ALEXANDER EWAN CAMPBELL Vs. THOMUS ERNEST ROFE

JUDGEMENT

(1.) This case arises out of the proceedings in the compulsory liquidation of the Marlow-Rolls Theaters, Ltd. (hereinafter called "the company,") of which the appellant is the Official Liquidator. The company, which had a brief existence, was incorporated in New South Wales on 29 December 1928, and went into liquidation on 4 September 1929.

(2.) The appellant sought to place the respondent on the list of contributories in respect of 8,000 preference shares allotted to him by the directors of the company on 12 March 1929, on the respondent's application therefor dated 7 March 1929. The respondent disputed his liability to be placed on the list of contributories on the ground that no preference shares were ever validity created by the company. There was no resolution of the company creating preference shares, and the sole question in this appeal is whether the directors had power under the Memorandum and Articles of Association of the company to issue these shares to the respondent. On 3 May 1930, the Master in Equity decided that the respondent was not liable as a contributory; this order was reversed on 13 October 1930, by the Supreme Court of New South Wales (Harvey, C. J., in Equity), but was restored by the High Court of Australia on 17 December 1931, from whose decision the present appeal is taken. Cl. 5 of the company's Memorandum is as follows : "5. The capital of the company is ?250,000 divided into 250,000 shares of ?1 each, with power to divide the shares in the capital for the time being into several classes and to attach thereto respectively and (sic) preferential, deferred, qualified, or special rights, privileges or conditions."

(3.) The relevant Articles of Association are as follows : "7. The capital is ?250,000 and comprises 250,000 shares of ? 1 each." "10. The shares shall be under the control of the Directors who may allot or otherwise dispose of the same to such persons on such terms and conditions and at such timers as the directors think fit and with full power to give to any person the call of any shares either at par or at a premium and for such time and for such consideration as the directors think fit. The directors may reserve any of the shares in the original or increased capital of the company upon such terms as to payment for same and otherwise as they may deem expedient." "46. The company in General Meeting may from time to time increase the capital by the creation of new shares of such amount as may be deemed expedient." "48. The new shares shall be issued to such persons and upon such terms and conditions and with such rights and privileges annexed thereto as the General Meeting resolving upon the creation thereof shall direct and if no directions be given as the directors shall determine and in particular such shares may be issued with a preferential or qualified right to dividends and in the distribution of the assets of the company and with a special or without any right of voting." "50. Except so far as otherwise provided by the conditions of issue (sic) or by these presents any capital raised by the creation of new shares shall be considered part of the original capital and shall be subject to the provisions herein contained with reference to the payment of calls and installments transfer and transmission forfeiture lien voting and otherwise." "51. The Company may from time to time by special resolution reduce its capital by paying off capital or cancelling capital which has been lost or is unrepresented by available assets or reducing the liability on the shares or otherwise as may seem expedient and capital may be paid off upon the footing that it may be called up again or otherwise. Provided that should a part of the issued capital at any time consist of preference shares the repayment of such preference share capital shall not be effected unless the holders of at least three fourths of the preference shares shall so agree." "117. The management of the business of the company shall be vested in the directors who in addition to, the powers and authorities by these presents or otherwise expressly conferred upon them may exercise all such powers and do all such acts and things as may be exercised or done by the company and are not hereby or by statute expressly directed or required to be exercised or done by the company in General Meeting, but subject nevertheless to the provisions of the Statutes and of these presents and Regulations from time to time made by the company in General Meeting. Provided that no regulations so made shall invalidate any prior act of the directors which would have been valid if such Regulations had not been made." 118. The Board may from time to time at their discretion raise or borrow or secure the payment of any sum or sums of money for the purposes of the Company. 119. The Board may raise or secure the payment or repayment of such moneys in such manner and upon such terms and conditions in all respects as they think fit and in particular by the issue of debentures or debenture stock (terminable or perpetual) of the Company charged upon all or any part of the property and assets of the Company (both present and future) including its uncalled and/or unpaid capital for the time being. 127. Subject to the rights attached to shares issued on special conditions and subject as aforesaid the profits of the Company shall be divisible among the members in proportion to the capital paid up or deemed to be paid up on the shares hold by them respectively. Provided that where capital is paid up on any shares in advance of calls upon the footing that the same shall carry interest such capital shall not whilst carrying interest confer a right to participate in profits. 146. Each holder of registered shares whether preference or ordinary whose registered place of address is not in the Commonwealth of Australia may from time to time notify in writing to the Company an address which shall be deemed his registered place of address within the meaning of these Articles of Association. 147. As regards those members whether holding preference or ordinary shares who have no registered place of address a notice posted up at the office shall be deemed to be well served on such members at the expiration of twenty-four hours after such posting up. 154. If the Company shall be wound up and the assets available for distribution among the members as such shall be insufficient to repay the whole of the paid-up capital such assets shall be distributed so that as nearly as may be the losses shall be borne by the members in proportion to the capital paid up or deemed to be paid up or which ought to have been paid up at the commencement of the winding up on the shares held by them respectively. And if in a winding up the assets available for distribution among the members shall be more than sufficient to repay the whole of the capital paid up or deemed to be paid up at the commencement of the winding up the excess shall be distributed among the members in proportion to the capital at the commencement of the winding up paid up or deemed to be paid up or which ought to have been paid up on the shares held by them respectively. But this clause is to be without prejudice to the right of the holders of shares issued upon special terms and conditions."