Hole v Garnsey

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Buckmaster,Viscount Dunedin,Viscount Sumner,Lord Atkin,Lord Tomlin,.
Judgment Date25 March 1930
Judgment citation (vLex)[1930] UKHL J0325-1
Date25 March 1930

[1930] UKHL J0325-1

House of Lords

Lord Buckmaster.

Viscount Dunedin.

Viscount Sumner.

Lord Atkin.

Lord Tomlin.

Reginald Hayward Hole
and
Sir Gilbert Garnsey.

After hearing Counsel, as well on Monday the 16th, as on Tuesday the 17th, days of December last, upon the Petition and Appeal of Reginald Hayward Hole of Clapcote Farm, Grittleton, Chippenham, in the County of Wilts, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal, of the 4th of December 1928, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order might be reversed, varied or altered, and that the Petitioner might have the relief prayed for in the Appeal, or such other relief in the premises, as to His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed Case of Sir Gilbert Garnsey, K.B.E., the Liquidator of Wilts and Somerset Farmers, Limited, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of His Majesty the King assembled, That the said Order of His Majesty's Court of Appeal, of the 4th day of December 1928, complained of in the said Appeal, and the Judgment of the Honourable Mr. Justice Romer, of the 24th day of May 1928, in so far as the said Judgment relates to the Appellant, be, and the same are hereby, Reversed except so far as regards the terms of the said Judgment of the Honourable Mr. Justice Romer as to costs; And it is hereby Declared that the amendments to the Rules of the said Wilts and Somerset Farmers, Limited, so far as they purport to impose upon the Appellant an obligation to hold further shares of the Society, are not binding upon him and that he ought not to be placed upon the list of contributories: And it is further Ordered, That the Respondent do pay, or cause to be paid, to the said Appellant the Costs incurred by him in the Court of Appeal, and also the Costs incurred by him in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is further Ordered, That the costs incurred by the said Respondent, as Liquidator, in and incidental to these proceedings as well before the Court of Appeal as before this House, should be his costs in the Liquidation: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Chancery Division (Companies) of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.

Lord Buckmaster .

My Lords,

1

The Wilts & Somerset Farmers, Limited, was registered under the Industrial and Provident Societies Act of 1893 on the 23rd March, 1910, and on the 30th January, 1923, it went into voluntary liquidation, the Respondent being appointed liquidator. In the liquidation it was sought to place the Appellant on the List of Contributories under the following circumstances.

2

The original rules fixed the shares at the nominal value of £1, provided by Rule 12 that individual members should hold at least one share for every 20 acres or fraction of 20 acres farmed by them up to 500 acres, and one share for every 40 acres or fraction of 40 acres above 500. There was also a provision fixing the shareholding of milk retailers, which is not relevant. Rule 13 provided that the total number of shares held by any member shall not exceed £200, and Rule 64 provided that the rules might be amended by resolution of a three-fourths majority at a Special General Meeting.

3

On the 14th November, 1921, the rules were amended so as to provide that individual members should hold at least 5 shares for every 20 acres up to 500, and 3 shares for every 40 acres or fraction of 40 acres above 500 and that—

"Milk producers shall hold shares on the above acreage basis or shall hold at least five shares for every dairy cow owned by them whichever shall be the greater number of shares."

4

On the 21st December, 1921, the rules were again amended in the following way—

"Rule 6.—Shares shall be transferable but not withdrawable. They shall be of the nominal value of 6s. 8d., which shall be payable on application."

5

At the same time, the following new Rule was added:—

"Rule 6a.—The nominal value of each of the issued and fully paid shares of the Society shall be reduced from the sum of £1 to the sum of 6s. 8d. by cancelling the sum of 13s. 4d. upon each share. Each of the shares of the Society which have been issued and are not fully paid shall likewise be reduced to the nominal value of 6s. 8d. but so that the existing liability in respect of unpaid capital on such shares respectively shall not be extinguished or reduced.

