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by North, J. in the case of Edwards v. Standard Rolling Stock Syndicate (ubi sup.), where he says, "I feel a difficulty in interfering with the right of ordinary creditors to levy execution." Now, in order to understand what the equity of the debenture-holders here consists of, I must look at the charge which is given to them. By the debentures the company charges "the freehold and leasehold premises, plant, stock, licences, book and other debts, property, goodwill, assets, and undertaking of the company," and the conditions provide that the charge "shall be a floating security, and shall not hinder any dealings by the company in the course of its business with all the property hereby charged in such manner as the company shall think fit." Those sentences rather puzzle me. I do not understand a floating security to be merely defined as one that shall not hinder, &c., but that there is to be a floating security, and one that shall not hinder, &c. Now, this execution itself is not a dealing by the company in the course of its business. True, the execution and the judgment upon which it is founded are the result of a dealing; but this matter, the execution and the sale, is not itself a dealing by the company in the course of its business. Therefore, putting that aside, what is the meaning of a floating security? Some day I hope it will be defined; I myself have never yet been able to crystallise it into a definition. I must endeavour, however, to construe it as well as I am able. It would indeed be quite possible to put such an interpretation upon it as would prevent the debenture-holders' security from attaching to these goods under these circumstances. security was not enforced until after the execution creditor had levied execution and really to all intents and purposes sold the goods. As a matter of fact, however, he has been paid off by the debenture-holders. Was that such an interposition on their part as to turn their floating security into an actual security? That is the real question. Was what was equitably charged then rendered active? In other words, who is to have the money now in the hands of the sheriff? In the case of Re Opera Limited (ubi sup.) it is said that the head note, "whether after sale by the sheriff the debenture-holders lose their priority quære," is in favour of the execution creditor here; but when you look at the words of Lindley, L.J. on which that is founded, the point as to what is the position of the debenture-holders after the property has been sold and before the money has been handed over remains open. I take it that I ought to give full effect to Lindley, L.J.'s language in that case, and I am of opinion that the fair conclusion to be arrived at from it is, that if the goods have been sold, but the proceeds have not been handed over, the equity of the debenture-holders is not displaced. I think Lindley, L.J. states the question in such a way as to guide me to that conclusion. I decide, therefore, that the equity of the debenture-holders is not displaced. The sheriff must have his costs, including those of to-day, which he will retain out of the moneys in his hand, the balance to be handed over to the receiver. There will be no costs against the execution creditors.

The

Solicitors: Belfrage and Co., for Reese, Harris, and Harris, Birmingham; Barlow and James, for P. M. Butlin, Birmingham; Taylor, Hoare, and Pilcher.

L

March 21 and 22.

[CHAN. DIV.

(Before WILLIAMS, J., sitting as an additional Judge of the Chancery Division.)

Re THEATRICAL TRUST LIMITED; CHAPMAN'S CASE; BRANDON'S CASE; GREVILLE'S CASE. (a)

Company-Winding-up-Contributory-Issue of fully paid shares-Registered contract-Consideration-Companies Act 1867 (30 & 31 Vict. c. 131), s. 25.

Sect. 25 of the Companies Act 1867, as interpreted by Re Eddystone Marine Insurance Company (68 L. T. Rep. 408; (1893)3 Ch. 9) and Re Almado and Tirito Company (59 L. T. Rep. 159; 38 Ch. Div. 415) regulates merely the mode of payment for shares. It permits payment to be made by a registered contract in the shape of something else than cash. But that something else must be the equivalent of cash. The shares must be really paid for, and if the registered contract makes it manifest on the face of it, that the consideration given under the contract is less than the nominal cash value the allottee will not be relieved from paying up the balance. But the court will not take each contract into consideration and decide whether the price given for the shares is fair and reasonable or whether what is given has a cash value in the market equivalent to their nominal amount, unless there is evidence to impeach the value of the consideration as stated in the contract.

SUMMONSES.

The Theatrical Trust Limited was incorporated on the 22nd Dec. 1891 for the purpose of carrying on the business of a theatrical club and agency, and in particular of acquiring from W. E. Chapman certain dramatic copyrights and agency contracts.

The first directors of the company were Chapman, H. Brandon, and another.

