Scottish Court of Session Decisions

In May 1900 Duncan Wilkie Paterson, S.S.C., Edinburgh, presented a petition to the Second Division of the Court, in which he craved the Court to sequestrate the estates and undertaking of the Dundee Suburban Railway Company, and to appoint a judicial factor thereon with all the usual powers, and further with the power, after making due provision for all proper outgoings, to apply and distribute all money received by him under the direction of the Court in payment of the debts of the company, and otherwise according to the rights and priorities of the persons for the time being interested therein.

The petitioner averred that he was a creditor of the Dundee Suburban Railway Company for £300, with interest at 5 per cent. per annum from 25th July 1894, and £8, 12s. 8d, of expenses and dues of extract conform to decree dated 31st January and extracted 28th February 1900; that the Railway Company had been duly charged to pay these sums, but had failed to do so, and that the days of charge had expired; that the Dundee Suburban Railway Company was incorporated by the Dundee Suburban Railway Act 1884; that the capital authorised to be raised for the purpose of the undertaking was £250,000 in 25,000 shares of £10 each, and £83,300 by borrowing, and that by the company's Act directors were appointed until the first ordinary meeting, three of whom alone qualified and continued as directors after the first meeting of the company.

He also averred as follows:—“In the year 1888 difficulty arose in regard to the management of the company, and in consequence thereof the intervention of your Lordships was sought. In a petition presented to your Lordships on the 17th day of July 1888 the whole estate and effects of the said company were sequestrated, and Mr George Todd Chiene, chartered accountant, Edinburgh, was appointed judicial factor to preserve the estate of the company, and to undertake the management of the company's affairs until such time as a board of directors could be duly constituted. In the petition it was stated that the minutes, minute-book of the company, the register, subscription contracts, seal, and various principal deeds and other documents were in the possession of Ferdinand Strousberg, Parliamentary agent and contractor, 13A Cockspur Street, London, and decree was granted for delivery thereof to Mr Chiene. Mr Chiene has had no intromissions with any funds of the company, and with the exception of making an attempt (which proved futile in consequence of erroneous proceedings adopted by him) to obtain possession of the books and documents, he has done nothing under his appointment. His appointment as such factor has lapsed, and his powers were superseded by the election which took place thereafter of a duly constituted board of directors. Subsequently the company's affairs have been carried on independently of and without reference to him as judicial factor foresaid. In particular, the company applied for and obtained in 1889, 1892, 1894, and 1896 special Acts of Parliament for extending the time for completion of the works authorised by the original Act. Mr Chiene took no part in the obtaining of these Acts, and offered no opposition to the passing thereof.

The time for the completion of the works expired on 26th July 1898, but no part of the work was begun. Notices for compulsory purchase of land were duly served, and provisional arrangements were made with some of the owners. …

The capital of the company … was fully subscribed. The larger amount was subscribed for by the said Ferdinand Strousberg, and by an assignment executed on 8th July 1891 he assigned his subscription contract to the extent of £235,000 to John Best, contractor, Edinburgh. Mr Strous berg further assigned 1000 shares to Henry Houseman, 3 Princes Street, Westminster, in or about the year 1889 or 1890, and 200 shares to Church King, 10 Basinghall Street, London, in or about the year 1890. Neither the said Ferdinand Strousberg nor his assignees (who are still vested in the shares) have paid anything to the company in respect thereof, and they are still liable for the whole amount due on them. The said assignees have been accepted by the company as shareholders, and have acted and voted as such.

There are other shareholders who are also liable for payment of the shares held by them.

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Mr Best, Mr Houseman, Mr King, and others who have right to and in the capital are solvent, and are responsible for and bound to pay all claims against the company to the extent of the shares held by them respectively, but access to the share register has been denied to the petitioner by Messrs Poole & Robinson, who have been acting as solicitors for the company, and they give no reply to inquiries made to them for information as to who has the register.

Of the three directors appointed by the company's Act of Incorporation who accepted office and qualified, Colonel Blair is dead and Mr Couper has left this country. It is not known whether General Harris is alive or not, and all efforts to trace him have failed. Letters sent to his last known place of residence have been returned through the Post-Office.

The management of the company's affairs fell into the hands of the said Ferdinand Strousberg and his solicitors, the said Messrs Poole & Robinson.

The said Ferdinand Strousberg died in London on or about 4th May 1900. Up to the time of his death he and Messrs Poole & Robinson, or others under their control, were, and it is believed that Messrs Poole & Robinson now are, in possession of the minutes and minute-book of the company, the register of shareholders, subscription agreements, seal, and various principal deeds and other documents belonging to the company. They have no title to have the custody of these documents, and retain them at their own hand and unwarrantably. They have been requested to state the names of the present directors of the company and of the secretary, but they have refused to give the information, although they professed to act for the company. It is believed and averred that there are now no directors and no secretary. … In any case, there is no-one now in charge of the company's affairs.

