1 PH. 789. MOZLEY V.

ALSTON 833

[790] MOZLEY v. ALSTON. April 23, 28, 1847.

[S. C. 16 L. J. Ch. 217. See Section v. Grant, 1867, 36 L. J. Ch. 642; Hoole v. Great
Western Railway Co., 1867, L. E. 3 Ch. 274; Gray v. Lewis, 1869-73, L. E. 8 Eq.
541; L. E. 8 Ch. 1050; Ward v. SUHnabmime & Sheerness Ry. Co., 1874, L. E. 9 Ch.
492 (n.); Russell v. WakefieU TFaterworlcs Co., 1875, L. E. 20 Eq. 479.]

The rule that a suit by individual shareholders in an incorporated company, complain-

ing of an injury to the corporation, cannot be maintained, if it appears that the
Plaintiffs have the means of procuring a suit to be instituted in the name of the
corporation itself, applies equally whether the subject-matter of complaint be an
act or transaction which is merely voidable at the discretion of a majority of share-
holders, or an act or transaction absolutely illegal, and incapable of being confirmed
by such majority.
The Court will not entertain a bill by shareholders in an incorporated company, seeking
merely to restrain the directors de facto from acting as such, on the sole ground of
the alleged invalidity of their title to their offices.
A general demurrer to a bill by two members of an incorporated railway company, in
their individual characters, against the corporation and twelve other members who
were alleged to have usurped the office of directors, and to be exercising the functions
thereof, as a majority of the governing body, injuriously to the interests of the
company, praying that those twelve Defendants might be restricted from acting as
directors, and be ordered to deliver the common seal, and the property, and books
of the company in their possession, to six other persons, who were alleged to be the
only duly constituted directors, was, on both the above grounds, allowed.
This was an appeal from an order of the Vice-Chancellor of England overruling a
general demurrer to a bill filed by two persons describing themselves as holders of
shares in the capital stock of the Birmingham and Oxford Junction Eailway Company,
who were duly registered, and had paid all their calls in respect of such shares," against
C. xxi.—27
834 MOZLEY V. ALSTON 1 PH. 791.

