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THE SHA GHAI COTTON
MFTG. CO., CASE.
R. N. Macleod, with whom was Mr. Lipson Ward, appeared for the de
fendant company,
Telephone 29.
beli
THE
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CORRESPONDENCE.
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TUESDAY, MARCH 29 1920
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dressed were the Japanese ma ther the Order in Council nor the jority again. Counsel pointed out authorities which his learned friend that apart from that statement had quoted could touch that propost there was nothing which could be tion, and if a new British company construed as evidence that there could be formed to hold all the shares. would be any injury to the company in Japanese company, managed by To the Editor of the "China Mäll?”) if there were to be a change in the Japaness it was ridiculous to say that management or that the continuance the British company would have no of Japanese management would be substratum if the present scheme
Dear Sir-Those who have been so of any material benedt to the com-were carried out.
flond in their denunciations of the pany. On the other hand it seemed Therefore, they came back to the verdict given by Mr. W. Logan In clear that there would be certain dis question of the construction of the the recent boxing contest would do advantages to British shareholders memorandum. They resented the well to read what Mr. Eugene, Corri, which they would have to face in the suggestion that they were not try the well known referee writes from event of the scheme. going through. ing to comply with the Order in Lndon an February 12, on the If it went through, they would lose Council. Their case was that they verdict he gave in a contest between the right of saying. We will not were trying to do so. Id effect Bandsman Dick Rice and a French not become. shareholders bo
a they had been a Japanese company boxer. Paul Journee, at the Holborn Japanese company."
ever since it started. They had Stadium recently. The match was Counsel also commented upon the had Japanese management and the to have been between the Frenchman difficulties which British shareholders majority of the capital had been and Frank Rey At the last moment would be in owing to ignorance of Japanese. The law said it is no Ray could not enter into the match. Japanese law and he also urged that longer allowed and they were now Corri writes there could be little doubt that if the turning themselves into what they proposed transfer of the undertaking really were, namely, a Japanese com did take place bankers' opinions as pany. Dealing with Mr. McNell's to the value of the shares of the contention that the proposed sale defendant company as security for would not be in pursuance of the nice contest at all, and one out of Enancial assistance would undergo company, Mr. Macleod said the sale which I, as the referee, got more a change. While they would regard was, in fact, an arrangement to kicks than falipence. There was a THE DAIRY FARM, 10E & COLD STORAGE CO., LTD. the shares in a British company carry on with as little change as considerable section of the onlookers bolding mills and other assets as possible the very things which the for Rice; the rest were pro-Journee, baving a certain value, they would company was started to do. not regard the shares of a British company holding shares in a Ja panese company as being of the same class of security,
Ay
· The case was adjourned.
PROCEEDINGS ON MARCH 16, The case of F. N. Matthews and others v. the Shanghai Cotton Manu- facturing Co., Ltd, was continued on March-16
·
"They hit upon one (a substitute), Bandsman Dick Rice no great perfor mer, but a man fairly formidable in arouch and tumble. It was not a
and then I declared the result to be a draw, there was a show of disappro val. Of course I stick to my guns. I hold that my decision, based upon and experience of forty years, was a good one. It has long occurred to me that betting has hted Impossible partisanship, and the time has come
when, unless the gambling element is cut out of boxing, the sport will be seriously hurt.
こ
I grant that the best of referees make mistakes, but such la now the attitude ́shown towards them by people who only see in the game the opportunity to speculate, that thei position is becoming almost impos- sible."
All that Mr. Corri writes above sounds as if much of it might be applied to some so-called boxing
fans" in Hongkong:
Yours etc.
P.B.T.
11
ARBITERS,
Sir,That "simple and appro-
Yours faithfully
VIMY.
