Re Old Silkstone Collieries Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE JENKINS,LORD JUSTICE MORRIS |
| Judgment Date | 02 December 1953 |
| Judgment citation (vLex) | [1953] EWCA Civ J1202-2 |
| Date | 02 December 1953 |
| Court | Court of Appeal |
[1953] EWCA Civ J1202-2
In The Supreme Court of Judicature
Court of Appeal
The Master of the Rolls
(Sir Raymond Evershed)
Lord Justice Jenkins and
Lord Justice Morris
Mr JAMES G. STRANGMAN, Q.C., and Mr PETER R. OLIVER (instructed by Messrs Hardman, Phillips & Mann) appeared on behalf of the Objectors (Appellants).
Sir ANDREW CLARK, Q.C., and Mr PHILIP J. SYKES (instructed by Messrs Clifford-Turner & Co., Agents for Messrs Hopworth & Chadwick, Leeds) appeared on behalf of the Company (Respondents).
This is an appeal from an order made by Mr Justice Vaisey on the 13th July 1953 whereby he confirmed a reduction of the capital of The Old Silkstone Collieries Limited to the extent stated in the order, but subject to the following proviso: "Provided that such reduction of capital is to be without prejudice to such (if any) rights as the first preferencestockholders and second participating preference stockholders respectively of the Company have or would have had under section 25 of the Coal Industry Nationalisation Act 1946 if the reduction of capital hereby confirmed had not been effected and so that for the purpose of the said section and for that purpose only the holders of the said preference stocks at the date of this order their executors administrators and assigns are to be deemed to be and to continue to be in possession of their respective holdings of such preference stocks respectively notwithstanding that the whole of the capital paid up on such holdings shall have been returned by virtue of the said resolution and this order".
In reference to that proviso, the language used in his Judgment by the learned Judge was as follows. After saying that there was great force in the objections which had been put forward on behalf of the preference stockholders, he continued: "I should be extremely reluctant, and indeed should probably refuse to confirm this reduction, if the result were to be what the objectors anticipate; but I have come to the conclusion that it is possible to deal with this case in a way which will obviate the difficulty altogether"; and the way in which he did deal with it (and which he hoped would obviate the difficulty) was by adding the proviso which I have read.
Mr Strangman for the objecting preference stockholders has argued that the proviso inserted by the learned Judge would be in fact ineffective to achieve the end intended, because the extinction of any stockholding in the preference stockholders at the time when any application under section 25 of the Coal Industry Nationalisation Act 1946 was made would disable them from having any locus standi before the tribunal. Sir Andrew Clark for the Company agrees with Mr Strangman that the proviso upon which the learned Judge pinned such hopes would be ineffective. We have, therefore, unfortunately had to consider this matter upon the footing that that is so. From the short passage which I have read, if the learned Judge had been of opinion that he could not,as he said, obviate the difficulty, it is at the very least doubtful whether he would ever have confirmed the reduction; and it has become necessary accordingly for this Court, in the light of the concession made by both sides, to consider what ought to be done.
Two quite distinct points have been raised by the appellants. The first is of this nature: It is said that as a result of certain previous reductions of capital, there was created in favour of each class of preference stockholders a special right within the meaning of the Company's articles of association, so that, by the terms of the articles, it was incompetent for the Company effectively to resolve upon the now proposed reduction of capital save inter alia with the assent of separate meetings of the classes of preference stockholders concerned. If that view is right, it is not in doubt that this petition must be refused, since there were no such separate meetings of the two classes of preference stockholders. Secondly, the appellants have contended that even if no such special rights were created, still in all the circumstances of this case the Court, in the exercise of its discretion, ought to refuse its sanction to this proposal on the general ground that it is not fair or equitable as between the classes of stockholders concerned.
As the learned Judge in the circumstances expressed no coneluded view on either point, we have thought it desirable that we should express a view on both points, though, as I have earlier indicated, it is our view that Mr Strangman is entitled to succeed on the first point, so that in strictness it is not necessary to express any view on the question of fairness. Still, it may be desirable in the interests of the Company itself that we should give reasons for a conclusion on both matters so that they may regulate their affairs hereafter in accordance with our view.
I must first state a little more fully than by the inferences which may be drawn from what I have already said what are the fact of the case. The Old Silkstone Collieries Limitedis a company which, as its name implies, was, before the coming into effect of the Coal Industry Nationalisation Act of 1946, concerned with the business of coal mining. Its commercial history shows that until not long before that Act came into operation, its success had not been of a very outstanding character, a fact illustrated by the circumstance to which Sir Andrew Clark drew attention, that during the years 1944 and 1945, none of its shares ever stood on the Stock Exchange at a price equivalent to part but according to Sir Andrew, towards the end of its commercial life, the Company had in fact begun to work upon profitable seams of coal so that its prospects from the commercial point of view undoubtedly had become much more promising. But whatever might have happened to this commercial adventure had it not been for the Act of 1946, it is not in doubt in this case that the coming into operation of that Act put an end altogether to the Company's commercial activities. As I follow, it is not suggested that this Company proposes or ever has proposed to continue in business in some other form. In other words, this is a case in which, when all the compensation has been received, the Company will go out of existence, and all its surplus assets will be divided among its stockholders.
It was in anticipation, therefore, of that final demise that in the summer of 1950 the Company put forward the first of its reduction proposals. The proposal was introduced to the stockholders by a circular dated 28th July 1950. At that time the issued paid up capital of the Company consisted of £198,780 of first preference stock, an exactly similar amount of second participating preference stock, and £158,854,5s, of ordinary stock. There was in addition a considerable amount of nominal but unissued capital, and for the purposes in hand it is not necessary to take up time by referring further to that nominal capital.
The rights of these respective classes of stockholders had been varied to some extent from time to time, and at the date to which I have just referred in July 1950, the rights of the first preference stockholders under the articles were these: They were entitled to a fixed cumulative preferential dividend of 6 per cent on the amount paid up (or credited as paid up) on the stock, but to no further right of participation in the Company's profits. They were entitled upon a winding-up to repayment of the capital paid up in priority to all other stockholders, but to no further participation in the surplus assets of the Company. Their voting rights were strictly limited by the amended article 65, which was to the effect that they were not entitled to attend and vote at general meetings of the Company unless the preferential dividend was in arrear to the extent there stated, or unless the business of the meeting included the consideration of a resolution "directly and prejudicially affecting the special rights" attached to that stock.
The second preference stock carried the right to a 5 per cent non-cumulative preference dividend ranking after the preferential dividend on the first preference stock, but with a further right to participation in the profits of the Company pari passu with the ordinary stockholders up to but not beyond a further 5 per cent on the paid up capital on the second preference stock. The second preference stockholders, like the first preference stockholders, were not entitled in a winding-up to any participation in the surplus assets of the Company beyond the amount required to repay the paid up capital on their stock to which they were entitled in priority to the ordinary stockholders. Their voting rights were more extensive than those of the first preference stockholders in that there was no limitation to their right to attend and vote at ordinary meetings of the Company. There was, however, an article in the form usually met with in limited companies and described as a modification of rights clause. That is article 6 and it provided: "If at anytime the capital of the Company is divided into different classes of shares, the special rights" — and I pause to note that that is the same formula, the same phrase, as is found in article 65 — "attached to any class may either with the consent in writing of the holders of three-fourths of the issued shares of the class, or with the sanction of an Extraordinary Resolution passed at a separate General Meeting of such holders (but not otherwise) be modified or abrogated". It is only necessary to note that the article was made applicable in the case of stock as well as of shares. The articles of association of the Company contain a power in article 48, the...
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