On the 26th July 1892 Chapman entered into an agreement with Brandon to transfer to him 400 fully paid-up vendor's shares in consideration of Brandon acting as solicitor of the company.

On the 10th Aug. 1892 a meeting of the directors of the company was held, at which Chapman, Brandon, and two others were the only directors present, and a resolution was passed that the proposed agreement with Chapman for the purchase of the dramatic copyrights and agency contracts should be carried out. Accordingly, by an agreement dated as of the date of the meeting the 10th Aug. 1892, and made between the company of the one part and Chapman of the other part, after reciting (inter alia) that the company was desirous of appointing Chapman as the company's managing director at a salary to be agreed on, it was witnessed in consideration of the foregoing and in consideration of the further work and trouble and expense of the said W. E. Chapman in and about the said scheme and in further consideration of the said W. E. Chapman transferring to the said Theatrical Trust Limited the benefit of all contracts in respect of agency and other business (if any) which he has either entered into or is in negotiation for, and in consideration also of the said W. E. Chapman paying all expenses in connection with the formation and registration of the

66 that

(a) Reported by W. IVIMEY COOK, Esq., Barrister-at-Law.

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said Theatrical Trust Limited up to allotment it had been agreed (inter alia) that the amount of the consideration to be paid to Chapman should be the sum of 4000l., payable as to 1001, in cash, as to 32001, thereof in 3200 fully paid-up ordinary shares of 11. each; and as to the remaining 7007. in seventy fully paid-up founders' shares of 101. each in the company, and that Chapman should serve as managing director of the company for the term of five years from the date thereof, at a salary to be agreed on between himself and the other directors.

On the 26th Aug. 1892 this agreement was duly registered under sect. 25 of the Companies Act 1867, and the 3900 shares were afterwards allotted by the directors to Chapman, and Chapman was registered as the holder of these shares as fully paid-up in the books of the company. The certificates for the shares were not however issued until the 22nd Sept. following.

On the 1st. Sept., before the certificates were issued, Chapman, in pursuance of his previous agreement with Brandon, transferred to him 400 of his fully paid vendor's shares, and Brandon's name was entered on the register.

In Oct. 1892, after the issue of the certificates, Chapman transferred 200 of his fully paid vendor's shares to Greville, and also other shares to other persons.

No dramatic copyrights or agency contracts were ever handed over by Chapman to the company in pursuance of his agreement, but on being pressed by the directors he deposited with the company a list of such copyrights and contracts.

In Dec. 1892 the directors, in consequence of a quarrel with Chapman, rescinded the agreement of the 10th Aug., and cancelled or purported to cancel the shares allotted to Chapman under it other than those already transferred by him.

In June 1893 the company passed resolutions for a voluntary winding-up, and the voluntary winding was subsequently continued under supervision of the court.

The liquidator had placed the names of Brandon, Chapman, and Greville on the list of contributories as holders of unpaid shares.

These were two summonses, one by Greville and the other by Brandon, Chapman and others asking to have their names removed from the list of contributories.

Rose-Innes for Greville.-The 200 shares transferred by Chapman to Greville were issued in pursuance of a duly registered contract as fully paid up, and were so entered upon the register. Greville never agreed to accept any but fully paid up shares.

W. E. Vernon for Brandon and Chapman.

Manson and James Roberts for the liquidator.Sect. 25 of the Act of 1867 only regulates the mode of payment, and does not contain any provisions exempting shares from being paid up in full:

Re Addlestone Linoleum Company, 58 L. T. Rep. 428 37 Ch. Div. 191, 205;

Ooregum Gold Mining Company of India v. Roper, 66 L. T. Rep. 427; (1892) A. C. 125. A company has, therefore, no power to issue fully paid-up shares, as a free gift or bonus, to its shareholders, merely by registering a contract under sect. 25:

Re Eddystone Marine Insurance Company, 69 L. T.
Rep. 363; (1893) 3 Ch. 9.

[CHAN. DIV.

