* 2. But the omission to state in a prospectus the number of shares taken by the directors, or other persons, in their interest, is no such fraud as will enable a subscriber to avoid his subscription. The fact that the directors of the company had entered into a contract with one, as general superintendent of construction, for four per centum upon the expenditure; and that this was an exorbitant compensation, and was, in fact, intended to compensate such person for his services, in obtaining the charter, and that this is not stated in the prospectus, is no such suppression as will exonerate subscribers for stock. "There was not the suppression of a fact, that affected the intrinsic value of the undertaking. That value depended upon the line of the projected railway, the population, the commercial wealth, the traffic of the places through which it passed, the difficulties of the construction, and the cost of the land required. Extravagance in the formation of a line of railway is a question of liability of the individual directors to the shareholders, but not a ground for annulling the contract between them." 2

3. There can be no question one will be affected with notice of all facts discoverable by examination of papers referred to in a prospectus for the sale of shares, provided such papers are accessible to him, unless the facts stated in the prospectus are so specific as to divert interest from all further inquiry. It was accordingly held that where the contract of subscription bound the subscriber to the terms of the articles of association, an examination of which would have disclosed the facts upon which the party claimed to be relieved from his subscription, but that trusting to the statements contained in the prospectus, he did not look further, it was held that this neglect or omission, was no answer to his claim for relief. But the party is not entitled to relief by reason of the representation of any fact, made in good faith, and upon reasonable grounds of probability, but which proves unfounded upon grounds equally unknown to both parties.1

4. But the learned judge here 2 suggests, with great propriety, that if the directors have made contracts, in the course of the performance of their duties, from which advantage is expected to

exaggerated expectations of the prospective success and value of the undertaking. See, also, upon this general subject, the remarks of the Master of the Rolls, p. 427. 3 Central Railw. v. Kisch, Law Rep., 2 H. L. 99.

4

Kennedy v. Panama Mail Co., Law Rep., 2 Q. B. 580.

arise to themselves, or to others, for their benefit, mediately or immediately, they may, in a court of equity, be made to stand in the place of trustees to the shareholders.5

§ 60. 1. The company, in enforcing the payment of calls by forfeiture of the stock, must strictly pursue the mode pointed out in their charter and the general laws of the state. This is a rule of universal application to the subject of forfeitures, and one which the courts will rigidly enforce, and more especially where the forfeiture is one of the prescribed remedies, given to the party, and against which equity does not relieve, when fairly exercised.1

2. But as the company, in such case, ordinarily stand in both relations of vendor and vendee, their conduct, in regard to fairness, will be rigidly scrutinized, and the forfeiture set aside in courts of equity, upon evidence of slight departure from perfect fairness.

3. Hence where the company declared the stock cancelled, and credited the value at a less sum than the actual market price at the time, but more than it would probably have sold for if that number of shares had been thrown at once into the market, the court set aside the forfeiture, on the ground that the company were bound to allow the highest market price which could be 5 Post, § 179.

1 Sparks v. Liverpool Water-Works, 13 Vesey, 428; Prendergast v. Turton, 1 Younge & Coll. N. R. 98, 110-112. This case is put mainly upon the ground of delay and acquiescence, but there is little doubt it would have been maintained, upon the general ground stated in the text. See Edinburgh, Leith, & N. H. Railw. v. Hibblewhite, 6 M. & W. 707; s. c. 2 Railw. C. 237.

But where the deed of settlement of a joint-stock company provides for a forfeiture of the shares without notice to the subscriber, the forfeiture determines the title without notice. Stewart v. Anglo-California Gold Mining Co., 18 Q. B. 736; s. c. 14 Eng. L. & Eq. 51.

obtained, without speculating on what might be the effect of throwing a large number of shares into the market.2

*4. By the English statute the company are not allowed to forfeit a larger number of shares than will produce the deficiency required. And upon payment to the company of the amount of arrears of calls, interest, and expenses, before such forfeited shares are sold by them, the shares revert to the former owner.3

5. The evidence of the company having pursued the requirements of their act, in declaring the forfeiture, must be express and not conjectural.4

SECTION XV.

Right of Corporators and Others to inspect Books of Company.

