White v Bristol Aeroplane Company Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE DENNING,LORD JUSTICE ROMER |
| Judgment Date | 11 December 1952 |
| Judgment citation (vLex) | [1952] EWCA Civ J1211-2 |
| Court | Court of Appeal |
| Date | 11 December 1952 |
[1952] EWCA Civ J1211-2
THE MASTER OF THE ROLLS
(Sir Raymond Evershed),
LORD JUSTICE DENNING and
LORD JUSTICE ROMER
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
MR J.G. STRANGMAN. Q.C. and MR K.L. COGHLAN (instructed by Messrs Stanley & Co., Solicitors, London) appeared on behalf of the Defendants (Appellants).
MR J. NEVILLE GRAY. Q.C. and MR D.S. CHETWOOD (instructed by Messrs E.F. Turner & Sons, Solicitors, London) appeared on behalf of the Plaintiff (Respondent).
The question raised in this appeal is whether, according to the proper construction of the Memorandum and Articles of Association of the Bristol Aeroplane Company, Ltd., to which I will refer hereafter as "The Company", the proposed distribution (by way of capitalisation of undistributed profits) of fully paid-up Preference and Ordinary shares requires: (1) that a separate meeting of the existing Preference stockholders should be summoned, and an extraordinary resolution in favour of the proposals passed thereat; and (2) that the existing Preference stockholders should be summoned to attend, and vote at, the General Meeting of the Company.
Before I refer to the relevant Articles, it may be convenient to state the existing capital position of the Company. There have been issued, and are fully paid up, 600,000 Preference shares of £1 each, since made into Preference Stock; in addition there have been issued and paid up 6,600,000 Ordinary shares of 10s.0d. each, which have also been converted into £3,300,000 Ordinary Stock. The proposal is to increase the capital from its existing figure of £3,900,000 to £5,880,000, by the creation first of £680,000 new Cumulative Preference shares of £1 each, ranking pari passu in all respects with the present Preference Stock, formerly shares, so as to form a uniform class therewith, and second by the creation of 2,640,000 new Ordinary shares of 10s.0d. each, ranking pari passu in all respects with the existing Ordinary Stock. It should be pointed out that, having regard to the rights conferred by the regulations of the Company on the existing Preference Stock, these new shares will all be distributed among the existing Ordinary stockholders; it is therefore manifest that the Ordinary stockholders, by obtaining between them the 660,000 Preference shares of £1 each, or its equivalent amount of Stock, will, on a matter which has solely to bedebated by Preference stockholders, have a majority over the existing Preference stockholders; and it is also manifest that upon a matter on which all the stockholders, Preference and Ordinary, debate together the new Ordinary Stock to be issued will swell the total number of votes that can be cast by Ordinary stockholders – although it is fair to add that the proportion of votes (I have not road the provisions as to votes yet) which Ordinary stockholders will have as against Preference stockholders will be reduced from the present ratio of about 11 to 1 to the smaller ratio of about 7 ½ to 1.
It has been the contention of the representative of the Preference stockholders, who is the Plaintiff in the action – a contention which was successful in the Court below – that the proposal now made falls within the ambit of certain clauses in the Articles which I will road, so as to give the Preference stockholders the right to a separate meeting, and to attendance at the General Meeting of the Company.
I turn, therefore, at once to the Articles, and I am bound to say that the draftsman has displayed a prolixity of expression, which has, I think, given rise to the difficulty with which the Company, and the Court, is faced.
It will be sufficient if I go at once to Article 61, observing only that by a previous Article, Article 50, the words "share" and "shareholders" are later used as comprehending "stock" and "stockholders".
Article 61 sets out the present capital, and indicates the rights, or some of the rights – for it is not in this respect exhaustive – which belong to the Preference stockholders. After stating the figures which I have already mentioned, the Article proceeds: "The said preference stock shall confer upon the holders thereof the right to a fixed cumulative preferential dividend at the rate of 5 per cent.per annum on the capital paid up or credited as paid up thereon, and the right in a winding up to repayment of the capital paid up or credited as paid up thereon, together with all arrears and accruals of the said preferential dividend down to the date of such repayment, whether earned or declared or not, before any return of capital is made on the ordinary stock or shares, but shall not confer any further right to participate in profits or assets".