In connection with the original application to Parliament, sums of £7999, 19s. and £1645, 5s. were lodged with the Exchequer as the Parliamentary fund, and a petition has been brought by Mrs Helen Allen Agnes Mason and others, the testamentary trustees of the late Samuel Lack Mason, who allege they are creditors of the company, before Lord Stormonth Darling as Lord Ordinary in Exchequer Causes, for determining the rights of parties in that fund. That petition is still undisposed of, and the company is not represented in it.

In respect of the circumstances above mentioned, and in particular of the fact that there is no one legally in the management of the affairs of the company, the petitioner has presented this petition. In addition to invoking the nobile officium of the Court the petitioner founds on the Railway Companies (Scotland) Act 1867 (30 and 31 Vict. cap. 126), and in particular section 4 thereof.”

The Railway Companies (Scotland) Act 1867 (30 and 31 Vict. cap. 126) enacts as follows:—Section 3. “In this Act the term ‘company’ means a railway company; that is to say, a company constituted by Act of Parliament, or by certificate under Act of Parliament, for the purpose of constructing, maintaining, or working a railway (either alone or in conjunction with any other purpose);” … Section 4. “The engines, tenders, carriages, trucks, machinery, tools, fittings, materials, and effects constituting the rolling-stock and plant used or provided by a company for the purposes of the traffic on their railway, or of their stations or workshops, shall not, after their railway or any part thereof is open for public traffic, be liable to be attached by diligence at any time after the passing of the Act and before the 1st day of September 1868 where the decree on which diligence proceeds is obtained in an action on a contract entered into after the passing of this Act, or in an action not on a contract commenced after the passing of this Act, or on a protested promissory-note or bill of exchange, or a deed containing a clause of registration registered after the passing of this Act; but the person who has obtained any such decree may obtain the appointment of a judicial factor on the undertaking of the company on application by petition in a summary way to the Court, and all money received by such judicial factor shall, after due provision for the working expenses of the railway and other proper outgoings in respect of the undertaking, be applied and distributed under the direction of the Court in payment of the debts of the Company, and otherwise according to the rights and priorities of the persons for the time being interested therein, and on payment of the amount due to every such person who has obtained decree as aforesaid, the Court may, if it think fit, discharge such judicial factor.”

John Best lodged answers to the petition, in which he submitted, inter alia, that the petition was incompetent and irrelevant, and should be dismissed.

Argued for petitioner—On the appointment of a duly constituted board of directors as averred in the petition, Mr Chiene's appointment as judicial factor fell, and the company was at present without anyone in charge of its affairs. If necessary he desired a proof on this point. The petitioner having an extracted decree against the company was entitled to get a judicial factor appointed in terms of section 4 of the Act of 1867. That section applied in the present case. “Company” was defined by section 3 of the Act as a railway company constituted by Act of Parliament for the purpose of constructing, maintaining, and working a railway. In order that a judicial factor should be appointed, the company did not itself require to be working its own line— Haldane v. Girvan and Portpatrick Railway Company, July 20, 1881, 8 R. 1003. In any event, the petitioner was entitled to appeal to the nobile officium of the Court. The company was possessed of plenty of funds, and it was unjust that its debts should remain unpaid because there was no one to in gather these funds.

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Argued for respondent Best—The Railway Company had no plant or rolling-stock or works of any kind. It had never acquired a single rood of land. It was therefore not an undertaking at all, and section 4 of the Act of 1867 had no application. Besides, the recovery of unpaid capital, which was the object the petitioners had in view, was not part of the duty of a receiver appointed under section 4. Under no statutory enactment could a judicial factor enforce payment of calls. The statute had no bearing on the present case. In re Birmingham and Lichfield Junction Railway Company, 1881, L.B., 18 Ch D 155; West Lancashire Railway Company, 1890, 63 L.T. 56. At common law the nobile officium of the Court had never been stretched in order to provide a creditor with a simple mode of recovering a debt. Besides, a judicial factor had already been appointed on this company's estate, and that appointment had never been recalled. The averments of the petitioner as to the election of a board of directors were not specific enough to go to proof.

Counsel appeared for Mr Chiene, the judicial factor appointed in 1888, and argued—He was still judicial factor on the company's estate. He had already attempted to get possession of the minutes and other documents, but had failed to do so. A judicial factor, whether appointed under the statute or at common law, had, however, no power to get in unpaid capital. The petition was therefore incompetent.