company for the purposes of its business, and this money the directors had no right to apply in making presents to one of themselves. The transaction was a breach of trust by the whole of them; and, even if all the shareholders could have sanctioned it, they never did so in such a way as to bind the company. It is true that this company was a small one, and is what is called a private company; but its corporate capacity cannot be ignored. Those who form such companies obtain great advantages, but accompanied by some disadvantages. A registered company cannot do any thing which all its members think expedient, and which, apart from the law relating to incorporated companies, they might lawfully do. An incorporated company's assets are its property, and not the property of the shareholders for the time. being; and, if the directors misapply those assets by applying them to purposes for which they cannot be lawfully applied by the company itself, the company can make them liable for such misapplication as soon as any one properly sets the company in motion. All this is familiar law, and must be borne in mind in deciding the present case. Mr. George Newman and his co-directors evidently ignored their legal position entirely. They regarded Mr. George Newman as the company, and it never seems to have occurred to them that he and his brothers could not do as they liked with what they regarded as their own property, or rather as his, for he and his children held the bulk of the shares. If this view were correct in point of law, if the corporate body could be disregarded, it would follow that Mr. George Newman and his brothers would be liable without limit for the debts which were contracted in the name of the company. This would be a just and proper result to arrive at ; but the Court is precluded by the terms of the Companies Act, 1862, ss. 191, 192, from adopting it. The Court is bound to recognize the company as incorporated, and to give effect to all the consequences of such incorporation.

What then are the consequences as regards presents to directors? The cases on the subject are few. The law will be found discussed in York & North Midland Railway v. Hudson (7) and Hutton v. West Cork Railway (5); but there is no case which quite covers.

(7) 16 Beav. 485; 22 L. J. Ch. 329.

this case. Directors have no right to be paid for their services, and cannot pay themselves or each other, or make presents to themselves out of the company's assets, unless authorized so to do by the instrument which regulates the company, or by the shareholders at a properly convened meeting. The shareholders at a meeting duly convened for the purpose can, if they think proper, remunerate directors for their trouble, or make presents to them for their services, out of assets properly divisible amongst the shareholders themselves. Further, if the company is a going concern, the majority can bind the minority in such a matter as this; but to make presents out of profits is one thing, and to make them out of capital, or out of money borrowed by the company, is a very different matter. Such money cannot be lawfully divided amongst the shareholders themselves, nor can it be given away by them for nothing to their directors, so as to bind the company in its corporate capacity.

But, even if the shareholders in general meeting could have sanctioned the making of these presents, no general meeting to consider the subject was ever held. It may be true, and probably is true, that a meeting, if held, would have done anything which Mr. George Newman desired; but this is pure speculation, and the liquidator, as representing the company in its corporate capacity, is entitled to insist upon and to have the benefit of the fact that, even if a general meeting could have sanctioned what was done, such a sanction was never obtained. Individual assents given separately may preclude those who give them from complaining of what they have sanctioned; but, for the purpose of binding a company in its corporate capacity, individual assents given separately are not equivalent to the assent of a meeting. company is entitled to the protection afforded by a duly convened meeting, and by a resolution properly considered and carried and duly recorded.

The

The articles of this company, wide as they are, do not authorize such presents as those impeached by the liquidator, and the result is that his appeal must be allowed as to 3,000l., part of the 10,0001., and as to the 3,500l., and Mr. Newman must be ordered to pay these sums with interest at 4l. per cent. He ought also to pay the costs of the appeal, and the costs of the summons, except so far as

they have been increased by the claim to the 2,500l. and to 7,000l., part of the 10,000l. The costs occasioned by these claims ought to be allowed him, and to be set off against those which he is ordered to pay.

Lord HALSBURY and A. L. SMITH, L.J., concurred.

Order varied; liquidator to have costs of the appeal, and the general costs of the summons.

Theobald asked to be allowed the costs of the shorthand note of the cross-examination of Newman in the Court below on the ground that the Court had been using and relying upon that note, there being no note of the evidence by the learned Judge.

