Kehoe v The Waterford and Limerick Railway Company

• Jurisdiction: Ireland
• Judgment Date: 24 April 1888
• Date: 24 April 1888
• Court: Chancery Division (Ireland)

Chancery Division.

KEHOE

and

THE WATERFORD AND LIMERICK RAILWAY COMPANY.

Flitcroft's Case 21 Ch. Div. 519.

In re Oxford Building andInvestment Society 35 Ch. Div. 502.

Bateman v. BoyntonELR L. R. 1 Ch. App. 359.

Dent v. London Tramways Co. 16 Ch. Div. 353.

Mills v. Northern Railway of Buenos Ayres Co.ELR L. R. 5 Ch. App. 621.

M'Dougall v. Jersey Hotel Co. Hem. & Miller, 528.

Bloxam v. Metropolitan Rail Co.ELR L. R. 3 Ch. App. 337.

Davison v. Gillies 16 Ch. Div. 347 n.

Burns v. Pennell 2 H. L. Cas. 497.

Foss v. HarbottleENR 2 Hare, 461.

Bloxam v. Metropolitan Railway Co.ELR L. R. 3 ch. 337.

Burns v. Pennell 2 H. L. Cas. 497.

M'Dougall v. Jersey Hotel CO.ENR 2 H. & M. 528.

Flitcroft's Case 21 Ch.Div. 519.

In re National Funds Assurance Company 10 Ch. Div. 118.

Oxford Benefit Building Society 35 Ch. Div. 502.

Davison v. Gillies 16 Ch. Div. 347 n.

Dent v. London Tramway Company Iblid. 344.

Dent v. London Tramway Company 16 Ch. Div. 353.

Davison v. Gillies Iblid. 347n.

Injunction Payment of dividend to shareholders out of capital Ultra vires Rolling stock Wear and tear of Discretion of Directors to replace.

