Scottish Court of Session Decisions

This note was presented in January 1886 by George Auldjo Jamieson and Francis More, liquidators of the California Redwood Company, for an order to stay proceedings. The date of the resolution to wind up the company was 28th April 1885, and a supervision order had been pronounced by the Court on 22d May 1885.

The respondents in the application were James Davidson Walker and Henry Dalbiac Harrison, copartners under the name and style of Falkner, Bell, & Company, trading as merchants in San Francisco, California, and also trading in London under the firm of Bell, Harrison, & Company, who had raised in the Superior Court of San Francisco in California an action against the company for two sums as commission for the services of the firm in connection with the business of the company, the amount of which was alleged to be upwards of £5000. Following upon this action they had levied attachments of the shares of the California Redwood Company of California, the whole of the shares of which were stated to belong to the company in liquidation.

The prayer of the note was that the Court should “pronounce an order restraining the said James Davidson Walker and Henry Dalbiac Harrison, copartners as aforesaid, from taking any further proceedings in the foresaid action raised in the Superior Court of San Francisco aforesaid in or about the month of November 1885 by them against the said California Redwood Company (Limited); and also to restrain them from taking or continuing any further proceedings in or connected with the foresaid attachment of the shares held by the said company in the California Redwood Company (of California), or any other proceedings for attaching or affecting the property, heritable or moveable, real or personal, of the company, whether in security or in satisfaction or execution of any judgment or decree in the said action, as also to ordain the said James Davidson Walker and Henry Dalbiac Harrison, copartners foresaid, to abandon and withdraw the foresaid action and the said attachment of the said shares.”

It was stated in the note that the company and the liquidators had good defences to the action, and that the company was not due to the plaintiffs the sum claimed; and further, that the company had a claim against them for about £20,000 as promotion-money or illegal commission which they alleged had been obtained from the vendors by the firm.

It was further stated—“The said James Davidson Walker is resident in London. The said Henry Dalbiac Harrison was resident in London, but is now in San Francisco. They are the only partners of the said concern, which trades in London in the name of Bell, Harrison, & Company, and in San Francisco under the name of Falkner, Bell, & Company. They are possessed of assets and property in London and elsewhere in the United Kingdom which are liable for the obligations of both firms. The said James Davidson Walker is a shareholder of the company, being a holder of (1) 120 shares in his own name; (2) 690 shares in the joint name of himself and William John Menzies, W. S., Edinburgh, besides certain other shares in his wife's name.” Mr Walker was charged to make payment of the calls due on these shares, and on January 1, 1886, raised a suspension of the charge, to which the liquidators lodged answers. This action was in dependence at the date of the application.

Henry Dalbiac Harrison and George Clarke Bellairs of 11 Clements Lane, Lombard Street, London, trustees under the marriage-contract of Mr and Mrs Carr Young, had lodged, as creditors, a claim in the liquidation in respect of debentures of the company. Under an agreement concluded in the course of the liquidation, dated 24th November 1885, and sanctioned by the Court, they were entitled to (1) the sum of 12s. per £ payable in cash; and (2) debentures of a new company to be formed for the balance of 8s. per £.

On 29th December 1885 Mr Harrison and Mr Bellairs received payment of the arrears of interest

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due on the debentures. On 19th February 1886 the liquidators paid 12s. per £ by cheque in favour of “Wm.Carr Young, Esq., for H. D. Harrison and Mr Bellairs, or order,” transmitted to Mr Carr Young, and delivered the debentures of the new company to and in favour of “George Clarke Bellairs, Lieutenant-Colonel, the Newarke, Leicester, and Henry Dalbiac Harrison, merchant, 11 Clements Lane, London, E.C.” in exchange for the old debentures, and a receipt and discharge signed by Mr Bellairs, and by Mr Carr Young acting for Mr Harrison under general power of attorney, accompanied with a guarantee by Mr Bellairs and Mr Young guaranteeing the company and liquidators against all loss, damage, and expense in consequence of their accepting the said receipt and discharge.

Under the above-mentioned agreement, according to the statement of the liquidators, Falkner, Bell, & Company were entitled to full payment of any debt they might establish against the company in respect of the claims sued for in the action in California.

The liquidators founded upon section 87 of the Companies Act 1862, which provides—“When an order has been made for winding-up a company under this Act, no suit, action, or other proceeding shall be proceeded with or commenced against the company except with the leave of the Court, and subject to such terms as the Court may impose.” They also founded upon section 122 of the same Act, which provides—“Any order made by the Court in England for or in the course of the winding-up of a company under this Act, shall be enforced in Scotland and Ireland in the Courts that would respectively have had jurisdiction in respect of such company if the registered office of the company had been situate in Scotland or Ireland, and in the same manner in all respects as if such order had been made by the Courts that are hereby required to enforce the same; and in like manner orders, interlocutors, and decrees made by the Court in Scotland for or in the course of the winding-up of a company shall be enforced in England and Ireland, and orders made by the Court in Ireland for or in course of winding-up a company shall be enforced in England and Scotland by the Courts which would respectively have had jurisdiction in the matter of such company if the registered office of the company were situate in the division of the United Kingdom where the order is required to be enforced, and in the same manner in all respects as if such order had been made by the Court required to enforce the same in the case of a company within its own jurisdiction.” They stated that on obtaining the order prayed for they would be able to get it enforced by the Chancery Division of the High Court of Justice in England, which had jurisdiction over Walker & Harrison.

