Scottish Court of Session Decisions

The “Gosford” Ship Company was incorporated and registered under the Companies Acts on December 18, 1891. By article 3 of the memorandum of association the objects for which the company was established were defined as follows:—“The purchase, owning, and working of a steel sailing ship, intended to be called the ‘Gosford,’ built by Messrs Scott & Company, shipbuilders, Greenock, … and of no other ship.” By sub-section D of the same article the company were empowered “to carry on the business of a shipowner in all its branches with respect to the said ship only.”

On 13th December 1893 Robert Cox, who held 10 shares in the company, presented a petition stating that the “Gosford” had been totally destroyed by fire in November 1893 off the Pacific coast of North America, and craving the Court to order the company to be wound-up by the Court.

Answers were lodged for the company by Briggs, Harvie, & Company, the managers,

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in which the following statements were made:—“On 25th November 1893, while the ship ‘Gosford’ was on a voyage from Birkenhead to San Francisco with a cargo of coal, the managers received a cable from the captain from Santa Barbara, California, intimating that the ship had been destroyed by fire, and had been scuttled, and lay in 5 1 2 fathoms of water, and that notice of abandonment should be given. Insurances had been effected by the managers for £21,500 on the hull of the said ship, for £3000 on disbursements, and the balance of freight was also insured. The managers accordingly gave notice of abandonment to the underwriters, but the underwriters have refused to accept notice of abandonment, and efforts are being made on their behalf to raise the said ship with the view of repairing her and restoring her to the company. In these circumstances the company is not in a position to be wound up. The petitioner is a holder of 10 shares of the company, and there are other 38 shareholders who hold among them 205 shares. There has not since the disaster to the ship been any meeting of the shareholders to consider what may have to be done, and it is premature to consider any proposition for winding-up the company unless and until the underwriters accept an abandonment of the said ship; but in any event the managers have ample powers to attend to the interests of the company, and to receive and discharge all sums due to the company, including the amounts insured, if they should become payable. The managers are the proprietors of 95 shares of the company.”

At the hearing, counsel for the petitioner referred to various telegrams and letters to show that the ship had been abandoned as a total loss.

Argued for the petitioner—The telegrams and letters about the ship were to the effect that it was a total loss. The captain's protest had been applied for by the petitioner, but he had been informed that it was in the hands of the company's London bankers, who were in negotiation with the underwriters for recovery of the insurance money. It stated that the ship was a total loss, and advised abandonment. The petitioner had received information from the underwriters that salvage operations started by them had been abandoned. There was thus ample evidence that the ship was a total loss, and as the company had by their memorandum of association no power to work any other ship than the “Gosford” the only question was between a compulsory winding-up and a possible voluntary winding-up, towards which no step had been taken. Now, applications by shareholders for winding-up orders had been refused where steps had already been taken to have companies wound up voluntarily, but there was no case in which, liquidation being unavoidable, such an application had been refused where the shareholder came forward prior to any resolution in favour of a voluntary winding-up. Such indications of judicial opinion as these rather showed that in these circumstances the application would be granted— In re Gold Company, L.R., 11 Ch. Div. 701, per L. J. Baggallay, 717; Lindley on Companies (5th ed.) 640. In the present case also the company was excluded from adopting a scheme of reconstruction— in re Gold Company supra—and there was no reason in equity why the petition should not be granted. Refusal would involve delay. The petitioner was therefore entitled to the order craved—Companies Act 1882, section 79, sub-section 5.

Argued for the respondents—The respondents did not dispute that the company must be wound up, but submitted that the shareholders should be allowed to decide on the mode of winding-up. The petitioner held only 10 out of 205 shares, while the respondents, the managers of the company, held 95; and if the matter depended on equitable considerations their wishes were entitled to more respect than his. The application of a shareholder stood on quite a different footing from that of a creditor, and there was no averment here that the debts of the company were unpaid. As between shareholders, the companies Act created a domestic tribunal, and it would take strong reasons to convince the Court that it was “just and equitable” to interfere with the decision of a general meeting of shareholders as to the mode of winding-up—Buckley on the Companies Acts (6th ed.) 208; in re Professional, &c., Building Society, L.R., 6 Ch. Div. 856, esp. per L. J. Mellish, 863; in re Langham Skating Rink Company, 669, per M. R. Jessel, 683; in re Middlesborough Assembly Rooms Company, L.R., 14 Ch. Div. 104. [The Lord President referred to section 129 (1) of the Companies Act as contemplating a voluntary winding-up in a case of this kind]. The petitioner would have his rights in a voluntary as in a compulsory liquidation. If anything illegal were being done he would apply to the Court to stop it. He could not be forced to go into a new venture against his will.

At advising—