There then follows a number of clauses dealing with increase of capital, of which the most important is the next clause, Clause 62, which I will read in full: "The Company may from time to time, in General Meeting, whether all the shares for the time being authorised shall have been issued, or all the shares for the time being issued shall have been fully called up or not, increase its capital by the creation of new shares, such aggregate increase to be of such amount and to be divided into shares of such respective amounts as the General Meeting resolving upon the creation thereof shall direct. Subject and without prejudice to any rights for the time being attached to the shares of any special class, any shares in such increased capital may have attached thereto such special rights or privileges as the General Meeting resolving upon the creation thereof shall direct, or, failing such direction, as the Directors shall by resolution determine, and in particular any such shares may be issued with a preferential, deferred or qualified right to dividends or in the distribution of assets and with a special or without any right of voting. No shares shall be issued so as to rank in priority to the preference stock referred to in Article 61 either as to dividend or capital, without the sanction of an Extraordinary Resolution passed at a separate meeting of the holders thereof in manner provided in Article 68; but preference shares may without any such sanction be created and issued so as to rank paripassu therewith, provided that the total nominal amount of the preference capital for the time being issued shall not exceed the total nominal amount of the ordinary capital for the time being issued and outstanding".
Article 63 provides for shares being offered to the existing members in a particular manner. Article 64 says: "Subject to any directions that may be given in accordance with the powers contained in the Memorandum of Association or these Articles, any capital raised by the creation of new shares shall be considered as part of the original capital, and as consisting of ordinary shares, and shall be subject to the same provisions with reference to the payment of calls, transfer, transmission, forfeiture, lien and otherwise as if it had been part of the original capital".
Article 68 bears the familiar heading "Modification of Rights", and it reads as follows: "Subject to the provisions of Section 72 of the Act" – that is, of the Companies Act, 1948, relating to the right of holders of special classes of shares to apply to the Court in certain circumstances where variation of their rights is proposed; it is a Section which does not apply in the present case – "all or any of the rights or privileges attached to any class of shares forming part of the capital for the time being of the Company may be affected, modified, varied, dealt with, or abrogated in any manner with the sanction of an Extraordinary Resolution passed at a separate meeting of the members of that class. To any such separate meeting all the provisions of these Articles as to General Meetings shall … apply" – I need not read that Article further.
Next I must refer to Article 83: and we now pass from the first point, whether there must be a separate meeting, to the second point, whether the Preference stock-holders are entitled to be present, and to vote, at the General Meeting. Article 83 reads: "Subject to any special rights or restrictions for the time being attached to any special class of shares in the capital of the Company, on a show of hands every member personally present shall have one vote only, and in case of a poll every member present in person or by proxy shall (subject as hereinafter provided) have one vote for every share held by him or in the case of the said preference stock one vote for every £1 of preference stock held by him or in the case of the said ordinary stock one vote for every ten shillings of ordinary stock held by him: Provided that preference shares or preference stock shall not confer on the holders thereof the right in respect thereof to receive notice of or to attend or vote at a General Meeting unless the dividend thereon is in arrear or unless the meeting is convened to consider a resolution for winding up or to reduce capital or to consider a resolution directly affecting their rights or privileges as a separate class" – and the last sentence is not material.
The only other Articles to which I need allude are Articles 131 and 132. Article 131, under the heading of "Dividends and Reserve Fund", provides as follows: "Subject to any rights or privileges for the time being attached to any shares in the capital of the Company having preferential, deferred or other special rights in regard to dividends, the profits of the Company which it shall from time to time be determined to distribute by way of dividend shall be applied in payment of dividends upon the shares of the Company in proportion to the amounts paid up thereon respectively" as therein stated. Article 132 provides: "The Directors may, with the...
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