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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> The Universal Corporation, Ltd v. Hughes [1909] ScotLR 839 (05 June 1909)
URL: http://www.bailii.org/scot/cases/ScotCS/1909/46SLR0839.html
Cite as: [1909] SLR 839, [1909] ScotLR 839
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SCOTTISH_SLR_Court_of_Session
Page: 839↓
Court of Session Inner House First Division.
[Sheriff Court at Glasgow.
v.
Facts:
The articles of association of a company, limited by shares, provided, inter alia, Art. 9.—“The directors may from time to time make such calls as they may think fit upon the members in respect of all moneys remaining for the time being unpaid on their shares, provided that no call shall exceed two shillings and sixpence per share.… A call shall be deemed to have been made when the resolution of the board of directors authorising such call was passed.”
At a meeting of directors on 10th December 1907 consecutive resolutions were passed and minuted—“That a call of 2/6 per share … be made, payable on the 1st January 1908 …” and “that a final call of 2/6 per share … be made, payable on the 31st March …” Following upon these resolutions two letters were sent out, headed respectively, “Fifth call” and “Sixth (final) call.” Each bore the same date, 17th December 1907, and gave notice of the fifth and the final call. In defence to an action for payment of these calls the defender argued that the calls were ultra vires, in respect of (i) not being made “from time to time,” (ii) being truly not separate calls but one call for 5s.
Held that the calls were separate and valid.
The Universal Corporation, Limited, Broad Street House, London, raised an action in the Sheriff Court at Glasgow, against George Hughes, spirit merchant, Glasgow, “for payment of ( First) the sum of £50 sterling, ‘being the fifth call of 2s. 6d. per share upon 400 shares of £1 each of the pursuers' said company, the Universal Corporation, Limited, in which company the defender is a registered holder of 400 shares,’ together with interest thereon … and ( Second) the sum of £50 sterling, ‘being the sixth and final call of 2s. 6d. per share upon said 400 shares of £1 each of the pursuers' said company,’ together with interest thereon.…”
The articles of association of the pursuers, who were a company limited by shares, provided, inter alia—“9. The directors may from time to time make such calls as they may think fit upon the members in respect of all moneys for the time being remaining unpaid on their shares, provided that no call shall exceed two shillings and sixpence per share, and every member shall pay the amount of calls so made to the persons and at the times and places appointed by the directors, which said persons, times, and places shall be notified in the notice of call to be sent to the member. A call shall be deemed to have been made when the resolution of the board of directors authorising such call was passed. The joint holders of a share shall be jointly and severally liable to the payment of all calls in respect thereof.”
At a meeting of directors duly convened and held on 10th December 1907, the following resolutions were passed and minuted:—“ It was resolved that a call of 2s. 6 d. per share on the ordinary shares be made, payable on the 1st January 1908, at the Clydesdale Bank, Ltd.
It was resolved that a Final Call of 2s. 6 d. per share on the ordinary shares be made, payable on the 31st March 1908, at the Clydesdale Bank, Ltd.
A draft of a circular to the shareholders was submitted and approved, and ordered to be issued with the notice of the above calls.”
Following upon these resolutions, notices, as the pursuers averred, were sent out by the secretary of the company to the defender in the following terms:—
The Universal Corporation, Limited.
Fifth Call, Two Shillings and Sixpence Per Share.
Payable 1st January 1908.
No. Broad Street House,
New Broad Street, London, E.C.
17 th December 1907.
“Sir (or Madam)—I beg to give you notice that the directors of the company have made a call of 2s. 6d. per share upon all the members holding ordinary shares upon which only 15s. per share has been paid; and it was determined that such call should be paid on the 1st day of January 1908 to the Clydesdale Bank, Limited, 30 Lombard Street, E.C.…”
The Universal Corporation, Limited.
Sixth (Final) Call, Two Shillings and Sixpence Per Share.
Payable 31st March 1908.
No. Broad Street House,
New Broad Street, London, E.C.
17th December 1907.
“Sir (or Madam)—I beg to give you notice that the directors of the company
Page: 840↓
have made a final call of 2s. 6d. per share upon all the members holding ordinary shares upon which the sum of 17s. 6d. per share has been called, the payment of which and of the call due on the 1st January 1908 will make such shares fully paid; and it was determined that such call should be paid on the 31st day of March 1908 to the Clydesdale Bank, Limited, 30 Lombard Street, E.C.…” The defender denied that such notices had been sent, or at any rate that he had received them.
The pursuers pleaded—“(1) The company having, in virtue of their powers, validly imposed calls on their members, and the defender, though a registered member of the company, having without just cause refused or delayed to make payment of said calls, decree should be granted in terms of the prayer of the petition, with interest on the said calls, and expenses as craved. (2) The defences are irrelevant.”
