Winding Up on The “Just and Equitable” Ground
| Author | B. H. McPherson |
| DOI | http://doi.org/10.1111/j.1468-2230.1964.tb01028.x |
| Published date | 01 May 1964 |
| Date | 01 May 1964 |
WINDING UP ON THE
“
JUST AND EQUITABLE
”
GROUND
WHEN,
in
1862,
section
9
(5)
of the Companies Act authorised the
making of an order for compulsory winding up
‘‘
whenever the
court is of opinion that
it
is just and equitable that the company
be wound up,” it was not the first occasion on which the courts
had been left to work out for themselves the principles on which
such orders should be granted.
A
similar provision had in fact first
appeared in the Winding-up Act of
1848,’
where its wording and its
situation at the end of a list of the circumstances in which winding
up was specifically authorised disposed Lord Cottenham to the
opinion that
“
this clause was no doubt thus worded in order to
include all cases not before mentioned,” his Lordship immediately
thereafter qualifying this with the remark that, ‘(of course,
it
cannot mean that it should be interpreted otherwise than in
reference to matters
ejusdern generis
as those in previous clauses.”
For
a long period this construction dominated interpretations of
the
‘‘
just and equitable
”
provision in section
72
(5)
of the Act of
1862,3
but, by a process which seems to have begun in the last
decade of the nineteenth centu~y,~ the strictness of the
ejusdem
generis
rule was gradually relaxed and the courts became bolder in
their approach toward petitions based on this ground. Since the
turn of the century judicial decisions in every jurisdiction have
made it clear that the old rule has now been entirely abandoned,
and that the words
“
just and equitable
”
in corresponding sections
of
more recent Companies Acts are to be treated as conferring a
discretionary power which is of the widest character.6 But it does
not follow from this that the courts are completely at large in the
exercise of the discretion conferred by the provision
:
the discretion
1
The
‘‘
just and equitable
”
clause was omitted from the Joint Stock Companies
Act
of
1856, where its place was taken in
8.
67 (5) by
a
provision authorising
winding up
I‘
whenever three-fourths of the capital
of
the company have been
lost and become unavailable.”
2
Re Agriculturist Cattle Insurance
Go.,
ex
p.
Spackman
(1849)
1
Mac.
&
G.
170 at p. 174.
3
Re Anglo-Gveek Steam
Co.
(1866)
L.R.
D
Eq.
1;
Re Suburban Hotel
Co.
(1867)
L.R.
2 Ch.App. 737
;
Re
New
Gas
Co.
(1877)
36
L.T.
364.
4
Contrast the remarks
of
Vaughan-Williams
J.
in
Re Brznsmead
d
Co.
[1897]
1
Ch. 45 at
p.
48 with those in
ll;
Amalgamated Syndicate
[1897] 2 Ch.
600
and
Re Sailing Ship “Kentnzere Co.
[1897] W.N. 58.
5
Re Yenidje Tobacco
Co.
[1916] 2 Ch. 426 (England):
Loch
v.
John Blackwood
R
Co.
[1924] A.C. 783 (Privy Council);
Re Newbridge Steam Laundry
[I9171
1
I.R.
67 (Ireland);
Symington
v.
Symington’s Quarries,
Ltd.
(1906)
8
F.
121
(Scotland), in which Lord M’Laren pointed out (at pp. 129-130) that according
to accepted principles
of
construction the
ejusdem generis
rule ought
never
to
have applied in these circumstances.
6
Re Wondof7ez Teztiles, Ltd.
[1951]
V.L.R.
458 at p. 464.
per
Smith
J.
282
MAY
1964
WINDING
UP
:
“
JUST
AND
EQUITABLE
”
GROUND
283
is
of a judicial nature and this requires that grounds must be given
for exercising
it
which can be examined and justified.? On the
other hand, it has been stated that the justice and equity which
falls to be considered is that which prevails between two classes of
persons-those who support the petition and those who oppose
it-
and that in reaching its conclusion on this question the court is
entitled to take account of
“
every consideration which is fair and
reasonable for the interests concerned.”
But the
ejusdem
generis
rule was not the only factor which
influenced early interpretations of what is now section
222
(f)
of
the Companies Act of
1948.
In particular, in an age which still
regarded a limited liability company as little more than an extended
form of partnership, it was not unnatural that the courts should
turn for guidance to the principles governing dissolution
of
partner-
ships
9;
and even after the heresies associated with this notion had
finally been extirpated by
Salomon’s
case, there was still a
sufficiently compelling degree of similarity between the two institu-
tions to make
it
possible for the
Court
of Appeal in
Re
Yenidje
Tobacco
Co.l0
to extend the analogous partnership principles to
the winding up of small
“
domestic
”
companies. Most important
of all, however, was the fact that by providing an alternative
means by which a majority of three-quarters of the shareholders
could voluntarily dissolve the company,11 the legislature had,
it
was thought, made it clear by implication that a petitioner who
sought an order for compulsory winding up should be bound to
show circumstances such as would justify the court in taking the
extraordinary step of intervening in the affairs of a company in
order to put an end to it, although fewer than the requisite majority
of members were in favour of its discontinuation. This judicial
reluctance toward becoming involved in what is thought
to
be
primarily a question of domestic policy was clearly expressed by
James L.J. when he said:
“
It
really is very important to these companies that the court
should not, unless a very strong case is made, take upon
itself to interfere with the domestic forum which has been
established for the management of the affairs
of
the
company.”
l2
The just and equitable ground has in practice been utilised
primarily by shareholders, and a shareholder who seeks a winding-
up order is, in doing
so,
most often motivated by
a
desire to
retrieve his investment before it is altogether dissipated, and the
liabilities of the company increased, by a course of business which
7
Bmrd
v.
Lees,
1924
S.C.
83
at
p.
90,
per
Lord Clyde.
8
Pine
v.
Steuwt
(1’904)
6
F.
647,
per
Lord
Kinross.
9
See,
e.g.,
the partnership cases cited by Lord Cairns in
Re
Suburban
Hotel
Co.
(1867)
L.R.
2
Ch.App.
737.
10
[1916]
2
Ch. 426.
11
z
e.,
xoluntary uinding up under what
is
no=
s.
278.
12
Re
Langham
Skatinq
Rink
Co.
(1677)
5
Ch.D.
669 at p.
G65.
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