Morris v Kanssen, sub nom Kanssen v Rialto (West End) Ltd

JurisdictionEngland & Wales
JudgeViscount Simon,Lord Thankerton,Lord Porter,Lord Simonds,Lord Uthwatt
Judgment Date22 March 1946
Judgment citation (vLex)[1946] UKHL J0322-5
Date22 March 1946
CourtHouse of Lords
Morris
and
Kanssen and Others

[1946] UKHL J0322-5

Viscount Simon

Lord Thankerton

Lord Porter

Lord Simonds

Lord Uthwatt

House of Lords

After hearing Counsel, as well on Monday the 11th, as on Tuesday the 12th, Wednesday the 13th, Thursday the 14th, Monday the 18th, Wednesday the 20th, Thursday the 21st and Friday the 22d, days of February last, upon the Petition and Appeal of Louis Morris of 52, Shaftesbury Avenue, in the County of London, 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 26th of May 1944, so far as therein stated to be appealed against, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order, so far as aforesaid, might be reversed, varied or altered, or 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 Charles Leslie Walker (Trustee of the property of Theodore Kanssen, a bankrupt); and also upon the printed Case of Rialto (West End) 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 26th day of May 1944, in part complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellant do pay, or cause to be paid, to the said Respondent Charles Leslie Walker, as aforesaid, the Costs incurred by him 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 the said Respondents Rialto (West End) Limited do bear and pay their own Costs of the Appeal to this House.

Viscount Simon
1

My Lords, the opinion which Lord Simonds has prepared in this appeal, and which he is about to deliver, covers the whole ground, and I need say no more than that I concur in every respect with his conclusions.

2

As regards costs, the Question which I should propose to put to the House when the appeal is dismissed is: That the Appellant do pay the Respondent Walker his costs in this House and that the Respondents Rialto (West End) Limited do bear and pay their own costs in this House.

3

I move that the appeal be dismissed.

Lord Thankerton
4

My Lords, I also have had the opportunity of considering the opinion about to be delivered by my noble and learned friend, Lord Simonds, and I concur in it.

Lord Porter
5

My Lords, I have had the like opportunity and likewise concur.

Lord Simonds

My Lords,

6

This appeal occupied many days in this House, but the facts relevant to the issues which your Lordships think it necessary to determine can be stated at no great length.

7

In two consolidated actions, in which this appeal is brought, the Respondent Kanssen, a Dutchman, the Plaintiff in both actions, in which the Respondent company, Rialto (West End) Ltd., and the Appellant Morris and two other persons, Robert Cromie and Eric Paul Strelitz, were Defendants, sought to have it determined who were the directors and who were the shareholders and what shares they held of the Respondent company.

8

The company (as I will call the Respondent company) was incorporated on the 27th December, 1939, with the primary purpose of taking up a lease of the Rialto Cinematograph Theatre in Coventry Street, London. Its nominal capital was £100 in £1 shares. Upon its incorporation two shares were allotted to the subscribers to the Memorandum of Association, and they transferred them, the one to Cromie, the other to Kanssen. There is no question as to the validity of the issue and transfer of these two shares. At the same time the same subscribers to the Memorandum, in exercise of the authority conferred on them by the Articles of Association of the company, appointed Cromie and Kanssen to be the first directors of the company. This was a regular and valid appointment.

9

The company in due course embarked on the business for which was incorporated. It entered into possession of the Rialto Theatre and acquired a lease of it. Soon disputes arose between Cromie and Kanssen, into the merits of which I need not enter. Cromie made an alliance with Strelitz and together they concocted a scheme for getting rid of Kanssen. It was an essential part of this scheme that Strelitz should be appointed a director, so that Cromie and he could, under Article 8 (7) of the company's Articles, call upon kanssen to resign. They claimed, but falsely claimed, that at a meeting of directors held on the 1st February, 1940, at which Cromie and Kanssen were present, Strelitz was duly appointed a director, and they concocted a minute to this effect, which was entered in the company's minute book and in due course signed by Cromie. Strelitz assumed to act as director, and on the 9th April, 1940, Cromie and he in purported exercise of their power under the Articles requested Kanssen to resign his office of director. The request was a nullity and Kanssen remained a director.

