Cox. v Dublin City Distillery Company, Ltd

• Jurisdiction: Ireland
• Judge: Barton J.
• Judgment Date: 10 July 1917
• Court: Chancery Division (Ireland)
• Docket Number: (1905. No. 125.)
• Date: 27 February 1917

Cox

and

Dublin City Distillery Company, Ltd. (No. 3.)

Barton J.

Appeal.

(1905. No. 125.)

CASES

DETERMINED BY

THE CHANCERY DIVISION

OF

THE HIGH COURT OF JUSTICE IN IRELAND

AND BY

THE IRISH LAND COMMISSION,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL.

1917.

Company — Debentures — Validity of — Estoppel — Res Judicata — Test Action, Order XVI, R. 8.

By a deed executed in 1895, property of a distillery company was conveyed to trustees for the holders of second debentures to be thereafter issued. The articles of association of the company provided that no director should vote in respect of any matter in which he was individually interested, the quorum of directors being fixed at two.

D., a director of the company, advanced moneys to the company on the security of manufactured whiskey of the company stored in a warehouse, and also upon second debentures issued to him by the company in 1903, but forming part of the series secured by the trust deed of 1895. There was admittedly no quorum of independent directors present at the meeting which purported to authorize the issue of these debentures to D.

The present action was instituted in 1905 by the plaintiff on behalf of himself and all other holders of first debentures claiming a declaration that certain first mortgage debentures were well charged on the property of the company, and a liquidator was subsequently appointed (Cox v. Dublin City Distillery, [1906] 1 I. R. 446; [1915] 1 I. R. 345).

In 1909 D. instituted an action for a declaration as to his rights against the company in liquidation and the trustees for the second debenture-holders. The latter defendants delivered no defence, and D. obtained judgment against them by default. The company impeached D.'s right to claim a lien on the second debentures, on the ground that these were not registered under the Companies Act, 1900, but no point as to the absence of a proper quorum at the meeting which purported to authorize the issue of D.'s debentures was either pleaded or specifically relied upon in argument, D.'s action subsequently resulted in a declaration by the House of Lords that D. was not entitled to a valid pledge of the whiskey, but was entitled to a valid lien on the debentures for the amount of his advances to the extent of the property comprised in the trust deed.

On the hearing of a memorandum from the Chief Clerk in the present action:

Held, by the Court of Appeal (1), reversing the order of Barton J., that C. R. and G., as representing the holders of valid second debentures issued by

the company in 1895, were sufficiently represented by the trustees for the second debenture-holder's in the action brought by D. against the company and the said trustees, and that the order of the House of Lords in the latter action operated as an estoppel so as to preclude C., R., and G. from relying in the present action on the invalidity in the creation of D.'s debentures.

Memorandum from Chief Clerk submitting for the consideration of Barton J. the following question:—

Whether, having regard to the decision of this Honourable Court on the 24th February, and of the Court of Appeal in Ireland on the 28th June, 1915, that the resolutions of the directors of the company, passed on the 12th and 16th May, 1903, and 20th January, 1904, are invalid, the debentures mentioned in the schedule hereto are invalid as against the holders of valid second debentures of the company.

And whether Edward Doherty (or Frederick Hans Kennedy on his behalf) should be allowed to prove on foot of the said debentures mentioned in the schedule hereto in competition with the holders of such valid second debentures in respect of advances made to the company by Edward Doherty; or

Whether William Carroll, George Richardson, and Patrick Gaynor, on behalf of themselves and the other second debenture-holders, whom they were appointed to represent by order herein, dated the 25th July, 1915, are in anywise precluded from relying upon the invalidity of the said resolutions and the debentures issued thereunder as against them by the orders of this Honourable Court, dated the 8th June, 1911, made in an action in which the said Edward Doherty was plaintiff, Frederick Hans Kennedy, William Findlater, and the above-named company defendants, whereby it was declared: “that the plaintiff is entitled to a good and valid lien on the debentures mentioned in the 26th paragraph of the statement of claim, being the debentures mentioned in the schedule hereto, so far as the same affect the freehold and leasehold premises comprised in the trust deed dated the 9th day of November, 1905, for the amount of his advances,” which said order was affirmed by the Court of Appeal in Ireland by order dated the 17th May, 1912, and by the House of Lords by order dated the 17th July, 1914.

SCHEDULE.