If it appears on the face of the registered contract that the allottee is paying less than nominal cash value of the shares he may still be called upon to pay the balance:

Re Almada and Tirito Company, 59 L. T. Rep. 159;

38 Ch. Div. 415.

Here the consideration was illusory. The dramatic copyrights and agency contracts were never handed over to the company, and the company never received anything at all for the shares. Further the contract was not bona fide. Both Chapman and Brandon were interested in the issue of these shares, and they and another director were the only directors present, when the resolution approving of the contract was passed. The directors, therefore, did not exercise an independent judgment in the matter, and the onus is accordingly on Chapman to show that the consideration given by him was equivalent to the nominal cash value of the shares. If the court is of opinion that some consideration was given, it can direct an inquiry as to its value and order payment of the balance:

Re Heyford Company; Pell's case, 21 L. T. Rep. 412; L. Rep. 5 Ch. 11.

Where an allottee has agreed with a company only to accept fully paid-up shares, but no contract has been filed previously to the issue of the shares, the liquidator is not debarred from requiring him to pay for the shares in full: he is for this purpose in a different position to the

company:

Re London Celluloid Company, 59 L. T. Rep. 109: 39 Ch. Div. 190.

Further we submit upon the evidence that the shares were not "issued" within the meaning of sect. 25 before the registration of the contract:

Re Ambrose Lake Tin and Copper Company: Clarke's case, 38 L. T. Rep. 587; 8 Ch. Div. 635;

Re Heaton's Steel and Iron Company; Blyth's case,
36 L. T. Rep. 124; 4 Ch. Div. 140;

Dalton Time Lock Company v. Dalton, 66 L. T.
Rep. 704.

Vernon in reply.-There is no evidence here that the consideration was illusory. On the contrary I submit that at the date of the contract the consideration was a valuable one, and that its subsequent failure is not a ground for treating the shares as unpaid:

Re Continental and Shipping Butter Company; Mege and Angier's case, W. N. 1875, p. 208. Further, Chapman, having agreed to take only paid-up shares, cannot have a contract to take unpaid shares forced upon him :

Re Scottish Petroleum Company; Anderson's cas' 43 L. T. Rep. 723; 17 Ch. Div. 373. [WILLIAMS, J.-In Almada and Tirito Company (ubi sup.) the shares were issued with 18s. paid up. and there was, therefore, a present of 18s. per share to the allottee: but good consideration was given.] It was there admitted by both sides that the value of the consideration was not the full cash value of the shares. There was, therefore. an issue of shares at a discount. Here how is it to be determined what amount is to be treated as paid-up on the shares? (Buckley on the Companies Acts (6th ed.) p. 560.) [WILLIAMS, J.-Assuming that the allotment to Chapman was legally and validly cancelled, did not

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the other applicants take as allottees and not as transferees?] I submit so. [WILLIAMS, J.-I do not believe that directors have any power where shares have been surrendered to re-allot them as fully paid-up.]

Rose-Innes, in reply, for Greville, referred to

Burkinshaw v. Nicolls, 39 L. T. Rep. 308; 3 App.
Cas. 1004.

WILLIAMS, J.-The question I have to determine in this case is, whether the applicants are liable as contributories of this company. The first point raised by the liquidator is that a great portion of the shares issued to Chapman as fully paid up were issued prior to the registration of the contract. Sect. 25 of the Companies Act 1867 provides that, "Every share in any company shall be deemed and taken to have been issued and to be held subject to the payment of the whole amount thereof in cash, unless the same shall have been otherwise determined by a contract duly made in writing, and filed with the Registrar of Joint Stock Companies at or before the issue of such shares." The question whether or not the shares in this case were issued before the registration of the contract is one of fact for me to determine upon the evidence. [His Lordship then dealt with the evidence on this point, and came to the conclusion that the shares were issued subsequently to the registration of the contract, and continued:] The next question is as to whether these shares were issued to Chapman subject to payment, or without any intention that he should pay for them, or without any liability to pay for them. This argument is based upon the cases of Re Eddystone Marine Insurance Company (ubi sup.) and Re Almada and Tirito Company (ubi sup.). The effect of those two decisions is this, that sect. 25 of the Companies Act 1867 only provides for the mode of payment; and that, if the section has been complied with an allottee may pay for shares otherwise than in cash; but the result is not that, because an allottee puts himself in a position to pay otherwise than in cash, he is to be altogether relieved from paying. That is the principle laid down in those

cases.

