J. A.

certain proportions. The three papers are substantially Judgment. the same in effect. They all say the subscribers will take MACLENNAN so much land, which is said to be for sale by the Government at $1 per acre, but there is no sense in saying, as two of them do, that they will buy at $1.10 and $3 per acre, land which is to be had for $1.

There is no one named in any of the papers as vendor, unless it be the Government, and there is nothing to indicate who is to receive, or what is to be done with, the excess over the government price of $1 per acre.

Therefore, if the plaintiff had claimed a land credit from the company on the strength of his being a subscriber of the paper of the 6th of September, I think no disinterested board of business men would have listened to his claim for a moment, and I agree with Mr. Justice Rose when he says that he is unable to see that the subscribers to the first third had any agreement or rights which could have been enforced against the company after its formation. The land never was theirs. They never got it, and never had the shadow of an interest in it. The Government refused to give it to them, and it was purchased on certain terms by the company, and never belonged to any one else. The notion of the first third subscribers selling the company's own land to the company is simply absurd.

I am therefore clearly of opinion that the plaintiff could not in this case have raised any question or dispute about his shares which could in law be called bond fide, and which if raised would have been sufficient to support the agreement in question: Dixon's Case, before Lord Justice Giffard, L.R. 5 Ch. 79; Lord Belhaven's Case, 3 D. J. & S. 41, per Lord Justice Turner; Lindley on Companies, p. 521 note (t.)

The only evidence pointing to any dispute as to the validity of the plaintiff's shares is in the recital of the by-law of the 17th of June, 1884, but I think that is not entitled to any weight, as it is the very foundation of the agreement which is under impeachment. The other recitals contained in that by-law are incorrect, and the recitals

Judgment. were all evidently prepared and inserted in order to give MACLENNAN an apparent ground for the cancellation of shares which it proceeds to authorize.

J.A.

It is to be observed, too, that even if the land credit agreement could be regarded as affecting the plaintiff's shares, it could only affect 1,500 out of 2,500 standing in his name. His land subscription was 50,000 acres, which by the resolution of the 20th of December, 1881, and the 26th of January, 1882, would entitle him to only 1,500 shares, so that in any view he had 1,000 shares of $100 each taken and subscribed by him without reference to the land credit, which alone would be equal to 2,500 shares of $40, whereas he has been relieved of all but 868.

I think the lengthy proposal of settlement of the 13th of January, 1885, prepared by the plaintiff, which was accepted by the directors, shews clearly that there was no dispute, with him at all events, about the validity of his holding, for he there goes on to enumerate his holdings in his own name and in the names of others, amounting in all to 4,360 shares of $100 each.

The further question remains whether this company or the board of directors had inherent power to cancel or accept the surrender of shares, as was contended before us by the respondent.

I think it is almost too clear for argument that they had no such power. The company was incorporated under the Dominion Joint Stock Companies' Letters Patent Act of 1877, 40 Vic. c. 43, (D.) and the capital was fixed at two million dollars, divided into $100 shares.

Section 20 of the Act provides for increasing the capital, and section 21 for diminishing it, by by-law to be passed by the board of directors; and then section 22 provides that no such by-law shall have any force or effect whatever until after it has been sanctioned by a vote of not less than twothirds in value of the shareholders at a meeting called for the purpose; nor unless it afterwards be confirmed by supplementary letters patent.

I think the effect of these sections is to prohibit the

cancellation or surrender of shares, because that is in effect Judgment. a reduction of capital, which may not be done otherwise MACLENNAN than in the prescribed manner: Lindley, 525, 526.

This view is confirmed, if that were necessary, by section 55, which provides for the forfeiture of shares for non-payment of calls, and declares that forfeited shares become the property of the company, and may be disposed of as the directors may ordain. They are not extinguished, and may be issued again. So also section 58 forbids the payment of dividends whereby capital is reduced.

Trevor v. Whitworth, 12 App. Cas., at pp. 432, 433, 436, 438, shews that in a company like this shares cannot be cancelled or surrendered. See also In re Mersina, etc., Construction Co., 1 Megone 341; and Lee v. Neuchatel Asphalte Co., ib. 140.

