TMI Blog1940 (8) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... stice under Section 154, which transferred to the respondent company all the property, rights, powers, liabilities and duties of a number of colliery companies, including the Hickleton Main Colliery Co., and which provided that these transferor companies should be dissolved without winding-up. The appellant continued to work at the Hickleton Main Colliery until October 7, 1937, and received wages from the respondents for his labour, but he throughout believed himself to be working under his contract with the Hickleton Main Colliery Co., which contract had never been terminated by notice. The company, however, as the result of the order made by the Chancery Division, had ceased to exist. On October 7, 1937, the appellant absented himself from work, in circumstances which would have made him liable under Section 4 of the Employers and Workmen Act, 1875, if he could be regarded as under a contract of service with the respondents. This he denied, and hence, on a case stated by the Justices of Doncaster, the general question arises which I have defined above and which the House has now to determine. Counsel for the appellant argued that a contractual right to personal service was a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he repairs being necessarily effected by the Parkgate Co., itself, but could be adequately performed by the Parkgate Co., arranging with the British Waggon Co., that the latter should execute the repairs. Such a result does not depend on assignment of contract at all. It depends on the view that the contract of repair was duly discharged by the Parkgate Co., by getting the repairs satisfactorily effected by a third party. In other words the contract bound the Parkgate Co., to produce a result, not necessarily by its own efforts, but, if it preferred, by vicarious performance through a sub-contractor or otherwise. A quite different situation, as it seems to me, is illustrated by the well-known case of Tolhurst v. Associated Portland Cement manufacturers [1903] 72 LJKB 834 ; 1903 AC 414, and, with all respect to an observation made by Lord Lindley at the end of his judgment in Tolhurst's Case ( Supra ). I doubt whether the British Waggon Case ( Supra ) was really an authority very much in point. In Tolhurst's Case ( Supra ) the majority of this House took the view; that the contract then under discussion was 'Assignable", because the contract ought to be read and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern where personal contacts disappear, is in all cases a matter of indifference to the employees. But the point made is that such a transformation can take place without necessarily changing the identity of the company. It is further argued on behalf of the respondents that Section 154 constitutes a new and simpler machinery for the transfer of the undertaking of an old company to a new company, which thus acquires the undertaking without the necessity of the transferor company going into liquidation. As the Master of the Rolls observed in his judgment, the word "transfer" is not a word of art and the language of Section 154 is in very wide terms. Moreover, Section 154 contemplates, or at any rate provides for the dissolution of the transferor company when the transfer of its undertaking has been made, and there appears to be no mean:-of calling back to life the company so dissolved, for Section 294 occurs in Part V of the Companies Act dealing with winding-up, whereas Section 154 is found in Part IV. In these circumstances, and with powerful arguments presented on either side, the House is left with the difficult task of putting the proper construction on Section 154, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Section 154 would remove all difficulty in transferring contracts for personal service. If, for example, one of the companies to be amalgamated under the procedure of that section has a long term contract with an individual to be sole manager of its undertaking, what would happen when the transfer takes place to a new and enlarged company ? The remuneration may be quite inadequate, or the individual may be quite unsuited. for so extended a responsibility. Again, if each of half a dozen amalgamating companies has such a contract with its manager, the suggested interpretation of Section 154 appears to lead to absurdity. The truth is that many contracts are not capable of being dealt with by the method said to be involved in the language of Section 154. For example, what would become of a contract which remunerates a manager with a share of the profits of a constituent undertaking, or a contract with a medical man to attend the servants of a company at a fixed total fee ? Such contracts cannot be dealt with by simply substituting a new . employer for the old, for the nature of the contract, necessarily depends upon the old employer continuing to be a contracting party, and any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of automatic transfer. The conclusion at which I have arrived may be regarded as limiting the usefulness of the section, but to that consideration there are two answers. In the first place I am not justified on that account in giving to the section a wider effect than its true interpretation should provide, and there must be great advantages in avoiding the necessity of liquidation and in effecting transfers without any further act or deed in cases contemplated