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Colonial Cases

Taylor v. Bell, 1884

[injunction, company law]

Taylor v. Bell and Others

Supreme Court for China and Japan
Mowat AJ, 17 June 1884
Source: North China Herald, 27 June 1884

Shanghai, 17th June, 1884
Before R. A. Mowat, Esq., Assistant Judge.
  This was a case in which the plaintiff sought for an injunction to restrain the defendants from cancelling or declaring forfeited five shares which he held in the (old) North China Insurance Company, and for an order that the defendant Company should allot to him twenty-five shares in the new Limited Company.
  Mr. Wilkinson and Mr. Wainewright appeared for the plaintiff, and Mr. Drummond and Mr. Lathan for the defence.
(Report continued from our last issue.)
  Mr. Latham, continuing, said the next issue was, "Is the plaintiff bound by the prospectus of the 25th May?" Mr. Taylor claimed that the clause in that prospectus with regard to a revision did not apply to him because his case was different from the others on account of the Chairman having asked him to go to the meeting and vote.  He was ready enough to seize hold of an equivocal expression in the circular of the 14th February and turn it to his own interest; but when he came to this statement in the circular of the 24th May, he said, "I did not think it had anything to do with me."  But although the plaintiff professed not to be bound by the May circular, in his application for shares, he put his pen through certain words, but not through the words which referred to this circular.
  The 12th issue was, "Did the plaintiff give notice of objection?" The plaintiff had produced no scrap of writing to show that he gave notice of objection.  The nearest he ever got to giving notice was when he went to Mr. Davis' office and said if the Company did not want him he did not much want the Company, he wanted to know what they would give him for his shares.  It appeared that Mr. Taylor wanted Tls. 1,800 per share, and that Mr. Davis had no purchaser at this price.  The plaintiff had stated that he then said, "Well, if I can't get my price I shall fight you;" but Mr. Davis would tell the Court that he was tolerably certain that nothing was said about fighting the company, and if anything of the sort had been said it would have been sure to make a strong impression on Mr. Davis because what he wanted to know more than anything else at that time was whether anybody was going to fight the Company or not.
  His Lordship - Did he expect fighting then?
  Mr. Wainewright - Guilty conscience.
  Mr. Latham said if anybody was going to fight the Company, the Secretary would have been glad to know it.  He contended that there ought to have been a written notice of objection.
  Mr. Wilkinson reminded the learned counsel of Mr. Wainewright's letter of the 24th December.
  Mr. Latham said no doubt that letter was unmistakable; but it came after a very long delay, and only a few days before the cancellation would take effect. The next issue was whether the plaintiff's silence amounted to acquiescence. The plaintiff remained silent from the 13th August to the 24th December, a period of four months and eleven days.  Mr. Latham quoted the maxim Vigilantibus non dormientibus subveniunt leges and cited cases with the object of showing that the plaintiff was precluded by his long delay from attempting to enforce his claim.
  His Lordship reminded Mr. Latham that the plaintiff wrote on the 28th September applying for shares.
  Mr. Lathan said that did not amount to an objection.  Anybody might apply for shares.
  His Lordship - Still, that is precisely the number of shares he would be entitled to if he were to be kept on.  I think the inference from that letter in the minds of the receivers would be, "Here is a man who does not acquiesce in what we propose to do; he applies for shares in spite of what we told him."  But it only makes a difference of a month in the delay if that is so.
  Mr. Latham said it was an ambiguous document at any rate, and from that time the plaintiff left the defendant under the impression that he was going to do nothing.  He cited cases to show that the plaintiff was bound to give notice.
  His Lordship thought the cases Mr. Latham cited were somewhat different from the present case.  The plaintiff, on receiving the notice of the 14th August, said to himself, "They have no right to take away my shares, and I do not care anything for their notice."  He would, however, look at the cases carefully.
  Mr. Latham thought it was an aggravation of the plaintiff's omission in his case that he was in the  daily habit of meeting some of the directors, and that here was a meeting of the directors held in October at which another shareholder actually did air a grievance.  If Mr. Taylor had come forward and complained, that would have given the directors an opportunity of looking into his case and enquiring whether any hardship had been done to him, as they had done in other cases where shareholders had appealed against the withdrawal of their shares.  The next issue was, "Was there a revision in 1880?" and it would be proved that a revision did take place, though no shares were withdrawn.  Then came the question as to the meaning of the words "fair proportion" in clause 39 of the Deed of Settlement.  The plaintiff seemed to imagine that it meant proportion as between shareholder and shareholder; but he contended that it meant a proportion between the amount of a man's interest in the Company and the amount of business he contributed.  If a man held five shares he was expected to contribute more business than if he held only one.  They did not propose to fix any definite sum as the exact proportion, but, as had been mentioned, Mr. Davis thought that a shareholder who contributed Tls. 1,000 per share, more or less, would be a profitable contributor, although of course there were a great many other considerations to be taken into account.  His Lordship would have no difficulty in seeing that the share-holders would have to look at the possibilities of the future in exercising the discretion as to retaining a shareholder.
  The next issue was, "Had the directors any power to cancel shares up to the 31st December?" Mr. Wilkinson had pointed out that there were certain acts which could not be done by a moribund Company; but in this case the directors had taken special means by the third resolution passed on the 29th March, to preserve their powers intact.  To these issues the plaintiff had added another in the course of his opening speech - "Did the defendants give notice to the plaintiff of their intention to withdraw his shares according to the Deed of settlement?" He contended that all that was necessary under the Deed of Settlement was that the directors should give notice to the shareholder that they had decided to withdraw his shares three months before the cancellation would take effect. It was not necessary that they should give him notice before deciding upon the withdrawal, but to give him notice three months before the cancellation would take effect.  The object was to give the shareholders an opportunity of selling his shares.
  His Lordship expressed the opinion that the sentence in the Deed of Settlement in regard to the notice was very ambiguous.  It certainly opened the door to the argument that it meant notice of intention to withdraw.
  Mr. Lathan thought his Lordship would have no difficulty in disposing of that argument.  He then asked why the change in the constitution of the Company should be held to place the defendants in a better position than if the old Company had been a going concern?  If the old Company had been continued he certainly would have been liable to be revised out, and probably would have been revised out; but now he came forward and said that in consequence of these arrangements, this turning of the Company into a limited Company, - or, to put it in a more legal form, this sale of the assets of a limited Company - he was to be in a better position than if this dissolution and transfer had not taken pace.  Mr. Latham urged that there was no ground for such a contention.  In conclusion he said that the defendants relied upon their bona fide conduct in the revision and upon the Deed of Settlement as a contract between the plaintiff and the defendants entitled them to do wat they had done.
  The Court then adjourned till the afternoon.
  On the Court resuming,
  Mr. JAMES KENNARD DAVIS was called and examined by Mr. Drummond.  He said he was Secretary of the North-China Insurance Company, Limited, and he was Secretary of the old Company at the time of its dissolution.  He had been in the service of the Company since 1863, when he was engaged by them in London and came out for them.  The Deed of Settlement of the old Company (of 1863) was signed by all the shareholders, either personally or by their attornies.  The plaintiff signed his by Mr. Addis.
 Mr. Drummond - Will you state to the Court the circumstances which caused the change of constitution from the old Company to the new.
  Witness - From almost the commencement of the Company we were endeavouring to register ourselves under the English Companies Act, and for a period of a great many years we were in correspondence with the Foreign Office for that object.  At one time we thought we were very near success; but at the end of 1882 we found that the Foreign Office would only meet us to such an extent that it was impossible for us to avail of the provisions of the Act if they were extended to Shanghai in the way that the Foreign Office proposed; and we then found that we must register either in London or in Hongkong. The Foreign office would not let us admit any but British subjects if we registered in Shanghai - that was the difficulty.  Then, after consideration, it was decided to register in London as a limited company under the Companies Act; but we were advised by counsel here and at home that the existing Company would not register, and that it would be necessary for seven or more persons in London to register as the North-China Insurance Company Limited, and afterwards to take over the business of the old Company; and, under advice, that is the course we adopted.
  Mr. Drummond asked if the company made any other change at the same time with regard to the value of the shares, or in any other way.
  The Witness said yes; they took advantage of the opportunity to sub-divide the shares.  They found that the capital and reserve of the old Company made the shares of very considerable value, and they thought it would be to the interest of the Company that the shares should be sub-divided in order that they might be spread out more, that being a policy which had been followed by all the fire and marine insurance companies during the last few years.  The transfer of the business from the old to the new Company was a formal transfer, simply to comply with the requirement of the law.  It was thought advisable to wait until they had finished with their triennial revision before making the transfer.
  The directors sent out to London a power of attorney to Mr. Morris, witness's predecessor in the secretaryship, to execute the agreement.  The other party to the agreement was the new company, under its common seal, which was affixed in the presence of two members of the Company.  The arrangements for the transfer were practically made in Shanghai; but they were all conveyed by letter to London, because the new Company was in London. Practically, everything emanated from the head office, In Shanghai.
  There was a revision of the share list, in 1880 in the sense of a review or examination; but the directors did not withdraw any shares.  Witness was not present in Shanghai when the circular of the 14th February was drawn up. And he did not draw up the circular.  He returned to Shanghai at the beginning of April to take up the position of Secretary - he succeeded Mr. Morris - and took charge about the 8th, 9th or 0th April.  That was before the confirmatory meeting which was held on the 16th April.
  The prospectus of the 25th May was prepared by witness. Copies were sent to all the shareholders, including the plaintiff.  It was then, and had all along been, the intention of the shareholders to hold a revision, and he referred to that in the prospectus because it was his object that in that prospectus every fact that could possibly occur to him in connection with the transfer of the business from the old Company to the new.
 By the words, "In the proportion of five shares to each one held by them," he meant that the old shares would be sub-divided in the proportion of one to five, and that the holders of shares in the old Company on the 1st January would present their scrip and receive shares in the new Company in the proportion of five to one.
  Mr. Wilkinson thought this evidence was scarcely admissible.  Properly speaking, of  course, a document had to speak for itself; but there was a difference between asking the plaintiff what he understood by particular phrases in a document and asking this witness what he intended by them.  This was an examination of the gentleman who drew up the document, and he submitted that it was not permissible for him to give evidence of his intention.
  Mr. Drummond admitted that if the drawer of a document expressed his meaning badly he must take the consequences; but in this case bona fides had been denied; and on that ground he was entitled to ask the witness what his intention was.
  The Witness, further examined, said the revision was commenced on the 2nd July and carried on till the 13th August.  It was decided to withdraw 111 shares, including the plaintiff's five.  These shares were held between 50 and 6o shareholders - he believed the number was either 57 or 59.  A good many had all their shares withdrawn, and a few were reduced.  On the 13th August, as soon as the revision was completed, the result was communicated to the shareholders from whom it had been decided to withdraw shares by means of a printed circular.  On the same date, the 13th August, the transfer between the old and new Companies was made in England, to take effect, of course, from the beginning of the new year.  Witness remembered the plaintiff calling on him with reference to the sale of his shares.  The account which the plaintiff gave of that interview at the first day's hearing of his case struck witness as being perfectly correct and accurate; but as to the addition which the plaintiff subsequently made to his account of that interview, witness had no recollection of the circumstance whatever.  He did not recollect the plaintiff saying that he would fight the directors if he could not get his price, or anything to the effect that he did not acquiesce in their decision.  The impression left on witness's mind was simply that the plaintiff would not sell his shares at the price witness knew people were willing to buy.  Witness understood that, like some other people, the plaintiff expected the shares to return to the exorbitant price at which they stood during the speculation in the spring, and that he wished witness to submit him an offer at this high price, if he could, from an intending purchaser.  He did not remember the plaintiff making any objection to the withdrawal.  Of course he might be mistaken, but it was impossible for the plaintiff to be more convinced of the accuracy of his recollection than witness was.  There was nothing unpleasant in the interview; it as a very pleasant one.
  His Lordship - I suppose you were not to blame at all. He could not be angry with you about it?
  Witness - Well, some people were a little angry at having their shares withdrawn, and I had to bear the brunt of it. - Continuing, he said - when he spoke of speculation during the spring he was referring to the months of March, April and May, during which shares were passed from hand to hand without being transferred - that is, without being registered, and without the purchaser's name being submitted to the directors for approval.  This gave the shares a fictitiously high price at that time.  
  Witness remembered receiving the plaintiff's application for twenty-five shares, and noticing that the words "or any smaller number" were struck out.  By that, witness understood the plaintiff to mean that if he could not get twenty-five shares he would not take an at all. He looked upon it as a "bluff." He had known other people apply for shares in the same way at other times.  It was as much as to say, "If you choose to give us a big interest in your company we will take it; if not, we will take none at all. We will not be troubled with a trifling interest." Witness did not remember receiving any other application of that kind at that time; but he remembered receiving one or two of that kind years ago, when the old triennial companies were being started.  He did not understand that the plaintiff intended to imply, by striking out those words, that he objected to the withdrawal of his shares, and that he claimed a right to twenty-five shares.  Up to that time he had never received any intimation from the plaintiff that he objected to the withdrawal of his shares.  They received many applications for shares in the new Company from persons who were not shareholders in the old Company.  The applications, as they were received, were numbered and put away in a box, to be dealt with when the allotments took place.  The plaintiff's was the 562nd application.  If everyone who had share in the old Company had been entitled to five shares in the new Company for each share in the old Company, there would, of course, have been no shares to allot to outsiders.
  His Lordship - That is supposing that every shareholder wanted the equivalent for all he had.
  Mr. Drummond - Yes. (To witness) Were there any shareholders who wished to get less that the full amount to which they were entitled?
  Witness - I think there was one.  He said he would be content to take a smaller number.  He only wanted an interest in the Company.
  Mr. Drummond - Then I understand that the others wished for the full equivalent, if they could get it?
  The witness said a good many applied for more.  They were a valuable property to get, subject to the revision clauses, and a great many people wanted shares.
  Mr. Drummond put in as an exhibit a copy of the North-China Daily News of the 14th October, containing a report of a meeting of the shareholders of the Company held on the 13th October.
  The witness sad that was a correct report of the meeting.  At that meeting a shareholders made a complaint.  He was requested by the Chairman to put his complaint in writing, and he was promised that the Board pf Directors would give every attention to it.  The shareholder did afterwards put his complaint in writing, and his letter, and all the facts the witness could gather bearing on the case, were circulated for the separate consideration of each of the directors; and the letter was afterwards discussed at a Board meeting.  In fact, everything was done that could be done to give a full and careful consideration to the shareholder's complaint.
  The first intimation witness received of the plaintiff's objection to the revision and the withdrawal of his shares as Mr. Wainewright's letter of the 24th December.  If he had received an official complaint from the plaintiff it would have been laid before the first meeting of directors and considered.  The meetings were held weekly.  They received several requests for reconsideration from shareholders who had had their shares withdrawn; he could remember a dozen.  Some of these were in writing, some verbal, and some forwarded through the Company's agents at outports.  Of these twelve applications, six were successful and six unsuccessful; they were all very carefully considered by the Board of Directors and witness was present at all the meetings.  Of the shareholders who were revised out or reduced, some expressed concordance in the action of the directors.  One of two wrote and cheerfully acquiesced in the decision of the directors.  One certainly wrote and said he was perfectly content with their decision, and another told witness personally that he knew the directors had treated him as his contribution warranted.  The last appeal against a withdrawal of shares came in at the very end of the year - just before the allotment of the new shares was finished.
