Qualter, Hall & Company Ltd v Board of Trade
| Jurisdiction | England & Wales |
| Judge | Lord Justice Harman,Lord Justice Donovan,Mr Justice Pennycuick |
| Judgment Date | 17 July 1961 |
| Judgment citation (vLex) | [1961] EWCA Civ J0717-1 |
| Court | Court of Appeal |
| Date | 17 July 1961 |
[1961] EWCA Civ J0717-1
In The Supreme Court of Judicature
Court of Appeal
Lord Justice Harman
Lord Justice Donovan and
Mr Justice Pennycuick
Sir Edward Milner Holland, Q.C. and Mr Ralph Instone (instructed by Messrs Biddle, Thome & Co., Agents for Messrs Wake, Smith & Co, Sheffield) appeared as Counsel for the Appellants
Mr. E. Blanshard Stamp (instruoted by the Solicitor to the Board of Trade) appeared as Counsel for the Respondents.
: In this appeal the appellant is fighting to preserve the status which it admittedly had before its financial reorganisation in 1955 of an "exempt private company" within the meaning of the Companies Act 1948, Section 129, The idea of limited liability in its origin, notably as embodied in early Victorian times in the Companies Act of 1862, was that the privilege of limiting its liability would be conferred on a corporate body in return for a disclosure to its customers, creditors and the public of its balance sheet and profit and loss account. "Private" limited companies only came over the horizon in the year 1907, but from that time until 1948 these bodies had the best of both worlds in that they enjoyed the privilege of limited liability without the obligation of disclosure. This anomalous privilege was largely corrected by Section 137 of the 1948 Act, but by Section 139 a privileged few were allowed to retain It, and a company which can bring itself within Section 129 and the Seventh Schedule to the Act is styled an "exempt private company" and retains the privilege of non-disclosure of Its affairs. This status, as I have said, was admittedly enjoyed by the appellant till 1955 and it is not surprising that it desires to retain it, for virtually the only customer for Its product, which is colliery equipment, is the National Coal Board which no doubt would prize the opportunity of looking into the prices charged.
The appellant is a family concern having some thirteen members and is, I think director-controlled company. It had in 1955 large reserves which could of course be distributed by way of dividend to the members, but that would Involve heavy charges to the Revenue. Moreover, like other concerns of this nature, the members were troubled by the prospeot of the estate duty which would be leviable as the members died and which might make it impossible to retain the private nature of the business. Accordingly, the scheme in question was set on foot and carried out with a view to providing the members with sums of capital cash which could be used to provide for death duties in due course while. as it was hoped, retaining the status of the company. The transaction has been fully described by the learned Judge I do not think it is necessary for we to rehearse it. In effeot the scheme was to oapltalise £75,000 of the reserves and to use them for paying up in full 25,000 cumulative preference shares and 25,000 "A" ordinary shares and to allot these, together with 25,000 already existing preference shares, to the members in proportion to their holdings of the "B" ordinary shares (which were the equity shares in the Company) upon the footing that the members should renounco their rights in favour of five finance companies who were willing to buy the shades at par, paying cash for tnem to the several members renouncing them in their faovour. The question is whether as a result of this transaction the Company has, as the learned Judge found, lost its status as an exempt private company.
Section 129 of the Act provides that a company obtains exemption if, but only if, the conditions mentioned in Section 129(2) are satisfied. These conditions are (a) that the conditions in the Seventh Schedule to the Act are satisfied, (b) that the number. of debenture holders is not more than 50 and (c) that no body corporate is a director of the company. The Seventh Schedule provides that the basic conditions as to the shares and debentures of the company are (a) that no body corporate is the holder of any of the shares or debentures, and (b) that no person other than the holder has an interest in any of the shares or debentures. There follow six classes of exception to this rule. These are exceptions made In favour of the company and are:(2) to enable the company or its members to raise money by way of security for business loans by way of charge in favour of a banking or finance company as later defined. (3) To facilitate operations under family settlements. (4) To deal with cases of unsound mind. (5) For trusts for employees. (6) For shares held by other oxempt private companies, and (7), with which we are here concerned. in the following terms: "Exception for banking or finance company providing capital. The first of the basic conditions shall be subject to an exception for any shares or debentures held by or by a nominee for a banking or finance company, where the banking or finance company acquired the shares or debentures or its interest therein in the ordinary course of its business as such and by arrangement with the relevant company or its promoters".
