The question does not seem, by the cases above cited, to have been thoroughly and satisfactorily settled--but it is conceived that, except in a case of complication and difficulty, the Court would not decline to exercise the jurisdiction. In In re London and Provincial Telegraph Co. (a) a preliminary objection to the jurisdiction as between shareholders was, after some discussion, waived. Semble, the discretion which, according to Ward and Henry's Case (b), whether dismay be exercised as to the exercise of the jurisdiction between two cretionary. members does not exist in the same manner so as to make the jurisdic tion discretionary only as between a member claiming to be taken off the register and the company (c). But, whether as between vendor and purchaser (d), or as between a shareholder and the company (e), if the Court is of opinion that upon the whole a bill had better be filed, it is probably entitled in its discretion to decline to proceed under this section, and to direct the matter to stand over for a bill to be filed. In Simpson's Case (f) a motion by a shareholder against the company under this section was refused, without prejudice to a bill being filed, on the ground that the case was one of so much doubt and difficulty that the Court was not justified in making an order. right to an A person whose name has been improperly entered on the register, is Member's entitled to have it removed by the order of the Court, although the shares in respect of which it was entered have been declared forfeited, and the forfeiture has been entered on the register (g). For when a person's name has been wrongfully put upon the register the order of the Court under this section to remove it is, as against the company, a complete indemnity to him, and thereby every other member of the company is precluded from moving for the restoration of the name. But it is not in the power of the directors by simply removing his name effectually to indemnify him. And, therefore, if the directors desire to remove the name they must apply to the Court for the purpose; and if they do not do so, the shareholder may himself apply although his name has been in fact removed (h). On an application under the section the Court is not bound to follow what a Court of law would do in such a case, but will take into consideration any principle of equity applicable to the subject; and if registration have been obtained by fraud on the directors the Court may interfere to rectify the register (i). order. Court will regard principles of equity. The Court will have regard to who is the applicant; and where, Application of ' owing to the default of the company, a transfer has not been registered official liquida tor. Jurisdiction, when given. I. "WITHOUT SUFFICIENT Misrepresentation; before the winding-up, the Court will not rectify the register on the application of the official liquidator, whatever may be the right of the transferor to have it rectified; for the official liquidator in such a case represents only the company, to whose default the error is owing-and the contributories have no interest in the question except through the company, and the creditors have no direct equity against a person whose name has never been held out to them (a). The company may by laches lose their right to have the register rectified (b). Where, however, registration of a transfer has been obtained by frand there are numerous cases in which, on the application of the official liquidator, the register has been rectified (c). The jurisdiction arises in two cases: (1) where the name of a person is, without sufficient cause, entered in or omitted from the register; and (2) if default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member of the company. Except in the two cases above mentioned, no jurisdiction to rectify the register exists. Thus, in Ex parte Ward (d), the articles of association provided that in case the whole of the shares should not be subscribed for or allotted, the registered members of the company for the time being should, iƒ the directors should by resolution so declare, be and continue associated for the objects thereof; and the business of the company should commence from that time. No such resolution was passed, and a shareholder, having successfully resisted an action for calls, applied under this section to have his name removed from the register. The Court held that it had no power to remove it, none of the circumstances specified by the section having occurred. "If a man has been induced by fraudulent mis-statements or fraudulent suppression to become a member of a company, and thereupon his name has been entered on the register, that entry will have been without sufficient cause" (e); to which Giffard, L.J., adds in Ex parte Kintrea (f), "It is clear, then, according to this, that if there is a fraud, or if the transaction is such that it cannot stand, the name is on the register without sufficient cause." Any person who, upon the faith of the prospectus issued by a company has been induced to