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TMI Blog1961 (12) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... and how the omission to give notice to the plaintiffs was accidental. As Mr. Dehn for the plaintiffs succinctly put it, it would have been accidental if a notice had been given to the plaintiffs. It was argued that an omission founded on a misapprehension of law, or indeed of fact, was accidental. Reference was made to the cases of Barker v. Purvis [1857] 56 LT 131 CA and In re Inckcape [1942] 1 Ch. 394; 58 TLR 372; [1942] 2 All. ER 157. Those cases concerned R.S. C, Ord. 28, r. 11, which in relation to judgments or orders permits the correction of "errors arising therein from any accidental slip or omission." I do not see how these cases can support the argument that an omission is accidental because it arises from an error. For the plaintiffs it was alternatively argued that the general meeting was a nullity because of the failure to comply with the requirements of section 158 (1) of the Companies Act, 1948. At the risk of seeming discourteous, I would content myself with saying that there is nothing in that point. Prima facie, therefore, the plaintiffs are entitled to their declaration that the annual general meeting was a nullity. On that basis they ask for an order that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtly stated, were these : that the result of the contract of May 21, 1958, it being specifically enforceable, was to confer upon the purchaser the beneficial ownership in the shares, leaving the vendors (they remaining on the register) the legal owners of the shares, with but a vendor's lien for the unpaid purchase money and otherwise trustees for the purchaser: that as such trustees they must, in the exercise of any right associated with the shares, comply with the wishes of the beneficial owner of those shares, and therefore of that right, short of a wish which would fraudulently deprive them of or undermine the security of their vendor's lien : that one right associated with the shares was the right to complain or not to complain of the omission to give notice of the annual general meeting; and that the plaintiffs in bringing the action were obviously acting directly contrary to the known wishes of the purchaser in this regard without there being any allegation or suggestion that a direction not to complain would affect in any way the value of their vendor's lien, let alone fraudulently. The matter was put also in this way : that the plaintiffs in exercising their voting powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvene in special circumstances; and moreover, in principle, the position was the converse. Further, it was argued that even if the authorities favoured the mortgagee in that regard, that did not point to a similar answer in the case of the unpaid vendor. The question really, for the purpose of this case, is whether, as between the plaintiffs and the individual defendants, the plaintiffs have the prima facie right to decide how to exercise the voting rights in respect of the shares, or whether the defendants have the prima facie right to direct in all cases how those votes are to be cast If the former, then there is no justification for not holding a proper meeting: if the latter, there is no point in holding a proper meeting and no justification for this action, for there is no suggestion by the plaintiffs that anything done at the purported annual general meeting went beyond the scope of the legitimate exercise of the defendants' prima facie right to direct how the votes should be cast, and there is no suggestion by the defendants that if a proper general meeting is held, the plaintiffs will do anything which exceeds the legitimate exercise of their prima facie right to decide ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y mortgaged premises, and in particular any voting right, has this operation, that it shows that there was an express agreement between the parties as to the extent to which, if at all, the company was to exercise or have the benefit of any voting rights in respect of the shares. In the ordinary way, where shares are transferred to and registered in the name of a mortgagee it follows, from his position as owner at law of the shares, that the ownership carries with it the voting right, that this is vested in the owner of the shares; and it would require a contract to exclude that right. Sometimes, where shares form a security, there is a contemporaneous collateral agreement as to the mode in which, and the extent to which, voting rights in respect of the shares shall be exercised. But in the absence of any such agreement the voting rights would be with the legal owners of the shares, and it would require a contract to control the exercise of those rights. The present case does not even stop there, because the contract itself shows that the mortgagor company was only to have voting rights so far as the trustees for the debenture-holders permitted them to have them. The words of claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further ground for good measure based upon the inference to be drawn from the reference to voting rights, an inference in entire accord with the general position. The argument of Mr. Gore-Browne, for the mortgagor [1918] 2 Ch. 324, 331, did not even venture to propose that the general position was in fact the opposite, which would obviously have been the starting point of his argument and not the reservation to the mortgagor of the power to carry on its business until default. An indication to the same effect is to be found in Puddephatt v. Leith [1916] 1 Ch. 200; 32 TLR 228. The question on which the case is reported is whether a mandatory injunction would be granted to enforce an express agreement by the mortgagee (he being on the register) to vote as required from time to time as the mortgagor requested him. But a preliminary point was decided by Sargant J. that the letter containing this agreement constituted a collateral agreement binding on the mortgagee. If the general position as between mortgagee and mortgagor had been the opposite of that stated by the Court of Appeal in the Siemens' case (supra), it would have been unnecessary for the mortgagor to place any reliance on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly to this observation, that the vendor, whom I have called the trustee, was not a mere dormant trustee, he was a trustee having a personal and substantial interest in the property, a right to protect that interest, and an active right to assert that interest if anything should be done in derogation of it. The relation, therefore, of trustee and cestui que trust subsisted, but subsisted subject to the paramount right of the vendor and trustee to protect his own interest as vendor of the property." I was also referred to a passage from the speech of Lord O'Hagan which reads as follows "Although a good deal of time was occupied in a learned disquisition on the effect of a contract for safe, as creating an equitable Estate in the purchaser, I do not apprehend that there is any doubt, or that the noble and learned lord whose judgment we are considering could have meant to suggest any doubt, upon that subject. The law is clear. It is, as Lord St. Leonards has said, 'one of the landmarks of the court': Baldwin v. Belcher [1844] 1 Jo. & Lat. 18; and it ought not to be called into question. By the contract of sale the vendor in the view of a court of equity disposes of his right over the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight to foreclose, that is to say, he has aright to say to the mortgagor, 'Either pay me within a limited time, or you lose your estate,' and in default of payment he becomes absolute owner of it. So, although there has been a valid contract of sale, the vendor has a similar right in a court of equity; he has a right to say to the purchaser, 'Either pay me the purchase-money, or lose the estate'. The reference by Jessel M.R. to an analogy between a mortgagee and an unpaid vendor is of some interest. In relation to a specifically enforceable contract for the sale of shares, similar considerations apply. Parway Estates Limited v. The Commissioners of Inland Revenue [1958] 37 ATC 164 CA is an example of how shares, the subject-matter of such a contract, become in equity the property of the purchaser on the execution of the contract. Reference may also be made to Oughtred v. Commissioners of Inland Revenue [1960] AC 206; [1959] 3 WLR 898; [1959] 3 All. ER. 623 HL. Such cases, it was submitted for the defendants, show that the only right or interest of a vendor after contract is his vendor's lien, with the exception in the case of land of a right in the vendor to possession and to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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