The defender pleaded, inter alia—“(1) The action is irrelevant. (2) The alleged resolutions of the directors being invalid, the defender should be assoilzied, with expenses. (3) The alleged calls not having been validly made, and no notice thereof having been sent to the defender, the defender should be assoilzied, with expenses.”
On 3rd August 1908 the Sheriff-Substitute ( Glegg) pronounced this interlocutor—“Repels the second plea-in-law for the pursuers: Sustains the first plea-in-law for the defender quoad the second conclusion of the petition, and dismisses the action in so far as laid under that conclusion; quoad ultra allows the defender a proof of his averments, and to the pursuers a conjunct probation.”
Note—[ After quoting article 9]—“Here the directors made two calls of 2s. 6d. each on 10th December 1907—the first call to be paid on 1st January 1908 and the second on 31st March 1908. Though the dates of payment are different, it seems clear, according to the articles of association, that the ‘calls’ were both made at the same time. Since the articles of association only give power to make calls from time to time, it cannot be said that these calls are made in accordance with their powers. What was done was at one time to make a call to the extent of 5s., and although the half-crowns were to be paid at different times, this does not mean that the calls were made on different dates.
With regard to the defence that the defender had no notice of the calls, that seems to me a good defence, but it is for the defender to prove it. The pursuers are required by article 9 to notify the members of the calls, and the maxim omnia prœsumuntur rite et solemniter acta esse applies, therefore it is for the defender to prove that he was not notified.…”
The pursuers appealed to the Sheriff ( Miller), who on 3rd December adhered.
Note—( After quoting article 9)—“The provision that no call shall exceed 2s. 6d. per share is made in favour of prospective shareholders, so that not too great a burden should be laid upon them at one time, and in order that they might have due notice of the call. The directors in this case, on Tuesday 10th December 1907, passed two resolutions—(1) it was resolved that a call of 2s. 6d. per share on the ordinary shares be made, payable on 1st January 1908 at the Clydesdale Bank, Limited; (2) it was resolved that a final call of 2s. 6d. per share on the ordinary shares be made, payable on 1st May 1908 at the Clydesdale Bank, Limited. In accordance with these calls the defender is now sued for the sums due in respect of his holding in the company. I think that the articles of association provide that the calls themselves should be made from time to time, and not that the payments should be demanded from time to time. In this case the calls were made by the directors on the same day, and are consecutive resolutions passed at the same meeting of the board of directors. I think, therefore, that the calls are not made from time to time, and so far as the second call is concerned it was outwith the power of the directors to make. Three cases were referred to— Lawrie v. Lees, 7 App. Cas. 19; Bryant v. Arthur, 11 A. & E. 17; and Coldfield Grammar School, 7 App Cas 91. I think these cases are quite different from the present. In the principal one, viz., Lawrie v. Lees, the question was whether an order granted by the Lord Chancellor to a commissioner on Sir Henry Meux's estate, giving power to the commissioner to execute leases on behalf of the lunatic, was ultra vires of the Lord Chancellor, as a separate order was not given for the lease of each public-house. It was said that the Court conferred power on the Lord Chancellor to make orders from time to time for these purposes, and that that could not apply to a compendious order such as had been given; and Lord Penzance says that the construction asked for by the appellants would be of a most inconvenient character and should not be adopted, ‘because the words from time to time are words which are constantly introduced where it is intended to protect a person who is empowered to act from the risk of having completely discharged his duty when he has once acted, and therefore not being able to act again in the same direction.’ The other cases go upon the same lines and are quite different from the present case. The words here are introduced for the purpose of protecting the shareholders from a demand for an unexpected amount.
The defender maintained that he should be assoilzied from the action, on the ground that if the second call was bad so also was the first. I do not agree with that view, because it is the second call that is ultra vires, and not the first.
I agree with the learned Sheriff-Substitute that a proof should be allowed on the question of notice, and on the whole matter I think that the appeal should be dismissed.”
The pursuers appealed to the Court of Session, and argued—The interpretation put upon from “time to time” in Lawrie v. Lees, 1881, 7 App. Cas. 19, was perfectly
Page: 841↓
applicable to the words as used in article 9. Their purpose was to enable the uncalled capital to be called up gradually, and to make it clear that one call did not exhaust the directors' power. In any case the first call was good. (2) Though the resolutions for the calls had been passed on the same day, and the notices sent out on the same day, that did not make the calls equivalent to one call of 5s. There was an interval of three months between the dates when they were payable. Argued for the defender and respondent—The whole resolution was bad. (1) The Sheriff's interpretation of “from time to time” was right. (2) But even if these words had been omitted, the calls would have been invalid. The date of the call was the date of the resolution; both resolutions were passed at the same meeting. Two simultaneous calls of 2s. 6d. were really equivalent to one of 5s. The liability attached to the shares from the date of the resolution— In re The China Steamship and Labuan Coal Company, Limited ( Daives' case), 1869, 38 L.J. Oh. 512. Reference was also made to Palmer's Company Precedents, 10th Ed. p. 542. [The Lord President referred to the Companies Act 1862, table A, article 4, the Companies Act 1908, table A, article 12, with reference to the use of the words “from time to time,” and to the period between payment of the calls.]
