Northern Times.
Liverpool, Merseyside, England, 1859-01-26 00:00:00

VICE CHANCELLOR'S COURT.—JAN. 24.
SCOTT AND ANOTHER V. DIXON.
The plaintiffs in this action were John Scott and
Robert Robinson, who sued the defendant, Joshua Dixon,
one of the directors of the Liverpool Borough Bank, to
recover damages for certain false representations alleged
To have been made to the plaintiffs respecting the affairs
of the bank, whereby the plaintiffs were induced to
Purchase certain shares in the bank, which afterwards
Was found to be insolvent, and stopped payment. The
alleged false representation was contained in a report
presented by the directors to their shareholders in the
month of July, 1857, which was set out at length in the
declaration, as follows :
Rat„!sie, Esq`.ifverpool Borough Bank.
"Board of Direetors for the year 1856-7 :
thbo
Chairman ; Christopher Bird Jones,
ueputy-chairman ; Edward Benn, Es q. ; Duncan
ilob
n-aY, Esq. ; John Cropper, Esq. ; David Lamb, Esq. ;
ert Crosbie, Esq. ; Joseph Pater, Esq. ; Joshua
kEs.”,,• James Ryder,Robert Ellison Har-
AT. ;q Thomas Seliar, Esq. ; John P. George Smith,
ana,rer.

"Resl3;t of the Directors to the Proprietors.
" According to the last report the paid-up capital
vt the bank was £900,000, and the reserve fund was
£101,775
10s. 11d.
"Since that date two calls of £1 per share have been
Paid upon the new shares, making the capital X 1,000,000.
es" The net profits of the past year, after payment of all
2s IdPenses of management, and after deducting £45,825
for losses by bad debts incurred during the same
Peri°d, amount to £69,318 12 8
,APPropriated as follows :
23 per cent divi-
end Upon
4 per cent. divi-
eaduPoll ..£1,000,000
.roperty tax paid

£950,000 . . £32,250 0 0

25,000 0 0

3,629 6 8

-£61,879 6 8

erve fund
of the losses above-mentioned have

suds of a customer.
he affairs of 1854, a year which, it
lost disastrous to those customers of
engaged in the colonial shipping
Las been sustained in the realisation
,aken over, by way of security, and in
estates, then considered good, than
been anticipated.
,:tors have thought it their duty at once to

dividend to the rate of 5 per cent per annum,
Lne grounds that, taking the most favourable view of
the liquidation of these accounts, the whole of the re-
serve
_
fund will be required to meet the losses incurred
and that, on the other hand, taking the most unfa-
vourable view consistent with probability, the
good
current business of the bank will, in their be
opinion,
sufficient to admit of the regular continuance of the
dividend without encroaching on the capital at the same
Period in the ensuing year.
" In laying this statement before the shareholders, the
directors desire stron,7ly. to impress upon them that' its
unsatisfactory character is to be attributed to the affairs
of 18:54, and that, apart from these, the sound and
ligitimate business of the bank would have enabled it to
Pay the ordinary dividends, and also to add largely to
the reserve fund, notwithstanding the losses that have
been incurred subsequently to that year. They wish
also to state their confident expectation that the change
they are making in the policy and regulations of the
bank will effectually guard against the recurrence of
similar results.
" sir'. Smith having .stated to the directors that his
nealth would not longer permit him to undergo the
labour of conducting the details of the manager's duties,
al! cl having in consequence requested to be relieved from
....111-s office, they have with reluctance complied with his
Revt.s„h, and have made arrangements that Mr. Thomas
Zsekl.ar, who is in every respect eminently qualified for
post, shall, from the Ist of August next, assume
Lae position of manager. Mr. Smith h as, at the request
of the directors, consented to take a place at the board,
and to continue to give the bank the aid of his valuable
-assistance.
"The directors who go out of office by rotation are
i
nathbone, Mr. Dixon, and Mr. Benn, who are
elßible for re-el
be ection.
"Pro.prietors legally exempt from the Income-tax will
f
theirhsbed vvithba certificate of the proportion due on
teionnapplication to the manager.
"WILLIAM RATIIBONE, Chairman."
!t, e points alleged that the above report was false. in
1. That there were no profits out of which
71.6rnvueesaded:ldrairevasidend could be paid, 2. That it concealed the
true financial condition of the bank, and gave an untrue
account thereof. 3. That the company was not then
Patty
essed of the capital aforesaid. 4. That the coin-
not at the time in a sound financial
irtencuti n.
And 5. That the shares during all that
,were wholly useless, and of no value. It concluded
niionaeueging that the plaintiffs had lost the purchase-
,ceonnrlbuotfo
tothmeiarkeshuapres, and had been compelled to
the losses of the bank. The de-
-1,1 laiiticlathp,.ts pleaded the general issue, and also that the
Bonus were not induced by the means alleged to become
eholders. At the trial, which took place before Mr.
~o-thsopeentiorAitslihtairafftrisesn at. Liverpool,, at the last Summer. Assizes,
obtained a verict for £l4O, being the value
including. the calls which they had paid.
groundslsl ently a rule was granted for a new trial, on four
ts that there was no evidence for. the jury of
hat and fraudulent misrepresentation ; 2, if there
evidence;was
att the verdict was against the weight of the
to that there Was no evidence of any representation made
plaintiffs that the report was true ; and 4, that the
ctors of 1837 and 1838 were improperly

