Holmes v Lord Keyes
Jurisdiction | England & Wales |
Judge | LORD JUSTICE ROMER,LORD JUSTICE ORMEROD,LORD JUSTICE JENKINS |
Judgment Date | 25 March 1958 |
Judgment citation (vLex) | [1958] EWCA Civ J0325-1 |
Date | 25 March 1958 |
Court | Court of Appeal |
[1958] EWCA Civ J0325-1
In The Supreme Court of Judicature
Court of Appeal
Lord Justice Jenkins,
Lord Justice Romer and
Lord Justice Ormerod.
Mr J.E.S. RICARDO (instructed by Mr A. Thomson) appeared on behalf of the Appellant (1st Defendant).
Mr GERALD GARDINER, Q.C. and Mr T.D.D. DIVINE (instructed by Messrs A. Kramer & Co.) appeared on behalf of the Appellant (2nd Defendant).
The Hon. DENYS SUCKLEY (instructed by Messrs W.R. Bennett & Co.) appeared on behalf of the Company.
Mr GILBERT BEYFUS, Q.C. and Mr PAUL SIEGHART (instructed by Messrs Basil Greenby & Co.) appeared on behalf of the Respondents (Plaintiffs)
LORD JUSTICE JENKIES: The action in which this appeal arises is an action brought by Mr William Arthur Holmes and Miss Zena Daniels, who are two of the Directors of, and also shareholders in, a company called Gordon Hotels Limited, suing on behalf-of themselves and all other shareholders of the Company, except the individual Defendants; and the Defendants against whom the action is brought are Lord Reyes, Mr Ashe Lincoln and the Company, Gordon Hotels Limited. The action was brought for a declaration that Lord Keyes and Mr Ashe Lincoln had vacated their offices as Directors of the Company. Having issued their Writ, the Plaintiffs moved for an injunction to restrain the two individual Defendants from acting as Directors until Judgment in the action or further Order. That motion came before Mr Justice Danckwerts on the 28th February, 1958? and. he granted the injunction sought. From that Order the two individual Defendants now appeal to this Court.
The question in the case is whether the Defendants acquired their qualification shares, which Directors are required to hold under the articles, within the period of two months from their appointment, as enjoined by Section 182, Sub-section (1), of the Companies Act, 1948.
Their election came about in this way: The Annual General Meeting of the Company was held on the 23rd December, 1957, and part of the business of that meeting was the appointment of Directors. At the moeting I understand the position to have been this: The number of Directors was seven, that being the maximum number provided for in the relevant article, as amended by special resolution. Four Directors retired at the meeting, three by rotation are one who had been appointed since the last Annual General Meeting by the Directors themselves and was accordingly, under the articles, due to retire at this Annual General Meeting. There were thus four vacancies, and I understand there were five candidates, including the two individual Defendants.
Resolutions for the election of the candidates standing for the office of Director were put seriatim, and in each case a poll was demanded. In each case the voter, on the poll were cast actually at the meeting on the 23rd December, 1957, but naturally it was not desired to keep the meeting waiting indefinitely while the votes were counted; so in fact the counting took place on the following day, the auditors of the Company being appointed to act as scrutineers. The result of the counting showed that the two individual Defendants, amongst others, were elected as Directors.
The substantial question in the case is whether in those circumstances, for the purposes of Section 182 of the Act, the two individual Defendants should be treated as having been appointed at the meeting itself so soon as all the votes on the relevant resolutions had been cast, or whether the true view is that the two individual Defendants were not appointed until the result of the poll was ascertained on the following day. The importance of that question is this: If the individual Defendants are to be treated as elected on the 23rd December, then for the purposes of the two months allowed for the acquisition of qualification shares, time began to run from midnight on the 23rd December, 1957 and expired, as I understand it, at midnight on the 23rd February.
