Scottish Court of Session Decisions

The Scottish Publishing Company, Limited, was on April 22nd 1885 registered and incorporated under the Companies Acts 1862 to 1886 with its registered offices in Edinburgh. It objects were, inter alia, to publish magazines and papers and purchase copyrights.

Samuel Cowan & Company, printers and publishers, Perth, were employed by the company from 1886 to 1888 to print and publish for them a monthly magazine called “The Scottish Church.” A dispute arose as to the payments due to Cowan & Company, and the question was submitted to arbitration. The arbiter, Mr W. J. Menzies, W.S., on the 10th of December 1891 issued his final decree-arbitral, by which he found Cowan & Company entitled to a sum of £58, 12s. 2d.

The company were on 10th December 1891 charged to make payment of this sum, and on their failing to do so, Cowan & Company on 23rd December presented a petition under the Companies Acts 1862 to 1886 for the purpose of having the company wound up by the Court.

They averred that they were creditors of the company to the extent of £58, 12s. 2d., for which they had an extract decree-arbitral; that they had charged the respondents to make payment; and that the inducice of the charge had expired without their having done so. The company therefore was liable to be wound up under the 79th and 80th sections of the Companies Act of 1862, and the present application should be granted. A letter dated 18th December 1891 was produced, in which the respondents did not dispute the debt.

On the 2nd of January 1892 answers were lodged for the company. The respondents denied liability for the debt, on the ground that the decree-arbitral was illegal, null, and void, and stated that they would have challenged the proceedings had they not taken steps for the voluntary liquidation of the company. They further stated that an extraordinary general meeting of the company had been held on 29th December 1891 to consider a resolution “that the company be wound up voluntarily under the provisions of the Companies Acts 1862 to 1890,” and that the above resolution had been passed. They produced a minute of the meeting signed by the chairman, which contained, inter alia, the words—“Mr Forbes' amendment being then put against the proposed resolution, and a show of hands being taken, there voted for the former four, and for the latter eight. The resolution therefore became the decision of the meeting, and the chairman declared it carried. No poll was demanded.” They further produced minutes of a meeting held on 13th January 1892, at which the above resolution was confirmed. They averred further that the affairs of the company were perfectly solvent, and that under the circumstances they should be allowed to go on with the voluntary liquidation as being a cheaper process than a judicial winding-up.

At the first hearing of the petition the liquidator appointed by the company was sisted and allowed to adopt the answers lodged by the company.

Mr Denham, a shareholder of the company, was allowed to lodge answers in support of the petition. The answers were lodged on 20th January 1892, and adopted the statements of the petitioners, and contained certain statements with regard to the affairs of the company, which were, however, not pressed at the bar.

Argued for the petitioners—(1) The company was unable to pay its debts in the sense of the statute, the inducice of a charge having expired without their making payment—Companies Act 1862, sec. 80, sub-sec. 3. The interest of the petitioners was merely to get payment of their debt, and on receiving it they would withdraw the petition. The respondents had not disputed the debt till they came into Court, and even now only disputed it to the extent of £15. It was not therefore a case for any indulgence to be shown to the company by the Court. The case of Bowes v. Hope Life Insurance Company, March 28, 1865, 11 H. of L. Cases, 389, showed that where a creditor appeared with a judgment debt he was entitled to get his winding-up order. There the order to wind up was merely suspended for a time, because it was alleged that there had been a collusive arrangement to get the decree upon which the debt was founded. Here no such collusion was alleged, and the circumstances were therefore not special enough to justify the Court in refusing judicial winding-up. In the case of Cunningham v. The Walkinshaw Oil Company, November 17, 1886, 14 R. 87, there were no other debts, large assets, and the company wished to carry on business; it could therefore be differentiated from the present one. (2) The resolution to wind up voluntarily had not been carried in accordance with the provisions of the Companies Act 1862, sec. 51. A majority of three-fourths was requisite for a special resolution, and the minutes showed there had not been such a majority at this meeting. The chairman should have demanded a poll to see which way the proxies voted, and should not have been contented with the bare majority in a show of hands. It would be wrong to go against the chairman's own statement as recorded in the minutes— Horbury Bridge Company, 1879, L.R., 11 Ch. Div. 109; Caloric Engine Company, April 18, 1885, Law Times, lii., 846; Lindley on Companies, 5th ed. 308.

Page: 377↓

Argued for respondents—(1) Where a debt was disputed, or special circumstances made it expedient to do so, the Court might throw out a petition to wind up a company. Under sec. 86 of the Companies Act of 1862 the Court might dismiss the petition. Further, the words of sec. 79 were words of permission, not of direction—Buckley, Notes to sec. 79 of 1862 Act. The special circumstances in this case were that the respondents had not raised a suspension of the decree-arbitral because they believed they were undergoing a process of voluntary winding-up. They wished the same thing as had been done in Bowes v. Hope Life Company, supra, viz., to have the chance of suspending the judgment. They were prepared to consign the money in dispute till the question was settled. Their winding-up did not imply insolvency, but merely that they did not wish to continue carrying on business— Cunningham supra. (2) There was a voluntary winding-up going on. Section 51 of the 1862 Act enacted, inter alia, in defining a special resolution, that “a declaration of the chairman that the resolution has been carried shall, unless a poll has been demanded by at least five members, be conclusive evidence of the fact without proof of the number or proportion of the votes.” … The mere fact of the majority should therefore be considered, and not the figures given, since the minority acquiesced without demanding a poll, it being evident to them how the proxies would vote. If the writer of the minutes had not inserted the figures there would have been no dispute as to the validity of the resolution. The minute should therefore be treated as containing simply a statement by the chairman to the effect that the resolution had been carried. Under the circumstances there was a good voluntary liquidation going on, and the Court should not interfere by ordering a judicial winding-up— New York Exchange, 1888, L.R. 39 Chan. Div. 415, 423.

At advising—