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McCraken vs. McIntyre.

what is the charter or title deed under which the Company in which he has agreed to become a shareholder is carrying on business."

In Bridgers' case (1), a Bank local agent, being requested to take shares in order to induce others to become shareholders, offered to apply for shares on condition that he should be called on to pay nothing for the shares; but that all payments should be deducted out of his commission on shares sold by him, and upon being told by the manager of the Company that he would "be allowed the privilege of paying them up as convenient," he applied for 100 shares, which were allotted him, and he was registered as the shareholder of the shares, but he never paid any money. He signed a proxy paper under protest that it should not cancel the agreement as to the non-payments on his shares, and attended two meetings of the Company. His commission was insufficient to pay for the shares. Held, that he had entered into an absolute contract to take shares with a collateral agreement as to the effect of taking them, which did not prevent him from being made a contributory.

Giffard, L. J., in Bridger's case (2), says: "There may have been an agreement that his calls were to be paid only in a particular way, but he agreed to be a shareholder in præsenti, and cannot be heard to say he was not a shareholder, because he had entered into that collateral agreement."

Langer's case (3), confirming decision of Stuart, V. C., by Cairns, L. J., shows, that if a party has become a registered shareholder on certain false representations, that is not a question as to which the public or other share

(1) L. R. 9 Eq., 74; (2) L. R. 5 Ch., 308; (3) 18 L. T., N. S., 67.

McCraken vs. McIntyre.

holders have anything to say, he may have cause for redress against some person who has made an untrue representation to him, but has no case for having his name removed from the list

The

The Defendant may or may not have any remedy against the persons making the representations. creditors certainly could not. The Defendant ought to have known exactly what the law was, and what obligations it imposed on shareholders, and he cannot, in my opinion, escape any liability by showing that he inadvertently became a shareholder, or that others misrepresented the true facts, and so induced him to become a shareholder in ignorance of the extent of liability he incurred.

66

The 25th section of the Companies' Act, 1867, says: Every share in any Company shall be deemed and taken to have been issued and to be held subject to the payment of the whole amount thereof in cash, unless the same shall have been otherwise determined by contract, duly made in writing, and filed with the Registrar of Joint Stock Companies at or before the issue of such shares.

Equally strong are the words of the Statute of Canada, 27 and 28 Vict., ch. 23, which says:

"That each shareholder, until the amount of his stock has been paid, shall be individually liable to the creditors of the Company, to an amount equal to that not paid up thereon."

In Blyth's case (1), it was held that this 28th section of the Companies' Act was in favor of creditors, and did not apply as between the Company and the shareholders.

As in that case, so in the case before us between (1) L. R. 4 Ch. Div., 140.

McCraken vs. McIntyre,

Griffith and the Company, the shares may be paid up, but the shares were not actually paid, and so Plaintiff is, in this case, as Blyth was in that, Blyth was in that, "a holder of un

paid shares," and is liable unless he can prove that the shares have been paid for.

STRONG, J.

I need not repeat the facts of this case, or the question which is presented for the decision of the Court, as they have already been fully stated in the judgment just delivered by the Chief Justice.

Two cases have been decided on an enactment contained in the Railway Act (1), precisely similar in expression to that in question here (2); Macbeth v. Smart (3) in the Court of Appeals in Upper Canada, and Ryland v. Delisle (4) in the Privy Council, on an appeal from the Court of Queen's Bench for Lower Canada.

I refer to these cases to point out that they are no authorities for a proposition which it has been assumed they warrant, viz. That in an action brought by a creditor under this enactment the creditor sues on a statutory liability imposed upon the shareholder by the statute, and not upon the contract entered into by the shareholder with the Company. This proposition has, it appears to me, been too readily assumed by the Court below, and in that lies the fallacy of the judgment which we are called upon to review in this appeal.

The words of the statute are: "Each shareholder, "until the whole amount of his stock has been paid up, "shall be individually liable to the creditors of the Com

(1) Cons. Stat. Can., cap. 66, sec. 80; (2) 27 and 28 Vict., cap. 23, sec. 5, sub-sec. 19, no. 27 ; (3) 14 Grant, 298; (4), L. R. 3 P. C. C., 17.

McCraken vs. McIntyre.

"pany to an amount equal to that not paid up thereon, "but shall not be liable to an action therefor by any "creditor before an execution against the Company has "been returned unsatisfied in whole or in part, and the "amount due on such execution shall be the amount "recoverable with costs against such shareholders."

This section is in pari materia with the 36th section of "The Companies' Clauses Consolidation Act, 1845" (1), the only difference between the two enactments being, that the English Act authorized the creditor to apply summarily to the Court in which the action against the Company had been brought for leave to issue execution instead of requiring him to bring a new action against the shareholder as provided by the Canadian statute. The liability of the shareholder was defined in almost the same words, for the execution against shareholders was to be limited "to the extent of their shares in the capital of the Company not then paid up." The Courts, although possessing the power of ordering execution to issue, upon motion in the first instance, yet, in order that questions relating to the shareholder's liability might be raised on the record and so made subject to review in error, without which there could have been no appeal, invariably required the judgment-creditor applying for execution against a shareholder to proceed by writ of scire faci is; a mode of proceeding which was substantially equivalent to the action against the shareholder required by our statute. Therefore, decisions upon this section 36 of the English Act are directly applicable to the present case.

Then, Macbeth v. Smart did not decide that the statute in any way extended the liability of the shareholder to the creditors beyond that which he had undertaken in

(1) Imp. Stat. 8 and 9 Vict., Cap. 16.

McCraken vs. McIntyre.

his contract with the Company, save, perhaps, in this respect, that whilst a call was by the statute made a condition precedent to the right of the Company to sue, the right of the creditor to bring an action was not dependent on the action of the Company making a call. What was decided in Macbeth v. Smart, and the only point there adjudged, was that the shareholder could not set off against the creditor a debt due by the Company which in an action for calls would have constituted a good subject of set-off against the Company; the grounds being that the statute of set-off was applicable only in cases where there was mutuality of liability. which the rule of Courts of Equity as to equitable setoff also made essential. The Court of Chancery had determined that the creditor's title to sue was derived through the Company, and that, as in the case of an ordinary assignment of a chose in action, the assignee takes subject to the debtor's right of set-off against the original creditor, the assignor, so the shareholder's action was open to the same defence. This contention was clearly erroneous, for, as the Court of Appeals determined, the creditor did not sue on a title derived through the Company, but on one which the statute, subject to the fulfilment of certain conditions, vested in him as soon as he became a creditor, and therefore there was no such right of set-off as had been established by the decree of the Court of Chancery.

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In Ryland v. Delisle (1) a different point was determined, for that decision of the Privy Council did not, as has been assumed, involve the same question of equitable set-off which had been raised in Macbeth v. Smart. In Ryland v. Delisle the action was on the same statute, the Railway Act (1), sect. 80, but what was (1) Con. Stat. Canada, cap. 66.

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