COUNSEL: Swinfen Eady, Q.C., A. T. Lawrence, Q.C., A. R. Kirby, and Peterson, for the plaintiff company.

Cozens-Hardy, Q.C., Carson, Q.C., Hon. E. C. Macnaghten, Q.C., and E. Russell Clarke, for the syndicate, and the defendants other than Colonel North’s executors.

Crackanthorpe, Q.C., Farwell, Q.C., and O. L. Clare, for Colonel North’s executors.

 

SOLICITORS: Slaughter & May; Budd, Johnsons & Jecks; Blunt & Co.

 

JUDGES: Lindley M.R., Rigby and Collins L.JJ.

 

DATES: 1897 July 13, 14.

1898 Jan. 25, 26, 27, 28, 29; Feb. 1, 2, 3, 8, 9, 10, 15, 16, 17; May 10.

1899 April 27, 29; May 1, 2, 3, 5, 6, 8; June 26.

 

 

Company – Memorandum and Articles of Association – Promoters – Directors, Duties of – Fiduciary Relation – Appointment of Directors of one Company as Directors of the other – Contract – Sale by Directors in one Character to themselves in another – Dual Relation – Independent Board – Contract by Company with its Directors – Agency – Prospectus – Concealment from Shareholders of Material Facts – Misrepresentation – Misfeasance – Breach of Trust – Vendor and Purchaser – Voidable Contract – Rescission – Damages – Delay – Change of Position.

 

The L. Company was promoted and formed by the directors of the L. Syndicate for the purpose of purchasing part of the property of the syndicate, consisting of nitrate works. The directors of the syndicate prepared and signed the memorandum and articles of association of the company, the articles nominating them as directors and stating specifically that they were also the directors of the syndicate. They also prepared the company’s prospectus and purchase contract, and affixed the seals of the syndicate and of the company to the latter. The company’s solicitors and secretary were also the same as those of the syndicate. Two years after the date of the contract and the completion of the purchase the shareholders of the company, believing that their property had been purchased at an over-value and that there had been misrepresentations in the contract and prospectus, appointed an independent board of directors who, after investigating the facts and with the sanction of a general meeting of the shareholders, brought an action against the syndicate and the directors for rescission of the contract and damages on the ground of misrepresentation, misfeasance, breach of trust, and concealment of material facts, but not alleging fraud. From the date of the contract and down to and also since the commencement of the action the company had, first by its original directors and afterwards by its independent board, carried on business and worked the property the subject of the contract. At the trial Romer J. dismissed the action.

 

On appeal by the company:-

 

Held, by Lindley M.R., and Collins L.J., that the company was not entitled to rescission or damages, for (1.) at the date of the contract the company had, by its memorandum and articles, notice that its directors were also the vendors or agents of the vendor syndicate, and the mere fact that its directors did not constitute an independent board was not a sufficient ground for setting aside the contract; (2.) there had been no misrepresentation made to, or any material fact concealed from, any of the persons who were members of the company at the date of the contract, those persons being the directors themselves; (3.) although the contract [*393] and prospectus were, on the evidence, misleading in certain particulars which would have entitled the company at the time to repudiate the contract, yet through the subsequent alteration of the property consequent on its being worked by the company, the position of the parties had been so changed that they could not be restored to their original position; and (4.) the defendants, the directors, had not been guilty of such negligence or breach of trust as to render them liable in damages in law for the loss occasioned to the company, or in equity to make good the loss.

 

But held, by Rigby L.J., (1.) that, in the promotion of the company, the preparation and sealing of the contract, and the preparation and issue of the prospectus, the original directors had, while acting as sole agents for the vendor syndicate, constituted themselves sole fiduciary agents for the purchasing company, and that the company was therefore entitled to rescission (but accounting for the profits of its working) on the principle that no fiduciary agent can bind his principal by a sale to him of such agent’s property, where the principal has purchased without independent advice; and that the notice in the memorandum and articles of the company of the double relation of its directors was ineffectual to discharge them from the obligations involved in that principle; and (2.) that the company had not lost its right to rescission either (a) through delay – for time did not run during the domination of the original directors and the non-disclosure by them of material facts – or (b) through alteration of the property, the alteration having been in effect the act of the vendor syndicate by its directors.

 

Erlanger v. New Sombrero Phosphate Co., (1878) 3 App. Cas. 1218, and Salomon v. Salomon & Co., [1897] A. C. 22, discussed.

