The Express.
London, England, 1868-02-28 00:00:00

SECOND_. EDITION.
LAW INTELLIGENCE.--MilS DAY.)

EQIJITY COURT.
(Before Vioe-Chasieellor Sir W. Page Wood.)
unfelt V. TEa POINCIAL C 041.0101011.
This wag a bill filed by Mr. Climb, of Cheltenham, on
behalf of himself and Limited), the sh in the
Financial (Corporation (exept thecandants),
against the Corporation, the Origami Commercial Beak
(Limited), sad certain directors and officers of either soma-
',any, praying for a declaration that an arrangement for
amalgamation conic to between the directors of the com-
pany and the bank, in March 1865, was beyond the power
a the directors, and was not binding on the plaintiff or
on any members of the corporation.
The corporation was registered on the 29th of December,
Igo3, for undertaking financial operations,the capital
being 3,000,0001., which was ultimately divided into
150,0001. shares of 201. each. The directors were em-
powered to amalgamate with, purchase, or acquire the
business and property of any company of like sharacter,but
there was no power to sell or transfer the boluses of the
company. Shortly after July, 1864, the plaintiff purchased
2,775 201. shares (U. geld up), which were tranderred to
him in September 1664. On the 19th December, 1864,
the first ordinary annual meeting was held. On the 18th
of January, 1805, the accounts up to the end of 1864 were
audited, allowing • grow profit of 31,836/. • but the
auditors recommended caution in dealing with ate balance
of profits, as • large amount of the transactions were
pearling, and it was impossible to say what some
of the securities might realise. On the 23rd
of May • second meeting was held, at which
the directors reported • profit of 31,8001. odd, and
proposed a dividend of 10 per cent., which was shortly
afterwards paid. Soon after this the directors of the cor-
poration enterediato negotiation for the amalgamation of
the corporation with the Oriental Commercial Bank,
ebb* was registered on the 30th of Dec., 1864, with
the object of taking over the burinseres of two
other financial companies, and " any other objects which
the company may adopt by 'pieta resolution."
Shortly before the 24th of March, 1865, a memorandum
called " Outline of Basis for Combination" between the
bank and the cooperation was prepared, and was on the
24th signed by Bwaun, one of the directors, and by
Demetno Pappa, then general manager on behalf of the
bank, an
by Key and Healey, two directors, and by
Wallord, the managing direotor, on behalf the corporation.
On the 27th of March the directors of the corporation
it-iied a circular to their abareholders stating that they
bad entered into arrangements for amalgamation ; that
the capital of the amalgamated company would be
3,000,00 W., of which the first issue would be
1,500,0001. in 75,000 shares of 201. each (51. paid).
The financial shareholders were to be entitled to One share
in the new company for each three shares then held in the
corporation (W. pad), and each of the new shame would be
credited in the first instance with 4/. paid. The remaining
I'. was to be credited, as the outstanding assets of the
corporation were realised ; or if these proved insufficient,
a call to the extent of the deficiency, whatever
it ;night be, not exceeding tie. Bd. per present share.
At a subsequent meeting of the corporation held on the
Nth of Slay the draft of an amalgamation deed wee read at
length, without explanation, and was then and there
adopted, and afterwards executed: in the month of May.
Ti pl.untiff`a case was that the circular Mined by the
fioancial directors did not correctly represent the
agreement of the 24th March. By the agreement it was
pro Wed that the corporation should pay and discharge
the whole of its own debts and liabilities ; whereas the
circular stated thatit had been agreed that the bank should
tie upon itself to pay them. Further, that the deed of
amalgamation differed from the " outline of basis," inas-
much as no limit was placed thereby on the amount of
cash. He said that he and others being de-
e, lied in supposing their documents to be accurate,
di.l net attend the above meetings, and acquiesced in oer-
ton resolutions pasted at them, whereby the amalgama-
tion wee. purported to be resolved upon, and a voluntary
of the company for that purpose was also agreed
to. 11 e also charged that the arrangements for amalgamation
acre preceded by a secret agreement with the bank
fortes, that Walfonl, the manager of the corporation,
should receive 5,000/. for his services, of which 1,6001 was
a, wally paid. The financial directors admitted that the
gin olar was not correct, but maintained that it was mai-
wilily so for the purpose ; and the defendants contended
muerally that the proceedings throughout were bone fide
iii ultra sires. The bonus to Mr. Watford was a proper
nsation for the abolition of his office. Both the
are now in course of liquidation.
Mr. W. B. Jarr.es, Q.C., and Mr. A. E. Miller, appeared
for the plaintiff ; Sir R. Palmer, Q.C., Mr. Drum, Q.C.,
su.l IMr. Macringhten for the bank and its directors ;
R.,y, Q.C.. and Mr. Eddie, for the corporation; Mr.
I:. hi. Lit/ant, Q.C., and Mr. Hadden, for six of the linen-
s-1.11 dit..ctors ; Mr. Kay, Q.C., and Mr. C. T. Simpson for
to., other directors, Dr. Collura and Mr. Cotterell • Mr.
Fromm, Q.C.,and Mr. A. G. Marten, for a third director,
Ceorge Moab, who severed in their defence; Mr. Fisoher,
for Mr. Watford.

