18s. 9d. to be provided for. When the balancesheet was laid before the society for its consideration, it was ordered, at a general meeting held on 29th March 1882, that 7s. 6d. per pound be deducted from the shareholders' accounts. This reduced the sum standing at the pursuer's credit from £97, 2s. 8d. to £60, 14s. 2d. The question is, whether this reduction was lawfully made?

In making up the balance-sheet the directors had to provide for the loss which had been incurred or was feared. They had no assets except the loans which they had made on heritable security, and while these loans amounted to £19,177, 7s. 8d., it was very doubtful whether more than £10,689, 17s. 3d. could be recovered. The reserve fund and the sum at the credit of profit and loss were absorbed, and a balance of £6505, 18s. 9d. left over. From what fund was the balance to be provided for? The society had nothing except its capital, which, as I have said, consisted of the advances made by the investing members. But that had, in accordance with the rules of the society, been invested in the heritable loans, and had been lost, or was in jeopardy, to the extent to which these loans were unsecured or stood in doubtful security.

To make a just balance provision had to be made for bad or doubtful debts. So much of the debts as were bad must be written off capital, or, in other words, must reduce pro tanto the amount at the credit of the investing members. So much as was merely doubtful could only be carried to a suspense account, but this operation can mean nothing else than that the capital, or, in other words, the sums at the credit of the investing members, must be correspondingly reduced. no other way could a balance be made which would make provision for bad or doubtful debts. Such debts must reduce the capital either absolutely or contingently.

In

The resolution of the society at the meeting of 29th March 1882 was, in my opinion, nothing more than a resolution to provide for bad or doubtful debts, or, in other words, to make a just balance. It was therefore, in my opinion, within its competence. But a just balance necessarily reduced the capital or the amount at the credit of the investing shareholders. The sum written off was in nowise in excess of what the circumstances required. I hold therefore that the sum at the credit of the pursuer was properly reduced to £60, 148. 2d.

1 do not think that it is material that the balance-sheet was not in point of fact corrected. That is a mere matter of detail. The fact remains that the 7s. 6d. per pound was written off the members' accounts as the means or effect of making a just balance. The result is the same in either case.

It is said that this reduction was made to provide for doubtful debts only, and that it deprives the member who retires of all benefit from the improvement of the securities. No doubt that will be so, but it is inevitable. An investing member cannot, I think, have more at his credit than a just balance will allow, and he necessarily loses all chance of future benefit by withdrawing from the society, for he can take with him no more than stands, or ought to stand, at his credit.

LORD JUSTICE-CLERK-I have considered this case attentively, and I have not been able to find

any ground on which the action of the society which is complained of can be defended. I concur in the result arrived at by the Sheriff-Substitute, and in his reasons also given in the case of Gray, in which generally I agree.

Throughout the argument which was addressed to us from the bar I think the true nature of the financial proceeding complained of was misapprehended. It had no resemblance or relation to the familiar operation of carrying bad and doubtful debts to a suspense account. The operation was one-apart from its mere bookkeeping aspect of another character. It was this. Certain securities stood in the books at a certain valuation. They for the most part consisted of house property in Glasgow over which the society had lent money or made advances to borrowing members. Owing to the depreciation of house property the directors became anxious as to these investments, and employed Mr Binnie, a surveyor, and a very competent man, to value the suspected property. The result was that Mr Binnie reported a depreciation on the subjects over which these securities extended of nearly 50 per cent.

The report did not deal with the solvency or insolvency of the society, or give any further information-at least none has been communicated to us as to its financial condition. It has not gone into liquidation, but has continued to transact business under its rules until now. But finding the actual market value of these securities so much lower than that at which they stood in the books, the directors seem to have looked about for some available fund to redress the balance and exhibit the capital account at its former figure. With that view they laid hands on the sums standing in the books at the credit of the investing members, and carried 7s. 6d. per pound, or three-eighths of the whole amount, to what they call a suspense account, but one which in truth represented the confiscation of important proprietary interests on the part of individual members of the society, with which, excepting in the event of liquidation, they had no right to interfere.