 

Statement of the principles as to (1.) the fiduciary relationship between the promoters of a company and its shareholders; (2.) the validity of contracts between a company and its directors as promoters; (3.) the non-liability of directors for losses when acting intra vires and honestly; (4.) the voidability of a contract for misrepresentation; and (5.) the impossibility of rescinding a contract after change of position.

 

IN the year 1889 the Lagunas Syndicate, Limited (hereinafter called “the syndicate”) was incorporated under the Companies Acts with a capital of 110,000£. in 1100 shares of 100£. each, its principal object being to acquire, by agreement with Colonel John Thomas North, certain nitrate deposits and works known as the “Lagunas Nitrate Works,” consisting of 548 estacas of land in Chili, and the buildings, plant and machinery in and about the same, and to resell portions of these properties to companies intended to be formed by the syndicate. An estaca is a Spanish measure equivalent to from six to seven English acres. In the same year the syndicate acquired this property from Colonel North at the price of 110,000£., payable [*394] as to 109,300£. in fully paid-up shares of the syndicate and as to the balance, 700£., in cash. In 1890 the syndicate increased its nominal capital to the total amount of 275,000£.

 

In the early part of 1894 the syndicate, through its board of directors, resolved to promote a company for purchasing 200 of the 548 estacas, together with an “oficina” or factory, otherwise called a “maquina,” erected thereon for the manufacture of nitrate of soda, with the plant and stock and a certain supply of water; the price to be 850,000£., payable as to 550,000£. in cash, and as to the balance, 300,000£., in fully paid-up shares of the intended company.

 

The directors of the syndicate then prepared the memorandum and articles of association of the intended company, and thereby provided that the company should carry into effect an agreement of June 18, 1894, hereinafter mentioned, a draft of which they had also themselves prepared. They also prepared the draft of a prospectus for issue to the public. The directors of the syndicate, and the actual promoters and creators of the company, were seven in number, namely, Colonel J. T. North, Robert Harvey, Richard Robertson Lockett, Edward Edmondson, George Fleming, Thomas Douglas Murray and Maurice Jewell. On June 15, 1894, the company was registered under the Companies Acts with the title of “The Lagunas Nitrate Company, Limited” (hereinafter called “the company”), having a nominal capital of 900,000£. in 180,000 shares of 5£. each, the memorandum and articles of association being signed by the seven directors of the syndicate and two other persons. The memorandum of association stated that the company had been formed to acquire land and works of the syndicate and its engagements and liabilities with reference thereto; and particularly to complete and carry into effect (with such modifications, if any, as might be thought fit) an agreement already prepared and settled for the purchase of such property from the syndicate. Art. 5 of the articles of association required the directors of the company to complete and carry into effect (with such modifications, if any, as they might think fit) the agreement with the syndicate referred to in the memorandum of association. Art. 57 nominated the above-named [*395] seven persons as the seven first directors of the company, stating that they were all directors, and the only directors, of the syndicate: it enabled the directors for the time being, at any time and from time to time, to appoint any other person as a director, but so that the total number of directors should not exceed the maximum prescribed number. It moreover empowered the directors to fill up any casual vacancy in the office of director by the appointment of a successor, who should hold office for the remainder of the time for which the predecessor in ordinary course would have held office. Art. 66 enabled the company, by extraordinary resolution, to remove any director. Arts. 82 and 83 conferred upon the directors extensive powers of acting for the company in all matters of business. By art. 96 no member of the company was to have any right to inspect any account or book or document of the company, except such as was actually conferred upon him by statute or should be authorized by the directors or by the company in general meeting.

 

