Scottish Court of Session Decisions

In December 1898 the shareholders of the Eglinton Chemical Company, Limited, passed a resolution that the company should be wound up voluntarily, and Mr Patrick Graham, C.A., Glasgow, was appointed liquidator.

William John Alexander Donald, manufacturer, 8 Firhill Road, Glasgow, a shareholder in the company, presented a petition under the Companies Acts 1862 to 1898, and especially by the Act 25 and 26 Vict. cap. 89, secs. 147 to 152, 138 and 82, in which he prayed the court “to order the voluntary winding-up of the said The Eglinton Chemical Company, Limited, resolved on by the special resolution above referred to, to be continued, but subject to the supervision of the Court, in terms of the Companies Acts 1862 to 1898, and to appoint the said David Guthrie, or such other fit person or persons as your Lordships may select, as additional liquidator or liquidators of the said company, and to determine whether any and what security or caution is to be given by such additional liquidator or liquidators; and further, if your Lordships think fit, to direct all subsequent proceedings in the winding-up to be taken before one of the permanent Lords Ordinary, and to remit the winding-up to him accordingly; or alternatively, to interdict, prohibit, and restrain the said Patrick Graham, as liquidator foresaid, from selling or otherwise disposing of the assets of the said The Eglinton Chemical Company, Limited, to the said Eglinton Limestone Company, Limited, and to order such report as to the

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present position of the affairs of the said The Eglinton Chemical Company, Limited, and as to the best method of disposing thereof, and such valuation of its assets as to your Lordships shall seem proper, and to order the sale of the company's assets to be carried out in terms of said report and valuation, or otherwise as your Lordships shall direct, and in any event to order that no sale or transfer of the assets of the said The Eglinton Chemical Company, Limited, shall take place without the sauction of your Lordships.”

The petitioner averred that the capital of the company was £33,000, divided into 6600 shares of £5 each; that he was the registered holder of 220 shares, and was also beneficially interested in 2012 shares, which had been transferred to and stood in the name of another party. With reference to the proceedings in the liquidation he made the following averments :—“The petitioner believes and avers that the assets of the company are amply sufficient to pay in full all the creditors of the company if said assets be properly realised. He also believes and avers that not only can the creditors be paid in full, but that there will or should be realised sufficient not only to repay the shareholders their capital in full, but that there will be a surplus to divide amongst the shareholders. In order to accomplish this the essential element in a proper realisation of the company's assets is either to effect a judicious sale of the company's business or to adjust new leases in the company's name of the harbour and quarries. The petitioner believes that the latter could easily be effected. But should the former course be adopted, the petitioner believes and avers that the company's assets constitute a valuable property, and that especially the business connections and goodwill would command a good price. The demand for the company's productions has largely increased, and the price obtainable has also considerably advanced. The petitioner believes and avers that if it were known that the company's business could be acquired, there would be competition to obtain it, and it would command a good price. It has recently come to the petitioner's knowledge that the said liquidator is negotiating for the disposal of the company's assets privately and for an inadequate consideration. The following is believed to be the present position of matters. A company has been or is being incorporated under the Companies Acts under the name of The Eglinton Limestone Company, Limited, for the purpose of acquiring the contracts and assets of the company now in liquidation, with a capital of £12,000 in 12,000 shares of £1 each. The directors of this company are to be William S. Brown of the Clydesdale Tube Company, Limited, 53 Bothwell Street, Glasgow. Robert Watson, tube manufacturer, Lin-wood, Johnstone; and James Armour, Clippens Oil Company, Limited, Glasgow. The solicitors of the company are to be Messrs Carruthers & Gemmill, 62 Bath Street, Glasgow, the auditors Messrs Grahams & Company, C.A., Glasgow, and the secretary of the company, Mr Patrick Graham, C.A., Glasgow. A prospectus stating these facts is produced herewith. This prospectus also states that the terms of a lease have been arranged, and that the price of the assets taken over is to be £5050. The petitioner calls the attention of the Court to the fact that two of the directors of this new company, Messrs Brown and Watson, are also directors of the company now in liquidation, and that the solicitors and auditors are the same as those who acted for the liquidating company, and that the liquidator himself, Mr Patrick Graham, is to be secretary of the new company, his firm of Grahams & Company, who were the auditors of the old company, are also to be auditors of the new company, and his office is to be the office of the new company.”

Answers were lodged for the company in liquidation, and Mr Graham, its liquidator, in which they stated that the price at which it was proposed to sell was a fair one, and more than would be obtained were the assets of the company put up to auction. They also stated that they were willing to advertise for offers before accepting any private offer, and submitted that the petition should be refused.

It was argued for the petitioner that the liquidator and directors practically proposed to sell the assets to themselves, and that in these circumstances he was entitled to demand the intervention of the Court— in re Irrigation Company of France, Jan. 19, 1871, L.R., 6 Oh. 176; in re Chillington Iron Co., Feb. 6, 1885, 29 Ch. D. 159.

The respondents argued that one shareholder had no right to insist on a liquidation being placed under the supervision of the Court unless some special cause was shown— in re London and Mercantile Discount Co., 1865, L.R., 1 Eq. 277; in re Beaujolais Wine Co., Nov. 22, 1867, L.R., 3 Ch. 15.

Counsel for the petitioner stated that they would be satisfied by a remit to an auctioneer or man of business to sell the company's assets by public auction.

Counsel for the respondents refused to assent to this.