TMI Blog1962 (5) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... raithwaite, a former chairman of the Stock Exchange; and certain other persons. These and one or two other deponents were cross-examined upon their affidavits. The evidence on behalf of the company consisted principally of affidavits by the chairman of the company, John Frederick Eccles, who was cross-examined upon his affidavits, and certain other affidavits, the makers of which were not cross-examined. I will now proceed to read certain provisions from the Companies Act, 1948, which are relevant to the present issue. Section 2(1): "The memorandum of every company must state ,..( c ) the objects of the company". Section 4: "A company may not alter the conditions contained in its memorandum except in the cases, in the mode and to the extent for which express provision is made in this Act". Section 5(1): "A company may, by special resolution, alter the provisions of its memorandum with respect to the objects of the company, so far as may be required to enable it ( a ) to carry on its business more economically or more efficiently; or ( b ) to attain its main purpose by new or improved means; or ( c ) to enlarge or change the local area of its operations; or ( d ) to carry on some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the same notice to the holders of any such debentures as to members of the company. In default of any provisions regulating the giving of notice to any such debenture holders, the provisions of the company's articles regulating the giving of notice to members shall apply." Section 15(1): "A certificate of incorporation given by the registrar in respect of any association shall be conclusive evidence that all the requirements of this Act in respect of registration and of matters precedent and incidental thereto have been complied with, and that the association is a company authorised to be registered and duly registered under this Act." Section 20(1): "Subject to the provisions of this Act, the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed and sealed by each member, and contained covenants on the part of each member to observe all the provisions of the memorandum and of the articles". Section 23(1): "Subject to the provisions of the last foregoing section and of section two hundred and ten of this Act, any condition contained in a company's memorandum which could lawfully have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in their own right to present this petition, they can only be heard in support of the National Trust's contentions, and that they cannot put forward grounds of complaint which are not made by the National Trust. A general objection was made to the petition on the ground that the proper form of procedure was by way of writ and not by way of petition. I do not think that there is any substance in this objection. Four main issues arose upon the validity of the resolutions: (1) Is the resolution altering clause 3 (T) of the memorandum authorised by section 5 of the Act ? (2) If so, ought notice to have been given to the holders of the debenture stock ? (3) Is the resolution altering clause 3 (T) authorised by section 23 of the Act ? (4) Was the circular defective ? These issues possess a certain artificiality in that the real objection of the petitioners is to the sale or the manner in which the sale is being carried through, and not to the destination of the proceeds of sale, if sale there must be. But it is clear that the National trust at any rate is entitled to object to the scheme as a whole in its one vulnerable spot, namely, the resolution for alteration of objects, and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the meeting should have been given to the holders of the company's debenture stock. In fact, notice was given to the trustees of the trust deed, but not to the holders of the debenture stock. Section 5(5) refers simply to "debentures". Under the definition section, unless the context otherwise requires, the expression "debenture" includes debenture stock, and it is contended by Mr. Mackinnon that here there is not any context which otherwise requires, and that the word "debenture" includes the words "debenture stock". Mr. Warren, on the other hand, contends that in this context, "debenture" holders means the trustees of the trust deed, and does not include the holders of the stock. No explanation is afforded by sub-section (5) itself as to whether the expression "debenture" holders here means the trustees or means the holders of the stock. It seems to me, however, that all doubt upon this point is removed by an examination of the earlier statutory provisions which have resulted in section 5(5) of the present Act. The first of such provisions is to be found in the Companies (Memorandum of Association) Act, 1890. Section 1(1) of that Act confers upon a company power to alter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d again the same definition of debenture as including debenture stock. So that Act takes the matter no further. Then comes the provision in section 5 of the Act of 1948, the obvious intention of which is to continue a measure of protection to one category of those creditors who, under the previous legislation, had the right to receive notice and object, namely, those holders of debentures whose security was protected by a floating charge. Under the Act of 1929 the persons entitled to receive notice and object in the case of debenture stock secured by a trust deed were the holders of the stock, and it appears quite clear that the holders of the stock are equally entitled to receive notice under section 5 of the Act of 1948. The point was made that under clause 20 of the trust deed the trustees were appointed as agents for the holders of the debenture stock to receive notices. [His Lordship read clause 20(2) and continued:] It seems to me impossible to read clause 20(2) as constituting the trustees general agents of the stock holders to receive all notices, including statutory notices, which now under the Companies Act, 1948, have to be given to the stock holders. I conclude, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to register as an article 4 provision opening with the words: "The objects of the company include the following things," even though the expressed functions need not have been made objects. In order to meet this difficulty, Mr. Warren, and more particularly Mr. Finlay, contend that the word "objects" only properly connotes those functions of the company which it can exercise whilst a going concern, and that the application of its assets in a winding-up cannot properly be inserted in the memorandum of a company as an object. Even if it is open to a company to challenge its own memorandum in this way, I do not think the contention is well founded. A provision as to the destination of surplus assets in a winding up is not normally included in a company's memorandum as an object, but I do not see any reason in principle why it should not be so included, and in the present case, where the company is a company limited by shares, and the surplus in a winding up is to go to an outside body, the inclusion of this unusual and important provision as an object seems to me not inappropriate. The only authority cited upon this point has been Cotman v. Brougham [1918] AC 514; 34 TLR 41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng heard the deponents cross-examined, that I ought to express my conclusion upon it. As I have already said, it does not seem to me that the holders of the ordinary shares can take this point themselves. Can then the National Trust take the point, although not itself affected by the circular? I do not think that there is an absolute bar to the holders of shares of one class taking a point on a defective circular, even though they were not themselves affected by that circular, but I think that, apart perhaps from very exceptional circumstances for example, if the circular appeared to be fraudulent the court would not refuse to confirm a resolution on the application of the holders of one class of shares, merely by reason that insufficient information was given in a circular to the holders of another class of shares, none of whom have effectively themselves complained of the circular. I will nonetheless deal with the three principal objections made to the circular, but I will do so more shortly than I would if this were a live issue upon the petition. [His Lordship considered the objections and continued: ] If therefore I had held that the resolutions for the alteration of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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