Before any prospectus was issued, and before any other person in addition to the nine subscribers to the memorandum of association had joined the company, namely, on June 18, 1894, the agreement referred to in the memorandum and articles of association was entered into by the syndicate and the company under the common seals of both. By that agreement, after reciting that the syndicate was the owner of extensive nitrate grounds and property known as “Lagunas,” in the province of Tarapaca in the Republic of Chili, and had recently erected on a portion of such ground an “oficina” with all usual and necessary plant and appliances capable of producing about 300,000 quintals of nitrate monthly, and had at considerable expense obtained a supply of water and conveyed it to the grounds in pipes, and had erected a pumping-station with engines, boilers and plant, so as to supply water sufficient for three oficinas: it was agreed (1.) that the company should purchase from the syndicate 200 estacas of the syndicate’s nitrate grounds together with the said oficina and all its machinery, plant and appliances in complete working order, the purchase to include all the extracted caliche (i.e., the raw [*396] product from which nitrate was manufactured) on the purchased grounds, all nitrate in course of manufacture, all live and dead stock on June 30, 1894, and the water-rights thereinafter mentioned, but not the manufactured nitrate in canchas (drying floors); (2.) that the company should be entitled to one-third of the total existing water-supply of the syndicate, after providing thereout so much as should be required by the Nitrate Railways Company, Limited, under a contract which had been entered into with that company by the syndicate; (4.) that the company should pay to the syndicate as from June 30, 1894, one-third of the cost to the syndicate of maintaining the said water-supply; (5.) that the consideration for the sale should be 850,000£.; (10.) that the company should be bound by an agreement of July 1, 1890, between the Nitrate Railways Company, Limited, and the syndicate for the carriage of goods over the company’s line for ten years, also by an agreement of August 19, 1890, whereby the syndicate had appointed the firm of North & Jewell (consisting of the above-named Colonel North and Maurice Jewell) port agents of the syndicate on the west coast of South America for a term of ten years, and by an agreement of December 21, 1891, whereby the syndicate had appointed the firm of W. & J. Lockett of Liverpool (in which the above-named Richard Robertson Lockett was a partner) the sole mercantile agents in England of the syndicate for ten years; and the company agreed to enter into contracts direct with the said railway company and the said Messrs. North & Jewell, W. & J. Lockett and Colonel North, to perform the obligations of the said agreements so far as they related to the purchased grounds; (12.) that the purchase-money should be paid, as to 300,000£. in fully paid shares of the company, and as to the balance, 550,000£., in cash; (16.) that the company should pay all the costs, charges and expenses of the syndicate in connection with the sale; and (18.) that if the company failed to satisfy the syndicate on or before June 24, 1894, that the 600,000£. (being two-thirds of the company’s capital) for which the public were by the prospectus to be invited to subscribe, had been subscribed for in cash and allotted to responsible persons, the syndicate might, by notice at any time before [*397] September 30, 1894, the date fixed for the completion of the contract, annul the sale.

 

The agreement having been executed, the directors of the syndicate, in their names as directors of the company, issued to the public a prospectus of the company substantially in the form of the draft they had already prepared. This prospectus, which bore date June 18, 1894, the date of the agreement, invited subscriptions for 600,000£. of the nominal share capital of the company. It stated that the nitrate grounds of the syndicate acquired by the company were “believed to contain the richest deposit of caliche in the province of Tarapaca”; that the said oficina was “of the most improved modern construction, capable of manufacturing 300,000 quintals of nitrate of soda per month”; that the syndicate had obtained, and brought in pipes into Lagunas, a supply of water, and that the company would have the right of using one-third of the surplus water of the syndicate after supplying the requirements of the railway company; that the company would have the benefit of the said agreements with the said Messrs. North & Jewell and Messrs. W. & J. Lockett; that the syndicate was formed in 1889 with a view to acquiring and developing the Lagunas property, and that its original share capital represented only the prime cost of the grounds at a time when no railway communication with the coast existed; and that it was now selling (at a profit) to the company a portion only of its property, with an oficina “in complete working order.” It further stated that the business would be taken over as a going concern as on June 30, 1894, and that the company would have the benefit of the contracts entered into by the syndicate for the supply of nitrate, and would also be bound by and have the benefit of the agreements referred to in the above agreement of June 18, 1894, and would also take over the services of the whole or greater part of the staff of the syndicate in connection with the oficina, “which is now already producing nitrate on a very important scale.” It stated, moreover, the directors’ belief that owing to the valuable nature of the caliche deposit, and the facilities of manufacture which would be possessed by the company, the profits from the production of nitrate would be [*398] very large, “and that the manufacture of iodine would also prove a source of profit”; also that “in their opinion the company is acquiring the property at a favourable price and on conditions most satisfactory to the new company.” It then went on to state that “the directors of this company are directors of the Lagunas Syndicate, Limited, and hold a considerable portion of the shares of that syndicate, and the purchase price has been fixed by them at 850,000£., of which 300,000£. will be paid in fully paid-up shares of this company, and the balance in cash, and the remaining 50,000£. of the capital, after paying all expenses in connection with the formation of the, company and the acquisition of its property (all which expenses are to be borne by the company), will, in the directors’ opinion, supply sufficient working capital for carrying on the company’s business.” It then stated that the only agreement entered into was the above-mentioned agreement of June 18, 1894. The solicitors and secretary named in the prospectus were the same as those of the syndicate.

