FERGUSON v WILSON [COURT OF APPEAL IN CHANCERY] [L R] 2 Ch App 77 HEARING-DATES: 5, 6, 7 November 1866

The Washoe United Consolidated Gold and Silver Mining Company, Limited, was registered on the 17th of July, 1864, and the Plaintiff, George Ferguson, was one of the promoters and original directors. On the 15th of June, a meeting of the promoters was held, at which the following resolution was passed with reference to advances to be made to the company, which resolution was confirmed by the directors at a meeting held after the registration of the company:"In consideration of A. or B. making an advance for a period of

7 November 1866 CATCHWORDS: Company - Specific Performance of Contract to allot Shares - Damages - Sir H. Cairns' Act (21 & 22 Vict. c. 27) - Liability of Directors - Evidence - Oral Examination at the Hearing - 15 & 16 Vict. c. 86, s. 39. HEADNOTE: The Plaintiff by his bill prayed the specific performance of a resolution passed by the board of directors of a railway company, under which he alleged that he was entitled to have a certain number of shares allotted to him; and he also prayed that if it should appear that all the shares had been allotted to other shareholders, the directors might indemnify him out of their own shares, or might be charged with damages. All the shares had been allotted before the filing of the bill:Held, that as no relief by way of specific performance was possible, the Plaintiff's claim for damages under Sir H. Cairns' Act (21 & 22 Vict. c. 27) failed also. Decree of Stuart, V.C., affirmed. In such a case the Plaintiff's claim against the directors to be indemnified out of their shares was only a claim for damages in another form. Per CAIRNS, L.J.:- Directors are agents of the company, and their personal liability in a suit, upon a contract made by them, must be governed by the ordinary law of principal and agent. But a shareholder may sustain a bill against directors personally, where he charges them as trustees, and seeks redress against them for a breach of duty to the company of which he is a member. In a case where, under the old practice, the Court would have directed at the hearing an inquiry or issue on a doubtful question of fact, the Court may now examine a party or a witness viva voce at the hearing, under the 39th section of the 15 & 16 Vict. c. 86. Whether that section applies to a person not a party who has not been a witness in a previous stage of the proceedings - Quoere. INTRODUCTION: THIS was an appeal from a decision of Vice-Chancellor Stuart. two months, to enable operations at the Washoe mines to be continued, it is hereby resolved and agreed that, at any time after the expiration of the said two months (from the date of advance), such advance, on application by A. or B., shall be repaid from any moneys, held in hand at the time being, of the company, and that, so long as the said amount shall remain unpaid, interest after the rate of oe6 per cent. per annum shall be paid for the same to the said A. or B. And it is further resolved that A. or B. shall have the option at any time, while the amount remains unpaid, of shares in the Washoe Consolidated Gold and Silver Mining Company,or partly paid-up shares, to the amount, or for such part thereof as the said A. or B. may desire, or of accepting a deposit receipt of oe1 per share on five hundred shares, or any proportion thereof, at the said A. or B.'s discretion." In pursuance of this resolution, the Plaintiff advanced, on the 17th of June, the sum of oe500, and, on the 1st of July, a further sum of oe200. On the 4th of October in the same year, the directors passed a resolution that the advances made in June and July should be repaid as the funds of the company would allow, and that cheques should be given on application. Accordingly, on the 9th of November, the secretary sent the Plaintiff a scrip certificate for 500 fully paid-up shares, in repayment of his first advance, and a cheque for oe204 6s. 2d., in repayment of his advance of oe200, with interest thereon. The Plaintiff, not having applied for the repayment of his loan, refused to accept the scrip certificate and cheque, which he returned to the secretary. On the 15th of November the secretary sent the Plaintiff a cheque for oe514 2s. 1d., enclosed in a letter containing a statement of his account with the company, in which credit was given him for his two advances, and he was debited with two calls of oe1 each on 100 shares, which the Plaintiff had agreed to take as his qualification as a director. On the 16th of November a general meeting of the shareholders was held, which the Plaintiff attended, and he there proposed a resolution that the unallotted shares in the company should not be disposed of without the consent of the shareholders; but the resolution was negatived, and in its place an amendment was carried to the effect that the unallotted shares should be offered to the registered shareholders pro rata according to their holdings. On the 17th of November the Plaintiff replied to the secretary's letter of the 15th, returning the cheque for oe514 2s. 1d., and requesting that 700 shares, on which oe1 had been paid, might be allotted to him, in repayment of his advances, in accordance with the resolution of the 15th of June.