But when one comes to consider what constitutes payment, it is plain that the moment an allottee is relieved from payment in cash, he may give other consideration instead of cash. He may give goods, he may give things that have no physical existence, such as a goodwill or a licence -in fact, all sorts of things in consideration of shares allotted to him, and thus pay for the shares. These two cases decide that an allottee must really pay for the shares. They go further than that and decide that, if the contract makes it manifest on the face of it that an allottee is paying less than the nominal cash value of the shares, he may be liable for the balance beyond what he has paid. I do not think, however, that those cases go beyond that. I do not understand them to decide that the court has any duty or power to take each contract and consider whether the price which is agreed to be given is a fair and reasonable price, or whether the thing which is to be taken in payment instead of cash is in the market of a cash value equal the nominal value of the shares. I do not think that the court is concerned to determine that, and I should he very sorry if it were supposed to be the duty of the court to measure consideration in that way.

[CHAN. DIV.

It is to be observed that in Re Eddystone Marine Insurance Company (ubi sup.) no difficulty could arise, because the consideration given for the shares was nothing; the shares were a bonus. The same was the case in Re Almada and Tirito Company (ubi sup.), for there it was plain that the shares were shares issued with 18s. paid up; that is that it was an issue of shares at a discount, and no consideration was suggested for the discount. The conclusion I come to is this, that, if the consideration is illusory, or if it presents an obvious money measure which shows that the shares were issued at a discount, or if the shares are openly issued at a discount, in all these cases the mere fact that a contract has been registered so as to comply with sect. 25 will not put the allottee in a position to relieve himself from the payment which the Act of 1862 requires shall be made in the case of the issue of shares in a company of this sort. I have here to consider whether the contract made with Chapman was for an illusory consideration, or whether these directors were really exercising their judgment and getting the money value equal to the value of the shares they were issuing. I am of opinion that the liquidator has not discharged the onus placed upon him in this case. He states in his affidavit that the consideration given for the shares was wholly illusory, but he gives me no reasons which leads me to suppose so. There are no materials before me on which I can judge of the value of the property agreed to be assigned by Chapman. When, however, I look at the agreement I find that part of the consideration was a premium to Chapman to assume the office of managing director. I do not think the liquidator has brought this case within those authorities, or that the evidence shows that the alleged consideration was illusory, or that the evidence shows that these shares were in any sense a present to Chapman or issued at a discount. The liquidator therefore fails. [His Lordship then dealt with the cases of the other applicants, and held that their applications also succeeded, and ordered the costs of all the applicants to be paid by the liquidator out of the assets of the company.]

Solicitors: Greville and White; Brandon and Nicholson; W. Negus.

Wednesday, April 3.

(Before WILLIAMS, J., sitting as an additional Judge of the Chancery Division.) MARWICK V. LORD THURLOW. (a) DebentureCompany-Winding-up- Practice holders' action-Declaration of charge-Action commenced after winding-up order.

In Dec. 1894 a company was ordered to be woundup. In Jan. 1895 an action was brought by a debenture-holder on behalf of himself and all other debenture-holders to enforce his security. By his statement of claim the plaintiff claimed (inter alia) a declaration that he and the other debenture-holders were entitled to a charge upon the undertaking of the company, and all its upon property both present and future, including its uncalled capital. On a motion by the plaintiff for judgment in default of defence:

(a) Reported by W. IVIMEY COOK, Esq.. Barrister-at-Law.

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Held, that it was the general practice of the Chancery Division in such cases to make the declaration of charge as asked for. Held, however, that where the application was made after a winding-up order, the court would, before making such a declaration, require to be satisfied that the official receiver raised no objection to the validity of the debentures.

MOTION for judgment.

The Colonial Debenture Corporation Limited was incorporated in Feb. 1892, with a nominal capital of 120,1007. divided into 12,000 ordinary shares of 101. each, and 100 founder's shares of 11. each.

The corporation had issued debenture stock to the amount of 10,000l. under the provisions of a trust deed dated the 4th April 1892, of which Lord Thurlow and the Hon. G. E. P. Willoughby were the trustees. The deed provided that the security thereby constituted should become enforceable in the event (amongst others) of an order being made, or an effective resolution being passed, for winding-up the corporation. And the corporation thereby covenanted to pay interest half-yearly as therein mentioned.