  Mr. Drummond put in the following advertisement from the North-China Daily News, dated the 5th January, 1884:-
  'NORTH-CHINA INSURANCE COMPANY. - Notice is hereby given that in accordance with the provisions of Article 41 of the Deed of Settlement, the Scrip Certificates for the Shares in respect of which notice of withdrawal was given in August last, and which have not been duly transferred or surrendered, have been noted as cancelled in the books of the above Company.  Holders of the said shares are requested to surrender the Scrip Certificates for the same.  On such surrender, a return of Tls. 1,000 per share is payable, being refund of Tls. 600 paid up, and Tls. 400 proportion of accumulated Reserve Fund.  
By Order of the Court of Directors. K. Kennard Davis, Secretary."
  The Witness said that advertisement was inserted for a fortnight.  In compliance with that notice a good many shareholders surrendered their Scrip; but a few had still to surrender.  In most of the cases where they had not been surrendered, either the shareholder was dead or his affairs were in liquidation or there was some other way of accounting for it.  There were only one or two cases of which he did not know the reason.  In all the other cases, the shares had been surrendered, and the holders had taken their Tls. 1,000 per share.  There were only three or four or five cases in which the shares had not been surrendered, and only one or two of these of which he did not know the reason.
  Mr. Drummond - That includes the plaintiff's. I resume?
  Witness - Yes,
  His Lordship - His reasons you are quite aware of. (Laughter.) At least we have been trying for the last few days to arrive at them.
  Witness - Yes, but I mean cases that I cannot explain satisfactorily. - Further examined, he said as far as he knew, there never was any intention on the part of the directors to give up the right or duty of revising the shares in 1883, and there was never any intention on their part to give five new shares for one old one irrespective of revision.  The allotment was to be made subject to the revision clauses of the Deed of Settlement.  Neither was there any intention at any time on the part of the directors of waiving their approval of the names of purchasers of shares. The course taken by the directors in regard to the revision was as follows. When it was arranged to hold the revision he was directed by the Board to prepare these statistics - the list of shareholders and their contributions, - and to submit it to the Board.  It was not finished then, but as nearly up to date as possible.  It was considered by the whole Board.  He believed all the directors were then in Shanghai; at any ate there was always a great deal more than a quorum at the meetings - three was a quorum.  Speaking from memory, he believed all the directors were present on every occasion; but there might have been one absent.  The revision was begun on the 2nd July, and there were three or four sittings altogether before it was completed; and after that there were certain named left over for reconsideration and brought up again at subsequent meetings.  Practically the revision was finished in three or four sittings; but there were some names about which the directors were a little doubtful, and they looked into these cases again. The principles on which the revision was to be conducted were discussed at one of the early stages, and it was decided to be as liberal as possible - not to be unduly harsh in the case of people who were in a position to contribute business.
  Mr. Drummond - Can you give me any idea, approximately, of what would constitute a profitable shareholder of the Company?
  Witness - On an average we received from each shareholders of the Company -we calculate on receiving - premia to the extent of Tls. 1,000 or more per share annually, but I only say that quite generally, your Lordship, because in some cases Tls. 500 premia would be worth more to us than Tls. 1,000 or Tls. 2,000 in others.  It depends on the class of business.  We know that in some classes of business we must have claims, and we are obliged to charge a high rate of premium; and in some cases a small premium might represent very large volume of business. In some cases we get only 1/6 or ΒΌ per cent; while in other cases we get 4 or 5 per cent, or me than that.  We consider the cheap business to be the best - that on which we charge a low rate of premium.
  Mr. Drummond - If a shareholder, therefore, was shown to have given in an amount of business beyond what is the average amount, do you consider that the directors have a right to withdraw his shares?
  Witness - No. - Further questioned, he said the directors considered each case on its own merits, and not as compared with other cases; but of course if a man were a partner in a firm which had contributed business, that was considered.  He understood the meaning of "fair proportion" in the Deed of Settlement to be a fair proportion between the shareholder's contributions and his holding in the Company.  That is to say, if he, as a shareholders, had not contributed a fair share of business, in proportion to his holding, his shares could be withdrawn.  A small shareholder could not hold more than ten shares in the Company; buy firms could hold more.  The directors made their revision on an examination of the list of contributors, without referring to the shareholders themselves, and then communicated the results to the persons affected.
  Mr. Drummond - And after these notices had been sent out, was the Board open to receive appeals against their decision up to the end of the year?
  Witness - Yes.
  And to reconsider each cases upon any new facts brought to their notice by the person appealing? - Yes.  We did so.  People represented that they were in a position to do better in the future, and we did not withdraw.  The principal point taken into consideration in cases of appeals was the possibility of the shareholder being able to do better in the future.
  You are aware that when the plaintiff obtained his shares he was manager of the Chartered Mercantile Bank here, are you not? - I am.
  At the time of the withdrawal of his shares, what was he? - A bill and bullion broker.
  Des that fact in any way change his position as regards the Company? - Undoubtedly.
  Would that make him more valuable or less valuable as a shareholder, in your opinion? - The directors made a rule some years ago not to admit gentlemen of the bill-broking profession as shareholders in the Company, on account of their inability to contribute.  There have been exceptions, where a bill-broker has also done business in produce and has given contributions; but I only know of one case. He is a bill-broker and does other business besides.
  The Witness, further examined, said - Supposing a shareholder is a junior partner in a firm, and at or about the time of the revision became an independent merchant, that would be a material element for consideration in discussing the withdrawing his shares, because his prospects of contributing business would probably be improved.  There were many other considerations to be taken into account by the directors in weighing the value of a shareholder to the Company, besides those he had mentioned.  The main question was whether it would be generally for the interest of the Company to retain him.  It was the practice of the Company, for instance, to give a share to an officer of the company - to an agent at an outport.  He considered that it was to the benefit of the Company to give its agents a personal interest.  That was one example of benefit to the Company apart from the direct contribution of business.  Another example he might make was that of a firm of very high standing in the commercial world, whom it as advisable to keep on the books as a sort of advertisement of the company, even though their contributions were small.  He did not say that this was a consideration which actually would influence the directors; but it was a matter for their consideration.  No other considerations suggested themselves to witness's mind at the moment; but he had no doubt that if he had time he could think of some.
  Mr. Drummond - The plaintiff suggested one, namely, that he might have been in a position to take away one of their contributing shareholders.  Is that one?
  Witness - I think it would be open to the directors, in their discretion, to retain a man as a shareholders if they thought that by eliminating him the Company would be injured.
  Now you are aware of the fact that the plaintiff represented another shareholder as he has stated? - Yes.  He was registered in our books as his attorney.
  So far as you are aware do you think it probable that the plaintiff could have affected the action of that shareholders in regard to inducing him to leave the Company? - I have no knowledge of it.
  You have hard the reasons given by the plaintiff in his evidence which would have been brought, as he states, to the knowledge of the Board if he had had what he considers a proper opportunity of doing so.  Do you think that any of the reasons that he has stated would have induced the Board in any way to alter their decision? - No; I do not think so.
  Do you consider that a shareholders inducing another person to become a shareholder in the company gives him any claim on the Board to continue him as a shareholder? - No. Why should it?
  Well, just state why it should not? - Because the fact of the other shareholder having an interest in the Company would give us sufficient hold on him, irrespective of his introducer.
  Have you ever had such a claim put forward, in your knowledge and experience of the working of the Company? - No. I never remember hearing one like it.  I do not remember one, and I do not think it would be admitted for a moment.
  The Court then adjourned till next morning at 9 o'clock.
18th June.
  The hearing was resumed at 9 a.m. today and the examination of Mr. J. Kennard Davis, Secretary of the defendant Company, was continued.
  Mr. Drummond - Can you tell me, Mr. Davis, whether the intention to revise the share list in 1883 was known in London prior to and at the time of the execution of the agreement between the old and new Company?
  Witness - It was.   
    His Lordship - If it was known before, it was known at the time.
  Mr. Drummond - By the parties executing it?
  Witness - Yes.
  And did you send that information? - Yes.
  Was it necessary to make a revision in connection with the transfer of the property from the old company to the new company? - Yes. It was one of the elements of the transfer.  It was a necessary element in the transfer of the old company to the new, that there should be a revision of the share list.
  And why? - Because we should never have made the transfer if the fact of making the transfer would have precluded us from revising our share list in 1883.  We should not have then made the transfer.
  If you had not been able to revise the list then, would you or could you have made the same agreement that you did male? - No.
  The Witness, further examined, said that of the fifty-seven or fifty-nine shareholders who were revised our or reduced, six were reinstated.  It was not the interest of the new Company to start with the others as shareholders, and no doubt they would have been revised out at the same time, and in the same manner even if the transfer had not taken place. The witness then took the list of shareholders, and the contributors and referred to the names which had each been numbered by the plaintiff.  He said the firm numbered 1, although no contributions appeared opposite their names, had contributed largely.  Their contributions last year amounted to considerably over Tls. 20,000, and this year up to date they had contributed about Tls. 20,000.  They held two shares in the old Company and were allotted ten, the equivalent in the new Company.  No. 2 had contributed nothing during the three years; but he believed they were connected with a firm abroad who had contributed.  He was not quite certain what the contribution was.  N. 3 was a large firm and might at ay time contribute business to a considerable amount.  No. 4 was absent from China; but witness had every reason to believe he was coming back in the same position so that he would be in a position to control business.  No. 4 was in identically the same position as the plaintiff was when he obtained his five shares.  No. 23 contributed a large amount of business which did not appear opposite his own name but opposite that of his firm.  He had been in charge of that firm for years. No. 48 was, as the plaintiff had said, sub-manager of a bank.  He had contributed no business according to the books; but witness did not agree with the plaintiff that No. 48 was not in a position to control business.  No. 57, according to the plaintiff, had left China and retired from business; but he certainly had not left China when the revision was made, and witness was of opinion that in any case the retention of his name on the share-list would ensure the continuance of the business which the Company got from his firm before.
   No. 58 had left China, but had given the witness to understand that he had not retired from business.  Witness thought it quite possible that N. 58 would return, and even if he did not, it was possible that he would still contribute business.   The largest silk-shipper from Shanghai last year was a gentleman who was understood to have retired from business.  No. 59 had been described by the plaintiff as "a clerk who was not in a position, he thought, to contribute business, although a small contribution appeared opposite his name."  Witness, however, had a special interview with No. 59, and No. 59 had satisfied him that it would be advisable to give him a trial.  Witness communicated the result of that interview to the directors, and he was thereupon accepted as a shareholder.  Witness believed No. 59 was giving business at present, or would give business.  No. 60 was a new shareholder, not having held shares in the old Company. He was described by the plaintiff as one who had formerly been in business in Shanghai, but who had retired.  Witness, however, had every reason to believe that he would contribute a considerable amount of business.  Witness had, in fact, practically got a guarantee from him that he would contribute fully up to the proportion of his holding.
  No. 24 had no contributions opposite his name, but he was a partner in a firm opposite the name of which contributions appeared; in fact, witness believed he was the sole partner.  In the old Company the firm had one share, and he held one; in the new Company the firm had ten shares and he had five; but he believed the firm had bought another share last year subsequent to the revision, and obtained the equivalent for it.  Witness certainly considered that No. 24 was likely to give a large amount of business to the Company in the future.  In the year that he acquired a share in his own name, the contributions of the firm increased to more than double - nearly three times - what they were in the preceding year. No. 50 had no contribution in the list opposite his name; but his firm contributed very largely, and the contributions appeared opposite the name of the senior partner, whether he was in Shanghai or not.  Witness had looked over all the fifty-nine names marked by the plaintiff, and he could give a satisfactory explanation of what the directors did in each case.
  Mr. Drummond - With regard to the present Chairman of the Company, do you know ow long he has been a shareholder in the Company - that is, the sequence of companies?
  Witness - He has been identified with the Company since its first starting.
  During that time has he been much on the Board of directors? - Ye. He joined the Board in 1864 - the company was formed in 1863, - succeeding his partner.  He was Chairman in 1865 and part of 1866.  He went home in 1866, and I think returned in that or the following year, and resumed his place on the Board - not in the first instance as Chairman.  A year or so after that he became Chairman again.  He remained on the Board till 1872, when he went home again - I think he was Chairman when he went home.  On his return to China he again joined the Board; he was elected Chairman in 1874, and he has been Chairman ever since.
  Then from what I understand he has been elected annually by the shareholders as a director and by the directors as their Chairman? - Yes.
  Do these circumstances that you have mentioned, in your opinion, make any difference in regard to the desirability of retaining him as a shareholder of the Company? - I think they make it desirable that he should be retained.  From his long continued connection with the Company, which is longer and more continuous than that of any other director, he has a special acquaintance with the details of the administration of the company.  His recollection of previous decisions of the Board is very useful to his co-directors.  He remembers facts which have come before the Board at different times which very often nobody else does recollect.
  Not even the Secretary? - I have not been continuously here.
  In the event of your absence, would his knowledge and experience have any greater value than at present? - It would, undoubtedly.
  In regard to his business position, is there anything in connection with that which would alter the circumstances in regard to his share? - Yes.  He is now sole partner in his own firm.  In 1881 and 1882 he was junior partner in the firm.
  Mr. Wainewright - He was the second of the partners, but they were on equal terms.  He would not like at all to hear that he was the junior partner.
  Mr. Latham - You need not mind.  We will protect him.
  Witness -The other partner's name came before his in the firm.
  Mr. Drummond - Do I understand you to mean that he was not in a position to control the business of the firm when you say you understand he was junior partner?
  Witness - I know nothing about that.  He might or might not be.
  When did he commence a firm of his own? - In May, 1883.
  Did that place him in a better position as to controlling or contributing business to the company or not? - It certainly might have.
  What I mean is, would you consider that as a reason for giving him shares in the new Company? - Certainly, for giving him a trial.
  The witness, further examined, sad the only period under review by the Revising Committee in considering whether a person came under the powers of the directors with regard to the withdrawal of shares was the triennial term ending with the year 1883; but they were not bound to judge only by the triennial period in considering whether they should keep a shareholder on or not.  That was where their discretion came in.  They could look at any circumstances bearing on the interest of the Company in considering whether they should exercise their powers or not; but in deciding whether a shareholder came within their powers they could only examine his contributions for the three years.  Witness did not know any reason why the act of the Chairman or any director asking the plaintiff to attend the meeting of the 29th March should place him in a different positon from that of any other shareholder.  The interests of the company were the only things considered in making the revision; the directors acted in perfect good faith, and it was a careful and conscientious and painstaking revision.  
  The plaintiff's application was treated as that of a new applicant for shares.  Most of those who were revised out applied for shares; some of them said, "You may have some left over, and we should be glad to get in again."
