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[April 2, 1906.
THE HONGKONG WEEKLY PRESS AND
insisted on by the Counsel for the
validity of the fourth resolution. This principle pany, The Court has no difficulty in assuming was again very clearly enunciated in the it. I do not remember any suggestion having Southern Counties Bank v. Rider (73 L. T. been made of malá fides, but only of injudicious 374). The Court was asked to declare a special action. In this connection there is one point resolution to wind up invalid because the which appears to have escaped attention. A notices were issued under that authority of a great number of the cases which have been resolution passed at a meeting of the directors referred to are cases in which the Courts in at which a quorum was not present. Lindly, England have had to deal with the doings of Lord J., repeating what he had said in an earlier the highwaymen of finance: people who had a case, said, "I think it is most important that great deal to conceal. Why should honourable the Court should hold fast to the rule upon gentlemen who have nothing to conceal shape | which it has always acted, not to interfere for their actions on such models? The law has been
the purpose of foreing companies to conduct hammered out in consequence of malpractices, their business according to the strictest rules, and the irreducible minimum of information to where the irregularity can be set right at any be given in the notices has been arrived at. moment." That is the doctrine upon which But why this apparent desire to give the least the Court has acted ever since the case of possible information ? It is only apparent, for Foss v. Harbottle, reported in Hare p there was an inspired article in the newspaper 461. I must first dispose of the technical and at the meeting full information was in fact objection based on the decision of the C. A. in given. Surely, it would have been better, if only Doughty's case, that the new company ought to for the sake of saving trouble, to have set out a have been made parties to these proceedings. clear statement of the whole proposal in the But in that case the C. A. held that they could notice. But although in my opinion such a clear not express any opinion as to the rights of the statement has not been given, nor even such in- parties in the absence of the new company who formation as the decisions point to as requisite,
were parties to the agreement for sale, and that I do not think that an injunction can be granted the agreement could not be set aside or declared on the ground of insufficiency of notice, without invalid without bearing them. A technical regard to the nature of the information with- objection may be met with a technical held, more especially when the plaintiff has
answer. In that case the declaration asked for subsequently ascertained all he need know to
was that the agreement was ultra mires the enable him to decide what course he will adopt. company and void. Here the prayer was for a In Tiessen v. Henderson the notice was held declaration that the resolutions passed at a insufficient and an injunction granted, but not certain meeting were void, no reference being on every ground. It was granted because the made to the agreement. The result of this interests of two directors were not disclosed,
case may be that the agreement cannot be But as to the position of Mr. Henderson, carried out, but I do not think that is sufficient to` Kekewich, Justice, said he thought it would compel the other parties to the agreementsor to have been better, and made the matter any of the other agreements parties to the action. clearer, if his position had been а little
An objection, which might be called a prelimin- dwelt on: but as I understand the judgment, ary objection, was taken as to the form of the that alone would not have been sufficient for interim injunction, which appears technical on the injunction to have been granted. So in this the face of it, but which really involves a ques- case, although I think it would have been better tion which goes to the kernel of the whole and made the matter clearer if other facts had
matter, and which I shall therefore deal with been stated, I do not think the commissions are
at once and fully. It was said that the interim sufficiently serious to warrant an injunction be injuuction was bad in form because it did not ing granted on this ground, certainly not at the take note of the fact that whatever might be instance of a plaintiff who did accept the notice said as to the validity or invalidity of as a summons to the meeting, who went and the other resolutions, the resolution to wind there obtained all the necessary information.