Name of present holder.	No. of debentures and amount.	Debenture No. both inclusive.	Amount of Principal.
Frederick Hans	3 of £100	241 to 243	£300
Kennedy as	4 of £100	262 to 265	£400
Trustee for	3 of £10	305 to 307	£30
Edward Doherty	17 of £100	214 to 230	£1700

The facts referred to before Barton J. are fully reported in Cox v. Dublin City Distillery (No. 2) (1), and appear in his judgment.

Serjeant Sullivan K.C., and Overend, for William Carroll, George Richardson, and Patrick Gaynor.

Herbert Wilson K.C., Garrett W. Walker K.C., and James Andrews, for Edward Doherty.

The arguments were similar to those in the Court of Appeal, reported infra, p. 208.

Serjeant Sullivan K.C., and Overend, for William Carroll, George Richardson, and Patrick Gaynor.

Herbert Wilson K.C., Garrett W. WalkerK.C., andJames Andrews, for Edward Doherty.

Barton J.:—

By order dated July 28th, 1915, the applicants William Carroll, George Richardson, and Patrick J. Gaynor, holders of second debentures of the Dublin City Distillery, were appointed to represent the class of second debenture-holders, other than certain specified debenture-holders one of whom is Edward Doherty. These representative parties have instituted this proceeding by way of memorandum for the purpose of having it decided whether twenty-seven debentures issued by way of security for advances to the company to Frederick Hans Kennedy as trustee for Edward Doherty are invalid as against the holders of valid second debentures of the company. Twenty-four of these debentures were for the amount of £100 and three for the amount

of £10, in all £2430. They are impeached upon the ground that the meetings at which the resolutions were passed authorizing their issue were not properly constituted. Their invalidity is admitted, and the only question for decision is whether the applicants are precluded from averring their invalidity by an order of the Court, dated 8th June, 1911, affirmed on this point by an order of the Court of Appeal and the House of Lords in an action in which Edward Doherty was plaintiff, the company and the trustees for the second debenture-holders were the defendants. The applicants were not parties to that action, but it is said that they were privies through their trustees, who were defendants.

That action was brought mainly to establish the plaintiff's claim as pledgee of whiskey in casks against the company in priority to the second debenture-holders. That was the only contentious question in the action, but the plaintiff also stated in paragraph 26 of the Statement of Claim that these twenty-seven debentures had been issued to Frederick Hans Kennedy as trustee for him as a security for money advanced and claimed, in paragraph 5 of the prayer of the Statement of Claim, a good and valid lien on them for the amount of such advance and interest thereon, and by the order of the Court he obtained a declaration that he was entitled to a good and valid lien upon the debentures mentioned in paragraph 26 of the Statement of Claim, and an account of the moneys available to meet such lien, and of the sum due to him on foot thereof. That order was made so far as the trustees of the second debenture-holders were concerned in default of defence.

In my opinion the applicants are not precluded by that judgment from averring the invalidity of these debentures. On their behalf reliance was placed upon the principle which was referred to the old case of Hamond v. Walker (1), that trustees are not deemed to represent the interest of absent cestuis que trust in a contention between cestuis que trust inter se, although it may be otherwise in a contention between a stranger and all the cestuis que trust. It was suggested in reply that this was an obsolete doctrine which is superseded by Rule 8 of Order 16 of the rules of the Supreme Court. That rule enables trustees, executors, and administrators

to sue and be sued as representing the estate of which they are trustees without joining beneficiaries, and provides that they shall be considered as representing such beneficiaries, but goes on to provide that the Court or judge may, at any stage of the proceedings, order beneficiaries to be added or substituted as parties. That useful rule does not in my opinion affect the principle to which I have referred. It recognizes that in certain proceedings trustees and personal representatives would not adequately or properly represent beneficiaries.

The principle referred to in Hamond v. Walker (1) was discussed in De Mora v. Concha (2), reported in the Court of Appeal and in the House of Lords under the name of Concha v. Concha (3). Although the ground of that decision does not affect the present case, the principle to which I have just referred was incidentally alluded to both in the arguments and in the judgments in the Court of Appeal. In the arguments it was recognized that the executor does not represent beneficiaries in internal disputes; and Fry L. J., in the course of observations made on behalf of Baggally L.J. and himself, remarked, at p. 305, that “where the litigants both claim...