Hongkong, March 23.
counsel said the present scheme seemed to him to be something en tirely different. The going through an ordinance, going round it and at The case was continued in H. M. the side of all visible obstacles was a Supreme Court at Shanghai on March matter of skill, but the present
With these grievances against the 15, taking the form of a trial, before scheme was something like the action his Honour Judge Sir Havilland de of a Chinese servant who has broken scheme they came to his Lordship Sausmares, in which Mr. F. N. Mat- the five coloured vase and mended it with the question as to whether as a thews and other shareholders in the with soap so that it might still be an matter of fact that scheme was not Shanghai Cotton Manufacturing Co. prnament to the living room. The ultre vires the company. Dealing. Mr. D. McNeill, with whom was a skilful operation, the with this aspect of the case, counsel Mr. E L Hartopp, appeared for the Ltd, sued the company for the com- first was paay for an injunction restraining it other was an unsubstantial thing, a urged that the proposed sale was not plaintiffs and Mr. R. N. Macleod, from selling the undertaking of the trick or device by which something a sale at all, but merely a futile with whom was Mr. Lipson Ward, company to any other company that was not real was made to look attempt, the like of which had often was for the defence.
failed, to carry out something which Mr. Macleod continued his argu not subject to the jurisdiction of real that Court and receiving in com- Counsel then read, in addition to was not really within the memoran- ment from the previous day and pensation for such sale shares or the affidavit filed first by Mr. Mat dam of association by means of a throughout the morning argued in
which other like interests in the purchas thews, further affidavits comprising procedure
appeared to support of his contention that the be covered by ing company, otherwise than in the evidence in the case.
the memoran- authorities quoted by Mr. McNell A second affidavit by Mr. Matthews Į dum. Further the compliance with the provision of
proposed in support of his case did not in Section 185 of the Companies Or- stated that he and his co-partners sale was. not In pursuance fact support it and were, more dinance. The case arises out of represented or
proxies or of anything which could be properly over, rather is support of his own the scheme to sell the property of promises of support from the called an object of the company but case. Dealing with the point raised the Shangha: Cotton Manufacturing holders of 7923 and, out of was a sale in the exercise of ancillary by Mr. McNeil as to whether the Co., Ltd., to a Japanese company the 4950 remaining shares held powers intended to be used for the business transferred to the Japan- to be be formed all the shares in by other than Chinese and Japanese furtherance of the company's subjects ese company could be afterwards in which, with the exception of 10, shareholders, 3,152 were registered and for no other reason. The sale, any way regarded as the business would be held by the defendant in the names of the three British he urged, was net in pursuance of of the company, commsel pointed He was informed and the company's objects as owners and out that the conduct of the mills, company, a proceeding to which the directors.
believed that one of the directors, workera of cotton mills, bu: an the buying of cotton, its manufac-[To the Editor of the “China Mail."] applicants object.
Mr. D. McNeill, with whom was namely, Mr. H. E. Morriss, had improper and illegal exercise of ture into yarn and the disposal of Mr. E. L. Hartapp, appeared in contracted to deliver at the forth powers given solely for the purpose the latter, together with all the cot support of the application, and Mr coming March settlement no less of the company's business, while the ton marketing and selling business,
than 3,100 shares to persons whom sale of the undertaking to a Japanese would be the business, legally and priate" war memorial is going to be, the deponent, represented. Cer company in consideration of the strictly, of the Japanese company cost $300,000 on a plece of ground tain foreign shareholders, having acquisition of shares was, putting and not that of the British-com-worth $800,000. Ye Rods Cas Mr. McNeill, in his opening, said sold their shares forward, had de it at its highest, merely a subsidiary pany whose business would be very such a thing bappen anywhere else the scheme for the sale of this com clined to take an interest in these object and as such could not be much in the nature of secretarial in the world? pany was, roughly speaking, an proceedings, and it, therefore, follow placed in the position of the main work and its directors and officers And yet Taipan Johnstone is attempt to oppose, or resist the ed that practically the whole of the object of the company which was would be concerned with a certain going for you "more in sorrow than recent Order in Council requiring shareholders other than Chinese and to own and work cotton mills. The amount of money which they were in anger." What will the people that the management of a China Japanese subjects were represented idea of transferring to a Japanese at present holding, profits from last say when they are asked to "simple" Company should be British. The by himself and his co- plaintiff's who company the undertaking of a year, and the shares which they subscribe towards this Order in Council said in effect that also held proxies from the Chinese British company came somewhat would hold from the Japanese com memorial? there must be a change of mana, owners of 938 shares.
