Scottish Court of Session Decisions

The Companies (Consolidation) Act 1908 (8 Edw. VII, cap. 69) enacts—Section 32—“ Power of Court to Rectify Register—(1) If ( a) the name of any person is, without sufficient cause, entered in or omitted from the register of members of a company, or ( b) default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member, the person aggrieved, or any member of the company, or the company, may apply to the Court for rectification of the register.”

On 15th April 1915 John Dodds, brick-maker, 470 Garngad Road, Glasgow, petitioner, presented to the Court a petition in which he craved the Court, inter alia, “to order that the register of shareholders of the Cosmopolitan Insurance Corporation, Limited, be rectified by removing therefrom the name of the petitioner as a shareholder in respect of the 300 deferred shares described in the schedule annexed hereto, and placing thereon the name of H James Martin, Doctor of Medicine, 376 Argyle Street, Glasgow, as the holder of the said shares, and to direct the liquidator forthwith to rectify the said register of shareholders accordingly, and to give due notice of such rectification to the Registrar of Companies; and further, to order that the ‘A’ list of contributories of the said corporation and the liquidator's certificate finally settling the same be varied by excluding therefrom the name of the petitioner as a shareholder in respect of the said deferred shares, and inserting in place thereof the name of the said H James Martin, and to direct the liquidator to vary the said list accordingly.…”

On 24th April 1915 answers were lodged on behalf of the Cosmopolitan Insurance Corporation, Limited, and the liquidator thereof, William M'Lintock, chartered accountant, Glasgow.

The petitioner was the holder of 300 deferred shares of the said Cosmopolitan Insurance Corporation, Limited, and transferred them to Dr H. J. Martin, 376 Argyle Street, Glasgow, on the 29th January 1915. On 30th January his law agent sent the transfer to the secretary of the company, who received it on 1st February. Ordinary meetings of the board of directors were held fortnightly, and in the ordinary practice of the company transfers were dealt with only at ordinary meetings of the board. The last ordinary meeting of the board prior to the company going into liquidation was held on 29th January. At the said meeting the directors resolved to convene a general meeting of the company on 9th February to consider, and, if so resolved, to pass, an extraordinary resolution to the effect that it was proved to the satisfaction of the meeting that the company could not by reason of its liabilities continue its business, and that it was advisable to wind up the company. The directors at the said meeting appointed the respondent William M'Lintock to supervise the affairs of the company until the meeting of shareholders was held on 9th February. Notices calling the meeting of shareholders were posted to all the shareholders on 30th January. The notice was received by the petitioner on 1st February. At the meeting on 9th February it was resolved to wind up the company, and the respondent William M'Lintock was appointed liquidator. The liquidator included the petitioner's name in the “A” list of contributories of the company as the holder of the said shares.

The liquidator averred that the said transfer was not bona fide, and that the petitioner still retained the interest in and control of the said shares, and that the transfer was executed after the said resolution of the directors on 29th January had been passed, and in the knowledge that the directors had passed the said resolution.

On 15th June 1915 the Court ( Lords Mackenzie, Skerrington, and Ormidale) ordered service of the petition on the said Dr H. J. Martin. No answers were lodged by him.

The petitioner argued—The sale of the shares was arranged some time before the date of the transfer, and when the sale took place there was no resolution of the company, or even of the directors, that the company should be wound up. The transfer accordingly should have been registered— Stenhouse v. City of Glasgow Bank, October 31, 1879, 7 R. 102, 17 S.L.R. 31. The company might have been insolvent, but it was not in liquidation when the transfer was received by the secretary. Liquidation began at the meeting of shareholders, and until that date the directors were bound to register the transfer— Furness & Company v. Liquidators of “ Cynthiana” Steamship Company, Limited, December 8, 1893, 21 R. 239, per Lord President (Robertson) at p. 245, 31 S.L.R. 189, at 193. In re The Ottoman Company, Limited ( Admiral Hornby's case), 1868, 16 W.R. 1164. Proof should be allowed.

The respondent argued—The prayer of

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the petition should be refused. The Court would remove names from the register only in the two cases dealt with in section 32 (1) of the Act. Here section 32 (1) ( b) alone could apply, and the petitioner must show fault or unnecessary delay in registering the transfer. Neither fault nor unnecessary delay was averred. But the company had stopped business, and the directors had published insolvency before they received the transfer. Not only were the directors and liquidator not at fault or in delay, but they were prevented from altering the register— Nelson Mitchell v. City of Glasgow Bank, December 21, 1878, 6 R. 420, per Lord President (Inglis) at p.429, and Lord Shand at p. 437, 16 S.L.R. 155, at pp. 159 and 164, aff. May 20, 1879, 6 R. (H.L.) 66, 16 S.L.R. 511; Alexander Mitchell v. City of Glasgow Bank, December 21, 1878, 6 R. 439, 16 S.L.R. 165, aff. May 20, 1879, 6 R. (H.L.) 60, per Lord Selborne at p. 65, 16 S.L.R. 503, at p. 506; Buckley on Company Law (9th ed.), p. 111.