1. May inspect and take minutes from | 4. This will not embrace the books of pro

§ 60. a. 1. It seems to be conceded as a well-settled rule of law, that the shareholders or corporators in a joint-stock corporation are entitled, as matter of right, to inspect and take minutes from the books of the company at all reasonable times,1 as they are the best evidence of the facts there registered, and equally the property of all the proprietors.2 And the board of directors of the company have no power to exclude any member from the exercise of this right, even upon the ground that he is unfriendly to the interests of the company.3

2. But it seems to be now settled that strangers cannot obtain the inspection of such books, even by application to the court, their contents being regarded as private memoranda, in no sense possessing any public character, notwithstanding a contrary

2 Stubbs v. Lister, 1 Y. & Coll. N. C. 81.

38 & 9 Vict. ch. 16, §§ 34, 35.

*

4 Cockerell v. Van Dieman's Land Co., 18 C. B. 454; s. c. 36 Eng. L. & Eq. 405. 1 Angell & Ames on Corp., § 681.

Owings v. Speed, 5 Wheaton, 420, 424.

3 People v. Throop, 12 Wend. 183; Cotheal v. Brouer, 1 Seld. 562.

practice obtained 5 for a time. It may sometimes have been assumed, that the books of private corporations possessed a higher quality of evidence than is the fact. We do not apprehend that they are in any sense indispensable primary evidence of the facts there recorded. As a general thing, as to the organization of the company and the choice of officers, all that is requisite will be to prove, de facto, the organization of the company and the exercise of such offices by the persons named. Where it is requisite that an authority be given by the majority vote of the company, it may most conveniently be shown by the record, and perhaps in such a case the records of the corporation may fairly be considered the best proof of the facts, if in the power of the party, as if the corporation itself were called to prove such vote. But any party not entitled to the custody of the papers can only prove their contents, unless the corporation is the opposing party, in which case he may give notice to produce the books, and, in default, may prove the contents by secondary evidence. It has been decided that the clerk of the company cannot be compelled to produce the books on a subpoena duces tecum.6

3. It has been held that a bank depositor has the right, under proper circumstances and in a reasonable manner, to inspect the books of the bank. In practice it is not one time in ten where the record books of a corporation are ever referred to in court, unless to fix a date or the precise form of a vote upon which a power is made to depend. But the registry of shareholders may be properly regarded as the primary evidence of membership, but by no means indispensable or conclusive.8

4. Where the deed of settlement under which a corporation is registered contained a provision "that the books wherein the proceedings of the company are recorded shall be kept at the principal office of the company, and shall be open to the inspection of the shareholders," it was held that the clause gave shareholders power only to inspect the books of minutes of proceedings of the general meetings, and not of the minutes of the proceedings of the directors.9

5 Mayor of Lynn v. Denton, 1 T. R. 689, and cases cited.

* Utica Bank v. Hillard, 5 Cow. 419; Narragansett Bank v. Atlantic Silk Co., 7 Union Bank v. Knapp, 3 Pick. 96.

3 Met. 282.

We refer to what we have before said upon the subject. Ante, § 18, pl. 1013; § 23, n. 7. Reg. v. Mariquita Mining Co., 1 El. & El. 289.

9

5. In a somewhat recent English case 10 it was held, that a party whose claim to be a shareholder is disputed by the company may, in an action brought against the company, inspect any entries in the register which relate to the matter in dispute.

6. And in a still more recent case, where one of the members of the corporation was in controversy with the company in regard to his right to act as one of the governing body, which right depended upon an inspection of the records of the company in order to determine its usages, the court granted permission to inspect the books. But it is here said this will not be done unless there is a suit or some proceedings pending.

7. And in the inspection of all documents, by order of the Court of Chancery, the party in whose favor the order is made has the right to have such aid in the inspection, either by counsel, interpreters, or experts, as will make the inspection available

to him.12

10 Foster v. The Bank of England, 8 Q. B. 689.

11 Reg. v. Saddlers' Co., 10 W. R. 87. At Chambers, Crompton, J.

12 Swansea Vale Railw. Co. v. Budd, Law Rep. 2 Eq. 274; s. c. 12 Jur. N. S. 561. As to the effect of the certificate of the clerk of a corporation under its seal, see New Orleans & O. R. Co. v. Lea, 12 Louis. Ann. 388.