The Sun.
London, England, 1858-08-27 00:00:00

LAW INTELLIGENCE,

COURT OF BANKRUPTCY.—AuG. 26.
(Before Mr. Commissioner False.)
IN RE E. LOW.
The bankrupt was the landlord of a tavern in Fleet-street,
known es " The Discussion Forum."
This was an examination meeting. Mr. Goddard, for the
assignees, did not oppose.
The Commissioner—There ere no assets.
Mr. NVarrand, for the bankrupt, called the attention of
the Court to a surplus expected on property as held by a
creditor.
The Commissioner—The holder of that propQrty is Mr.
Low. What rellrion is he to the bankrupt ?
Mr. Warrend—A brother.
The Commissioner—And the two brothers between there
have contrived to get the property oesf thoe n
under ajudgment
credi.ors ?
Mr. Warrand—Mr. Low took posssi
which was eight yesrs old.
The Commissioner—That does not improve the matter.
Credit was obtainer!, this judgment being pending. I see
Mr. Low (the bankrupt's brother and creditor) describes
himself as a banker in Leicester-square. As no creditor in-
terferes the bankrupt may pass.

ASSIZE INTELLIGENCE.

NORTHERN CIRCUIT.--LevEerooL, AUG. 26.
(Before Mr. Bart n Martin.)
SCOTT AND ANOTHER T. DIXON.—THE LCTERPOOL
BOROUGH BANK ACTION AGAINST THE MANAGING
DI HECTOR.
This trial, on which a large amount of commercial In-
terest has concentrated, came on to-day, and the court was
cr wetled at an early hear.
The counsel for the plaintiffs were Mr. Wilde, Q.C., Mr.
Edward James, Q.C., and Mr. Brown; for the defendant,
Sir Fitzroy Kelly, Mr. Atherton, Q.C., and Mr. Meleuish.
Mr. Brown, in stating the case, said that John Scott and
Robert Robinson were the plaintiffs, and Joshua Dixon the
defendant. The declaration stated that the defendant was a
director cf a banking company, and that the shares of the
company were transferable; that the defendant, intending to
deceive the plaintiffs, fraudulently represented that there
were profits of the company paid to and divided amongst the
shareholders; that a report was fraudulently contrived and
published whereby he represented that the financial condi-
tion of the company was sound, and that the shares were
then of great value, whereby the plaintiffs were induced to
purchase shares ; that there were no profits to be divided
amongst the shareholders ; that the financial condi ion of
the said company was not sound, whereby the plaintiffs lost
the value of their shares, and were forced to contribute to
make up the losses of the company. o his the defendant
pleaded not guilty, and that the plaintiTffst were not induced
a s sserted.
Mr. Edward James, in opening thecaee, said—May it please
your lordship and gentlemen of the jury, the defendant is
sued in this case by the plaintiffs, for the purpose of recover-
ing from him the amount of ten shares which were purchased
by the plaintiffs in August of last year, together with a fur-
ther sum that they have been called upon to pay, I think,
of 15 per share—a call made subsequently to the failure of
the Borough Batik; and the action is founded upon the well-
known rule of the law, that where a man has been induced
to alter his position for the worse by the misrepresentations
of another individual, he is entitled to be indemnified against
any losethat he may have sustained by reason of such trans-
action so entered into through the misrepresentation of that
other person, and from him. It is a rule based on common
sense, and built up with the strictest principle of what is
just and right. Now, gentlemen, having stated that as the
foundation of the claim in the present action, I will, as
shortly as I can, consistently with my duty, call your atten-
tion to the facts of this case. The Borough Bank of Liver-
pool, of which the defendant has been f tr. some years a direc-
tor, was established in the year 1837, upon the remains of a
bank belonging to Messrs. Hope and Co. There was, as is
usual in such cases, a deed of arrangementamougst the pro-
prietors, whereby the management was vested in certain
gentlemen, called directors. I shall very shortly call your
ttention to two or three of the clauses, and not more. The
27th section provides " that the entire management of all
the affairs and business concerns of the company shall be,
and is hereby vested in the directors of the company." Sec-
tion 44 provides that "the directors shall keep all necessary
and proper books of account; that they shall, half-yearly,
settle, adjust, and balance the said books, and make out and
declare a full, true, and explicit statement and balance-
sheet, exhibiting the debits and credits of the said company,
the amount and nature of the capital and property thereof,
and the then true-estimated value thereof, with the amount
of the company's negotiable securities then in circulation,
and the profits and losses of the said company, and other
matters, fully and truly manifesting the state of the affairs
of the said company." Nothing can be more explicit and
clear than that. Clauses 55 and 57 provide for the general
annual meeting of the proprietors, and for what is to be
done with respect to the proprietors at such meetings.
