3PLR – BRAILEY V.

RHODESIA CONSOLIDATED LIMI…

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3PLR – BRAILEY V.
RHODESIA CONSOLIDATED
LIMITED.
Published by  Law Nigeria Admin at  May 11,
2018

POLICY, PRACTICE AND PUBLISHING, LAW REPORTS

3PLR

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BRAILEY

V.

RHODESIA CONSOLIDATED LIMITED.

[CHANCERY DIVISION]

1910 April 22, 29.

CITATION

[1909 B. 3095.]
BEFORE: WARRINGTON J.

COMPANY LAW:- Winding-up – Reconstruction –

Dissentient Shareholder – Registered Office in
Rhodesia – Notice of Dissent left at London Office –
Waiver by Liquidator – Conflict of Law – Companies
Act, 1862 (25 & 26 Vict. c. 89), s. 161 – Companies
(Consolidation) Act, 1908 (8 Edw. 7, c. 69), s. 192,
sub-s. 3 – Evidence of Local Law.

REPRESENTATION

1. F. Topham, for the plaintiff

2. Terrell, K.C., and Arthur Sims (Gore-Browne,

K.C., with them), for the defendants.

Solicitors: Carter & Barber, for C. B. Brill, Brighton;

Birkbeck, Moreton, Thompson & Co.

HISTORY AND SUMMARY OF FACTS

The plaintiff was the holder of fully paid up shares in

the defendant company, which was in course of
liquidation for the purposes of reconstruction. The
company was registered in 1903 under the
Companies Ordinance, 1895, of Southern Rhodesia,
and its registered office was in Bulawayo. By the
company’s articles it was provided that the business
of the company should be carried on in England. At
extraordinary general meetings held in London on
June 18 and July 3, 1909, resolutions had been
passed for the voluntary winding up of the company,
and all its assets were to be taken over by a new
company.
Under s. 158 of the Companies Ordinance, 1895,
which was similar to s. 161 of the Companies Act,
1862, a dissentient shareholder had to give notice of
dissent at the registered office of the company within
seven days of the date of the meeting. The plaintiff
voted against the resolutions and on July 5 gave
notice of dissent at the London office of the company.
On July 6 the liquidator sent him in reply a letter in
the following terms:- “I am in receipt of your letter of
the 5th inst. and note that you do not consent to the
reconstruction of the above company.” Subsequently
the liquidator refused to treat the notice of dissent as
valid on the ground that it was not served at the
registered office of the company, and the plaintiff
brought this action. Under the Companies Ordinance,
1895, the liquidator had power to do all acts in the
name and on behalf of the company:-

Held, that the liquidator had waived the irregularity

and that the notice of dissent must be treated as
valid.

Evidence of an expert in Roman-Dutch law admitted

although he had not practised in Rhodesia.

THE plaintiff, Mr. W. H. Brailey, was the holder of 500

fully-paid shares of 10s. each in the defendant
company, Rhodesia Consolidated, Limited, which was
now in course of liquidation for the purposes of
reconstruction, and he brought this action in order to
assert his rights as a dissentient shareholder under
the provisions of the Companies Ordinance, 1895, of
Southern Rhodesia.1 The company was registered
under that Ordinance in 1903, and its registered
office was situated in Bulawayo, Rhodesia.
(1) See note, p. 103, post.

By the articles of association of the company it was

provided that (4.) “the affairs and business of the
company shall so far as possible be under the control
and management of the board of directors in England
notwithstanding that the company is incorporated in
Rhodesia”; (66.) general meetings might be held in
England; (69.) general meetings might be held upon
a requisition by shareholders on the requisition being
deposited at the London office of the company;
(158.) all members were to give to the directors an
address within the United Kingdom for the service of
notices, and in default thereof the London office of
the company was to be deemed to be their registered
address; (169.) the register of members was to be
kept in England.