eighteen persons who, tie facto, constituted the existing body of the directors of the
company, and against the company itself by its corporate title. •
The bill, after setting forth certain clauses of the company's Act, by which it was,
amongst other things, provided that the number of directors should be twelve, with
power to the company to increase it to any number not exceeding eighteen, and that
five should be a quorum at their meetings, stated that an ordinary meeting of the
company was held pursuant to the Act on the 27th February 1847, when it was
adjourned to the 13th March at four o'clock P.M. ; and that an extraordinary meeting
of the company was held on the [791] same 13th March at two o'clock P.M., pursuant
to a special notice thereof duly given, " for the purpose of considering the propriety of,
and if so determined, taking the necessary steps at such meeting for increasing the
number of directors, which was then twelve only, by the election of six new ones, and
also for the purpose of considering the provisions of a bill, intituled " A proposed
Bill for uniting the Birmingham and Oxford Junction Railway Company, and the
Birmingham, Wolverhampton, and Dudley Railway Company into one, and for
authorising the sale of the latter railway and other new works to the Great Western
Railway Company," and of considering and determining upon the propriety of intro-
ducing into Parliament, or of proceeding with or withdrawing the said bill, and, if
thought fit, of taking such steps for proceeding with or withdrawing the said bill, and
passing such resolutions and giving such instructions to the directors of the Birmingham
and Oxford Railway Company touching any sale or other disposition of the said railway,
or for effecting any of the above-mentioned purposes, as the meeting should think
expedient."
That at the extraordinary meeting, it was resolved that the number of directors
should be increased to eighteen, and six additional directors were accordingly elected,
after which the meeting was adjourned to five o'clock P.M. of the same day.
The bill then stated, in substance, that the Defendants were, on the 27th February
1847, the duly constituted directors of the company, the greater part of them having
been duly elected in the month of October 1846, and the rest having been appointed
to fill vacancies which had occurred during the interval; and that, according to the
true construction of the company's Act, one-third of the [792] number ought to have
gone out, by balloting or agreement among themselves, at the ordinary meeting of
the 27th February, or the adjourned ordinary meeting of the 13th March, and to
have been replaced by the election of four new directors; and that, accordingly, at
the adjourned ordinary meeting, which was duly held on the 13th March at four
o'clock, a shareholder moved that one-third of the directors who were in office
previously to the 27th February 1847 should retire from office, pursuant to the
provisions of the Act, and that the twelve should agree or determine among them-
selves which of them should retire; but that, although the motion was duly seconded
and carried unanimously by all the shareholders present at the meeting, except the
twelve original directors themselves, the chairman, who was one of their number,
refused to put it, and the twelve refused to retire or to determine or agree which of
them should retire, insisting that they were still lawful directors and entitled to act
as such; and that, in consequence of such refusal, the shareholders present at the
meeting were deprived of, and unable to exercise, their right of electing persons to
supply the place of the directors who ought then to have retired.
The bill then stated that the adjourned extraordinary meeting was duly held at
five o'clock of the same day, when it was resolved that the proprietors of the company,
wholly disapproving of the proposed amalgamation of the Birmingham and Oxford
Railway with the Birmingham, Wolverhampton, and Dudley Railway, and of the
proposed sale of both concerns to the Great Western, the directors should be, and
they were, thereby instructed not to proceed with, but to withdraw from, the bill
then before Parliament for those objects, and that they be further instructed to affix
the company's seal to the petition then read against such [793] bill, and to take all
necessary measures for opposing it in both Houses of Parliament; and the chairman
having refused to affix the common seal of the company to such petition, it was further
resolved that certain shareholders, who were specified, should be authorised to sign
the same on behalf of the meeting.
That there were present at both the adjourned meetings upwards of seventy
shareholders holding personally, and representing by proxy, upwards of 35,000 shares
1 PH. 794. MOZLEY V. ALSTON 835

out of 50,000, which constituted the whole capital, and that all the resolutions come to
at those meetings were passed almost unanimously, except that the twelve original
directors declined to vote and objected to the said resolutions.
The bill then charged that, by reason of the aforesaid conduct of the twelve
directors at the adjourned ordinary meeting, it had become impossible to ascertain
which of them ought to have retired from office, and consequently that they were not,
nor was any of them, competent in law to act or vote as directors or a director of
the company, and that the six newly-appointed directors were the only persons now
competent to act as lawful directors thereof; but that the twelve, nevertheless,
retained the possession and custody of the common seal, and the books and documents
of the company, to the exclusion of the six now directors, although such possession
and custody by the lawful directors was absolutely necessary for the interests and
purposes of the company; and that the Defendants, asserting that they were a
majority of the body of directors, threatened and intended to assemble and vote as
such, and to employ the common seal, and (hereby to represent their acts as the
lawful corporate acts of • the company, and to bind the company thereby: that they
[794] had in fact acted, and were now acting, in divers matters which were of the
utmost importance to the company, and had uiider their control large sums of money,
amounting to upwards of £100,000, belonging to the company, which they threatened
and intended to deal with and expend; and that, previously to the adjourned ordinary
meeting, they had procured the before-mentioned bill to be brought into Parliament,
and that they intended to represent themselves before Parliament as a majority of the
lawful directors of the company, and in that pretended character to procure the said
bill to be passed; and, by retaining the common seal in their exclusive possession and
control, to prevent the use thereof by the company or its lawful officers, for the
purposes of the company, and to prevent the company from being represented before
Parliament by its lawful directors, counsel and agents; whereas, the bill charged that
the twelve had ceased to be, and were now, incapable of acting as lawful directors of
the company, and that the company and its interests would be greatly prejudiced if
they should be permitted to act as directors of the company in the matters therein
mentioned or otherwise, although the Plaintiifs did not seek to prevent them from
acting or being represented before Parliament or otherwise, as they might think fit, in
their own names and characters, as individual uhareholders.
The prayer of the bill was, that the twelve directors and every of them might be
restrained by injunction from voting or acting as directors or a director of the
company, and that they might be ordered to place the common seal, and all the books,
documents, and property of the company, in their custody, possession, or power, under
the control of the lawful directors of the company for the purposes of the company.
[795] The corporation and the twelve directors whose title was impeached, put in
two separate demurrers, both of which were overruled by the Vice-Chancellor. On
the hearing of the appeal,
Sir Fitzroy Kelly, Mr. Rolt and Mr. G. Russell, appeared for the Appellants.
Mr. Bethell, Mr. James Parker and Mr. W illcock, appeared for the Respondents.
A great part of the argument turned upon the construction of the Act of
Parliament, the Appellants contending, in opposition to the construction suggested by
the bill, that none of the twelve directors who were in office on the 13th of March
were bound to have then retired, but that they were all entitled to retain their offices
until the ensuing year; and that, even if they ought to have ballotted out four of their
number on the 13th of March, it did not follow that they, or any of them, therefore,
ceased to be directors, or to act as such, so long as no others were validly appointed in
their places.
On the question of jurisdiction, and the frame of the bill, it was contended, on the
part of the Appellants, that, if the Plaintiffs were right upon the construction of the
Act, the proper remedy was at law, by mandamus; and, further, that, as the subject-
matter of complaint, if it was an injury at all, was an injury to the whole corporation,
the suit could not be sustained by individual members, unless, at least, it were shewn
that the company could not, or would not, institute proceedings in their corporate
capacity : Foss v. Harbottle (2 Hare, 461).
[796] On the other hand, it was insisted that Foss v. Harbottle did not apply, the
only point decided in it being that the Court would not interfere with transactions,
836 MOZLEY V. ALSTON 1 PH. 797.