as a shock when it first came to pany. The scheme, he emphasized, Counsel mentioned two affidavits one's notice. One could not help was not merely a device to comply gement of the..company. The com pany replied that they were of a filed by Messa. Horatio Robertson feeling that persons who subscribed with the Order in Council, but was contrary opinion and that they did and E, I. Ezra in support of Mr. for shares in a British company in fact an actual compliance with not intend there should be any Matthews' affidavit, after which he ought not to expose themselves or the objects of the order. The order change of management. Quoting read the affidavit of Mr. Keitare be exposed to the risk of finding did not and could not seek to estab from the circular addressed to Auroda, secretary to the defendant themselves shareholders in a Japan lish any sort of control on the part shareholders, counsel said that his company, which showed, inter alia ese company. The proposed sale of that Court over the assets which of the fact that Mr. Matthews re- Lordship would see that after re- that the shares of the defendant was actually in violation of the were legally the property of foreign presented a great number of share holders. It Mr. Matthews repre ferring to the Order in Council, and company were held as follows on terms of the company's memoran. companies and in a sense the presented only himself, the case would dum of association, while at a later posed scheme relieved the Court of have to be decided upon precisely stating that the Shanghai Cotton February 20, 1920:- Manufṛcturing Co., Ld., was a China
stage, counsel remarked that the business in dealing with which it the same principles, and the state- company and that the management.
scheme was a shameless and im would be hampered if the order had ment of the number of shareholders was in the hands of a Japanese com
pertinent attempt act in direct not been made. pany, the circular went on to state
be represented did no more than to contravention of the law as laid His Lordship Why? ' that the Order provided for "pains The deponent also set forth a list down by HM the King-in the Counsel In the present. circum. establish Mr. Matthews' bona fides. and penalties if its requirements were showing the dates upon which cer- Order in Council. The Mitsui stances you have a company, the Then there was the suggestion that the directors, or one of them, had not carried out and stated: The tain of the British and foreign Bussan Kaisha would in fact still actual effective control of the assets sold forward a certain amount of directors feel confident that you will shareholders first appeared on the control the Shanghai Cotton Manu- of which are in the bands of persons his holding. There was nothing in agree that a change of management register as holding shares in the facturing Co., Ltd. There was a not subject to the jurisdiction of this that unless the suggestion was tha: is not desired."
company and concluded by saying: majority of Japanese shareholders Court,
he had acted in support of the other Counsel thought he might say
His Lordship-At the present directors with malafides. ・・・ 'Since the proceedings herein of in. the old company, there would with regard to the circular, that it February 26, 1920, the directors have be in the new, the management
time, yes...
His Lordship It is only material appeared to him to be, not inter fully considered the question of an would be Japanese and so would Mr. Macleod: It is to correct in showing that the number of shares tionally but in fact, misleading, alternative to the scheme which is the control.
that disadvantage that, the Order is held by the British directors amounts because it was quite clear that the the subject matter of this action and Mr. McNeill further argued that made. It is not intended to bring to 52... publication of the Order in Council' are now unanimously of opinion there would have to be a liquidation within the jurisdiction of the Court With regard to Mr. McNeill's did not leave the company with only that the only alternative course in if the scherie went through and if assets which are truly the property contention that there was not evi- two alternatives such as were there the interests of the company would there was to be one the rights of the of foreigners.