by the section. In the second place, if the Legislature really desires that workmen should be transferred to a new employer without their consent being obtained, plainer words can be devised to express this intention. I cannot regard Section 154 as plainly authorising this result and, in my view, the appeal should be allowed with Costs here and below, and the question of law raised in the case stated should be answered by saying that a contract of service did not exist between the appellant and the respondents and that the magistrates should dismiss the summons with such order as to costs as they think fit. Lord Atkin (read by Lord Wright). This is an appeal from an order of the Court of Appeal dismissing an appeal from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther. I had fancied that ingrained in the personal status of a citizen under our laws was the right to choose for himself whom he would serve, and that this right of choice constituted the main difference between a servant and a serf. But if Parliament has so enacted the result must be accepted. I venture to think, however, that the effect of the legislation is far different from what it is supposed to be by the six Judges who have dealt with the matter in the Courts below. The problem arises under two sections in the Companies Act, 1929, Sections 153 and 154, which with Section 155 form a small division of the Act entitled "arrangements and reconstructions", which, modifying and replacing Sections 45 and 120 of the Act of 1908, provide for compromises between a company and its members or creditors, and also provide for arrangements in the nature of reconstruction or amalgamation. Section 154 was introduced for the first time into the Companies Act, 1928, by Section 54, and so found its way into the Consolidation Act of 1929. The sections come into play in the following way. The Hickleton Main Colliery Co., was a company working its pits in Yorkshire. Nokes, in January, 1937, enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is that the effect of the section is to transfer all rights which a transferor company had against anyone at the date of the order whether on personal contracts, or on contracts expressed to be non-assignable, or on property the rights in which ceased on assignment. In other words rights not transferable in law or equity were in fact transferred, if necessary against the will of the parties against whom the rights existed, and in confiscation of the rights which those parties had reserved to have dealings only with the person, that is, the transferor company, with whom, they had elected to be associated. It means that contracts of service are compulsorily altered, and new contracts of service with a new employer created without the consent of one of the contracting parties. It is not, of course, confined to weekly or fortnightly contracts : it extends in the case of collieries to the longer term contracts of accountants, managers, salesmen, solicitors, doctors, and apparently, though how this would be applied where the company is dissolved is not explained, to managing directors engaged for a term of years. It applies to other personal contracts such as those to write a book or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e former system. An arrangement can be made for transfer of an undertaking by way of amalgamation without incurring the necessity of a winding up. Once a winding up is avoided there is no longer a liquidator to control the transfer; and by the old device of a vesting order property that previously had to be conveyed can be transferred as the order in the present case says without further act or deed. A further change is made. Under the former law a company could only be dissolved after the winding up had been completed, which involved delay until its liabilities had been met or compromised, either by arrangement with the new company, that is, a novation, or by taking an indemnity from the new company, realising or reserving assets sufficient to meet the liabilities. But as there is to be no winding up under the new system there was to be a special power of dissolution. This is given by Section 154 (1) ( d ), but no time is fixed for dissolution ; it need not be ordered at all; or if ordered can be postponed for any period that the Judge may deem necessary. One other change is necessary; as the assets are to be vested in the new company, and an early dissolution is in most cases ant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act to be transferred to another company. The judgment is very apposite to the present case. After deciding that there is no difference between publishing contracts with an individual and contracts with a company so far as assignability is concerned the Judge said (66 LJ Ch., at p. 14) : " No doubt part of the inducement was also that the company had a very efficient manager. It was said that the company might have discharged him the next day without giving the plaintiff cause to complain. That observation is well-founded. The company might have discharged its manager the next day, and appointed new officers at any time ; but still the plaintiff might well act on the assumption that this Tower Company and those who directed its affairs would select a manager who would maintain the reputation of the company. It seems to me that it would be wrong to draw any such distinction as is suggested between an agreement entered into by an author with an individual