affecting a company, which were merely voidable, at the instance of some only of the
shareholders, although they professed to sue on behalf of themselves and the others;
because such transactions were capable of being confirmed, and different members of
the company might entertain different opinions as to the expediency of confirming
them. But what the Court was asked to do in the present case, was to interfere, not
with what was merely voidable, but with acts which, if the Plaintiffs were right,
were illegal and absolutely void, and which, therefore, could not be confirmed by a
majority of shareholders, however large, so long as there was one who objected to
them: for the complaint was, that twelve out of eighteen directors who assumed to
act as a majority of the governing body were illegally in possession of their offices,
and had no authority to act at all: and that was a complaint for which each and every
shareholder in the corporation was entitled to seek redress without the concurrence of
the rest, and even in spite of the rest.
It was upon that principle that, both in Ware v. The Grand Junction, Waterworks
Company (2 K. & M. 470), and in Ward v. The Society of Attorneys (1 Coll. 370), the
Court granted an injunction against a company and its governing body at the instance
of a few individual members. Those cases then were authorities in point, for the
frame of this bill: and as to the substance of it, there could be no doubt that it was the
familiar practice of this Court to entertain jurisdiction for the purpose of keeping
great public bodies within the limits of their Parliamentary or cor-[797]-porate powers.
That was the object of this suit. It was said, indeed, that the proper remedy was by
mandamus; but, even supposing that the writ would lie in such a case, which was
perhaps doubtful, liegina v. Alderson (1 Q. B. Eep. 17), the remedy it afforded would,
without the aid of the ancillary jurisdiction of this Court, be too tardy to be effectual
for its purpose.
THE LOED CHANCELLOR [Gottenham]. This is a case in which two persons, not
alleging distinctly that they are shareholders in a railway company, but so describing
themselves, file a bill in which they allege that, owing to circumstances which I do
not particularly enter into, twelve persons, who were originally appointed directors,
ought, at a day now past, to have ballotted out four of their number in order that four
others might be elected in their stead: that they omitted to do so, and that,
consequently, there is not now a body of directors constituted according to the Act;
and, therefore, praying an injunction to the effect that these twelve persons may be
restrained from voting or acting as directors of the company, and that they may be
ordered to deliver the seal and the property and books of the company in their
possession into the hands of six other persons, who, the bill alleges, were appointed
under a provision of the Act authorising the company to increase the number of the
directors from twelve, the number originally contemplated, to eighteen. The result,
therefore, of the injunction prayed is, that twelve out of eighteen who now exercise
the functions of directors may be restrained from acting, and that all the duties of
the governing body may be performed by the six.
[798] Now, the first thing to be observed is, that the bill does not pray that the
Court may set right what is alleged to be wrong; but there being, according to the
allegation of the bill, four among the twelve who ought to have gone out, and it being,
as it is alleged, impossible to ascertain who those four are, it is insisted that the whole
of the twelve are illegally exercising the functions of directors, and ought to be
restrained from so doing.
Now, it is not my intention to give any opinion upon the construction of the Act,
because I see quite enough to make it my duty to allow these demurrers, without
going into that question; and, indeed, one of the grounds on which I have come to
this conclusion is, that it is not within the jurisdiction of this Court to entertain that
question at all, and I therefore abstain from expressing any opinion upon it.
The bill, as I stated, is a bill by two shareholders in their individual characters
only, praying relief, in which all the other shareholders are interested. It is quite
clear that some years ago no one would have entertained any doubt that such a bill
was demurrable. It is true that the rule which requires all persons interested to be
parties has been relaxed to meet the exigencies of modern times, it being found that
too strict an adherence to it would operate in many cases as a denial of justice, and
leave parties who had a real grievance without a remedy. And, therefore, where the
grievance complained of is common to a body of persons too numerous to be all made
1 PH. 799. MOZLEY V. ALSTON 837

