McCraken vs. McIntyre. as I conceive, authorize any Court to substitute other terms." "As to the shares taken for attendance fees, I am also of opinion that the Appellants are not liable to contribute in respect of those shares. They were taken, and as it seems to me, improperly taken, as paid-up shares, but the principles which apply to the 100 shares, apply, I think, to these shares also. The transaction might be undone, but could not be modelled." The sale and transfer of stock throughout the world is one of the most important branches of trade. That of one country is sold all over it, and in many others; and a decision such as that asked for by the Respondent, would, and should have, in relation thereto, the most damaging results. No man would be safe in buying stock on certificates setting forth that it was fully paid up, or that which was held out, as such, by the Company issuing it through their responsible officers; and the difficulty of ascertaining the truth of such representations from long distances would necessarily put an injurious clog on sales. I feel myself compelled to the conviction that if my judgment should, in some few cases, prevent a creditor from recovering his claim in the way the Respondent now seeks to do, an immeasurably large balance of evils to the trade of the country would otherwise result; and I, therefore, the more readily conclude the Legislature did not so intend it. I believe the proper jurisprudence to be that which throws a large part of the onus of inquiry upon the party sought to be made the creditor of a Company, and, before occupying that position, of ascertaining precisely how the matter of unpaid-up stock stands. In this case, perhaps, a party could not, as of right, inspect the books of the Company before becoming a creditor, as he might do under the McCraken vs. McIntyre. English statutes, but he always had the option of refusing credit until satisfied of the position of the Company. Had the Respondent here done so he would have no doubt been informed that the Appellant's stock was fully paid-up, and if, after that intimation of what all parties considered an honest and fair sale and transfer, he gave credit to the Company with the intention of evoking the aid, to say the least, of a doubtful statute, to intrude a claim for payment between the company and the innocent holder for valuable consideration without notice, by which he would seek to take from the latter more than he agreed to pay, and failed in the attempt, I don't think he should be the object of much commiseration. If he failed to make that inquiry I think he must be taken to have given the credit irrespective of the stock in question, and solely upon the general credit of the Company, and should not be permitted to intervene to the injury of an innocent holder, as the Respondent here seeks to do. The case of Macbeth v. Smart (1) was cited as authority for the position that a shareholder, in an action against him, by a judgment creditor of the Company could not set off in equity a debt due to him by the Company, before the judgment was recovered. The decision in that case was by a bare majority of one out of the seven judges. No calls for the unpaid stock had been made, and the case virtually only decides that inasmuch as in the absence of any call no money was due and payable to the Company, a set-off could not be allowed. The Company could not sue, and therefore there could be no set-off. The stock, in that view of the law consequently remained unpaid, and in a suit by a judgment creditor he acquired a right under the statute (1) 14 Grant, 298. McCraken vs. McIntyre. to recover from the shareholder the amount so unpaid, which the Company could not have done in the absence of a call Had, however, calls been duly made, a sum would then be due to the Company to which the doctrine of set-off could be applied, and to an action to a judgment-creditor of the Company, the shareholder could legally plead a set-off for money due and payable to him by the Company previous to the accruing of the creditor's right of action (1). From all the authorities taken together, I consider that the accruing of the right of action to a creditor of a Company under the section in question, has the same effect and no more, than the notice to a debtor by the assignee of a debt, or chose in action, and that therefore a shareholder may defend a claim made by a judgment-creditor, by means of a set-off, for money due and payable to him before the accruing of such right, or by showing that he was not then indebted to the Company. In re Mattock Old Bath Hydropathic Company (2) the shareholders owed £1,000 for shares, but the Company owed him £1,000 for property sold and conveyed by him to the Company. He was placed on the list of contributories by Vice-Chancellor Bacon, but, on appeal, his decision was reversed, and it was held that Maynard was to be treated as the holder of fully paid-up shares. Lord Selborne, L J., said: "The question in this case is one of payment or no payment. The liability of the Appellant to pay up to the Company the full amount of the shares for which he subscribed, the memorandum of association being unquestionable, and the Company having been free to accept the payment in any honest way. If the contract for the sale of the Appellant's property to (1) See Watson v. Mid-Wales R. Co., L. R. 2 C. P., 593; (2) Maynard's case, L. R. 9 Ch. App. 60, (1873.) McCraken vs. McIntyre. the Company, dated the 1st March, 1866, and the conveyances consequent thereon, expressed the true agreement between the parties, the Company became bound to pay the Appellant £1,000, the same sum which he was liable to pay for the shares in question, and there was no difficulty in point of law in setting off one payment against the other. * Consistently, therefore, with all that was decided in Fothergill's case (1) I think that the Appellant ought not to be on the list for those 100 shares otherwise than as fully paid-up shares." Concurred in by the other Lords Justices Sir Wm. James and Sir T. Mellish. Under the governing principle of that judgment, I feel justified in concluding, as I have before intimated, that the liability of the shareholder in a case in liquidation, is not greater than that to the Company at the commencement of winding up, with such exceptions as do not touch the points in this case; and that the position of the liquidator is no better than that of the Company, where the liability to pay, on each side, had previously arisen, and was payable; and I will here add that I have seen or can find no case where a different rule has been authoritatively laid down or enforced. In Leifchild's case (2) an attempt was made to put him on the list of contributories as the assignee of certain shares in a Company. The shares were subscribed for by Claypole, who assigned a patent to the Company for a nominal consideration of ten shillings, there being also a parol agreement that the delivery of the paidup shares was the consideration of the assignment. The shares were also represented in the Articles of Association as paid up. Vice-Chancellor Kindersley says: "The question is here whether W. Liefchild ought to (1) L. R. 8 Ch., 270; (2) 13 L. T., N. S., 267 (1865). McCraken vs. McIntyre. * * * be put on the list of contributories." Again "It appears to me there is no reason why Mr. Liefchild should be put upon the list, unless, according to the terms of the Act, he is liable to contribute to the assets." "What do these words mean? Why, that the contributory is liable, with other persons, to pay a certain contribution to make good the liabilities, no one in this case having the right to say that Mr. Liefchild is bound to assist in paying the debts; but it is said that does not apply to creditors. Now, under the original Act, the Court did not concern itself with creditors, but the interests of creditors are now to be consulted; that is to say, by means of contribution the Court is to make up, if it can, the means of paying them. But, unless they can say it is a fraudulent transaction, they can have no remedy anywhere, and if they had, how is the matter to be decided upon a question whether a party is to be placed on the list of contributories or not? Their remedy would be by a bill seeking to set aside the whole transaction." Here, then, it is again unequivocally held that the only remedy (if any) was, not by making the shareholder a contributory, but by proceedings in equity to avoid the original transfer of shares; and I quote the case, and the learned Vice Chancellor's dicta, in further proof of the position that the Plaintiff here cannot, in the present proceeding, adopt the contract in part and reject it in part, and that, if he cannot do so, the Appellant is entitled to our judgment. I will now refer to another recent case (in 1868), Guest v. The Worcester, Bromyard and Leominster Railway Company (1). The Company deposited with the Bank 1,500 shares of £10 each, as security for an advance of (1) L. R. 4 C. P., 9. |