the article ultra vires? I know of no obligation imposed by law or statute to create a Reserve Fund out of revenue to recoup the wasting nature of capital. Subject to any provision to the contrary contained in the articles, I believe the disposition of the revenue is entirely in the hands and under the control of the company. Provided there is by the company no infraction of the capital and nothing in the articles to the contrary, the disposition of the revenue is a matter of internal arrangement. I am unable to see in this case that either capital or the produce of capital has been dealt with in a way which is not authorised. The case of BOLTON v. NATAL LAND AND COLONIZATION (Decided before Mr. Justice ROMER, in the Chancery Division, Company-Losses of Capital not made good- Subsequent Declaration of Dividend out of working Profits made since Losses sustained-Injunction. The fact that some portion of the capital of an incorporated company limited by shares has been lost, and not made good, affords no ground for restraining the payment of a dividend out of profits subsequently earned. The business of an incorporated company, limited by shares in the ordinary way, consisted mainly in buying, holding, cultivating, letting, selling, and otherwise dealing with land in South Africa. In 1882 the company, under peculiar circumstances, debited their Profit and Loss Account for that year with the whole loss occasioned by writing off a certain debt of over £70,000 as a bad debt, and per contra credited the same Profit and Loss Account with a sum of nearly £70,000 in respect of an increase in value attributed (rightly or wrongly) to their lands (or a portion of them) in South Africa, above and beyond the cost price at which such lands previously stood in the books of the company, the result being to make the Profit and Loss practically balance each other upon the year's accounts. The company, having subsequently earned a working profit, declared a dividend thereout, in respect of the year 1885. Thereupon the plaintiff, in an action commenced in 1886 to restrain the payment of such dividend, contended that, at the time the value of the lands was written up in 1882, they were valued, and now stood in the company's books at an amount considerably exceeding their true value, and that, before a profit could be deemed to have been made which would be properly available for the payment of a dividend, the lands in question must be written down to their true value, and the difference debited to the Profit and Loss Account, in the same way as the supposed increase had been credited to the Profit and Loss Account for the year 1882. JUDGMENT. Held, that, assuming that a part of the capital had in fact been lost, and not subsequently made good, no sufficient ground was thereby afforded for restraining the payment of the dividend; that the fact of the company having written up the value of their land in 1882, and credited the increase to the profit of that year in the manner described, did not place them under any obligation to bring into account in every subsequent year the increase or decrease in the value of their lands; and that, having regard to the case of Lee v. The Neuchatel Asphalte Company (61 L.T. Rep. N.S. 11; 41 Ch.D. 1), it was not correct, in estimating the profits of a year, to take into account the increase or decrease in the value of the capital assets of the company. The case of OURO PRETI GOLD MINES OF BRAZIL. (Decided before Mr. Justice CHITTY, in the Chancery Division, on 29th October 1892.) Practice-Company-Reduction of Capital-Evidence of Loss. This was a petition for reduction of capital. The chairman deposed that £80,000 was lost, but gave no explanation under what circumstances such loss took place. JUDGMENT. Chitty, J., ordered the petition to stand over for further evidence. In practice he often had the Balance Sheet produced to see that no dividends had been paid out of capital. Some detailed evidence, showing clearly in what manner the £80,000 loss took place, must be given. The case of the NEW ORIENTAL BANK CORPORATION, LIM. (Decided before Mr. Justice VAUGHAN WILLIAMS, in the Chancery Division, on 17th December 1892.) Judicial views as to the duties of an Auditor-Voluntary Winding-up under Supervision v. Compulsory Order. In this case an order was made before the Long Vacation continuing the voluntary winding-up of the bank under the supervision of the Court. Mr. Edward Pratt, a creditor of the company, afterwards presented a petition asking for a compulsory winding-up order, and this petition was ordered to stand over in order that an affidavit might be made by Mr. Thomas A. Welton, the voluntary liquidator. Affidavit having now been made by Mr. Welton, Mr. Pratt's petition was again brought on for hearing. LL Mr. Justice Vaughan Williams said he had read Mr. Welton's affidavit and the exhibits thereto, and had been much impressed with one part, which stated Mr. Welton's reasons for saying that a compulsory winding-up order, if now made, would cause great additional expense. It was desirable, if possible, to avoid that. On the other hand, the affidavit had not removed the impression that there were certain matters which required looking into more vigorously. His Lordship thought that Mr. Welton, having been auditor, was not perhaps the best person to conduct such inquiries. It was desirable to continue the liquidation under supervision, provided proper steps could be taken to have these matters carefully gone into. Sir Horace Davey, Q.C. (who, with Mr. Robinson, Q.C., and Mr. Ingle Joyce, represented the voluntary liquidator and the company), suggested that Mr. Pratt should join the committee of creditors supervising Mr. Welton. In supervision proceedings, if the liquidator did not give satisfaction, any creditor could come to the Court on his own account. Mr. Justice Vaughan Williams said the real difficulty was that the creditors had not full information. One of the advantages attending a compulsory order was that if necessary there could be a public examination of directors, &c. Sir Horace Davey said no doubt the powers under such an order were very large, but he had never heard complaints that liquidators and their advisers were not active enough. It was often said they were too ready to take proceedings. Mr. Justice Vaughan Williams said that might be so generally, but here the liquidator had been