liquidator of the Anglo-Moravian-Hungarian Railway Company then in course of compulsory winding up. Mr. Smart employed Mr. T. E. Watkin as his solicitor in the affairs of the winding up from the date of his appointment as liquidator to the 5th of August, 1874, when he applied for and obtained ex parte an order on a petition of course at the Rolls appointing Messrs. Lowless & Co. his solicitors in lieu of Mr. Watkin.

In September, 1873, Mr. Watkin had taken Mr. Frederick Clift into partnership, but the partnership was dissolved in April, 1875, and throughout that period Mr. Watkin alone acted as solicitor in the liquidation of the company.

In Cctober, 1874, Messrs. Lowless & Co., on behalf of the official liquidator, took out a summons that Messrs. Watkin & Clift should be ordered, within four days, to hand over all papers and documents relating to the winding up of the company in their possession, but without prejudice to their lien thereon for their costs, charges, and expenses as solicitors to the official liquidator; and that they should be ordered within fourteen days, to deliver a bill of such costs, charges, and expenses to be taxed in the usual way. Mr. Watkin, in his affidavit, stated that he offered to consent to an order being made on the summons if it should contain a direction for the official liquidator to pay the costs when taxed within a specified time, but that on this being refused he opposed the summons. The summons was heard on January 28, 1875, and an order was then made by consent that the taxed costs should within twentyeight days after the filing of the taxing master's certificate be paid "by the said official liquidator without prejudice to the pending summons," and that on payment of the costs, the books, &c., should be given up by Mr. Watkin. The pending summons referred to in the order was a summons to remove the official liquidator, and was stated to be still pending at the date of the present appeal.

The liquidator in his affidavit said that at the hearing of the summons a note had been made by the chief clerk to the effect that the order was for payment of the costs by Mr. Smart as official liquidator, and not personally, but Mr. Watkin denied that this, if done at all, was done with his knowledge.

The taxing master's certificate was not signed until August 7, 1875. It then appeared that the costs amounted to £426 Os. 7d., and a correspondence immediately ensued between Mr. Watkin and the official liquidator and his solicitors, the former threatening to enforce immediate payment of the costs at the expiration of the twenty-eight days limited by the consent order, and the latter objecting that at that moment there were not sufficient assets in the hands of the liquidator to meet the costs, and that in any case, owing to the absence of the chief clerk, no cheque could be signed during the vacation.

On the 26th of August, 1875, Messrs. Lowless & Co. served a notice of motion, and on the 31st of August Bacon, V.C., as vacation judge, made an order in terms of the notice restraining Messrs. Watkin & Clift "from issuing a subpoena for their costs, or from taking any other proceedings against the said official liquidator, or his estate, or the estate of the company, or from enforcing or seeking to enforce payment of their taxed costs until further order," and extending the time for payment of the costs until November 10.

From this order Mr. Watkin now appealed. The proceedings relating to the winding up of the company were attached to the court of Hall, V.C.

Cracknall, for the appellant, argued that as a general proposition of law an official liquidator was, in the absence of an express contract to the contrary, personally liable for the costs, charges, and expenses of the solicitor appointed by him with the sanction of the court to assist