An extraordinary general meeting was held on the 2nd of December for the purpose of confirming the resolutions passed on the 16th of November, but the resolution as to the allotment of the unallotted shares was not confirmed, and those shares, therefore, remained at the disposal of the directors. On the 18th of November a meeting of the directors was held, at which the Plaintiff pressed his claim to receive shares in repayment of his advances, but modified his application by asking for 500 shares, on which oe1 had been paid, and 100, on which oe2 had been paid, it being understood that the last-mentioned 100 shares should be considered as those which he had agreed to take as a director of the company. The chairman declined to accept the application until the opinion of Counsel had been taken as to the construction of the resolution of the 15th of June. The opinion of Counsel was accordingly taken by the directors, and was to the effect that the resolution did not prevent the company from paying off the debt at any time prior to the lender making his election, and that, as the Plaintiff's loan had been repaid before he had made any election, he was in the position of any other shareholder. The secretary accordingly again sent the cheque for oe514 2s. 1d. to the Plaintiff, and on the 7th of December the directors, proceeded to allot the unallotted shares to the various shareholders without regard to the Plaintiff's claim. On the 21st of December the Plaintiff, having, in the meantime ceased to be a director, filed his bill against the company and the directors, praying that he might be declared entitled to 700 shares, on which oe1 had been paid, or 500 shares, on which oe1, and 100, on which oe2, had been paid, and that the directors might be ordered to allot the same accordingly, and that the directors might be restrained from allotting the unallotted shares in such manner as to render it impossible for them to make the allotment. The allegation in the bill, as to the letter of the 15th of November, was this: "On the 15th day of November, 1864, the said secretary sent to the Plaintiff a cheque for oe514 2s. 1d. on behalf of the said company, and on the same day wrote and sent to him a letter of that date, which was as follows," saying nothing as to the time when the letter was received. The meeting of the 16th of November was set up by the Defendants, but it was not mentioned in the bill. The Defendants put in a voluntary answer to the bill, in which they stated that the whole of the shares had been allotted before the filing of the bill, and that the Defendant had been informed of that fact by the secretary on the 19th of December. With regard to the letter of the 15th of November, they stated as follows:- "We are informed, and believe, that such letter, with its inclosures, was posted by Mr. Robertson (the secretary) on the said 15th day of November, 1864, in sufficient time to be delivered, and we believe that in course of post the same, together with the inclosures, was delivered, at the Plaintiff's address, Ward's Wharf, Southwark, in the evening of the said 15th of November, 1864." The answer then set forth what passed at the meeting of the 16th in nearly the same terms as above, and

proceeded to state that, immediately after the meeting, in consequence of favourable advices which had been read at it, and of the resolution which had been passed by it, the price of the shares rose to a considerable premium, and that the Plaintiff's letter of the 17th was not delivered at the office of the company till the 18th. The Plaintiff then amended his bill, alleging that if all the shares had been allotted, some of them had been allotted to the directors, and praying that they might transfer a sufficient number of them to him, or else that they might be answerable in damages as the Court might direct. The Plaintiff did not introduce any fresh statement respecting the receipt of the letter of the 15th of November, nor did he enter into any evidence as to the time of the actual receipt; and the evidence on the part of the Defendants as to this point was exactly the same as the statement in their answer. The Vice-Chancellor dismissed the bill, being of opinion that the Plaintiff, by keeping the cheque for oe514 2s. 1d. till after the meeting of the 16th of November, had elected to accept it in payment of his advances, and could not afterwards claim an option to receive shares. When the cause came on for hearing before the Lords Justices, the Plaintiff tendered himself and a Mr. Price, who had not given evidence in the cause, for examination, for the purpose of proving that, owing to his being absent from his place of business during the whole of the 16th of November, he had not received the letter containing the cheque until the morning of the 17th, the day following the meeting. The counsel for the Defendants objected to the proposed examination, which had been refused in the Court below. The Plaintiff was accordingly examined, and gave evidence shewing very distinctly that he did not receive the letter till the morning of the 17th. The point, however, in the view which their Lordships took of the case ultimately became immaterial. COUNSEL: Mr. Malins, Q.C., and Mr. E. K. Karslake, for the Plaintiff, proposed the admission of the evidence. Mr. Bacon, Q.C., and Mr. Elderton, for the Directors; Mr. Greene, Q.C., and Mr. W. C. Harvey, for the company:There is no conflict here on the proceedings; the pleadings and evidence all go the same way. The answer does not, indeed, in terms allege that the Plaintiff had the letter and cheque in his possession at the meeting; but the context clearly suggests the materiality of it. There is no precedent for allowing the Plaintiff, in such circumstances, to adduce fresh evidence at the hearing: Glover v. Daubeny n(1) ; Oliver v. Wright n(2) . Mr. Karslake, in reply:There is no doubt a rule that a party is not to be allowed to bolster up his case by fresh evidence, when he