At extraordinary general meetings of the defendant

company held in the city of London on June 18 and
July 3, 1909, respectively, special resolutions were
passed and confirmed to the effect that the defendant
company should be wound up voluntarily with a view
to its reconstruction, and that the defendant Walter
Winder (a London chartered accountant) should be
appointed liquidator of the defendant company for the
purpose of such winding-up, and should be
authorized, pursuant to s. 158 of the Companies
Ordinance, 1895, of Southern Rhodesia, to enter into
an arrangement with a new company to be called The
Rhodesia Consolidated, Limited, or some similar
name, for the sale to it of the whole undertaking and
assets of the defendant company, subject to its
liabilities, in consideration of the allotment of shares
in the new company in accordance with the terms of
a certain scheme of reconstruction.
The notices of these meetings were sent out from the
London office of the company. By the reconstruction
scheme one 10s. share in the new company credited
with 7s. 6d. paid was to be offered to the present
shareholders for each share held by them in the old
company, and the shareholders were informed that
their claims for shares must be sent in by July 27,
1909, or they would lose all right to an allotment.

Under s. 158 of the Companies Ordinance of 1895,

which was almost identical in terms with s. 161 of the
Companies Act, 1862, re-enacted in s. 192 of the
Companies (Consolidation) Act, 1908, where a
company was being wound up voluntarily and its
business and property were to be transferred to
another company, a shareholder who dissented from
the special resolutions for reconstruction and had not
voted for them, and had expressed his dissent in
writing left at the registered office of the company
not later than seven days after the date of the
meeting at which the resolutions were passed, might
call upon the liquidator to abstain from carrying the
resolutions into effect or to purchase the interest of
the dissentient member. Inasmuch as the registered
office of the company was in Rhodesia, it was
impossible for the plaintiff to leave an expression of
his dissent in writing at that office within seven days
of the meeting.

The plaintiff voted against the resolutions and on July

5 wrote a letter to the liquidator as follows:-

“Being a shareholder to the extent of five hundred

ordinary shares in the above company, I beg to
inform you that I do not consent to the
reconstruction. I hereby call upon you either to stop
the reconstruction or to purchase my shares at a fair
valuation. According to the various statements of the
directors fifteen shillings each would be a fair sum
and I hereby offer to accept this sum if paid within a
month from date.”

On July 6 the liquidator sent him the following

answer:-

“I am in receipt of your letter of the 5th inst. and

note that you do not consent to the reconstruction of
the above company.”

Further correspondence ensued, and the plaintiff

threatened to take legal proceedings to enforce his
rights, and on July 30 the liquidator wrote to the
plaintiff’s solicitors as follows:-

“I have referred your client’s letter of the 5th inst. to

my solicitors, who inform me that I am not entitled to
act upon it as it does not comply with s. 158 of the
British South Africa Company’s Ordinance of 1895.

“Under these circumstances you may prefer to apply

for your relative shares in the new company, and I
shall have pleasure in procuring you an allotment if
you should do so within seven days from this date.

“Failing this I am afraid I can do nothing more in the

matter than send you your proportion of any sum
that I may be able to realize for rights to apply for
the undistributed shares.”

The plaintiff brought this action against the company

and the liquidator, claiming a declaration that by
virtue of his notice of dissent he was entitled to the
rights of a dissentient shareholder under the
Ordinance; an injunction to restrain the defendants
from parting with the assets without making provision
for his interest; and in the alternative for damages.

1. F. Topham, for the plaintiff. The plaintiff has

substantially complied with the requirements of
s. 158 by bringing his dissent to the notice of the
liquidator, who has accepted it. It was impossible
for the plaintiff to leave his notice at the
registered office of the company in Bulawayo
within the time limited by the section. The words
“at the registered office of the company” were
inserted for the convenience of shareholders in
order that they might know where to send their
notices. That being so, it was competent to the
liquidator to waive the requirement in this case,
as he in fact did.

