10th February.
CHANG YEN-MAO 0. MOREING AND OTHERS, The hearing of this case was resuned yesterday and this morning. It is an action by the plaintiff to have it declared general. Mr. Moreing when he wrote that letter had seen the draft provisions which it was proposed to insert in the articles, and he had no reason to think that they would not be so inserted. If wrong on the facts, then, so far as the claim was by the Chinese company, counsel submitted that the action was not maintainable. It was not a corporation which could sue according to English law. If damages were recovered, it would be impossible to say to whom they should be paid or who could give a receipt. Partners could sue in their firm name, but the names of the partners must be given, whi-h in the case of the plaintiff company was impossible, the shares being bearer shares, and nobody knewing by whom they were held.
Mr. Haldane, for the defendant comrany, said that on the evidence the terms of the memorandum, reasonably construed, had been carried out. The articles of the company were framed so aa to admit of that being done. But the plaintiff would not he satisfied with anything short of his being put in the position of absolute dominus.. The company never agreed to anything of that sari, and any such sgreethat a certain memorandum of conditions "+"ent would have been entirely lira relating to the sale of mining property in wires. A person enntracting with a cor-China to a company oiled the Chinese poration must be taken to have notice of Envineering and Mining Company (Limit-:1's powers and capacity, and could not ed) is binding upon the defendants, and, in charge it with contracts which were lira the event of its being held not to be so: vires, though sealed with the corporate binding, for a declaration that the s"le was seal (Leake on Contracta, 3rd p- Fi). obtained by fraud and ought to be set 3 Where a contract contained provisions aside. soma of which could not be performed for Mr. Lovett, K.C.,. Mr. Gill, K.C, Mr. ilewality, then, if the illegal part could Younger, K.C., and. Mr. G. Lawrence not be severed, the whole contract was appeared for the plaintdf; Mr, Hughes, void, but where, as here, there could be Ko., Mr. Rufus Isaacs, K.C.. and Mr. severance, the bad part might be rejected G. F. Uart for the defendants, C. A. More-and the good retained. The stipulations ing and Bewick, Moreing, and-Ca.; anti of the memorandum were in fuéuro, and if Mr. Haldane, K.C., Mr. W. Ham: lion, not performed, the only remedy was in E.C., and Mr, Vernon for the defendant damages. The plaintiff could not now get company. rescission ('*Sheffield Nickel Company v.
Mr. Hughes, in continuing his argument Unwin," 2 Q.B.D., 214). The substance yesterday on-behalf of the defendant of the contract had been performed. The Moreing, said that not only was there no porvisicn as to making Chang director-express stipulation in the deed of 3th general Sas before" wes not capable of July 1900 that there should he no fully-specific performance. To pnt him ina paid shares issued over and above those position of supreme control, independ: ut given to the old shareholders, but it was of the shareholders, would be contrary to entirely contrary to what was understood the English law of joint stock companies. between the parties. It wax true that If the memorandum were construed ina was not definitely stated what number manner consistent with English law, then should be issued, That was impossible, the company did not contest that if was inasmuch as it was necessary, as was raid binding, and. so construed, were prepared by one witness to give plenty of room to move around." (On the evidence it was to carry it out, The avowed objec' of the action was that Chang micht be able to go clear that Chang Yen-mao knew in hack to China and ray that he had got the Jannvary, 1901, that he and Detring were whole contract rescinded. The rights of to receive complimentary shires. And innocent debenture-holders had intervened, D trin.'s knowledge, which must also be and such an order could not rightly be imputed to Chans, wags greater. The arrangement was that the Chinese share-made. holders shoald have 375,000 shares out of This morning Mr. Haldane, in conclud-1.000,000, that Moreing was to finance the; ing his argument, said than the claim was company, pay off the liabilities, rearrange an alternative one—for a declaration that the loans, and that the actual financing the memorandum was binding, or for was'o be left to Moreing.. The case) rescission. The real question, however, presented by the plaintiff, that the.e were wag rescission. The plaintiff was seeking tobe no fully-psid shares, had on the to carry out the orders of the Viceroy by evidence entirely broken down. With re—getting the registration of the company ference to the mode in which the financing " unripred." The ese was unlike any was done, Moreing put the matter in other} other. On the fare of it the Court had and competent hands. In order to get only to det-mine the rights of the parties. the required capital and to meet "11 claims But if the Court made the declaration that it was thought necessary to issue the was