Richards v Mount Royal Investments Ltd
| Jurisdiction | St Vincent and the Grenadines |
| Judge | Berridge, J. |
| Judgment Date | 26 November 1973 |
| Neutral Citation | VC 1973 HC 16 |
| Docket Number | No. 78 of 1973 |
| Court | High Court (Saint Vincent) |
| Date | 26 November 1973 |
High Court
Berridge, J.
No. 78 of 1973
E. Robertson and C. Dougan for plaintiff
A. Williams for defendant
Company law - Winding up — Companies Rules 1949, s. 226.
Facts: Petition that the respondent company may be would up under the provisions of the Companies Act, Cap. 219, of the Revised Laws of St. Vincent, 1926 edition. The issues were whether procedures for winding up properly followed - Whether petitioner had locus standi to approach the Court in this regard - Whether irregularities which existed created such injustice as to justify the refusal of the petition under s. 226 of Companies (Winding up) Rules 1949.
Held: The court was not persuaded that an injustice substantial or otherwise has been caused to the respondent; the petitioner had locus standi to petition the court, and so the objection is overruled.
This petition that the respondent company may be wound up under the provisions of the Companies Act, Cap 219, of the Revised Laws of Saint Vincent, 1926 Edition, was filed on the 7th April, 1973, and an affidavit in support thereof filed on the 10th April, 1973.
Appearance was entered by the solicitor for the respondent on the 13th April, 1973, but no counter affidavit was filed. When the matter was called on counsel for the respondent objected, in limine, that the petitioner had no locus standi in that–
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(i) as a contributory and shareholder, he alleges insolvency on the part of the respondent;
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(ii) as a director, he cannot himself come to court for relief in keeping with the rule in Foss v Harbottle [1843] 2 Hare 461;
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(iii) as a creditor, inter alia he must first
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(a) attempt to obtain settlement by execution against any unmortgaged property of the respondent,
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(b) make a demand for the settlement of his debt.
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In re Rica Gold Washing Co. (1879) 11 Ch. D.36 is authority for saying that a fully paid up shareholder who presents a petition to wind up the company must both allege in his petition and show by evidence that there are assets of the company of such an amount that in the event of winding up he would have a tangible share of surplus to receive.
In para. 10 of his petition the petitioner alleges that the company is insolvent and unable to pay its debt. This is proceeded by the apparently inconsistent allegation in para. 8 of the petition to the effect that the company's assets consist mainly of real estate situated at Montreal, Brighton and Kingstown while in para. 7 it is alleged that the company caused to be advertised for sale 6 lots of lands in Kingstown and 4 – 2 acre parcels of land together with 3 second hand cars at Montreal.
In Re Kaslo-Slocan Mining & Financial Corpn., Ltd. [1910] W.N. 13 an allegation that a company has no assets and is insolvent was held to disentitled a petitioner to a winding up order but the difference between that and the instant case is that in the former the petitioner alleged non existence of assets and insolvency while in the instant case the petitioner alleges the existence of assets and insolvency.
Be that as it may the existence of assets is not inconsistent with commercial insolvency and in Buckley on the Companies Act (8th Edn) at p. 258, to which reference is made in Re E. M. Martin (Succs) Ltd. (1962) 5 W.I.R 39 at p.42, is to be found the following passage:
“If a company is commercially insolvent, if, that is, it cannot meet current demands, it is properly the subject of a winding-up order. It is useless to say that if its assets are realised there will be ample to pay twenty shillings in the pound: this is not the test. A company may be at the same time insolvent and wealthy. It may have wealth locked up in investments not presently realisable but although this be so, yet if it have not assets available to meet its current liabilities it is commercially insolvent.”
Counsel for the petitioner cited the case of Re Newman and Howard Ltd. [1961] 2 All E.R. 495 in which it was held that where a contributory's petition for the winding up of a company is based on a failure on the part of the com-pany to supply accounts and information, with the consequence that the petitioner is unable to tell whether a surplus will be available for the contributories, the general rule that prima facie a contributory is not entitled to a winding up order unless he proves that he has a tangible interest in the assets in the liquidation is inapplicable. Counsel also referred to certain paragraphs of the petition alleging failure on the part of the company, inter alia, to keep true and correct accounts, appoint auditors and lay statements before the members in general meeting.
It is true that insolvency was not in issue in Newman and Howard, in which the Rica Gold Washing case was distinguished, but on the basis of the principle enunciated in the former I hold that the petitioner has locus standi as a contributory or shareholder.
As far as the preclusion of the petitioner, as a director, from coming to this court is concerned, Art.1 of the respondent company's Articles of Association prescribes that the provisions of the Table in the First Schedule of the Companies Ordinance, Cap.219 shall not apply to the company while regulation 49 et seq of Table A of the First Schedule to the Ordinance provides for the appointment of directors, their powers and other ancillary matters.
Counsel for the petitioner sought and obtained the leave of the court to amend paragraph 5 of the petition by the deletion of the words “your said petitioner is a director accordingly ( sic) to the provisions of Chapter 219 of the Companies Act of the Laws of Saint Vincent” at the end thereof, words which appear to me, in the circumstances, to be meaningless and of no effect. It was not disputed however, that the petitioner was a shareholder of the company.
In MacDougall v Gardiner [1876] (NS.) 45 L.J. in which the rule in Foss v Harbottle was approved and applied, appears the following judgment of Mellish L.J. at p. 34:
“I think it is a matter of considerable importance rightly to determine these questions, whether a suit ought to be brought in the name of the company or in the name of one of the shareholders on behalf of the others. It is not at all a technical question, but it may make a very serious difference in the management of the affairs of the company. The difference is this: according to the one construction, if any irregularity whatever is committed in carrying out the articles, and of course, looking to the nature of these companies, looking at the way in which their articles are framed, and that they are not lawyers who attend these meetings, nothing can be more common than that there should be something more or less irregular done...
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