Gregory, on behalf, &, v Patchett

JurisdictionEngland & Wales
Judgment Date01 January 1864
Date01 January 1864
CourtHigh Court of Chancery

English Reports Citation: 55 E.R. 499

ROLLS COURT

Gregory, on behalf
&c.
and
Patchett

[595] gregory, on behalf, &c., v. patchett. June 10, 11, 13, July 26, 1864. Shareholders in a company cannot lie by, sanctioning, or by their silence at least acquiescing in, an arrangement which is ultra vires of the company, watching the results : and if it be favourable and profitable to themselves, to abide by it and insist on its validity ; but if it prove unfavourable and disastrous, then to institute proceedings to set it aside. Therefore, where shareholders complained of acts ultra vires, which they had acquiesced in for six years, relief was refused. In matters strictly relating to the internal management of a company this Court, though it should come to the conclusion that the course adopted is not warranted by the terms of the instrument, will not interfere, even though the minority should have summoned a meeting of all the shareholders, and the majority should have persisted in the course complained of. But if the measures adopted are plainly beyond the powers of the company, and are inconsistent with the objects for which the company was constituted, then the Court will, at the instance of the minority, interpose to prevent the performance of the act complained of, and it will do so whether an appeal has or has not been made by the minority to the shareholders generally. The Court will interfere to prevent the directors of a railway company, not having powers so to do, from embarking the funds of the company in carrying on a brewery or a steamboat company, and from speculating in the purchase or sale of stock, and from transferring their business to another company. But it will not interfere to prevent a call not required, or stop a dividend not justified by the 500 GREGORY V. PATOHETT 33 BEAV. BM. pecuniary condition of the company, though it will prevent the illegal apportionment of the dividends amongst the shareholders. Where the Court interferes by injunction to prevent the performance, by the directors of a company, of an act ultra vires, it will also, to the extent of its power, redress the act performed and give relief to the persons injured thereby, although it is not called upon to dissolve the company or wind up its affairs. The only available property of a company was transferred to two shareholders in lieu of their shares, and the company was thereby practically put an end to, and the debts were thrown on the remaining shareholders. This was sanctioned by a majority of the shareholders at a general meeting. Held, that the majority could not bind the minority in such a transaction, and it was set aside. A company held, under the circumstances, not a necessary party to a suit to impeach aets of its directors. The object of this suit and the facts of this case are fully stated in the judgment of the Court. The case was argued at the hearing by the attorney-general (Sir R. Palmer), Mr. Southgate and Mr. Osborne Morgan, for the Plaintiffs, and by [596] Mr. Selwyn, Mr. Kay, Mr. Burnie and Mr. Casson, for the Defendants. The following authorities were referred to:--Foss v. Harbottle (2 Hare, 461); Mozley v. Alston (1 Phillips, 790); Lord v. The Copper Miners' Company (I Hall & Twells, 85); Hodgkinson v. The National, &c., Company (26 Beav. 473); Clegg v. Edmondson (3 Jur. (N. S.) 299); Edwards v. Shrewsbury Railway Company (2 De G. & S. 537); Bailey v. Birkenhead, &c., Railway Company (12 Beav. 433); Kent v. Jackson (14 Beav. 367; 2 De G. M. & G. 49); Re Era Insurance Company (1 De G. J. & S. 29); Graham v. Birkenhead, d-c., Railway Company (2 Mac. & G. 146, and 12 Beav. 460); Norway v. Rome (19 Ves. 144); Premlergast v. Turton (1 Y. & C. C. C. 98); Hoare's case (30 Beav. 225); 7 & 8 Viet. c. 110, s. 25, r. 1, 2, 3; The Exeter, &c., Railway Company v. Butter (5 Eailw. Cas. 211): Troup's case (29 Beav. 355); Ernest v. Nicholls (6 H. of L. Cas. 401); Morgan's case (1 Mac. & G. 225); Bennett's case (18 Beav. 339; 5 De G. M. & G. 284); Aberdeen Railway Company v. Blaikie (1 Macq. 461); Bentley v. Craven, (18 Beav. 75); Benson v. Heathorne (1 Y. & C. C. C. 326, and 2 Coll. 309); Emns v. Coventry (8 De G. M. & G. 835); Stanhope's case (3 De G. & S. 198); Re South Essex Gas Company (Johns. 480); Ex parte Baker (1 Drew. & S. 55); Teversham v. Cameron Company (3 De G. & S. 296) ; Foster v. Oxford, &c., Railway Company (13 Com. B. 300); Ritchie v. Couper (28 Beav. 344); Ex parte Hill (32 L. J. (Ch.) 154); Richmond's Executors' case. (3 De G. & S. 96) ; lie Phrenix Life Insurance Company (2 Johns. & H. 441); Lindley on [597] Partnership (pp. 754, 755, 763); Stupart v. Arrowsmith (3 Smale & G. 176); Clements v. Bowes (1 Drew. 684) ; Inderwick v. Snell (2 Mac. & G. 216). July 26. the master of the bolls [Sir John Eomilly]. This is a suit to annul certain proceedings of a company intituled the "North Devon Shipping Company," on the ground that they were in excess of the powers contained in their deed of incorporation, so that the majority of the shareholders could not bind the minority, and, if necessary for that purpose, to dissolve and wind up the company. The suit is instituted by the Plaintiffs " on behalf of themselves and all others the shareholders of the North Devon Shipping Company, except such of the shareholders therein as are Defendants," against the directors and the representatives of two deceased directors, praying that the directors and the estates of the deceased directors may be liable to replace the funds of the company lost by reason of the acts complained of, and that all proper and necessary directions may be given for this purpose. The defence is that the matters in question are such as belong to the internal management of the company, which concern the shareholders alone, and that these were, in fact, sanctioned by the general body of the...

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