has in the course of the proceedings found out the weak point of his case. But, on the other hand, the Court will not allow a party to be taken by surprise, and where his attention has evidently not been called to the materiality of a particular date fresh evidence will be allowed.

within the powers of the directors, and if they exceeded those powers the company is not responsible: Royal British Bank v. Turquand n(5) ; Ernest v. Nicholls n(6) . The Plaintiff's option was put an end to by the tender of payment; for which purpose the tender of a cheque is equivalent to

n(1) 9 Jur. (N. S.) 90. n(2) 1 Sm. & Giff. App. xvi. Until the Vice-Chancellor had made the receipt of this letter before the meeting the principal ground of his decision, the point had not been considered material. Mr. Malins, Q.C., and Mr. E. K. Karslake, then argued in support of the appeal:n(4) Law Rep. 1 Ch. 244. The Vice-Chancellor agreed with us that, on the true construction of the resolution of the 15th of June, the Plaintiff had an option of taking shares instead of money in satisfaction of his advances. The main question, therefore, between us and the Defendants, is, whether the Plaintiff had waived his option or accepted payment. The Vice-Chancellor rested his opinion on the supposition that the Plaintiff had accepted payment in money by retaining the cheque: but it is now satisfactorily proved that he did not receive it or hear of it till after the meeting of the 16th of November. What passed at that meeting, therefore, could amount to no election. The mere tender of the money could not terminate his option; and, moreover, the existence of the option was recognised by the directors at the meeting of the 18th of November. If the Plaintiff cannot have the shares, he is entitled to damages under Sir H. Cairns' Act (21 & 22 Vict. c. 27). He had originally good ground for relief in equity, and if the directors have put it out of their power to satisfy his claim, they are personally liable. The directors, as well as the company, are therefore properly made parties: Bagshaw v. Eastern Union Railway Company n(1) ; Howe v. Hunt n(2) ; Davenport v. Rylands n(3) . The shares have lost all their value since the time when they ought to have been allotted, and the measure of damages is the amount of the highest premiums in the interval. Mr. Bacon, Q.C., and Mr. Elderton, for the directors:The directors passed the resolution of the 15th June, and acted throughout the transactions in the discharge of their duty as officers of the company, and incurred no personal liability to the Plaintiff. When the bill was filed, all the shares having been allotted, it was impossible for the Plaintiff, as he well knew, to obtain relief in the form of specific performance. He had, therefore, no ground on which to found his application for relief to this Court, and his claim for damages under Sir H. Cairns' Act fails: Durell v. Pritchard n(4) . Mr. Greene, Q.C., and Mr. W. C. Harvey, for the company:The bill does not allege any misconduct on the part of the company. The allotment of shares was entirely n(5) 6 E. & B. 327. n(6) 6 H. L. C. 401. the tender of money, if it is not objected to at the time: Polyglass v. Oliver n(1) ; Jones v. Arthur n(2) . Mr. E. K. Karslake, in reply. PANEL: SIR G. J. TURNER and SIR H. M. CAIRNS, L.JJ JUDGMENTBY-1: SIR G. J. TURNER, L.J JUDGMENT-1: SIR G. J. TURNER, L.J: :There is nothing as to which I am more sensitive than breaking in upon the rule of the Court against admitting further evidence after the evidence in the cause has been closed, and I always am reluctant to admit it at the hearing of an appeal. But, at the same time, I have as little inclination to cripple the useful power conferred on the Court by the 15 & 16 Vict. c. 86, s. 39, which clearly was given to enable the Court to ascertain the truth on any material point, without putting the parties to the expense of a long and complicated inquiry. I had occasion to consider this section early in my judicial career, and am of opinion that its powers may properly be exercised wherever the Court, under the old practice, would have directed an issue or an inquiry, and that witnesses will be examined under this section where the Court cannot, on the materials before it, come to any satisfactory conclusion on a question of fact. In the present case I cannot but suspect that when the pleadings were filed neither party saw the possible importance which might attach to the question at what time the letter of the 15th of November was actually received. There is not, on either side, any specific positive allegation on the point. The Plaintiff's allegation is, that it was written and sent on the 15th, the Defendants allege that it was posted in time to be delivered on the 15th, and that they believe it n(1) 7 Hare, 114. n(2) 31 Beav. 420. n(3) Law Rep. 1 Eq. 302.

