[cuaime over non-delivery of bonds. [Counzes-Cursnt' of refusal to take delivery of bonds.
Counsm: Mr. H. A, Tecks for Plaint Mr. Ranald MeDonald for Defendant.
Judgment delivered on August 1 Judge P. Grant Jones.
Judgment was given for plaintiffs with costs on both the claim and the chunter-claim by Judge P. Grant Jones In HM. Supreme Court on August 1 In the case brought by the Asolclated Investments, Lid., In quid: lon, against Aaron E, Moses. Mr, 1H. A. Reoks appeared for the plaint-Mis and Mr. Ranald MeDonald for the Jdefendant in the action, which con-Jeerned a transaction between the parties whereby defendant was to supply plaintiffs with 3,000 Belgian 1932 bonds, the deal involving a sum'
$198,000. Plaintiffs claimed the tum' of $27,002, and sundry other monies. while defendant fled a sot off and counter-claim, The plaintiff in this action is a pri vote company with limited lability Incorporated under the "Companies JOrdinance, 1932, and now in volunlary liquidation: the defendant 3s a Joroker and member of the Shanghs Stock. Exchange, the against him is for $27,002 balance of sum of $44,700 deposited with him for the purpose of posing for a Jnumber of Belgian bonds which formed the subject-matter of an agreement of sale between the parties, with Interest and ancillary relief. The defendant alleges that the has appropriated the amount in Jquestion to various items owing to him from the company and to loss arising out of the company's failure to take delivery of rome of fronds; alternatively' he seeks to oft such items and loss and counter claims in respect of them.
The facts, as far as T have been able to extract them from a weller conflicting and confusing evidence, fare these: Mr. J. E Judah, who subsequently became the managing director of the plaintiff company, was employed with a Swiss concern for {the sale of bonds called the United Bond Investment. Company Limited. To this concern the defendant Moses acted as broker and In it he also held shares. In the former capacity he purchased through the Honskons Shanghai Banking Corporation 3000 Belgian Emprunt 4 Lots 1932. bonds for" the United Bond Tnvestment Company but that company never ook them up and subsequently went into liquidation. From the company.
liquidation "fosses, at the sug-ection of Judah, purchased the bonds with a view to' their sale to the Jpublic' on. the" instalment system through the medium of a company which Judah was to promote for the Purpose. Moses agreed to take 48 shares in this company and aleo to carry another 48 shares for Judah at 8 per cent per annum; four shares were taken in the name of Gray and 24 by A.M Vartaniantz who was subsequently bought out by Moses "to reduce expenses." The company was duly Incorporated on February 9, vestments Lid. afterwards transferred. to Shanghai; objects were declared to be the jecquisition and sale of bonds and int other securities and its nominal capital was fixed at $50,000. divided into a thousand shares of $50 each. The subscribers to the memorandum of association were Joseph Edwin Judah and James Albert Gray and by the articles Messrs, Judah and Gray were named first directors of the company. "The paid-up capital was $6200, and of the 124 shares re-resented therein Moses owned 72 and paid for 120 shares.
"one-man Company"
It was objected for the defence that this was nothing ko what Is known In common parlance as a "one-man company," 'a5 Moses was not a director and_had no control lover the company. "But Moses owned Most of the shares in the company and it is clear law (Marshalls Valve Gear Ca, v. Manning, Wardle & Ca) that the majority of the shareholders Ina company have the ultimate control of is affairs and can assert their rights in general meeting: the company may therefore not unfairly be, considered as approximating to "one-man company." Until the year 1894 no doubt was openly, expressed, as to the regularity of the consutulon of such companies, but in that year their validity was challenged in the case of Broderip v, Salomon. 'There the defendant, in' order" to obtain the "advantages of limited Vabitity, had converted his leather business into a private company: the shares in the capital he. took mortgaged certain. debentures to Broderip as security for a oan but at the end of the year the company got into dimeulties, Broderip brought fu action to enforce the debentures winding-up order was shortly afterwards made against the company on another creditor's petition, 'There were unsecured creditors 10 the extent of several thousands of pounds and" Vaughan Williams" J., perhaps not unnaturally, considering that the company was' a sham and mere alias of Salomon, decided In effect that the latter was bound to pay the unsecured creditors out of his own pocket.
The case then went to the Court of "Appeal where all the Lords Justices insisted, In the words. of Lindley L. J. that "the legislature never contemplated an extension of limited lability to sole traders. or to a fewer number than seven," Was never intended," said Lopes LI. "that the company' to be constituted should consist of one substantial Jperson and six more dummies, nominees of that person without any cal Interest In the company." "And Key L. Ji: The statutes were in= tended' to\ allow seven or more per= sons, bona fide associated for the purposes of trade, to limit their iabitity under certain conditions and become a corporation, but they were not intended to leyalise a pretended association for the purpose of en:
ihiing an individual fo carey on his own business with limited liability in the name of a joint stock com: pany." These views were, however, overruled by the House of Lords on Jthe technieat canon of construction that the intention of Parliament ts to be sought only in the words of the enactment. "I can only," said the Lord Chancellor, "And the true intent and meaning of the Act from the Act itself" Tt Is, to my mind, at least conceivable that the legisla: ture of 1862 itself never envisaged the possibility of the "one-man com= pany" which is at any rate incompatible with conditions in this country where it operates to enable an alien corporation to hold practically all the shares in a. so-called British com-any with the assistance of a suf Clent number of British subjects as dummy directors to satisfy the requirement of Article 104 of the China Order in Council, 1925.
Text read from the printed page and cleaned; old type leaves the occasional error.