Case Summary
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Full Case Details
Plaintiff declared against defendants, a joint stock Company completely registered under
stat. 7 & 8 Vict. c. 110, on a bond, signed by two directors, under the seal of the Company,
whereby the Company acknowledged themselves to be bound to plaintiff in £2,000. The plea
set out the condition, which appeared to be for securing to the plaintiff, who was a banker,
such sum as the company should, to the amount of £1,000, owe to plaintiff on the balance of
the account current, from time to time, and for indemnifying plaintiff to that amount from
losses incurred by reason of the account between plaintiff and defendants. The plea further set
out clauses of the registered deed of settlement, by which it appeared that the directors were
authorized, under certain circumstances, to give bills, notes, bonds or mortgages: and one
clause provided that the directors might borrow on bond such sums as should, from time to
time, by a general resolution of the Company, be authorized to be borrowed. The plea
averred that there had been no such resolution authorizing the making of the bond, and that it
was given without the authority of the shareholders.
The replication set out the deed of settlement further, by which it appeared that the
Company was formed for the purpose of carrying on mining operations and forming a railway
- On demurrers to the plea and replication, held, by the Court of Exchequer Chamber,
affirming the judgment of Q.B., that plaintiff was entitled to judgment, the obligee having, on
the facts alleged, a right to presume that there had been a resolution at a general meeting,
authorizing the borrowing the money on bond–Semble, per Jervis C.J., that such resolution
would confer sufficient authority if it authorized the borrowing on bond of such sums as the
directors might deem expedient, in accordance with the statute and deed, without otherwise
defining the amount.
The plaintiffs declared against the defendant, as official manager of Cameron’s
Coalbrook Steam, Coal, and Swansea and London Railway Company, according to The Joint
Stock Companies Winding up Acts (the Company being completely registered under stat. 7 &
8 Vict. c. 110). The declaration alleged that the Company, before defendant became official
manager, to wit on 6th March 1850, by their writing obligatory, sealed with their common
seal, acknowledged themselves to be held and firmly bound to plaintiffs in £2,000, to be paid
to plaintiffs on request; for which payment the said last mentioned Company did bind
themselves and their successors. Yet the said sum, or any part thereof, has not been paid.
Plea (1), in which was set out the condition, which appeared to be for securing to the
plaintiffs, who were bankers, such sum as the Company should, to the amount of £1,000, owe
to plaintiffs on the balance of the account current, from time to time, and for indemnifying
plaintiffs to that amount from losses incurred by reason of the account between plaintiffs and
the Company. The plea further set out clauses of the registered deed to settlement of the
Company. The plea further set out clauses of the registered deed to settlement of the
Company, by which it appeared that the directors were authorized, under certain
circumstances, to give bills, notes, bonds or mortgages: and one clause provided that the
directors might borrow on bond such sums as should, from time to time, by a general
resolution of the Company, be authorized to be borrowed. The plea averred that there had
been no such resolution authorizing the making of the bond, and that the same was given and
made without the authority or consent of the shareholders of the Company.
The replication set out the deed of settlement further, by which it appeared that the
Company was formed for the purpose of carrying on mining operations and forming a
railway. It then alleged that, at a general meeting of the Company it was resolved “that the
directors of the said Company should be, and they were thereby, authorized to borrow on
mortgage, bond or otherwise, such sums for such periods and at such rates of interest as they
might deem expedient, in accordance with the provisions of the deed of settlement and Act of
Parliament. And the said resolution and determination has thence hitherto remained
unrescinded.” The replication then alleged that afterwards, in accordance with the authority
granted by the general meeting, the directors agreed to enter into the bond, and appointed two
directors to affix their seal, and the secretary to sign the bond, which bond, so sealed and
signed, plaintiffs took “in full faith and belief of the validity of the said resolutions, and that
the said bond was authorized by, and would be a valid and binding security upon, the said
Company.”
Phipson, for the party suggesting error. The plea answers the declaration; it amounts to a
special Non est factum. Stat. 7 & 8 Vict. c. 110, s. 25, limits the powers of the Company to
the acts which are authorized by the deed of settlement; and here the deed of settlement limits
the power of borrowing on bond by the directors to cases where such borrowing is authorized
by a resolution passed at a general meeting of the Company. The plea alleges that there has
been no such resolution. The bond therefore, being sealed without authority, is not the bond
of the Company. The Court below assumes that the bond is allowed to be under the seal of the
Company, and to be their bond: whereas the plea insists that this is not so. The ground
therefore, suggested by the court below, of distinction between this case and Ridley v.