was delivered at the Plaintiff's address on that day. Evidence whether it was actually delivered at that time or not is wholly wanting. Assuming, as we must for the present purpose, that it may be of importance whether the letter was in the hands of the Plaintiff before he attended the meeting of the 16th of November, it is impossible for the Court upon the present materials to come to a satisfactory conclusion on the case. The answer and evidence of the Defendants go no further than belief that the letter was delivered at a certain place on a certain day. There is no proof that it was delivered on that day, and no proof that the Plaintiff was at the place on that day. In such a case, the Court would not be justified in acting without inquiry, and instead of an inquiry the Court ought now to endeavour to ascertain the fact at the hearing. I am of opinion, therefore, that the evidence of the Plaintiff ought to be received. It has been objected that this evidence is tendered too late; but an appeal to this branch of the Court is only a rehearing of the cause, and we ought to take now the course which, in our opinion, it would have been right for the Vice-Chancellor to take at the original hearing. I do not think it necessary to go further, at present, than to say, that the Plaintiff ought to be examined. With respect to Mr. Price we at present say nothing, for there arises a question on the meaning of the words of the section which it may be unnecessary to decide, whether the word "witness" means any person who may be then called to give evidence as to the particular fact, or whether it means only persons who have already given evidence in the cause. As the section says, "witness or party in the cause," there is no difficulty as to the Plaintiff, and we, therefore, go no further at present than deciding that he may be examined. JUDGMENTBY-2: SIR H. M. CAIRNS, L.J JUDGMENT-2: SIR H. M. CAIRNS, L.J: :I am of the same opinion, and for the same reasons. JUDGMENTBY-3: SIR G. J. TURNER, L.J JUDGMENT-3: SIR G. J. TURNER, L.J: , after referring to the facts of the case, continued:The questions which in this case are material to be considered, seem to me to be these - What was the contract created by the resolution? Between whom was the contract entered into? And whether the remedy upon that contract is, under the circumstances of the case, proper to be claimed in this Court? Upon the first of these points, what was the contract between the parties? I take the view of that contract the most favourable to the Plaintiff's case, and I assume that he had a right of election to be paid the moneys which he advanced, either in money or in shares, and that the company had no right to pay the money without giving him that election. I say no more upon that point than that I assume it in favour of the Plaintiff. The point is, in my opinion, one which it is not necessary for us to decide. On the second question, between whom this contract must be taken to have been made, I take it to have been entirely a contract between the Plaintiff and the company. Whether the directors had or had not power to

make a contract, the contract, as I understand it, was intended to be, and was in fact, a contract between the Plaintiff and the company, the company acting, or intending to act, through their directors, in making and entering into that contract; because the advance is an advance which is clearly to be made to the company, and the allotment is an allotment which is to be made by the company, and out of the assets of the company. It cannot, therefore, be considered as a case of contract between the Plaintiff and the other directors of the company, or as a case of contract between all the directors, including the Plaintiff, and the Plaintiff in his individual character; it is simply a case, and was intended to be a case, of contract between the Plaintiff and the company.