10

On the 12th April, 1940, Cromie and Strelitz purported to hold a meeting of directors, and thereat issued one share to Strelitz and seven more shares to Cromie. The issue was invalid and of no effect.

11

On the 26th April, 1940, an extraordinary general meeting of the company was held. Cromie was there; so were Kanssen and Strelitz, but the latter had no right to be there. At that meeting Cromie moved and Strelitz seconded a resolution to confirm the appointment of Stielitz as a director. It appears to have been carried by the votes of Cromie and Strelitz against the opposition of Kanssen. There was no appointment to confirm. Strelitz had no right to second a resolution or to vote for it: Cromie could lawfully use one vote only. No resolution was effectively passed and no valid appointment emerged from these proceedings. Kanssen withdrew protesting, and continued to protest.

12

Nevertheless from that time onward throughout 1940 and 1941 Strelitz acted as a director with Cromie. There was in fact little to be done, as the cinema was closed as the result of enemy action.

13

No general meeting of the company was held in 1941.

14

It is not disputed, therefore, that at the end of 1941 both Cromie and Strelitz (if he was a director) ceased to be directors under Article 73 of Table A as varied by Article 22 of the company's Articles. From the 1st January, 1942, there were no directors of the company.

15

Early in 1942 it appeared that the cinema might be able to reopen. Further finance was needed, and for that purpose Cromie got into touch with Morris and made an arrangement with him under which ( inter alia) he was to become a director of the company and certain shares were to be allotted to him.

16

In pursuance of this arrangement, on the 30th March, 1942, Cromie and Strelitz held a meeting of directors, at which first Morris was appointed a director, then, Morris having joined the Board, the three allotted 34 shares to Morris, 32 shares to Strelitz and 24 shares to Cromie. I will later in this opinion discuss this meeting in greater detail.

17

On or about the 20th April, 1942, Strelitz transferred 17 of his shares to Morris. If all the shares were validly issued, the position then was that Kanssen held one share, Morris 51 shares, Cromie 32 shares and Strelitz 16 shares. In the meantime, on the 30th March, 1942, and the 13th April, 1942, Kanssen issued his writs in the two actions, which were afterwards consolidated. It is sufficient for the present purpose to say that in effect he claimed that the only shares validly issued were the two shares issued to the subscribers and by them transferred to Cromie and to him, and that the register of the company should be rectified by altering Cromie's holding to one share and removing the names of all other persons except himself therefrom. He also claimed a declaration that he and Cromie were the only directors of the company and that Strelitz and Morris were not directors.

18

I will dispose at once and in a few words of the question of directorship. Though it appears not to have been realised until then, it was in the course of the trial appreciated what was the effect of Article 73 of Table A as varied by the company's Article 22, and it was admitted then and at the bar of the House that neither Cromie nor Strelitz has in any view been a director since the end of 1941. The same consideration applies to Kanssen. Whether or not he ceased to be a director at an earlier date, at any rate he did so at the end of 1941. Morris rests his claim upon his appointment by Cromie and Strelitz at the meeting of the 30th March, 1942. But, apart from the considerations which apply equally to the allotment of shares and to this appointment, it is, I think, clear that neither the section of the Companies Act and the Article, which I shall have to consider, nor the general law can avail to establish him in his office of director when he was not in fact appointed a director. To Mr. Justice Cohen and to the Court of Appeal this seemed too plain for argument.

19

I turn then to the more difficult question of the shares.

20

From the short narrative that I have given it is clear that no shares were in fact validly issued except the one share each held by Cromie and Kanssen, and Cohen J. accordingly, having decided the long and hotly contested question of fact in favour of Kanssen, ordered the register to be rectified by striking out the name of Cromie as the holder of any but one share and the name of Strelitz altogether. It remained to consider the case of Morris.

21

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