1876 PORTAL v. EMMENS, Companies Clauses Consolidation Act, 1845, has been held to be the governing section as to the definition of "shareholders." In Brown's Case (1), Lord Selborne, C., says that the mere acceptance of the office of director, without more, will not warrant the inference of a contract to become a shareholder. And Lord Justice Mellish adds (2): "In order to constitute any person a shareholder, there must be proof of an agreement between him and the company that he should become a shareholder. I think it is quite clear that the mere fact of being a director cannot by itself make a man a shareholder,—that is to say, make an agree ment between the man and the company that he will take shares from the company. The expression that he must be qualified by holding so many shares, does not oblige him to take shares from the company; but he may obtain the shares in any other legal manner by which shares may be acquired; and I think strictly to comply with the articles of association, it would be sufficient that he should have acquired the shares before he acts as a director." There is no difference in principle between the provisions of a special Act and those of articles of association. The decision in Ness v. Angas (3) proceeded upon the 7 Geo. 4, c. 46, s. 13, which uses the word "members," not "shareholders." Now, "member" includes a person who has agreed to become a member. Harrison, in reply. Section 8 of the Companies Clauses Consolidation Act, 1845, has reference to the exercise of the rights of the shareholders inter se, and does not profess to be an exclusive definition of the term shareholder. Here, the defendant is by the very terms of ss. 4 and 16 of the special Act constituted a shareholder and director of the company. Section 85 of the general Act expressly enacts that "no person shall be capable of being a director unless he be a shareholder, nor unless he be possessed of the prescribed number, if any, of shares." Kincaid's Case (4) and Forbes's Case (5) are distinct authorities for holding that a man who promotes an Act of Parliament for the incorporation of a public company, and allows his name to be inserted therein as a (1) Law Rep. 9 Ch. 105, 107. (3) 3 Ex. 805; 18 L. J. (Ex.) 470. (4) Law Rep. 11 Eq. 192. (5) Law Rep. 19 Eq. 353. director, thereby makes a statutory contract with the company to take the number of shares declared by the Act to be necessary to qualify him for the office of director. GROVE, J. This case has been ably argued; and, as it presents some difficulty, we will consider our judgment. Cur. adv. vult. Jan. 28. The judgment of the Court (Grove, Archibald, and Lindley, JJ.), was delivered by LINDLEY, J. In this case the plaintiff obtained judgment against the Didcot, Newbury, and Southampton Junction Railway Company for 3217. 68. 6d., and issued execution against the property and effects of the company. Nulla bona being returned, and the judgment being still unsatisfied, the plaintiff sued out a scire facias against the defendant as the holder of and entitled to thirty unpaid-up shares in the capital of the company. To this scire facias the defendant pleaded that he was not at the time of the commencement of the action against the company liable to the judgment as an existing or former member of the company. On this plea the plaintiff joined issue; and, there being no facts in dispute, a special case was stated for the opinion of the Court. The question submitted to the Court was, whether the defendant is or is not liable as a shareholder in the above company. This question turns entirely on the true construction of the Act of Parliament creating and incorporating the company, and of the Companies Clauses Consolidation Act, 1845, which is incorporated with it. The material portions of the company's special Act (36 & 37 Vict. c. ccxxix) are as follows, viz. the preamble, and ss. 2, 4, 6, 14, 15, 16, 18, and 40. The preamble recites that "the making of the railways thereinafter described would be attended with public and local advantage; and that the persons in this Act named (including the defendant), with others, are willing, at their own expense, to construct the railways, and it is expedient that powers should be conferred on them for that purpose." Sect. 2 enacts that "The Companies Clauses Consolidation Act, 1876 PORTAL v. EMMENS. 1876 PORTAL EMMENS. 1845, Part I (relating to cancellation and surrender of shares) and Part III (relating to debenture stock) of the Companies Clauses Act, 1863, the Lands Clauses Consolidation Acts, 1845, 1860, and 1869, the Railways Clauses Consolidation Act, 1845, and Part I. (relating to construction of a railway) of the Railways Clauses Act, 1863, are (except where expressly varied by this Act) incorporated with and form part of this Act." of Sect. 4. "William Emmens, J. R. Engledue, H. Vigne, and all other persons and corporations who have already subscribed to or shall hereafter become proprietors in the undertaking, and their executors, administrators, successors, and assigns respectively, shall be and are hereby united into a company for the purpose making and maintaining the railway, and for other the purposes of this Act, and for those purposes shall be and are hereby incorporated by the name of The Didcot, Newbury, and Southampton Junction Railway Company, and by that name shall be a body corporate, with perpetual succession and a common seal, and with power to purchase, take, hold, and dispose of lands and other property for the purposes of this Act.” Sect. 6. "The capital of the company shall be 600,0007., in 60,000 shares of 107. each." Sect. 