  With regard to the defendants, Messrs. Bell, Brand, Hearn, Lavers, McLeod and Westall, they were all merchants in Shanghai, and partners in the firms to which they belonged.  They had all been engaged in business in Shanghai for many years - all but one, Mr. Brand, had been here longer than witness himself, and he had been here 21 years.  Mr. Brand, he thought, had been about fifteen years in China.  With regard to the Company, it had been an exceedingly prosperous company since the commencement, and was now, he thought, increasingly prosperous.  He believed it was one of the largest marine insurance companies in the world, and he attributed its success to its strict adherence to the mutual system.  They had had the question of the sub-division of the shares under consideration for a long time, and it would probably have been carried out, even if the constitution of the Company had not been altered.
  Mr. Wilkinson - You have said a great deal, Mr. Davis, about the Chairman of the Company.  In considering the advisability of retaining the Chairman upon the share list, I understood you to say you looked at a great many circumstances.  Was the question of retaining the Chairman ever submitted to the directors at all?
  Witness - Yes.  It was very carefully discussed.
  I think you said there were three meetings? - There were three special meetings; but almost to the 13th August I do not suppose there was one meeting at which some names were not considered.  We waited some time before sending out the notice, in order that the circumstances might be very carefully considered in each case.
  Were you present at the meeting when the question of the Chairman's shares was discussed? - I know it was under the consideration of the directors, because I had interviews with one or two of them - one or two of them came round to the office and spoke to me on h subject.  I know that the Chairman's case received every consideration.
  Was it discussed at a meeting? - There was no special discussion of the Chairman's case at a meeting of the directors, so far as I recollect - no open discussion.
  I take it, then, that the question of the withdrawal of the Chairman's shares never came before a meeting of the director? - I do not say that at all.
  Will you explain that answer with your last answer? - I say there was no open discussion at a meeting.  The decision was arrived at at a meeting.  The directors came to the meeting and decided not to take away the Chairman's shares.  There was no open discussion at the particular meeting.
  Will you state in what way that decision was arrived at? - Well, this summary of shareholders' contributions was laid before the directors and considered by then, and certain names were selected for discussion.  The list was made up for 1881 and 1882.
  Only 1881 and 1882? - Well, the figures for the previous years were in the book; but the directors only looked at these two years.  A large number of names were discussed.
  And you have already told us that the Chairman's was not discussed? It was not discussed.  The decision was arrived at without discussion.
  They only looked at the columns of 1881 and 1882? - And such figures as I had in regard to 1883.
  I think you told us that the Chairman had seven shares? - Yes.
  And he got thirty-five new shares? - Yes.
  His Lordship - You say a large number of names were discussed?
  Witness - Yes.
  Was there a list of the names that came up for discussion? - The list was not made up before the first revision meeting.  At the first meeting, the Contributors' list went before the Board in its entirety, and then afterwards notes were made and certain names were discussed and re-discussed.
  Was Mr. Lavers's name on that list of names taken out for discussion? - No.
  The witness produced two rough lists of names of shareholders with shares which at some period or other during the revision, it  was thought of withdrawing, one in witness's handwriting and one in that of the Chairman.  He explained that they were two out of several such memoranda; but the others had been destroyed.  One of the names was marked with a cross and the words, "apply new shares." The witness said he could not profess to explain the meaning exactly; but as far as he remembered it was doubtful whether this shareholder should be retained or not.  The idea at one time was to take away his shares and tell him he could apply for new shares and take his chance.  It was ultimately decided, however, to withdraw his shares altogether, and he was one of the men who afterwards appealed successfully against the directors' decision.  The cross was probably a figure 1 struck out.  He appealed through one of the company's agents and also by letter.  As a matter of fact, that shareholder did contribute a respectable amount of business towards the end of the year 1883.
  Mr. Wilkinson - What were the reasons for withdrawing his shares in the first instance?
  Witness - Because his contributions were not very considerable.
  Was there any other reason? - No.
  Did he come under any other description of people who were not to hold shares? - He was the exception to which I have alluded.  He is a bill-broker; but he had as a fact contributed business.
  Was the fact that he belonged to that prescribed class brought to the notice of the directors? - Yes, the directors were aware of it.
  Was that one element in the withdrawal of his shares? - The reason his share was withdrawn was that he had not contributed a satisfactory amount of business to the Company.
  How much do you remember, had he contributed in 1883, when his shares were withdrawn? - A very small amount.  By far the major part of that year's contribution was made in the latter part of the year, after the revision.
  Under the Deed of settlement, did the chairman contribute a "fair proportion" of premia during the triennial term? - No, I should say not.
  I suppose, from what you told us of having discussed the matter with other directors, you purposely left his name out of your list? - We made no such list, as I have already explained.  There were records of names which were discussed at particular meetings; but with regard to the Chairman's name there was no discussion.
  From that discussion you had with the directors, you understood his name was not to be revised out? - Yes.
  Can you give any reason, shortly, that operated on the minds of the directors, so far as you can recollect? - Yes. The directors all arrived at the same conclusion; but I think one or two of them arrived at it in different ways.  One laid great stress on his usefulness as a director, and another spoke of his being likely to contribute business - he called him a "real live merchant."
   You have spoken of his past services.  How, from what you have heard the directors say, did the question of gratitude enter into their minds? - They recognised his past services, and the advisability of retaining him.
  Had his services in the past been gratuitous? - He received the same remuneration as each of the other directors - he shared with the other directors equally.
  That, of course, appears in the accounts, so that you might just state wat the remuneration was? - The remuneration was fixed by the shareholders some time ago at Tls. 1,000 per annum for each director.  At that time there were six directors; but it was afterwards thought to the interest of the company to add another director to the board, and the remuneration was divided among the seven instead of amongst six.  That is to say that each of the six gave up a share of their fees; they did not charge the shareholders any more.
  Can you give any other reason? - He had been rendering services for 22 years.  The company had been conducted on the same principles for a great many years, and his knowledge and services have extended over all those years.
  Then it was from a feeling of gratitude for what he had done? - I do not say it was simply out of gratitude.  It was felt that his services had been great, and that he was a very useful man to have as director of the Company.
  Would his usefulness have been diminished if he had had some of his hares taken away? -One or two might have been taken away, except that the holding of several shares might have been a stimulus to zeal.  It is generally supposed to be.
  How many shares would have been taken away without diminishing his usefulness? - In what way his usefulness? It would have been possible to take two shares away and yet leave his qualification to act as a director.  A director must have five shares.
  Under the new company how many shares does he require to qualify? - Fifteen shares is the qualification in the new company.
  So that four shares might have been taken from him in the old Company and still left him qualified in the new company? - Yes.
  And of course, supposing that you had determined to get him on the directorate, and had determined to take away as many shares as would still leave him qualified, you might have taken away four shares and still left him qualified in both Companies, because your withdrawal would not come into operation till the 31st December? - Yes, I think you are right.
  Now did it not occur to any of the directors at all that some of these shares should be taken away? - It was decided not to take away any.
  What would you say was his fair proportion? Upon how many shares did he contribute a fair proportion of business from the beginning of the Company? - His contributions up to 1881 inclusive - certainly to 1881 - are not accurately stated there, because those are his own contributions as an individual, and do not include the contributions of his firm, Forester, Lavers and Co.  They were not very much, but they were considerably more than that.
  I suppose Forester, Lavers and Co. took care to have their contributions attributed to some share or another? - Yes. That firm was dissolved, and then the shares were transferred to Mr. Lavers.  Before May, 1883, he had not seven shares; he had only three.
  Then how was he a director? - Because he was a partner in Forrester, Lavers and Co.
  How many shares did Forester, Lavers and Co. have? - Five were the most they had; then they sold one, and four were transferred to Mr. Lavers.
  Do you know when they sold one? In the early part of last year.
  Can you remember who hey sold it to? - I do not remember who it was, but it was somebody unconnected with the firm.
  Upon how many shares would their contribution be a fair proportion, as far as you can recollect now? - Well, if you take what Mr. Drummond says of the average of the whole company, - Tls. 1,000 a share.
  Mr. Wainewright - I thought it was the witness said so.
  Witness - I said Tls. 1,000 would be satisfactory.
  Mr. Wilkinson - I suppose it was not more than a fair proportion upon one share?
  Witness - About that,
  During what time would that apply? - The three years.  It might have been a fair proportion on two shares.
  Would the firm's contributions and Mr. Lavers's contributions put together amount to more than a fair proportion on two shares for the three years under review? - No; as a matter of opinion I should say not.
  Can you say what it would be from the commencement of the Company? - No, I cannot.
  Then, as a matter of fact if Mr. Lavers had been allowed to retain three shares, as far as the contributions of himself and his late firm are considered, he would have been treated liberally? - Yes; I do not think he could have said we had treated him unjustly.
  His Lordship - You do not think he could have complained?
  Witness - No.
  Mr. Wilkinson - Now did you allow any circumstances in the past to influence you with regard to any other shareholder than the Chairman?
  Mr. Drummond - He has not stated that they allowed any circumstances in the past to influence them in regard to the Chairman.
  Witness - No; I said that his past services had rendered his services useful for the future.
  Mr. Wilkinson - Then, as a fact, Mr. Lavers had no claim at all for anything that had gone before, except in regard to his accumulated experience? - No; I think it was his experience.
  Then what you told us about the twenty-two years was simply to show what a very valuable director he is to the present Company? He had no claim at all on the score of past services? - No.
  Can you tell me what considerations made the directors allow him his seven shares instead of cutting him down to three? - No. They exercised their discretion.
  Mr. Wilkinson - Now this big list you have prepared contains the amount of the premia contributed by shareholder.  Did you prepare any statement of the amount of premia influenced by shareholders?
  Witness - In what way? What do you mean by "influenced"?
  Mr. Wilkinson - I was going to ask you that.  I will read you the rule under which you are supposed to act and ask you whether you really acted under it or not. - Mr. Wilkinson then read a clause of the Deed of Settlement relating to revision, according to which the directors were to ascertain hat amount of business had been "contributed o influenced" by shareholders.  He a sked - Do you affix any meaning to that, upon which you acted?
  Witness - yes. Business "influenced" would be down in the list as "contributed."
  Mr. Wainewright - Synonymous terms?
  Witness - Very nearly - not quite.  There is a distinction.  We recognize a small distinction in practice.  I will try to explain it by an example.  Supposing I am a shareholder. And a man in London who is also a shareholder wanted a box of tea sent to him.  He writes to me, "Please send me a box of tea, and insure it in the North- China under the influence of my share."  I bring business to the company in my own name, but I say "Please note that the business is "influenced" by the gentleman at home."
  Hs Lordship - But he instructs you to do it; you would be disregarding his instructions if you did otherwise.  It seems to me that in the case you put, there is a contribution from him and influence from you to the same amount.
  Witness - We do not recognise influence, irrespective of contribution.
  Mr. Wilkinson - Perhaps you wills stop me if I put it incorrectly.  You understand that a man "contributes" business who on the spot brings business, but a man "influences" business who from a distance directs his agent to contribute it? - Yes -that is, on his own share, of course.
  His Lordship - In the case you have imagined, you would get no credit in any way for it?
  Witness - No.
  His Lordship - If I understand it rightly it is very simple.  Business "contributed" means business given by a shareholders here; business "influenced" means business given here by a shareholder at a distance.  It is simply a question of where a shareholder happens to be.
  Witness - I think so, my Lord.
  His Lordship - If he is in Shanghai it is business he has contributed; if he is at a distance it is business he has influenced?
  Witness - I think so.  But there are cases in which a man can influence business here.  In the case of the sub-manager of a bank who influences the bank to contribute money, I should say that was influencing.  But I must say I think the terms are all but synonymous.
  His Lordship - You mean the case of a sub-manager who has a choice of where he will insure, and who gives the business to you?
  Witness - Yes.
  His Lordship - You would not call that giving business?
  Witness - I think perhaps "influencing" would be the more correct term.
  His Lordship - If he is left absolutely free where to give it, and he gives it to you, I imagine he contributes it just as much as if it were his own?
  Witness - I should rather look upon it as a case of influence.
  Mr. Wilkinson - Then, as a matter of fact, no credit is given for influencing, apart from contributions?  As a matter of fact, that is so?  No two men get credit for the same business in any way?
  Witness - Yes, in the case of two partners in a firm.  Each partner in the firm had a share, and their combined influence brings the business to us; but only one partner gets credited with the contribution, and we recognise the influence in the case of the other partner.  As a matter of arrangement, we do not pay the bonus to the other partner.
  Bu except in the case of firms, there is no record of any influence in the books? - No - except so far as the record of contributions is a record of influence.
 And the fact of the men being partners appears on the books? - No; but it is in our knowledge.
  And is your knowledge perfect? - Yes.
  How do you arrive at that knowledge? - Because we do not register shares in the names of firms; we require the firms to give us the names of the individual partners.
  If a new partner came in? - The share certificate would be sent in for alteration.
  Is it always done? - As a rule. I would not swear I is always done.
  Mr. Wilkinson - I believe at one time the Company's shares were not so eagerly sought after as they are at present?
  Witness - You are referring to something the plaintiff said?
  Mr. Wilkinson - I believe it is a fact that at one time shares were not eagerly sought after?
  Witness - I do not say that.  Shares were at a very high premium then.
  And did you find people willing to buy at the high premium? - Yes; shares were bought and sold.  We could have got lots of people to buy but it is not always easy to find valuable shareholders.
  There was a time when you found it difficult to find useful shareholders; I think it amounts to that? I think you say shares were high and could be sold to anybody in the pen market; but, thee being a restriction, there was a difficulty in getting people to take over the shares? - We never had to go and beg people to take the shares in the company.  Sometimes there is a demand from good shareholders, and sometimes there is none.
  Is it not a fact that at one time, for reasons which have been explained by the plaintiff, shares in unlimited companies were not sought after? - Oh, certainly; the failure of the City of Glasgow Bank did affect the position of unlimited companies.
  Had you at that time a number of shares sent out from home? - I only know of one instance, and in that case tee was a limit.  They could have been sold many times, but he had put a very much higher limit on them than the market value.
  You were here during the whole of 1880? - Yes.   
   How many shares were sent to you for sale then? - There was one man who sent five shares.  He had five shares, and he sent them and asked us to sell them; but, as I have said, his idea was considerably above the marker price. The market price, I think, was Tls. 1,125 or Tls. 1,150 on Tls. 600 paid up, and I think it was Tls. 1,500 he wanted.
  With some reserve fund accumulated? Yes, there was some reserve fund.
  Do you know of any shares belonging to a bankrupt's estate? - Yes. We were very anxious indeed to sell them, but the difficulty was to get the shares from the estate.  There was a dispute; the trustees of the estate claimed the shares, one of the banks claimed them, and we could not find any one to transfer them.  We tried very hard indeed to get those shares transferred - in fact we had some lawyer's letters written begging the people to make arrangements to sell them.
  Now you say there was a revision in 1880? - Yes.
  Give your own definition of that.  Did you take the same steps in 1883 as were taken in 1880? - Very similar steps.
  What steps were taken in 1880? - There were no special meetings of the court of Directors, because it had been decided beforehand not to withdraw any shares; but I pointed out to the directors that there must be a revision of the share list, and a list of the shareholders and their contributions were laid on the Board table, in order to be as strictly correct as possible.
  Hs Lordship - It had been decided not to withdraw?
  Witness - Yes - it had almost been decided.
  Mr. Wilkinson - Then I suppose, having made up your minds not to withdraw, you did not examine the list very carefully?
