 10%. share to every two 107. shares now held." Then after a third provision which need not be read, the letter continues:-" 'You are entitled to an allotment of the number of the shares or any part of the same inserted in the annexed form of application which you will be pleased to sign and remit." The number in the annexed form of application is 115. Now I should have thought that this document addressed to any person who could understand the plain meaning of words, and specially addressed to a share broker, was very intelligible. I should have thought there could be no possible misapprehension or doubt as to the meaning. It appears to me to say as plainly as words can say, "You, Henry Sewell, are treated as an existing shareholder in this company, in respect of twentythree 100%, or 230 107. shares, twenty-three 1007. shares made 230 by conversion, as being entitled to 230 shares; you are also entitled to 115 new shares upon the ratio of one for every two; we are now communicating with you to know whether you are disposed to claim on this title these 115 new shares ?" And what does Mr. Sewell do? Being told that he was thus entitled to 115 shares, he signs the form of application for them; and as I understand, although the evidence is not very distinct, but I believe it to be the view that Mr. Sewell himself wishes to present, he puts that form so signed into the hands of Mr. Sichel, and by Mr. Sichel it is used for the purpose of obtaining the entry of Mr. Sewell's name as the proprietor of these 115 shares.

The next fact is that at or about the same time there is this letter from Mr. Sichel to Mr. Sewell, referring to this same document: "In the month of June 1864 I received from Mr. Sichel a lithographed circular, enclosing a cheque for 57. 10s.," and he exhibits that circular which is in these words: "To-day being the last day for applying for the new shares in the New Zealand Banking Corporation to which you are entitled, being part of those held by the association for which I have advanced a credit" (by which I understand that Mr. Sichel means to say, these being new shares allotted in respect of old, inasmuch as the old were

CHAN.]

Re THE NEW ZEALAND BANKING COMPANY (LIMITED); SEWELL'S CASE.

[CHAN.

subject to the provisions of this association, the new subscribed to the document, getting his rateable allotted in respect of the old will also be part of proportion. And Sir Roundell Palmer said that there those same shares); "I beg to inform you that you were several names, which I believe was not disputed. will find enclosed a cheque for 57. 10s., which some six or eight names, affixed to the document to please pay into your bankers, and send in your own whom no shares at all had been allotted, and that cheque for the same amount, together with the therefore the shares that could have been obtained letter of allotment which is furnished you from the were cumulated, if I may use the expression, to a New Zealand Banking Corporation, duly filled up greater extent than was intended upon the other to the Agra and United Service Bank before persons to whom they were allotted. Now I will four o'clock, returning me receipts at your con- assume that that is the proper construction of the venience. You will shortly receive a private document, and that Mr. Sewell might have comcircular statement giving you the whole par- plained that the authority had not been pursued ticulars of the transaction." I suppose, very pro- with regularity. I say, I assume that, because I bably, the just inference from that is that until Mr. | have considerable doubt about it. It is obvious, for Sichel called for the form to be thus filled up, it had example, this being an operation which must have not actually been filled up. I think that is the been conducted by stages, that it might not have just inference, that Mr. Sewell, having the matter been possible to obtain from time to time more than, brought to his mind by Mr. Sichel being told that say fifty or sixty shares, and it would have been he had a document sent to him for the purpose of utterly out of the question to have allotted different his claiming the shares, is asked to sign that docu- parcels so obtained from time to time rateably ment in order that the shares might be claimed, and among these persons. It might well have been that he does sign it, and returns it to Mr. Sichel. In ex necessitate the authority could not have been the month of September in the same year Mr. pursued in that way, but I will assume the construcSewell says in his affidavit, "I received a letter tion to be otherwise. Mr. Sewell, according to the from the clerk of the said G. Sichel, inclosing me conclusion I have drawn from the fact, did know in a cheque for 577. 10s., for the payment of a second the month of May 1864 that, regularly or irregucall of 10s. on some shares." And then he says that larly, rightly or wrongly, under this authority he that cheque was paid into his bankers, and in lieu had been put upon the list as a shareholder for 230 of it he gave his own cheque to the company for shares. If he had any doubt as to the manner in the second call on those shares. Again an operation which the authority had been pursued, it was for of the same kind took place in the month of Dec. him to have inquired whether he could have asserted 1864, as to a subsequent call, although the docu- any right against either Mr. Sichel, or Mr. Hankey, ments which passed with regard to this matter are or the Company, as to the mode in which the authonot actually produced On the 8th Dec. 1864 a rity had been pursued, and whether he could have dividend appeaes to have been declared on the reclaimed the ownership of these 230 shares may be shares of the company in respect of the half-year doubtful; but I assume, in his favour, that he between the 15th April and the month of October, might have had a case of that kind. It appears to and a cheque was made out for that dividend for me that not having done so, being aware that he the sum of 127. odd payable to Henry Sewell, or was held out to the public as the holder of twentyorder. That cheque, whether by post or by private three (or 230) shares, it is too late for him, months or hand, comes to Mr. Sewell; he indorses it, and, as I years afterwards, to enter into that question. With understand his evidence, sends it to Mr. Sichel. He is regard to the first question, it is clear that if there therefore, so far as the company is concerned, the is nothing more in the case, Mr. Sewell will be liable recipient from the company of this cheque for the to be placed on the list for the whole number of half-year's dividend, and that dividend is a dividend shares. calculated and paid upon the whole number of 230 shares and the 115 shares.

