McCraken vs. McIntyre. cent. to the original allottee, and he could not take them at a lower rate than the fully paid up value, and so defraud the creditors of the Company. There is a difference. between the Canadian Act of 1864 and the English Joint Stock Companies' Act. Under the latter the official liquidator stands in the position of the Company, and winds up the estate for the benefit of each concerned; he cannot repudiate the contracts of the Company, and it would seem that under that Act creditors are bound by such contracts (1). As to notice, the evidence does not sustain the averment that the shares were entered upon the books of the Company as fully paid up. In the language of the Defendant himself "the scrip did not, on its face, show it was paid." Defendant, before Respondent was a creditor, became a Director, and the moment he knew the shares were not actually paid-up, he could have repudiated the contract and got rid of them. This case is distinguishable from Waterhouse v. Jamieson (2), as in that case the creditor was enforcing his right through an official liquidator. Moreover, although as between the Company and the Defendant the Company cannot claim what remains unpaid in respect of shares held by him, yet Defendant is liable to a creditor of the Company to an amount equal to that not paid thereon. Oakes v. Turquand (3); In Re Hoylake Railway Company, ex parte Littledale (4). The policy of the statute is that a creditor of the Company should not suffer by any contract entered into between the Company and its shareholders. The case of Waterhouse v. Jamieson, on which Appellant relies, and upon which the judgment of the Court of (1) See Lindley on Partnership, pp. 657 et seq; (2) L. R. 2 Sc. App., 29; (3) L. R. 2 H. L., 325; (4) L. R. 9 Ch. App., 257, 260, 262. McCraken vs. McIntyre. Queen's Bench proceeded, is distinguishable from the present case. The only agreement Mr. Waterhouse entered into was to pay up £ per share. The deed or articles of association so stated it, and the registered memorandum of agreement gave notice to the public that these shares were to be so treated, and that only a certain amount was to be paid in respect of them. This case is very different. This is an action expressly given by the statute to a creditor against the holder of any shares at the time execution is returned unsatisfied. The Plaintiff, (Respondent), creditor, does not claim through the Company, but the act gives a personal, individual and original right, as against the individual shareholder, a right paramount to any right of the Company, and which the creditor exercises adversely in order to reach certain assets of the Company, that is to say, the amount unpaid on any of its stock. No case in England can overrule this statutory enactment, the wisdom of which shews itself here. The Judges of the Common Pleas have adopted this view. Benner v. Currie (1); McGregor v. Currie (2). The public must be protected and there can be but one answer, viz. payment. Nor can a creditor of the Company be affected by any fraudulent representations made by the Directors or officers of the Company to its shareholders or those who become shareholders on the faith of such representations. Henderson v. the Royal British Bank (3); Daniel v. the Royal British Bank (4); Powis v. Harding (5); Deposit Life Assurance Company v. Ayscough (6); The Western Bank of Scotland v. Addie, Addie's Case (7). (1) 36 U. C. Q. B., 411; (2) 26 U. C. C. P., 58; (3) 7 E. & B., 356; (4) 1 H. & N., 681; (5) 1 C. B., N. S., 533; (6) 6 E. & B., 761; (7) L. R. 1 Sc. App., 145. McCraken vs. McIntyre. Nothing in the statute of 1864, or the Letters Patent issued thereunder, relieves the Company or its individual shareholders from the liabilities imposed on an ordinary partnership or the individual members thereof, and on this point the following authorities were referred to : Lindley on Partnership (1); Re Electric Telegraph Company of Ireland (2); In re The London and County Assurance Company, Wood's claim and Brown's claim (3); Macbeth v. Smart (4); Ryland v. Delisle (5). Finally, the Respondents fully submit on the whole case that a creditor of such a Company as this, when sueing a shareholder, does not claim through the Company, but that he has a paramount right accorded to him by our statute, and that even if it were certain that the Company could not maintain a suit to recover from the Defendant (Appellant) the unpaid balance due on his shares, which in this case it is submitted it is unnecessary to determine, that would not,upon the authority of the cases cited and upon our statute, absolve him from liability to a creditor. Mr. J. .K Kerr, Q. C., in reply : It is now too late to fasten any liability on facts found by the Judge, viz.: That Appellant purchased these shares in good faith for value without notice. In the course of the argument reference was also made to: Buckley on Joint Stock Companies Act (6); Spargo's case (7); Bush's case (8); Wynne's case (9); Ashworth v. Bristol and North Somerset Railway Company (10); Beck's (1) Pp. 206, 556, 562, 565; (2) 2 De G., F. & J., 275, 295; (3) 9 W. R., 366; (4) 14 Grant, 310; (5) L. R., 3 P. C., 17; (6) Pp. 37, 65, 66 ; (7) L. R. 8, Ch. App., 410; (8) L. R. 9 Ch. App., 554; (9) L. R. 8, Ch. App., 1002; (10) 15 L. T, N. S. 561. McCraken vs. McIntyre. case (1); and South Staffordshire Railway Company v. Burnside (2). June 28th, 1877. THE CHIEF JUSTICE: [After reviewing the facts of the case, proceeded as follows:-] A caustic writer, who has considered the subject of Joint Stock Companies in England, thus refers to those of limited liability : "The advantages to be enjoyed by reason of limited liability, may be thus enumerated: "You are permitted to incur debts without limit, but to prescribe your own limit for payment of them. You may invest £20 and trade to the amount of £250,000. If you succeed your profits will be enormous, if you fail you can only lose your £20, the rest of the loss must fall upon your creditors. You are placed by this law in the advantageous position of a man who has everything to gain and nothing to lose. It is obvious wisdom, in any game of chance or skill when the sum staked by you is limited, but the sum for which you play is unlimited, to play for the highes stake upon the table. Limited liability places you precisely in this desirable position. You cannot lose more than your £20 while it is open for you to speculate for £1,000 or for £100,000. The reason why prudent persons did not so speculate formerly was their consciousness that they must stake, not merely the £20 they laid down, but also an amount equal at least to the sum played for. Released by the law from that liability, and your loss limited (1) L. R. 9, Ch. App., 392; (2) 5 Exch., 138. McCraken vs. McIntyre. to your small stake, you have no longer need for caution, and not only may you safely speculate without limit, but according to the well-known doctrine of chances it will be the most prudent course for you to do so." According to the contention on the part of the Appellant in this cause, applied to the position of Griffith, who took the shares in question, he might have all the advantages of having paid for his stock in full when he had, in fact, paid but little over half of the price of it. If the Company were successful, and he made his $1,000 on an investment of $300, none of his brother stockholders could complain, as they all had agreed that he should take the stock at the rate he paid for it. If the Company turned out a failure, according to his present contention, he could not be responsible even for the amount unpaid on his stock. At best, these acts afford but poor protection to the creditors, but in this view they would have none. Under the statute in question, those applying for a charter must state the amount of the nominal capital of the Company, half of it must be subscribed in good faith, and five per cent. of the whole capital paid in. The number of shares and amount of each share must be stated. The creditors of the Company, after having exhausted the remedies against the property of the Company, may recover from the shareholders any amount not paid up on their shares, (and this seems to be the remedy the creditors have against the shareholders.) As to the unpaid instalments on the shares necessary to be subscribed to obtain the charter, I apprehend there can be no doubt that the original subscribers, who had not paid up the whole amount of their stock, would be liable to creditors though, as between themselves and the Directors, if all had agreed |