n(1) 2 C. & J. 15. n(2) 8 Dowl. 442. Then the question arises - which is, in my judgment, the only important question in this case - whether the remedy upon that contract is in equity or not? This Court can only deal with a contract by way of specific performance, and the question therefore resolves itself into this, - whether, under the circumstances of this case, there can be a specific performance of that contract? In order specifically to perform the contract, it would be necessary that the directors of the company should allot shares to the Plaintiff according to the claim which has been made by him, and which I have assumed to be a just and proper claim. Could or could not this have been done at the time of the filing of this bill? At that time, according to the evidence before us, all the shares had been allotted, and it was not possible, therefore, that the claim of the Plaintiff to have shares allotted to him according to the title which he set up could have effect given to it by this Court. Not only was this so, but it is clear that before the filing of this bill the Plaintiff had been told that it was so, for it appears that on the 19th of December, 1864, the secretary of the company, by the direction of the company, wrote to the Plaintiff informing him that all the shares in the company had been allotted. By the Plaintiff's own affidavit it appears that he received that letter on or about the 19th of December, and this bill was not filed until the 21st of December, two clays after the allotment was made. Probably this was not known to the Counsel at the time when the bill was drawn; and, according to the bill as originally framed, the prayer was, that the allotment might be made by the directors to the Plaintiff, and that an injunction might be granted to restrain the Defendants, the directors, from disposing of the shares, so as to prevent the allotment being made. That would be quite correct, upon the assumption that there were shares which had not been allotted remaining sufficient to answer the Plaintiff's claim; but when the answer came in to this bill, it appeared that, in truth, according to the allegations of the Defendant, all the shares of the company had been allotted, and there were no shares which could be allotted to the Plaintiff. Then the bill was amended by praying that in that event the directors should, out of the shares which had been allotted to them individually, make good to the Plaintiff the shares to which he claimed to be entitled, or that they might pay damages in respect of being unable to fulfil what the bill insists was a contract on their part to allot in favour of the Plaintiff.

This wholly varied the character of the bill, and the fact that the shares had been disposed of before the bill was filed, to an extent which disabled the allotment, wholly altered the position of the Plaintiff with respect to the right to file a bill in equity. For if, as a matter of fact, all the shares were gone before the filing of the bill, and were beyond the reach of the parties, so that no allotment could be made in favour of the Plaintiff, there could be no specific performance of the agreement, and no right to come into equity upon any other ground, unless, indeed, the Plaintiff could come to this Court for damages, a claim to which I shall presently refer. [His Lordship then considered the allegations in the pleadings, and in the affidavits, respecting the allotment of the remaining shares by the directors, and continued:-] Therefore, in this state of the evidence, it seems to me that the specific performance of this agreement is entirely out of the question. The agreement cannot be specifically performed, if the shares have been already validly allotted in favour of other shareholders of the company. The bill then prays damages in, I may say, a double form. It prays, in the first place, that the directors of the company may, out of the shares which have been allotted them, transfer to the Plaintiff those shares which, according to his contention, would have been proper to be allotted to him. What in truth is that but asking for payment of damages by the directors of the company in the shape of a sacrifice of the shares which have been allotted to them, instead of in money? If a man has to make good a certain claim, it is just the same thing whether he makes it good by paying a sum of money, or by parting with other property to which he has become validly entitled. In truth, therefore, that part of the prayer which seeks the transfer of the shares by the directors is no other than a prayer for damages. There may be cases in which, if there is a trust relation subsisting between A. and B., and B. has taken property under the trust which belongs to A., or ought to have been appropriated to A., the Court will compel B., out of the property which he has so taken, to make good that of which A. has been deprived. But this is not a case of trust; this is simply a case of contract, as I think, between the Plaintiff and the company; but if it goes further, it is a case of contract between the Plaintiff and the other directors. I am not aware that there is any law of this Court which in a case of contract, not raising any question of trust, would put upon a Defendant in a suit the obligation of satisfying the claim in the mode in which the Plaintiff contends that it ought to be satisfied. There remains the question of damages, and that depends entirely upon the effect of that very valuable Act which my learned brother passed through Parliament, commonly known as Sir Hugh Cairns' Act n(1) . I understand that Act to mean this:- There was great difficulty in cases of specific performance, and also in cases of injunction, before the passing of that Act, arising under this state of circumstances. There were many cases where a Court of equity would decline to grant specific performance, and yet the Plaintiff might be entitled to damages at law; and great complaints were constantly made by the public, that when Plaintiffs came into a Court of equity for specific performance the Court of equity sent them to a Court of law in order to recover damages, so that parties were bandied about, as it was said, from one Court to the other. The object, therefore, of that Act of Parliament was to prevent parties from being so sent from one Court to the other, and accordingly the Act provides that the Court may either, in addition to or in substitution for the relief which is prayed, grant that relief which would otherwise be proper to be granted by another Court. But