  Witness - No. The shareholders had been told at the previous meeting that the directors did not think it would be advisable to withdraw any shares on that occasion.
  Can you give the date of that meeting? - April, 1880.
  You say you took similar steps in 1880 to those in 1883.  Did you issue this notice (the advertisement as to closing the transfer books for the purpose of the revision) in 1880? - No; there was no advertisement.
  So that, in fact, really all the similar steps that were taken were the preparation of a list of contributions and laying it on the Board table? - Yes. I did all that was necessary to comply with the Deed of Settlement.
  You have told us about the directors making memoranda and a great many other things.  Was there anything of that sort in 1880? - No, nothing of that sort.
  So that I am correct in saying that no step was taken except the preparation of a list similar to this and laying it on the Board table? - Yes.  It was laid before the directors, and they looked at it.
  Hs Lordship - I take it that it was simply pro forma?
  Witness - Yes.
   Mr. Wilkinson - Can you state now what the reasons were why the directors had made up their minds beforehand not to revise anyone out?
  Witness - We were at that time in the thick of our negotiations with the Foreign Office to get the companies Act extended to Shanghai, and we hoped that at last we were going to be successful.
  It was not the case that there were no unprofitable members at that time? - No. The reason was as I have stated.
   At what time in 1880 was the revision? - I think it was about August or September.  The Deed of Settlement said it was to be at or towards the close of the triennial term. It was simply a matter of form, but I was very careful to do exactly what was laid down in the Deed of Settlement.
  For 1880 you made a list of the contributions since the previous revision? - Not since the previous revision, but during the triennial term.
  Not since the last revision? - Well, the revision was in the middle of the year.  But the contributions since the last revision are in the book.
  But could the directors see by looking at the book what were the contributions since the last revision? - Well, the word "revision" is used in two senses.  We made a revision in 1880, but no named were revised out. I laid before the directors in 183 a list of the contributions since the date when the last revision would have taken effect if any shares had been withdrawn and any shareholders revised out.
  You have stated that the last revision was in August or September.  Did you lay before the Board of Directors any statement showing the business contributed since August or September, 1880? - Not specially, no.  The contributions in 1880 were there for the directors to see, but not the contributions from August to December specially.
  But you have told us that they did not take that into consideration? - No; only the business for the triennial period.
  Taking the revision to have been in August or September, 1880, had the directors before them in 1883 any statement showing what business was contributed by each shareholder for the period of revision - from August or September, 1880? - They had nothing as far as the period from August or September 1880 to December 1880 was concerned; they had not that shown specially - nothing beyond what you have in the book.
  The Court then adjourned till 9 o'clock next morning.
19th June.
  The hearing was resumed at 9 clock.
  Cross-examination of Mr. Davis, Secretary of the defendant company, resumed:-
  Mr. Wilkinson put in the witness's hands a list of shareholders to whom notice of withdrawal of shares had been sent.  The witness identified the list, and it was put in as an exhibit, and marked "W." - Mr. Wilkinson then put in minutes of the directors' meetings at which the revision of 1883 took place, the meetings dating from the 8th May, 1883, to the 7th January, 1884.  They were made an exhibit and marked "X."
  Mr. Drummond - I should lie to put one question to the witness to explain an answer which he gave yesterday.  I think, Mr. Wilkinson, you were misled by his answer; the witness did not quite understand you.  He was asked, "Did the revision of 1880 appear in the minutes?' and he said "No."
  Witness - I did not understand that.  I understood you to ask whether there was any minute stating that a revision was made, and I said "no;" but there were several references to the revision in the minutes.
  Mr. Wilkinson - You did not withdraw any shares because there was going to be a change in the constitution. Did not the same reason appear in 1883?
  Witness - No, no.  In 1883, your Lordship, as I have explained before, we were trying to get an Order in Council passed, through the Foreign Office, bringing the Companies Act to Shanghai.  We hoped to be successful, but it was uncertain; we were in a state of general doubt and uncertainty, and when the Act was brought here, then it was the intention of the directors to go into th matter.  We took opinions here and opinions at home, and the opinions we got were very contradictory = even those of eminent counsel at home.  We wanted to get the Act here first, and then the directors would decide what to do.
  Opinions on what point? - As to whether we could register the existing company.  The opinion of Mr. Lindley was that we could.
  Mr. Wilkinson - I suppose was before Buckley and Schultz.
  Mr. Drummond - Before Mr. Lindley went on the bench, anyhow.
  Mr. Wilkinson - That was the reason?
  Witness - Yes.  The directors thought we had better keep quiet, because we did not know what we should have to do when the Companies Act came to Shanghai.
  Mr. Wilkinson - Out of all the 49 names that the plaintiff has numbered on the contributors' list, how many contributed a fair proportion during the three years?
  The witness suggested that it would take less time to pick out those who did not contribute a fair proportion.
  Mr. Wilkinson asked him to pick out those who did.
  Witness -No. 9 did, and 58, did I think; 10; 11 I should say, judging from the class of business; and 12. - What do you mean by a fair proportion of business?
  Mr. Wilkinson - What do you mean by it? I want you to define it.
  Witness - I am naming the people who contributed a useful business to the company.
  Mr. Wilkinson - The words of the Deed of Settlement are "a fair proportion," and I want you to name those who did contribute a "fair proportion."
  Witness - 15 I think did; 17, 16, 18 - I am a little doubtful about 1, so I will not include him; I can explain if afterwards; 0- 7, 23, 24. 25. 28, 30. 31, 57, 8, 1, 33; 35 I think.  - Of course you gave selected cases very near the line, and it is not easy to say.  I am doing at a moment's notice what took the directors six weeks to do. 36, 38, 41, 44, 6, 48, 49, 50; 51 I am a little doubtful about, but I think I may put him in; - 54. 55 contributed a fair share of business - he has got three shares. - Yes, I should say 55 gave a fair proportion; but all these cases have been very carefully selected; they were very near the line. 56 dud.
  Mr. Wilkinson - Perhaps your Lordship will say how many you have a note of?
 His Lordship - 32.
  Mr. Wilkinson - There are 59 in all.
  Witness - Yes.
  That leaves 28 who did not contribute a fair proportion of business and yet were allowed to retain their shares? - Yes.
  Can you say why? Is there one general statement that applies to them all, as to why these 27 were allowed to retain their shares? - No; I do not know.  I dare say there were different reasons in different cases. - There was one general reason, and that was that it was considered to the interest of the company to retain them on the list.  That one general reason would cover everything.
  Hs Lordship - Then you say there might be special reasons applying to special cases?
  Witness - Yes.
  Mr. Wilkinson - Will you look at No. 3 and state the special reasons in that case?
  Witness - No. 3 is a firm doing a considerable business, and we had special reasons in their case to expect that they would give more business. They had not given anything in the past to speak of, but we had special reasons in their case.
  Did you communicate with them? I have communicated with them since the revision, not before.  We expected that they would contribute satisfactorily in the future, and from communications I believe that expectation is likely to be realized.
  Can you state what your reasons were for expecting that? - Yes; we were changing our agency at the port where they reside.  We were opening a branch of our own, substituting it for an agency.  Some people dislike to show their business to agencies, which are private firms.  When we have a branch of our own at that post, we believe that particular firm will contribute more business.
  Does that apply to any other cases? - No; that special reason does not apply to anyone else on the list.
  Now, look at No. 13. What are the reasons there? - 13 is a tea inspector, and has had opportunities for doing business on his own account.
  But for three years he gave you no business? - Probably he did not think he prospects of tea were sufficiently encouraging.   I may mention that his predecessor in exactly the same position was a shareholder, and some years when he thought tea was going to pay he contributed a very large amount, and other years he might not contribute anything.
  His Lordship - Has 13 contributed?
  Witness - Nothing at all for three years.
  Mr. Wilkinson -And for the previous years did he contribute a faii proportion?
  Witness - In 1878 he gave fair business; in 1879, insignificant; in 180, nothing at all.  Hs predecessor contributed very largely one or two years; but his contributions were very irregular.
  In 1878 did No. 13 contribute a fair proportion? - I think he did; but in 1870 and 1880 his contributions were very small.
  Now as to No. 14? - He is a large ship owner in London and also does some insurance-broker business.
  You don't proscribe him? - An insurance broker? Certainly not. The very people we would like to get hold of.  There is a great deal of difference between that and bill broking.
  Did he contribute a fair proportion in any of the six years? - No; I hardly think he did; no, certainly not; his contributions in 1878 were fair, but that is a long time back.
  Were they a fair proportion? - No, I would say not.
  No. 19? - He is in charge, manager, of a very important mercantile co-partnership or trading company.  He might at any time be removed to another branch and be able to contribute a very large amount of business indeed.  He was, I think, some years ago in a different branch, where his opportunities of contributing would be very considerable indeed.
  When he was in another branch, did he contribute during any of these six years? - He was not in another branch during any of these six years.
  But he has no contributed a fair proportion during any of these six years? - I would not say that. In 1878 and 1881 his contributions were good, considering the nature of the business he gave us.  It represents a larger volume of business than would be apparent at first sight in figures.
  The figures are Tls. 396 and Tls. 271? - Yes.
  Can you explain how Tls. 271 is a fair proportion of business? - From what I know of the business contributed, Tls. 271 would represent a large volume, the premia being small.  It was a good paying business, and not likely to result in claims.
  His Lordship - Do you make any difference for this purpose, in estimating whether a contributor is valuable or not, as to the riskiness or non-riskiness of the business?
  Witness - Each case is judged on its own merits.  If a man gives a large amount, whatever the business, I would say it was a fair proportion; but some kinds of business are good although the proportion is small.
  Mr. Wilkinson - On which you never have any loss?
  Witness - Then I think that would also be a fair proportion.
  And you think you may consider that as much as the man who pays actually more money but on whose business there is likely to be loss? - Yes; it is a question of what is for the benefit of the company.
  Can you, without revealing any great secret of rad, explain how that is? - Short coasting routes.
  Now as to No. 20? - He is a merchant, and he may at any time contribute business.  Is he a "live merchant"? - Yes, he is a merchant.
  The witness, further examined, said 21 was a tea inspector; he was very likely to contribute. 22 was manager of a bank, and had been so during the three years; he had been either manager or agent during the last six years.  He did not contribute a fair proportion; but from some branches of the bank they had to make large shipments in treasure, and he might at any day be transferred to a port from which he might contribute a large amount of business.
  Mr. Drummond - I do not wish to interrupt, my Lord, but I think I really must make one observation.  If my learned friend's contention is that we are bound by these figures alone, under the words "fair proportion," I think that one answer is that these figures do not show a fair proportion; that covers the ground.  But if we are entitled to go into other circumstances, then it is really a waste of time to go through a series of cases, picking out the reasons and showing the manner in which the business of the Company was conducted?
  His Lordship - I am not much impressed with this.  I should think, Mr. Wilkinson, you have now got enough facts as a basis to ague upon. He is evidently prepared to give some sort of explanation in regard to each case - more or less satisfactory according to the person who judges of them.
  Mr. Wilkinson - Do these reasons apply equally to the other cases?
  Witness - There may be other reasons in other cases.  I am perfectly prepared to justify our action in every single case; I can in every case give an explanation that is perfectly satisfactory to my mind.
  Have you generally given a fair explanation of the reasons? Can the court gather from what you have said now, what the reasons generally would be? - Yes, I think so; but there are stronger cases.
  You have mentioned some cases as having contributed a fair proportion which, on the face of them, do not appear to have contributed a fair proportion.  Will you explain No. 10, please? - He contributed a considerable amount of business, but for convenience's sake it was put to the credit of the manager of the head office of this firm, in Hongkong.
  The witness, continuing, said No. 25 also gave a large business, a very satisfactory business; and the same applied to No. 5; No. 11 contributed what witness would call a very useful little business, though it was small.  The rate of premia was small, and it was a very profitable business.  Witness considered that Tls. 141 was a fair proportion in this case; it was a useful contribution.  No. 7 was a partner in a firm, and his business was credited to his partner's share; he was also one of the Company's agents.  No. 30 was a partner in a firm.  No. 48 was a bank manager, and the same marks applied to him as to No. 38.
  Mr. Wilkinson - I want to refer you to the last name on page 7 of L. You took away some shares in his case - you took two away.
  Witness - There were special circumstances connected with the withdrawal of those shares.  Those two shares were acquired on the understanding that they should be given up when we required them.
  Did he object? - No, he acquiesced cheerfully.
  Was he one of those who, in Chinese fashion, thanked the Emperor for the punishment he had been pleased to inflict upon him? - No, he was not one of those.
  Mr. Wilkinson put in as an exhibit, marked "Z," a list of certain shareholders in the company who were all connected with one institution, with lists of the shares which they held in the old and new companies respectively.
  The witness said that the shareholders named in the list were all officers of one institution which gave a large and valuable business to the Company.
  His Lordship - The institution does?
  Witness - Yes. The institution; but the shares have to be placed in the names of the officers.  They held in the old company 29 shares, and they hold in the new company 142 new shares.  That is nearly the equivalent; but there has been a sort of redistribution amongst them
  Mr. Wilkinson - Why is it necessary that the officers should hold them?
  Witness - Because the Institution will not hold them.
  I suppose the institution could have given business all the same whether the officers held shares or not? - No. I think not, because the managers have the control - or to say that the officers have the control would be more correct.
  His Lordship - The institution will not hold shares?
  Witness - No. We should prefer t, your Lordship, if it would.
  Mr. Wilkinson - Now was there a fair proportion of contributions during the three years upon 29 shares? - Yes. It is a large and valuable business; it is worth giving a good many shares to secure.
  The witness, further questioned, explained that business contributed by one officer of the institution had in some cases been credited to another.  Examined with reference to the list of shareholders in the new and old Companies respectively, he said there were many cases in which a man who held shares in the old Company in his own name, took shares in the new Company in the name of his firm.  With respect to one shareholder in the old Company wo had been revised out, the witness admitted that during the three years he had contributed a fair proportion of business; but he explained that when the revision took place the shareholder had changed his business.
  Mr. Wilkinson - What had he become?
  Witness - A share broker.
  Did that influence the directors at all? - It was proved that he could not contribute any business.
  So I suppose the same reason applied to him as to the plaintiff - he did not belong to the privileged classes? - I did not say that.
  Mr. Drummond - That is putting a phrase into the witness's mouth, which he did not say.
  Mr. Wilkinson - It is a perfectly fair comment.  I am not asking to have that put down as his evidence.
  Mr. Wilkinson read part of a clause in the Deed of Settlement, according to which the directors had power to withdraw the shares of those who had not "since the last revision contributed or influenced a fair proportion of business."  He asked - Did you recognise that when you withdrew his shares - you say he had contributed a fair proportion?
  The witness said the shareholder had changed his business, and was no longer in a position to contribute business.  The directors, in their discretion, therefore withdrew his shares.
  His Lordship asked if this shareholder objected to the withdrawal of his shares.
  Witness - He never objected in writing. He was dissatisfied. But he ultimately surrendered his shares.
  Mr. Wilkinson - Did you ever hear that the plaintiff did not like his shares being withdrawn?
  Witness - Yes.
  When did you hear that? - Oh, a long time before.  I heard first that he did not like the idea that there was going to be a revision at all.