•
The ice-Chancellor, in giving judgment this as
raid, in the first plebe; N appeared", him thltstgran
whewe as this proposed amalgamation was clearly not
within the mope of the articles of association of the me.
raration. In argument, however, it was chiefly rested
upon the ',milieus of the 161st section of the Companies
A.t, 1..6'2. The principle of that section was this, that if
iipany were desirous of merging or dissolving
itolf in another—inasmuch an it was clear that
company could so far amalgamate with an-
other as to compel its own shareholders to be-
r....• members of the other company —it was canape.
the amalgamating company to sell its assets to the
r. receiving back the proceeds in the shape of shares.
am shareholder who did not choose tooome in would
he co for hound by the majority of his co-shareholders as
th.,t he would lose all share in the purchase-money ; but
1.0 iimt Lae would be his last, and he would not become
meoreinhle for the liabilities of the concern into which he
ii, !fined to enter. But in the present instance
thew was an express provision in the out-
bee of combination sad also in the deed
ti,.,t ry .bar -holder in the corporation should be bound
p.y *.!'. upon 7:i,000 shares, that is, should be forced to
ke sli.,res, in other words a debt to that amount was
ere..w.l against the corroration, which if not satisfied by
the liquidation of securities, must be met by a call on the
c-rporation sharcholden. That, his Honour held, was not
.11 a redo of assets in exchange for shares as was intended
It the 161st section. That being so it became
~,.n• rcary to consider at lentrth the provisions of the
.h., dof the 17th of May. Then came the question of
wii. the, the plaintiffs had come in time ; and his Honour
thonAht that the plaintiff, not having become aware of
erroneous till June, 1865, was not out of time in
filing this bill on the 10th of the following November.
Th.., would therefore be declarations to the effect that
tbe .fliwilgamation was beyond the powers of the corpora-
ti.ui directors whether under their articles, or under the
r..ieputies Act; and an injunction to restrain further
pt.s.eelings on the footing of the amalgamation.
.11.0 a declaration that the bank were entitled to stand
3+ creditors of the corporation in respect of any advances or
merits which they had made in liquidation of any of
the debts or liabilities of the corporation, and to a lien on
all the assets of the corporation comprised in the schedules
to the deed of amalgamation, to the amount of such ad-
with interest on such of them as carried interest.
Further that without prejudice to any question se between
the shateeholden of the corporation who had been regis-
tered as shareholders of the bank and the creditors of the
I• ink, ouch shareholders, as between themselves and the
leek on the one hand, and themselves and the corpora-
tion oar the other, were entitled to have their shares in the
corporation restored to them.
Then as regarded the question of *oats ; two sets of
charges of fraud bad been made. One was that of
the issue of the circular misrepresenting the effect
of the outline of combination. Now, if not that
very document, certainly a letter of Pappa, the
manager, pointing out the discrepancies, was
,ctually entered in the minutes of the book, and of
that, strange to say, the directors took not the
slightest notice. That fraud, therefore, was clearly
established. The next was as to the bribe offered to
sod accepted by Watford. His Honour was compelled
to call it a bribe, because though it may have
leen a very proper compensation for his loss of salary, and
the bank company might probably have sanctioned it if
it had been brought forward, the transaction unfortu-
nately had been attempted to be concealed ; and there was
the astonishing spectacle of one of the directors writing
to Mr. Watford, and suggesting to him how be could
lest tell a lie, in order to conceal the transaction. Such a
scandalous occurrence could not pass without notice.
Theat matters were frauds established, and whichthe plain-
tiff was compelled to bring forward, in order tontatehmease
properly. But there were other charges of fraud whisk were
net proved, namely, that the bank directors treated some
of the corporation senate that were bad as if they were
goal, in order to increase their own saLria, kci. The
plaintiff must pay the costa occasioned those
paragraphs of the bill, The other costs would
be Paul by the defendants, the bank, by its
.lirectors, and by the directors of the corporation, except
Collum and Mr. Cotterell, who did not support the
other defendants' case, and Messrs. Evans and Rey, the
ufhcial and voluntary liquidators. Their meta must be
pci,l by the plaintiff, who would recover them over. His
Honour said he must leave Mr. Pappa, the manager, to he
indemnified by his own company.

COURT OF QUEEN'S BENCH.
After Term Nil Prins Sittings at GuildhalL—(Before
the Lord Chief Justice and a Speeds' Jury.)
Al )1. V.II SMIIII--1111 CHAMPIONSHIP OF TIM THANES.
The further bearing of this ease was resumed this
S.Orting.
Kr. Hawkins, Q.C., Mr. Henry James, and Mr. Bann.
.1. Non Tennant were mussel for the plaintiff ; Mr. Ser.
leant B.illaistine, Mr. Garth, Q.C., and Mr. Brick wood,
for the defendant.
The first witness caned wan
Ur. Walsh (editor of the Pield)His had had consider
isle experienoe in boat racing. He bad acted as umpire
several maim. Waterman almost invariably started
themselvee ; refused to be started.
Mr. Frank graduate of Exeter College,