The right of the plaintiff as a shareholder must be

determined in accordance with the law of Rhodesia,
and under that law the provision of the statute was
sufficiently complied with. But even if that is not so,
the plaintiff has an equity against the company. The
company has put the plaintiff to rest by accepting his
notice and cannot now turn round and say that it is
invalid: British South Africa Co. v. De Beers
Consolidated Mines, Ld 1; In re London and
Westminster Bread Co.2

1. Terrell, K.C., and Arthur Sims (Gore-Browne,

K.C., with them), for the defendants.
The liquidator has no power to waive the provisions of
the statute. The requirement as to notice is a
condition precedent, and unless the plaintiff complies
with the condition he has no rights. The Court is
bound to give effect to the statute. No right arises
under the statute unless the plaintiff has complied
with its requirements, however difficult it may be to
comply with them: Burdett-Coutts v. True Blue
(Hannan’s) Gold Mine.3

The liquidator had no power, express or implied, to

waive this condition; he could not give the plaintiff
these rights as against assenting shareholders. The
assets do not belong to the liquidator and he cannot
give them away.

(1) [1910] 1 Ch. 354, 387.; (2) [1890] W. N. 3; 59 L.

J. (Ch.) 155.; (3) [1899] 2 Ch. 616, 628.

[WARRINGTON J.

Can a Rhodesian company deprive dissentient

shareholders of their rights by passing resolutions in
England?]

If they passed them in Rhodesia a shareholder in

England would be in the same difficulty, for notice
could only be given by cable. The statute must be
construed strictly: In re Union Bank of Kingston-
upon-Hull1.
MAIN JUDGMENT

WARRINGTON J.

I need not trouble you, Mr. Topham.

The plaintiff is a shareholder in the defendant

company, Rhodesia Consolidated, Limited, and he
seeks in this action to assert his rights as what is
generally known as a dissentient shareholder in the
proposed reconstruction of the company.

Now the facts are these. The company was registered

under the Companies Ordinance of the Colony of
Rhodesia. Its registered office is at Bulawayo, but the
articles contain elaborate provisions for the
management of the business in England, for giving
notices to the company in England, and generally
providing that the company shall be treated, so far as
it lawfully can be treated, as an English company,
although it is incorporated under the laws of Rhodesia
and has its registered office in Rhodesia. The plaintiff
applied for and was allotted 500 shares. Those shares
were fully paid up. Now under those circumstances in
June of last year the directors of the company
contemplated a reconstruction of the company, and a
notice dated June 10 was issued from the office of the
company in London of an extraordinary general
meeting to be held in London for the purpose of
approving the proposed reconstruction scheme, and
one of the resolutions to be submitted provided for
the appointment of a London chartered accountant as
liquidator. Amongst the proposals involved in the
reconstruction was the provision that the shares to be
taken by the shareholders of what would then be the
new company, in lieu of their paid-up shares in the
old company, were to have a liability attached to
them of 2s. 6d. each share. It was the usual thing:
they tried to force the shareholders in the old
company to contribute more than they were originally
bound to contribute; or, failing that, lose their shares.
The plaintiff attended the meeting of the company;
he spoke against and voted against the resolutions.
The second meeting was held for the purpose of
passing a confirmatory resolution on July 3. On July 5
the plaintiff wrote to the liquidator this letter. [His
Lordship read the correspondence, and continued:-]

(1) (1880) 13 Ch. D. 808.

The Companies Ordinance, 1895, of Rhodesia is

modelled on the Companies Act of 1862, and it
contains a section referring to reconstruction which is
to all intents and purposes the same as s. 161 of the
Companies Act, 1862. It provides, as s. 161 does, for
the transfer of the assets of the company being
reconstructed to a new company, in consideration of
shares, and then it goes on to provide: [His Lordship
read the proviso under which a dissentient
shareholder has to express his dissent in writing at
the registered office of the company within seven
days of the date of the meeting, and continued.] It is
said that the shareholder is debarred from his rights
as a dissentient shareholder because the notice,
which was in every respect sufficient, was not left at
the registered office in Bulawayo within seven days of
the passing of the resolution in London.