that Act never was intended, as I conceive, to transfer the jurisdiction of a Court of law to a Court of equity. If, therefore, a Plaintiff in a suit in equity had no equitable right at the time of filing the bill - for the case would be quite different if there was an equitable right at the time of filing the bill - so that the bill was altogether improperly filed in equity, I am of opinion that the Act has no application; otherwise the consequence would necessarily be, that everybody who had a doubtful case at law

n(1) 21 & 22 Vict. c. 27. would come into equity for specific performance, and when it appeared that he had no case in equity at all he would ask for damages, and so almost every action of contract would be transferred from a Court of law to a Court of equity. That, according to my view of this subject, was never intended to be the effect of the Act of Parliament. I have had occasion to consider the Act in many cases, and have always entertained the same opinion about it. I think, therefore, there being, according to my judgment, no case in equity for the Plaintiff at the time when the bill was filed, it being a mere question of contract between the Plaintiff and the company, the remedy on that contract was at law, and not in equity, and that this bill was improperly filed, and was properly dismissed by the Vice-Chancellor. Accordingly, I think that this appeal cannot be sustained. At the same time, as we have other evidence before us than that which was before the Vice-Chancellor, and as we do not proceed altogether, or mainly, perhaps, on the same grounds as those on which the Vice-Chancellor proceeded, I think the appeal should be dismissed without costs; and I think it will be right at the same time to add to the decree, that it shall be without prejudice to any proceedings at law which the Plaintiff may be advised to take. JUDGMENTBY-4: SIR H. M. CAIRNS, L.J JUDGMENT-4: SIR H. M. CAIRNS, L.J: :I am of the same opinion. I take first the case of the directors, the first nine Defendants upon the record. Now, I think that it ought to be very clearly understood upon what principle, and to what extent, directors in suits of this kind are liable to the jurisdiction of this Court. This is a bill filed upon a contract. With whom has the contract been made? The bill alleges that the contract is made with and binds the company. What is the position of directors of a public company? They are merely agents of a company. The company itself cannot act in its own person, for it has no person; it can only act through directors, and the case is, as regards those directors, merely the ordinary case of principal and agent. Wherever an agent is liable those directors would be liable; where the liability would attach to the principal, and the principal only, the liability is the liability of the company. This being a contract alleged to be made by the company, I own that I have not been able to see how it can be maintained that an agent can be brought into this Court, or into any other Court, upon a proceeding which simply alleges that his principal has violated a contract that he has entered into. In that