Plymouth Grinding and Baking Company [2 Exch. 711], Kingsbridge Flour Mill Company
v. Plymouth Grinding and Baking Company [2 Exch. 718], Smith v. The Hull Glass
Company [11 Com. B. 897], and Greenwood case [3 De G. Macn. & G. 459], disappears.
The judgment below states that no illegality appears on the face of the bond or condition, and
infers, from Collins v. Blantern and Paxton v. Popham [9 East, 408], that the plea should
allege facts showing illegality. But in those cases it was admitted that the bond was duly
executed, and the plea was by way of confession and avoidance. [Bramwell B. I think that, in
The East Anglian Railway Company v. The Eastern Counties Railway Company [11 Com.
B. 775], I urged, without success, the argument that the deed was admitted, on the record to
be the deed of the defendants]. And there the covenant was under the common seal. The
defendants have no power besides what the statute confers; and the statute refers to the deed:
the case is not like that of ordinary partners, each of whom has a prima facie authority to bind
the firm in matters relating to the business of the firm; an authority which cannot, as against
other parties, be restrained by a private agreement among the partners themselves. The
plaintiffs were bound to know the statute and the contents of the deed of settlement.
[Crowder, J. That appears to be the view of Parke B. in Ridley v. Plymouth Grinding and
Baking Company [2 Exch. 711]. The same view is taken by Jervis CJ. And Maule J., in
Smith v. The Hull Glass Company [11 Com. B. 897]; though there judgment was given for
the plaintiffs on the ground that the goods were supplied for the purposes of the trade of the
defendants, and were, with their knowledge, received and so used. [Bramwell B. Suppose all
the members of the Company had joined in affixing the seal]. The affixing would not be an
act of the Corporation. The judgment below relies upon Hill v. The Manchester and Salford
Water Works Company [2 B. & Ad. 544] and Horton v. Westminster Improvement
Commissioners [7 Exch. 780]. But in Hill v. The Manchester and Salford Water Works
Company (2 B. & Ad. 544) the company were authorized to raise a certain sum; there was no
statutory restriction as to the modes of executing the powers; and there was nothing to shew
that all the shareholders had not been parties to the instrument. In Horton v. Westminster
Improvement Commissioners [7 Exch. 780] the decision on the seventh plea was on the
language of the plea, which did not bring the defence within the words of the statute.
The replication does not satisfy the condition imposed by the deed of settlement,
inasmuch as the resolution set forth does not specify the sum to be borrowed.
JERVIS CJ. – I am of opinion that the judgment of the Court of Queen’s Bench ought to be
affirmed. I incline to think that the question which has been principally argued both here and
in that Court does not necessarily arise, and need not be determined. My impression is
(though I will not state it as a fixed opinion) that the resolution set forth in the replication
goes far enough to satisfy the requisites of the deed of settlement. The deed allows the
directors to borrow on bond such sum or sums of money as shall from time to time, by a
resolution passed at a general meeting of the Company, be authorized to be borrowed: and the
replication shows a resolution, passed at a general meeting, authorizing the directors to
borrow on bond such sums for such periods and at such rates of interest as they might deem
expedient, in accordance with the deed of settlement and the Act of Parliament; but the
resolution does not otherwise define the amount to be borrowed.
That seems to me enough. If that be so, the other question does not arise. But whether it
be so or not we need not decide; for it seems to us that the plea, whether we consider it as a
confession and avoidance or a special non est factum, does not raise any objection to this
advance as against the Company. We may now take for granted that the dealings with these
companies are not like dealings with other partnerships, and that the parties dealing with them
are bound to read the statute and the deed of settlement. But they are not bound to do more.
The party here, on reading the deed of settlement, would find, not a prohibition from
borrowing, but a permission to do so on certain conditions. Finding that the authority might
be made complete by a resolution, he would have a right to infer the fact of a resolution
authorizing that which on the fact of the document appeared to be legitimately done.