  Did you hear after the revision that he did not like the result of t? - It was mentioned to me that he was angry.
  When was that mentioned to you? - As the plaintiff says he expressed himself very freely about the matter, and the fact reached my ears; it is impossible for me to say when.
  Did you know of it when you got his application for shares? - I think so.
  Did you apply one fact to the other?  No. I saw it and smiled and put it away with the other applications.
  Now what passed through your head when you smiled? - I knew he had been advised to sell; and had said he would not; and I understood he wanted his twenty-five and did not want a small holding.  He wanted all or none.  The other case of an application of this sort that I referred to was from an eminent lawyer.  He was a very big man, and he said he was not going in for a small investment in the Company.  He wanted a large number of shares.  He was in the same position as the plaintiff with regard to being able to contribute business.
  And you understood the plaintiff to mean that he wanted a large interest or none? - Yes. I did not look upon it as a protest in any way.
  But, at the same time, you knew he objected to the withdrawal of his shares? - No. I knew he was angry; but I did not know he would object officially.  I only knew that he was dissatisfied.
  The Witness, further questioned, said he remembered the plaintiff showing him, a legal opinion. That was in December, a week or two before witness received Mr. Wainewright's letter.  He thought at the time that the production of that legal opinion was entirely a "bluff" on the part of the plaintiff.
  Mr. Wilkinson - You admit now that you were mistaken?
  Witness - Yes; I admit now that he was not bluffing. - Further examined, the witness said  he never had a doubt on the subject as to whether there would be a revision in 1883.  They took an opinion on the subject in 1882.  They got an opinion on proper steps to be taken for registering the company, and the revision was one of the points considered.  The directors never had any doubts as to their power of making a revision. Without being instructed by the directors, witness obtained advice as to what they ought to do in regard to making the revision.
  Mr. Wilkinson - Did you give the directions to mark on the plaintiff's prospectus, "no bill-broker need apply."
  Witness - No.
k   Mr. Wilkinson - Then did you not think it was tantalising to send him a prospectus - to give him a Pisgah view of the Promised Land he was not to enter?
  Witness - He was entitled to get a copy.
  His Lordship - Besides, he might have qualified, as another gentleman did.  I think he was clearly bound to send a notice to every director.
  Mr. Wilkinson - There was nothing in that prospectus, my Lord, to indicate that bill-brokers need not apply. - (To Witness) - You knew at that time that he was a bill-broker?
  Witness - Yes.
  One of those who must fall under a ban? - I did not look at that at the time.
  In addition to brokers, are there any other classes who are disqualified? -The disqualification is inability to contribute.
  Yes, but what professions? - Well, clergymen. Professional men, diplomatists.
  Mr. Nils Moller was told that the meeting of the 4th October was not a proper place to make a complaint? - He was told it as more suitable to go before the directors.
  Would the plaintiff have been told the same thing? - Undoubtedly.
  Then it was not a proper place? - It was an opportunity to bring it forward, not a place to have it settled.  There certainly would have been no objection to his bringing the matter before the meeting of shareholders.  He would have got the satisfaction, I feel certain, that the directors would have undertaken to consider the case.
  This concluded Mr. Wilkinson's cross-examination of the witness, and the Court adjourned till the afternoon.
On the Court resuming,
  Mr. Drummond said he had no re-examination of Mr. Davis to make, but the witness wished to give a date or two which he had been unable to give before.
  Witness - On the 3rd September, 1883, we received a rough draft of the proposed agreement between the two Companies; on the 25tth September we received a copy of the agreement as subsequently executed, and on the 31st October we received the executed agreement.
  FREDERICK HAYLEY BELL was then called and examined by Mr. Latham. He said he was senior partner in the firm of Adamson, Bell and Co., and had been resident in China since 1857.  He became a director of the North-China Insurance Company, he thought, in 1865, and he had been so ever since, except at intervals when he had been at home, and for a short interval in 1881, before he was re-elected.  The reasons for reconstructing the company that year were that they were desirous of making it a limited liability company, and in the second place to constitute the list of shareholders; but the principal reason was to get rid of the unlimited liability.  At the same time it was considered desirable to decrease the value of the shares and increase the number of them - to sub-divide them. They knew there had been a large number of applications in London for shares, many of them from people who objected to the unlimited liability; and the reduction in value of shares would enable them to admit a number of people at home who were desirous of getting in. It had certainly never been the intention of the directors to abandon their right or duty of revising the share-list, or their right of approving or disapproving of transferees.  The revision of 1883 was a bona fide and a most careful revision.
  Mr. Wainewright we admit that it was intended to be a real revision, though we do not say that it was popery conducted.
  M. Wilkinson - Or that the defendants had the power to revise.
  The Witness, further questioned, said the case of each shareholder was considered upon the contributions he had made previously.  They had a list of all the shareholders, with their contributions, before them; they were considered very carefully, and a number of shares were withdrawn.  Having heard the reasons which the plaintiff said he might have brought before the directors if he had had an opportunity of being heard, witness did not think the directors would have been induced by those reasons to refrain from withdrawing the shares.  The plaintiff must have known perfectly well that his shares were in jeopardy, but he never came forward ad assigned any reasons for the not withdrawing his shares.  Witness considered that the plaintiff was not in a position to fulfil any promise he might make of contributing business in the future; and with regard to what he had done in the past, it was all before the directors in the books.  There must have been a revision just the same even if there had been no reconstruction of the Company.  The directors thought it would be undesirable to take away any of Mr. Lavers's shares.  Witness himself spoke to the directors about the mater, and it was considered very carefully.  They thought it very desirable to retain him as Chairman of the Company because he had had a very long experience and intimate acquaintance with affairs of the Company which scarcely anybody else except the Secretary could know about.  The question of taking away some of the chairman's shares and leaving him enough to qualify him as a director of the new Company was spoken of once or twice; but it was considered that in view of the services which he had rendered to the Company, and was likely to render, it was undesirable to take any away.  One other reason was that in h early absence of the Secretary it would be very desirable to have a Chairman so well acquainted with all the details of the staff and offices.
  Hs Lordship - That is the present Secretary?
  Witness - Yes.  Continuing, he said he had had no reason to doubt since that in deciding not to withdraw Mr. Lavers's shares they had acted in the best interest of the Company.  He was quite sure they had acted in the best interest of the Company, and he should certainly act in the same way again. He considered that there was every reason to suppose that Mr. Lavers would contribute more in the future, because he now had his own business.  Business fluctuates, and a man is able to give more one year than another; it was quite possible that Mr. Lavers had exercised great prudence in not giving more during the last two or three years.
Mr. Latham - Would you be inclined to put him in the same class as the plaintiff in this case, in the way of contributing business.
  Witness - No, because he is a "real live merchant." (Laughter.)  Continuing, he said there was certainly not the slightest animus or ill-feeling shown towards the plaintiff on the part of any of the directors at any of the meetings.
  M. Wainewright - If you look at the list of contributors, you will see he had contributed Tls. 1, Tls. 14, Tls. 12, Tls. 20.  Do you mean that he would contribute more than that, or that he would contribute a small amount?
  Witness - He might possibly contribute a very substantial amount.
  Upon what do you base your idea that he would probably contribute substantially, what you would call a fair proportion - looking at his past contributions?  In the first place there might be an improved state of trade, and he has started his own firm now.
  And that is an advantage? He is also the agent of another marine insurance company, is he not? - Oh, we all are.
  I mean that was one of the advantages, perhaps.  Well, where was the Secretary going to? - We knew Mr. Davis was only here for a short time.  He only came at the express wish of the directors to stay for a very short time.
  Now Mr. Bell, you were here in 1880? - No.
  Then you do not know anything about that.  How was the revision conducted last year? Were you present at all the meetings? - I think so; Yes.
  What was the system on which you went? - We went through the list of shareholders, with their shares, and decided as to the number of shares we should allot to each.
  Did you make any memoranda yourself? - Have you got any list of names brought before you, with any observations upon them - No.
  Had any of the directors, or the Secretary, memoranda before them? - The Secretary had, of couse; and I think two or three of the directors had lists before them and revised them from time to time; but I did not.
  I suppose, as a matter of fact, the Chairman and Secretary gave you their views as they went over the names, and you agreed with them? - Not at all. I think we all arrived at our views very independently, and came to our conclusion afterwards.
  A unanimous conclusion? You did not differ about any of the names?  I think we did, occasionally.
  You are aware of the clause of the Deed of Settlement of the last company under which you made your revision.  What is your idea of the meaning of "influencing:" business to the company?  Well, I confess that I never put any meaning to it beyond "contributing."
  You look upon it as synonymous with "contributing"? - I always have.
  What is your idea of a fair proportion? What is the test of a fair proportion - a proportion relative to what?  Relative to the number of shares held.
 Not relative to the contributions of other shareholders? - Well, it must to a certain extent be relative to the contributions of other shareholders too.
  Can you give me a numerical definition of a fair proportion? - No, I cannot.
  Have you any idea? Can you name any sum which you think would probably be a fair proportion? - I do not think I could without the contribution book; it is so difficult - (Looking at the contributors' book) - I should think Tls. 1,000 would be a fair proportion on two or three shares.
  Will you state what were the considerations which influenced the directors, speaking generally, in withdrawing shares? - The absence of contributions and the absence of prospects of giving business.
  So far as you known. Did you in any case make an inquiry of any man as to his prospects? - No. We never made enquiries.  We had appeals made to us.
  You never on any occasion addressed any question to any shareholders with a view to seeing what his prospects were? - No; we went on the past.
  Mr. Wainwright - But you have just told us that you went on the future also.  Can you give any reason why No. 13 was allowed to retain his shares? -Mr. Wainewright explained to the witness that they were numbering the shareholders "like prisoners" instead of naming them.
  Witness - I consider he was a man in business who could, and probably would, give business.  He belongs to a firm.
  Why did you retain No. 9? - He was a man who had given business and was giving more business year by year.
 The witness said another case to which Mr. Wainewright called his attention was a large and influential firm; and in another instance he could not remember the reason why the shareholder was retained.
  Mr. Wainewright - Was there any special reason for taking away the plaintiff's shares, besides what was shown by the contribution list?
  Witness - Well, there was the conviction that we should not get business from him.
  Was there any rule of the Company against his holding shares - anything like an agreement that you had come to as directors, among yourselves? - Well, certainly we did exclude bill-brokers as not being able to give business to the Company.  It was not a rule, but certainly had been our practice. It almost amounted to a rule.
   Did you look beyond the year 1881, or did you confine yourselves to the three years?  We confined ourselves to the three years.
  Look at this name, please.  Do you consider, looking at the number of shares held by that gentleman, and his contributions, that he had contributed a fair proportion during the the years? - Yes.
 But you withdrew his shares?  Yes, because his business had ceased.
  And you consider that although he had contributed a fair proportion you were entitled to withdraw all his shares? - Yes, looking at the absence of contributions during one period.  He had ceased to be a merchant.
  Mr. Wainewright - And you withdrew his shares simply because you thought he could not give you any business in the future.
  I suppose, M. Bell, that the revision having been conducted at Board meetings nearly a year ago, you find some trouble in recollecting all the details?
  Witness - Very great difficulty.  I certainly could not undertake to recollect all that passed at hose meetings.
  And for details and enquiries I suppose you have to rely a great deal, on working officer of the Company - on the Secretary? - Yes; but different directors would probably have a knowledge of special cases.
  The witness, further questioned as to what he understood by a fair proportion, said - I mean if the whole contributions for the year are a certain amount, and the whole of the shares are a certain amount, then each share must bear a certain proportion to the premia. Taking the whole amount of the contributions and the total number of shares, the contributions of each shareholders ought to bear some proportion to the number of shares held by him.
  Mr. H. R. HEARN, one of the defendants and directors of the Company, was then briefly examined.
  Mr. Drummond said that was the defendant's case.
  The Court adjourned till Monday, the 23rd inst.
  The case was subsequently further adjourned till Thursday, the 26th inst.
26th June.
  Mr. Drummond summed up the case for the defence. He said at the opening, he took exception to the admission of certain evidence on the ground of the absence from the petition of any reference to the allegations which it was sought to prove by the evidence.  His objection had been overruled; but he still contended that the proceedings which had been taken by the defendants in this case were such as did not fall within the purview of this Court - certainly not upon the pleadings as they stood. He urged that unless the plain tiff directly charged the defendants with some illegal act, fraud or collusion, he could not frame a case which would be properly triable in a Court of Law or Equity at al.
  The first point he should therefore take was the attempted interference with the internal regulations of the company.  He cited cases to show that in cases of this kind a Court had no power to interfere with the internal regulations of a company.  This was a strictly mutual Company, and one of the primary duties cast upon the directors by the Deed of Settlement was that of rejecting unsatisfactory purchasers of shares, and allied to that was the right of revising the share list every three years.  He proceeded to argue that the clauses of a Deed of Settlement conferring these rights or duties upon directors were valid.
  His Lordship did not understand the plaintiff to argue that such clauses were not valid of themselves.  He had not heard anything impugning the validity of such clauses.
  Mr. Wainewright - No, and you will not hear anything, my ord.
  Mr. Drummond then pointed out that the withdrawal was not an ordinary forfeiture of the shares; the Deed of Settlement gave the directors the right to take away the shares, not for a past period, but for a future period, at the same time paying a reasonable price for them.  The plaintiff had touched upon the fact that the examination for the purpose of the revision in 1883 had not covered the whole period of three years, but had omitted a month or two.
  His Lordship did not understand the plaintiff to rely in any way upon that.
  Mr. Wainewright - I shall contend that the revision was incomplete and imperfect and invalid because it did not embrace the right period; it did not go back to the last revision.
  His Lordship - To August, 1880?
  Mr. Wainewright - Yes, or to the beginnings of the Company.
  Mr. Drummond admitted that the period embraced by the revision left out a month or two at the end of 1880;, and that it might not be in strict compliance with the words of the Clause; but the Clause said they were to ascertain "so far as may be practicable" what amounts of business had been contributed or influenced since the commencement of the Company; and this he thought covered any possible objection as to the non-examination the contributions for that month or two.  As a matter of fact, the books contained the contributions of six years; but they had it in evidence that only the contributions of the three years were considered.  There was some difficulty in ascertaining what the machinery of revision was intended to be; but practically the directors understood it to be the same as was laid down in the deed of settlement of the new company.  Mr. Drummond read from the Deed of Settlement of the new company, according to which the secretary was to report on the business contributed by the shareholders, and the directors were to consider as to the prospects of the shareholders contributing business in the future.  Properly carried out, the clause of the Deed of Settlement of the old Company meant that the case of each shareholder who had contributed an insufficient amount of business, in proportion to the number of his shares - taking into consideration the amount of business of the Company and nothing else - was to be considered by the directors, and they were to form an opinion as to whether he was a person liable to have his shares withdrawn or not.  Then, having formed an opinion on that, and having decided that a shareholder was liable to have his shares withdrawn, they had to exercise their discretion as to whether they should exercise their powers and withdraw his shares or allow him to keep them.  It was in the discretion of the directors, in deciding whether they should withdraw or not, to include any other circumstances which in their opinion  as men of business bore upon h on mtan act they had to decide, viz., whether he was a likely to be a profitable shareholder during the next triennial period.