The individual Defendants in fact set about acquiring their qualification shares some time during January, and well within the two months they became beneficially entitled to shares, but there was no registration of the individual Defendants as proprietors of the shares acquired until some time on the 24th February, which would be too late, if time is properly to be calculated from midnight on the 23rd December. If, on the other hand, they were not elected until the 24th December, when the result of the poll was ascertained, then their acquisition of qualification shares and completion of their title by registration took place just within time. The question is a highly technical one and probably would not have been litigated at all but for certain unfortunate internal divisions in the councils of the Company.
I should next refer to some of the provisions of the Act and of the Articles of Association of the Company. I should first refer to Section 182. Section 182, Sub-section:- (1), is as follows: "Without prejudice to the restrictions imposed by the last foregoing section, it shall be the duty of every director who is by the articles of the company required to hold a specified share qualification, and who. is not already qualified, to obtain his qualification within two months after his appointment, or such shorter time as may be fixed by the articles".
Then Sub-section (2): "For the purpose of any provision in the articles requiring a director or manager to hold a specified share qualification, the bearer of a share warrant shall not be deemed to be the holder of the shares specified in the warrant".
Then Sub-section (3): "The office of director of a company shall be vacated if the director does not within two months from the date of his appointment, or within such shorter time as may be fixed by the articles, obtain his qualification, or if after the expiration of the said period or shorter time he ceases at any time to hold his qualification".
Then Sub-section (4): "A person vacating office under this section shall be incapable of being reappointed director of the company until he has obtained his qualification".
Then there is a penal provision in Sub-section (5): "If after the expiration of the said period or shorter time any unqualified person acts as a director of the company, he shall be liable to a fine not exceeding five pounds for every day between the expiration of the said, period or shorter time or the day on which he ceased to be qualified, as the case may be, and the last day on which it is proved that he acted as a director".
As to the articles, Article 1 excludes Table A in the First Schedule to the Companies Act, 1929, which was the Companies Act in force when the articles were adopted, "except so far as the sarco are repeated or contained in these articles". Then I can go to Article 80, which deals with the number of Directors. It provides: "Until otherwise' determined by a General Meeting, the number of Directors shall not be less than throe nor more than nine". I understand that the maximum of nine was reduced to seven, exclusive of certain Directors appointed on behalf of debenture holders, but nothing turns upon that.
Then Article 81 is the usual provision for the appointment of Directors by the Board. "The Directors may from time to time appoint any other person to be a Director, either to fill a casual vacancy or by way of addition to the Board, but so that the maximum number fixed as above shall not be thereby exceeded. Any Director appointed undor this article shall hold office only until the Ordinary General Leeting following next after his appointment, but shall then be eligible for re-election".
Then there is Article 83, the qualification of a Director. That article as it originally stood was altered by special resolution, and in its new form reads as follows: "The qualification of a Director other than a nominated Director shall be the holding in his own right of 500 Ordinary Shares of the Company of £1 each and Section 141 of the Act shall be duly complied with by every Director requiring such qualification". Section 141 of the Act - that is to say, the Act of 1929 - corresponds to Section 182 of the Act of 1948.
Then Article 98 deals with the vacation of office by Directors and it provides: "The office of a Director shall be vacated". Then there are events (A) and (B) which are not material. Then (C): "If he ceases to hold the number of shares required to qualify him for office or does not acquire the same within two months after election or appointment". Then there are three other disqualifying events, with which we are not concerned.
Then there are provisions as to the rotation of Directors. They begin with Article 100: "At the Ordinary Meeting in every year, two of the Directors for the time being shall retire from office". Then there is the usual provision deciding who is to retire, the rule being that the longest in office since their last election art the ones to retire; and there is a provision that as between Directors of equal seniority, the Directors to retire, in the absence of agreement, are to be selected from among them by lot. Then: "A retiring Director shall be eligible for re-election and shall act as a Director throughout the meeting at which he retires".
Then Article 102: "Subject to any resolution for reducing the number of Directors, the Company shall, at the meeting at which any Directors retire in manner aforesaid, fill up the vacated office of each Director by electing a person thereto".
Then I do not think...
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