Re Yenidje Tobacco Company
| Jurisdiction | England & Wales |
| Judgment Date | 1916 |
| Date | 1916 |
| Year | 1916 |
| Court | Court of Appeal |
Company - Winding up - “Just and equitable” -
In 1914 W. and R., who traded separately as tobacconists and cigarette manufacturers, agreed to amalgamate their businesses, and in order to do so formed a private limited company in which they were the only shareholders and directors. The constitution of the company was such that under the articles of association W. and R. had equal voting powers, one director was to form a quorum, and if any dispute or difference should arise consequent whereon inability to pass a directors' resolution should result, the matter in dispute should be referred to arbitration, the award to be entered in the minute-book as a resolution duly passed by the board. The company's business was successfully carried on until June, 1915, when differences arose between the parties. One of such differences was referred to arbitration, which, after a protracted hearing involving costs exceeding 1000l., resulted in an award to which R. declined to give effect. He brought an action for fraudulent misrepresentation against W., and the parties became so hostile that neither of them would speak to the other, communications having to be conveyed between them through the secretary of the company. In spite of this the company continued to transact business and large profits were made. Under these circumstances W. presented a petition alleging that a complete deadlock had arisen, that the substratum of the company was gone, and that it was “just and equitable” within s. 129 of the Companies (Consolidation) Act, 1908, that a winding up order should be made:—
Held, affirming the decision of Astbury J., that if this were a case of partnership there would clearly be grounds for a dissolution, and that the same principle ought to be applied where there was in substance a partnership in the guise of a private company. The position amounted to a complete deadlock, and it was “just and equitable” that the company should be wound up.
APPEAL from a decision of Astbury J.
In this case a petition was presented by Marcus Weinberg to wind up the above-named company on the ground that it was “just and equitable” that such an order should be made. The company was incorporated in March, 1914, with a nominal capital of 21,285l. divided into 20,285 preference shares of 1l. each, 500 “A” ordinary shares of 1l. each, and 500 “B” ordinary shares of 1l. each. The whole of the capital was paid up or credited as paid up. The objects of the company were to acquire, amalgamate, and carry on two businesses formerly separately carried on by the petitioner and Louis Rothman respectively. The company was a private company, the only shareholders being the petitioner and Rothman. It was arranged between the parties that they should have equal rights of management and voting powers in the company. The articles of association were accordingly so drawn that neither party was in a position to outvote the other or to carry any resolution in opposition to the other. The only shares which carried a vote were the “A” shares, and these were allotted equally between the petitioner and Rothman, so that each had the same number of votes in the management of the company. Of the preference shares 16,995 were held by the petitioner and 3290 by Rothman, the whole of the “B” shares being allotted to the petitioner.
It was provided by the articles that the first directors should be the petitioner and Rothman, and each of them should hold office so long as he lived and was the registered holder of his qualification shares; that the directors might meet and regulate their meetings as they thought fit, and that, unless otherwise determined, one should be a quorum; that questions arising at any meeting should be decided by a majority of votes; that in case of an equality the chairman should have a casting vote, provided that there should be no such casting vote during such time as the petitioner and Rothman should both be permanent directors of the company; that if any dispute or difference should arise between the petitioner and Rothman consequent whereon inability to pass a directors' resolution should result, then the matter in dispute should be referred to two arbitrators (one to be appointed by each director) or their umpire, who should communicate their award to the secretary to be entered in the minute-book and deemed to have been duly passed by the board of directors.
The company's business was carried on successfully until June, 1915, when differences arose between the petitioner and Rothman, and in August of that year Rothman brought an action against the petitioner for a declaration that he had been induced to enter into the agreement for the sale of his business to the company by fraudulent misrepresentation and non-disclosure, and asking for rescission or rectification and damages. Since that time the parties had been in a state of continuous quarrel. One subject of disagreement related to the employment by the company as factory manager of a mall named Litiger whom Rothman had purported to discharge. This matter was referred to arbitration under the articles. After a hearing which lasted eighteen days the umpire made an award confirming Litiger in his appointment at a weekly wage of 5l. The costs of the arbitrators and umpire alone amounted to 1050l., of which Rothman was directed to pay two-thirds together with an additional sum of 50l. towards the...
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