In pursuance of the provisions to that effect in the trust deed the corporation had issued to the trustees certain debentures whereby the corporation covenanted with the trustees for payment to them of moneys corresponding in amount to the debenture stock for the time being outstanding and interest thereon as aforesaid, and charged with such payment its undertaking and all its property whatsoever and wheresoever, both present and future, including its uncalled capital for the time being, and it was thereby provided that the principal moneys thereby secured should immediately become payable if and when the security constituted by the trust deed should become enforceable.

On the 20th Dec. 1894 the corporation was ordered to be wound-up compulsorily.

On the 11th Jan. 1895 the present action was commenced by the plaintiff, who was the registered holder of 80001. of the debenture stock, on behalf of himself and all others (if any) the holders of unsatisfied debentures issued by the corporation, against the trustees of the deed, and the corporation for the realisation of his security.

By his statement of claim the plaintiff claimed to have the trusts of the trust deed of the 4th April 1892 carried into effect; a declaration that the plaintiff and all others (if any) the unsatisfied holders of debentures were entitled to a charge upon the undertaking of the corporation and upon all its property, whatsoever and wheresoever, both present and future, including its uncalled capital; to have the security of the trust deed and debentures realised; to have a receiver appointed of the property comprised in the debentures and the trust deed; and to have all necessary accounts, inquiries, and directions taken, made, and given.

None of the defendants had put in any defence. This was a motion by the plaintiff for judg ment in default of defence, and came on as a short

cause.

The minutes proposed asked for the usual inquiries, and contained a declaration of charge in the terms of the prayer of the statement of claim.

Notice of motion had been served on the defen

[CHAN. DIV.

dants, and they had written to the plaintiff's solicitor stating that they saw no objection to the proposed minutes, and did not intend to appear.

A. à B. Terrell, for the motion, asked for an order in the terms of the minutes.

WILLIAMS, J.-Some time since Romer, J. declined to make such a declaration as that now asked for, on the ground that it might be desirable before doing so that the validity of the debentures should be inquired into. Since then I have consulted with the judges of the Chancery Division on the matter, Romer, J. himself being present, and they agreed that, however desirable it might be to adopt such a practice as that, it was not in accordance with the usual practice of the Chancery Division. Sitting as a judge of that division I am bound to follow that practice, and I will accordingly make the declaration in a case proper for it. I do not, however, intend to have my hands tied by the practice more than I can help. One of my objections to it is, that the debenture-holders' action is often transferred to me after judgment, because the winding up order may not have been made until after the judg ment in the action. One of the first things to do in the winding-up is frequently to inquire into the validity of the debentures. Those who have the management of the company when solvent, and the liquidator of the company when insolvent, may take different views as to that, especially when the directors are nominees of the vendor, and the company may not oppose what the liquidator would. Accordingly, when I come to inquire into the validity of the debentures, I may be met with the declaration of charge contained in the judgment made perhaps in a short cause, which it will be said establishes the charge as a fact, though of course it does not establish any priority; and the result may be that the inquiry which ought to be made cannot be made. I do not think it desirable that an inquiry should be burked in that way. This is not a case of that kind, as the cause was transferred to me before

judgment, but I wish to emphasise my view by saying that I so far regard a company when solvent as a different legal entity from a company when insolvent, that is a company plus its creditors, that I will not make any declaration of charge without having the view of the liquidator on the subject brought before me. The official receiver and liquidator must attend here, and show me that he is satisfied as to the debentures. The expense of his doing so will not be very great. I will take care that it is not. It will be better that he should attend personally. He has, no doubt, done his duty, and made inquiries. I will not make any order until I have had the view of the official receiver.

Later in the day one of the assistant official receivers having attended and stated to his Lordship the official receiver's views on the matter, WILLIAMS, J., said: The assistant official receiver informs me that a doubt was felt whether the validity of the debentures could be questioned. having regard to the fact that the winding-up order had been made upon the petition of a debenture-holder. I do not think that that is material. Under the circumstances, I shall not at present make any order which contains a declaration that the debentures created a valid charge. or which will interfere in any way with the pro

Q.B. Div.]

PHYTHIAN (app.) v. BAXENDALE (resp.).

perty of the company. I simply order the trusts of the trust deed to be carried into execution, and direct the inquiries which are asked for to be taken. An order of a somewhat similar kind directing inquiries, without any declaration of title, was made by Malins, V.C., in 1876, in Huntingdon v. Coal Consumers' Association, which was followed, in 1892, by Chitty, J. in Hazard v. Marine and General Land Company, and is set out at p. 151 of Manson on Debentures of Trading Companies.