It is quite true that these rights, which were vested in the investing members, were to a certain extent contingent. They were not perfect rights of credit unless there was money to meet them. But the members were entitled to wait and to retain them until funds were available for their liquidation. They were also entitled to withdraw from the association altogether, and to be paid out according to the state of their account in the books. The present pursuer gave his notice, and withdrew after this proposal had been carried out, and the society now offer him 12s. 6d. per pound on the balance which admittedly stood at his credit.

The rules confer no power, either on the directors or on the shareholders, to make any such use of the credits of investing members. They were, as I have said, important proprietary rights, of which, in the absence of any provision to that effect in the articles of the association, they could not be deprived without their own consent or some default on their part. In the event of liquidation, some such procedure might be justified, but even then not on the inequitable footing adopted here. But there is no liquidation in this case, and as long as the society continued to carry on business these balances stood at the

credit of the investing members solely for the purposes provided for in the articles of association.

It appears clearly enough from the minutes of the directors that the main object they had in view was to arrest the current of withdrawal on the part of the investing members, and it must be owned that the readjustment of the capital account was important if they had possessed funds to meet it, but what they did was quite beyond their power. The investing members had as good a right to withdraw and be paid out according to the rules as the borrowing members had to receive advances and to repay them by instalments, and no general meeting had power to interfere with these rights.

I may add that I do not think the annual meeting had power to deal with this matter. The 44th rule limits such meetings to the discharge of ordinary business, which this certainly

was not.

LORD CRAIGHILL was absent.

The Court pronounced this interlocutor:

"Find in fact that the defenders at their annual general meeting, held on 29th March 1882, approved of a report by the directors recommending that in consequence of the depreciation of the heritable property on the security of which the funds of the society were invested, a sum of seven shillings and sixpence per pound should be deducted from the account of all the shareholders and placed to a suspense account, and that the defenders accordingly made a corresponding deduction from the sums standing in the books of the society at the credit of the pursuer from ninety-seven pounds two shillings and eightpence to sixty pounds fourteen shillings and twopence, which sum the defenders are willing to pay: Find in law that this reduction was validly made; therefore sustain the appeal; recal the interlocutor of the Sheriff-Substitute appealed against; dismiss the action: Find the defenders entitled to expenses in the Inferior Court and in this Court," &c.

Counsel for Pursuer (Respondent)--ScottRhind. Agent-William Officer, S.S. C.

Counsel for Defenders (Appellants)-Mackintosh Jameson. Agents Carment, Wedderburn & Watson, W.S.

GARDINERS V. VICTORIA ESTATES COMPANY. Public Company-Transfer of Shares-Rectification of Register-Companies Act 1862 (25 and 26 Vict. c. 89), sec. 35-Ultra vires.

A shareholder in a public company sold his shares to the managing director, and the directors approved of the transfer "in favour of the managing director for behoof of the company. The name of the company itself was thereupon entered on the register as holder of the shares. Six years thereafter the company, on the ground that it had no

power to hold its own shares, challenged the transaction, and replaced the shareholder's name on the register. Held that the shareholder's name having been lawfully removed in consequence of a transfer which the directors approved could not again be placed on the register.

This was a petition to have the register of the Victoria Estates Company (Limited) altered.

The Victoria Estates Company was incorporated under the Companies Act 1862 and 1867, in 1877. Its registered office was at the office of the managing director James Drummond, C.A. The business done was that of a company dealing in acquiring and erecting houses, lending money on heritable property, &c. The capital was divided into shares of £5 each. The company was a small one; its shares were not quoted on the Stock Exchange. In October 1878 W. G. Gardiner and James Gardiner, who were brothers, were each owners of 100 shares, on which £100 had been paid in each case.

