Scottish Court of Session Decisions

The Solana Mining Company Limited was on 10th July 1889 registered and incorporated under the Companies Acts 1862 to 1883 for the purposes of purchasing or otherwise acquiring and working mineral properties in Spain. The capital of the company was £30,000, divided into 6000 ordinary shares of £5 each. No money was actually raised by the issue of the share capital, and working capital was obtained by the issue of debentures authorised to the amount of £8000, of which £7105 only were issued. At an extraordinary general meeting of the company held on the 25th May 1891 within the offices of Messrs John Mann & Son, C.A., 118 St Vincent Street, Glasgow, the following extraordinary resolution was unanimously adopted:—“That it has been proved to the satisfaction of this meeting that the company cannot by reason of its liabilities continue its business, and that it is advisable to wind up the same, and accordingly that the company be wound up voluntarily.” Thereafter a resolution was proposed and carried unanimously that Mr John Mann junior be appointed liquidator of the company. Mr Mann accordingly entered upon his duties as liquidator of the company, and proceeded to take the steps necessary for winding up its affairs.

The liquidator presented the present petition for a supervision order in consequence of certain claims having been made and actions raised by an alleged creditor of the company, and in order that these actions might be restrained, and that preferences might not be acquired.

The Companies Act 1862 (25 and 26 Vict. cap. 89), sec. 87, provides:—“Where any order has been made for winding up a Company under this Act, no suit, action, or other proceeding shall be proceeded with or commenced against the company except with the leave of the Court, and subject to such terms as the Court may impose.”

Answers were lodged by John Ralston Cunningham junior, merchant, George Square, Glasgow (who claimed to be a creditor of the company), and who alleged that he had raised an action of reduction inter alia of the resolution of the extraordinary general meeting of the company referred to in the petition, and all that had followed thereon. He averred—“The respondent submits that the present petition should be dismissed with expenses, in respect ( first) that it is altogether unnecessary; ( second) that the petition is wanting in such specification as will enable the creditors of the company to form any opinion as to whether they should appear and oppose it; ( third) that only six persons were present when the resolution to wind up the company was passed; ( fourth) that the said agreement with the respondent was never read to the shareholders; ( fifth) that the funds said to be at the disposal of the liquidator will not even meet the claims of the debenture-holders, and accordingly that no preferences can be acquired by any of the creditors of the company; and ( sixth) that most of the creditors of the company disapprove of the liquidation proceedings and all that has followed thereon.”

Argued for petitioner—The company were all but unanimous in their approval of the course proposed by the liquidator, the only objector being the respondent; and he stated no relevant ground for

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opposing the granting of a supervision order. It was not suggested that the procedure was in any way irregular or incompetent, and in the absence of any such allegation the Court would not refuse the application— Lawson Seed Company v. Lawson & Son, December 2, 1886, 14 R. 154. It was essential that the proceedings adopted by the respondent should be stayed, and the course proposed by the petitioner was the most effectual for this purpose; without a supervision order the proceedings complained of could not be stayed— Sdeuard v. Gardner, March 10, 1876, 3 R. 577. The circumstances which induced the Court in the case of Mitchell v. The Rawyards Coal Company, November 20, 1888, 16 R. 117, to refuse a supervision order were entirely wanting in the present case, and the application should be granted, especially as under it all interests would be fully protected.

Counsel for the debenture-holders stated that it was entirely with their money that the concern was floated, and that the debenture-holders concurred in the application of the liquidator and adopted his arguments.

Argued for respondent—If the petitioner's application was granted, then the respondent's action would be stopped. The action had reached the procedure roll, and the Lord Ordinary was about to determine its relevancy. If it was found irrelevant, then it would be thrown out, and there would be no need of a supervision order; but if it was found relevant, that was the strongest argument in favour of its being allowed to go on; but even if found relevant it could not proceed if the present application was granted. The question of whether such an order should be granted was one for the discretion of the Court, and no sufficient reason had been assigned for its being granted.

At advising—