Supreme Court of Canada
Re Standard Fire Insurance Co. (Caston’s Case), (1886) 12 S.C.R. 644
Date: 1886-05-17
Re Standard Fire Insurance Company (Caston’s Case).
1885: November 30; 1885: December 1; 1886: May 17.
Present: Sir W.J. Ritchie C.J., and Fournier, Henry, Taschereau and Gwynne JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.
Joint stock company—Contribntories—Sub scription for stock—Payment by services.
The act of incorporation of a joint stock company provided “that no subscription for stock should be legal or valid until ten percent, should have been actually and bona fide paid thereon.”
C. gave to the manager of the company a power of attorney to subscribe for him ten shares in the company, such power of attorney containing these words “and I herewith enclose ten per cent. thereof, and ratify and confirm all that my said attorney may do by virtue thereof.” The ten per cent. was not, in fact, enclosed, but the amount was placed to the credit of C. in the books of the company, and a certificate of stock issued to him which he held for several years.
The company having failed, proceedings were taken to have C. placed on the list of contributories, in which proceedings he gave evidence to the effect that the sum to his credit was for professional services to the company, he having been appointed a local solicitor, and there had been an arrangement that his stock Was to be paid for by such services.
Held, affirming the judgment of the court below, Henry J. dissenting, that C. was rightly placed on the list of contributories.
APPEAL from a decision of the Court of Appeal for Ontario affirming the order of Ferguson J., that Caston was properly placed on the list of contributories of the Standard Fire Ins. Co.
For a statement of the facts of the case see the reports in the courts below.
Galt for the appellant.
If the contract with Caston for the stock is invalid
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there has been no payment. Fathergill’s Case. I submit that it is invalid. There was to be a local board in Toronto of which he was to be solicitor, but such board was never formed. No bill lor services was rendered, and the application never came before the company or the directors. The company could not take advantage of the subscription without being paid everything required to make it good. Simpson’s Case; Pellatt’s Case.
The certificate of stock was not issued by direction of the directors, but by the mere motion of the secretary. See Roscoe’s N.P. Evidence, 15th ed. p. 1,060, and see Stephens on Joint Stock Companies for the form of the certificate.
The certificate being non-negotiable we are not bound by it. Duke v. Andrews; Chaplin v. Clarke. And see Eley v. Positive Ass. Co.; and Nicol’s Case as to contract between shareholders and applicants for stock.
The learned counsel cited also Cartmell’s Case and Hallmark’s Case, and referred to secs. 15 and 19 of the Joint Stock Companies Act R.S.O. ch. 49 and secs. 29, 34, 35, 37 and 49 of R.S.O. ch. 50.
Bain Q.C. for respondents.
The entry in the books of the company, and the issue of the stock certificate, are primâ facie evidence of Caston being a shareholder, and the onus is on him to show that he is not.
The ten per cent. clause only referred to the increased stock, and after the board was formed the directors could allow payment in any form they chose, by promissory notes, by services or in any other manner. See East
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Gloucester Ry. Co. v. Bartholomew; Piscatagua Ferry Co. v. Jones.
The distinction between Elkington’s Case and Pellat’s Case referred to by the learned counsel is pointed out in the former, and see also Thomson’s Case; Woollaston’s Case; Oakes v. Turquand.
The intention of the company to accept the application for stock, as shown by the issue of the certificate, makes the applicant a stockholder. Richards v. Home Ass. Co.; Gorrissen’s Case; Ritso’s Case; National Ins. Co. v. Egleson.
Galt in reply cited Bain v. Whitehaven Ry. Co.; Nasmith v. Manning; Port Dover & Lake Huron Ry. Co. v. Grey; re Duckworth.
HENRY J.—The law requires that 10 per cent. of the stock of a joint stock company should be paid up, and that no subscription for stock shall be valid unless that amount is paid. The question arises then: Was that amount paid in this case?
The payment must be to the company, and it is claimed here that $100 was paid to the company in services. But it is in evidence that no such services were performed for the company. Any services performed were for the promoters of the company, and the payment for the stock was arranged to be by services for the promoters, and not for the company.
I think it is necessary, to entitle a party to claim as one of the stockholders of a company, that he should be a regular and lawful stockholder. I do not think
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such could have been the case here unless ten per cent. of the stock was paid up. The claimant had arranged for no services to the company; he had no claim against the company; and if he had applied to the company for his stock, I think they could well have answered: “You have not paid the 10 per cent;” and if he had claimed that he had arranged that with the promoters, they could have replied: we have nothing to do with the promoters. I think the plaintiff could not have enforced his claim against this company in any way, and the rule should work both ways. In my opinion the appeal should be allowed with costs.
GWYNNE J.—In my opinion the appeal in this case should be dismissed, and the appellant’s name has been rightly placed on the list of contributories. The condition upon which the appellant says he agreed to subscribe for the shares in the Alliance Insurance Company now merged into the Standard, namely that the stock so subscribed for should be paid by services to be rendered by him as solicitor of the company, that is to say that the moneys to become due to him for services as solicitor should be applied by the company to his quotas in payment of his stock, was a condition subsequent, and although under the circumstances stated by the appellant in his evidence, he might have had the right to rescind the contract while the company was solvent, he has lost that right now.
In October, 1880, he executed a power of attorney to one Crawford, the manager of the company, authorizing him to subscribe for ten shares in the capital stock of the Alliance Insurance Company of the face value of $100 each, and in that power of attorney are the words following:— “And I herewith enclose ten per cent, thereof, and ratify and confirm all my said
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attorney may do by virtue thereof.” Now what his attorney did was to cause the appellant’s name to be entered on the stock register as a holder of ten shares, upon which ten per cent. was entered as paid. The appellant now says that he never did send the $100 mentioned in the power of attorney to be sent with it, and being asked, was there any arrangement between him and any person as to the credit of $100, he replied, “that was part of my services, it was not in cash,” and being further asked if it had not been credited for services he had rendered the company in getting subscriptions, he replied “Yes, part of my arrangement.” Again he says: “It was distinctly understood that I should pay no cash on my stock.” And the question being again asked whether he was not to be credited on his stock for services, he replied, “yes.” He admitted also that he had received a scrip certificate of shares held by him, which on his examination he produced, and bears date the 9th November, 1880. whereby it is certified under the hand of the secretary of the company, that the appellant holds ten shares of the stock of the Alliance Insurance Company, of the par value of “one hundred dollars each on which ten per cent. has been paid in.” This certificate he held in his hands for years without repudiating it so long as the company continued in existence, nor in fact until the Standard Insurance Company into which the Alliance became merged, became insolvent and in process of being wound up. He also received a warrant of attorney under the seal of the company dated 80th of October, 1880, constituting him solicitor of the company for the transaction of their professional business arising out of and in and for the county of York and city of Toronto. Under these circumstances, I do not think that he can evade being placed on the list of contributories. The case as it appears to me, presents as clear a case of
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liability to contribution as appeared in the recent cases of Southport and West Lancashire Banking Company; Fishers case and Herringtons case.
Sir W.J. Ritchie C.J. and Fournier and Taschereau JJ. concurred.
Appeal dismissed with costs.
Solicitor for appellant: A.G. Gall.
Solicitors for the petitioners: Bain, Laidlaw, & Co.
Solicitors for the liquidators: Osler, Teetzel & Harrison.
34 L.J. Ch. 525; 4 DeG. J. & S. 749.
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