9911796707
TMI Blog1936 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... properly made on the petition to be next mentioned. As will be seen the date of the commencement of the winding up (if any) is of primary importance in this case. The proceedings were begun by a petition presented on 8th July 1931, by the appellants, D. Davis and Company, Limited, as holders of 30,000 1 preference shares and 10,000 ordinary shares in the Company. The petition was opposed by two American trading companies, Brunswick Bailee Collender Company (called below "the Brunswick Company"), and Brunswick Radio Corporation (called below "the Radio Corporation"). The former company is the registered holder of 20,000 ordinary shares of the Company and the latter is a creditor of the Company, and, as will be seen, is or may be entitled in equity to the 20,000 ordinary shares just mentioned. The Chief Judge in Equity, on the evidence before him, was satisfied that the Company had no liquid assets and no capita with which to carry on, and that its prospects appeared to be hopeless. He also inferred from certain cables dated in December 1930, that the main object of the American companies was to tide over the two years period of a certain guarantee, and not the bona fide object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge and profitable business in Australia and New Zealand as distributors of Brunswick gramophones and makers and distributors of Brunswick records as licensees of the Brunswick Company under an agreement dated 1st October 1926. The shares in the appellant company were held at all material times by Herbert Davis Klippel and Jacob Davis Klippel, these two gentlemen being commonly known as Herbert Davis and Jack Davis respectively. On 9th April 1930, an agreement was entered into between the Brunswick Company and Warner Brothers Pictures Incorporated, another American company of very ample means (called below "the Warner Company,") The agreement is contained in a proposal by letter dated 9th April 1930, addressed by the Brunswick Company to the Warner Company, and an .acceptance by the Warner Company of the same date. The letter of proposal is only partially set out in the record which creates a difficulty in taking an accurate view as to its true construction and effect. It appears, however, to amount to an agreement by the Brunswick Company to transfer to the Warner the Company the musical part of its business, that is to say, the business of manufacturing and selling in a number of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the goodwill and other assets of the appellants relative to their gramophone and record business. The Company agreed to employ Herbert Davis and Jack Davis as consulting manager and consulting engineer respectively for two years at salaries of 1000 a year each. The agreement further provided that the brothers Davis were to be free to devote a portion of their time to any other business or businesses including those of a company called Clifford Industries, Limited, and of the appellants. It should be explained here that Clifford Industries was a company carrying on business in Australia and New Zealand in the manufacture and sale of cheap records. The Brunswick records were of a more expensive kind. The third agreement was made between the Brunswick Company and the Company. It was in substance a sale agreement between the two companies in relation to the assets which the Brunswick Company had agreed to sell; and further it contained a guarantee "that a dividend (duly earned as certified by the auditors of the company during the year) of 8 per. Cent. per annum should be paid to the preference shareholders" of the Company "for each of the first two years after the allot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the parties. The position, therefore, is that it appears to be uncertain who is the beneficial owner of the 20,000 ordinary shares in the Company held by the Brunswick Company, though it is beyond doubt that those shares continued to stand in the name of the Brunswick Company at the date of the petition and that that Company was entitled to appear and to resist the proposed order. The Radio Corporation was also formally entitled to be heard since it was a creditor of the Company. In fact, however, the Radio Corporation has acted since 30th June 1930, on the footing that it either had acquired the interest of the Brunswick Company in the Company or that it was about to acquire that interest. It nominated the directors of the Company, and gave instructions to them from time to time, and it took upon itself the burden of providing the Company with funds. The Company was plainly a private company possessing in effect two shareholders only, formed to take over the assets in Australia and New Zealand of the appellants on the one hand, and of the Brunswick Company on the other. The articles of association of the Company provided that each member should have one vote for each ordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan of 3500 on the security of its factory at 8 per cent. Per. annum interest. It is clear that Davis brothers, who were directors of the Company, nominated by the appellants, as well as its consulting engineer, were not displaying any great zeal in the interests of the Company. The exceptional difficulties due to general trade depression and the competition of wireless broad casts with the sale of gramophone records were further complicated by the competitions of the appellants in the rival record business of Clifford Industries, Limited, by the liquidation of various important