Scottish Court of Session Decisions

The facts of this case, which were fully stated in the previous report, may be summarised as follows:—John Gunn, who was a shareholder in the West End Cafe Company, entered into an agreement with James Muirhead, whereby he agreed to accept certain shares in a company called Aitchison & Sons, which was being formed to take over the assets of the West End Cafe Company, in lieu of shares belonging to him in the West End Cafe Company, while Muirhead, on the other hand, undertook to relieve Gunn of the shares allotted to him in Aitchison & Sons.

No payment in cash was made by Gunn for the shares allotted to him in Aitchison & Company, and no contract was filed with the Registrar of Joint-Stock Companies, in terms of sec. 25 of the Companies Act 1867.

Gunn raised an action against Muirhead to have him ordained to take over the shares in implement of his agreement. Muirhead defended the action, on the ground that the shares allotted to Gunn were not free from liability, as no cash had been paid for them, and no contract under sec. 25 had been filed. In the action Muirhead was assoilzied (see 36 S.L.R. 798).

Gunn now brought a petition for authority to file a contract with reference to these shares, under the provisions of the Companies Act 1898. By section 1 of said Act it is provided as follows— “(1) Whenever, before or after the commencement of this Act, any shares in the capital of any company

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under the Companies Acts 1862 and 1890, credited as fully or partly paid-up shall have been or may be issued for a consideration other than cash, and at or before the issue of such shares no contract or no sufficient contract is filed with the Registrar of Joint Stock Companies, in compliance with section 25 of the Companies Act 1867, the company or any person interested in such shares, or any of them, may apply to the Court for relief, and the Court, if satisfied that the omission to file a contract or sufficient contract was accidental or due to inadvertence, or that for any reason it is just and equitable to grant relief, may make an order for the filing with the Registrar of a sufficient contract in writing, and directing that, on such contract being filed within a specified period, it shall, in relation to such shares, operate as if it had been duly filed with the Registrar aforesaid before the issue of such shares; (2) Any such application may be made in the manner in which an application to rectify the register of members may be made under section 35 of the Companies Act 1862, and either before or after an order has been made or an effective resolution has been passed for the winding up of such company, and either before or after the commencement of any proceedings for enforcing the liability on such shares consequent on the omission aforesaid, and any such application shall, if not made by the company, be served on the company; (3) Any such order may be made on such terms and conditions as the Court may think fit, and the Court may make such order as to costs as it deems proper, and may direct that an office copy of the order shall be filed with the Registrar aforesaid, and the order shall in all respects have full effect; (4) Where the Court in any such case is satisfied that the filing of the requisite contract would cause delay or inconvenience, or is impracticable, it may, in lieu thereof, direct the filing of a memorandum in writing, in a form approved by the Court, specifying the consideration for which the shares were issued, and may direct that, on such memorandum being filed within a specified period, it shall, in relation to such shares, operate as if it were a sufficient contract in writing, within the meaning of section 25 of the Companies Act 1867, and had been duly filed with the Registrar aforesaid before the issue of such shares; the memorandum shall, before the filing thereof, be stamped with the same amount of ad valorem stamp duty as would be chargeable upon the requisite contract, unless the contract has been produced to the Registrar duly stamped, or unless the Registrar is otherwise satisfied that the contract was duly stamped.”

The petitioner prayed, alternatively, the Court to ordain the said Aitchison & Sons, Limited, and the said James Muir-head and Henry Waters, to enter into a supplementary agreement with the petitioners in such other terms, to be adjusted at the sight of your Lordships, as your Lordships may approve of as a sufficient contract in writing, within the sense and meaning of section 25 of the Companies Act 1867 (30 and 31 Vict. cap. 131), and of the Companies Act 1898 (61 and 62 Vict. cap. 26); or to direct the filing with said registrar, in lieu of a contract as aforesaid, of a memorandum in writing in a form to be approved by your Lordships, specifying the considerations for which the above-mentioned shares were issued.

The memorandum which it was proposed to file was set forth in an appendix to the petition in the following terms:—

“Pursuant to an order of their Lordships of the First Division of the Court of Session, dated 1899, in a petition at the instance of John Gunn, otherwise John Gordon Gunn, of the Queen Hotel, St Colme Street, Edinburgh, with consent and concurrence of Finlay Cook Auld, S.S.C., Edinburgh, and the said Finlay Cook Auld for his own interest, for authority to file a contract or memorandum with reference to fully paid-up shares in Aitchison & Sons, Limited—

The after-mentioned 3164 shares of £1 each in the said company were issued to the several persons hereunder named and designed, in satisfaction of £3164, being part of the consideration of £22,000 agreed to be paid by the said Company to the West End Cafe Company, Limited, incorporated under the Companies Acts 1862 to 1867, and having its registered office at 129 Princes Street, Edinburgh, for the purchase of the heritable subjects, 129 Princes Street aforesaid, with the pertinents thereof and fittings and furniture therein, and the goodwill of the business carried on therein. At the date of the disposition carrying out the said purchase, the said several persons were shareholders of the West End Cafe Company, Limited, and held therein the same numbers of shares respectively as were issued to them in Aitchison & Sons, Limited, as hereunder stated. Said shares in the West End Cafe Company, Limited, were A shares of the value of £1 each fully paid up, and the said persons agreed to discharge, and did discharge, their claims for payment to them respectively of the share capital invested in the shares held by them in said West End Cafe Company, Limited, being £3164 in all, in consideration of the issue to them respectively, as fully paid-up shares of the shares in Aitchison & Sons, Limited, after mentioned—

Name and Address	No, of Shares.	Progressive Numbers in Register.
John Gunn, hotel-keeper, Queen Hotel, St Colme Street, Edinburgh	700	10,047 to 10,746
Finlay Cook Auld, S.S.C., Edinburgh	464	10,747 to 11,210
James Muirhead, poulterer, 79 Queen Street, Edinburgh, and Henry Waters, butcher, 3 Queensferry Street. Edinburgh	2000	7,277 to 9,276

By arrangement between the said James Muirhead and Henry Waters, assented to

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by the directors of the company, the said allotment of 2000 shares to Messrs Muirhead and Waters was subsequently cancelled, and the same 2000 shares (register Nos. 7277 to 9276) were issued to the said James Muirhead alone as fully paid-up, and in satisfaction of the sum of £2000, being part of said price of £22,000 due by Aitchison & Sons, Limited, to the West End Cafe Company, Limited.”

Appearance was made for Aitchison & Sons, Limited, and for Muirhead. They objected to a contract or supplementary agreement being entered into, but offered no opposition to a memorandum. They moved, however, that the proposed memorandum be amended by adding the words, “without prejudice to any question of liability of the signatories of the memorandum of association of Aitchison & Sons, Limited, with regard to the shares severally subscribed for in the said memorandum.”

To this the petitioner agreed.

The following authorities were referred to— Hartley's case, January 12, 1875, L.R., 10 Ch. 157; in re Whitefriars Finance Company, Limited [1899], 1 Ch. 193.