parties, the Court has permitted one or more of them to sue on behalf of all, subject,
however, to this restriction, that the relief which is prayed must be one in which the
parties whom the Plaintiff professes to represent, have all of [799] them an interest
identical with his own : for if what is asked may by possibility be injurious to any of
them, those parties must be made Defendants, because each and every of them may
have a case to make, adverse to the interest of the parties suing; Taylor v. Salmon (4
Myl. & Cr. 134), Wallworth v. Holt (Ibid. 619). If, indeed, they are so numerous that
it is impossible to make them all Defendants, that is a state of things for which no
remedy has yet been provided; but no such inconvenience arises in the present case;
and it is sufficient for the present purpose to say, that in the cases to which I have
referred as instances of the relaxation of the rule, all persons interested in the subject-
matter of the suit have been parties either actually or by representation, and that in
none of those cases has it been permitted to one or two to institute a proceeding in
their individual characters for a purpose common to all. The evil which would result
from such a course is perfectly apparent; for if it were permitted to one or two, it
must be permitted to all, and then as many bills might be filed as there were
shareholders in a company, all praying different things, or the same thing in a
thousand different ways. I think, therefore, that if there were no other objection to
this bill, but the shape and form of it, as filed by one or two shareholders, not on
behalf of themselves and others, but in their individual characters only, that objection
alone would be fatal to it.
That, however, might be easily corrected by amendment, and, therefore, a decision
upon that point only would not finally dispose of the question between these parties.
But another and more important objection is this. The complaint against the
Defendants is, that they are illegally exercising the powers of directors, and illegally
retaining the seal and property of the company. [800] That, if it be an injury at all,
it is an injury not to the Plaintiffs personally, but to the corporation of which they
are members—a usurpation of the office of directors, and, therefore, an invasion of
the rights of the corporation ; and yet no reason is assigned by the bill why the
corporation does not put itself in motion to seek a remedy.
A case occurred some time ago before Vice-Chancellor Wigram, which is identical
in principle with the present, I mean the ca,se of Foss v. Harbottle. An attempt,
indeed, was made to distinguish them, but it entirely failed. In one respect, that
was a stronger case for the interposition of this Court than the present, for the bill
stated a case of malversation in the corporate officers which was properly a subject
of equitable relief. The Plaintiffs sued, not as here in their individual characters
only, but on behalf of themselves and all the other shareholders, except a few who
were made Defendants; but the Vice-Chancellor, after examining all the authorities,
decided that such a bill could not be supported ; and, as one of the reasons for coming
to that conclusion, he said that, for anything that appeared to the contrary, there
existed in the company the means of rectifying what was complained of, by a suit in
the name of the corporation. And the same observation applies with still greater
force to the present case, for not only does it not appear that the Plaintiff's have
not the means of putting the corporation in motion, but the bill expressly alleges
that a large majority of the shareholders are of the same opinion with them ; and, if
that be so, there is obviously nothing to prevent the company from filing a bill in its
corporate character to remedy the evil complained of. Such a bill would be free from
the objections to which I have referred as existing in this case, for it would be a bill
by a body legally authorized [801] to represent the interests of the shareholders
generally; but to allow, under such circumstances, a bill to be filed by some share-
holders on behalf of themselves and others, would be to admit a form of pleading
which was originally introduced on the ground of necessity alone, to a case in which
it is obvious that no such necessity exists. It appears to me, therefore, that the case
of Foss v. Harbottle, so far as relates to this point, is identical in principle with the
present; and thinking, as I do, that the observations of the Vice-Chancellor in that
case, in which he pronounced a very elaborate jndgment, correctly represents what is
the principle and practice of the Court in reference to suits of this description, it is
unnecessary for me to say more on the present occasion than that I fully concur in
them : and I should not hesitate to adopt them in this case, even if the first objection,
to which I have referred, was removed, by making this a bill on behalf of the share-
838 1 PH. 802.

