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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Anderson & Munro, Ltd Petitioners [1924] ScotLR 108 (12 January 1924)
URL: http://www.bailii.org/scot/cases/ScotCS/1924/61SLR0108.html
Cite as: [1924] ScotLR 108, [1924] SLR 108
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SCOTTISH_SLR_Court_of_Session
Page: 108↓
Court of Session Inner House Second Division.
Facts:
The Companies (Consolidation) Act 1908 enacts—Section 88 (1)—“Whenever a company limited by shares makes any allotment of its shares, the company shall within one month thereafter file with the Registrar of Companies …—( b) In the case of shares allotted as fully or partly paid up otherwise than in cash, a contract in writing constituting the title of the allottee to the allotment, together with any contract of sale, or for services or other consideration in respect of which that allotment was made, such contracts being duly stamped, and a return stating the number and nominal amount of shares so allotted, the extent to which they are to be treated as paid up, and the consideration for which they have been allotted.” (2) Where such a contract as above mentioned is not reduced to writing “The company shall within one month after the allotment file with the Registrar of Companies the prescribed particulars of the contract stamped with the same stamp duty as would have been payable if the contract had been reduced to writing, and those particulars shall be deemed to be an instrument within the meaning of the Stamp Act 1891, and the registrar may as a condition of filing the particulars require that the duty payable thereon be adjudicated under section 12 of that Act.” (3) “If default is made in complying with the requirements of this section, every director, manager, secretary, or other officer of the company, who is knowingly a party to the default, shall be liable to a fine not exceeding fifty pounds for every day during which the default continues: Provided that in case of default in filing with the Registrar of Companies within one month after the allotment any document required to be filed by this section, the company, or any person liable for the default, may apply to the Court for relief, and the Court if satisfied that the omission to file the document was accidental or due to inadvertence, or that it is just and equitable to grant relief, may make an order extending the time for the filing of the document for such period as the Court may think proper.”
A company which had made an allotment of shares fully paid up otherwise
Page: 109↓
than in cash accidentally omitted to file with the Registrar of Companies the particulars prescribed by the Companies (Consolidation) Act 1908, sec. 88, sub-sec. (2), until more than a month after the allotment. In order to remedy the defect in procedure the company reduced the contractto writing, and presented a petition under sub-section (3) for extension of the time during which the document might be filed. The reporter submitted that the procedure adopted by the company to remedy the defect was unnecessary, and that the petition should have taken the form of an application for relief from the penalty prescribed by the Act. The Court granted the prayer of the petition, holding that the remedy sought by the petitioners was the only remedy under the statute, and that the course proposed was the only safe method for the petitioners to adopt in view of the previous procedure.
Anderson & Munro, Limited, electrical engineers, 136 Bothwell Street, Glasgow, petitioners, presented an application to the Court under section 88 (3) of the Companies (Consolidation) Act 1908, in which they stated, inter alia—“5. At a meeting of the directors held on 17th May 1920 it was resolved ‘to make a bonus distribution of two fully-paid ordinary shares for each one ordinary share presently held, and for this purpose to distribute £2000 from the balance standing at the credit of profit and loss account, this £2000 to be transferred to the credit of the 2000 ordinary shares now being issued.’ the said shares, which are numbered 1001 to 3000 inclusive, were duly issued and are now held by Thomas Brown Wright, electrical engineer, 136 Bothwell Street, Glasgow, Alexander Stephen Nairn, electrical engineer, 136 Bothwell Street, Glasgow, and Frederick Charles Stewart, engineer, 55 West Regent Street, Glasgow. 6. The said shares were issued by the company as fully paid, but no contract or document relating thereto was filed with the Registrar of Joint Stock Companies under and in compliance with section 88 of the Companies (Consolidation) Act 1908. 7. The petitioners are advised that in consequence of no contract or document having been filed as above mentioned, it is now necessary to apply to your Lordships to grant relief under section 88 (3) of the said Act by making an order extending the time for filing a contract or document with the Registrar of Joint Stock Companies. The contract or a memorandum setting forth the particulars of the contract proposed to be filed will be lodged in the course of the proceedings to follow hereon. 8. The petitioners submit that in the circumstances the omission to file the contract or document was due to inadvertence, and that it is just and equitable that the relief provided by the said Act should be granted.”
The prayer of the petition craved the Court, inter alia, “To make an order extending the time for the filing with the Registrar of Joint Stock Companies of such contract in writing relating to the said shares of the company numbered 1001 to 3000 inclusive as shall be deemed by your Lordships to be sufficient under and in terms of section 88 of the Companies (Consolidation) Act 1908, and that to such date as to your Lordships shall seem proper, and to direct that on the filing of such a contract as aforesaid it shall operate in relation to such shares as if it had been duly intimated to the Registrar of Joint Stock Companies before the issue of such shares; or alternatively, to make an order extending the time for the filing with the Registrar of Joint Stock Companies of such memorandum in writing as to your Lordships shall seem proper, the same having been previously duly stamped, relating to said shares, and that to such date as to your Lordships shall seem proper; and to direct that on the filing of such memorandum as aforesaid relating to the said shares the memorandum so filed shall in relation to the said shares operate as if it were a sufficient contract in writing within the meaning of the said section of the said Act, and had been duly filed with the Registrar of Joint Stock Companies before the issue of the shares, all in terms of section 88 of the Companies (Consolidation) Act 1908.”