|

him in the winding up. But even if that was not so generally, yet in this case the official liquidator had, by consenting to the order of the 28th of January, 1875, made a bargain to pay these costs personally within twentyeight days after the date of the taxing master's certificate. [MELLISH, L.J., asked how Mr. Watkin had been originally appointed solicitor-whether on the personal credit of the official liquidator, or on the credit of the assets in his hands.] Mr. Watkin had been chosen by the liquidator personally, and not by the court. Section 97 of the Companies Act, 1862, empowered an official liquidator to have "the assistance of a solicitor with the consent of the court," and that did not mean that the court must consent to the appointment of the particular person selected by the liquidator, but gave a general sanction to the employment of a solicitor. [BAGGALLAY, J.A., referred to the 68th Gen. ord. (Nov. 1862), form 12, and pointed out that the form for the sanction of the appointment of solicitor is: "The Master of the Rolls" (or whoever it may be) "sanctions the official liquidator appointing a solicitor to assist him in the performance of his duties."] The usual practice was that the chief clerk's consent to the appointment of a solicitor was obtained as a matter of course, and no control was exercised by him over the choice made by the official liquidator. In bankruptcy the assignee was personally liable for the costs of the solicitor whom he employed, and the difference between the position of the assignee and of the liquidator was, that the former could under no circumstances make any profit out of his office, while the latter often made large profits. [JAMES, L.J., referred to the cases of Re Massey, 18 W. R. 444, L. R. 9 Eq. 367, and Re Trueman, 20 W. R. 700, L. R. 14 Eq. 278, as having definitely decided that an official liquidator was not personally liable for the costs of his solicitor.] In cases where the official liquidator had brought appeals to this court without sufficient reason, their lordships had often dismissed the appeal with costs against the liquidator, and had refused to direct the costs to be paid out of the assets of the company, leaving that to the discretion of the judge in whose court the winding up was pending; and in such cases the costs had primarily to be paid by the official liquidator personally see The Official Manager of the Grand Trunk Railway Company v. Brodie, 9 Hare, 823, on app. 3 De G. M. & G. 146. Sections 110 and 114 of the Companies Act, 1862, were also referred to.

Dickinson, Q.C., and Everitt, for the official liquidator, were not called upon.

JAMES, L.J.-In this case the Vice-Chancellor has made an order restraining a personal execution against a gentleman who was an official liquidator of a company. Mr. Cracknall has raised two points; one is on the general law, that is to say, notwithstanding it is a liquidation, notwithstanding there has been a liquidator and solicitor appointed by the sanction of the court, the relation between the liquidator and solicitor is simply the ordinary relation of solicitor and client; that he is, in fact, doing the work and labour on the retainer of the official liquidator on his personal responsibility. It is admitted by him, and he is obliged to admit, that the contrary has been decided years ago by Lord Romilly in this court (Re Massey), and it is impossible to read that decision without seeing that it decided that which Vice-Chancellor Bacon afterwards (Re Trueman) held that it decided-that credit in these cases is given to the assets of the company; that is to say, that the official liquidator is only the agent or person acting for the company. In a voluntary winding up he is appointed by the company to act as their agent. In a compulsory winding up he is appointed by the court itself to act for the company, and that seems to be good sense and has been so settled. The contract is a contract by him as agent for the company

or

not.

the papers were delivered up He was only acting on behalf of the company, and asking for the papers for the purposes of the company, and it would require very strong words indeed to show that he was making himself personally liable, without any consideration or any motive whatever, for that which he was not personally liable for before, and when the solicitor was not in any way altering his position. The solicitor retains the same right to the costs he had before. The solicitor has got a right to retain the papers on which he had a lien. He has given up nothing. All the order did was to ascertain the exact amount that was due to the solicitor, on the payment of which the solicitor was to deliver up, not to the official liquidator personally, but to the new solicitors, in fact to the solicitors of the official liquidator, the papers for the good of the company. It appears to me that the language of the order is not sufficient to suppose that it was intended by the parties that their legal rights and liabilities should be altered by it. Therefore I think the Vice-Chancellor was right in acting in that view. Then it is said the order appealed from goes too far because it restrains him from taking any proceeding that means proceedings against him personally. It never was intended to prevent any application being made to

the chambers of the Vice-Chancellor who has the conduct

of the proceedings in the liquidation to obtain a further order. It is only to be stayed until further order; it was quite open to any party interested in the matter to go before the Vice-Chancellor who has the conduct of this matter in chambers, aud say, "Make me an order for payment out of the assets; there are plenty of assets." If the man, having assets out of which he can pay it, will not pay it out of the assets, then you can say, "Make the order personally." I think that the order does not place any difficulty in the way of the appellant if he wishes to go before the Vice-Chancellor and obtain a further order.

I am of opinion that the appeal must be dismissed, and dismissed with costs.