distributors in Australia, by the high salaries payable to Herbert and Jack Davis and by attempts by the appellants to secure the immediate winding up of the Company. The attitude of Davis brothers only three months after the formation of the Company is well shown by a cable of 19th August 1930 to one C.S. Brice who was acting as representative of the Company at the time. It was in these terms: 'Confidentially Brunswick unable make cheap records and only fooling you with promises. Suggest you meet vocalion competition with new two shillings six pence Clifford record quality equal any four shilling rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain was refused. On 27th February 1931, there took place in New York an interview at which Mr. Herman Starr, Mr. Davis, Mr. Julian T. Abeles, Mr. Maurice Goodman and others were present. Mr. Davis at the interview was asking 175,000 dollars for his interests in the Company above referred to, a sum largely in excess of 35,000 at the rate of exchange then ruling between the United States and Australia. Mr. Herman Starr declined to give such a sum and made a counter offer of 17,500 which was contemptuously refused. It was alleged by Mr. Abeles, but wholly denied by Mr. Herman Starr, that the latter had stated that the Radio Corporation intended to carry on the Company until the guarantee expired. The cross-examination of Mr. Herman Starr by counsel for the petitioners on this point seems to indicate that he himself placed little reliance on it; Mr. Maurice Goodman who was present was called to support Mr. T. Abeles but failed to do so; and their Lordships note that Mr. Herbert Davis (who was admittedly present) was completely silent on the subject of the alleged statement when he made an affidavit in support of the petition in the following September. In these circumstances their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts in the Company and the month of June 1931. There was plenty of time before the guarantee of the preference shares would expire. But the appellants were not disposed to wait to see whether the position would improve. They called upon the Radio Corporation and the Brunswick Company to consent to a voluntary liquidation, and this being refused the petition for a compulsory winding up was presented on 8th July 1931. It does not - seem to their Lordships that any useful end will be served by considering in detail the evidence in support of and in opposition to the petition as it came before the Chief Judge in Equity since that position has been substantially altered by the further evidence. The question is whether considering the evidence as a whole it was just and equitable that the Company should be wound up on the petition of the appellants. Three facts have to be borne in mind. The company had lost the sum of 7000 by its trading since its incorporation and there were at this time no immediate prospects of carrying on business at a profit. Secondly, the appellants were the holders of the whole of the preference share capital and, having regard to the preference as to capital o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shares. In this connection it should be remembered that the Company was formed to exploit in Australia and New Zealand an enterprise which originated with the Brunswick Company. It is well settled that the sub-section in the (Imperial) Companies Act giving power to the Court to wind up a company on the just and equitable ground a sub-section similar in terms to the section obtaining in New South Wales is not confined to causes in which there are grounds analogous to those mentioned in the other parts of the section : Loch v. John Blackwood Ltd., where the previous cases are referred to. Nor, on the other hand, can any general rule be laid down as to the nature of the circumstances which have to be borne in mind in considering whether the case comes within the phrase. Holding an even hand between the two conflicting interests in the present case their Lordships are of opinion that the decisive question must be the question whether at tht date of the presentation of this winding-up petition there was any reasonable hope that the object of trading at a profit, with a view to which the Company was formed, could be attained. In considering that question, the guarantee of the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question and the local conditions where these affect the matter. No doubt the view of persons who have not taken the trouble to consider the problem are worth little, and the views of those who have an interest in a particular direction must be considered in the light of the bias thereby occasioned. The question in this case must depend to a considerable extent upon the testimony of Mr. Herman Starr. Their Lordships whose attention has been called to the whole of his lengthy evidence, are unable to take the view that the evidence of Mr. Starr was substantially shaken in cross-ex-amination or that he displayed any reluctance to answer any proper questions that were put to him and they observe that the Commissioner before whom such evidence was given expressed his opinion on two occasions that the witness was endeavouring to answer the questions fairly. Further, their Lordships do not consider that the constantly repeated questions as to whether the Radio Corporation had become liable on the guarantee or not were unfairly dealt with in the circumstances by Mr. Herman Starr, or that the fact that there was and is a doubt as to whether the Radio Corporation has become so liable or ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