obtain an allotment of shares, and who, upon referring within a reasonable time to the memorandum of association, has found that the business is to be of a different or more extensive character than that which the prospectus indicated, is entitled upon an application made within reasonable time and before proceedings have been taken to wind up the company, to withdraw and have his name removed from the register upon a motion under this section. The effect of partial misrepresentation is not to alter or modify an (a) Sichell's Case, L. R. 3 Ch. 119; and see Re General Floating Dock Co., Hughes' Case, 15 W. R. 476; 15 L. T. (N.S.) 526. (b) Parson's Case, L. R. 8 Eq. 656. (c) See s. 22. (d) L. R. 3 Ex. 180. (e) Per Kelly, C.B., in Ex parte Ward, L. R. 3 Ex. 180. (f) L. R. 5 Ch. 95, 99. agreement pro tanto, but to destroy it entirely, and to act as a personal bar to the party who has practised it (a). "If it can be shewn that a material representation, which is not true, is contained in the prospectus, or in any document forming the foundation of the contract between the company and the shareholder, and the shareholder comes within a reasonable time, and under proper circumstances, to be released from that contract, the Courts are bound to relieve him from it, and to take his name off any list of shareholders or contributories on which it may have been put" (b). Contracts of this description between an individual and a company, so far as misrepresentation or suppression of the truth is concerned, are to be treated like contracts between any two individuals, subject, however, to this rule, that, whereas upon the faith of a person becoming a member of the company various persons are induced to deal with the company, and to become shareholders, it is necessary for him, in order to set aside a contract of this description, to come with the utmost diligence for that purpose, so that no person may be misled by the fact of his remaining a member (c). And the rule laid down by Turner, L.J., in Jennings v. Broughton (1) will also be borne in mind, "that, although it is the undoubted duty of the Court to relieve persons who have been deceived by false representations, it is equally the duty of the Court to be careful that, in its anxiety to correct frauds, it does not enable persons who have joined with others in speculations, to convert their speculations into certainties at the expense of those with whom they have joined." But, where it is clear that there has been material misrepresentation or suppression, the shareholder is, unless barred by laches or acquiescence, entitled as against the company, to have his name removed from the register (e). And as to the question of the company being responsible for mis- of agent imrepresentations on the part of the directors the rule was laid down by putable to the Lord Chelmsford, in Western Bank of Scotland v. Addie (ƒ), that "where company. a person has been drawn into a contract to purchase shares belonging to a company by fraudulent misrepresentations [or by fraudulent concealment (g)] of the directors, and the directors, in the name of the company, seek to enforce that contract, or the person who has been deceived institutes a suit against the company to rescind the contract on the ground of fraud, the misrepresentations are imputable to the company, and the purchaser cannot be held to his contract, because a company cannot retain any benefit which they have obtained through the fraud of their agents." (a) Clermont v. Tasburgh, 1 Jac. & W. 112. () Per Turner, L.J., in Reese River Co., Smith's Case, L. R. 2 Ch. 604, 609; and see Blake's Case, 34 Beav. 639; Rye's Case, 3 Jur. (N.S.) 460; Ship's Case, 2 D. J. & S. 544; and other cases cited below, Stewart's, Austin's, Webster's Cases, &c. (c) Railway Co. of Venezuela v. Kisch, L. R. 2 H. L. 99, 125. (d) 5 D. M. & G. 126, 140. (e) Downes v. Ship, L. R. 3 H. L. 343. (f) L. R. 1 H. L., Sc. 145, 157. Questions to be discussed. (i.) What constitutes misrepresentation in prospectus. And Wood, V.C., said, in Henderson v. Lacon (a): “I think the cases clearly shew this, that any representations made by the agents of a company which form the foundation of a contract between that company and a third person-those misrepresentations lying at the root of the contract-will entitle the other party to avoid the contract, and the company must in that sense take upon themselves the consequences of the misrepresentations of their agents." But if an officer of the company, not being a director, answer inquiries which do not properly fall within the business of the company deputed to him, the representations of such officer cannot, in the absence of proof, be imputed to the directors (b). It will be convenient to consider in order the following points: (i.) What constitutes such a misrepresentation, or such a discrepancy between the prospectus and memorandum, as entitles the shareholder to be relieved from his contract. (ii.) What is a reasonable time within which he must apply for relief. (iii.) The difference in his