1927 (7) TMI 6 - Other - Companies Law

Issues Involved:

1. Validity of the transfer of shares from Millar to McBride.
2. Compliance with By-law No. 37.
3. Consideration for the agreement signed by Millar.
4. Impact of the Ontario Act of 1912 on the transfer.
5. Right of pre-emption and restrictions on share transfer.

Issue-wise Detailed Analysis:

1. Validity of the transfer of shares from Millar to McBride:

On 23rd June 1922, Chas. Millar executed a transfer of one share in the Ontario Jockey Club, Ltd. to McBride. The company refused to register the transfer, citing non-compliance with By-law No. 37. McBride initiated legal action on 24th November 1923 to enforce registration, resulting in a Supreme Court order on 15th December 1926 mandating the company to register McBride's name. The company appealed this decision. The judgment underscored that the transferrer Millar was not a party to the action, and thus, the order to register McBride's name implicitly required removing Millar's name. The court found difficulty in affirming such an order without Millar's involvement but proceeded to address the merits of the case.

2. Compliance with By-law No. 37:

By-law No. 37, ratified on 30th November 1910, imposed restrictions on transferring shares to non-shareholders unless the club was given an opportunity to find a purchaser. The by-law required shareholders desiring to sell to notify the club, which would act as their agent to find a purchaser within 30 days. If the club found a purchaser, the shareholder was bound to transfer the share. The by-law also stipulated the price determination method and conditions under which the club could receive purchase money and register the purchaser's name.

3. Consideration for the agreement signed by Millar:

Millar signed an agreement on 18th December 1910, acknowledging receipt of shares and agreeing to By-law No. 37's conditions. The court rejected the argument that there was no consideration for this agreement, stating that the issuance of shares was valuable consideration. The shareholders, including Millar, were bound by the restriction upon signing the agreement. The restrictive footnote on the share certificate reinforced this binding agreement.

4. Impact of the Ontario Act of 1912 on the transfer:

The Ontario Act of 1912 replaced the 1907 Act, stipulating that shares were personal estate and transferable subject to conditions prescribed by the Act, Letters Patent, or by-laws. Section 54(2) of the 1912 Act prohibited by-laws restricting the transfer of paid-up shares but allowed regulation of the transfer mode. The court found it unnecessary to determine whether the 1912 Act was retrospective or whether the by-law would have been binding without the agreement, focusing instead on the binding nature of the agreement signed by Millar.

5. Right of pre-emption and restrictions on share transfer:

The court affirmed that restrictions on share transfer, such as the right of pre-emption in By-law No. 37, were valid. The restriction did not preclude transfer altogether but ensured the club had the first opportunity to find a purchaser. This restriction was deemed reasonable and beneficial for the company, preventing shares from being transferred to rivals. The court concluded that the company was entitled to refuse registration of the transfer to McBride, as it was subject to the right of pre-emption agreed upon by Millar and other shareholders.

Conclusion:

The appeal was allowed, and the action dismissed with costs, as the transfer was subject to the right of pre-emption in By-law No. 37, binding upon Millar and all shareholders by virtue of their agreement.

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