Re English, Scottish, and Australian Chartered Bank

JurisdictionEngland & Wales
Judgment Date1893
Date1893
Year1893
CourtCourt of Appeal
[COURT OF APPEAL] In re ENGLISH, SCOTTISH, AND AUSTRALIAN CHARTERED BANK. 1893 July 1. 1893 July 12, 13. VAUGHAN WILLIAMS, J. LINDLEY, LOPES and A. L. SMITH, L.JJ.

Company - Winding-up - Scheme of Arrangement - Meeting of Creditors - Proxies - Creditors Abroad - Companies Act, 1862 (25 & 26 Vict. c. 89), s. 91 - Joint Stock Companies Arrangement Act, 1870 (33 & 34 Vict. c. 104), s. 2 - Stamp Act, 1891 (54 & 55 Vict. c. 39), s. 15, sub-s. 3; s. 80.

A chartered banking company, the principal business of which was in Australia, stopped payment, and was ordered to be wound up in this country. A scheme of reconstruction was proposed, by which a new bank was to be established, which was to defray the liabilities of the old bank with certain exceptions. The Judge directed meetings of the shareholders and creditors to be held in order to ascertain their wishes as to the scheme. It being necessary that this should be done without delay, and the great majority of the creditors being resident in Australia, the Judge made an order directing a form of proxy to be sent by the Official Receiver by telegraph to Australia appointing specified persons to vote for or against the scheme at the London meeting; the proxy papers were to be executed by the creditors in Australia and deposited at the offices of the company at the principal cities in Australia not later than three days previous to the meeting in London, and the particulars and number of the proxies for and against the scheme were to be telegraphed to the Official Receiver. This was done, and the result declared at the meeting in London, when it was found that more than the statutory number of the creditors, including the Australian creditors, were in favour of the scheme, but that if the Australian votes were not counted the resolution in favour of the scheme would not have been carried. Under these circumstances the Judge sanctioned the scheme. Some of the Scotch and English creditors appealed from this decision on the grounds (1.) that the scheme was improvident and unfair towards the creditors generally; (2.) that the Judge had no power to order the result of the Australian proxies to be communicated by telegram to the meeting, but that the proxies ought to have been produced at the meeting; (3.) that the Australian proxy papers were irregular in naming a particular person as agent for the voter; (4.) that as to some of the proxy papers, which were stamped with a penny stamp, the day of the meeting at which they were to be used was not inserted, and, therefore, they were void under sect. 80 of the Stamp Act, 1891:—

Held (affirming the decision of Vaughan Williams, J.) (1.) that following the principles laid down in In re Alabama, New Orleans, Texas and Pacific Junction Railway CompanyF1, as there was nothing unreasonable or unfair in the scheme as between different classes of creditors, the Court would defer to the expressed opinion of the great majority of the creditors; (2.) that the Judge had power under the Joint Stock Companies

Arrangement Act, 1870, s. 2, to direct the particulars of the Australian proxies to be telegraphed to the Official Receiver and the proxies to be counted at the meeting, there being no necessity that the proxy papers should be produced at the meeting; (3.) that the proxy papers were not irregular on account of the agent being named on the form; and (4.) that the proxies on which the day of meeting was not named would be good if stamped with a ten shilling stamp within thirty days of their being received in England under sect. 15, sub-sect. 3, of the Stamp Act, 1891.