MELLISH, L.J.-I am of the same opinion. I observe in the cases decided before Lord Romilly and by ViceChancellor Bacon that it was held both in the case of a winding up by the court and a winding up voluntarily that the liquidator is not, in the absence of an express bargain, personally liable to the solicitor for the costs. The liquidator is different from a trustee in bankruptcy. He has not the assets of the company vested in him. In the case of a voluntary winding up he is the officer of the company, who acts instead of the directors. He is no more personally liable for contracts which he makes on behalf of the company than the directors would be for the contracts they make on behalf of a company still carrying on business. In the case of a compulsory winding up he is the officer of the court, and his solicitor is appointed by the consent of the court. It is carefully laid down that the solicitor, in the absence of an express bargain, must be assumed to trust to the assets of the company. The 110th section gives the costs of the solicitor next after the costs of the petition for the winding up.

That being so the only question is on the construction of the order which was made by agreement. I agree with what the Lord Justice has said—that it would require very strong words to induce one to believe that the liquidator, not being personally liable, has consented to an order making himself personally liable. I think the true construction of the order is that it is an order made against him in his character as liquidator to pay the costs out of the assets.

BAGGALLAY, J.A.-I am of the same opinion. I wil! only add that it appears to me that the order of the ViceChancellor of the 31st of August, 1875, against which the present appeal is brought, bears on the face of it that all that was intended by the Vice-Chancellor was to preserve matters in the state they then were, until an application could be made to Vice-Chancellor Hall, in whose chambers the administration of the estate was going on.. I think the extension of time until the 10th of November intimated that this was the intention of the Vice-Chancellor.

BRETT, J.-I am of opinion that the solicitor appointed by the official liquidator according to the terms of the statute is appointed on the terms that he is to look to the assets of the company only, and is not ap pointed on the terms of looking to the personal credit of the official liquidator. It seems to me that follows from a consideration of the 97th section and the 110th section. A solicitor appointed according to the terms of the 97th section is not any solicitor whom the official liquidator may choose. He has not the choice of all the world of solicitors from whom he may select one at his own option; he is confined to the appointment of such a solicitor as the court may sanction. According to the words of the 110th section it appears to me that the court has power to order that the costs of the solicitor shall be paid in priority to the costs of the liquidator. Now, both of these considerations seem to me to be wholly inconsistent with the idea that a solicitor is appointed by the official liquidator on the terms of looking to his personal credit. I should have thought so if the statute stood alone, but it seems to me that the decision of the Master of the Rolls in the case which has been

quoted (Re Massey) gave that construction to the statute

which I think the statute itself would bear. If it did not I think that the reasoning of the Vice-Chancellor Bacon in the case of Re Trueman cannot be answered, and shows that that is the true interpretation of the statute. Then is it right to say, as has been argued,

that the Master of the Rolls' decision does not decide the point, which I think it did? The second part of his decision decided the point, and in the most express terms. Besides, in that case, the solicitor does not look to the personal credit of the official liquidator. He looks only to the assets, and, if the assets are not sufficient to pay, he loses the difference between the amount of his costs and the assets. Even although the assets are not sufficient he does not look to the official liquidator as personally liable to him for the difference. Therefore I entirely concur in the view that, according to the construction of the Act, there is no personal liability at all on the part of the official liquidator to the solicitor.

Now it is argued that there was a decision of the Court of Appeal, which was inconsistent with that view, namely, an order of the court that the official liquidator should be personally liable to pay the costs of the opposite party because he had appealed without, as the court thought, sufficient ground. That is very different; that is not a matter which depends on contract. An arrangement for the personal liability of the official liquidator is put as on a contract between him and the solicitor. In the other case, there was no pretence for a contract. It is an order of the court against a litigating party for having improperly instituted that litigation. I cannot see that that is any authority for the proposition for which it is

COURT OF APPEAL.

put. If there was not any personal liability according to the statute, and the understanding of the parties originally, it seems to me the strongest proposition in the world to say that the official liquidator, without any consideration, would intend to make himself personally liable, by agreeing to an order made on him for the taxation of the costs. He might do so, I suppose, but I should think it would require very strong words to lead one to believe that a man had intended by consenting to such an order to make himself personally liable, when, according to law, he was not liable. I do not think he so intended, and I do not think the words lead to that conclusion; therefore, I think neither on the law nor on the construction of the order was the official liquidator here personally liable. That being so, the attempt to issue execution against his own personal property in the long vacation was wholly unjustifiable, and was properly stopped.