Being desirous to invest their funds in their business as shipbrokers, the Gardiners resolved to realise, and one of them called on Drummond on the subject. After one or two meetings it was intimated by Drummond that the shares would be taken at par. The Gardiners, as they contended and deponed in evidence in this action, understood Drummond to be the purchaser for his own account. The transfers, which were dated 26th October 1878, bore that Drummond was transferee, but there was added the words "for behoof of the Victoria Estates Company, Limited." In the case of W. G. Gardiner's transfer these words were interlined, and the interlineation was not authenticated. The Gardiners and the witness who witnessed their signature deponed that to the best of their recollection and belief these words were not there at the time of signature. James Gardiner alleged that in his case also the words "for behoof of the Victoria Estates Company, Limited," had been introduced after the signature. In this process the company and Drummond both maintained that the transaction was all along intended to be, and known by the Gardiners to be, one for behoof of the company, and not of Drummond at all.

After this transaction the Gardiners believed themselves to be no longer shareholders of the company. They were not called to meetings, they received no call-letters when calls on the shares were made-as was done on several occasions-their names were not on the list furnished to the Registrar of Joint-Stock Companies, nor did they receive dividends, balance-sheets, reports, or the like.

It subsequently appeared that the shares from the date of the transfers stood in the books as the property of the Victoria Estates Company, the directors having approved of the transfers "in favour of the managing director for behoof of the company," and the company's name having then been put on its register as owner of the shares. In the summer of 1884 the directors took the advice of counsel as to the power of the company to hold its own shares. The only provisions on the subject in the articles were-Article 15, "The board shall have power, without assigning any reason, to decline to register any transfer or transmission of shares in favour of any person whom they may consider it against the interest of the company to

admit as a shareholder, or where the transfer or transmission has been made for a gratuitous or any consideration other than a full price; and the board, before registering any transfer, may claim the shares at the price paid, or agreed to be paid, by the transferee, to the exclusion of such transferee. No number of shares less than ten shall be transferable except to the company." Article 16-"Shares acquired by the company may be retained as the property of the company, or disposed of in such manner as the directors may appoint. Article 17-"Shares in the company shall be transferred in the following form, or as near thereto as may be, or in such other form as the board may from time to time approve of :-I, A B, of in consideration of the sum of pounds, paid to me by C D of do hereby transfer to the said C D the share (or shares) numbered standing in my name in the books of 'The Victoria Estates Company, Limited,' to hold unto the said C D, his executors, administrators, and assignees, subject to the several conditions on which I held the same at the time of the execution hereof: And I, the said CD, do hereby agree to take the said share (or shares) subject to the same conditions."

There was thus in the rules no direct power to the company to hold its own shares.

The directors were advised by counsel that the company could not buy and hold its own shares. The law-agent therefore on 12th July 1884 (nearly six years after the transfers) wrote to the Gardiners -In October 1878 you sold to this company at par 100 of its shares then held by you. The letter proceeded to say that opinion had been taken as to the legality of the transaction, and that the company were advised that it was ultra vires and illegal, and that the Gardiners were still shareholders. They were therefore called upon

to

repay the amount for which they sold the shares, and to pay up the calls made since the transfer, in all about £460 each. Subsequently the directors had the Gardiners' names re-entered on the register. On 21st September a fresh call was made, and it was intimated to the Gardiners. They repudiated liability for the shares, and brought this petition under section 35 of the Companies Act 1862, to have the register rectified by removal of their names, and, if necessary or expedient, by the insertion of such entries or entry as the Court should deem proper.

Answers were lodged for the company, and eventually Drummond, who was no longer managing director, also appeared separately. Both the company and Drummond maintained that the petitioners were well aware that they were selling to the company.

The company maintained that the transaction was ultra vires, and that the Gardiners were still shareholders and were rightly on the register.

Drummond maintained that while the company might or might not be owner of the shares (in the latter of which events he contended that the petitioners were still such) he himself could not be held the owner or put on the register as such. A proof was led, when the facts above narrated appeared. It also appeared that the company was more prosperous in 1878 than in 1884.

