Meyer v Scottish Co-operative Wholesale Society

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeViscount Simonds,Lord Morton of Henryton,Lord Keith of Avonholm,Lord Denning
Judgment Date24 Jul 1958
Judgment citation (vLex)[1958] UKHL J0724-1
Docket NumberNo. 3.

[1958] UKHL J0724-1

House of Lords

Viscount Simonds

Lord Morton of Henryton

Lord Keith of Avonholm

Lord Denning

Scottish Cooperative Wholesale Society Limited
and
Meyer and Another

Upon Report from the Appellate Committee, to whom was referred the Cause Scottish Co-operative Wholesale Society Limited against Meyer and another, that the Committee had heard Counsel, as well on Monday the 9th, as on Tuesday the 10th, Wednesday the 11th, Monday the 16th, Tuesday the 17th, Wednesday the 18th, Thursday the 19th, Monday the 23d and Tuesday the 24th, days of June last, upon the Petition and Appeal of The Scottish Co-operative Wholesale Society, Limited, having their Registered Office at 95 Morrison Street, Glasgow, praying, That the matter of the Interlocutor set forth in the Schedule thereto, namely, an Interlocutor of the Lords of Session in Scotland of the First Division of the 20th of March 1957, so far as therein stated to be appealed against, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Interlocutor so far as aforesaid, might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the printed Case of George Meyer and Joseph Lucas, 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 Her Majesty the Queen assembled, That the said Interlocutor of the 20th day of March 1957, in part complained of in the said Appeal, be, and the same is hereby, Affirmed, except in so far as regards the words "ordain the second-named respondents to purchase the petitioners' shares in the Scottish Textile and Manufacturing Company, Limited (the first-named Respondents) at a price of £3 15s. per share and that within one month from the date hereof", and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do purchase the Respondents' shares in the Scottish Textile and Manufacturing Company Limited at £3 15s. per share within one month from the 24th day of this instant July, and do pay interest on the purchase money at 5 per centum per annum from the 20th day of April 1957 till payment: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments: And it is also further Ordered, That unless the Costs, certified as aforesaid, shall be paid to the parties entitled to the same within one calendar month from the date of the certificate thereof, the Cause shall be, and the same is hereby, remitted back to the Court of Session in Scotland, or to the Judge acting as Vacation Judge, to issue such Summary Process or Diligence for the recovery of such Costs as shall be lawful and necessary.

Viscount Simonds

My Lords,

1

In this appeal from an Interlocutor of the First Division of the Court of Session I am in such full agreement with their Lordships both in their findings of fact and in their conclusions of law that I do not think it necessary to trouble the House at such length as I otherwise might. But, inasmuch as your Lordships have for the first time to consider a new and important section of the Companies Act, 1948, it is right that I should state my views upon it.

2

On the 7th May, 1946, there was incorporated as a private limited company the Scottish Textile and Manufacturing Company Limited, which I will call "the company". It had an authorised share capital of £25,000 divided into 25,000 shares of £1 each. Its substantial object was the manufacture and merchanting of rayon fabrics. The Respondents, formerly of German but now of British nationality, who had left Germany when the Nazis obtained power in that country, had a large experience and extensive connections in the continent of Europe in the rayon trade and one of them, Dr. Meyer, had already in 1945 been appointed textile adviser to the Appellant Society. Into this trade the Society wished to enter and, though they would have preferred to carry it on as a branch of their own business, this was for more than one reason not practicable. The Respondents were unwilling to act merely as employees of the Society and, since at that time licences had to be obtained for the manufacture of rayon, and were granted only to persons who could satisfy the Cotton Control authorities that they commanded the necessary skill and experience, it was mutually advantageous to the Society and the Respondents that a subsidiary company should be formed in which they should both be interested. The company was accordingly formed and 7,900 shares were issued, 4,000 to the Society, 3,450 to Meyer, 450 to Lucas. Thus the Society had such control as a majority shareholding could give. Moreover, of the five directors of the company three were at all material times nominees of the Society, the other two being the Respondents who were the managing directors. Nor was there lacking control by the Society of a practical sort. For from the outset it was contemplated that, at any rate until a factory could be built or acquired for it, the company should be substantially dependent for its supplies upon the Society's mill at Falkland which in 1946 was partially idle. Accordingly under arrangements with Cotton Control the production of a number of looms at Falkland was allocated to the company and the looms were licensed for rayon production. Dr. Meyer made arrangements for the supply of rayon yarn to be used in the manufacture of the finished cloth, the yarn being purchased by the Society and invoiced to them at Falkland Mill. There it was woven and the woven cloth sold to the company ready for dyeing and finishing. This was the plan and from the beginning it flourished greatly.

3

But, my Lords, it was a plan which demanded the utmost good faith on both sides and, as your Lordships will see, it was the lack of it on the part of the Society which led to this discreditable tale.

4

I must hark back for a moment to the year 1947. It seems that in March of that year an agreement between the parties was made for what was curiously called a realignment of their shareholding, so that instead of approximately equal holdings the Society should hold 70 per cent, and the Respondents 30 per cent, of the issued capital. That was in March, 1947, but nothing was done to carry the agreement into effect until the year 1951. In November of that year, the company being then apparently very prosperous, the nominee directors, as I will call them, under the instructions of the Board of the Society raised the question: numerous proposals were put forward some of which involved the purchase by the Society of some of the Respondents' shares. It is unnecessary to go into the details of this episode, for in the end nothing was done. The significance of it lay in the fact that the Society's representatives adopted the view that they were entitled to acquire at par any shares they might get under the so-called realignment and upon a refusal of this unjust demand threatened that the Society would liquidate the company if it was not met. This and other threats led to legal advice being sought. The solicitor to the Society and the company advised that the shares should be valued and bought at a valuation: they were valued by the company's auditors at no less than £6 0s. 11d. a share and thereafter the Society proceeded no further in the matter. It is impossible after reading the voluminous evidence in this case not to see that the Society, thus foiled in their attempt to obtain a grossly unfair advantage of the Respondents, determined to seize any opportunity of procuring for themselves the benefit of the trade which had been largely built up by their efforts.

5

It is at this stage convenient to refer to the section of the Act under which the Respondents petitioned the Court for relief and obtained the order, against which this appeal is brought, that the Society should buy their shares in the company at £3 15s. 0d, per share. It is so far as relevant as follows:

"S. 210 (1). Any member of a company who complains that the affairs of the company are being conducted in a manner oppressive to some part of the members (including himself) … may make application to the court by petition for an order under this section.

(2) If on any such petition the court is of opinion—( a) that the company's affairs are being conducted as aforesaid; and ( b) that to wind up the company would unfairly prejudice that part of the members, but otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up; the court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether for regulating the conduct of the company's affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company … or otherwise."

6

It is common ground that at the date of presentation of the petition on the 13th July, 1953, it was just and equitable that the company should be wound up. It could hardly be denied that to wind up the company would unfairly prejudice the Respondents. The only question is whether its affairs were being conducted in a manner oppressive to the Respondents and, if so, whether the Court ordained the appropriate remedy.

7

My Lords, as I have already said, I do not propose to rehearse the facts at length. The four learned Judges of the First Division, including Lord Carmont who was deputed to take the proof, were unanimously of opinion that the...

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