dence showing that the scheme was stated. It seemed to him that it be a sale for cash to the best shareholders should be safeguarded. In conclusion counsel submitted for the benefit of the company, Mr. would have been very much fairer advantage of the whole of the com. In the event of the scheme going that the scheme did not contravene Ward argued that that was a mat- to the shareholders to have told pany's undertaking and assets. The through his clients would take every any law and the only objection noter for the company's consideration them, in the first place, that market price of the Company's shares step to see that the company was it was that a certain section of the and had nothing to do with the Court: they might have British management in Shanghai is about Tls. 335"
shareholders did not like That If people cared to take shares in a as stated in the circular, and in the The affidavit of Mr. Ichiro Morita, Mr. Macleod, who commenced his was not a good ground, but that it company in which the majority of second place, that if they wished to assistant manager of the Mitsui reply just before the Court rose, sub was the real ground was evidenced shares was held by Japanese they retain Japanese management it was Bussan Kaisha, set out the history mitted that the Court would not from the affidavits put forward and were bound to accept the decisions thing they could not do but that of the defendant company, while a interfere with the decision of the in the way Mr. McNeill opened his Let that majority so long as they they would have to wind up the second affidavit by Mr. Kuroda gave majority of the shareholders except case. If it was within the power of were in conformity with the law; company altogether and become evidence as to prior holdings of for two grounds where there was the company to carry through the the Court was not there to protect shareholders in a Japanese company shares in the company in which the fraud and where it was shown that scheme proposed, and if there were the interests of British shareholders, having that management, and than holders of shares had since transferred the majority were in fact selling to no fraud nor anything like it, then it but to see that the company, a possibly it might have been fair that their holdings.
themselves. There was no question was a matter for the company's British company, was not doing as a third alternative the second on Mr. McNeill then proceeded to of fraud in this case nor was the domestic tribunal and if the majority anything which the law said it the circular might be given.
point out his clients' objections to majority selling to itself. The ques. of shareholders, no matter of what should not, while with regard to Mr. Counsel then referred to the speech the scheme. He said that the major tion whether the sale was within the nationality, were in favour of such a McNeill's contention that the shares made by Mr. R. N. Macleod at theity of shareholders were Japanese and powers of the company" as contained thing, there was no reason why the in the defendant company, would extraordinary general meeting of the the scheme was in fact addressed to in the memorandum of association scheme should not be carried net rank so high in the esteem of shareholders of the company and re those, whose interests were not iden. was one of construction of a written out web
bankers as security for financial marked that the advantages which tical with those of Mr. Matthews and document
Mr. Ward, who also spoke for the assistance if the scheme were to go. his learned friend then said would be his fellow-shareholders. The British There was nothing in the law at defendants, submitted that the whole through, counsel said the banks obtained by the shareholders in the directors, themselves, had the the present time to prevent a Japa- question before his Lordship was one would regard the shares as valuable British company under the scheme smallest, possible interest in what nese company forming in Shanghai, of law. There were two questions if what was paid upon them was were somewhat illusory and, if the was going to happen with regard owning cotton mill and running it in law and the facts that had been of value. ebareholders carefully considered the to the scheme, and the persons, under Japanese management There brought forward were entirely Counsel then proceeded to deal remarks which Mr. Macleod made to therefore, who would ultimately de was, also, nothing to prevent British immaterial to a consideration with the law on the matter after them, they would have come to the cide, whether the scheme would be subjects bolding shares in such of those two questions. Coun- which the Court again adjourned. conclusion that he had not advanced adopted or not would be the Japanese a company and there was, more sel then referred to the manner of any substantial argument in favour of majority. The circular further said over, nothing in the law, to pre Mr. McNeill's opening and auggest- the scheme. Referring to a remark it was for the interests of the com- vent. a British company being ed that the latter had endeavoured passed by his Lordship at a pre-pany that the management should formed solely for the purpose of to create a for of prejudice before vious hearing about. driving anot be changed and the effective holding shares in Japanese dealing with the legal aspect of the coach and horses through an Act, persons to whom that was ad- cotton manufacturing company. Nel case. A great deal had been made
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