Argued for the petitioners-The sale to Drummond was valid as far as the petitioners were concerned; they sold to him as an individual, and he entered into the transactions for his own

behoof. Even if he did so truly for the company, and that was really ultra vires, the petitioners had no concern with that. Their names had been removed by authority of the directors, in accordance with a transaction into which the petitioners acted in good faith. It was therefore illegal to restore the names six years afterwards. If the interlineations were authentic, and were there at the date of the transfers, they should have been initialed; in the absence of such initialing the presumption of law was that they were made subsequent to the execution of the deed. The shareholders of the company must have known of this transfer by the petitioners, and they were barred by acquiescence from now objecting.

Authorities-Bonnington Sugar Refining Company v. Thomson's Trustees, October 25, 1878, 6 R. 80; Fyfe, L. R., 4 Ch. 768; Lindley 780 and 1412; Parson's case, L. R., 8 Eq. 656; Dronfield Silkstone Coal Company, 17 Ch. Div. 76; Phosphate Lime Company, L. R., 7 Com. Pl. 43.

Replied for the company-The transfer was invalid; as the transferee's name could not validly be put upon the list of shareholders, the transferrors' ought to have remained on it. The facts of the case made it unlikely that Drummond was buying for himself. The fact that no commission was charged showed that Drummond was acting for the company.

Authorities-Gustard's case, L.R., 8 Eq. 438; Heritage's case, L.R., 9 Eq. 5; Cartmell's case, L.R., 9 Ch. 691; Taylor on Evidence, 1547.

Replied for Drummond-The purchase was one solely on behalf of the company, and was formally approved by them. The interlineations were put on at the time the transfer was executed. At advising

LORD PRESIDENT-This is a petition under the 35th section of the Companies Act of 1862 for the rectification of the register of the Victoria Estates Company. The petitioners are the Messrs Gardiner, who were each registered shareholders of 100 shares of the said company, upon which £1 per share had been paid.

In October 1878 the Messrs Gardiner wished to sell their shares, and they entered into negotiations with Mr Drummond, the manager of the company, and their allegation is that they sold and transferred their shares to him, and that he accepted their transfer. It is clear, I think, that from 1878 to 1884 the petitioners heard no more about these shares, and they had good grounds for believing that they were no longer shareholders of the company. When the directors required to make calls, which occurred more than once between 1878 and 1884, they were not included; they were not summoned to meetings of the company; nor was any offer of unissued shares made to them as was done to the regular shareholders of the company. They were in fact all along treated as though they had ceased to be members of the company from 1878. Ultimately they were told that they were to be put again upon the list of shareholders in respect that the sale of their shares was really a sale to the company, who had been advised that they had no power to deal in their own shares.

It would indeed be hard if the Messrs Gardiner were, after so many years, to be again entered on the list of shareholders, and after they considered

that they had effectually transferred the shares standing in their names. There are, however, some legal difficulties in the way of holding these transfers effectual, and if these cannot be got over, hard as it may appear, the names of the petitioners may have again to be entered on the list of shareholders of this company.

There are, in the first place, some facts which must be carefully kept in mind, as they have an important bearing upon the decision of this case. The petitioners, for instance, say that they dealt with Mr Drummond all along as an individual, and that they had no idea that he was purchasing these shares for behoof of any other party but himself.

The respondents say that the Messrs Gardiner were all along made aware that the purchase was for the company, and that Drummond was acting for them in the matter.

Now, this is a simple matter of fact, but it is a most important fact, and I must say that I believe the account of this matter given by the Messrs Gardiner. They say that they dealt with Mr Drummond from beginning to end of this transaction as an individual, and they thought that in so dealing with them he was acting for himself, and not as the representative of any other person or body. Then, às to the transfers, one of them is wholly in manuscript, the other is partly written and partly printed. In both the name of Drummond appears as the transferee, but as these transfers now stand they bear to be transfers to Drummond "for behoof of the Victoria Estates Company (Limited)."