The respondents lodged answers, which contained the following statements:—“The company is subject to the jurisdiction of said Court in San Francisco, and has entered appearance there, and lodged a defence to said action. Explained that the matters and facts to be inquired into in said actions took place in or near San Francisco, and almost all the witnesses who can speak thereto are resident there. It would cause great additional expense to have any inquiry in this country. The questions of law at issue in said actions, moreover, fall to be determined by the law of San Francisco, which is in several important respects different from the law of Scotland. .. Falkner, Bell, & Company's only place of business is in San Francisco. The firm is established under the special provisions of the law of California, and by the said law is a separate persona, distinct from that of the individual partners thereof, and neither the firm nor any of the partners thereof is subject to the jurisdiction of any of the Courts of this country or of England.

It was admitted that Mr Walker was holder of 120 shares of the company. With reference to the claim made by Harrison and Bellairs, it was stated that this claim was made on behalf of the marriage-contract trustee of Mr and Mr Carr Young, and that Harrison had no personal or beneficial interest in the debentures. It was explained that Harrison was in San Francisco when the claim was made, and that he knew nothing about it, and that his name was used by Mr Carr Young acting under a power of attorney without communicating with him.

It was further stated—The Court of Session has no power or authority over the pursuers or plaintiffs in said action in San Francisco, and the Court in San Francisco would not recognise or give effect to any order or warrant by the Courts in this country ordering the proceedings in San Francisco to be stayed. The prayer of the note should be refused, in respect, inter alia, (1) It is incompetent; (2) The Court of Session has no jurisdiction over the plaintiffs in said proceedings in San Francisco, and said plaintiffs are not subject to the jurisdiction of any of the Courts of England; (3) The Court of Session is not a forum conveniens in regard to the questions at issue in the actions pending in San Francisco.

Argued for the liquidators—The Court should restrain proceedings taken outside the liquidation— Carron Company, 5 Clark (H.L.) 416, per Lord Cranworth; Oriental Inland Steam Co., ex parte Scinde Railway Co., L.R., 9 Ch. Ap. 557. Section 87 applied to diligence as well as to actions— New Glenduffhill Coal Company v. Muir & Co., Dec. 16, 1882, 10 R. 372. The Court had the same power to restrain an individual over whom they had jurisdiction from taking proceedings in a foreign Court as from taking proceedings in a Court in the United Kingdom— Lindsay v. Paterson, July 10, 1840, 2 D. 1373; Young v. Barclay, May 27, 1846, 8 D. 774—approved by Lord Sel-borne in Orr Ewing's Trustees, 13 R. (H.L.) 1; Burge's Com. iii. 1075; Maclachlan v. Meiklam, July 9, 1857, 19 D. 960. The probability was that the Court in California would respect an order of the Court of Session— Busby, 5 Maddox 297; Carron Company, supra cit., p. 440. The Court could proceed by way of interdict and penalty for breach of interdict— International Pulp Co., 3 Ch. D. 594; Hamilton v. Caledonian Railway Company, Nov. 12, 1847, 10 D. 41, altered 7 Bell's App. 272. The Court had jurisdiction over Walker in virtue of section 122, and also because he was before the Court in other proceedings, and therefore liable ex reconventione—Ord v. Barton, Jan. 22, 1847, 9 D. 541; Thompson v. Whitehead, Jan. 25, 1862, 24 D. 331, at p. 340; Barr v. Smith and Chamberlain, Nov. 18, 1879, 7 R. 247. This latter ground of jurisdiction applied also to Harrison, who had made a claim in the liquidation in regard to debentures.

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But even if Walker alone was interdicted the firm could not proceed with the action. The order was not intended to operate on the foreign Court, but against the person to be interdicted. The power to pronounce such an interdict was not merely statutory, but inherent in the Court. The question with regard to their promotion money should be tried in the Scottish Court— Huntingdon Copper Co. v. Henderson, Jan. 12, 1877, 4 R. 294, aff. 5 R. (H.L.) 1; Hay, in re Canadian Oil-Works Corporation, July 20, 1875, L.R., 10 Ch. Ap. 593.

Argued for the respondents—The only source of jurisdiction pleaded by the liquidators was reconvention, and the facts were not sufficient to Bupport it— Thompson v. Whitehead, Jan. 26, 1862, 24 D. 331; Bell v. Stewart, June 4, 1852, 14 D. 337. They could not put their case higher than that; if the Court pronounced an order the Californian Court would probably give effect to it ex comitate. Section 122 of the statute did not give the Court jurisdiction over persons resident in other countries—Buckley on the Companies Acts, secs. 87 and 122.