The Sun.
London, England, 1857-11-21 00:00:00

LAW INTELLIGENCE.--(This Day.)

COURT OF C HANCERY.
THE REDPATEE FRAUDS.

Before the Lord Chancellor and the Lords Jastices.)

THE PREFERENCE SHAREHOLDERS OF THE GREAT NORTH-

ERN EA.ILWAT.--REDPATH'S FEAUDS,-*HENET V. THE

GREAT NORTHERN RAILWAY COMPANY.

The Lord Chancellor gave judgment in this case, which
was an appeal from a decree of Vice Chancellor Wood,
made on the 24th of August last, during the long vcca-
tion. The proceedings arose out of the frauds of Leopold
R•dpath, who, it will be recollected, during a series of
years fraudulently falsified the share books of the
company, and appropriated for his own purposes a
sum exceeding 200,0001. In consequence of these
frauds it became necessary to ascertain which of the
funds of the company should make good the defalca-
tions occasioned thereby. The sum of 243,9231.
ss. Bd. was the net revenue applicable for dividends for
the half-year ending the 31st December, 1856. At that
time, however, the forgery of stock by Redpath had been
discovered, and as it was very difficult to distinguish
the valid stock from the forged, no dividend could safely
be paid, and as the holders of the forged stock appeared
to have purchased it bona fide and for value the company
determined to apply to Parliament for an act to render
the spurious stock valid, and to authorise the payment
of dividends thereon. The adoption of this course was
recommended by the directors in their report to the
company of the 4th of March, and the directors then
added that they could not take upon themselves to
propose or support any bill which should throw any
portion of the loss upon the preference shareholders.
The directors also introduced into Parliament a bill re-
o'lnieing as valid the spurious stock, and authorising
the purchase of an equal amount of stock out of capital
which the existing acts of the company still authorised
them to raise. When this bill was laid before Lord
Redeadale, as the chairman of committees in the House
of Lords, he insisted that the loss should be paid out
of revenue, and within a limited time, and objected to
the creation of fresh capital. Subsequently, on the 12th
of March, a general meeting of the company was held,
and it was then resolved, after considerable di-cuseion,
"That no dividend be declared : but that this meeting
m considersent
mentioned
ned desirable
inh
t e
directors't at t the
rbeapl
oa
rot:
hes ofo should b
243,e a923p/p.
ied
ss.
8.1.,
to meet the losses caused by Redpatb, referred to in the
directors' report, and that the directors be and are
hereby requested and authorised so to apply the said
balance when and in such a manner as they may con-
sider roost beneficial to the company." An amended
bill was thereupon introduced into parliament, which,
like the first, made valid the spurious stock, and
required the directors to apply the above-men-
tioned net baler cc of revenue, and any monies to be
received by the company from Redpath'e estate, in
paying the expenses occasioned by hie frauds, and in
purchasing from time to time stock to the amount of
that forged, and forthwith cancollinz the same ; ar.d
as to any surplus that might remain, to apply the same,
as far as it would extend, in payments in order to the
different classes of the preference shareholders for the
dividends to which they would have been entitled if the
said net revenue had been apportioned as dividend at
the general meeting of the 12th March. By the 139th
standing order of the House of Commons it is provided
that " no railway company shall be authorised to alter
the terms of any preference or priority of interest or
dividend which shall have been granted by such com-
pany, in pursuance of, or which may have been con-
firmed by, any previous act of parliament, or which may
otherwise be lawfully subsisting, unless the committee
on the bill report that such alteration ought to be
allowed, with the reasons on which their opinion is
founded, together with the number of preference
shareholders who have aseented to or dissented from

much alteration." The bill was introduced iuto Par-

Lament without reference to this standing order, as a
bill which did not by its provisions affect to deal with

any right of preference shareholders. There being some

doubt, however, whether the bill might not indirectly
be held to have that effect, the preference shareholders
appeared before the select committee of the House of

