Cane v Jones
| Jurisdiction | England & Wales |
| Date | 1980 |
| Year | 1980 |
| Court | Chancery Division |
Company - Articles of association - Amendment - Corporators all agreeing to amendment - No meeting held or special resolution passed - Whether agreement effective to deprive chairman of casting vote -
Section 10 (1) of the Companies Act 1948 provides:
“Subject to the provisions of this Act and to the conditions contained in its memorandum, a company may by special resolution alter or add to its articles.”
Section 141 provides:
“(1) A resolution shall be an extraordinary resolution when it has been passed by a majority of not less than three fourths of such members as, being entitled so to do, vote in person or, where proxies are allowed, by proxy, at a general meeting of which notice specifying the intention to propose the resolution as an extraordinary resolution has been duly given. (2) A resolution shall be a special resolution when it has been passed by such a majority as is required for the passing of an extraordinary resolution and at a general meeting of which not less than 21 days' notice, specifying the intention to propose the resolution as a special resolution, has been duly given: …”
A family company incorporated in 1946, had an issued capital of £30,000 divided into shares of £1 each, of which 15,000 were vested in the first and second defendants jointly, representing one branch of the family, and the remaining 15,000 in two trustees of a family trust in trust for the plaintiff as sole beneficiary, representing the other branch of the family. The company's articles of association provided for up to six directors; that the brothers, P and H, should be life directors; that the chairman should be elected by the directors, and should have a casting vote at board meetings, and that he should preside over and have a casting vote at general meetings of the company. P was the third defendant and father of the first and second defendants. H was the plaintiff's father. In March 1967 the first and second defendants agreed with the two trustees that the chairman should not have any casting vote.
On the determination of the trust, the trustees transferred 15,000 shares in the company to the plaintiff. Subsequently, a state of deadlock was reached in the management of the company's affairs. The first and third defendants, maintaining that the agreement of March 1967 was unenforceable by the plaintiff who had not been privy to it, sought to enforce the chairman's right to exercise a casting vote. The plaintiff denied that any such right existed as a result of the agreement reached by all the shareholders in March 1967.
On the question whether the agreement of March 1967 was effective to alter the company's articles of association: —
Held, that despite the wording of sections 10 and 141 of the Companies Act 1948 and the fact that there had been neither a meeting nor a resolution in writing, the agreement of March 1967, being an expression of the unanimous will of all the corporators acting together and being intra vires the company, was effective to amend the company's articles of association so as to deprive the chairman of his casting vote (post, pp. 1459G–1460B, H–1461A, 1465A).
The following cases are referred to in the judgment:
Consolidated Nickel Mines Ltd., In re [
Duomatic Ltd., In re [
Express Engineering Works Ltd., In re [
MacDougall v. Gardiner (
Moorgate Mercantile Holdings Ltd., In re [
Newman (George) & Co., In re [
Oxted Motor Co. Ltd., In re [
Parker and Cooper Ltd. v. Reading [
Pearce Duff & Co. Ltd., In re [
Wenlock (Baroness) v. River Dee Co. (
The following additional cases were cited in argument:
Bentley-Stevens v. Jones [
Beswick v. Beswick [
Browne v. La Trinidad (
Cotter v. National Union of Seamen [
Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge and Co. Ltd. [
Foster v. Foster [
ACTION
Kingsway Petrol Station Ltd., the fourth defendant, was incorporated on June 21, 1946, and in its articles of association the third defendant, Percival Charles Jones (“Percy”) and his brother, Harold Courtney Jones (“Harold”) were named as life directors.
At all material times 15,000 of the 30,000 issued shares of £1 each were registered in the joint names of the first and second defendants, Ronald Vivien Courtney Jones (“Ronald”) and Mrs. Maureen Heather Fooks (“Heather”), a son and a daughter, respectively, of Percy. Since August 1967 the remaining 15,000 shares had been registered in the name of the plaintiff, Mrs. Gillian Mary Cane (“Gillian”), who was the daughter of Harold, the shares having been transferred from Mr. Williams and Mr. Fooks, the trustees of a family trust of which Gillian was the sole beneficiary, and to which she had become absolutely entitled.
Half the shares of the company were thus held by Percy's side of the family and half by Harold's side. A dispute arose between the two branches of the family. The chairman of the board of directors, under the articles of association, had a casting vote at board meetings and presided over and had a casting vote at general meetings.
By a writ dated February 22, 1977, the plaintiff, Gillian, claimed against the defendants (1) a declaration that Percy and Harold were and had been since December 31, 1975, the only directors of the company; (2) a declaration that certain heads of agreement of 1975 between Percy, Ronald, Harold and Mr. Williams were void and of no effect in so far as they purported to (i) reconstitute the board of directors, (ii) alter the company's articles of association, or (iii) amend the provisions of an agreement made in or about March 1967, to which Ronald, Heather, Mr. Fooks and Mr. Williams were alleged to be parties, they being the then registered holders of all the issued shares in the company, whereby it was allegedly agreed that the chairmen should not exercise any casting vote at general meetings of the company; (3) a declaration that the proceedings of a meeting allegedly held on September 27, 1976, were a nullity in so far as they purported to constitute a meeting of the directors, and that the resolutions purportedly passed thereat were void and of no effect; (4) a declaration that the proceedings at an annual and an extraordinary general meeting of the company on December 31, 1976, were a nullity in so far as they purported to constitute such annual general or extraordinary general meeting of the company and that each of the resolutions passed thereat was void and of no effect; (5) a declaration that at any agreed meeting of the company in the case of an equality of votes, whether on a show of hands or at which a poll was demanded the chairman was not entitled to a second or casting vote; (6) a declaration that the proceedings at each of the meetings of shareholders or directors on January 26, 1977, were a nullity in so far as they respectively purported to constitute (i) a meeting or directors, or (ii) an extraordinary general meeting of the company, and that each of the resolutions passed thereat was void arid of no effect. (7) An injunction restraining Ronald from acting or holding himself out as a director of the company. (8) An injunction restraining the company, whether by its directors, servants, agents or otherwise, from acting on any of the resolutions declared to be void and of no effect. (9) Costs. And (10) further or other relief.
The facts are stated in the judgment.
Oliver Weaver for the plaintiff.
Robin Potts for the first and third defendants.
The second defendant was not represented.
The defendant company took no part in the proceedings.
December 19. MICHAEL WHEELER Q.C. read the following judgment. This action concerns a dispute in a family company, called Kingsway Petrol Station Ltd. (“the company”). The family is the Jones family and I will briefly refer to the family tree. In doing so I shall adopt for convenience the method adopted by counsel of referring to them (if they will forgive me) by their Christian names. There are two brothers, Percy and Harold Jones — Harold is sometimes called “Nick.” Percy has a son Ronald and a daughter Maureen Heather, more usually referred to as “Heather,” who is now Mrs. Fooks. Harold has a daughter Gillian, who is Mrs. Cane. Gillian is the plaintiff in this action, and Mr. Oliver Weaver appears for her. Ronald and Percy are the first and third defendants, and they appear by Mr. Robin Potts. Heather is the second defendant, who has entered an appearance but has not been represented at the hearing, and the company is the fourth defendant, which has taken no part at all, for reasons which will become apparent in the course of this judgment.
The company was incorporated on June 21, 1946, under the
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