THE English, Scottish, and Australian Chartered Bank was a chartered banking company whose business was principally in Australia, and which had branches at Melbourne, Sydney, Adelaide, and Brisbane. The bank having stopped payment, a winding-up order was made by Mr. Justice Vaughan Williams, and a scheme was afterwards proposed for the reconstruction of the company under the provisions of the Joint Stock Companies Arrangement Act, 1870. Under this scheme it was proposed that a new bank should be formed and registered under the Companies Acts, to be called the English, Scottish, and Australian Bank, Limited, with a share capital of £1,575,000, in 45,000 shares of £35 each. Certain specified claims to the amount of £838,000 were to be borne by the old bank, and the remainder of the liabilities were to be borne by the new bank, which was to take over the assets of the old bank with certain exceptions. The new bank was to pay in cash the preferential debts of the old bank, and all its debts on current account under £50 in amount, and to pay the rest of the unsecured creditors of the old bank, as to one-fourth in debenture stock, as to one-fourth in terminable deposit receipts, and as to the remaining half in inscribed deposit stock. Mr. Justice Vaughan Williams made an order directing meetings to be held of the creditors and shareholders to ascertain whether they consented to this scheme. The far greater number of the creditors of the bank resided in Australia, and the learned Judge accordingly directed meetings to be held in Melbourne, Sydney, Adelaide, and Brisbane, as well as in London, at which the shareholders and creditors might vote personally or by proxy. For this purpose he directed that the Official Receiver should send a form of proxy to the shareholders and creditors in Great Britain and also in Australia. The form of proxy sent to the creditors in Great Britain empowered a named person, or, him failing, another named person, “as my proxy, to act for me at the meeting to be held in London on the 12th of June, 1893, for the purpose of considering, and, if thought fit, approving a scheme of arrangement dated the 17th of May, 1893, with or without modifications; which meeting is to be held pursuant to orders made in this matter on the 18th of May, 1893, and at such meeting, or any adjournment thereof, to vote for me and in my name for the said scheme, either with or without such modifications as my proxy may approve.” In the margin opposite the word “for” was this note: “If against, strike out the word ‘for’ and insert the word ‘against.’” The proxies furnished to the creditors in Australia were substantially in the same form, but a large number of them did not contain the date of the meeting to be held in London.

The order of the Judge then contained the following provision: “That the creditors and contributories in Australia be at liberty to give proxies to persons to be designated by the Official Receiver for or against the scheme, or to any other persons entitled to vote at the meetings whom they may think proper; provided that such proxies be deposited at the offices in Melbourne or Sydney of the company not later than three days prior to the holding of the meetings in London, and that particulars of the proxies so deposited be communicated by telegram to the Official Receiver for use at the meetings.”

Under this order the Official Receiver telegraphed to his representative in Australia the form of proxy to be sent to the shareholders and creditors in that country. Meetings were held in Melbourne, Sydney, Adelaide, and Brisbane, and the scheme was approved by them all, and proxies for the meetings in London were deposited in pursuance of the order. The particulars of these proxies were telegraphed to the Official Receiver and were counted at the London meetings. At the meeting of creditors in London 143 creditors, whose debts amounted to £192,139, voted for the scheme, and 33 creditors, whose debts amounted to £75,646, voted against it. The Australian proxies shewed that 5299 creditors, whose debts amounted to £2,436,832, voted for the scheme, and 126 creditors, whose debts amounted to £74,508, voted against it. The total of the debts represented was £2,779,125. Under these circumstances there was a sufficient statutory majority in favour of the scheme, but not without counting the Australian proxies.

The Official Receiver accordingly presented a petition for the sanction of the scheme, which was opposed by seven Scotch insurance companies, namely, the North British and Mercantile, the Edinburgh Life, the Scottish Widows' Fund, the Scottish Union and National, the Life Association of Scotland, the Caledonian, and the Scottish Life, who were creditors for £92,000, and other dissentient depositors to a large amount, representing debts amounting together with those of the Scotch companies to about £262,293.

The petition was heard before Mr. Justice Vaughan Williams on the 1st of July, 1893.

Latham, Q.C., and Howard Wright, for the Petitioner, the Official Receiver and Liquidator of the Bank, stated the facts, and asked the Court to sanction the scheme.

Finlay, Q.C., Beale, Q.C., and C. E. E. Jenkins; Buckley, Q.C., and Warrington; Vernon R. Smith, Moloney, and A. J. Allen, for the opposing creditors:—

The scheme is framed in the interest of the contributories rather than in that of the creditors. The assets being ample, the creditors have nothing to fear from a winding up by the Court. The Joint Stock Companies Arrangement Act, 1870, contemplates the preparation and sanctioning of a fair scheme, but does not authorize the sacrifice of the interests of creditors in favour of those of shareholders. The assent of the requisite number of creditors has not been obtained. How is the majority of creditors to be ascertained? The meetings held in Australia cannot be taken into account. The proxies given in Australia and telegraphed to this country cannot be accepted, and if they are not counted, the majority required by the Act has not been obtained. The proxies themselves are not good. They are not neutral, and they are so framed that they cannot without difficulty be altered so as to authorize voting against the scheme. Another objection is, that the proxies were not produced at the meeting. The proxy must be in writing, and it is the invariable practice...

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