auditor. Sir Horace Davey said that Mr. Welton's position as liquidator of the old bank and as auditor of the new one, and the experience he had thus gained, made it advantageous to the creditors to have him for a liqui dator. He was extremely anxious that all the assets should be realised, and he was bound to consider the wishes of the creditors who were against the additional expense and delay of a compulsory winding-up. Of course, opinions differed as to whether compulsory proceedings were more expensive than those under supervision, and they would probably continue to differ, as this was a free country. No grounds whatever were shown for saying that Mr. Pratt was "prejudiced" by the proceedings within the meaning of section 145 of the Companies Act 1862. An allegation had been made that some of the directors had introduced as customers of the bank certain companies of which they were themselves directors, and that the bank had lent money to these companies; but it did not follow that any personal liability attached to such directors or that what they had done was improper. Nor did it follow that the directors were personally liable because through a mistaken but bonâ fide view as to the amount of income a dividend had been paid which such income was insufficient to meet. Nor was there any ground of complaint against Mr. Welton as auditor. He had only to see that the Balance Sheets accorded with the books, and could not inquire into all the circumstances which induced the directors to value debts or other assets at a certain amount. The liquidator invited full inquiry. He placed himself in the hands of the Court, and if any means could be pointed out by which the assets could be more efficiently collected he would, of course, employ them. Mr. George Lawrence, Mr. Theobald, and Mr. F. E. Lemon also opposed the petition. Mr. Pratt, the petitioner, appeared in person. He said he was not willing to join the committee, as it would not meet the requirements of the case. Moreover, he was too old for the duties which it would entail, especially as he would probably meet with some hostility. He read a long written statement in support of his petition, urging that full inquiry was necessary, and that such inquiry could only be satisfactorily had in compulsory winding-up proceedings. JUDGMENT. Mr. Justice Vaughan Williams said that he should not make the order asked for, and must dismiss the petition. His Lordship regretted that Mr. Pratt did not accept the position which had been offered to him on the committee of creditors. At the same time, he thought the petition had not been unreasonably presented. The result of it was that the attention of the Court had been called to matters which might require further examination and investigation. As to Mr. Welton's affidavit, his Lordship was not going to pass judgment on him. Mr. Pratt had not made any tangible suggestion of misconduct against Mr. Welton, though he had suggested that, as auditor, he might have prevented a certain dividend from being declared. His Lordship did not agree with certain views which he gathered from Mr. Welton's affidavit that Mr. Welton entertained as to the duties of an auditor. His Lordship did not think it was taking the true view of the duties of an auditor to arrive, from conversations with directors, at a conclusion whether a Balance Sheet fairly represented the state of the bank's affairs. It was not for an auditor to consider the bona fides of directors, but to deal with the books of the company and with commercial details and figures-not to consider the honesty of its officers. If an auditor once embarked on such an inquiry he was apt, when he arrived at a conclusion, not to continue his investigations. His Lordship, however, was not saying that the auditor could, when he looked into the books, have formed an opinion that the statements in the Balance Sheet were unfounded-there might be nothing on the face of the books to lead an auditor to doubt such statements-and he accepted Mr. Welton's statement that he was anxious to assist in full investigation. The petition would be dismissed without costs, and the costs of the liquidator would be costs in the winding-up. The case of THE EDINBURGH UNITED BREWERIES, LIM., AND OTHERS v. JAMES A. MOLLESON (NICHOLSON'S TRUSTEE) AND ANOTHER. (Decided in the Scottish Court of Appeal before the LORD President, and Lords ADAM, M'LAREN, and KINNEAR, on 17th March 1893.) Investigations preparatory to the formation of Limited Companies. In this action the Edinburgh United Breweries, Lim., and William H. Dunn, 27 Bishopsgate Street, London, sued James A. Molleson, C.A., Edinburgh, as trustee of David Nicholson, Parson's Green, for the reduction of the sale of the Palace Brewery, on the ground that the books had been falsified in order to show a larger profit than that actually earned during the two years preceding the sale. Lord Kyllachy assoilzied the defenders, with expenses, on the ground that if there was a fraud the pursuer had opportunity of discovering it by examination of the books. The pursuers reclaimed, and to-day the Court, following Lord M'Laren, adhered to the judgment of the Lord Ordinary, with expenses. Lord M'Laren, who gave the judgment of the Court, said the case was peculiar in this respect, that while the action was laid on the ground of fraudulent representations, no personal fault was attributable to Mr. Molleson, who was known to be a gentleman of high standing in his profession. The case against him was that he employed Andrew Smith Geddes to keep the books of the brewery while it was under his management as trustee; that Geddes, for his own purposes, falsified the books and the Balance Sheets; that Mr. Dunn was induced to become the purchaser in reliance on the apparent profits exhibited on 'the face of the books and Balance Sheets, and was in that sense deceived by representations for which it was said Mr. Molleson was civilly responsible. So far as his Lordship understood, Geddes had no motive to falsify the books beyond the wish to please his employer and keep his situation by giving an aspect of fictitious prosperity to the business. By the agreement of November between Mr. Molleson and Mr. Dunn the sum of £3,700 was to be paid down, and the balance of the price was to be paid on 31st December, when the conveyance was granted. By the tenth clause of that agreement it was provided |