right to relief as against the persons who prepared and issued the prospectus, or the company, and as against the creditors of the company. (iv.) If he be retained as a contributory, what rights he has against the persons or the company who have fraudulently induced him to take shares. A contract to take shares cannot be set aside because it was founded on a prospectus which contains exaggerated views of the advantages of the company, but does not contain any material mis-statement of fact (c). The object of a prospectus is to invite the public generally to join the proposed undertaking: and in an advertisement of this description allowance must always be made for the sanguine expectations of promoters, and no prudent man will accept the prospects which are always held out by the originators of every new scheme, without considerable abatement. But though some high colouring, and even exaggeration may be expected, yet no mis-statement or concealment of any material facts or circumstances ought to be permitted. The public ought to have the same opportunity of judging of everything which has a material bearing on the true character of the adventure as the promoters themselves possess (d). Exaggeration is a totally different thing from a misrepresentation of any precise or definite fact, as to which there must be uberrima fides on the part of the contractors (e). (a) L. R. 5 Eq. 249, 261; and see New Brunswick Co. v. Conybeare, 9 H. L. C. 711; 31 L. J. (Ch.) 297. (b) Partridge v. Albert Life Assurance Co. (Albert Arbitration), 16 S. J. 199. (c) Denton v. Macneil, L. R. 2 Eq. 352; and see New Brunswick Co. v. Conybeare, 31 L. J. (Ch.) 297; 9 H. L. C. 711, on misrepresentation generally, and the liability of the company for the representations of its agents. (d) Central Railway Co. of Venezuela v. Kisch, L. R. 2 H. L. 99, 113; and see 3 D. J. & S. 122, 135. (e) Per Wood, V.C., Ross v. Estates Investment Co., L. R. 3 Eq. 122, 136. "Those who issue a prospectus holding out to the public the great advantages which will accrue to persons who will take shares in a proposed undertaking, and inviting them to take shares on the faith of the representations therein contained, are bound to state everything with strict and scrupulous accuracy, and not only to abstain from stating as fact that which is not so, but to omit no one fact within their knowledge the existence of which might in any degree affect the nature, or extent, or quality of the privileges and advantages which the prospectus holds out as inducements to take shares” (a). In Oakes v. Turquand Lord Chelmsford said (b): “The objection to the prospectus is, not that it does not state the truth as far as it goes, but that it conceals most material facts with which the public ought to have been made acquainted, the very concealment of which gives to the truth which is told the character of falsehood." A mere difference in the language of the prospectus and the memorandum will not relieve the shareholder from his liability. The question in every case is, whether the obligations incurred under the memorandum do or do not go beyond those which would have been incurred under the prospectus (c). "In all those matters which are not contradictory to the prospectus, but are compatible with it, the applicant for shares cannot plead ignorance of the clauses of the articles of association, which profess to execute the objects of the prospectus, even if they go somewhat beyond it, unless they are wholly incompatible with it” (d). Again, in construing a prospectus, the preliminary character of the document must be taken into account, so that often a future sense must be given to words which it contains in the past and present tense; and unless it distinctly refers to what is actually existing at the time, it must be taken to represent what will be the state of things when the company is completely formed (e). A mis-statement as to the names of the directors of the company is an important misrepresentation (ƒ). Where the prospectus stated that the Crédit Foncier would, in conjunction with the A. Bank and the B. Bank, receive applications for the capital of the company, and on the back of the prospectus was printed, "issued by the Crédit Foncier, in conjunction with the A. Bank and the B. Bank," and the A. Bank had no connection with the company except as its bankers; it was held that there was nothing to lead a reasonable man to suppose that the A. Bank held shares in the company, and no misrepresentation entitling to relief (y). If the representation in the prospectus be untrue in point of fact, it (a) Per Kindersley, V.C., in New Brunswick and Canada Railway Co. v. Muggeridge, 1 Dr. & Sm. 363, 381; approved in Railway Co. of Venezuela v. Kisch, L. R. 2 H. L. 99, 113; and see Henderson v. Lacon, L. R. 5 Eq. 249, 262. (b) L. R. 2 H. L. 342, (c) Downes v. Ship, L. R. 3 H. L. 343, 354. (d) Per Romilly, M. R., Ec parte Briggs, L. R. 1 Eq. 483, 486. (e) Hallous v. Fernie, L. R. 3 Ch. (f) Munster's Case, 14 W. R. 957. Representation not wilfully false. |