publisher, and a similar agreement between an author and a limited company ; and agreements of the former kind being non-assignable, I hold that agreements of the latter description are also incapable of being assigned". Much st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when you are dealing with Acts of Parliament, and examining what the effect of your proposed construction is, whether or not you are dealing with something that it is possible the Legislature might either have passed by definite and specific enactment or have allowed to pass by some ambiguous reference. . . . If you want to alter the law which has lasted for centuries and which is almost ingrained in the English Constitution, in the sense that everybody would say 'to call a wife against her husband is a thing that cannot be heard of ', to suggest that that is to be dealt with by inference, and that you should introduce a new system of law without any specific enactment of it, seems to me to be perfectly monstrous". In the same case Lord Atkinson (81 LJKB, at p. 618) said : "The principle that a wife is not to be compelled to give evidence against her husband is deep-seated in the common law of this country, and I think if it so to be overturned it must be overturned by clear, definite, and positive enactment not by an ambiguous one such as the section relied upon in this case". My Lords, I should have thought that the principle that a man is not to be compelled to serve a master a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . But a speedy transfer of property from A to B and a short sharp dissolution of A, though certainly simple, does not necessarily do justice to A and still less to third parties who had dealings with A. I am satisfied that this in the main procedural section should not be construed so as to transfer rights which in their nature or by law not transferable. I am of opinion, therefore, that the appeal should be allowed with costs here and in the Court of Appeal and in the Divisional Court, and that in answer to the case the justices should be directed to dismiss the summons with such order as to costs as they think fit. Lord Thankerton . I have had the privilege of considering the written opinions of my noble and learned friends, Lord Atkin and Lord Romer ; I find myself in agreement with the opinion of Lord Atkin, and regret that I feel bound to differ from Lord Romer's opinion, as also from the decision of both Courts below. The decision of the appeal turns on the proper construction of head ( a ) of the matters referred to in Section 154 (1) of the Companies Act, 1929, namely, "the transfer to the transferee company of the whole or any part of the undertaking and of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the main object of these provisions which were first introduced in Section 54 of the Companies Act of 1928, was to facilitate the amalgamation of companies and to avoid the payment of duties on a whole series of deeds of transfer, etc. It cannot be gain said that the rights of third parties which would be overridden or extinguished by the respondents' construction are, in many cases, of material importance and value, I will only add one illustration to those instanced by my noble and learned friend Lord Atkin. In the case of mineral leases it has long been settled in Soctland that a lease excluding assignees unless approved of by the landlord has the same force with an unqualified exclusion ; the tenant has no right under such a clause to require the landlord to justify his refusal, neither, if he docs assign a reason, is that subject to the review of the Court : Portland (Duke) v. Baird Co [1985] 4 Macph. 10, p. 69 Bell's Principles of the Law of Scotland,. Vol. 1, Section 1218. In the Portland's (Duke) Case [1985] 4 Macph. 10, p. 69 Lord Justice" Clerk Inglis (4 Macph. 18, at p. 76), after referring to the delectus persona involved in certain leases, says, "But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can only assign with the consent of some third party whose consent to the transfer has not been obtained. The question more particularly involved is whether the order made by Mr. Registrar Stiebel on June 4, 1937, was effectual to transfer to the respondent company all the rights and liabilities of the Hickleton Main Colliery Co., as they subsisted on that date, under and by virtue of the contract of employment entered into by the last mentioned company with the appellant. In other words was the appellant, as from June 4, 1937, in the employment of the respondent company upon the terms of such contract ? It is plain that the proper answer to be give to these questions can only be discovered after a careful and critical examination of the language employed in Section 154. It is true that the section merely gives effect to an amendment of the law made by Section 54 of the Companies Act of 1928, but. that Act was passed for the purpose of amending the law relating to companies with a view to the consolidation of such law effected in the following year, and never itself came into force. In order, therefore, to appreciate the objects that the Legislature had in view when making the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igns of the contracting parties, such a contract is not assignable at law See Tolhurst v. Associated Portland Cement Manufacturers [1903] 72 LJKB 834 ; [1903] AC 414. If, therefore, the new company were desirous of obtaining the benefit of the contract the