C. A. 1897 SPOKES The v. GROSVENOR some cases have been cited in support of this proposition which shew that a person who is a mere witness cannot be made a party to the suit in order to obtain discovery from him. This is not what has been done in the present case. order under which Day J. has acted is Order XXXI., r. 12, of HOTEL CO. the Rules of the Supreme Court, which is as follows: "Any A. L. Smith L.J. party may apply to the Court or a judge for an order directing any other party to any cause or matter to make discovery on oath of the documents in his possession and power." Why is not the company an "other party" within this rule? The company are defendants in the action in order that the action may be maintained, and to my mind are clearly a necessary party, which a mere witness certainly is not. It is said that this Court in Shaw v. Smith (1) has held that the company in a case like the present are not within the order, for, to constitute an "other party" within the meaning of the order, there "must be some right to be adjudicated upon" in the action between the company and the plaintiff, per Lord Esher, or "some community of interest," per Lindley L.J., or "some question in conflict in the action," per Lopes L.J. These judgments were given in a case, not where discovery was sought between a plaintiff and a necessary defendant, but where a question of discovery arose between two defendants in an action, which was a wholly different matter. No case has been cited in which Order XXXI., r. 12, has been construed as above between a plaintiff and a defendant who is a necessary party to an action, and I think the rule upon its true construction in a case like the present gives the jurisdiction to order discovery of documents, and that Day J.'s order must, therefore, be upheld. CHITTY L.J. read the following judgment:-This is an appeal by the defendant hotel company, or in their name, from an order made by the judge in chambers on the application of the plaintiff, whereby the appellants were ordered to make the usual affidavit of documents relating to the matters in question in the action. (1) 18 Q. B. D. 193. C. A. 1897 SPOKES V. GROSVENOR Chitty L.J. The action is brought by a shareholder on behalf of himself and other the shareholders in the company. It is founded on an alleged wrong done to the company. For such a wrong the company alone can sue at law, and the general rule is the same HOTEL CO. in equity (see MacDougall v. Gardiner (1)). But equity has admitted certain exceptions to the general rule, one of which is that where a fraud is committed by persons commanding a majority of votes the minority can sue by a shareholder. The principle of the exception is well illustrated by such cases as Atwool v. Merryweather (2), decided by Wood V.-C. in 1867; Menier v. Hooper's Telegraph Works (3), decided by James and Mellish L.JJ., and Mason v. Harris (4), decided by the Court of Appeal. As was said by Sir G. Jessel in the last-mentioned case, the reason for the exception is plain, for, unless it were allowed, it would be in the power of the majority to defraud the minority with impunity. On the allegations made in the statement of claim this case falls within Mason v. Harris. (4) The substance of the case set up is a conspiracy on the part of the directors of the company and the manager and certain tradesmen to defraud the company by commissions, excessive charges for goods supplied, charges for goods not supplied, and other means; that the company have in fact been thereby defrauded; and that the persons implicated in the fraud have obtained the control of the company and a majority of votes, rendering it impossible to bring the action in the name of the company. The directors and others charged with the fraud are defendants. To such an action as this the company are necessary defendants. The reason is obvious: the wrong alleged is done to the company, and the company must be party to the suit in order to be bound by the result of the action and to receive the money recovered in the action. If the company were not bound they could bring a fresh action for the same cause if the action failed, and there were subsequently a change in the board of directors and in the voting power. Obviously, in such an action as this is, no specific relief is asked against the com (1) (1875) 1 Ch. D. 13. (3) (1874) L. R. 9 Ch. 350. C. A. 1897 SPOKES v. GROSVENOR pany; and obviously, too, what is recovered cannot be paid to the plaintiff representing the minority, but must go into the coffers of the company. It was argued for the appellants that the company were made a party for the purpose of discovery only, and authorities were cited to shew that when no relief is HOTEL Co. asked against a party he cannot or ought not to be compelled to make discovery. But this argument and these authorities have no bearing on the present case, where, as already shewn, the action cannot proceed in the absence of the defendant company, and the defendant company are interested in and will be bound by the result. The order complained of was made under rule 12 of Order XXXI. That rule speaks of "other party": an order for discovery may be made against "any other party to any cause." It was argued for the appellant that the company were not "any other party" within the meaning of the rule, and the decision of this Court in Shaw v. Smith (1) was relied