Cree v Somervail
| Jurisdiction | England & Wales |
| Judgment Date | 20 June 1879 |
| Docket Number | No. 12. |
| Date | 20 June 1879 |
| Court | House of Lords |
Ld. Chancellor (Cairns), Ld. Hatherley, Ld. O'Hagan, Lord Blackburn, Lord Gordon.
Public CompanyWinding upContributoriesPurchase by Directors in trust for CompanyUltra viresCompany purchasing its own shares.
The articles of association of a joint stock company provided that no transfer of shares should be valid without the consent of a majority of the other shareholders expressed in writing, but that if the other shareholders declined to consent to any such transfer, they should be bound to take the shares at the price offered in the case of a sale, or at the market price in other cases.
Shares held by the trustees of a deceased partner were purchased directly for the company by three of the directors, and paid for out of the company's funds. A transfer of the shares was made out in name of the three directors in trust for the company, and their names were entered in the register of shareholders as holders of the shares in trust for the company.
Thereafter the selling trustees ceased to be treated as having any interest in the company. At the next general meeting of shareholders, the purchase was approved.
Fifteen months after, the company went into liquidation, and calls were necessary to pay creditors. The liquidator petitioned the Court of Session to find that the trustees of the deceased partner ought to be placed on the list of contributories in respect of the said shares, on the ground that the purchase of the shares for behoof of the company was ultra vires and void. It was admitted that all parties had acted with perfect good faith.
Held that, whether the transaction was otherwise challengeable or not, the three directors, having agreed to have the shares transferred to them, and haying had their names regularly entered in the register of shareholders, could not, as against creditors, claim to have their names taken off the register, and consequently that the petition, which was in effect a petition to rectify the register by removing the names of the three directors and substituting those of the respondents, must be refused.
Opinions that the purchase of the shares for the company did not fall within, and was not warranted by, the clause in the articles of association above referred to.
(See Court of Session report in present volume, Bonnington Sugar Refining Co. v. Thomson's Trustees, Oct. 25, 1878, p. 80.)
The object for which the company was established, as stated in the memorandum of association, was the buying and selling of sugar, and carrying on the business of sugar refining, and all processes connected therewith.
In addition to the facts stated in the Court of Session report, it should be stated that the entry in the register of the company for 1876 relating to the shares in question was as follows:The late James Thomson, Millview, Helensburgh, merchant, 100,February 16,1876; Peter Somervail, Thomas Somervail, Peter Clouston, Matthew Bullock, and John A. Callender, trustees of James Thomson. Peter Somervail, Thomas Somervail, Peter Clouston, Matthew Bullock, and John A. Callender, as trustees for the late James Thomson, Esquire, Helensburgh, 100,December 11, 1876; Hugh Rose, John Weir, and John Crabbie, in trust for the Bonnington Sugar Refining Company (Limited).
In the register of 1877, which remained unaltered at the time when the resolution to wind up the company was come to in March 1878, Hugh Rose, John Weir, and John Crabbie, in trust for the Bonnington Sugar Refining Company, were entered as the holders of the shares.
The petitioner appealed.
At delivering judgment,
Lord Chancellor.My Lords, I understand from the judgments of the learned Judges of the Court of Session in this case that Lord Gifted and the Lord Justice-Clerk, who formed the majority of the Court, and who decided in favour of the respondents, were of opinion that the Bonnington Sugar Refining Company had, by the operation of the 12th of its articles of association, the power of purchasing its own shares. I am unable to adopt that interpretation of the 12th article. It may he open to doubt by what persons or in what manner shares within the meaning of that article are to be bought in the event of the necessary consent to a transfer being refused; but it is perfectly clear to me that in the case before your Lordships that article was not brought into operation; no person intended to act or supposed he was acting under it, and any sweeping determination by the company or the shareholders to refuse assent to transfers under that article, fox the purpose of becoming themselves owners of the shares, would, in my opinion, have been an exercise not in bona fide of the power given by that article.
The appellant is the liquidator of the company, and he applies to the Court to find that the names of the respondents should be placed on the list of contributories of the company in respect of 50 shares, on which 1 a share has been paid up. He makes this application under the combined operation of the 98th and 35th sections of the Companies Act 1862, and the application becomes, as was admitted at the bar, an application to the Court under the 35th section to rectify the register by removing the names of Rose, Weir, and Crabbie, who now stand upon the register in respect of these shares, and by substituting the names of the respondents, upon the ground that the former have been entered without sufficient cause, and that the names of the respondents have been without sufficient cause omitted from the register.
My Lords, there appears to me to be no doubt as to the circumstances under which the change of names in the register took place. The shares belonged to the late Mr James Thomson, and the respondents are his trustees. The company through its directors were willing to buy, and the respondents were willing to sell, these shares, and an arrangement was made that Rose, Crabbie, and Weir should purchase the shares and hold them for the company. This is made perfectly clear by the minute of the meeting of the directors of the 17th of November 1876, which is in these words:Present, Messrs Rose, Crabbie, Callender, and Weir, directors; C. A. Rose, secretary. The directors unanimously approved of the purchase by Messrs Hugh Rose, John Crabbie, and John Weir, from the trustees of the late Mr James Thomson of Helensburgh, of his 100 shares in this company, at the price of 45 per cent on the original costthat is to say, the 50 old shares to be bought and paid for at the rate of 45 per share, and the 50 new shares, or B stock, in the same proportion on paid-up price. These shares to be held by them in trust for the Bonnington Sugar Refining Company (Limited).
It is not disputed that the purchase money for the shares came out of the funds of the company. A transfer of the shares was made by the respondents, which was in the following terms:We, Peter Somervail, Thomas Somervail, Peter...
To continue reading
Request your trial
- Liow Su Fah; Yeng Hing Enterprise Sdn Bhd
-
Gill v Arizona Copper Company, Ltd
...Co.ELR, L. R. [1892], 3 Ch. 279. 1 Cleve v. Financial Corporation, 1873, L. R., 16 Eq. Cas. 363. 2 Cree v. SomervailELR, 1879, L. R., 4 App. Cas. 648; Buckley (7th ed.) 46. 3 Hope v. International Financial Society, 1876, L. R., 4 Ch. Div. 327; cf. General Property Investment Co., Limited, ......
-
Re Munster Bank, Ltd Dillon's Claim
...Dronfield Case 17 Ch. Div. 76. Oakes v. TurquandELR L. R. 2 H. L. 325 Chapman and Barker's CaseELR L. R. 3 Eq. 361. Cree v. SomervailELR 4 App. Cas. 648. Chapman & Barker's CaseELR L. R. 3 Eq. 361. Oakes v. TurquandELR L. R. 2 H. L. 325. Company Winding-up Trustee for Company Contributory I......