1948 (3) TMI 22 - HC - Companies Law

Summary

Issues:
- Validity of the resolution for the issue of preference shares
- Entitlement of the appellant to recover the money paid for preference shares
- Claim of total failure of consideration by the appellant
- Relevance of the appellant's subsequent sale of shares to the claim

Detailed Analysis:
The judgment by the High Court in the Privy Council involved several key issues. Firstly, the validity of a resolution for the issue of preference shares by a public company registered in Palestine was challenged. The resolution, passed by the shareholders, aimed to issue preference shares from the unissued share capital of the company. The judgment assumed the invalidity of this resolution for the purpose of the appeal. Secondly, the appellant, who had acquired 775 preference shares by paying a sum in Reichsmarks, sought to recover the money paid based on a claim of total failure of consideration. The appellant also sold her shares after holding them for four years, which raised questions about the impact of this sale on her claim. The appellant's action was for money had and received due to an alleged lack of consideration received for the shares.

The central issue revolved around whether there was a total failure of consideration on the part of the respondent company towards the appellant. The appellant contended that she did not receive the consideration she had bargained for, leading to her claim for a refund of the amount paid for the preference shares. However, the court dismissed this claim, emphasizing that the appellant had been duly registered as a shareholder and had sold her shares for value. The court noted that the appellant received exactly what she had bargained for when she sold her shares, regardless of the subsequent invalidity of the share issue. The court rejected the argument that a later challenge to the validity of the share issue could result in a total failure of consideration for the appellant, especially considering the value she obtained through the sale of the shares. The court distinguished the case from situations where shareholders still held their shares, emphasizing that the appellant's sale of shares impacted the assessment of consideration received.

Furthermore, the judgment highlighted the inapplicability of certain precedents cited by the appellant's counsel, particularly Rowland v. Divall [1923] 2 KB 500, which focused on scenarios where shareholders retained their shares. The court underscored that the appellant's sale of shares altered the dynamics of the case, rendering the cited precedent irrelevant to the current circumstances. Ultimately, the court concluded that the appellant failed to establish a total failure of consideration, leading to the dismissal of the appeal with costs. The judgment emphasized that the appellant had received value for her shares upon sale, precluding the claim of total failure of consideration against the respondent company.