liquidator of the transferor company would do his best to obtain a novation of the contract by arrangement between himself as representing the transferor company, the other party to the contract in question, and the new company. Failing this the other party to the contract would be entitled to treat the sale of the transferor company's undertaking as a repudiation of the contract by that company, and prove in the liquidation for such damages as he might have suffered by reason of the repudiation. The contract, however, might be one that was essential to the success of the undertaking. In such a case the parties to the scheme of amalgamation would, if there were any risk of failure to obtain a novation of the contract, have adopted an alternative scheme of arrangement that is not an amalgamation in its strict sense but is one for all practical purposes. The new company would not purchase the undertakings of the two companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll where the new company merely purchases the shares in the amalgamating companies. The making of an order for winding up by the Court operates no doubt as a notice of dismissal of a company's employees. But this is not the result, or at any rate is not necessarily the result, of the passing of a resolution for voluntary winding up See Midland Counties District Bank v. Attwood [1904] 74 LJ Ch. 286 ; 1905, 1 Ch. 357 and Reigate v. Union Manufacturing Co. (Ramsbotham) Ltd. [1918] 87 LJKB 724 ; 1981, 1 KB 592. It would certainly not be the result of a voluntary liquidation of a company entered upon merely for the purpose of carrying through an amalgamation with another company by means of a sale of the company's undertaking and assets. In such a case the liquidator would carry on the business as before, making use of the employees' services and paying their wages, until the time came for a transfer of the undertaking to the new company. The transfer would unquestionably operate as a notice of dismissal of the employees and the liquidator before making it should in strictness take timely steps to determine the existing contracts of service and give the employees the opportu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Main Colliery Co., was not in fact made until nearly two and a half months after the order sanctioning the arrangement. This, however, is immaterial. The important thing is that the Legislature contemplated that the two orders might be made at the same time. It is plain that until the arrangement is sanctioned by the Court, there can be no transfer to the transferee company of the undertaking or property of the transferor company. It is equally plain that if the dissolution of the transferor company takes place the moment that the arrangement is sanctioned, there can be no transfer thereafter of such undertaking or property whether by way of deed of assignment or declaration of trust or notation of contract or otherwise. The transferor company will have ceased to exist. The Court has, no doubt, power under Section 294 of the Act to declare the dissolution of a company "to have been void". But the section would seem to be applicable only to cases where the company has been in compulsory or voluntary liquidation and the dissolution has been effected under the provisions of Section 221, 236 or 245. Under those sections it is a condition precedent of dissolution that the affairs of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f making provision for such incidental, consequential and supplemental matters as are necessary to secure "that the reconstruction or amalgamation shall be fully and effectively carried out". These words are of great importance. Of equal importance is the very remarkable provision contained in sub-section (1) ( c ). The Court apparently under that provision can by the order that puts an end to the transferor company enable the transferee company to continue any legal proceedings that have been instituted by or against the transferor company. The more closely I examine the section the more I am convinced that the object of the Legislature was to enable the Court by an order to make a complete substitution of the transferee company for the transferor company as regards the whole of the rights and liabilities of the latter without exception, and thus to secure, without delay and without the tedious formalities attendant upon a voluntary liquidation of transferor companies, that full and effective carrying out of the amalgamation that previously occupied so much time and involved the execution of so many documents and the making by the liquidators of so many arrangements with credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible consistently with well-settled rules of construction to exclude that property from the operation of the section ? Property, moreover, for the purposes of the section, includes rights of every description. Under its trading contracts and its service contracts the transferor company, as I have already said undoubtedly possesses rights. What rule of construction will permit such rights to be excluded ? It is contended that an answer to these questions favourable to the appellant is to be found in sub-section (1) ( a ), under which the Court may by the order make provisions for the transfer to the transferee company of the property and liabilities of the transferor company. The use of the word "transfer", so runs the argument, shows that the only property that can be