state of things, not the agent, but the principal, would be the person liable. I rather imagine that any confusion which has arisen upon this point arises in this way. There is no doubt whatever that it is a proper course, when a Plaintiff comes into the Court of Chancery to restrain the doing of an unlawful act by a company, to make the directors parties to his bill, because the company must act through the directors, and the injunction will operate upon the consciences of the directors, if an injunction is ordered by the Court. But it is altogether a different matter where the cause comes to the hearing, and it is no longer a question of injunction, but a question what liability has been incurred by reason of the breach of contract. Again, we must distinguish the present case altogether from those cases, very familiar to the Court, where a shareholder files a bill against the company and against the directors, treating the directors as his trustees, which in point of law they are, and seeking redress against them for a breach of trust. That kind of case is exactly the converse of the present. There the shareholders who file the bill, in point of fact allege that the company has done no wrong whatever, that it is the executive which has committed the wrong, and they the shareholders - file the bill to protect, as it were, the company from the unlawful acts of the directors. There the directors, being in the position of trustees, are of course liable in this Court. I therefore think, as regards the directors, the first nine Defendants in this suit, that as there is now no case for an injunction there is no case whatever for a decree against then personally. Then I take the case of the company. Now, upon the questions which have been argued as to the construction of this resolution I will not say more than this, that nothing that I have heard has convinced me that the view of the Plaintiff as to the construction of the resolution is an erroneous view. As at present advised I incline to think that the Plaintiff had a right under this resolution to exercise the option of taking shares, and that he has been deprived of that right. I say that it is my impression, but it is unnecessary, for other reasons, to decide it in the suit. But what is the suit for? It is a bill for specific performance of a contract. We all know that this is not the Court, as a general rule, to entertain suits for damage for breach of contract, whereas it is a Court to entertain suits for specific performance of contract. Now what is asked to be performed is a contract which is to give to the Plaintiff certain shares in this company. He asks that the contract may be performed. [His Lordship then referred to the statements in the pleadings respecting the allotment of shares, and continued:-] The bill, as amended, seems to me no longer to assert or to raise the issue that there are unallotted shares; but, on the contrary, to accept the statement that there are no such shares to allot. Now, that being the case, how would the matter stand if we put the Act of 1858 n(1) out of the question? I suppose that there can be no controversy but that, before that Act, a bill filed in the Court of Chancery stating a contract, and alleging that the subject matter of the contract no longer existed, or could no longer be made over to Plaintiff, or a suit in which those facts appeared, must, as a matter of course, have been dismissed; the Court of Chancery could have no jurisdiction in such a case. Does the Act of 1858 make any difference? The important words of the Act are these:- "In all cases in which the Court of Chancery has jurisdiction to entertain an application

for the specific performance of any covenant, contract, or agreement." That, of course, means where there are, at least at the time of bill filed, all those ingredients which would enable the Court, if it thought fit, to exercise its power and decree specific performance - among other things where there is the subject matter whereon the decree of the Court can act - in a case of that kind, the Court has a discretionary power to award, under certain circumstances, damages in substitution for, or in addition to, the decree for specific performance. The object obviously was to enable the Court of

n(1) 21 & 22 Vict. c. 27. Chancery to do "complete justice," as it was called, a phrase which assumed that there was the power in the Court of Chancery to make a decree to some extent, but not to make a decree to the whole extent which the case required. But that seems to me not in any way to give to the Court a power, where it has no jurisdiction, to decree specific performance, for want of the subject matter whereon its decree would operate, to give damages by reason of some antecedent breach of contract. I, therefore, think that the bill fails for these reasons as against the company as it does against the directors. With respect to the question of costs, I must say that I entertain a very strong opinion that, as a general rule, costs ought to follow the result of litigation, both upon appeals and in the Court below, and that where we depart from that rule, a reason ought to be assigned for the departure. I think there are two reasons in this case which are perfectly sufficient. In the first place, I cannot think that the directors here took exactly the proper course with regard to the claim of the Plaintiff. They knew, before the shares were allotted, that the Plaintiff was asserting his claim to certain unallotted shares; they knew that he never had abandoned that claim; and I think it would have been better if they had put aside the number of shares that would have answered his claim for a reasonable length of time, until they had ascertained, either that he had abandoned his claim, or what the result of litigation upon that claim might be. That is the one reason. The second reason is that which has been adverted to by my learned brother. Our decision, although we arrive at exactly the same conclusion which the Vice-Chancellor arrived at, does not proceed upon the same grounds, and, under those circumstances, I think we may safely dismiss the appeal without costs. SOLICITORS: Solicitors for the Plaintiff: Messrs. Stephens & Sons. Solicitor for the Defendants: Mr. J. Richardson.