VERNON LLOYD-OWEN Vs. ALFRED E BULL

JUDGEMENT

(1.) This is an appeal by special leave from a judgment of the Court of appeal for British Columbia dated 17 July 1935, affirming an order of the Supreme Court dated 28 March 1985. The petition on which the order of the Supreme Court was made was presented on 13th March 1935, by the appellant and the respondent Johh S. Salter as liquidator in the voluntary liquidation of a British Columbian company, Pioneer Gold Mines, Limited, to be referred to throughout as "the company." By the petition the liquidator submitted himself to the Court but took no active steps in the case. It was the appellant, a minority contributory of the company, was the active party. The petition prayed for an order that the liquidator be directed in the company's name to take action against the respondents other than himself, for the recovery of property and assets alleged to be the property of the company and for other relief. Alternatively the appellant asked for leave to bring an action in the company's name for the same relief. The proposed defendants collectively hold a controlling interest in the company, fifty-one per cent of the issued shares. Two of them were directors; two others are representatives of a deceased director. As against all of these the claim or some part of it would be made in that character. The petition was dismissed by the Supreme Court- Murphy, J.-and his order, as just stated, was affirmed on appeal. This bare statement suffices to disclose the unusual character of this appeal, one justified only by the importance of the issues involved, the exceptional circumstances in which the application was made, and the even more unusual course taken by the learned Judge in dealing with it.

(2.) The purpose of the petition was to obtain leave to have action taken in the company's name in respect of matters which, so far as it was a representative suit by a minority shareholder, had been the subject of a former action brought by one Andrew Ferguson suing personally and on behalf of all other shareholders of the company except the respondents against the respondents as defendants. The company itself was not joined as a party. The action had been dismissed by the Supreme Court of British Columbia and by the Court of appeal. A further appeal to His Majesty in Council was also dismissed, but not, as in the Courts below, on the merits. It was dismissed on objection to the competency of the proceedings then taken for the first time. Learned counsel for two of the respondents as a preliminary objection and before proceeding to deal on the merits with the arguments which had been addressed to this Board by learned counsel for the appellant Ferguson, objected that the action and the appeal were then alike incompetent. The relief which had been claimed by the appellant before the Board was all of it, when its true basis was appreciated, relief in respect of wrongs at the hands of the respondents really if at all inflicted upon or suffered by the company. Such relief could only be claimed and the right to it could only be ventilated in an action to which the company was at the least a party. But the objection went further. The company it was said, was, and was even stated to be, in liquidation, and when a company was in that position no corporate relief could be granted in an action in which it was not itself plaintiff. In short the whole proceedings had become incompetent and ineffective: amendment not being open to the Board they should now cease. And the Board by their judgment delivered on 1 February 1935 accepted that view. They examined the nature of the claims presented to them in argument on behalf of the appellant and concluded that they were, all of them, claims competent to the company alone. They gave it as their opinion that after liquidation no such claims could be made in a representative contributories' action even if the company were joined as defendant. The following is the passage from their Lordships' judgment which deals with this aspect of the case:

(3.) The permissibility of the form of proceeding thus assumed, where the Company concerned is a growing concern, is an excellent illustration of the golden principle that procedure with its rules is the handmaid and not the mistress of justice. The form of action so authorised is necessitated by the fact that in the case of such a claim as was successfully made by the plaintiff in Cook V/s. Deeks-and there is at least a family likeness between that case and this- justice will be denied to him if the mere possession of the Company's seal in the hands of his opponents were to prevent the assertion at his instance of the corporate rights of the Company as against them. But even in the case of a growing company a minority share-holder is not entitled to proceed in a representative action if he is unable to show when challenged that he has exhausted every effort to secure the joinder of the company as plaintiff and has failed. But cessante ratione legis, cessat lex ipsa. So soon as the Company goes into liquidation the necessity for any such expedient in procedure disappears. Passing over the superficial difficulty that a Company in compulsory liquidation cannot be proceeded against without the leave of the Court, the real complainants, the minority share-holders, are now no longer at the mercy of the majority, wrongly retaining the property of the Company by the strength of their votes. If the liquidator, acting at the behest of the majority, refuses when requested to take action in the name of the Company against them, it is open to any contributory to apply to the Court, and under S. 234, Provincial Companies Act, which corresponds to S. 252 of the Imperial Statute, it is open to the Court, on cause shown, either to direct the liquidator to proceed in the Company's name or on proper terms as to indemnity, and otherwise to give to the applicant leave to use the Company's name as plaintiff in any action necessary to be brought for the vindication of the Company's rights. Nor is the contributory confined to that form of procedure. It would be open to him, so far at least as the respondent directors are concerned, under S. 243 of the Act, without leave from anyone, and by motion or summons on the winding up jurisdiction, himself to bring the respondents before the Court and obtain relief on the Company's account, against the respondent whose liability to the Company is in that proceeding established. See and contrast Cape Breton V/s. Fenn, (1881) 17 Ch D 198. And it is the policy of the Act, that all claims competent to the Company should be brought within the scope and control of the winding up and that not only in a compulsory liquidation. Therefore, such procedure is not to be discouraged.