Commons, and endeavoured, although without success,
to have a clau.e introduced expressly recognising their

rights. Upon the bill going to the House of Lords,

where no such standing order exists, the directors, apps-

rently thinking that something to authorise the confis-
cation of the rights of the preference shareholders ought
to appear on the face of the bill, proposed, after the latter
had again failed to pracure the insertion of an express
clause in their favour, to add to Clause 3, which directs
the application of any possible surplus, as already men-
tioned, the words : " and thereupon the said sum of
243,9231.55. Bd, shall be considered t 3 have been duly di-
vided among all classes of shareholders in the company.'
This addition was opposed on the third reading, but on a
division was carried by the majority of 53 to 7. It was, bow-
ever,objected to in the House of Cornmoas,and the bill was
returned by them to the Lords, the reason stated for
their disagreeing to the amendment being " because the
sait's amendment, if adopted, would decide a question of
law in dispute between the preference and ordinary
shareholders of the Great Northern Railway Company,
which ought to be left to the decision of a court of law."
The Lords thereupon did not insist upon their amend-
ment, and the bill as it now stands passed. Under these
circumstances the present suit was instituted. The
plaintiffs are the holders of an aggregate amount of
135,0001. of the four descriptions of preference stock
issued by the company. The first description of Great
Northern Railway preference shares are 5 per cent,
perpetual, and were issued under the provisions o
the Great Northern
Railway Acts Amendment Act
of 1849, which empowered the company, with
the assent of three-fifths of the votes at any
general meeting, to guarantee dividends not ex-
ceeding 7 per cent. per annum, in preference to the
payment thereof on ordinary shares. The next descrip-
tion of preference shares are 5 per cent., redeemable at
a premium of 5 per cent., issued under the authority of
the Great Northern Railway Act No. 1, 1851, which
enabled the company to raise 750,0001. for completing
the railway by new shares, on which the company, with
the assent of three-fifths of the votes at a general meet-
ing, might guarantee the payment of dividends not ex-
ceeding 7 per cent, per animal, in preference to the
payment of dividends on the ordinary shares of the corns
pang. The third description of preference shares was issued
wider the Great Northern Railway Company's Increase of
Capital Act, 1853, by which the company was authorisi d
to raise 750,0001 by the creation of new shares, bearing
and receiving dividends at 4t per cent. per annum in pros
ference to the payment of dividends on the ordinary
shares of the company, redeemable at six months' notice
on payment of 10 per cent. premium'. The last pre.
ference shares were issued under the Great Northern
Railway Act, 1855, whereby the company were authorised
to raise the further sum of 1,000,0001. by shares, the
holders of which shonld be entitled to fixed dividends at
5 per cent. per annum, in preference to the payment of
dividends on the ordinary shares. The certificates of all
these shares referred to the acts of Parliament under
which they were created. The object of the suit was
to obtain a declaration that the plaintiffs and other pre.
ference shareholders were entitled, before any dividends
should be paid to the ordinary shareholders, to be paid
full dividends from the 30th of June, 1856. The bill
also sought to restrain the company by injunction from
declaringor paying dividends to the ordinary share-
holder, regard to each right of the plaintiffs
andh o
wi
ltheder
other holders of preference stock. The Vice-
Chancellor hill in effect that the plaintiffs and other
before any payment of dividends
holders of preference stock were entitled to be paid tom
the ordinary original stock—the A
dends out of the profits realised by the company, from
rhhtoohlf de jeßur :get (),0
ck ut of such profits, and that a per-
any dividend on the ordinary original
tstohtoect3khoeot
petual injunction be issued to restrain the defendants from
dateocclakr,iwngithoroupti‘ryeinggard to the righte of the preference stock
holders to be paid in priority their dividends from
the 30th of June, 1856. The Vice-Chancellor also de.
Glared that the 3d section of the act of 1857 was cumuls•
tive, by way of security for, and not in substitution oft
such
h topr pay theeferenced paints costs. lvidlen'Thecompany were also or-
dered The company on
behalf of the ordinary shareholders, now appealed from
this decision.
His lordship having, at great length, gone through
the whole of the acts constituting the company, and also
those empowering the declaration of dividends, said be
was of opinion that the judgment of the Vice-Chancellor,.
in favour of the preference shareholders, must leo affirmed
The appeal was therefore dismissed with costs.