In the one transfer, which is wholly in writing, these words, "for behoof of the Victoria Estates Company (Limited)," are interlined, but that interlineation is not authenticated. In the other transfer there are no interlineations, because there was ample room to add the words without interlineation. Now, the Messrs Gardiner say that this interlineation was not there at the time when they executed the transfers. On the other hand, Drummond says it was. The evidence upon this point leaves the whole matter in considerable doubt, but I am willing to assume that the words "for behoof of the Victoria Estates Company (Limited)" were there when the transfer was executed. What is their effect to be? This is a transfer to Drummond as an individual-it is he that pays the money-while the cheque by which it is paid is from his own private account. In such circumstances the transferror has no business to inquire into the objects of the transfer, or as to whether the purchaser is buying for his own behoof or for that of some third party. He has a good name given to him in the transferee, and he has no more concern in the matter. If the transfer was approved by the company, and was registered in the usual way, the effect of that would be to transfer any liability attaching to these shares from the Messrs Gardiner to Drummond, assuming of course that the company was not entitled to hold its own shares.

Now, what took place in the present case was just this. Upon the 6th November 1878 the transfers were registered, and the entry in the shareholders' ledger was in these terms, "To 100 shares transferred to the Victoria Estates Company (Limited), £100." But such an entry was quite irregular, and it had not the same effect as if Drummond's name had appeared in the list

of shareholders. He was the person whose name should have stood against these shares, and seeing that the company was not in liquidation the question comes to be, whether the company was not bound to make the entry in the register in the name of "James Drummond, for behoof of the Victoria Estates Company (Limited)." I think that they were.

They could, if they had thought fit, have refused to have accepted this transfer, but, on the contrary, they passed it, and duly recognised it as a transfer in favour of the managing director "for behoof of the company." This transfer was formally approved of by the directors. In these circumstances what the directors ought to have done was, they should have registered the transfer in these terms, and not as a transfer to the Victoria Estates Company.

I am therefore of opinion that the directors of this company are not entitled to replace the names of the Messrs Gardiner upon their list of shareholders. Their names were properly struck off at the time when the shares were transferred to Drummond, and although in putting the company's name on the register an illegal act may have been committed, yet the petitioners' names were at that time properly struck off the list of shareholders, and cannot now be replaced.

I am therefore for granting the prayer of this petition by ordering the register of this company to be rectified by striking out the names of the Messrs Gardiner.

WHYTE V. WHYTE'S TRUSTEES. Trust-Judicial Factor-Sequestration of Trust Estate.

Circumstances in which the Court without removing testamentary trustees sequestrated the trust estate and appointed a judicial factor theron.

This was a petition for sequestration of the trust estate of the deceased George Whyte, proprietor of Meethil and Burnhaven, Aberdeenshire, and if the Court should consider it necessary, for removal of the trustees. The petitioner Phillis Whyte was 8 daughter of the truster, and entitled to a legacy of £1000, which was not to vest during the lifetime of one of the trustees, the truster's widow, who was alive and a trustee at the date of the petition. The peti

Friday, July 17.

tioner had obtained the concurrence of George Whyte, one of the trustees, to the petition. The truster died in 1869. The petitioner averred that the trustees, who were three in number, Mrs Whyte, George Whyte, the truster's son (both of whom were trustees nominated by the truster), and Rev. J. Stewart, were at variance among themselves, and that the management of the estate (which was almost entirely heritable and was heavily burdened) was brought to a dead-lock thereby. On this point it was admitted that there had been variance between George Whyte and the other trustees, but denied that the management was brought to a dead-lock thereby.

The petitioner also averred that no accounts had ever been produced by the respondents, though they were ordered to produce them in a previous action which they had brought against her, and the conclusions of which involved the question of her election between her testamentary provisions and those in the testator's marriage-contract, which action had been dismissed as premature. The trustees stated that full accounts could be produced, and produced in the present process accounts showing that the estate was in a very embarrassed position, and that though the estate at the time of Mr Whyte's death produced a considerable revenue, there was now almost no available revenue.