holders generally, instead of being a bill by two of them in their individual characters
only.
But there is another thing in the way of the Plaintiffs which must be very care-
fully considered before any other attempt is made to obtain the interposition of the
Court in a case like the present; and that is, that the ground on which the whole
complaint rests is, that those who are acting as directors are not directors. All
turning, therefore, on the question, whether they are or are not entitled to the
corporate offices, the functions of which they profess to exercise. I asked several
times, in the course of the argument, whether there was any instance to be found of a
bill seeking such relief as is here prayed, solely on the ground of the supposed in-
validity of the title of persons claiming to be corporate officers. The argument was
interrupted by an interval of several days, yet no such case was produced. I did not
expect to hear of one, and the search, which I must [802] presume has been made by
counsel, satisfies me that no such case exists. This, therefore, is the first time that
the Court has been called upon to interpose under such circumstances. That alone
would be sufficient to deter me from assuming a jurisdiction which, it appears, my
predecessors have never exercised, and of which it would be difficult to assign the
limits or the end. The whole case depends upon a pure question of law—whether
the parties claiming to be directors do or do not lawfully fill that character. That is
a preliminary question which must be decided before this Court can make any decree :
there are other modes open to the parties by which it may be decided, and I will not
be the first to bring it into a Court of Equity. But when it is decided, and even
supposing that it is decided in favour of the Plaintiffs, what will there remain for this
Court to do? It is not pretended that I can give directions which will set this
corporate body right, if it has gone wrong; I am not asked to direct that a meeting
should be convened in order to determine which of these twelve persons ought to go
out of office, and to appoint others in their place; it is not pretended that I have
jurisdiction to do that; but the only equitable relief which I am asked to administer
is to restrain them from acting as directors. Is not that asking me to do what, in
the great majority of cases, would put an end to the corporation altogether? It may
not be so in this case, because six other directors have been appointed; but the
jurisdiction, if admitted, would extend to a case in which that circumstance did not
exist. And yet this is what these Plaintiffs, who profess to have the interest of the
corporation at heart, ask me to do.
Any one of these reasons would satisfy me that the Court ought not to exercise
jurisdiction upon this bill. And I am, therefore, of opinion that the demurrers ought
to be allowed.