affected by the order is property that the transferor company can by itself transfer. But there seem to me to be several objections to this argument. In the first place the transfer for which provision may be made is not a transfer by the transferor company at all. It is not, indeed, a transfer that is to be made by anybody. The making of the provision for a transfer is merely the machinery for bringing into operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat may differ widely from that of their predecessors. Yet no one could possibly say without gross exaggeration that the landlord, the contractors, or the servants of the first company had suffered an injustice. Their position nevertheless; would differ little for any practical purpose from the position they would be in had the first company become amalgamated with the second company by means of an exercise of the powers conferred on the Court by Section 154 of the Act, construing those powers as I think they should be construed. For these reasons I would dismiss this appeal. Lord Porter (read by Lord Thankerton). The facts in this case have been fully stated by my noble and learned friend, Lord Atkin, and it is unnecessary for me to repeat them. It is clear from that statement that the solution of the question at issue depends solely on the true construction o1 Sections 153 and 154 of the Companies Act, 1929, and primarily of the latter of those two sections. The vital words are [His Lordship read Section 154 and continued :] It will be seen from the wording quoted that the matter to be determined is what is included under the word "property" in sub-section (1) ( a ) as defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of "property" spoken of in sub-section (1) ( a ) which is said by subsection (4) to include property, rights and powers of every description must include every contract of the original companies, and that words so wide must held to be substitute the amalgamated company for the original constituent companies so that the amalgamated company must be held to be, as it were, the same entity as each of the old companies and to succeed to all their contracts without requiring the consent of other interested parties to the change. I will consider the meaning of the word "property" itself later on; for the moment I desire to consider the words with which it is associated. In the first place I do not think its meaning is elucidated by the fact that it is found in collocation with the word "undertaking". "Undertaking" is, I think, inserted in order to make it plain that the business will be transferred as a going concern. Nor in my view does the definition in sub-section (4) settle the question in favour of the respondents. "Property, rights and powers of every description" is not to me a familiar phrase. I should have thought that the additional words added after "property" are merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company are to be treated in the same way as liabilities which have not so resulted, and provides that they are to be transferred to the amalgamated company. In the former case the Court which is asked to sanction the arrangement can assure itself that the assets of the amalgamated company are sufficient to answer liabilities already incurred ; to discover whether that company can meet its future liabilities is a different and more difficult matter. In the latter it merely makes a similar provision where the liability has already given rise to the issue of a writ. Section 154(1)( c ) also enacts that legal proceedings by the original company may be transferred to the amalgamated company. Such claims seem to me to have nothing in common with contractual obligations where no cause of action has arisen. There is no question of transferring a contract against the will of the defendant. All that is provided for is that an accrued right should be enforceable after substituting one plaintiff for another in an action which in the case of a winding-up a liquidator would have been entitled to continue under the Act of 1908 and, where no amalgamation had taken place, would have been entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of difficulties which would arise if the construction put forward by the respondents were to be adopted. One example may suffice. A company may have contracted to take all its requirements from a third party or appointed a general manager or managing director for all its undertakings ; how could the quantum of those requirements be ascertained or the area of the undertaking which bad to be supervised be known after the amalgamation was effected ? No doubt the amalgamated company would be liable in damages if they failed to take the necessary material or employ the manager, but that is merely to adopt the construction suggested by the appellant and not to solve the difficulty posed by the respondents' construction of the Acts. Apart from these considerations I do not myself feel that in this particular case any great hardship would be imposed upon the appellant if the respondents' construction were accepted. Workmen are entitled to and must receive the same consideration as any other employees of the company, but their contracts are for a short term and no serious disadvantage is likely to be caused by their being transferred without their consent to a new company for a period of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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