It was further averred and admitted that the agents of the trustees held an adjudication over the trust-estate for a sum of £319 or thereby, which consisted of cash advances and law charges, the history of which was that the debt had been incurred to them during their agency, that they had resigned the agency, and afterwards led the adjudication for the debt, and had two years after its date again been appointed agents.

Mrs Whyte, one of the trustees, was seventyeight years of age. The Rev. Mr Stewart had no intromissions with the trust funds.

The answers lodged bore to be on behalf of the majority of the trustees (Mrs Whyte and Rev. Mr Stewart) and all beneficially interested except the petitioner.

George Whyte (who was alleged by the respondents not to have any beneficial interest in the trust, since he had been bankrupt, and his whole interest had been sold by his trustee) made a separate appearance at the bar and lodged a minute craving that the desired appointment should be made, and setting forth that the accounts which had been produced showed that the estate was being rapidly dilapidated, and further that he was excluded from all share in the management.

The Court, without delivering opinions, sequestrated the estate and appointed a judicial factor.

Counsel for Petitioner-Sym. Agents-J. & J. Ross, W.S.

Counsel for Respondent-Comrie ThomsonDickson.

FIRST DIVISION.

[Lord M'Laren, Ordinary.

LORD ADVOCATE V. LADY WILLOUGHBY
DE ERESBY.

Teinds-Valuation-Rescissory Act 1662, cap. 1
-Act 1662, c. 9-Act 1663, c. 28.

A valuation of teinds by the High Commission in 1647 held not to be struck at by the Rescissory Act 1662, c. 1, depriving of all force acts, gifts, tacks, or deeds passed after 1637 to the prejudice of the rights of the several bishoprics.

In the locality of the parish of Cargill a question arose between the Lord Advocate as representing the Crown and Lady Willoughby de Eresby, heiress of entail in possession of the entailed estates of Drummond, as to whether the teinds of the lands of Kirklands of Cargill, and Nether Campsie, the property of Lady Willoughby de Eresby, were or were not valued, the Crown as titular of the teinds of Cargill in right of the Bishop of Dunkeld contending that the teinds in question were unvalued. The Lord Advocate accordingly lodged objections in the locality, alleging that the teinds in question had not been, as they ought to be, included in the state of teinds, and Lady Willoughby de Eresby lodged answers. She maintained (1) that the lands in question were valued by a decree of the High Commission dated December 1647, and which had gone amissing for a long period (during which a valuation of 1629 was assumed to be the ruling valuation), but which she now produced. (2) She maintained, alternatively, that the lands in question were included in a decree of valuation by the Sub-Commissioners of the Presbytery of Dunkeld in 1629, approved by decree of the High Commission dated 24th July 1771 and 3d February 1773.

The former of these contentions was alone the subject of decision in the Inner House in this process, and it is fully explained in the opinion of the Lord President.

The Lord Ordinary repelled the objections for the Lord Advocate.

"Opinion. In this case it is contended on behalf of the Crown that the teinds of certain lands pertaining to the respondent, known as the Kirklands of Cargill, and the lands of Nether Campsie, are unvalued.

"There is a valuation of the respondent's estate, made by the Sub-Commissioners for the Presbytery of Dunkeld in 1629, and approved by the Commissioners of Teinds, by decree of approbation and valuation, dated 24th July 1771 and 3d February 1773. But in the valuation thus approved the lands of Nether Campsie are not referred to by name, and in it the Kirklands of Cargill are named without being valued, because it is there stated that they are 'alleged to be feued cum decimis inclusis, but no charter or confirmation produced for verifying thereof.'

"One of the answers made by the respondent is, that the lands in question are valued by a decree of the High Commission dated December 1647, an extract of which is produced and founded on. It is not disputed that the lastmentioned decree has reference to the lands of