upon in support of the argument. That case is clearly distinguishable. The question there was between co-defendants, and not, as here, between the plaintiff and a defendant. What the Court was there considering was whether the term " any other party" meant "opposite party" (the expression used in the first rule of the same order), and whether it ought to be cut down so as to apply only to a party on the other side of the record. The Court held that it ought not. I am of opinion that this case falls within the express provisions of the rule in question, and that there was jurisdiction to make the order. But then it was urged that upon the merits disclosed, and in the exercise of a sound discretion, the order ought not to have been made. The defendant company produced an affidavit before us to shew that the action was not an honest suit brought in the interest of the minority of shareholders, but was brought in the interest of a rival hotel company for the purpose of obtaining an insight into the defendant company's mode of business. If such a case had been made out, or a good ground shewn for believing it to be true, I should have agreed that the discovery ought not to have been granted. But the case set (1) 18 Q. B. D. 193. Chitty L.J. C. A. 1897 SPOKES GROSVENOR Chitty' L.J. up was entirely displaced by an affidavit produced by the plaintiff, which shews that the action is brought at the instance of a respectable minority, and that the ostensible purpose is the real purpose for which the action is brought. Shareholders HOTEL Co. representing the minority have applied to the Board of Trade under the 56th and following sections of the Companies Act, 1862, for an investigation into the affairs of the company in relation to matters involved in the action, and the Board of Trade, being satisfied that the applicants have shewn good reason for the investigation and that they are not actuated by malicious motives, have appointed an inspector. An attempt was made before us some short time ago by the directors, in the company's name, to stop or embarrass the proceedings before the inspector, but it wholly failed. The present appeal is brought in the name of the company, but (as was necessarily admitted by the appellants' counsel) on the instructions of the directors, who are charged with a fraud. It is the directors' appeal in the name of the company. The directors alone have the control of all the company's proceedings in the suit. This exceptional form of action has been allowed by the Court for the purposes of justice, and it is important to maintain the principle on which it is founded. What the minority is asking for is a discovery of the documents in the possession or control of the company of which they are members. To refuse the discovery would tend to defeat actions of this class, or to impair their efficiency to a considerable extent. For these reasons I think that the appeal should be dismissed. LORD ESHER M.R. I say nothing. Appeal dismissed. May 24. Pollard, for the defendant Drew. The only cause of action is conspiracy, and the defendant under the old Chancery practice could not have been called on to answer questions which might subject him to pains, penalties, or forfeitures: East India Co. v. Campbell (1); Chetwynd v. (1) (1749) 1 Ves. Sen. 246. Lindon (1); Cartwright v. Green (2); Paxton v. Douglas (3); Maccallum v. Turton. (4) The same principle is carried out under the Judicature Acts: Redfern v. Redfern. (5) The case of Allhusen v. Labouchere (6) was on interrogatories, and does not apply to discovery of documents. J. Eldon Bankes, for the plaintiff. The only objection that can be taken by the defendant is that the production of the documents might tend to criminate him, and this fact shews that the objection must be taken on oath in the affidavit. There is no authority to shew that the objection can be taken to the question being put. Redfern v. Redfern (5) was decided on the ground that the question desired to be put as an interrogatory was inadmissible under the provisions of a statute. The rules applicable in this respect to interrogatories will apply equally to discovery of documents, and there are authorities that in both cases the objection must be taken when the answer is made upon oath: Fisher v. Owen (7); Allhusen v. Labouchere (6); Webb v. East (8); Seaward v. Dennington. (9) Pollard, in reply. The cases already cited, and others that could be cited, shew that the objection in Chancery proceedings was taken on demurrer, and that the defendant was not called on to raise it by answer. The defendant is, therefore, entitled to object to the question, and is not bound to wait until he makes the affidavit of documents. LORD ESHER M.R. In this case an action has been brought in which the present appellant is charged with conspiring with other defendants to defraud the defendant company. A summons has been taken out calling on him to make an affidavit of documents. The meaning of that is that he shall state in an affidavit what documents he has relating to the issues in the action. He is asked a question as to those documents, and it is said on his behalf that the Court ought not to allow that question to be put. There is no question before us as to (1) (1752) 2 Ves. Sen. 450. (3) (1812) 19 Ves. 225. (5) [1891] P. 139. (6) (1878) 3 Q. B. D. 654. (9) (1896) 44 W. R. 696. C. A. 1897 SPOKES v. GROSVENOR |