  His Lordship - In other words, a man may have contributed no business at all during the three years under view, but if the directors think he is likely to contribute business in the next three years, they would be entitled to leave him his shares?
  Mr. Drummond said yes; that was the only way of reading the clause so as to give any sense or meaning to it.  If the discretion of the directors was entirely limited to forming an opinion on the point, they would practically have no discretion; it would be entirely covered by a few figures.  They would have to withdraw all those who contributed less than a certain amount and retain all who contributed more.
  His Lordship remarked that Mr. Drummond appeared to get all that out of the word "discretion." That is to say, if the words "in their discretion" were not in the clause, the directors would not be able to look at the future.
  M Drummond thought the words "shall have full power of withdrawal," as distinguished from "shall withdraw," would have implied discretion even if the words "in their discretion" had not been there.  With regard to the directors having power to look to the future he would call his attention to the striking fact that this was the plaintiff's view also.  On looking over the list of contributors, he constantly made statements such as "so-and-so is a clerk and not likely to contribute much business."
  Mr. Wainewright pointed out that the plaintiff said, "I do not say that these men ought or ought not to be put out or left in; what I do say is that you have not acted consistently in withdrawing my shares and leaving theirs."
  His Lordship said the plaintiff certainly looked to the future, because he said "I would have done my best to give them business in the future."  Everything turned upon the future for him, because his past business was nothing.
  Mr. Drummond said the next point was as to what was meant by a "fair proportion." He contended that it meant the proportion of business contributed by a shareholder as compared with the number of shares he had, taking into consideration, to some extent, as Mr. Bell said, the whole volume of the Company's business.  It was very difficult to state in figures what a fair proportion was, on account of the different classes of business; but the annual gross income was about Tls. 1,000,000, and the number of shares was 1,000, and this was some guide.  It was not possible, however, to take the case of one shareholder and contrast it with that of another and so arrive at what a fair proportion was.  This was really great fallacy upon which the plaintiff's case rested.  The gravamen was that the defendants had not acted fairly as compared with other shareholders. That was an element which the Court of Directors did not take into consideration; they did not compare one shareholder with another; they simply considered the individual's past contributions and probable future contributions.
  His Lordship asked, supposing he could decide that the directors were not entitled to look to the future, what would Mr. Drummond have to say then?
  Mr. Drummond said such a view would be inconsistent with the whole terms of the Deed of Settlement and subversive of the whole business of the Company from beginning to end.  The whole revision was made for the sake of the future, and had nothing to do with the past at al.  He then referred to the plaintiff's contention that the prospectus of the 14th February, containing the words "the holder of one share in the present company is entitled to five new shares," precluded the directors from making a revision in 1883.  He understood the plaintiff to rely upon those words as amounting to an absolute undertaking on the part of the defendants to give shares in the new Company to all the then existing shareholders in the old company.  He submitted that they amounted to nothing of the kind.  It simply meant that the shares were to be divided up into shares of one-fifth of their value. It meant that every shareholder who was in a position on the 1st January, 1884, to present his scrip to the Company would be entitled to five new shares for each share he then held.  He contended that it was not necessary, when referring in that prospectus to the sub-division of shares, to go into the question of revision at all. The revision clauses were in the Deed of Settlement; there had never been any intention of tampering with them or giving them up; and it was not at all necessary to give a long explanation of this fact in the prospectus. There was nothing in the document to the effect that the right of revision was to be given up, and if the plaintiff made an unjustifiable inference from the prospectus it was for him to find out, as he easily could have done, whether that inference was correct.  The plaintiff carefully abstained from obtaining a knowledge which, if he had taken steps to do so, he might have obtained any day, in five minutes. If he had enquired at the office or asked a director he would have found that a revision was to be held.  Then at the meeting on the 29th March a resolution was passed, for which plaintiff voted, to the effect that "all the terms and provisions of the present Deed of Settlement shall have like force and effect." That must mean that the Revision Clauses would have full force and effect, and that therefore they would be carried out.  The plaintiff refrained from asking the question "Does that include revision?" and the result must recoil upon himself entirely, so far as his case was concerned.
  Mr. Drummond then referred to the prospectus of the 26th May and an advertisement which appeared in the N-C Daily News on the 26th June, in which the revision was referred to in unmistakable terms, and commented on the fact that the plaintiff had taken no steps in regard to these in the way of objection to the revision or calling a special meeting of the shareholders to consider the action of the directors.  He then referred to the agreement between the old and new Companies and the circular of the 2th February and denied that the directors had in any way made a contract with the plaintiff through these documents not to hold a revision.
  The Court then adjourned.
  On resuming in the afternoon,
  Mr. Drummond, continuing his reply for the defence, said there was another fact on which the plaintiff relied in support of his contention that there was an agreement that he should not be revised out, and that was the Chairman's invitation to him to attend the meeting.
  Mr. Wainewright - I may say at once upon that, that it was a mere remark of plaintiff's.  We do not intend to argue that the Chairman's invitation alters the legal aspect of the question.
  Mr. Drummond said he would nevertheless refer to the circumstances as an instance of the strange ground upon which the plaintiff set the court in motion.  It seemed to him most extraordinary that any man should hold such an argument in his mind and put it forward as basing a claim to consideration.  With regard to the question of the plaintiff of having an opportunity of being heard, he contended that it was not necessary, and if it were necessary, the plaintiff had abundant opportunity of being heard.  He had three months in which he might have taken steps to induce the directors to rescind or modify the decision.  Mr. Drummond cited several cases to show that, apart from the Deed of Settlement, it was not necessary to give the plaintiff an opportunity of being heard and it was in evidence, besides, that even if he had been heard, he could not have urged anything which would have induced the directors to alter their decision.
  The next point was whether the directors had acted bona fide for the interest of the Company, and with regard to the charge that the directors had, from motives of self-interest, kept it dark that hey meant to hold a revision and revise the plaintiff out, he thought that such a charge against such men had never been brought forward in a Court of Law upon such shadowy and insufficient evidence.
  Mr. Drummond then referred to the cases of treatment of other shareholders which had been instanced by the plaintiff.  He contended that this evidence was entirely irrelevant; and even if it were relevant, it had entirely broken down.  He commented in strong terms on the use by the plaintiff's Counsel as "proscribed classes," "under a ban," and "no bill-brokers need apply," as being simply intended to prejudice the Court. The conditions upon which the revision had been conducted were perfectly fair and plain and straightforward.  Another attempt to prejudice the case was regarding the Chairman of the Company. A desperate attempt had been made to fasten a similar of some sort to defendants as having retained their own Chairman on a different footing altogether from that on which they treated others.  That might sound very plausible, but like every one of the fifty-nine cases of shareholders whom Mr. Taylor had referred to, utterly broke down on examination.  They had the distinct assertion that the case of the Chairman was carefully considered by the defendants, and that the whole body of directors decided that in the interests of the Company it was desirable to retain him as most valuable chairman and director of the Company; and in addition it was not to be forgotten that the business status of the chairman had been change shortly before the revision, and that he had put himself in the position of a person to whom trial should be given in the coming triennial period. With regard to the fifty-nine cases of shareholders whom plaintiff instances as having been treated better he had, Mr. Drummond thought it was not going too far to say that in every case the attack had failed completely and recoiled on those who made it.  
  With regard to the plaintiff's claim for good-will in the old Company, as far as shareholders were concerned good-will could no be said to exist at all.  There was nothing to show that any good-will had been paid for by the plaintiff in purchasing his shares, and therefore he was not entitle to an good-will on their withdrawal.
  The evidence which had been given as to the fluctuation in the old shares had no bearing on the case whatever.  The price to be paid on the withdrawal of shares was laid down in the Deed of Settlement.  They were bound by the Deed of Settlement to give to plaintiff, on his surrendering his shares, Tls. 600 per share, the amount paid up, Tls. 400 per share, proportion of the Reserve fund, and Tls. 120 profit up to the end of 1883. By not surrendering his shares the plaintiff had, according to the Deed of Settlement, upon the terms of which the defendants were bound to act, forfeited his claim on the Tls. 130 per share; and the defendants had paid into Court $5,000, being Tls. 1,000 for each of the plaintiff's shares. The plaintiff's shares would in all probability have been withdrawn whether there had been a change in the Constitution of the Company or not, and as a matter of fact the amount which he would have received if he had surrendered his shares was just about the market value.  
  He thought that the key of the whole case was really to be fund in the fact that the plaintiff had missed his market. That was the real reason which induced him to come to Court. He thought the market was going to rise; but like some other people, he was mistaken; instead of rising, it fell. The fact that he had missed a good market and had never been able to regain was the cause of his working up what was really an imaginary grievance into something that he thought was a case for a Court of Equity to consider.
  In conclusion, he said, the defendants' case amounted to this: That the right of revision exists and is valid; that it never was abrogated; that it was fairly carried out; that the plaintiff's shares were properly withdrawn; that the price paid into Court is sufficient; and that the plaintiff has shown any equitable grounds for the present claim.
 The Court then adjourned till Saturday, the 2th inst.


Source: North China Herald, 4 July 1884

Shanghai, 28th June, 1884
Before R. A. Mowat, Esq., Assistant Judge.
  This was a case in which the plaintiff sough for an injunction to restrain the defendants from cancelling or declaring forfeit five shares which he held in the (old) North-China Insurance Company, and for an order that the defendant Company should allot to him twenty-five shares in the new Limited Company.
  Mr. Wilkinson and Mr. Wainewright appeared for the plaintiff, and Mr. Drummond and Mr. Latham for the defence.
   Mr. Wainewright summed up for the defence.  He first referred to the argument of the defendants that this action was an attempted interference with the internal management of the Company, and quoted from Buckley, citing cases to prove that the defendant's action came properly within the purview of the court.  It was not, he urged, a matter of internal management at all; I was an attempt to turn out a shareholder.  
  The main questions in the suit were whether the directors had a right to revise the share-list in 1883 and withdraw hares, and whether, if they had that right, they exercised it properly.  The plaintiff contended that they had no right to revise the list and withdraw shares in 1883, firstly because there was an agreement, implied if not expressed, that they would not do so, and secondly because the facts and circumstances of the case rendered their powers no longer exercisable.  In mentioning an agreement he referred, of course, to the prospectus of the 14th February, in which it was stated that the holder of one share in the old company would be entitled to five new shares, and to the agreement between the two Companies. According to that prospectus the closing of the old company might have been contemplated before the end of 1883, i.e., before the time for revision arrived, and he submitted hat the plaintiff was entitled to read the prospectus as a promise to give him the shares.  The plaintiff had deposed that he went to the meeting and voted for the resolution on the strength of this statement in the prospectus and the construction which the defendants sought to put upon it, viz., that it simply meant that the shares were to be sub-divided into five was a forced construction.  It had been said that the plaintiff ought to have had in his mind the revision clauses of the Deed of Settlement.  Perhaps he had; but he also had in his mind the fact that there had been no revision in 1880.  A great deal had been said by M r. Drummond about the plaintiff being put on his guard by the fact of this being a Mutual Company; but the prospectus if it showed anything, showed, that the principle of mutuality was to be departed from to some extent; because in the old Company the contributors got the lion's share of the profits, while according to the prospectus the dividend to shareholders was made he first charge upon the profits.
  Then they were told that the terms of the resolutions at the meeting of the 29th March ought to have put him on his guard; but there was nothing in the first and second resolutions which in any way pointed to a revision, and as to the third resolution it was mere surplusage.  It provided for the terms and provisions of the Deed of Settlement remaining in force until the transfer was effected; but he submitted that even if no such resolution had been passed those provisions would have remained in force, except in so far as their effect might be modified by the fact of the Company being in a moribund condition. He contended that the revision clauses were rendered inoperative by the fact that the company was no longer a going concern; and if this were so then the resolution passed at the meeting in March would not alter the fact; it was, in fact, pure suplusage.
  His argument was that the circular and prospectus of February contained a promise that the plaintiff, in common with the other shareholders, should have certain advantages in connection with the winding-up of the Company; and on the strength of these promises they agreed to wind up the company.  The plaintiff was accused of having willfully abstained from making enquiries as to whether there would be a revision, but he contended that the plaintiff was entitled to draw from the prospectus of February the inference that there would be no revision; and that there had been no evidence whatever of willful blindness on the plaintiff's part.  
  Then with regard to the prospectus of May, by which it was first brought to the notice of the plaintiff that there would be a revision, what could the plaintiff do on receiving that? He could do nothing but stand upon his rights. If he had rushed forward and tried to get a meeting to reverse the decision of the directors he would have put himself in an absurd position. He had no reason to assume at the directors were going to revise him out. He was not going to accuse himself by calling out, "You must not revise me out," when the whole position was that they could not revise him out.  Therefore his silence did not affect the question one way or the other.
  The same remarks applied to the advertisement of the 24th June, stating that the transfer books would be closed for the purpose of the revision.  Then it was contended that the plaintiff, by the way in which he applied for shares, had accepted the terms of the prospectus of the 25th May, because, while striking out the words, "Or any smaller number," he had said, "I hereby agree to accept 25 shares on the terms of the prospectus of the 25th May." But that could not possibly mean that he accepted the shares on the terms that his old shares were to be revised out and he was not to get the shares at all.  He accepted the terms of the prospectus as far as they affected the new shares which he claimed; but that fact did not in any way affect the contract between the plaintiff and the defendants that he was not to be revised out.  The prospectus of May contained a notice that there was to be a revision; but the plaintiff had nothing to do with the issue of that prospectus and it did not bind the plaintiff in any way.
  Then with regard to the notice of withdrawal, and the plaintiff's acquiescence to it, the plaintiff had certain rights, and the directors gave him notice that they were not going to recognise those rights; but the issue of that notice did not give them the power to do an unlawful act, and the fact of the plaintiff not taking any steps did not prove acquiescence.  Because a man says he is going to do an unlawful act it does not allow hat h will do it, and in a case of this sort one has to give him the benefit of the doubt.  The plaintiff could not get an injunction to prevent the directors from revising him out; in fact, he could do nothing until they actually revised him out.  
  The next point was that the power of revision was no longer exercisable, in view of the company being no longer a going concern.  The power of revision, according to the Deed Of Settlement, could only be exercised for the benefit of "the" Company - that is, the company holding under that Deed of Settlement; and the Company was passing into a position from which it was impossible that any benefit could be derived from the exercise of the powers of revision, and therefore those powers could not legally be exercised. Mr. Wainewright proceeded to cite cases o show that such acts as that of revising the share-list in this case could not be taken by a moribund Company.   He said it was admitted that the old and new companies were legally distinct companies, and therefore to say that the action of the old company was for the benefit of the new Company would not make that action legal.
  His Lordship - Supposing your contention is correct, and there are a large number of unprofitable shareholders, how can you get a new Company?
  Mr. Wainewright - Perhaps you cannot.
  His Lordship - Not unless by taking over the whole body of unprofitable shareholders?
  Mr. Wainewrright - Yes; but the articles of association of the new Company may make what provisions they like about revision.
  His Lordship - Then the shareholders might complain of that.