The respondent also contended that a company like the present could do anything whatever in relation to its own affairs, and that the cancellation of its shares must be within its power, and that the decision in Ashbury, etc. Co. v. Riche, L. R. 7 H. L. 653, depended on express provisions of the Companies Act. But this is not so. In Baroness of Wenlock v. River Dee Co., 10 App. Cas. at pp. 354, 359, 360, 361, 362, it was held that the doctrine of Ashbury v. Riche applies to all companies created for a particular purpose, and in Attorney General v. Great Eastern R. W. Co., 5 App. Cas. 473, it is said that whatever is fairly incidental is intra vires, but what is not permitted is forbidden.

I am, therefore, of opinion, with great respect, that the judgment of the Divisional Court should be reversed, and that the agreement for compromise must be declared invalid.

I think also that, if the appellants ask for it, they are entitled to an account of any money of the company received by the plaintiff by way of commissions, after the company was incorporated, and also an account of what he owes for calls on his shares.

With regard to the third call, which was made on the

J.A.

J.A.

Judgment. 22nd of October, 1885, and became payable on the 31st MACLENNAN of December, and which, though not yet due when the counterclaim was filed, is claimed thereby, I am of opinion that inasmuch as the plaintiff pleaded to it, and as the defendants could, under Rule 153 of the Judicature Act, have properly claimed it in this action, either by amendment or further pleading, there is no reason why that call should not also be included in the judgment for the defendants.

HAGARTY, C. J. O. :

The facts in this extraordinary case are so complicated that it is very difficult to reduce them to any short summary. Many things seem to have happened which present an almost unintelligible aspect.

It is not easy to understand how, in a company chartered as this was, with a declared capital of two millions, and a specified number of shares of $100 each, there should have existed three classes of stock-holders, each to enjoy a widely different pecuniary interest in an undertaking based apparently on perfect equality. The assets of the undertaking are stated as so many acres of land, all to be obtained from the Government at a fixed price per acre. One class of subscribers are to get many thousands of acres at that price-another much larger class is to get it at a price three times greater. In the absence of anything in the charter or in any articles of association providing for this difference, it is not easy to understand how some of the subscribers could have knowingly joined in an adventure based apparently on perfect equality, but so very partial in operation.

The plaintiff seems to have been the most active promoter, and for some two years manager, of the company. He never owned or had allotted to him an acre of the land. He subscribed for 2,500 shares, and for 50,000 acres of the land. He never appears to have in any way become entitled thereto. Yet, by the alleged operation of

C.J.O.

certain meetings and resolutions of the promoters, and the Judgment. alleged recognition by the company of these proceedings, HAGARTY after the charter, he is allowed to appear in the books as a creditor of the company to the amount of many thousands of dollars on the strength of his being entitled to his 50,000 acres at one dollar per acre, while the bulk of the other subscribers have to pay three dollars, and another class a still larger price.

All this seems hardly credible and yet appears to have been done or allowed.

When this extraordinary claim is made the alleged consideration for a settlement or compromise, now insisted on, by which this plaintiff's stock is reduced from some $436,000, to some $34,720, it may well be enquired whether it be possible to support such an arrangement.

I agree with the reasons given by my learned brother MACLENNAN for refusing to uphold this alleged compromise.

The whole case presents a most unpleasant aspect.

We may well believe that most of the parties who went into this large adventure did not intend any wrong. But the very large amounts of money involved in the shape of shares for which they made themselves liable-in the present plaintiff's case some 25,000 shares at $100 -each, amounting to $250,000-and other large subscriptions, are rather startling, unless in the case of subscribers of very large means.

Men subscribed for thousands of acres of land, when any enquiry would have shewn them that no title could be made, except by actual settlement, even to 240 acres.

Perhaps the very serious lesson which this ill-starred adventure teaches will not be wholly lost, but may have a wholesome influence on future speculators, whether actuated by philanthropic or wholly mercenary mɔtives.

It is an unsatisfactory result to men of fair standing to have their good faith vindicated at the cost of their character for common intelligence.