Solicitor for the appellant, Alfred Brown.
Solicitors for the respondent, Lowless & Co.

Companies Act, 1867 (30 & 31 Vict. c. 131), s. 38-Issue of prospectus-Concealment of contract-PromoterAdmission of fresh evidence on appeal.

In July, 1873, M. agreed with S., a patentee, to purchase his patent for £65,000, £1,000 to be paid upon signing the agreement, £4,000 within twenty-one days after an allotment of shares in a company to be formed by M. for the purpose of working the patent, £15,000 in preference shares, and the balance in fully paid-up ordinary shares in the company. It was further agreed that M. should use his best endeavours to form or cause to be formed a company to acquire and work the patent, and that on the formation of the company, and the payments in cash and shares being made in accordance with the agreement, S. should assign the patent to M., and if M. failed to form the company or the company failed to make the stipulated payments the £1,000 should be forfeited to S.

In October, 1873, M. sold the patent to W., a trustee for a company intended to be formed, for £125,000, to be paid in cash and shares, and it was agreed that M. should be managing director.

The company was formed and registered in November, 1873, and M. was appointed a director.

The prospectus, issued after the formation of the company and while M. was a director, duly specified the agreement of October, 1873, between M. and W., but made no mention of the agreement of July, 1873, between M. and S.

G. took shares on the faith of the prospectus, and applied under section 35 of the Companies Act, 1862, to have her name removed from the register on the ground that the agreement between M. & S. was not disclosed in the prospectus.

Held, per James and Mellish, L.JJ., and Bramwell, B. (Brett, J., diss.), that she was not entitled to have her Rame removed.

Decision of Bacon, V.C.), affirmed.

Per James, L.J., and Bramwell, B.-The 38th section of the Companies Act, 1867, requires those contracts only to be specified in the prospectus which are entered into by the company or by a person who, at the time of entering into the contract, is a promoter, director, or trustee of the company.

Per Mellish, L.J.-The section ought to be held to extend to every contract made with a person who after

COURT OF APPEAL.

wards becomes a promoter, director, or trustee, provided the company have become entitled to the benefit or have become liable to perform the provisions of the contracţ before the prospectus is issued.

Per Brett, J.-The section includes every contract made before the issue of the prospectus, the knowledge of which might have an effect upon a reasonable subscriber for shares determining him to give or withhold faith in the promoter, director, or trustee issuing the prospectus, whether such contract was made by such promoter, director, or trustee before or after he became promoter, director, or trustee, and whether or not the contract was made on behalf of, or so as, if adopted, to impose a liability on, the company.

Per James and Mellish, L.JJ., and Bramwell, B. (Brett, J., diss.).—Where a prospectus omits to specify a contract, which, under the 38th section, ought to be specified, the remedy of the person taking shares on the faith of the prospectus is by action personally against the promoter, director, or trustee who issued the prospectus. Under such circumstances the section gives no right to the shareholder as against the company to have his name removed from the register.

This was an appeal by Miss Gover, a shareholder in the company, from a decision of Bacon, V.C., refusing to make an order, under section 35 of the Companies Act, 1862, to remove her name from the register of shareholders.

The case below is reported 23 W. R. 608, L. R. 20 Eq. 114, where the facts are fully stated.

Jackson, Q.C., and Ince, Q. C., for the appellant.-The ap pellant is entitled to have her name removed, because the contract between Skoines and Mappin was not mentioned in the prospectus. That was not a mere contract of sale and purchase between Skoines and Mappin; the substance of it was purchase by a company to be formed by Mappin. Mappin contracted to be a promoter: Cornell

v. Torrens, 21 W. R. 580, L. R. 8 C. P. 328; Charlton v.

Hay, 23 W. R. 129; Askew's case, 22 W. R. 833, L. R. 9 Ch. 664. A promoter can become liable for a non-existing corporation: Tyrrell v. Bank of London, 10 W. R. 359, 10 H. L. 26; Hichens v. Congreve, 1 R. & My. 150. Mappin bought for a company to be formed, and on its formation became trustee for the company: The Society of Practical Knowledge v. Abbott, 2 Beav. 559; Henderson v. Lacon, 16 W. R. 328, L. R. 5 Eq. 249. But if Mappin was not a promoter at the time of his agreement with Skoines, he was a promoter and director when the prospectus was issued, and as the prospectus did not disclose this agreement it was fraudulently issued by him as a director, and the company can not take advantage of his fraud. Independently of the 38th section of the Companies Act, 1867, the concealment amounted to a fraudulent misrepresentation.