  Mr. Wainwright - Yes, but that is not a point we are arguing.  I say that they are two distinct companies. And we have nothing to do with the effect of a revision upon the new Company, - Continuing, he said the purpose for which revision was to be held could not, under these circumstances, be carried out.  It was expressly stated that the Directors were to make a revision and allot the shares withdrawn, ether amongst existing shareholders or amongst new applicants. Here there could be no allotment, because the company ceased to exist on the day the shares were withdrawn.  Then, by Clause 7 of the Agreement between the two Companies, the directors were to ascertain before the 31st December, 1883, or as soon after as practicable, who among their shareholders were willing to take shares in the new Company in exchange for their shares in the old company, and were to nominate such shareholders as they had ascertained to want new shares.  There could be no words more adapted to conceal the intention of holding a revision; indeed the whole agreement, so far as language could make anything plain, appeared to show exactly the opposite intention, because by that agreement when a shareholder in the old company signified that he wanted new shares the directors were bound to give them to him.
  These were the two points on which he relied when he said that the directors had no right to make a revision - the contract with the shareholders and the fact that the company was ceasing to exist.
  Mr. Wainwright then dealt with the question whether, in the Deed of Settlement, the word "revision" meant a withdrawal of shares or a mere examination of share-list with a view to a possible withdrawal. He submitted that in most instances it man an actual change in the share-list.
  His Lordship said there seemed to be a little confusion as to the meaning of the word.
  Mr. Wainewright admitted that there was a certain amount of confusion.  He then dealt with the manner in which the revision had been made.  With regard to the plaintiff not having had an opportunity of being heard, he said Mr. Wilkinson ad dealt with this so fully in his opening that it was not necessary for him (Mr. Wainewright)  to say much; but with respect t Mr. Drummond's contention that  was only in cases in which a person's conduct was concerned at a quasi-judicial tribunal was bound to give him an opportunity of being heard, he submitted that in this case it was really a question of  conduct. The question the directors had to consider was whether the plaintiff's conduct in contributing or not contributing business required his removal from the company.
  His Lordship thought if the term were used in that wide sense every question would be a question of conduct.
  Mr. Wainewright thought practically every case was a case of conduct unless it turned on the payment of a specific sum of money.  He cited cases to prove that both judicial and quasi-judicial tribunals were bound before depriving a man of his property to give him an opportunity of being heard. In one of these, reference was made to the fact that God himself did not condemn Adam without giving him an opportunity of being heard.
  His Lordship - That would be a judicial case, I suppose.
  Mr. Wainewright said the next point was that the revision was not properly made, inasmuch as if there was a revision in 1880 the Court did not in 1883 ascertain what amount of business had been contributed or influenced since the last revision, and consequently they did not form an opinion as to whether a fair amount of business had been contributed in each case; and if there was no revision in 1880, then they did not ascertain how much each shareholder had contributed since the  commencement of the Company.
  Hs Lordship here asked Mr. Wainewright how much longer he was likely to be, as his Lordship intended to go right on without adjourning until Mr. Wainwright had finished.
  Mr. Wainwright said in that case it was probable that he would be finished before his arguments were. (Laughter.) He contended that there was no revision in 1880, as no alteration was made in share-list, although it was admitted that there were then unprofitable shareholders in the Company.  He contended that all forfeiture clauses had to be treated strictissimi juris, and any deviation from the letter of the law was fatal to those who relied on them.  The fact that if there was a revision in 1880 the whole period since the last revision had not been considered in making the revision of 1883 was not a mere technical defect; it was a substantial injustice to leave out of consideration a period which might exercise an important influence on the position of the shareholder being dealt with. Then another point on which he contended that the revision was irregular was that the notice sent to the plaintiff was not in accordance with the Deed of Settlement.  Instead of giving notice that they had decided to withdraw, the directors should have given notice that they intended to withdraw.
  Hs Lordship here suggested that they might have given notice that they "intended to decide to withdraw."
  Mr. Wainwright said another point was that the directors had not considered the business "influenced" but only the business "contributed." The Secretary had put a highly technical meaning on the word "influenced," which was not supported by anybody else, and Mr. Bell had admitted having treated it as synonymous with "contributed;" but Mr. Wainewright contended that the meaning to be attached to the word was its ordinary meaning.  He took it that if a man touted for business successfully, he influenced business; or if a bill and bullion broker, in the course of his rounds, got people to take their business to the Company he influenced business.
  His Lordship - If he carried a poster round in his trap. "Take your business to the North-China Insurance Company?"
  Mr. Wainewright - If he proved that he had induced people to give business to the company by that means. Yes. - Continuing, he said the main question was whether the revision was conducted fairly - whether shareholders were all treated on the same principles, and whether the plaintiff was treated like other shareholders.  He believed there had been an admission that the plaintiff had not been treated on exactly the same principles as other shareholders; he understood the defendants' position to be that, if they acted bona vide towards the plaintiff, whether they treated other shareholders in the same way or not was no concern of his.  He was not going in detail through all the cases of shareholders that had been selected; they were before his Lordship and spoke for themselves to a great extent. The plaintiff had been rather jeered at because he had not established all the cases which he had selected - for having selected some instances which were capable of explanation; in fact Mr. Drummond even went so far as to state that every case had collapsed and was a lamentable failure; but out of the 59 cases the Secretary gave explanations of thirteen and no more. The plaintiff had of course no other knowledge than that which the list of contributors afforded him.  He was informed that that was what the directors had to rely upon; but it appeared that the directors knew so much in addition that it was unnecessary for them to go outside their own board-room.  The plaintiff was not gifted with this omniscience, and therefore he had selected some cases which, when they were explained, might have been struck out of his list; but it was admitted that at least twenty-seven out of the fifty-nine had not contributed a fair proportion of business.
  With regard to a "fair proportion" he did not quarrel with the definition which the defendants gave of that, but they had not always stuck to their own principles and followed out the spirit of their constitution.  In one case it was shown that a shareholder did contribute a considerable amount of business - more than a fair proportion, - but his shares were withdrawn because he had become a broker.  This was a case in which he directors were clearly not entitled to rule him out, because their discretion only arose in the event of them deciding that he had not contributed a fair proportion.  In that case, therefore, they had broken the provision of their Deed of Settlement, and when they did that in one case the inference as that that case did not stand alone.  
  With regard to the Chairman, it was admitted that he had not contributed a fair proportion of business, but explanations had been given and he (Mr. Wainewright) would not remark upon them further than  to say that the Chairman's rights as a shareholder were not greater than those of any other shareholder.  It was rather a remarkable thing, however, that they had not had the benefit of the chairman's evidence.  The Chairman knew everything; he was in fact a reserve secretary as well as chairman, but still the defendants had not thought it well to get him to give an able explanation of the working of the company and the meaning of its constitution.
  The only remaining question - though there were a number of other small points with which he did not think it necessary to deal with - was the question whether the plaintiff had precluded himself from taking action by acquiescence or  delay.  Mr. Wainewright cited cases against this view,
  His Lordship thought that was not a very strong point in the defendant's case.
  Mr. Wainewright - Well, my Lord, that is all  have got to say, except that my learned friend has furnished an explanation of the plaintiff's conduct.  He says the plaintiff would never have brought this suit if he had not missed his market.  How he knows that I do not know.  I think it is quite natural that a man who has been deprived of his property should take action.
  His Lordship - If that was so it does not disentitle him.
  Mr. Wainewright - I think it is quite natural that he should take action, and I did not see any ground for charging him with impropriety or animus.
  Mr. Latham - There is no impropriety or animus in missing his market; we do not pretend that there is.
  His Lordship asked if Mr. Wainewrght had anything to say about the directors looking to the future in considering whether they would withdraw shares.
  Mr. Wainewright - I am not prepared to say that when they have decided that a man comes within their powers they have not a right to look to the future; but I is a strong point in favour of hearing a man.  The directors cannot know much about a man's future except from the man himself.  The plaintiff might be in a position at any moment to resume contributing business.
  His Lordship - The case is one that is full of difficulty, and I shall take some time to consider my judgment.  It has been very ably argued on both sides, and I am indebted to the Counsel for putting their views before me with all possible clearness.
  The Court then adjourned.


Source: North China Herald, 25 July 1884

Shanghai, 22nd July 1884
Before R. A. Mowat, Esq., Assistant Judge.
  This was a case in which the plaintiff sought for an injunction to restrain the defendants from canceling or declaring forfeited five shares which he held in the (old) North-China Insurance Company, and for an order that the defendant Company should allot to him twenty-five shares in the new Limited Company.
  Mr. Wilkinson and Mr. Wainewright appeared for the plaintiff, and M. Drummond and Mr. Latham for the defence.
  His Lordship said - I regret that so much time has elapsed since the hearing, but I have been prevented by one circumstance and another from taking the case in hand until quite recently.  I hope the delay has not inconvenienced anybody. - His Lordship then delivered the following
  The defendants F. H. Bell and others were the directors of an unincorporated Company, called the North-China Insurance Company, which until the 31st December last carried on marine insurance business at Shanghai and elsewhere, and is now being voluntarily wound up. They are also directors of the defendant Company which is substantially the same Company reconstituted  with limited liability under the English Companies Acts, and which on 1st January, 1884, took over the property, assets and business of the unincorporated Company.
  The plaintiff held five shares in the earlier company, but these shares the directors, assuming to act under the provisions of certain clauses of the Deed of Settlement, declared to be cancelled as and from the 31st December, 1883, on the terms, however, as to payment for the shares on the basis specified in the Deed.
  The plaintiff, conceiving that the defendants had no right to cancel his shares, brought his action, in which he asks for an injunction to restrain the defendants from dealing with his shares as cancelled, a declaration that he is entitled to have allotted to him, in lieu of them, twenty-five shares of the defendant Company (such number being the equivalent of five shares in the earlier Company), and an order upon the defendants to allot and issue to him twenty-five such shares.
  The case lasted several days, and was agued at great length and with much ability on both sides.  Although in the view I have come to, many of the points that were advanced on one side or the other do not require to be decided, it may be convenient, in the event of an appeal, that I should indicate shortly what were the main contentions in the case.  And for this purpose it will be necessary here to set out the provisions of clauses 39 to 41 of the Deed of Settlement. They are as follows:-
39. - Once in every three years there shall be a general revision of the share list made by the Court of Directs. For the purpose of such revision the court shall or towards the close of each triennial term of the Company's existence ascertain so far as may be practicable what amount of business has been contributed or influenced by each and every shareholder since the commencement of the Company or since the last revision and upon making such revision the Court shall have full power in their discretion to withdraw or call in from any shareholder or shareholders the shares or any one or more or all of the shares held by such shareholder or shareholders if he or they shall not in the opinion of the Court have contributed or influenced a fair proportion of premia or business to the Company. And to reallot or re-issue such share or shares so withdrawn or calling in either amongst or to the other existing shareholders or any new applicant thereof at a price to be based on the par value thereof and the amount of  the reserve fund as the court may deem to be most expedient in the interest of the Company.
40. - In the event of the court deciding to exercise their discretion and withdraw or call in the share or shares of any shareholder under the provisions of this clause they shall at least three months prior to the actual date fixed for such revision give him a notice in writing of their intention so to do and further notify him that if he shall nor before that date have sold or disposed of his share he must surrender his share certificate for cancellation at the time of such revision and that in the latter case he will be entitled to a return of the Capital paid up thereon (should the Company be in a position to make such return) and subsequently to a pro rata share of the Reserve Fund (if any accumulated) and such proportion  of the unappropriated profits (if any) as may be found due to him when the financial position of the Company up to the date of his retirement can be ascertained and the accounts adjusted.
41. - In the event of any shareholder failing to comply with the terms of such notice and not surrendering to the Company the share certificate held by him on or before the date on which he shall have received notice so to do such shareholders shall nevertheless cease from and after such date to have any further right title or interest in the Company or the property or profits thereof in respect of such shares which shall thereupon revert to and revest in the Company and such shareholders shall only be entitled thereafter upon yielding up to the Company his share certificate to receive back from it his pro rata share of Capital and Reserve Fund (if any accumulated) and all and any balance of profits accrued or accruing upon such share up to h date of such share reverting to and revesting in the Company shall be wholly forfeit to and become the property of the Company.  The Court shall mote the un-surrendered share certificate as cancelled in the books of the Company from and after such date and shall be fully empowered to reallot and reissue such share to an applicant therefor and to issue a new share certificate in lieu of the one so canceled to the allottee or grantee of such share .  .  .  .  .  
  To return now to the main contentions in the case.  On behalf of the plaintiff it was contended, in the first place, that the directors had no right to revise the share-list and withdraw shares in 1883, firstly, because there was an agreement, implied if no expressed, that they would not do so, and, secondly, because the facts and circumstances of the case rendered the power no longer exercisable.
  For the agreement a letter and prospectus sent by the Secretary of the Company to the plaintiff on the 14th February, 1883, and an agreement dated the 14th August, 1883, between the two companies, were relied on; the circumstance that rendered the power no longer exercisable was the circumstance that the Company was no longer a going concern.  But if this branch of the argument should fail, the plaintiff contended, in the next place, that the revision was not properly made in these three particulars:-
- that the plaintiff was not given an opportunity of being heard before the directors decided to withdraw his shares;
- that the data which they had before them when they held the revision did not cover the right period;
- that they did not act impartially towards the plaintiff.
  On behalf of the defendants, on the other hand, it was replied to those several points, - that there was no agreement not to revise - that the right to revise existed - that the plaintiff was not entitled to have an opportunity of being heard - that the revision was properly held - and that the directors acted bona fide and for the benefit of the company in withdrawing the plaintiff's shares.  Further, as two substantive grounds of defence, they alleged, first, hat the action was not one which the Court would entertain, inasmuch as it was in the nature of an attempted interference with the internal management of a Company, and, secondly, that the plaintiff was not entitled to relief by reason of his delay in objecting to the withdrawal of his shares.
  It will be convenient to deal first with the objection as to the action being an attempted interference with the internal management of a Company, as that objection goes to the root of the case.  On that point the only cases cited by the defendants' counsel were MacDougall v. Gardner (L.R. 20, Eq. 383, and, on appeal, 1 Ch. Div. 13) and Inderwick v. Snell (2 Mac. and G 216). But in each of these cases the point on which an appeal was unsuccessfully made to the court, was purely one of internal management of the Company; in the one, the chairman at a meeting of shareholders had ruled that there could not be a poll on the question of an adjournment; in the other, resolutions had been duly passed at a regularly convened meeting of shareholders removing certain directors.  In what way is either of these cases an authority for the position that a shareholder may have his shares forfeited and left not even the right to complain in a Court of Justice of the forfeiture and to test its legality there? In MacDougall v. Gardner the Vice-Chancellor says at p. 392 (and this part of his judgment is not touched by the decision on appeal) - "In all matters of internal regulation of a Company where a company has acted within its own powers, an individual shareholder cannot sustain a bill in this Court relating exclusively to such internal affairs of the company.  If, therefore, the directors are acting in one mode, and a shareholder thinks it would be much more wise to act in another mode in a matter of internal arrangement, he must be bound by the will of the majority; and his proper course is, not to come to this Court for relief, but to call a meeting of the shareholders, in pursuance of the constitution of the Company, to take the decision of the majority, which must be binding upon him." Is it seriously contended here that the plaintiff should have called a meeting of the shareholders and taken the decision of the majority whether his shares should be forfeited or not? Where is their authority for deciding such questions? And as to the legality of the forfeiture, are they to decide too by voting upon it?