up stood, and that therefore the position The refusal of the injunction on this ground
was that the company WBS in liquidation, of course affects absent as well as d ssentient
the liquidator had been restrained from shareholders: but I am not at all sure that an
Boting. It was intimated that the learned absent shareholder is altogther deprived of counsel for the company had endeavoured in remedy supposing him to have been injuriously the public interest to keep the trama running affected by the absence of information, apart from and yet prevent the liquidators from infring- the remedy under section 201. It will be conveni- ing the terms of the injunction too mucb, ent if I here deal with the suppose 1 principle of lest they should be brought before the Court law that the Court will not interfere if the for contempt. 1 confess that I felt some result will be to make the company do orer anxiety on the subject because it is re- again legally what they have done illegally. I pugnant to the Court to err, even though doubt whether such a broad principle really it be through the fault of Counsel in not exists. Burland's case was cited in support of drawing its attention to cases bearing on the it, where the rule laid down more elaborately subject. I certainly thought the injunction
by Mellish, Justice, in Macdougall v. Gardiner
was right in form at the time, and on (I Ch. D. at p. 25) was adopted. The question further consideration I think so still. The was whether an action in respect of something question seems to me to fall within the principle which had besu done illegally by the majority involved in Teede and Bishop's case. Stated should be brought in the name of the company briefly, the resolutions in that case were to the or by one shareholder on behalf of the others. effect that the company should be reconstructed; But what sort of illegal act? One concerning that it should be wound up voluntarily, and a the internal management of the company. liquidator appointed, who should be authorised As to this see the headnote in Burland's to consent to the registration of a new company case. It is an elementary principle of law which should take over the assets and liabilities that a Court has no jurisdiction to interfere of the old company that there should be in with the internal management of the com. fact reconstruction of the old company. Now panies acting within their power." It was as
at the meeting the only resolution which was to such matters that Mellish, L.J., said "there put was for voluntary winding up and the can be no use in having a litigation about it, the appointment of a liquidator: the remainder of ultimate end which is only that a meeting has the scheme was dropped. The judgment of to be called, and that ultimately the majority Cozens Hardly, Justice, was to the following gets its wishes." Neither the question whether affect:-"The result of the meeting was alto- the notice is itself sufficient, or any other ques-gether different from what was proposed tion raised in this case, bas anything to do with the internal manarement of the company, and to apply this doctrine, otherwise perfectly in- telligible, to such a case as this involves a non sequitur: for it by no means follows that, if another meeting were called after this discus- sioa, the majority would remain of the same opition. The reference to the regard which the Court should pay to the wishes of the majority in Fox's case relates only to the inter- ference with a voluntary winding up by the grant of an order for a winding up puder supervision at the request of a minority. I pass now to the more serious question, the
so, but until the consent is actually given the requirements of the law have not been complied with and the transfer cannot be effected. In this connection it is important to remember that the Government, that is, the Governor himself, the Governor in Executive Connoil, and the Council of Government of which the Governor is President controlling the official members, are three distinct bodies in the system of Crown Colony government, and that there is nothing to ensure the same opinion being given by all three, nor am I at all sure that the question which each has to decide is the same in principle in all three cases. The consent of Government comes in because the Bill has not yet bou read a third time. The company has offer d an undertaking that they will not proved with the transfer ratil the necessary consent has been obtained. An undertaking not to do something which you are not entitle i to do may perhaps not amount to much, but coupled with what the company has already done I cannot disregard it. I attach considerable importance to what has been done, more especially to the fact that a petition has been presented to the Governor in Executive Council praying that the transfer may be sanotioned. I understand that all proceedings in relation to the bill and the petition are in suspense pending the conclusion of this c188. The company has satisfied me that they intend to comply with the law, and therefore there is no ground for an injunction on this head. injunction cannot be granted to prevent a person doing what he has no intention of ding. The second point as to the sufficiency of the notice is more difficult. The notice given is to my mind clearly insufficient. It is also I think misleading: but this more on the technical ground to be considered at length presently, that the circular mentions a reconstruction and the resolutions as explaine 1 by the agreement propose a sale for cash. But even supposing, as the defendant contended, that such & sale amounted to a reconstruction, it was a sale with an option to take shares in a new company, an option which is only another way of saying that the shareholder who has been paid off may invest his money in the new company, and as it appears, from the agreement of further pre- ferance being added to it to take up the remaining shares in the new company. Clearly when shareholders in a going and very profitable concern are invited to consider whether they will accept terms such as these: in other words, so to invest their money, they are entitled to full particulars of the new scheme: for this very sufficient reason, that if they do not approve of the new conditions they may be very loth to let the old company take the necessary steps to bring it into operation: and as they have to give their approval at once, they must manifestly exercise their option then and there. The only thing which is really clear from the gotice is that the capital of the new company must be sufficiently large to provide, in addition to the cost of construction of the new line, $250,000 to pay off the old shareholders at $200 per share. Nothing is said as to what the cost of construction will be, nor even what the capital of the new company will be. They are thus asked to give up their interest in a very paying concern and invest in a new business of which they know nothing, and with no guarantee moreover that the necessary capital will be raised to float it. I ask myself the question what object there could be in not falling them? Why should they have to wait to get the confirmation till the meeting or why should they be told that they can find out all they want to know by going to some office and looking through a long document? For the life of me I cannot answer these questions satisfactorily. This attitude of seeming to keep back information which every. body concerned had a perfect right to know is, incomprehensible. It is certainly no answer to say either that the Consulting Committee think it all satisfactory, and that the principal share. holders agree, or that an inspired article has appeared in the newspapers. It may well be that the same particularity as is required by statute in a prospectus of a company is not required in the case of there notices: but the decisions of the Courts certainly show a marked tendency to require much the same class of information. The bono fides of the whole transactions was much
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in the notice. The winding up which had been agreed to was not a winding up to bring into operation the provisions of section 161: in fact it was not the resolution of which notice had been given. A shareholder receiving the notice might very well say that he would not trouble to attend an ordinary, reconstruction meeting, and at the same time have the strongest objection to an ordinary voluntary winding up, which is something more than & winding up for the limited purpose of a reconstruction." The learned Judge seems to be here laying down a very clear proposition: a voluntary winding up is one thing, but a winding up for
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