Now, under the circumstances of this case, am I

bound to give effect to what seems to me a
monstrous injustice? In the first place, what is the
meaning and intention of inserting in the section the
condition that the notice shall be left at the registered
office of the company? It is not for the benefit of the
liquidator, because the notice left at the registered
office of the company need not reach the liquidator at
all. It seems to me that the provision referring to the
leaving of the notice at the registered office of the
company, if inserted for the benefit of anybody, is for
the benefit of the dissentient share holder, in order
that he may not have the difficulty of proving the
actual receipt by the liquidator of the notice which he
has addressed to him. It is sufficient for him to prove
that that notice has been left at the registered office
of the company, and he need not go further and shew
that the liquidator has received it. But whatever view
may be taken of that, it seems to me quite plain that
the leaving of the notice at the registered office of the
company cannot, on the true construction of the Act,
be treated as an essential condition. It is quite true
that it is a condition, but it is a condition the omission
of which under such circumstances as the present has
had no effect, prejudicial or otherwise, upon either
the liquidator or the assenting shareholders in the
company. That has a most material bearing on the
point which I think decides this case in favour of the
plaintiff, and that is that under the circumstances of
this case the liquidator has waived the requirement
and accepted the notice which was given to him as a
sufficient notice.

It is said that the liquidator has no power to waive

any provision in this section, however trifling and
however immaterial that provision may be, and that,
if the shareholder fails to comply modo et forma with
the provision laid down, the liquidator cannot accept
a notice which departs one hair’s breadth from the
conditions. From that doctrine I entirely dissent. By s.
132, sub-ss. 4 and 7, of the Ordinance, which deals
with the power of the liquidator, it is provided that
the liquidator may, without the sanction of the Court,
exercise all powers by this Ordinance given to the
official liquidator. By s. 99 it is provided that “the
official liquidator shall have power, with the sanction
of the Court, to do the following things,” and amongst
them, “to do all acts, and to execute, in the name
and on behalf of the company, all deeds, receipts and
other documents, and for that purpose to use, when
necessary, the company’s seal.” I have no doubt the
company has power to waive a requirement such as
that of the 158th section, and if the company has the
power to do it, the liquidator has power to do that
which might be done by the company. I do not mean
to say that a liquidator would be justified in waiving
an essential condition without getting, as he could get
if he were a voluntary liquidator, the sanction of the
Court to his so doing, but where, as in this case,
there is a condition which is entirely unessential, and
an objection to the notice which is wholly technical,
with no substance whatever in it, then I am clearly of
opinion that the liquidator had power under the
Rhodesian Ordinance to waive the condition and
accept the notice which was given to him as sufficient
notice.

Now has he accepted the notice? In my opinion he

has. I think no one can read his letter of July 6
without seeing that it was intended to be read by the
plaintiff as an acceptance of that notice. He says, “I
am in receipt of your letter and note that you do not
consent to the reconstruction of the above company”;
that means to say, “I take note that you have
expressed your dissent, and that you desire to be
treated as a dissentient member.” After that, and
after having, without objection, allowed the seven
days to pass within which it was just possible by
cable to communicate the notice of dissent to
Rhodesia – having allowed those days to pass without
having raised the objection, in my judgment the
Court is bound to hold that the liquidator, to use an
expression appropriate to rather a different order of
documents, has “accepted service.” The notice has
got to him and he is the only person concerned with
it; he says he has accepted it, and he notes the
position which the plaintiff takes up. If that is not
acceptance of service I do not know what is.

On the whole I think the plaintiff is entitled to

succeed, and to be treated as a dissentient
shareholder, to a declaration to that effect, and an
injunction to restrain the defendants from parting
with the assets of the company without making
adequate provision for the purchase of the plaintiff’s
interest therein in manner provided by the Ordinance.

Just one word more. There may be a question

whether this case ought to be decided by English law
or by Rhodesian law. I will assume, notwithstanding
that every transaction material to the case took place
in England, that, as the company is incorporated in
Rhodesia, the rights of the shareholders might be
interpreted by Rhodesian law. If that is so, I have no
doubt, on the evidence which has been called before
me, that the Rhodesian law would be the same as the
English law, that the Rhodesian Courts would give
effect to those principles of construction and those
principles of common justice which are the principles
to which I have tried to give effect in dealing with this
case. The expert who was called on Rhodesian law
was in my opinion a sufficient expert to prove that
fact. It is quite true he is not actually practising in
Rhodesia, but he is the Reader in Roman-Dutch Law
for the Incorporated Council of Legal Education; he
has made a special study of Roman-Dutch law as
applicable to our Colonies for the purpose of
instructing in that law the students here who will
practise in those Colonies, and I think his position as
an expert was quite sufficiently proved. With regard
to the facts that he proved, he to my mind proved
without doubt that the Rhodesian Courts would on
such a matter as this be guided – of course not bound
– by the decisions of the English Courts, and, in
particular, he said he knew of no rule or authority in
Rhodesian law which would prevent the Court from
holding that there might be a waiver of such a
condition as this. The defendants must pay the costs
of the action.