Lord HALSBURY: Yes, I think that ought to be allowed.

Solicitors: Thorne & Welsford, for the Appellant.
W. Brookes Palmer, for the Respondent.

R. C. M

IN RE LONDON METALLURGICAL CO., EX PARTE PARKER.

1895, March 21. VAUGHAN WILLIAMS, J. Company-Winding-up-Costs-Successful Contributory-Payment-PriorityPending Applications-Companies Winding-up Rules, 1890, r. 31.

An alleged contributory who has obtained an order striking his name off the list with costs out of the company's assets is entitled to be paid in full in priority to the costs of the winding-up. If there are other contributories who have obtained similar orders they will all rank pari passu, but payment is not to be postponed because applications are pending by other contributories or by the liquidator, which may result in orders for costs against the company.

As a rule an order for payment of costs by a company in liquidation should be for payment out of the assets of the company and not by the liquidator personally.

ON 24 April, 1894, the present applicant had obtained an order in the winding up of the above company that his name be struck off the list of contributories, and that the liquidator should pay the taxed costs of the application out of the company's assets. The amount of such taxed costs was 131. The assets standing to the account of the company at the Bank of England were, at the date of the above order, 9741. Applications by other persons to have their names struck off the list were pending, but no order had at the date of the application been made upon them. There were also pending actions by the liquidator in which he had given security. liquidator objected to pay the costs in question until the result of the proceedings by other contributories, or by the company, whether then pending, or to be subsequently taken, should be ascertained, so that all might come in pari passu. Parker moved for an order for immediate payment.

R. Younger, for the applicant.

The

These are costs of external litigation, and entitled to be paid in full in priority to any costs of the winding-up: Ex parte Smith, In re Bank of Hindustan, China, and Japan (1), Bailey and Leetham's Case, In re Trent and Humber Shipbuilding Co. (2). Primâ

(1) L. R. 3 Ch. 125; 37 L. J. Ch. 185; 17 L. T. 339; 16 W. R. 170.
(2) L. R. 8 Eq. 94; 38 L. J. Ch. 485; 20 L. T. 301; 17 W. R. 1079.

facie I am entitled to immediate payment. The mere pendency of proceedings by other contributories who have not obtained judgment ought not to affect that right, still less the possibility of proceedings by other contributories. I rely on In re Home Investment Society (3) and the view of PEARSON, J., in In re Dominion of Cana la Plumbago Co. (4).

[He referred also to Buckley, Co. Acts, 5th edit. p. 296.]

Ashton Cross, for the liquidator:

The application is premature. The applicant is only entitled to payment in due course of administration: Cape Breton Co. v. Fenn (5), otherwise an ignoble scramble would be caused: Ex parte Percival, In re Marlborough Club Co. (6), In re Staffordshire Gas & Coke Co. (7), at p. 527.

[VAUGHAN WILLIAMS, J.: The successful litigant is not a claimant in the administration. His right is to be paid in full, not a dividend.]

Subject to the right of other successful litigants to come in pari passu: In re Dronfield Silkstone Coal Co. (No. 2) (8).

[VAUGHAN WILLIAMS, J.: When the other successful litigants present their orders to the Court, they are all entitled to come in on an equality.]

If once the Court is to wait it must wait the result of pending proceedings. Sections 85 and 87 of the Companies Act, 1862, were passed to prevent one creditor getting priority. The view taken by the Court of Appeal in In re Dominion of Canada Plumbago Co. (4) is right.

[VAUGHAN WILLIAMS, J.: That case, as I understand the judg (3) 14 Ch. D. 167; 28 W. R. 576.

(4) 27 Ch. D. 33; 53 L. J. Ch. 702; 50 L. T. 518; 32 W. R. 425; 33 W. R. 9.

(7) 8 R. 365; [1893] 3 Ch. 523; 63 L. J. Ch. 68; 69 L. T. 376.

(8) 23 Ch. D. 511; 52 L. J. Ch. 963; 31 W. R. 671.