Kay, Q.C., and Cookson, Q.C., for the respondent.— The 38th section was not intended to make that a fraud which was not a fraud before; it merely affected the mode in which contracts which ought to be disclosed were to be disclosed. Such contracts only ought to be specified, as before the Act it would have been fraudulent to conceal from the shareholders. There was no suppression here on which an action of deceit could be founded; for that there must be a wilful false statement: Peek v. Gurney, 22 W. R. 29, L. R. 6 H. L. 377, 390. The agreement between Mappin and Skoines was a mere contract of sale with which the company had nothing to do. Mappin was not a promoter at that time, and was in no fiduciary relation towards the company, which was not then formed, and the contract was not made on behalf of the company. But if the contract is one which ought to be specified in the prospectus, the remedy is against the director issuing it personally, and no remedy is given against the company.

Jackson, Q.C., in reply.

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Dec. 1.-JAMES, L.J., delivered the following written judgment:-This is an application by a shareholder to have her name removed from the list of shareholders in a joint stock company on the ground that the prospectus did not contain the date and parties to a certain contract between a Mr. Mappin and a Mr. Skoines. The legisla tive enactment on which this application is based is as follows. [His lordship referred to the 38th section of the Companies Act, 1867, and continued:-] The circumstances are briefly these. Mr. Skoines was the patentee of an invention relating to gas lighting. Mr. Mappin appears to have thought it a thing he could sell at a very high price to a joint stock company which he might be able to form for the purpose of bringing it out and working the patents. He therefore bargains with Mr. Skoines, and, in consideration of £1,000 paid down, he obtains from Skoines a contract binding the latter, for a certain further price in money and certain paid-up shares in a company to be formed, to convey his patent rights. If Mappin did not succeed in forming the company and obtaining for Skoines the further money and shares, Skoines was to be released from his obligation; he would retain the £1,000, and the patents. At the time this agreement was made there was no company in existence, and no promoter, trustee, or director. The company had not even an inchoate existence except in the brain of Mappin, and the utmost that could be said of Mappin was that he was the projector of a company which he intended and agreed to promote.

Having acquired this equitable right to the patents, this dominion over them for his own purposes and benefit-having bought what he did buy of Skoines for the lowest price he could get the latter to accept, with the view to sell it at the highest price which he could get, he did what, it appears to me, he lawfully and rightfully might do. He advertises his wares in the following manner in substance. He says, "I have an article to dispose of. I am willing to allow persons to become partners and shareholders with me on the following terms and conditions." He had a right to prescribe his own terms and conditions, like any other vendor with any other purchaser.

The way in which he made his offers was in the usual way, viz., he entered into a provisional contract with a person on behalf of the intended company. The making of that provisional contract was, in my opinion, the first

period of time at which it could be said that the company had even an inchoate existence, and it was only from and after the making of that contract that any fiduciary or other relation between Mappin and the company began. In the making of that contract, on presenting his own terms and conditions, he was, in my judgment, in the position of any ordinary vendor with any ordinary purchaser. Everything anterior to that was a matter relating to himself and his own title as vendor. It is surely open to any man, in point of law, to sell his property to a company, and to invite persons to form themselves into a company to purchase from him; just as it is open to any man to sell to any persons in the world the right to become his partners in any property or undertaking. Until the formation of the partnership he is simply a vendor of the wares; he may ask what price he likes, and obtain what price he can, and he is under no obligation whatever to say what price he gave or has to give for them to complete his title to the goods. I really am, for myself, at a loss to understand on what principle it can be said that Mappin's contract with Skoines was a contract by the company, or by any promoter, trustee, or director of the company.