Now, stopping there, and supposing there were nothing else in the case, it appears to me that a more simple case for placing Mr. Sewell on the list in respect of all these shares could not exist. He gave a general and somewhat ambiguous authority for the purpose of having his name entered as a shareholder of the company; he knew it was acted upon; he not only knew it was acted upon, but he knew the number of shares for which, in consequence of that authority, he had been placed on the list of the company. He acted by virtue of the title thus acquired, in claiming a further part of the capital of the company, and received a dividend upon all these shares. That would be a simple case if there were nothing more in it.

Before passing from that part of the case, I must advert to an argument that was pressed by Sir Roundell Palmer as to the manner in which the authority given by the document of the 11th March 1864 was exercised. That document ended with these words: "Should the quantity of shares obtainable (of first and second issue) be less than the whole desired by us, we agree to be responsible for such lesser quantity as can be rateably apportioned to

Sir Roundell Palmer said that that might be an authority to become answerable each for the whole number of shares affixed to his name; but that if the whole number that was desired should not be given to each, then the agreement was merely that each should be responsible for a rateable proportion upon the footing of every person whose name was

I come now to the question of what is called the unauthorised issue. The facts as to that appear to me to be very clear. The company, according to my understanding, was a company with a capital of 300,000Z. only, in 3000 1007 shares. So in point of law it stood up to the month of May 1864; but prior to May 1864-some months before (the date is not very material)—the directors seem to have taken upon themselves (whether under mistake as to law or otherwise I do not know) to have issued, over and above the 3000 1001. shares, another 1000 shares of 1007. each, attempting thus to add 100,000%. to the capital of the company, and to make it a capital of 400,000l. In point of law that, of course, was invalid at that stage. I have said that eight and fifteen shares had been allotted on the 15th April to Mr. Sewell. The eight shares were in respect of the original and proper capital of the company of 300,000l.; they are quite clearly earmarked. The fifteen shares were taken out of this additional capital of 100,000l. I will assume, therefore, in favour of Mr. Sewell that it would have been open to him at this stage to have said that he had been made in respect of these twentythree shares a shareholder in a capital which did not exist, or invalidly existed, and that no right could exist to make him a contributory at that point. What took place afterwards was this: The meetings to which I have referred on the 2nd and 23rd May passed special resolutions extending, as the company had power in that way to extend, their capital to 600,000, and professing to subdivide the old capital into 10 shares. As to the old capital,

CHAN.]

Re THE NEW ZEALAND BANKing Company (Limited); SewELL'S CASE. [CHAN. according to the previous decisions of the court the | by virtue of the proxy by which he attended at the 100% shares could not be properly so divided. As second meeting. But in addition to that, being to the new capital, by the articles of association the clearly a shareholder at this time to some extent, company had the power to raise it in shares of any the letter of the 23rd of May 1864 had expressly amount they thought fit. The result was that, if told him that he was taken to be a holder of twentythe resolutions were properly worded, there was three of these 4000 shares which had been issued power to increase the capital to 600,000Z., and as to (twenty-three or 230 according as you take the unit the new capital, to have it in 101. shares. Now, the or the decimal), that he was the holder of twentyresolutions were in these words: First, that the three or 230 of the 4000 shares which had been subscribed capital of the company be increased to already issued. If I am right in my construction 600,000%, to be divided into 60,000 shares of 107. of the resolutions, that issue of capital had been each, in lieu of 6000 shares of 1007. each; and that confirmed on that very day by the resolutions the 107 shares of the new denomination, credited | which had been passed. That appears to me to be with 17. paid-up, be issued in exchange for each one quite enough information for Mr. Sewell. It was of the old shares credited with 10. paid-up. for him then, if he had any objection to make in Secondly, that the unissued 2000 shares be offered point of irregularity or otherwise, to have made his at a premium of 25 per cent. to the registered complaint, and to have endeavoured to dispute the owners of the 4000 shares already issued in the status and position which were assigned to him by proportion of one new to every two old 1007. shares. that letter; and this he never did. I may add that Well, now so far as words are concerned, it upon that same day a new entry on the register was appears to me there can be no doubt that although made entering Mr. Sewell as the holder of 230 the expressions in these resolutions are not, perhaps, shares in the capital of 400,000l. Therefore I am the happiest that could be used, yet that in sub- not at all prepared to say that, even if nothing had stance they describe clearly the course that was gone before, if the case had merely started on that necessary in order to cure any irregularity which 23rd May without any previous authority or premay have been committed. The resolutions take vious negotiation between Mr. Sewell and the comnotice that 4000 shares, which from the context pany, that information, not disputed by him, but clearly mean 4000 shares of 1007. each, had already acted upon by him in his application for new shares, been issued. The resolutions take notice that there would not have been enough to fix him as a sharewould be 2000 more shares of 1007. each to make up holder in the capital to the extent of the whole of the capital of 600,0007, to which it was intended to these shares. So much, therefore, for the second raise the capital of the company. The resolutions point as to the unauthorised issue. affirm that the capital is to be raised from whatever was the proper capital at that time, up to a capital of 600,000Z. And the resolutions take further notice that those persons to whom de facto the 4000 1007. shares already issued had been allotted, should be the persons, and the only persons, to have the first offer of the 2000 1001. shares, or 20,000 104 shares, which were then to be issued. The resolutions thus construed appear to me to put out of the case the argument that was suggested, namely, that the new shares ought to have been offered, and that the resolutions were wrong in not offering them to the holders not of the 4000 shares issued, but of the 3000 shares which formed the proper capital.