No answers were lodged.
On 17th November 1923 the Court remitted the petition to Mr J. C. Strettell Miller, W.S., Edinburgh, to inquire as to the facts and circumstances set forth therein and as to the regularity of procedure, and to report.
On 30th November 1923 Mr Miller reported, inter alia, as follows—“By its memorandum of association the capital of the company was declared to be £3000, divided into 2000 preference shares and 1000 ordinary shares, both of £1 each. The whole of said share capital was issued and fully paid up. By a special resolution of the company passed on 9th and confirmed on 25th March 1920 the share capital was increased to £10,000 by the creation of 7000 additional ordinary shares of £1 each ranking pari passu with the existing ordinary shares of the company, and a copy of this special resolution was duly filed with the Registrar of Joint Stock Companies in terms of the statute. By article 12 of the articles of association it is provided—‘The directors may, for the purpose of paying off on behalf of the company any person for any property or work or service or for any claim such person may have, or any valuable consideration whatever, issue any shares which may be issuable at the time with whatever amount the directors may think proper credited as paid thereon in payment either in full or in part for said work, property, service, or other consideration.’ At a meeting of the directors on 17th May 1920 it was resolved ‘to make a bonus distribution of two fully-paid ordinary shares for each one ordinary share presently held, and for this purpose to distribute £2000 from the balance standing at the credit of profit and loss account, this £2000 to be transferred to the credit of the 2000 ordinary shares now being issued.’ On this date the shares were actually allotted and are now held by Thomas Brown Wright, electrical engineer, 136 Bothwell Street, Glasgow, Alexander Stephen Nairn,
Page: 110↓
electrical engineer, 136 Bothwell Street, Glasgow, and Frederick Charles Stewart, engineer, 55 West Regent Street, Glasgow, all designed in the petition.… On this date (September 1, 1920) the petitioners presented for filing to the said Registrar the prescribed particulars required by section 88, sub-section 2, of the said Act above set forth.… The reporter respectfully submits that a default has been made by non-compliance with the requirements of the said section 88, sub-section 3, by not filing with the Registrar of Joint Stock Companies within one month, as prescribed by the said Act, the said relative particulars prescribed by section 88, sub-section 2, of said Act.… The contract or agreement between the company and the holders of the ordinary shares in said company dated 2nd November 1923, relating to the said allotment of shares lodged in process in the course of the proceedings relative to this petition, is in order and might be filed. The reporter, however, respectfully submits that this procedure proposed by the petitioners is rendered unnecessary in respect that the said … prescribed particulars of the contract conform to the said Act have been, as hereinbefore stated, already filed though not within the statutory period. The reporter, further, is of opinion from the information submitted to him by the secretary of the said company that the omission to timeously file the said … prescribed particulars of the contract conform to the said Act was not intentional. In conclusion the reporter most respectfully submits that the form of this petition should rather have been a petition for a declaration that the default in not timeously filing with said Registrar the said … prescribed particulars of the contract conform to the said Act was inadvertent and unintentional, and relief from the penalty prescribed by the said Act might be granted.” At the hearing in the summar roll the petitioner argued—The statutory form of relief was that craved by the petitioners, viz., an extension of time under sec. 88, sub-sec. 3, of the Companies (Consolidation) Act 1908 (8 Edw. VII, cap. 69). The form of the interlocutor was set forth in Palmer's Company Precedents (12th ed.), vol. i, p. 1360. The procedure as to filing particulars had been irregular. The Registrar ought never to have received the particulars. Section 277 dealt with the applications of fines, but there was no warrant in the Act for a petition for the remission of the fine, as was suggested by the reporter.
The petition has been intimated and no answers have been lodged, and it was then remitted to a reporter. The reporter suggests that the petition is unnecessary, because particulars have already been put upon the file under sub-section (2) of section 88, but he does not seem to have fully appreciated—it may be through no fault of his—that what the petitioners really want now to do is to register the contract in writing which came into existence after the date of the registration of particulars under subsection (2). The reporter has said that the omission to register timeously was “not intentional” on the part of the petitioners. The provision of the statute is that it must be “accidental or due to inadvertence.” I take it that these phrases have the same meaning, and I think that although the statement in the report is bald it may perhaps in the circumstances be held to be sufficient.
As regards the remedy sought, it appears to me that it is the only remedy under the statute—and we are here exercising a purely statutory jurisdiction—which we have power to give. Inasmuch as it proceeds upon the view that the past procedure in this unfortunate case has been faulty if not entirely null, and that the suggestion made embodies the only safe course which in view of possible litigation or other emerging circumstances would safeguard the position of parties, I propose that the petition should be granted, and the time extended for lodging the document to which I have referred till the 1st February.
The Court pronounced this interlocutor—
“Extend the time for filing with the Registrar of Joint Stock Companies the contract in writing mentioned in the petition relating to the shares of the petitioning company numbered 1001 to 3000 inclusive to the 1st day of February next 1924, and direct that on the filing of such contract the same shall operate in relation to such shares as if it had been duly intimated to the Registrar of
Page: 111↓
Joint Stock Companies before the issue of such shares, and decern.”
Counsel for the Petitioners— Wark, K.C.— Macdonald. Agents— J. & J. Galletly, S.S.C.