NOTE. – The material sections of the Companies

Ordinance, 1895, were as follows:-

“99. The official liquidator shall have power, with the

sanction of the Court, to do the following things:-

(1.) To bring or defend any action, suit, or

prosecution, or other legal proceeding, civil or
criminal, in the name and on behalf of the company.

(2.) To carry on the business of the company, so

far as may be necessary, for the beneficial winding-
up of the same.

(3.) To sell the moveable and immoveable

property, effects and things in action of the company
by public auction or private contract, with power to
transfer the whole thereof to any person or company,
or to sell the same in parcels.

(4.) To do all acts, and to execute, in the name and

on behalf of the company, all deeds, receipts and
other documents, and for that purpose to use, when
necessary, the company’s seal.”

“132. The following consequences shall ensue

upon the voluntary winding-up of a company:-

(1.) The property of the company shall be applied

in satisfaction of its liabilities, in the legal order of
their preference, and, subject thereto, shall, unless it
be otherwise provided by the regulations of the
company, be distributed amongst the members,
according to their rights and interests in the
company.

(2.) Liquidators shall be appointed for the purpose

of winding up the affairs of the company, and
distributing the property.

(3.) The company in general meeting shall appoint

such persons or person as it thinks fit to be
liquidators, and may fix the remuneration to be paid
to them.

(4.) If one person only is appointed, all the

provisions herein contained, in reference to several
liquidators, shall apply to him.

(5.) Upon the appointment of liquidators, all the

powers of the directors shall cease, except in so far
as the company, in general meeting, or the
liquidators, may sanction the continuance of such
powers.

(6.) When several liquidators are appointed, every

power hereby given may be exercised by such one or
more of them, as may be determined at the time of
their appointment, or in default of such
determination, by any number not less than two.

(7.) The liquidators may, without the sanction of

the Court, exercise all powers by this Ordinance given
to the official liquidator.”

“158. Where any company is proposed to be or

is in the course of being wound up voluntarily, and
the whole or a portion of its business or property is
proposed to be transferred or sold to another
company, the liquidators of the first mentioned
company may, with the sanction of a special
resolution of that company, conferring either a
general authority on the liquidators or an authority in
respect of any particular arrangement, receive, in
compensation, or part compensation, for such
transfer or sale, shares, policies or other like interests
in such other company, for the purpose of distribution
amongst the members of the company being wound
up, or may enter into any other arrangement
whereby the members of the company being wound
up, may, in lieu of receiving cash, shares, policies or
other like interests, or in addition thereto, participate
in the profits of or receive any other benefit from the
purchasing company; and any sale made or
arrangement entered into by the liquidators in
pursuance of this section shall be binding on the
members of the company being wound up; subject to
this proviso, that if any member of the company
being wound up who has not voted in favour of the
special resolution passed by the company of which he
is a member at either of the meetings held for
passing the same expresses his dissent from any
such special resolution in writing, addressed to the
liquidators or one of them, and left at the registered
office of the company not later than seven days after
the date of the meeting at which such special
resolution was passed, such dissentient member may
require the liquidators to do one of the following
things as the liquidators may prefer: that is to say,
either to abstain from carrying such resolution into
effect, or to purchase the interest held by such
dissentient member at a price to be determined in
manner hereinafter mentioned, such purchase-money
to be paid before the company is dissolved, and to be
raised by the liquidators in such manner as may be
determined by special resolution; no special
resolution shall be deemed invalid for the purposes of
this section by reason that it is passed antecedently
to or concurrently with any resolution for winding up
the company, or for appointing liquidators; but if an
order be made within a year for winding up the
company by the Court, such resolution shall not be of
any validity unless it is sanctioned by the Court.”

1. C. R.

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