 

The applications for shares received in answer to the prospectus were very numerous, and far exceeded the number of shares actually allotted. The property comprised in the agreement of June 18, 1894, was duly conveyed to the company, which thereupon proceeded to work it, the syndicate, at the company’s request, making considerable outlays upon it in putting the oficina in complete working order, and in providing further necessary water supply, which was completed in December, 1894. The business of the manufacture of nitrate of soda was for some time profitably carried on by the company, and large dividends were declared and paid. The 300,000£. worth of the company’s shares received by the syndicate in part payment of the purchase-money for the property were forthwith sold by the syndicate at a premium.

 

In January and February, 1895, resolutions were passed by the syndicate for a voluntary winding-up, and liquidators were appointed, one of whom, George Fleming, was a director both of the syndicate and of the company. Towards the end of 1895 the shareholders of the company, being under the belief that their property had been purchased at an exorbitant price, [*399] and that there had been misrepresentations in the purchase agreement and the prospectus, compelled three of the original directors to retire, and appointed three independent directors in their places. These new directors then investigated the facts connected with the formation of the company and the sale of the property purchased by it. On December 3, 1895, another independent director, a Mr. Porlitz, joined the board. In March, 1896, further independent directors were appointed, and by the death of Colonel North on May 9, 1896, the voting power of the board ceased to be under the control of the remaining syndicate directors. As the result of the investigation damages for misrepresentation were claimed by the company from the syndicate, but the company still continued to carry on their works. Ultimately, on June 12, 1896, the market price of nitrate and of the company’s shares having fallen, the present action was commenced in the name of the company, upon the instructions of the new directors, against the syndicate, its liquidators, the said G. Fleming, E. Edmondson, R. Harvey, R. R. Lockett, and T. D. Murray, five of the original directors of the syndicate and the company, and the executors of Colonel North and Maurice Jewell, the other two, both deceased, claiming (1.) rescission of the agreement of June 18, 1894, and the return and delivery-up and surrender of all cash and shares paid or issued thereunder, with interest on such cash, and any dividends declared and paid on such shares, the plaintiff company accounting for any profits made by it in respect of the said property sold to it; (2.) payment by the defendants of the sum of 39,000£., expended out of moneys of the plaintiff company in putting the oficina into proper working order, providing plant and appliances necessary for its proper working and making good alleged defective workmanship in its construction, with interest on such sum; (3.) an indemnity by the defendants in an action brought in the Queen’s Bench Division by Messrs. W. & J. Lockett against the company to recover various sums of money alleged to be due under the said agreements of December 21, 1891 (the Lockett agreement), and June 18, 1894; (4.) alternatively, an account of all profits made by the syndicate and [*400] the said directors, and payment to the company of the amount so due, with interest; (5.) damages as against the syndicate and the said directors, and the estates of such of them as were dead, for alleged misrepresentation, misfeasance, breach of trust and breach of warranty; (6.) damages as against the syndicate for alleged breach of contract to hand over the said oficina in complete working order and with all usual and necessary plant and appliances, and with all modern improvements, and with such proper water supply or with all usual and necessary plant and appliances as was provided for by the said agreement of June 18, 1894, with other incidental relief, including administration of the estates of Colonel North and Maurice Jewell, if assets were not admitted. The new directors then proceeded to summon a general meeting of the shareholders of the company for the purpose of explaining the position of affairs and obtaining their sanction to the prosecution of the action. The meeting was held on July 29, 1896, and a resolution was then passed by an overwhelming majority sanctioning the continuance of the action. This was followed by the retirement, on or about August 7, 1896, of the remaining syndicate directors, the management of the company being thus left entirely in the hands of the new directors.

 

Notwithstanding the action the company continued to carry on its business, having on July 28, 1896, given the defendants notice of its intention to do so and thus maintain its undertaking in working order in the interests of all parties until the questions in the action had been disposed of, but without prejudice to the company’s rights. While so continuing to carry on their works, the company, in April, 1897, declared an interim 4 per cent. dividend, but under legal advice it was not paid. The works had since been stopped altogether.

