1932 (9) TMI 12 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the forfeiture of shares.
2. Validity of the calls made by the company.
3. Requirement of specifying the time, place, and person for payment in the resolution.
4. Presumption of proper authorization by the directors.
5. Waiver of irregularities by the parties.

Detailed Analysis:

1. Validity of the Forfeiture of Shares:
The company purported to forfeit the appellant's shares and acted upon this view for two years. They later sought to set aside the forfeiture, claiming their own default in carrying out the forfeiture. The court noted that if the forfeiture took effect, the company could not reinstate the appellant as a shareholder without his consent, referencing Larkworthy's case. The court had to determine whether the forfeiture was valid, which depended on the validity of the calls made.

2. Validity of the Calls Made by the Company:
The court examined the Articles of Association, particularly Articles 18, 19, 20, and 21, to determine if the calls were validly made. Article 18 authorizes directors to make calls and requires members to pay the amount of the call to the persons and at the times and places appointed by the directors. The court concluded that a resolution making a call of a particular amount payable at a particular time constitutes a valid call, even if the resolution does not specify the person or place for payment. This interpretation was supported by several cases, including The Newry and Enniskillen Rly. Co. v. Edmunds and Johnson v. Lyttle's Iron Agency.

3. Requirement of Specifying the Time, Place, and Person for Payment in the Resolution:
The court found that it was not necessary for the resolution making the call to specify the time for payment, person to whom, or place where the call is to be paid. This was based on the interpretation of Article 18 and supported by the authority of Sir George Jessel, M.R., in Johnson v. Lyttle's Iron Agency, and the judgment in The Newry and Enniskillen Rly. Co. v. Edmunds. The court distinguished the case from In re Cawley & Co., where the article in question was differently worded and required all conditions necessary to make a call enforceable to be specified in the resolution.

4. Presumption of Proper Authorization by the Directors:
The court addressed whether the directors had appointed the persons and the place for payment. The notices of calls given to the appellant were signed by the agents "by the order of the Board," implying that the agents acted on the Board's instructions. The court presumed that the agents did their duty and took instructions from the Board, as the directors knew to whom and where the calls were to be paid. This presumption was supported by the principle stated by Jessel, M.R., in Johnson v. Lyttle's Iron Agency, that in the absence of evidence, it should be assumed that acts done by agents were authorized by the directors.

5. Waiver of Irregularities by the Parties:
The court held that even if a formal resolution specifying the person and place for payment was necessary, it was a matter that could be waived by the parties. The appellant had waived any right to object to his liability for the calls and to challenge the forfeiture, and the company had waived any irregularity by enforcing the forfeiture for two years. The court emphasized that setting aside the forfeiture on the ground of no formal resolution would be taking too narrow a view.

Conclusion:
The court concluded that the shares of the appellant were validly forfeited, and his name should not be entered on the register of shareholders. The appeal was allowed with costs against the company. The judgment was concurred by both judges, who emphasized the importance of the construction of the Articles of Association and the presumptions of proper authorization by the directors.