It was conceded that, if he had bought it and paid down the price in money, or contracted to pay down the price in money, he would have been under no obligation to disclose his previous bargain or contract. He would have been obliged to show a good title to, and make a good conveyance of, the thing which he proposed to sell,

COURT OF APPEAL.

and I cannot draw any distinction between a legal right and an equitable right, between a conditional right and an absolute right, between a defeasible right and an indefeasible right. All that was still matter of title; his obligation in any case would have been the same to make a valid conveyance at the proper time of the thing which he undertook to convey.

It is said, however, that when the bargain with Skoines is looked at it contains stipulations about the forming of the company, and the constitution of the company, and the shares of the company. I cannot myself see that the court has for this purpose any right to read those stipu- . lations. They were stipulations between Mappin and Skoines alone-obligations as between them.

Even if they were stipulations by Mappin to do something wrong in the company or to the company, they might be evidence of that wrong, and proper redress might be given for that wrong as a substantive complaint. But that is, in my judgment, wholly beyond this section. And no impropriety in the contract can make it the contract of the company, or the contract of a promoter, trustee, or director of a company, when at the date of the contract there was no company, no promoter, no trustee, no director. The character of the contract cannot operate as a transformation of the contracting parties. I may illustrate my view by referring to a contract which, I think, would be within the Act. If, instead of contracting to sell to the company, or inviting the company to become shareholders in the thing itself, Mappin had invited them to become shareholders with him in a contract for the thing, and they had come into that, then he would, by the terms of his offer and by their acceptance of that offer, have made himself their agent as from the date of that contract; and any by- or collateral contract made for his own benefit would be a contract by a trustee of the company or partnership.

I have, for myself, no hesitation in agreeing with the Vice-Chancellor's decision and the substance of his judgment.

But there is another view of the Act which appears to me against the applicant. The Act says that an omission shall be deemed fraudulent; it provides that something which, under the general law, would not be fraudulent, shall be deemed fraudulent, and we are dealing with a case of that kind. When the Legislature provides that something is to be deemed other than it is, we must be careful to see within what limit and for what purpose it is to be so deemed. Now, the Act does not say that the prospectus shall be deemed fraudulent simpliciter, but that it shall be deemed fraudulent on the part of the person wilfully making the omission as against a shareholder And I am of having no notice of the matter omitted. opinion that the true intent and meaning of that provision is to give a personal remedy against the wrongdoer in favour of the shareholder.

No doubt a company is liable to have its contractswith its shareholders rescinded if its prospectus containsfalse statements, or omissions amounting in effect to false statements, because the prospectus is the basis of that contract. But if the prospectus does not, in fact, contain any such false statement, or any omission which, in fact, amounts to such false statement, it seems to me it would work a grievous wrong and injustice if the company were to be affected thereby.

The vendor, according to the hypothesis, conceals from the company something, and, while so concealing it, stipulates and obtains that he shall be a director, and, as such director, joins in issuing the prospectus. It appears to me that it would require express words or very clear implication, to make the company answerable for that beyond what they would be answerable for on the ordinary principles of law and equity. And I think it is more consonant with justice and common sense to hold that the words "on the part of" mean as against." On both grounds I am of opinion that the order of the

66

Vice-Chancellor ought be affirmed. And, on the second point, I may add that I have not myself the courage to throw the affairs of I know not what or how many companies into inextricable confusion because somebody accidentally discovers that, perhaps years before, some one had made an omission, perhaps accidental, perhaps immaterial, or, as in this case, an omission in which one Vice-Chancellor and one Lord Justice have been unable to detect any legal or moral impropriety.

MELLISH, L.J., delivered the following written judgment:-I am of opinion that the judgment of the ViceChancellor in this case ought to be affirmed upon the ground that even assuming the prospectus ought to be deemed fraudulent on the part of Mappin as regards the appellant, still that does not entitle the appellant to rescind her contract with the company, or to have her name removed from the register.

I think that the object of the 38th section of the Companies Act, 1867, was to prevent the concealment of contracts in the prospectus which it might be material for applicants for shares to know, by making the directors who were parties to such concealment personally responsible to such applicants if they became shareholders, but that it is not enacted that the contract for taking shares should be rescinded on account of such concealment. The question entirely turns on the meaning of the words that the prospectus shall be deemed to be fraudulent on the part of the directors knowingly issuing the same as against any person taking shares on the faith of such prospectus.