uvorcs of th
rejected in e
On Thursday last andthis-d Mr. Edward J, Q.O
" 1"d cause against the rule ay
and was followamesed on the
Barne side by Mr. J. Wilde -.Q.0 , and Mr. Broun. The
Attorney-Ge.neral, Mr. Atl;erton, Q.C., and Mr. Mellish
Mr. James
appeared in support of the rule.
1111 e 1110 ibegan by observing that in moving for the

rned AttOrnev-

a General had made a stroll;
appeal to the compassion of t he Court on theart of th
thetenan4ar_ll_t,, and had said that if this verdict should stani

Ant would be a ruined man.
general rose and said the defendant was
nan of large property, and he believed that even
ant rule should be discharged the defendant
-save.

T Attorney-

would still
Mr• James pro(

eded to state that the action were two poor men, who had inve plais n the
sted nti
their little

lroperty in the Sank.
Lord Campbell intimated that the Court would not b€
Influenced either way by the circnmstances of the parties.
Mr. James then read the report, which commenced by
totting forth the names of directors of undoubted
'respectability and character, and contended that it was
false in stating that the bank at that time had an
existing and available capital of £1,000,000. The fact
Was, that only £933,137 10s. had been paid up, as would
appear on reference to Mr. Banner's report of the 17th
of February, 1858. Then the report stated that the net
Profits of the past year, after payment of all expenses of
Management, and after deducting £45,825 2s. id. for
losses by bad debts incurred during the same period,
amounted to £69,318 12s. Bd. The learned counsel
Contended that that statement was not only a logical
absurdity, but a gross fraud.
The Attorney-General said it was perfectly true that

during the fear

Mi. James admitted that the profit had been made
during the year, but the statement as it was made

Was a fraud, because it led people to suppose that
that sum was fairly divisible among the shareholders,
and that there were no contingent losses. The
Report must be read as it would be construed by any
ordinary man, and not as it would be construed by
a special pleader ; and so reading it, the inference
ta be drawn from the Report would be, that all the
losses incurred would be met by the reserve fund of
£109,000, without trenching on the capital in the coming
Year. Instead of that proving to be the case, it turned
,ant at the. end of three months that the whole of the
capital of the bank was gone, and it required a call of £5
Per share to clear off its liabilities. The fraud consisted
1.11 Making a dividend out of capital. If it was proper
0 do that at all, which the learned 'couu.sel doubted, it
znl,lrd:irlid:lidlsbe done by stating the fact clearly to the
Campbell said that, prima facie, a dividend was
taken out of profit.
f Mr. James : The directors said, that, taking the most
fa view of the liquidation ,of the accounts, the
'hole of the reserve fund would be required to meet the
WlossesZl incurred; but, taking the most unfavourable view,
• e goad current business of the bank would " be suffi-
cleat to admit of the regular continuance of the di4idend,
ithout encroachine, on the capital at the same period in
the coming year." It was admitted by the defendant
of knew that statement to be untrue, and
hiniehprtohoef
defendant
the learned counsel referred to a speech w
'endant made to the shareholders, at a meeting heldb on
a
the 25th of
that
111;aaiiker FelJruary, 1858. The defendant had been a.
k N.ew Orleans, and had been a director of
te _
suspec d
,or several years, and he said he had long
`u,'?, affairs of the bank were not going on we 1.1,,
In
fo`4r(l Campbell : He was an " outside director.
0,1n,,er tunes, in this country, there was an "inner cabi-
.a and also an "outside cabinet," who knew nothing
u.?l..ct the proceedings of the "inner cabinet."
41 • James said
d•
.of
Of rector to make himself acquainted with thp air
e b4uk. In the month of hue/ 18577 tile defell44l4