There is to be a general meeting in July, provided for
and by section 67. The directors fur the time being
"shall exhibit to the proprietors assembled a true and
correct summary and balance-sheet and report of the
profits and accumulations or losses of the company from
the time of the commencement of the business, or from
the end of the business included in the last preceding
report, and of the state and progress of the affairs of the
company up to and including the 30th June last preceding
such annual general meeting, and also such further ac-
counts and statements as the said directors shall deem expe-
dient for the interests of the company to be made public"—
[the learned counsel called particular attention to the words
to be made public," and then proceeded]—" and every such
report as aforesaid, of the losses and profits and accounts of
the company, shall be binding and conclusive on all the
proprietors, their executors, administrators, and assigns,
unless some errors shall be discovered therein before the
next subsequent report shall have been produced, and,in that
case, such errors shall be rectified." So that, besidesthe half-
yearly account and balance sheet, there is to be an annual
meeting of proprietors,hefore which meeting the directors are
to lay " a true and correct summary of all the accounts and
profits, and of the losses and all other matters relating to
their concern which may be expedient for the knowledge of
the proprietors and for the public." That is what is provided
for by this clause. Clause 95, to which I will next call your
attention, provides that '`the directors shall from time to
time, either half-yearly or otherwise, during the continuance
of the company, as they ball seem fit, declare such a dividend
out of the clear profits of the company then actually accrued
and received into possession, including the interest and pro-
ceeds of capital laid out and invested in pursuance of the
powers therein on their behalf contained, as they shall think
fit, and so often as a dividend shall be declared they shall
cause it to be divided." So teat the dividend is to be de-
clared out of the clear profits of the company " then actually
accrued or reduced into possession." The 98th section pro-
vides as to what shall be considered the net profits. The net
profits of the company made in and during the first year of
heftiness ending on the 30th Juue, and so on, after making
deductions for had and doubtful debts, and after setting apart
such portion as the directors think requisite for maintaining a
reserved surplus fund, shall be divided amongst the proprie-
tors in proportion to the number of shares which they shall
bold. Therefore, they must first ascertain and set apart for
the bad and doubtful debts, and next lay aside such a sum as
they think proper for the reserve fund. The 106th section
provides for the dissolution of the company only in certain
events. "If at any time the losses of the said company shall
have exceeded all the said fund called the reserve surplus
fund, and also one-fourth part of the capital of the company
which shall have been actually paid up without regard to
the amount of the subscribed capital, the managing board
for the time being shall, so soon as possible after the above-
mentioned state of the company shall have become known
to the directors, it is imperative upon them to call a
meeting of the proprietors, and lay before them these
facts, when, upon the application of any two proprietors the
company shall be declared to be absolutely dissolved, unless
certain pertioes of the proprietors shall think proper to
carry it on under eel tain tegulations." So that Ti. en the
reserve fund is gone, and when one-fiairth of the paid-up
capital is also Lour, the duty of the directors i
ss, as
s so
n
ta
he
pass* • - 'We eft-r nscaql,itiing th- fact, to !ak?. meaurfor
dis.olu'iol of the company. Now, gentlemen, as to the
st ate of things with regard to the bank. The eklentlant is a
gentleman, I believe, of po Woo in the commercial
circles of the town. Some few years ago he came to Liver-
pool from New Orleans, where he had acquired during seve-
ral years an intimate acqueintence with banking transac-
tions. Soon, probably, after his arrival here the firm with
which he was csnnected, having an account with the B
rou.r,h Bank, and he thinking that with the exttererce he
had nequired he might be enabled io be .efit himself as Will
at others (for I give him credit fur teat) it was not nude-
sirßhle on his part to beeline a shareholder and a dlr. etor
in the Borough Bank. "Ile accordingly examined the pub-
lished reperts of the directors from time to time, and having
wade up his mind ria to the exp;dieney of joining the com-
pany, he purchased shares solely that he might, accord-
log to his own words, became a director, and a director he
did become, about three years ago. When lie joined the
bank the affairs were not conducted exactly in a manner
provided by the deed to which I have drawn your attention.