I construe these words to mean simply that, as between the particular director and the shareholder, the prospectus shall be deemed fraudulent so as to enable the shareholders to recover in an action against the director for issuing a fraudulent prospectus.

It is true, no doubt, as a general rule, that a principal cannot rely on a contract procured by the fraud of his agent, but then this section does not enact that the contract shall be deemed to be fraudulent on the part of the company, and, in my opinion, does not enable the shareholder to rely on the act of the director as being fraudulent in any action or other proceeding between himself and the company, but only in an action between himself and the director. If the contrary construction were adopted it would follow that in this very case the whole of the shareholders of the company, if they had made their application in time, with the exception of Mappin and Skoines (who, as far as I know, only held fully paid-up shares) might have had their names struck off the register, leaving the creditors to get paid as they could, and, moreover, it would follow that shareholders might escape from their liability on their shares on account of some concealment of a contract by a director which had not done them the slightest harm, and in respect of which they could only recover nominal damages in an action against the director who had been guilty of the concealment.

Having come to this conclusion it is unnecessary that I should give a positive opinion on the question whether Mappin was himself a person who ought to be deemed to have issued a fraudulent prospectus within the section. I think, however, it is right to add, that I do not at present agree with the whole of the reasoning of the Lord Justice on this part of the case. If, indeed, the 38th section could be confined to contracts made by promoters and directors in their character of promoters and directors, or after they had become promoters or directors, the contract between Skoines and Mappin would not be within the section, because I agree that there was no fiduciary relation, at the time the contract between Skoines and Mappin was made, between Mappin and the company. I think, however, there are grounds for holding that this would be too narrow a construction, and that the section ought to be held to extend to every

contract made with a person who afterwards becomes a promoter or director, provided that the company have become entitled to the benefit of the contract, or have become liable to perform the provisions of the contract before the prospectus is issued.

If this view is correct it becomes material to consider whether the company had become entitled to the benefit of the contract made between Mappin and Skoines at the time when the prospectus was issued. Now I agree that if the contract between Mappin and Skoines is to be looked at as an unconditional contract for the sale of the patent from Skoines to Mappin, the company had no interest in that contract, and were not entitled to have its contents disclosed to them. The contract, however, between Skoines and Mappin was a contract, it appears to me, upon the condition that Mappin should procure the patent to be sold to a company formed for the purpose of working the patent, and if such sale was effected, £65,000, partly in money and partly in shares, was to be given to Skoines, and the residue of the price, whether money or shares, was to be retained by Mappin. Now, when the company became the purchasers of the patent, that is to say, when the directors, after the formation of the company, adopted the contract made by Mappin with Wright, Mappin was both promoter and director of the company. The purchase of the patent by the company, who were the only company then in existence formed for the working of the patent, enabled him, without the knowledge of the company, to fulfil his contract with Skoines, and to earn an enormous profit. It seems to me these are grounds for contending that under these circumstances he ought not to be considered as the owner of the patent, but only as a person who, by a contract with the owner of the patent, had the disposal of the patent, and in that case, according to the decision of the House of Lords in the Imperial Mercantile Credit Association v. Coleman, 21 W. Re 696, L. R. 6 H. L. 189, he was bound to communicate his contract with Skoines to the company, and as he did not do so the company were entitled to the benefit of

that contract.

BRAMWELL, B., said he entirely agreed with Lord Justice James in the two conclusions he had come to and the reasons he had given for them. Had he known that Lord Justice Mellish differed, he should have thought it right to have considered the matter more carefully and to have prepared a written judgment.

Suppose Mappin had originally bought the patent for ceded that without doubt his agreement with Skoines his own purposes and worked it for ten years it was conneed not in that case have been specified in the prospectus. If that were true for ten years, would it not be also true for six months, and true if he had not worked it at all? Where was the difference if, instead of working the patent, he intended to dispose of it to a joint stock company? His lordship thought it impossible to say that Mappin ought or ought not to state in the prospectus matter as important to be known to the intending company according as he had or had not a certain intention.