The learned Sheriffs have assoilzied the defender upon the ground that the call was bad, in respect that the two calls for half a crown each were not made “from time to time,” because they were made upon the same day. I think that is an entire misreading of the words “from time to time.” The genesis of the use of these words is pretty clear. We find it in section 4 of the original table A appended to the Companies Act of 1862, which reads—“The directors may from time to time make such calls upon the members as they may think fit, provided that twenty-one days' notice at least is given of each call”; and the words reappear again in the amended table A under the Act of 1908, which provides that “The directors may from time to time make a call, provided that no call shall exceed one-fourth of the nominal amount of the share, or be payable at least within one month from the last call.” I agree with the comment upon the expression “time to time” which was made by Lord Penzance in the case that is referred to by the learned Sheriff. I think it is quite clear that these words as used in this article are not limiting words in any way, but are descriptive words. The framer of the article obviously intended to provide against its being supposed that the directors had power to make only one call, and that that call must exhaust the whole uncalled capital, or otherwise the balance could not be called up. The directors might require the money gradually, and therefore the operation of making a call was stated to be an operation which might recur “from time to time.” Really, the intention, according to the natural use of language, is obvious. I think the expression “from time to time” merely means that the making of a call is an operation which the directors may perform, not once and for all, but from time to time as they wish; and to argue that the effect of the expression is to prevent the operation being repeated in the course of the same day is, I think, to put a meaning on the language which it will not bear.
That disposes of the case so far as it is dealt with by the learned Sheriff, but Mr Watson has submitted an argument which I think has a good deal more weight than the argument upon “from time to time.” That argument is founded upon the terms of this particular article 9, and it is to the effect that inasmuch as it is provided that no call shall exceed two and sixpence per share, and further, as it is undoubted law, and indeed is expressed in this very article, that a call is made when the resolution of the directors authorising such call is passed, therefore taking the resolution as given in the minute the call made is truly a call of five shillings, because, as Mr Watson argues, after that minute was passed there was fixed upon the shareholders a liability of five shillings, and accordingly that is an infringement of the article limiting the calls to two and sixpence. I think that that is a stronger argument than the one based upon “from time to time,” but I do not think it is
Page: 842↓
I think they are separate calls, because although the liability is affirmed upon the same day the sum is not made payable upon the same day. The meaning of the proviso “no call shall exceed two and sixpence per share” is, I think, to protect the shareholder from having a demand made upon him at the one moment for more than two and sixpence per share. Supposing, for instance, that what had been done was this, that the two calls had been made returnable on the same day, then I think it would have been quite fair to argue that by the mere device of putting the two calls in two envelopes instead of one and calling them two half-crowns instead of five shillings, you could not escape from the limitation, because in that case the shareholder would have been faced with a demand for more than two and sixpence. But that is not the present case. It is quite true that the shareholder's liability to pay is affirmed and fixed on the one day, but the demand that is made upon him is a demand for half a crown on the 1st of January and nothing more, and the other demand is for another half-crown on the 31st of March. Accordingly I think that what was done upon that day was to make two perfectly separate calls, and each of those calls was only for two and sixpence, and therefore they do not infringe the provision in the articles. There might have been of course a provision in the ordinary way, such as that which I have quoted from article 12 of table A as it now stands, providing that a certain space of time shall elapse between one call and another. Here there was no such provision, and therefore I think one call might have been made to succeed another with the greatest celerity. As a matter of fact, the period which was given here is the quite sufficient period of three months, two months more than that given by table A, and consequently there is absolutely no inequity in what has been done. The justice of the case is obviously in favour of the pursuers, because it is quite evident that even upon the argument submitted against them, if they had simply taken the device of passing the resolution calling the second half-crown the very next day after the first call was made, no objection could have been taken.
I think, therefore, that the call was quite properly made and that the interlocutors of the Sheriffs ought to be recalled. The case, of course, must go back to the Sheriff, because the defender here alleges that he never got the notices. If he can prove that the notices were not sent to him, then that raises a perfectly different question. That is a question which depends upon disputed facts.
The Court sustained the appeal, recalled the interlocutors of the Sheriff and Sheriff-Substitute, dated 3rd December 1908 and 3rd August 1908 respectively; remitted the cause to the Sheriff to allow the defender a proof of his averments as to want of notice, and to the pursuers a conjunct probation; and found the pursuers entitled to expenses in the Court of Session and in the Sheriff Court since closing of the record on 15th July 1908.
Page: 843↓
Counsel for the Pursuers (Appellants)— Hunter, K.C.— Fleming. Agents— Graham, Johnston, & Fleming, W.S.
Counsel for the Defender (Respondent)— Hon. Wm. Watson. Agents— Simpson & Marwick, W.S.