Scottish Court of Session Decisions

The Musselburgh Wire Mills Company (Limited) was in June 1878 incorporated under the Companies Acts of 1862 and 1867. The capital of the company was £11,000 divided into 2000 shares of £5 each. The articles of association contained no provision for the remuneration of the directors otherwise than as fixed by the board of directors or by the company in general meeting. On 3d July 1878 William Nelson Brunton, one of the directors of the company, was at a meeting of the directors appointed to the post of managing director, on the understanding that he was to discharge the duties of that office gratuitously until the company was in a position to pay 5 per cent. dividend to its shareholders. This appointment Brunton continued to hold until the company went into voluntary liquidation on the 4th February 1880, when at a meeting of shareholders it was resolved, as the company was not a successful one, that it should be wound up voluntarily, and the said William Brunton and Matthew Brown, two of the directors, were appointed to carry on the mill till all the orders were made up, with power to advertise and sell it if they could find a purchaser.

In September 1881 Brunton submitted a state of his intromissions with the funds of the company, in which was the following entry—“W. Brunton, time and expenses attending to limited company business and settling up same, August 1881, £42.” For this sum credit was taken by him in his account, although neither the board of directors nor the shareholders in general meeting authorised any remuneration to the managing director for services rendered to the company. On the 28th October 1881 the petitioner James Macnaughton was appointed liquidator for the purpose of voluntarily winding up the company, and in this capacity he applied to the respondent Brunton for all moneys in his hands belonging to the company. The respondent handed over the sum of £16, 16s., but refused to make payment of the aforesaid £42, which he retained and declined to hand over to the petitioner.

This petition to have him ordained to pay over that sum was accordingly presented under the 165th section of the Companies Act of 1862, which provides that “When in the course of the winding up of any company under this Act it appears that any past or present director, manager, official, or other liquidator, or any officer of such company, has misapplied or retained in his own hands or become liable or accountable for any monies of the company, or been guilty of any misfeasance or breach of trust in relation to the company, the Court may, upon the application of any liquidator, or of any creditor or contributory of the company, notwithstanding that the offence is one for which the offender is criminally responsible, examine into the conduct of such director, manager, or other officer, and compel him to repay any monies so misapplied or retained, or for which he has become liable or accountable, together with interest after such rate as the Court thinks just, or to contribute such sums of money to the assets of the company by way of compensation in respect of such misapplication, retainance, misfeasance, or breach of trust, as the Court thinks just.”

Brunton lodged answers maintaining his right to retain the £42 he claimed.

Authorities—Lindley on Partnership, i., 776; Gordon, February 9, 1853, 15 D. 378; Braun, Jacob's Ch. Reps. 284.