asked for it would go forth in China shares as fully paid. Whether a better. that the English Court had declared that plan could have been d-vised was not now j Chang Yen-mao had entire dominion over under consideration. The mere existence the properly. The Government at Peking of flotation profits did nut necessarily imply anything improper. Having regard to the state of the country and the risks that had to be run, there was nothing wrong in wht was dune. The method of financing the company had been beneficial to the old shareholders The necessary money had been found, and the interests held by the old shareholders were much more valuable than before. Counsel then dealt with Mr Moreing's letter of 9th November, 19:0. It stated that the China board had been formed and tht Chang would be director-would act accordingly and take hack the property in entire disregard of the rights of everyone. Counce] asked his Lordship either to construe the memorandum and say what it meant, of if any declaration must be made, then that it should be expressly without prejudice to any question of construction. If no construction were to he placed on the document the Foreign Office would be considerably embarrassed. The Court had not to deal with any ordinary case, but one of fare reaching, diplomatic signifoange, Mr. Lovett, in replying upon the whole ease, said that he hoped his Lordship would not be unduly terrified by any allusion to the Foreign Office. He would now trace the history of this piece of Western finance, and he hoped that, in the result, it would not gv forth with the sanction of this Court. Counsel then proceeded to deal at length with the evidence, and in the course of his examination of it he pointed out that the scheme which the plaintiff was led to believe waa carried out by the documents involved the raising of the capital by the issue of shares. No doubt there was a surf of understanding that there were to be 200,010 free " shares, but that was a very different thing from what was done—viz., to issue the whole "f the 1,000,000 sh-res as fully paid, the promoters tuking 625,000 and sad-dung the company with " debenture debt, of £5°0,100. Counsel then ¢ mented severely upon certain letters, particularly one of the 9th November, 1909, written by the defendant Moreing, characterising it as dishonest, and claiming that it rendered him liable to an action of deceit. With regard to what had happened "#fter the formation of the: company, there had bren a deliberate refusal t carry out the terms of the memorandum. The board of direcors had treated it as involving no lability on the company and as having no legal effect. They had practically ignored it. The defendant Moreing had, perhaps, dissociated himself from this course, but he had not resigned his position on the board.
Mr. Lovett had not concluded his reply wher the Court adjourned.
11th February.
Mr. Lovett, in concluding his reply upon the whole case this morning, said that the relief which he asked from the Court was (1) A simple declaration that the memorandum was binding on the defendants, with liberty to apply; (2) an inquiry what damages the plaintiffs had sustained by reason +f the fraudulent misrepresentations of the defendant Moreing contained in certain specific-d letters; (8) xn oder for the payment of such dam "ges by the defendant ©. a. Moreing and his firm; (4) an inquiry what damages the plaintiffs had sustained by reason of the memorandum not having been carried out; and (5) payment by the defendant company of such damages, The learned counsel then dealt as length with the different grounds of defence that had been set up, contendi: g that neither on authority or principle wis there anything to prevent the pl.intiff company from sueing in this country. As to the relief which he claimed against the defendant Moureing, the statements in the letters were untrue in fact, they were intended to and did convey false impression, and upon the authority of Pasley v. Freeman " (2 S: n. L.C., 63),- Aaron's Reefs v. Twiss" ([1896] A.C., 231) and Derry v. Peek" (14 A.C., 337), that was enough to establish the plaintiffs' right to relief. As to the defence of the company that to carry out the provisions of the memorandum would be ultra vires, it was not good law. 'I here was nothing to prevent a company by its articles app..inting a director-veneral with absolute power to do everything exc:-pt what was required by statute to be done by the shareholders in general meeting. The real qu-stions were, tad the Chinese company been deceived And had the defendant company any honest, ground for refusing to carry out the memorandum? If the Court was sat-istled that the answer suggested by the plaintiff to' those two questions was correct, then the plaint: ff w-uld be entitled to damages against the defendant Moreing, and Chang Yen-mao would be able to go back to his own country and satisfy his Government that he was not guilty of the charge which was laid against him, of fattening himself at the expense of his country, His Lordship then said that he yould consider his judgment,
Text read from the printed page and cleaned; old type leaves the occasional error.