Hannay v Muir
| Jurisdiction | Scotland |
| Judgment Date | 16 December 1898 |
| Docket Number | No. 51. |
| Date | 16 December 1898 |
| Court | Court of Session |
Lord Low, Lord President, Lord Adam, Lord M'Laren.
ProcessAmendment of RecordCourt of Session Act, 1868 (31 and 32 Vict. cap. 100), sec. 29.
An action was raised on behalf of a company by certain shareholders against its agents for payment of several sums alleged to have been illegally retained by them, and, inter alia concluded for payment of 16,000. The pursuers alleged that this sum was the amount of overcharges of commission. Subsequently the pursuers restricted this conclusion to 1306, and craved leave to amend their condescendence by substituting for their former averment an averment that the defenders had improperly failed to credit the pursuers with 1306 of discounts received by the defenders on purchases made for the company.
The Court in respect that the amendment was necessary for determining the real questions in controversy between the parties, which was whether the defenders failed to make sufficient payment to the pursuers, allowed the amendment.
ProcessConjunct and several liabilityAction against two firmsAverment that one person practically the sole partner of each firmRelevancy.
In an action at the instance of certain shareholders in a company on its behalf against a firm in Glasgow, and a firm in India, which had acted respectively as the secretaries of the company and its agents in Calcutta, concluding for payment by the defenders conjunctly and severally, or severally, for one and the same sum, the pursuers averred that the sum concluded for represented commission improperly charged by the defenders on advances in Glasgow and in Calcutta, but did not specify the advances obtained or the improper charges made by each firm, nor any ground on which the one firm should be liable for the other. They averred, however, that the senior partner of each of the two firms was the same person, that the two firms were under his control and domination, and that he was practically the sole partner of both firms. Held that each firm being a separate persona the averments were irrelevant to support the conclusion against both firms, or against either firm.
CompanyAction against managers of companyMinority of ShareholdersTitle to sue
Held per Lord Low, Ordinary, and acquiesced in, that a minority of the shareholders of a company who averred that a chairman who commanded a majority of votes, had defrauded the company, and had used the voting power to prevent the pursuers getting redress through the company, had a title to sue an action against the directors.
On 27th July 1895 Maxwell Hannay, merchant, Glasgow, and others, shareholders of the Champdany Jute Company, Limited, raised an action against Sir John Muir of Deanston, Bart., merchant, Glasgow, James Luke, Thomas Watson, Alexander Marshall Brown, and Douglas Mann Hannay, then or formerly directors cf the Champdany Jute Company, James Finlay & Company, East India merchants, Glasgow, Finlay, Muir, & Company, merchants, Calcutta, and the Champdany Jute Company, Limited, for its interest.
The conclusions of the action were that the defenders James Finlay & Company, and Finlay, Muir, & Company, should be ordained conjunctly and severally, or severally, to pay or refund and restore to the Champdany Jute Company three sums of (first) 16,250, (second) 8160, and (third) 8000, and further that the defenders Sir John Muir and the other directors of the Champdany Jute Company should pay or refund and restore to the company conjunctly and severally, or severally the sum of (fourth) 9850.
The pursuers made averments, inter alia, to the following effect:The pursuers were the registered holders among them of 900 shares of the Champdany Jute Company, Limited, which was formed in 1873 with a capital of 200,000, the nominal value of the shares being 10 each fully paid-up. (Cond. 2) The objects for which said company was established, inter alia, were the building of a jute mill at Champdany near Calcutta on the river Hooghly, and the prosecution of the business of manufacturers of jute, and of merchants and dealers in the manufactured article. The said company was promoted by the defender Sir John Muir. The defenders James Finlay & Company of Glasgow of which firm Sir John Muir is the principal if not sole partner, were appointed secretaries of the said company at an annual salary of 600, and the defenders Finlay, Muir, & Company of Calcutta, of which firm Sir John Muir is the principal if not sole partner, were appointed the company's agents in India on commission at an unusually high rate. The whole affairs of the company have from the commencement of its business been controlled by Sir John Muir in this country through his said firm of James Finlay & Co., and in India through his said firm of Finlay, Muir, & Co.
(Cond. 3) The conduct of the company's business abroad was provided for by article 58 of the Articles of Association.*The said firms of James Finlay & Company, and Finlay, Muir, & Company, are not independent partnerships. The said Sir John Muir is virtually the sole partner of both. They have, from time to time, also contained certain salaried partners, but these have been dismissable by Sir John Muir on brief notice, without cause assigned, and have never been allowed to see the private books of their respective businesses, or the balance-sheets thereof, which latter were always made up in Glasgow. Said firms have been, therefore, and are completely under the control and domination of the said Sir John Muir, and are truly only other names for himself.
(Cond. 4) That the directors of the Champdany Jute Companywith the exception of the defender Thomas Watson, who was strongly opposed to the proceedings of Sir John Muirwere entirely under the influence and control of Sir John Muir, and that he commanded a majority of the company's shares and votes.
(Cond. 7) That Sir John Muir and his firms of James Finlay & Co. and Finlay, Muir, & Co. had been parties to a fraudulent scheme for working the company's business to their own illegal profit in defraud
of the interests of the shareholders, by appropriating in name of commissions, &c., either sums not due or in excess of those due.
(Cond. 8) In terms of the company's articles, the firm of James Finlay & Company was to be paid a fixed salary of 600 per annum. The remuneration of Finlay, Muir, & Company, on the other hand, was to be by percentage. Although by article 58 the remuneration of the said Finlay, Muir, & Company, as agents of the company, is fixed at a definite commission, based solely upon the value of the goods annually sold and delivered, Sir John Muir and his said firm have during said period knowingly charged sums in excess of said commission and brokerage, and upon purchases as well as sales, and have appropriated the same to themselves, to the loss of the said company. The amounts of said overcharge have not been less, during the five years ending 30th April 1894, than 16,250. Said sum of 16,250 is the sum first concluded for in the summons.*
(Cond. 9) Farther, the remuneration stipulated by the company's articles to be paid to Finlay, Muir, & Company by way of commission on sales only, was intended to include, and did include, commission on all financial accommodation required by the company in the course of its business. It has, however, recently been discovered that for many years, and particularly between 1889 and 1894, the said Sir John Muir and his firms of James Finlay & Company and Finlay, Muir, & Company, have improperly and in breach of their agreement with the company, been in use to charge commission on every advance obtained on company's account in Glasgow or Calcutta against said company, and have thereby illegally made large profits for themselves at the expense of the shareholders. The pursuers then set out various instances of commission on advances being charged by James Finlay & Company or by Finlay, Muir, & Company, the amount of which...
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