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TMI Blog1931 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... d by election at the meeting. But this number had been by amendment of the Articles reduced to five, and it was provided, as a special case, that at the General meeting of 1930 the six Directors should vacate office and that not more than five should be elected in place of them. At the meeting the 3rd defendant, who was at the time the Chairman of Directors, took the chair, and, it being decided to fill all five vacancies, a vote was taken by show of hands, and five persons were declared elected. A poll was then demanded, and the Chairman directed that it should be held at the Company's Office on Monday, the 20th October, between the hours of 4 and 6 p.m., and appointed the Company's Manager, Mr. Church, Returning Officer for purpose of taking it. In thus allowing a week to elapse before the poll was taken, the Chairman incurred the disapproval of the 1st plaintiff, one of the share-holders, who addressed to him on the 15th, a letter protesting against his action, and pointing out that, since all the share-holders' Directors had retired on the 13th, the share-holders must during the interval remain wholly unrepresented, and the opertions of the Company come to a standstill, because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsiders that the Articles of Association provided the share-holders with an alternative remedy, and that at least until that had proved infructuous the Court should not intervene. All the plaintiffs appeal against this decision, which is supported in varying ways by the several defendants, whose points of view may be gathered from the contents of their written statements. The 1st and 2nd defendants, the two policy holders' Directors, endeavour to justify their action in co-opting the 3rd and 4th defendants, and then, with these defendants, co-opting the defendants 5 to 7. The Chairman (3rd Defendant) contends that even if this procedure was not legal, those of the new Directors who were previously in Office-all except the 4th Defendant-may be deemed to have continued by virtue of the terms of Article 68 (g). The 4th Defendant, the sole new comer to the Office has-perhaps to give scope to this alternative-since resigned. The 5th and 6th Defendants denounce the act of co-opting them as unlawful, but claim to be still in office under Article 68 (g). It has become clear to me that the crucial questions of law upon the answers to which a correct decision depends in this case are, firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 49, reproduced above, empowers the Chairman to take the poll at such place as he may direct. The person appointed to conduct the poll, unlike the Chairman of a meeting, need not be, and indeed in the present instance was not, a share-holder of the Company. His functions in no way resemble those of a chairman of a meeting, and are, as has been pointed out in Harben v. Phillips [1883] .23 Ch. Dn. 14; 48 L.T. 334; 31 W.R. 173 purely ministerial. The operation of taking a ballot, too, has little resemblance to such a meeting-each share-holder may come at any time between the hours fixed, record his vote, and go away. It is only the result of the poll which forms part of the meeting at which the poll was demanded by being deemed to be a resolution passed on it. 'The taking of a poll,' said Brett, L. J., in The Queen v. Wimbledon Local Board [1882] 8 Q.B.D. 459; 51 L-J-Q-B. 219; 46 L. T. 47; 30 W.R. 400 'is a mere enlargement of the meeting at which it was demanded.' In the same case Cotton, L.J., observes: "A poll is not a new meeting, but it is a mode of ascertaining the sense of the meeting which is continued for that purpose. The meeting of rate-payers did not come to an end, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate? Having brought matters to this impasse by the break-down of the arrangements which it was his duty to render effectual, the Chairman would now ask the Court to dismiss the claim of these persons on the ground that, as matters fell out, their only course was to assume his functions and proceed with the election, failing which they must suffer disenfranchisement until the time should arrive for another annual general meeting. The alternative view, more commendable alike to the terms of the Articles and the common sense, is that the Chairman having been enjoined by the shareholders to hold a poll and having under Article 49 ample power to carry out their wishes, should have persisted in his attempts to do so until they were successful. I have heard no argument which, upon the true theory underlying these proceedings, encourages me to hold that when the first attempt broke down he was functus officio. Let us now see by what machinery it is proposed to carry on the business of the Company in the meanwhile. It is sought to justify the action of the two policy holders' Directors in the first place, and of themselves and their two co-opted directors in the second, in filling up the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the object in view of rendering its application possible that the arguments to which I have already referred were with some strenuousness advanced. So long as the meeting exists, it appears that under the Articles, as they now stand, the Directors' posts remain vacant. It was to save any inconvenience arising from this that a provision existed in the Articles before amendment that the outgoing Directors should continue until their successors were elected (See old Article 64), but whether by inadvertance or intention this has not been reproduced. If, as. I hold, the General Meeting has never been closed, this provision for automatic re-election admittedly can have no application, and the five Directors' places may still be filled up by election. The remainder of the arguments addressed to us represent an attempt to prevent the Court from interfering. It would seem that in a case where the share-holders have, through no fault of their own, been deprived of their fundamental privilege of choosing their own management, and where that management has passed into the hands of persons with no legal title to enjoy it, if ever there were a case for the Court's interposition it must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 W. R. 377 and Henderson v. Bank of Australasia [1890] 45 Ch. Dn. 330; 59 L. J. Ch. 794 ; 2 Meg. 301. The class which concerns us here, however, relates to acts in derogation of the rights of all the share-holders, and is represented by a number of instances of suits brought by individual share-holders. In Moseley v. Koffyfontein Mines, Ltd., [1911] 1 Ch. 73 the plaintiff sued the company and Directors on behalf of himself and the other share-holders to restrain the unauthorised issue of capital. It was a matter affecting the share-holders as a body, but the plaintiff was allowed to sue because, as Fletcher Moulton, L.J., put it, 'it must be the right of a shareholder by reason of his being a share-holder to bring an action to stop such a proceeding.' It is to be observed that in such a case the Company itself, by resolution of its members, could also have sued to restrain the Directors from such an act. Another case involving a breach of duty by the Directors towards the whole body of share-holders is Alexander v. Automatic Telephone Company [1900] 2 Ch. 56; 69 L.J. Ch. 428; 82 L.T. 400; 48 W.R. 546; 16 T.L.R. 339. Lindley, M.R., decided that it was not a matter of mere internal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nflicted upon it, as a. cestui que trust, by its trustees, and it was for the Corporation to deal with it. The purchase was not void, but only voidable, and if the Corporation should choose to ratify it no individual shareholder could resist such action. 