 

The company did not base its action on fraud, which was not in fact alleged, but the grounds of action put forward by the company in its statement of claim were shortly these: First of all it was said that there had been misrepresentation in the prospectus and the agreement of June 18, 1894, in the following particulars: (1.) the nitrate grounds acquired by the company were not rich in caliche, as stated, but, on the contrary, [*401] the deposits were of inferior quality; (2.) the oficina was not in complete working order, nor of the most improved modern construction, nor capable of producing 300,000 quintals of nitrate of soda per month, or any such amount; on the contrary, the directors found themselves obliged to expend 39,000£. of the moneys of the company in putting the oficina in proper working order, in providing necessary machinery and plant for the proper making of an oficina, also in providing an iodine house, and in general repairs to make good defective workmanship; and (3.) the agreement with Messrs. W. & J. Lockett was so onerous that the company could not and did not derive any benefit therefrom, but, on the contrary, could only be and was in fact most injuriously affected thereby; (4.) the price and conditions on which the company acquired the property were neither favourable nor satisfactory. On the contrary, the price was most exorbitant, being 850,000£. for 200 out of the 548 estacas which the syndicate originally purchased for 110,000£. No such sum could have been obtained as the purchase price if the syndicate and the said directors had not, as in fact they did, excluded from the directorate of the company all persons except directors of the syndicate, these directors holding practically the whole of the shares of the syndicate; and (5.) the water supply was insufficient for working the oficina sold to the company. It was further alleged that the company had no independent advice before entering into the agreement of June 18, 1894, nor had it on its board any independent directors; that the agreement was entirely in the interest of the syndicate and the said directors, who never considered the interest of the company or its shareholders; that Colonel North never disclosed to the company the fact that he was, under some agreement with Messrs. W. & J. Lockett (the particulars of which the company did not at present know), entitled to a moiety of the profits derived by that firm from the said agreement between them and the syndicate of December 21, 1891, the obligations of which agreement the syndicate and the said directors purported by the agreement of June 18, 1894, to impose upon the company; that, purporting to act under the latter agreement, the said [*402] directors paid, out of moneys belonging to the company, to the syndicate the sum of 550,000£. in cash, and issued to the syndicate or its nominees fully paid shares of the company to the nominal value of 300,000£., and that such cash and shares were in fact received and retained by the said directors, who distributed the same among themselves and their friends and nominees. It was further alleged that there were no independent members of the board of directors of the company until the end of 1895, and that the real facts of the case were not disclosed to the company or its shareholders, but, on the contrary, were concealed by the syndicate and the said directors from the company and its shareholders, who first became aware of them from the investigation conducted by the three independent directors of the company appointed at the end of 1895.

 

The defendants, the executors of Colonel North, delivered a statement of defence in which they insisted that the sale and the other matters forming the subject of complaint in the action had been made and conducted in good faith and without any fraud or concealment, and submitted that the sale was binding on the company. They further alleged that the company had worked and manufactured nitrate out of and upon the property, the subject of the action, to a large extent, and were still in possession of and then working the same; and it was submitted that in any event, having regard to those circumstances and to the lapse of time, the company was not now entitled to rescind the sale.

 

The defendants the syndicate, its liquidators, and the five original directors of the syndicate and of the company, also delivered a defence denying the allegations of the company, and stating that the sale complained of was an honest transaction and was believed by the syndicate and its directors to be, and was in fact, at a fair and reasonable price and beneficial to the company, and that there had been no concealment in connection therewith; and further that all the material circumstances appeared from the company’s prospectus and the documents therein referred to, and that the interests of the company had been fully protected by the syndicate and its directors. [*403] They submitted that, having regard to the lapse of time and to the fact that the company had been in possession of and working the property comprised in the agreement of June 18, 1894, for upwards of two years, rescission of that agreement had become impossible and ought not to be granted, and they relied on the delay and laches of the company.

 

Issue having been joined, the action came on for trial before Romer J. on July 13, 1897.

