Scottish Court of Session Decisions

This petition was at the instance of Mr Thomas Whitson, C.A., trustee on the sequestrated estates of the late Mr Curror of the Lee, and had for its object the rectification of the register of the Caledonian Heritable Security Company, to the effect of having the name of Mr Curror, or of the petitioner in his right, deleted as the holder of certain shares.

The petition was brought under the 35th and 62d sections of the Companies Act 1862 (25 and 26 Vict. c. 89).

The late Mr Curror had been one of the promoters, a shareholder, and an original director of the Company in question, and had continued a director down to the date of his death in February 1879. Shortly before his death Mr Curror had applied for sequestration, and the petitioner had been appointed trustee on his estate. Part of the estate consisted of 800 shares of £5 each in the Company in question, and about the month of March 1879 the petitioner, in the course of his administration of the estate, sold these shares through a broker to various purchasers.

On the transfers being sent in to the manager of the Company for registration in the Company's books, the petitioner on 17th March 1879 was applied to for payment of the sum of £91, 12s. (including interest) alleged to be due by Mr Curror upon 30 shares of the Company, being a portion of 267 shares (the remainder of a new issue of 5000 shares made in May 1877 at £2 premium) which it was alleged the directors had agreed to take up among themselves. It was further intimated that no transfers of any shares held by Mr Curror would be passed by the directors until the payment was satisfied.

The petitioner had known nothing of the additional shares, and refused to recognise his liability for them, and he accordingly presented this petition.

Answers were lodged by the Company. It was stated for them that “shortly before the report of the annual general meeting of the shareholders for 1877 was prepared, the directors (other than Mr Kenneth Mathieson, who was abroad at the time), finding that between 200 and 300 shares of 5000 new shares remained to be taken up, agreed to take these remaining shares amongst themselves. This arrangement is expressed in the report under the head of I. Shareholders’ Capital,’ as follows—‘In terms of a resolution agreed to at last annual general meeting, 5000 new shares were issued to the shareholders in proportion to their respective holdings, at £3 per share (being a premium of 40s. per share), the whole of which were accepted by the shareholders, with the exception of between 200 and 300 shares, which the directors arranged to take up among themselves. They are therefore in a position to report that the whole of this issue has been placed. From the premiums thereon the reserve fund has been increased from £6600 to £15,000, and a balance of £1600 has been carried to the credit of the profit and loss account, all as shown in the balance-sheet. The number of shares now issued is therefore 20,000, representing a subscribed capital of £100,000, whereof £1 per share, or £20,000, has been paid up.’ The full amount of premiums on these 5000 shares—£10,000—is also credited in the accounts annexed to the report—£8400 to the reserve fund, and £1600 to profit and loss. The report was approved of at the meeting held on the 6th March 1878, and was thereafter issued and engrossed in the minute-book of the Company. Mr Curror was present at the various meetings of the board when the report was prepared and adjusted, and also at the meeting of shareholders when the report was adopted.”

It was admitted that Mr Curror never accepted in writing the shares referred to, and that no notice of allotment was ever sent to him. The entry in the stock-ledger as to the transference of the shares to Mr Curror was as follows:—

“1878.

Dec. 31. By shares transferred from Richard Wilson in trust,’

17926–17942

30, Nos. 16322–16334

By shares transferred from Kenneth Mathieson, 3, Nos. 16419–16421.”

It was admitted that these entries were made after Mr Curror's death. Mr Mathieson, who as stated above was abroad, refused to take up his shares, and they had been allotted among the other directors.

Argued for the petitioner—The contract or agreement to take shares was defective (1) because there was no evidence to show what number of shares Mr Curror had agreed to take; (2) Because one director was abroad, and knew nothing of what was going on, and part of the shares he should have got were afterwards assigned to Mr Curror; (3) Directors were not bound by a report signed by the manager unless the shares had been actually allotted and the allotment intimated to the allottee.

Authorities—Lindley on Partnership, 100 and succeeding pages, and 1382; Buckley (2d ed.) (notes of sec. 23 of Companies Act), p. 46, &c.; Gunn's case, L.R., 3 Ch. App. 40; Wheatcroft's case, July 24, 1873, 29 L.T. 324; Hallmark's case, 38 L.T. 413; Ritso's case, L.R., 4 Chan. Div. 774; Ramsgate Hotel Company v. Montefiore, L.R., 1 Exch. 109; Ward's case, L.R., 10 Eq. 659.

Argued for the respondents—The report was written evidence of a contract by Mr Curror to take these shares; it was not the contract, but was the narrative of it. The cases quoted did not apply, for all of them were cases of outsiders who had applied for shares and to whom no intimation had been sent. Here Mr Curror was a director and cognisant of the whole transaction, and present at the meetings at which it was carried through. The transaction was one calculated to increase the credit of the Company with the public, and the latter were entitled to rely on the good faith of it.

Authorities — Harward's case, L.R., 13 Eq. Cases, 30; Leek, L.R., 6 Chan. App. 469; Leveta, L.R., 3 Chan. 36