It is most persuasively argued for the appellant that tho shares in question come within Section 7(1) as having been acquired by one of the four acquiring companies under the arrango-ment (these companies ranking admittedly as banking and finance companies within the definition of those words in paragraph 9 of the Sohodule) in the ordinary course of its business as such. The first words to be construed are the words "as such", and they must mean in ray judgment "as a banking or finance company as defined by the Schedule", and It would be illegitimate to enquire into the general meaning of those words. The definition reads, so far as material, as follows! ". Meaning of 'banking or finance company' In this Schedule the expression 'banking or finance company. means any body corporate or partnership whose ordinary business includes tho business of banking and any other body corporate whoso ordinary business includes the business of lending money or of subscribing for shares or debentures" – I do not think I need read the exception. The crux of this argument is whether "as such" is limited to the business of lending money or subscribing for shares or debentures, or whether, having regard to the use of the word "Includes", the reference may be extended to the general powers of such a company which may be assumed. to extend to the acquisition of as opposed to subscription for shares. The Company argues that the relevant word in Section 7(1) is not "subscribed" but is "acquired", which is a wider word and la limited only on the face of it by the Provision that the acquisition must be, as here it was, by arrangement with the Company, The respondents support a more limited meaning and rely first on the heading to the section which reads: "Exception for banking or finance company providing oapltal". It is the respondents' argument that this shows the limits of the exception, which is intended to allow such a company to raise money by Issuing shares or debentures for cash to a finance company. In my judgment the words "provide capital" mean providing capital for the company, and Indicate that the cash is to be paid into the company1s coffers. The appellant argues that this is to cut down the plain meaning of Section 7(1) by virtue of the heading and that this is an illegitimate method of construction, I would agree that if there were no doubt at all about the meaning of the paragraph. which is the particularity of the legislation, it would not be right to overrule it by tho heading, which is its generality, but to my mind there is here at least a doubt as to the meaning of the words "as such" above discussed, and the correct way of construing the paragraph is to read it in conjunction with the heading and make the two consistent if possible.
Headings of this kind are the equivalent of preambles to older statutes - see the Judgment of the Privy Council in Martina v. Fowler (1926 Appeal Cases at p. 750). This matter was also discussed before Mr Justice Cohen (as he then was) in Re Carlton (1945 Chancery, p. 280) where he cites Lord Herschell's opinion in Ingles v. Robertson (1898 Appeal Cases, p. 616) to this effect: "These headings are not in my opinion mere marginal notes, but tho sections in the group to which they belong must be read in connection with them and Interpreted by the light of them". The learned Judge further oftes Lord Collins in Toronto Corporation v. Toronto Railways (1907 Appeal Cases, p. 315) citing ( Hammersmith Railway Co. v. Brand Law Reports, 4 House of Lords, p. 171): "Such a heading is to be regarded as giving the key to the interpretation of the clauses ranged under it unless the wording is inconsistent with such interpretation" In the recent caso of Attorney General v. Prince Ernest of Hanover (1957 Appeal Cases, p. 436) this subject was much discussed and at the foot of page 460 Lord Simonds is found saying this? "My Lords, the contention of the Attorney-General was, in the first place, met by the bald general proposition that where the enacting part of a statute is clear and unambiguous. it cannot be cut down by the preamble. and a large part of the time which the hearing of this case occupied was spent in discussing authorities which were said to support that proposition. I wish at the outset to express my dissent from It, if it means that I cannot obtain assistance from the preamble in ascertaining the meaning of the relevant enacting part. For words, and particularly general words, cannot be read in isolations their colour and content are derived from their context. So it is that I conceive It to be my right and duty to examine every word of a statute in its context, and I use 'context1 in its widest sense,...
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