It provides for the management being invested in directors.
The directors consisted far the most part of gentlemen of
eminence and standing in the town, high in the mercantile
world, but they delegated their powers to three gentlemen
who were selected from their body, and called managing
directors. These managing directors likewise appointed
another person called the manager, and it will probably turn
out that in the great multiplicity of instances for years gone
by, previous to the sunamer oflast year, the manager directed
the managing directors, and the managing directors ruled
the directors. That will probably be the state of things. All
that the directors contributed to the concern was the sanc-
tion of their high names, and the lustre which could be shed
about the bank by their undoubted respectability. Directors
they were in name, and name only—" Lucus a non la-
cende"—they directed because they had nothing to direct.
There were accounts weekly or fortnightly placed before
them, which informed them, as I believe, of little or
nothing which transpired. They trusted to the managing
directors, and it is not at all unlikely that the managing
directors trusted too much to the manager himself. There
can be very little doulst t hat Mr. Dixon, with the experience
that he had acquired in New Orleans, and with the expecta-
tion he had formed of having some part and parcel in the
management and direction of the Borough Bank, when he
became a director, was not satisfied with the state of af-
fairs, nor with the course which matters were taking; and I
believe that from time to time he did utter certain mur-
murings of discontent, but that he never took any active
step to set matters right, which he suspected for some time
were going wrong. So matters went on until June last year,
having been informed that Mr.
when Mr. Dixon (defendant)
smith, who had been manager fur some years up to that
time, was about to retire, was askedwhether he would
become a
managing director, thereby having,
of course, an
work at once to
opportunity of investigating the true position of s affairs.
He seceded to the request, returning
iltradob uiel
ateitended to the
de
if sly
h be fromh had
.
London to Liverpool, and settttittittglahsi;masnecliaf
ascertain the true position
of
pursued the dictates of his own heart,
n
warnings of his own conscience and common sense, he would
have studiously pursued the course which in the beginning
he did unquestionably tnark nurforoltui,mbeeclar,usaenpdrrolbliasbclyasief
would not have been brought before y
not a thoroughly accurate statementthoaft thtlete acffonalcresronf
,%thaes
bank, yet at all events one showing
utterly insolvent, would have
1 res and would,
would never have become purchasers of s
been put forth—rny clients
consequently, never have had a right of action
d t tat he had
'aetains,t Mr.
Dixon. It appears that he did investigate, an he
his own serious doubts as to whether there ought toI
dividend. Mr. Smith laid before hint a statement which
have never seen, but which I shall call upon Illy ].stood
friend to produce—a statement which sati,fied Mr. Dixon
beyond all question, that do dividend ouelit, under the cir-
cumstances, to be declared. lie was overruled—l am n w
giving you his own account—but he did not persist itt the
views which he took. A report founded on that statement
of Mr. Smith was furnished to the directors, wag acceoed to
by them, was placed in the hands of a printer for the purpose
of being disseminated and sent forth to the proprietors and
the public, showing that there was to be no dividend at all
for that half-year; when all cf a sudden that report was
revoked, and they published a report which shall be brought
before you in a few minutes, and upon which this action is
that report was placed before the
founded. Now, gentlemen,
public. It was placed ha the first instance before the pro-