Scottish Court of Session Decisions

This was an application by Robert Sharp, iron merchant, Coatbridge, under sec. 35 of the companies Act 1862, by which he sought to have the register of the “Coatbridge Tin-plate Works (Limited)” rectified by the registration of his name therein as the holder of 248 shares of the company.

The petition was presented in the following circumstances—The petitioner had, upon 6th June 1884, been appointed trustee on the sequestrated estate of Edward Mather Bell, who prior to his sequestration had been the manager of the Coatbridge Tin-Plate Works. Bell had upon various occasions purchased shares of the company, and at the date of his sequestration 248 shares stood in his name in the register of shareholders. These shares were, in all, of the nominal value of £12,400, but were really of much less value. The 20th article of the articles of association provided that “Any person becoming interested in a share in consequence of the death or bankruptcy of any shareholder, or by any lawful means other than by transfer, in accordance with these presents, may, upon producing such evidence as the board think sufficient, either be registered himself as the holder of the share, or elect to have some person nominated by him, and approved by the board, registered as such holder, and if he shall elect to have such nominee registered, he shall grant to his nominee a transfer of the share, and until such transfer be registered, he shall not be freed from any liability in respect of the share.” The petitioner averred that he was now, as trustee, in right of the said 248 shares, and was entitled to be entered in the register of shareholders as holder thereof. He further averred that he had requested the secretary of the company to register his name as the holder of Bell's shares, but that he had declined to do so. He prayed the Court to order that the register of the company be rectified by the registration of him (petitioner) as holder of 248 shares.

Answers were lodged by the company, in which they averred that between January 1879 and January 1886 Bell had drawn and used on his own account various sums of money belonging to them, and further, that he had had various transactions in goods with them, which resulted in his being due and indebted to them at the time of his sequestration the sum of £7038, 2s. 9d. They alleged the market value of Bell's shares to be £4216, and they averred that his indebtedness to them had frequently been recognised and admitted by the petitioner, his trustee, and especially that in a claim made by them to rank on Bell's sequestrated estate for the debt of £7038, the petitioner, as trustee, had admitted their claim to the extent of £1038, but had rejected it quoad ultra in respect that the claimants (the respondents) held a security over a part of the estate of the bankrupt valued at the sum of £6000. The security referred to was the respondents' lien over the 248 shares held by and standing in the name of the bankrupt, and to which this petition referred.

They founded on article 11 of the articles of association of the respondents' company, which provided—“The company shall always have a first and permanent lien on the shares of each member for all the debts, liabilities, and engagements to the company of such member, solely or jointly, with any other person, and the company may refuse to register the transfer of any shares by any member who may then be indebted, or under any liability to the company, whether solely, or jointly with any other person on any account whatever, and the company may at any time call upon such of the shareholders who may be indebted to the company to pay such debts and engagements, and interest and expenses thereof within one month from the date of the notice thereof, and should they fail to pay the same at the time and place fixed upon in the said notice, the company may at any time thereafter absolutely sell and dispose of the shares of any member who may refuse or neglect to pay such debts, liabilities, and engagements, and whether such member be the sole or joint holder of such shares, and apply the proceeds of such sale, so far as the same will extend, in discharge or satisfaction of all debts, liabilities, or engagements from such member of the company, and upon such sale the company shall without any further or other consent from the holder

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or holders of such shares, transfer the same in the books of the company to the purchaser thereof.”

On 29th February 1884 the company had written to Bell calling upon him for payment of his debt to them within one month, and informing him that failing payment the company would proceed to sell and dispose of his shares, and apply the proceeds in payment of their debt under section 11 of the articles above quoted.

The respondents also stated that Bell died on 24th May 1886, and that article 19 of their articles of association provided—“The executors or administrators of a deceased shareholder shall be the only party recognised by the company as having any title to his share.” The respondents in these circumstances therefore objected to the order for rectification craved being granted, and they submitted that the petition should be refused, in respect the petitioner had no sufficient title or interest; all parties interested were not called; the petitioner's statements were irrelevant, and, in so far as material, were unfounded in fact, and, in any event, the petition should not be granted without payment being made, or sufficient security being given for the payment of the indebtedness of Bell to the respondents by the petitioner as representing him. In any view, they submitted that the petition should only be granted subject to such conditions as would preserve their lien, and to all pleas competent to them against Bell.

Argued for petitioner—The petitioner's right to be entered on the list of shareholders was absolute. He took by transmission, and not by simple transfer. This point was settled by in re Bentham Mills Company, L.R., 11 Ch. Div. 901. The company might refuse to transfer but not to transmit. The petitioner as trustee was entitled to reconsider his deliverance if its terms were pleaded against him. The matter was in no sense res judicata.

Authorities— Monkhouse M'Kinnon, January 28, 1881, 8 R. 454; Henderson v. Auld & Guild, July 6, 1872, 10 Macph. 946.

Replied for respondents—The prayer of the petition could not be granted to the effect of registering the trustee without destroying the company's lien over their shares, as the petitioner, if once registered, could sell the shares in open market. In the case of in re Bentham there was only a passive lien, so it did not apply to the present case. The articles of association gave the company the right which they here claimed, and it could not be defeated, but could only be got over by payment of the debt.

Authorities—Buckley on Companies Acts, p. 412; Harrison, L.R., 26 Ch. Div. p. 522; in re Lewis, 1871, L.R., Ch. App. 818; Hotchkis v. Royal Bank, 3 Pat. App. 680; Burns v. Lawrie's Trustees, July 7, 1840, 2 D. 1348.

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