14. "The first ordinary meeting of the company shall be held within nine months after the passing of this Act; and the quorum for general meetings, whether ordinary or extraordinary, shall be seven shareholders holding together not less than 20,000l. in the capital of the company." Sect. 15. "The number of the directors shall be five; but the company may from time to time reduce the number, provided that the number be not less than three." Sect. 16. "The qualification of a director shall be the possession in his own right of not less than thirty shares." Sect. 18. "William Emmens, J. R. Engledue, H. Vigne, and two persons to be nominated by them or the majority of them, and consenting to such nomination, shall be the first directors of the company, and shall continue in office until the first ordinary meeting held after the passing of this Act. At that meeting the shareholders present in person or by proxy may either continue in office the directors appointed by this Act or nominated as afore said, or any of them, or may elect a new body of directors, or directors to supply the place of those not continued in office, the directors appointed by this Act or nominated as aforesaid being, if qualified, eligible for re-election; and at the first ordinary meeting to be held in every year after the first ordinary meeting, the shareholders present in person or by proxy shall (subject to the power hereinbefore contained for reducing the number of directors) elect persons to supply the places of the directors then retiring from office agreeably to the provisions of the Companies Clauses Consolidation Act, 1845, and the several persons elected at any such meeting, being neither removed, nor disqualified, nor having resigned, shall continue to be directors until others are elected in their stead in manner provided by the same Act." Sect. 40. "The articles of agreement forming the schedule to this Act are hereby confirmed, and shall be valid and effectual to all intents and purposes as between the company and Melville Portal, Esq., and carried into execution accordingly." The agreement here referred to and confirmed is an agreement between the plaintiff and a gentleman on behalf of the promoters of the company. It does not appear whether any shares or scrip were ever issued; but the case states that no shares were ever allotted to the defendant, that there never was a register of members, that no first ordinary meeting of the company nor any general meeting of shareholders was ever held, and that no directors were ever appointed otherwise than by the Act itself. Under these circumstances, the first question for consideration is, what was the exact position of the defendant with reference to the company formed by the above Act. This much we think is clear : 1. The company was created and incorporated, and became capable (as from the date of the Act) of acquiring rights and incurring debts and obligations: 2. The agreement mentioned in the schedule became binding as between the plaintiff on the one side and the company on the other, and the company became bound to pay the sum of 3157. mentioned in clause 11 of the agreement on or before the 1st of December, 1873, whether any shares were issued or not, and VOL. I. R 3 1876 PORTAL V. EMMENS. 1876 PORTAL V. EMMENS. whether any general meeting of shareholders should, be held or not previously to that time: 3. The defendant and the other persons mentioned in s. 4 became by the Act members of the company: See as to this Cromford and High Peak Ry. Co. v. Lacey (1) and Scott v. Berkeley (2), where, however, the Court held that the defendant had ceased to be a member before judgment against the company was recovered: 4. The defendant and the other persons mentioned in s. 18 became the first directors of the company: 5. The same persons continued such directors until the first ordinary meeting of shareholders; in other words, they have never ceased to be directors. The language of ss. 16 and 18 is somewhat obscure, and leaves it doubtful whether the defendant and the other directors named are to be treated as having from the date of the Act thirty shares of 107. a piece, or whether they are to be treated as being only entitled to require and bound to take thirty shares each when the time for allotting shares arrived, if that time should ever come. The expression "if qualified" in s. 18, taken by itself, is as consistent with an absence from the beginning of all qualification as with a qualification held at one time but lost at a later period. But s. 16 must, we think, be taken in connection with s. 85 of the Companies Clauses Consolidation Act, 1845, and, so taking it, we think that the defendant became by the special Act a member of the company in respect of thirty shares of 107. each in the capital of the company, although no shares might be allotted to him, and although the particular shares in respect of which he was constituted a member might not be capable of identification by numbers or otherwise. Unless this be the true construction, the effect of the special Act will be to constitute as first directors of the company men who are made members of the company by the Act, but who have no shares at all in the capital of the company. Moreover, the persons thus constituted directors without having any portion of the capital of the company will be those persons procured the passing of the Act and expressed their willingness to construct with others at their own expense the railways authorized by the Act. Such a result is so irrational as to compel us to (1) 3 Y. & J. 80. (2) 3 C. B. 925; 16 L. J. (C.P.) 107. who |