Then it is said that these resolutions were invalid for the purpose intended, because the company was not sufficiently informed of the irregularity that had been committed. The company was a company consisting of shareholders. It is impossible not to impute to every shareholder of the company the knowledge of what has been called the charter under which the company was trading. The company was trading under that memorandum of association as its principal document. I think every shareholder must be taken to have known the contents of the memorandum of association, and would be thus informed that the original proper capital of the company was 300,000%. in 3000 shares. The balance sheet before the shareholders at this meeting showed that de facto a capital of 400,000l. had been obtained by an attempted issue of 4000 shares. The shareholders, therefore, had exactly before their minds, if they chose to address their minds to it, all the facts that were necessary, and in the face of that, and with that knowledge, they passed the resolution to which I have referred. So far as the shareholders at large were concerned, there appears to have been no concealment which would deprive the resolutions of any validity which they would otherwise have had. Then it is said that whatever other shareholders might have known Mr. Sewell knew nothing of all this. Now, Mr. Sewell, as I have already said, must, as far as regards the confirmation of these resolutions, be taken to be an assenting party

Then as to the reduction of the denomination from 1007. to 107. shares. Little or no argument took place upon that; clearly no argument can take place upon it after the previous decisions of this court, and I do not understand that the Master of the Rolls had any doubt upon that part of the case. As to the original twenty-three 100% shares, they have no doubt been attempted to be converted into 101. shares. That was irregular, but there is no difficulty in tracing and ear-marking the capital, the original twenty-three shares in their present shape of 230. As to the 115 shares they were properly issued as 107. shares. I think, therefore, that Mr. Sewell must be fixed on the list for the whole of these shares.

Now, as to the costs, the official liquidator, sueceeding to this extent in his appeal, will have his costs out of the estate. With regard to Mr. Sewell's motion, I am unable to accede to it; but, at the same time, I should not in any event have dismissed that motion with costs, because a great deal of new matter has been introduced here, and the case now is not a rehearing on the evidence before the Master of the Rolls. But, in addition to that, I observe, in the judgment of the Master of the Rolls, that he says that he was informed by the chief clerk that this was a representative case governing others of a considerable amount; and the Master of the Rolls therefore ordered the costs of the proceeding before him to be paid out of the estate. Now, unless the official liquidator has any argument to offer against it, my view is this-that, as the case no doubt is one of difficulty, and as the difficulty in some respects was certainly caused by the course which the company took in dealing with its capital, which required investigation and explanation, I think that the costs of this appeal, as well as the costs below, ought to come out of the estate.

Ordered accordingly, and that Mr. Sewell should be entered in the list for 150 101. shares, in respect of the fifteen 1001. shares of the second issue, in addition to the eight original shares and the 115 new 101, shares, for which the Master of the Rolls had included his name.

Solicitors for the official liquidator, Lewis, Munns, Nunn, and Longden; for Mr. Sewell, Fox and Robinson.

ROLLS.] GUNSTON V. EAST GLOUCESTERSHIRE RAIL. Co.-RAPER v. CRYSTAL PALACE RAIL. CO. [ROLLS.

Baggallay, Q. C. and Chapman Barber for the 1861, with which the Lands Clauses Consolidation Act plaintiff.