 

The viv‰ voce evidence given at the trial by the directors and others, the depositions of witnesses taken on commission in Chili, and the answers to interrogatories delivered by both sides, were very lengthy and voluminous. It appeared that several of the original directors were men experienced in nitrate grounds, and that the whole of the Lagunas property had been visited and thoroughly examined, prior to its purchase by the syndicate, by three of the directors – Colonel North, R. Harvey, and M. Jewell – all of whom were convinced of their richness in caliche; that the property had a high reputation and had been surveyed and reported upon on behalf of the Government of Chili, and had been partly worked; that the syndicate had moreover sent over an expert for the purpose of making an investigation and trial of the ground, upon which he reported in high terms; that the directors made various other inquiries as to the nature of the property; and that the directors in order to keep up the market price of nitrate of soda contemplated a combination of manufacturers, which it was intended the company should join. It appeared, moreover, that during the two years from the date of the company’s incorporation to the date of the commencement of the action the company had worked out of its property and sold upwards of five million quintals of nitrate of soda. A mass of evidence was also adduced upon the questions whether at the time of the sale to the company the oficina was in complete working order and capable of manufacturing 300,000 quintals of nitrate of soda per month as represented in the prospectus and the agreement of June 18, 1894; also as to whether there was at the time a sufficient water supply to the oficina as represented. Upon these points it appeared that shortly after the date of the [*404] contract, the directors of the company, at the request of the manager of the oficina, expended considerable sums in providing additional machinery for the purpose of increasing its productive capacity, and in the erection of additional buildings for workmen and other purposes; that at the date of the contract, and even on June 30, 1894, from which date the company was to be entitled to the profits to be derived from working the oficina, one-half of it was not in complete working order, and was not being worked, inasmuch as certain pipes had to be fixed and certain other work done upon it; but the work to be done was small in amount, and the directors of the syndicate had been led to believe it would be completed before the date of the contract. Owing, however, to various circumstances the work was not done until September 2, 1894, when it was completed at the expense of the syndicate. Upon the question of the water supply, this was proved to have been defective at the date of the contract, but the directors stated that they believed the defect to be temporary only and would be speedily put right at the expense of the syndicate, and that they believed the statements as to the water supply in the contract and prospectus were substantially true. The defect was, however, remedied and made good by December, 1894, by the syndicate itself at very considerable expense. Upon the question of the alleged excessive purchase price paid by the company to the syndicate, it appeared that the total sum expended by the syndicate in respect of the 548 estacas down to the sale of the 200 estacas, including at par the shares which went to make up the original purchase price of 110,000£., was considerably less than 400,000£. The shareholders of the company were never informed of the price paid by the syndicate for the whole of the property originally purchased by it, nor of the profit made by the sale by the syndicate to the company. It also appeared, as the result of the evidence, that a considerable portion of the nitrate grounds sold to the company had been worked out at the time of the sale, and that a further large portion was not capable of being continued to be worked at a profit. With regard to the agreement between the syndicate and Messrs. W. & J. Lockett (the syndicate’s [*405] agents in England for the sale of nitrate), the obligations of which had been taken over by the company, it appeared that certain advances had been made under it to the syndicate by Messrs. Lockett. The other points of the evidence in the case sufficiently appear from the judgment of Romer J., and also in the judgments of the Court of Appeal.

 

G. I. F. C.

 

Swinfen Eady, Q.C., A. T. Lawrence, Q.C., A. R. Kirby, and Peterson, for the plaintiff company. The company was formed and promoted by the syndicate and its directors; as promoters the syndicate was in a fiduciary position towards the plaintiff company, and therefore bound to make a full and fair disclosure of all material facts; mere non-disclosure would be sufficient to establish a right to have the contract for sale rescinded; it is not necessary to establish direct misrepresentation; there was no independent board of directors, and that imposed greater obligations upon the vendors, who were also promoters: Erlanger v. New Sombrero Phosphate Co. (1) The directors of the syndicate are accountable for any profits made: Lydney and Wigpool Iron Ore Co. v. Bird. (2) The burden of proving that a full and fair disclosure of all material facts was made lies on the directors of the syndicate: Dunne v. English (3); otherwise the contract cannot be sustained: Tate v. Williamson. (4) Fraud is not charged against any of the defendants, but the plaintiff company is entitled to refer to the terms of the contract for sale of June 18, 1894, and to the prospectus to shew what representations were made by the syndicate at the time of the sale, many of which the evidence now shews to have been misleading and incorrect. The purchase price, too, was excessive, and the directors of the syndicate, when acting for the vendors and the company, had not sufficient grounds to justify them in fixing this price, especially as they had notice of the defects of the property sold. The defendant directors are liable for misfeasance, and for negligence for not having properly investigated the terms of the

 

(1) 3 App. Cas. 1218.

 

(2) (1886) 33 Ch. D. 85.

 

(3) (1874) L. R. 18 Eq. 524.

 

(4) (1866) L. R. 1 Eq. 528.