Solicitor, G. M. Folkard.

NOTE.-On a previous occasion (6th March 1895), Williams, J. had declined in a similar case to make a declaration of charge, being of opinion that such was not the practice of the court: (see Charlwood v. Leasehold Investment Company, 98 L. T. 451: W. N. 1895, p. 47.) See also Brinsley v. Lynton and Lynmouth Hotel and Property Company (W. N. 1895, p. 53), and Parkinson v. Wainwright and Co. Limited (98 L. T. 568; W. N. 1895, p. 63).

QUEEN'S BENCH DIVISION.

Wednesday, March 27.

(Before CAVE and WRIGHT, JJ.) PHYTHIAN (app.) v. BAXENDALE (resp.). (a) Highway-Cart and horses passing upon-Horses standing still-Driver leaving horses-Liability of driver to penalty-Highway Act 1835 (5 & 6 Will. 4, c. 50), 8. 78.

The Highway Act 1835 provides by sect. 78 that if the driver of any carriage negligently or wil fully be at such distance from such carriage, or in such a situation whilst it shall be passing upon such highway, that he cannot have the direction or government of the horses drawing the same, he shall be liable upon conviction to forfeit a sum not exceeding five pounds. The appellant, the driver of a farm waggon, was convicted under the above section, it appearing from the evidence that when he was driving along a highway he stopped his horses and went into a public - house. The horses remained standing outside the house while the appellant was inside, and it was contended on his behalf that, as the horses were standing still, the cart was not passing upon the highway. Held, that the conviction was right.

CASE stated by justices.

The justices found as facts, that the appellant was, on the day and at the place in question, the driver of a laden lorry or farm waggon drawn by two horses, on a journey from Halewood to Liverpool; that he stopped his horses and left them standing on the highway and went into a public-house, or, at all events, to the door of it (a distance of ten yards or thereabouts from the waggon); that he returned to his horses, started them, and went on his way; that he was away from his horses for ten minutes, and whilst at the house he had not the direction and government of the horses. It was proved and admitted that the lorry and horses did not obstruct the passage of the highway.

Temple Franks for the appellant. It is submitted that the decision of the justices was wrong. The provision in the section under which

(4) Reported by W. H. HORSFALL, Esq., Barrister-at-Law.

[Q.B. DIV.

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Friday, March 29.

(Before CAVE and WRIGHT, JJ.)

REG. v. JUSTICES OF DURHAM; Ex parte
NEWTON. (a)

Appeal to quarter sessions-Recognisance-Court before which recognisance may be taken-Summary Jurisdiction Act 1879 (42 & 43 Vict. c. 49), 8. 31.

An appellant from a court of summary jurisdiction, under the Summary Jurisdiction Act 1879, sect. 31, may enter into the required recognisance before any court of summary jurisdiction, and need not necessarily do so before the court which convicted or made an order upon him, or before a court acting for the same county, borough, or place.

THIS was an order nisi calling upon the justices for the county of Durham to show cause why a writ of mandamus should not issue directed to them commanding them to enter or cause to be entered continuances from session to session to the next general quarter sessions upon the appeal of one William Newton.

On the 8th Nov. 1894, at the Houghton-leSpring Petty Sessions in the county of Durham, an order was made upon William Newton.

Within seven days of an order being made William Newton gave notice of appeal against the said order to the next court of quarter sessions for the county of Durham, and served such notice upon the said M. J. Merrington and the clerk to the justices for the petty sessional division of Houghton-le-Spring.

William Newton, who resided at Haltwhistle, in the county of Northumberland, within three days of the notice of appeal having been given, attended with one surety before a justice of the peace acting for the Haltwhistle petty sessional division of the county of Northumberland, and, after having told the justice the facts of the case, entered into a recognisance to prosecute the said appeal.

A copy of the notice of appeal and the recognisance were then duly sent to the clerk of the peace for the county of Durham, and the appeal was duly entered.

The Court of Quarter Sessions for the county

(a) Reported by W. H. HORSFALL. Esq., Barrister-at-Law.

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