'The very fact that the governing body of proprietors assembled at the special general meeting may so bind even a reluctant minority is decisive to shew that the frame of this suit cannot be maintained whilst that body retains it functions.' It might be that the mortgages were void, as ultra vires, but that would not in the circumstances dispose of the question, because, since the money received was expended in the manner stated, if the Corporation approved the Directors' action in making the purchases it could not complain of the manner in which they raised the money. The principles on which this case was decided were thus that there was no infringement of the individual rights of a share-holder, only a possible injury to the Company as a corporate body; and secondly, since it would lie with the Company to ratify it must also lie with it to challenge, whether by suit or otherwise. The same principles were applied by Lord Cottenham ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon a fallacy. It is no doubt, true that if the Directors of a Company act ultra vires, and if what they have done would be within the power of the Company, acting with its Memorandum and Articles of Association, to do, the Company can ratify the action taken. It cannot so ratify it by a simple majority if by a general resolution it could not sanction such a course. The effect of the cases cited to us has been thus summed up by Lindley (6th Edn., Vol. 1, page 769): "........if Directors or share-holders have done or are about to do that which is a fraud upon the minority, or is wrong, even if sanctioned by a majority, then an action by some of the members on behalf of themselves and others, or by a member suing alone, may be sustained, for otherwise the dissentients would be without redress." It is surely enough to point out that even a majority cannot act in breach of rules which they have agreed shall regulate their actions. "The articles", observed Swinfen Eady, J., in Boschoeck Proprietary Company, Limited v. Fuke [1906] 1 Ch. 148; 75 L.J. Ch. 261; 94 L.T. 398; 54 W.R. 359; 13 Manson 100; 22 T.L.R. 196, "until altered, bound the share-holders in general meeting as much as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at as retiring Directors they continue in office till their successors are actually elected, or that by virtue of provision of Article 68 (g) , they are to be deemed to have been re-elected. These two defendants together with Defendants 3, 7 and 8 are five of the six shareholders' Directors who under the Articles of Association were due to retire at the Ordinary General Meeting on the 13th October. Defendants 3 and 7 also rely on Article 68 (g) . Defendant 8 has not put in a written statement. The learned Counsel for Defendants 5 and 6 has not pressed the first part of his clients' contention, and I think it is untenable. "A Director," said Sargant, J., in In re Consolidated Nickel Mines Ltd. [1914] 1 Ch. 883; 83 L.J. Ch. 760; in L.T. 243; 28 Manson 273; 58 S.J. 556; 30 T.L.R. 447 "does not ordinarily step into an office which is pepetual unless terminated by some act, but into an office the holding of which is limited by the terms of the Articles." By Article 63 the six share-holders' Directors vacated office at the Annual General Meeting on the 13th October. Having vacated their office, at that meeting, there could be no question of their still continuing in the office when a pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, the assembled share-holders had the remedy in their own hands; that under Article 44 they might have chosen one of their number of he Chairman in the absence of the 3rd defendant and have proceeded with the business of the poll, using such pieces of paper for the purpose of voting papers as might have been available; or that under Article 46 they might have resolved to adjourn the meeting to some other date for the taking of the poll. Articles 44 and 46 in terms apply to ordinary general meetings. In my opinion, an assembly of share-holders for the purpose of recording their votes at a poll has no power to fix some other date than that already fixed for the holding of the poll. The position, when a poll has been demanded and directed to be taken at a future date, is that the meeting subsists in contemplation of law until the poll has been taken; or, as Lord Justice Brett expressed it, "the taking of the poll is a mere enlargement of the meeting at which it was demanded.": The Queen v. Wimbledon Local Board [1882] 8 Q. B. D. 459; 51 L.J.Q.B. 219; 46 L.T. 47; 30 W. R. 400. See also Shaw v. Tati Concessions Ltd. [1913] 1 Ch. 292; 82 L.J. Ch. 159; 108 L.T. 487; 20 Manson 104; 57 S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the 3rd defendant as Chairman, and indeed obligatory upon him, when he learned that the poll could not be held on the 20th, to appoint another date for it. Finally, it has been objected that the matter being one of internal management of the Company's affairs the Court has no jurisdiction to interfere, and that the plaintiff's suit is unsustainable. It was upon this objection that the learned trial Judge dismissed the suit. A number of authorities have been cited to us. I do not think it necessary to refer to them in detail, because the law upon the subject has been compendiously stated by Lawrence, L.J., in Cotter v. National Union of Seamen [1929] 2 Ch. 58; 88 L.J. Ch. 323; 141 L.T. 178; 73 S.J. 206; 45 T.L.R. 352, as follows:- "If an act is intra vires the corporation, and therefore one which could be sanctioned by the majority of the corporators properly assembled in general meeting, the Court will not entertain any proceedings to restrain the doing of the act resolved upon, unless such proceedings are brought by the majority of the corporators and in the name of the corporation itself." It has been contended that, assuming Defendants, 3, 5, 6, 7 and 8 have usurped the off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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