Each person who since the 1st day of July last has made to the Society an application for Shares in the Society shall in the event of his application being accepted by the Society receive an allotment of three shares in the Society of the nominal value of 6s. 8d. each in respect of every share of the nominal value of £1 applied for."

6

On the 25th March, 1922, Rule 12 of the original rules as amended was further amended in substituting for the words "five shares" in the two places in which they occur the words "shares of the nominal value of £5."

7

In May of 1922 the Society issued to its members a letter calling up the appropriate amount from each of the 1,200 members to whom Rule 12 as amended appeared to apply. These 1,200 members, of whom the Appellant was one, disputed the demand to subscribe for further shares and alleged that the rules which had been passed were ultra vires. Proceedings were then taken against the Society, which were heard by Mr. Justice Lawrence, who decided that Rule 12 both in its original form and as amended was ultra vires, the main ground of his decision being that such rule interfered with the principle of limited liability and was, therefore, void by analogy with the Companies Act.

8

In 1925 a similar question arose in a case between the Biddulph District Agricultural Society, Limited, and the Agricultural Wholesale Society, Limited. This latter Society was registered on the 14th day of September, 1914, and the qualifying rule there was one which provided that each Society or Company which was a member of the Agricultural Wholesale Society should hold one share for 50, or any fraction of 50, of its members. The Biddulph Society became a member and, having between 50 and 100 members, took up two shares of £1 each. At a later date, by a special resolution passed on 1st May and 16th May, 1918, the Agricultural Society amended its rules and provided by a new Rule 6 that every existing member should within three calendar months after June, 1918, take up such a number of shares as, together with the existing shares of such member, would make up the number which such Society if a new member would have had to take up, and it also provided that every Society should within six months after the end of each financial year apply for and take up such further shares as would represent an increase in membership and turnover over that on which its then present holding of shares should have been calculated. The effect of this alteration was that the Biddulph Society became bound forthwith to take up additional shares and also within six months after the end of each financial year to take up further shares representing its increase in membership and turnover.

9

On the 12th August, 1918, the Agricultural Society brought this alteration to the notice of the Biddulph Society, who thereupon asked for an estimate of the number of shares for which it was liable and, on being informed that this was 472, they applied for these 470 additional shares. The shares were issued and the amounts paid. As membership and turnover of the Biddulph Company increased from year to year they became bound, if the rules were valid, to take up a further 2,211 shares and this they refused to do. Proceedings were then taken to compel acceptance of the shares. The case came originally before Mr. Justice Lawrence, who followed his own former case, and finally to the Court of Appeal, who reversed his judgment. From the judgment of the Court of Appeal an appeal was taken to this House and the proceedings are reported in 1927 Appeal Cases, p. 76.

10

I have set out the facts in some detail because the first and, to my mind, the most difficult question in this case is whether the decision that this House then reached does not bind us on the present occasion. They dismissed the appeal and held that the Biddulph Company was liable to take the shares but, in order to ascertain exactly what was the foundation and effect of this decision, it is necessary to see what it was that had happened in the Court of Appeal. The report is there to be found in 1925, Chancery Division at page 769. The Agricultural Society presented their case before the Court of Appeal upon two grounds: first, that an obligation to take the 2,211 shares arose under the rules and, alternatively, that there was a contract to take them which was to be implied from the circumstances in which the Biddulph Company had applied for the 472 shares. The Court of Appeal overruled Dibble's case and made a declaration in these words "that under and by virtue of the agreement under Rule 6, 1918, and in the events which have happened the Defendants became and were at the date of the issue of the writ in this action liable to take 2,211 shares of £1 each in the plaintiff Society."

11

It is impossible to read this judgment and to follow what took place in the Court of Appeal without seeing that their conclusion was based entirely upon the view that the alteration of the rule was within the powers of the Society. An agreement "under the rule" cannot...

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