  The second objection taken by the defendants which would also be fatal if well founded - viz., that of delay on the plaintiff's part - will naturally fall to be dealt with later if it should appear that otherwise the plaintiff would be entitled to relief.
  In the outline of the plaintiff's case already given, it will be seen that he contended in the first place that the company had impliedly agreed with the shareholders that there should be no revision.  Or this position a circular letter of the 14th February, 183, with its accompanying prospectus, from the then Secretary to the shareholders was mainly relied upon. The copy of the circular addressed to the plaintiff was as follows:-
"North-China Insurance Company,
Shanghai, 14th February, 1883.
J. A. Taylor, Esq., Shanghai,
  DEAR SIR, - I am instructed by the Directors to inform you that in compliance with the wishes of a large and influential section of Shareholders they have decided to bring forward a scheme under clause 123 of the Deed of Settlement for the registration of the Company in London with Limited Liability, the Head Office and General Management still remaining in Shanghai.
  You are doubtless already aware that for several years past negotiations have been pending for the extension of the Join Stick Companies Acts of England, to China, but up to the present time no order in Council has been issued and it is uncertain whether the measure will be eventually adopted, the Directors therefore deem it expedient without further delay to take steps whereby the liability of shareholders may be limited and the Company placed on a more satisfactory legal basis than at present.
  It is further proposed to avail of this opportunity for making sundry changes in the constitution of the Company for particulars of which I beg to refer you to the accompanying Prospectus.
  In order that you may be represented at the extraordinary Meetings which it will be necessary to convene in accordance with the Deed of Settlement to carry out these changes, should you be unable to attend, I shall feel obliged by your filling up the enclosed form of Proxy in Favour of the Chairman or some other person being a shareholder) resident in Shanghai and returning same to me as early as possible whether or not the proposals meet with your approbation.
I am, &c., Herbert S. Morris, Secretary,
And so much of the prospectus herein referred to as need be set out is as follows:-
"For Private Circulation. - Prospectus. - North-China Insurance Company (established 1863.) Head Office - Shanghai.
  It is proposed to reconstitute the company as a Joint Stock Company with Limited Liability under the Companies Acts of England 1862 to 1882 whereby the liability of a shareholder is limited to the amount of his shares.
  The property assets and business of the existing company be taken over by the Limited Company on or before the 1st Day of January 1884.
  Subscribed capital Four Million Taels (Tls. 4,000,000.)
  Exchange 5s 0d. per Tael = Pounds 1,000,000 Sterling.
  In 5,000 shares of Taels 60- each (in lieu of Taels 2,000,000 in 1,000 shares of Tls. 2,000 each.)
  Exchange 5s. 0d. per Tael = Pounds 250,000 Sterling.
  Equal to Tls. 200 per share (in lieu of Taels 600,000 equal to Taels 600 per share.)
  No call will be required, the Reserve Fund accumulated being converted into capital.
  The holder of one share in the present Company will be entitled to five new shares."
  It is upon the last clause in his prospectus - "The holder of one share in the present company will be entitled to five new shares" - that the plaintiff relies in this part of his argument.  He says he understood it to mean that he would receive in exchange for his five shares twenty-five shares in the new Company.  He says that so understanding the clause he attended the meeting of shareholders which the circular stated would have to be called, and on the faith of it voted in favour of the resolutions which were brought forward and which were then passed unanimously. The defendants say, on the other hand, that he statement meant no more than that each share in the old company was to be sub-divided into five shares in the new Company and that the plaintiff was not entitled to read into it any other sense.
  Now I find as matter of fact - and I think it was not really disputed by the defendants - that the plaintiff, on receiving the prospectus, honestly attached to the clause the meaning he now says he did attach to it.  But the defendants say he ought not to have attached that meaning.  Why not? The words themselves, read by themselves, plainly bear the meaning, and such is their natural meaning.  I am not of course considering what the Secretary meant to convey  by the statement in question, nor how the defendants with the knowledge of their intention understood it.  If it is equivocal, as one of the Counsel for the defendants at one time described it, but which I do not think it is - that is not the plaintiff's fault, as the document is not of his framing, but the Secretary's, and it is a familiar principle of construction that a document is to be taken most strongly against the framers of it because they could have taken care by clear words to make it explicit.
  But then it is said that, apart from the words themselves and what they would convey to an ordinary reader and a total stranger to the company, the plaintiff ought not to have been misled by them.  As a fact I find that he was misled, and I think it follows that where the words are such that on the first perusal they were calculated to mislead and did mislead, the arguments in support of what has been called willful blindness on the plaintiff's part in not seeing another meaning in them ought to be very strong before they should be acceded to.  Once the plaintiff is set off the track, the sharper is the pull needed to get him back.  Now what is there in the circumstances of the case that according to the defendants ought to have enlightened the plaintiff as to the meaning they intended the clause to bear?
  First, it is said that the directors were bound by the Deed of Settlement to hold a revision every three years, and the plaintiff ought to have inferred that one would be held.  But if it were the duty of the directors under any circumstances to hold a revision it was one which, as the plaintiff believed and as the fact was, they had omitted at the close of the previous triennial period (the first one since the plaintiff's connection with the company  began), for there was no real revision in 1880.  All that took place then was this: the Secretary, in order to be within, as he thought, the letter of clause 39, prepared a tabulated statement of contribution of premia as if for an effective revision of the share-list, but the statement was merely laid on the Board table for the directors (as he said) to look at or not as they pleased.  The directors had already stated at the shareholders meeting of April 20th of that year that they "did not deem it advisable to make any important revision of the list of shareholders at the end of this year" in view of the probability of registration," and at the next half-yearly meeting on the 28th September they announced to the shareholders the determination that they had come to at their Board-meeting of the 20th July, "not to call on any shares for re-allotment at the close of the present year," "one of the reasons being the hope that before long facilities would be obtained to registering he Company under the English Acts."
The Company being thus in 1883 in the transitional state in which it was supposed to be in 1880 why should the plaintiff have inferred in 1883 that the directors were going to hold an effective revision under circumstances similar to those which had determined them not to hold such a revision in 1880? If he were to infer anything from his knowledge of the action of the directors in the matter of revision since he had joined the Company, I should have expected him to infer just the opposite of what the defendants say he should have inferred, viz., that as there had been no revision in 1880 there would for the same reason that operated then be none in 1883.
  It is said, however, in the next place by the defendants on the subject of the inferences that the plaintiff ought to have drawn, that the resolutions which were to be brought forward at the meeting on the 29th March were published beforehand, and that he ought to have seen from he terms of Resolution 3 - "That until the above resolutions have been carried into effect, and the property, assets and business  have been transferred to and vested in the new Company, the present Deed of Settlement and all the terms and provisions thereof shall have full force and effect? - that the power of revision was preserved and would or might be exercised. But I do not think that it was obligatory on the plaintiff or that it was to be expected of him when he saw in a newspaper a notice of such resolution that he should take out his copy of the Deed of Settlement and study it as a lawyer would study it, or take it to his lawyer for an opinion as to which of its provisions could legally be exercised after a resolution to dissolve. Had he done so, he might have come to the conclusion, or been advised, as was argued with great force on his behalf at the hearing, that the circumstances of the case rendered  power of revision no longer exercisable.  The exercise of that power could only be justified by being for the be benefit of the Company might well cease to be valid when the Company was ceasing to exist; and as there could be no re-allotment of withdrawn shares "among existing shareholders" (the language of clause 39) because at the time when the withdrawal was to take effect the Company was at an end, there could be no withdrawal. Such was one of the points argued at the hearing, and without expressly deciding it (for it is unnecessary to do so) I may say that, having regard to the exceeding strictness with which all forfeitures are construed, I was not satisfied by the arguments to the contrary of the defendants'  Counsel. Am I to say that a difficult point like that was one which the plaintiff ought to have answered at once for himself on the perusal of the resolution, and answered in the same way the defendants contend?  Indeed I think the argument for the defend ants on this part of the case is a misconception throughout.  They argue as if there had been no statement at all in the prospectus about the holder of one share in the old Company being entitled to five shares in the new, and seem to think that the plaintiff ought to have been asking questions to elicit what the defend ants meant by that statement.  My view is that if the defendants meant only to convey by that statement what they contend it means, they ought to have qualified it in such a way as would have made their intention as to revision reasonably clear; and the obligation upon them was all the greater from the action they had, to the knowledge of their shareholders, taken, under what were supposed to be similar circumstances, in respect of the revision of 1880.
  I ought perhaps not to pass unnoticed the argument of the defendants that the plaintiff's application for shares in the new Company contained the words "upon the terms of the company's prospectus dated the 25th day pf May 1884," a passage in which prospectus certainly showed that a revision of the share-list was to take place during the year.  Some stress was laid on the fact that while he struck out certain words from the printed form of application, he left the words referred to standing, so that his application ran - "I hereby request that you will allot to me Twenty-five (25) shares in the above-named Company, and I hereby agree to accept the same or any smaller number that may be allotted to ...... upon the terms of the company's prospectus dated the 25th day of May, 1883," etc. But this cannot be construed into an admission by him that he was content to be "revised out;" on the contrary, it was an application for the full number of shares that he conceived he was entitled to, and  coming in point of time after the notice of the 13th August as to the withdrawal of his shares, it may well have been intended by the plaintiff as an assertion of his claim to receive twenty-five shares and as a refusal to be content with anything less.  In any case, as was pointed out by his Counsel, it could not amount to anything more than an acceptance of the terms of the prospectus as far as they affected the new shares he claimed.
  Subject, therefore, to the objection founded on the plaintiff's delay, which I will consider presently, I have come to the conclusion, without going further into the case, that, the directors having made the representation contained in the prospectus, and the plaintiff having attended the meeting and voted for the winding-up of the Company on the faith of it, they are bound to give effect to the representation so far as he is concerned.  It is needless to enquire what would have been the plaintiff's position if the prospectus ad not contained the statement in question, and it is idle to speculate what might have taken place if the prospectus had stated that those shareholders who should not in the meantime have their shares withdrawn would be entitled to have five times he number in new shares.  In the latter case I cannot doubt that the meeting would not have been quite so harmonious and unanimous; in the interval before it was held, doubts as to the powers to revise under the circumstances might have sprung up, and developed into difficulties at the meeting.  But, as I have said, it is idle to speculate on this.  It is enough to say that in that case the plaintiff would not have been able to say that he was misled.
  I have now to consider the objection taken by the defendants that the plaintiff has lost any right to relief he might have had, by reason of delay in objecting to the withdrawal of his shares.  It was argued that at least from the date of the prospectus of the 25th May h must have known that there was to be a revision and that he might have his shares withdrawn.  But I accede to Mr. Wainewright's argument that at that time the plaintiff could do nothing. He could only wait to see whether the directors proposed to withdraw his shares, and he did not receive notice of their intention till about the end of August.  Therefore what delay there was did not begin till then.  In favour of the Company I assume that the Secretary did not gather from the plaintiff's conversation with him that the plaintiff objected to the action of the defendants, and also that his application on the 28th September for the full number of shares he would have been entitled to on the basis of there being no revision, was equally misunderstood as an objection to the directors' action.  But on the 24th December - that is to Say, a week before the withdrawal was to take effect -explicit notice was given to the directors in a  letter from plaintiff's legal adviser that the plaintiff contested the right to cancel his shares and would take legal proceedings if they attempted to do so.  The delay, therefore, was at the most a period of about four months.  
  The cases cited by the defendants on this point were In re Cachar Co., In re Madrid Bank, and In re Barned's Banking Co. (all reported in L.R. 2 Ch. App.), but these were cases where shareholders sought to have their names struck off the register on the ground of a variance between the prospectus and the memorandum, and the reason for requiring promptitude in the exercise of regulating shares in such cases is that it would be unjust  allow  the holders to withdraw from a company on such grounds after holding themselves out for months to the world as shareholders, and thereby possibly being the means of inducing third parties to become shareholders. These cases are a different class of case altogether from the present, which is one of forfeiture of shares, and the principle applicable is consequently not the same.  In this class of case there must be such a delay on the part of the plaintiff in objecting to the forfeiture as raises the presumption that he has abandoned his property.  (Garden Gully C. v. McLister, L.R. 1 App. Cases 39.) What lapse of time would be sufficient for this purpose must depend on the circumstances of each case.  In the present, the plaintiff objected a week before the forfeiture was to take place and while the parties were therefore in statu quo, and it is thus impossible in strictness to say that there was any delay at all.
  The plaintiff is accordingly entitled in my judgment to the injunction, declaration and order that he prays.  He must also have the general costs of the cause, but I propose to deal specially with the costs incidental to and arising out of the charge of partiality made against the directors.  Substantially, I consider that charge as impeaching the bona fides of the directors.  It was not made in the petition, but I allowed evidence in support of it to be given at the hearing under these circumstances.  The plaintiff said that he was not in a position to allege it in his petition because until he had instituted proceedings he could not get discovery from the defendants.  This circumstance of itself would not have enabled him to give evidence of the subject; he must have filed an amended petition charging it specially.  But the defendants in the 13th paragraph of their answer pleaded that the directors "in withdrawing the shares of the plaintiff acted bona fide in the interests of the company." I decided at the hearing, and am of the same opinion still, that under the Rules of this Court a plaintiff is at liberty to call evidence to rebut any statement in the defendants' answer, and that it is not necessary for him, even when it is a question of bona fides or mala fides, to get special leave of the court to file a replication to the answer.  I mention this matter thus fully as the defendants' Counsel apparently considered the point of sufficient importance to ask me to note an objection to my ruling, to be used in the event of an appeal.
  Considerable time was occupied with the evidence on this branch of the case, and, as in the result I am perfectly satisfied that the directors acted throughout with complete good faith in the interests of the Company, the plaintiff must pay to them their costs of and coincidental to the hearing in connection with that plea.  With this exception he will, as I have said, have the costs of the cause.
  I have only to ad that the same circumstance which prevented the parties having the great advantage of having the case heard by the Chief Justice would prevent his taking part in a rehearing of the case before the Full Court, it was agreed by the parties at the close of the hearing to take this decision as the judgment of the Full Court.  I mention this agreement to facilitate an appeal direct to the Privy Council; without any intermediate steps here.
.  .  .  
Mr. Drummond said with regard to the question of costs on the discovery, he did not actually take part in the proceedings with regard to discovery himself, but he believed a good deal of costs were incurred, and that was all on the question of bona fides.
His Lordship said nevertheless he thought the plaintiff was entitled to the costs of the discovery.  Since Mr. Drummond had missed the point he would say that he thought the defendants were quite wrong in refusing inspection of the books, and therefore they ought to pay the costs.
  Mr. Drummond - Does your Lordship decide that now, or is it to be decided afterwards?
 His Lordship - As you mention it, I give you it as my idea now.
  Mr. Wainewright - I understand your Lordship to give the other side so much of the costs of the hearing as are incidental to the question of bona fides.
  His Lordship - And the preparation for the hearing.  I do not go back to the discovery; I think the defendants were wrong in refusing the discovery.  I think the plaintiff was entitled to see his own books.

Published by Centre for Comparative Law, History and Governance at Macquarie Law School