Vox,. XXI.] CHANCERY DIVISION. 221: 'KEHOE v. THE WATERFORD AND LIMERICK M. R. RAILWAY COMPANY. 1888. April 18, 24. Injunction-Payment of dividend to shareholders out of capital-Ultra vires Rolling stock-Wear and tear of-Discretion of Directors to replace. The payment, by the Directors of a Company, of a dividend to the shareÂÂholders out of capital is illegal and ultra vires, and the rolling stock of a Railway Company is part of its capital. But where the Directors had been, for several years, replacing, out of revenue, rolling stock which had been worn out, and the rolling stock appeared to be improved and to be greater in money value than it was five years before, and, although there were some deficiencies in it which the Directors were gradually supplying, it did not appear that the traffic had been thereby interfered with or inconvenience suffered, the Court refused to restrain the payment of a dividend to the preference shareholders which had been declared at a general meeting until the deficiencies in the rolling stock had been supplied. The Court will not restrain acts done by the Directors in the exercise of their discretion in managing the affairs of their Company, unless the acts comÂÂplained of are illegal, as ultra vires. BY the writ the plaintiff claimed, on behalf of himself and all other the preference and ordinary stockholders and shareholders of the Waterford. and. Limerick Railway Company :- 1. An injunction to restrain the defendant Company and the Directors thereof from paying to the preference stockholders or shareholders of said Company, or any of them, the dividends declared and passed at the General Meeting of the said Company, held on the 28th February, 1888 ; 2. An injunction to restrain the said defendant Company and the Directors thereof from applying, towards the payment of the said dividends, any portion of the earnings or revenue of the said Company during the year 1887, which ought to have been applied or set aside for the purpose of making good the wear and tear of the railway, lines, buildings, bridges, rolling stock, and other the property and capital of the undertaking, which occurred during X222 LAW REPORTS (IRELAND). [L. R. I. M. R. the year 1887, and for replacing so much of same as had, during 1888. the said year, been destroyed or lost ; KEHOE 3. The costs of the action ; V. WATERFORD 4. General relief. & LIMERICK RilLWIY Co. The Right Hon. Samuel Walker, Q. C. (with him Arr. Alexander Holmes), moved for an injunction pending the hearing of the action, or until further order, in the terms of the writ. Dlr. P. P. White, Q.C., and Mr. Robertson, for the defendant Company. The affidavits on which the motion was supported and resisted, and the circumstances which gave rise to it, are very fully referred to in the judgment of the Master of the Rolls. The arguments, so far as they relate to the power of the Court to interfere are also referred to generally. The following cases were cited :-Fliteroft's Case (1); In re Oxford Building and Investment Society (2) ; Bateman v. Boynton (3); Dent v. London Tramways Co. (4) ; Mills v. Northern Railway of Buenos Ayres Co. (5) ; M'Dougall v. Jersey Hotel Co. (6); Bloxam v. Metropolitan Bail Co. (7) ; Davison v. Gillies (8) ; Burns v. Pennell (9). THE MASTER OF THE ROLLS (after reading the notice of motion) : The case has been, in its discussion, narrowed to the question as it affects rolling stock, including locomotives ; and the applicaÂÂtion is founded on the statements in the affidavits of Mr. Laurence Kehoe the plaintiff, who is a shareholder, Mr. John Stevenson M'Intyre, an engineer, and Mr. Robert K. Clay, a solicitor. Mr. Kehoe states that he has been for a number of years a (1) 21 Ch. Div. 519. (2) 35 Ch. Div. 502. (3) L. R. 1 Ch. App. 359. (4) 16 Ch. Div. 353. (5) L. R. 5 Ch. App. 621. (6) 2 Hem. & Miller, 528. (7) L. IL 3 Ch. App. 337. (8) 16 Ch. Div. 347 n. (9) 2 H. L. Cas. 497. Voi. XXI.] CHANCERY DIVISION. 223 shareholder in the Waterford and Limerick Railway Company, M. R. but does not say when he first became one. His affidavit says, " I 1888. at present hold in my own name 180 ordinary and 2000 4 per KEHOE V. cent. preference shares in said Company." These ordinary shares WATERFORD & represent .9000, 80 that his interest as an ordinary shareholder RAThwAy Co. very considerably exceeds his interest as a preference shareholder. He then states the constitution of the Company, and says : " For a few years prior to May, 1887, I and a number of the other shareÂÂholders, holding both ordinary and preference shares of the Company, were very much dissatisfied with the management of the said Company, and made numerous attempts to induce the Directors to allow independent and reliable persons, skilled in such matters, to investigate the financial and other affairs of the ComÂÂpany, for the purpose of having laid before the shareholders of the Company in general, at a meeting assembled, the real state of the affairs of the Company. Our efforts to have such investigation instituted were, however, always met by the Directors of the Company, the majority of whom are still members of the Board, in a most hostile manner. Our motives were impugned by them, and the Directors obtained at each meeting such a number of proxies that they for a length of time successfully resisted our efforts. At last, however, we succeeded in having a resolution passed at the General Meeting of the Company, held on the 23rd August, 1887, in the words following (so far as they are material) :- Resolved, that the following (naming them) be appointed a Committee, consisting of eight, to investigate the financial position of the Company, and its arrangement with leased lines and other Companies, with power to employ such skilled public accountants and other assistance as the Committee may think necessary and expedient to assist them in the aforesaid investigation.' The result of such investigation, and the report and recommendation of the Committee was to be furnished to the shareholders immediately upon the same being agreed to and dealt with at next half-yearly meetÂÂing. All the gentlemen nominated on said Committee agreed to and did act thereon, and held a number of meetings in Dublin, ranging from the 4th October, 1887, down to the 17th February, 1888. The said Committee, in pursuance of their powers, resolved to and did appoint professional experts of independent position and undoubted 224 LAW REPORTS (IRELAND). [L. R. I. M. B. capacity to investigate the affairs of the Company and to report 1888' thereon, under the following three heads :-1, The accounts and. KEII0E financial position of the Company to be reported on by the V. WATEEFoRD accountant ; 2, the permanent way and works and rolling stock _81 LIMERICK by an engineer ; and, 3, the traffic arrangements and agreements RAILWAY CO. with other Companies by a traffic manager. And for this purpose they secured the services of the following gentlemen :-Messrs. R. Mackay & Co., chartered accountants ; Mr. J. S. M'Intyre, and. Mr. Fust, civil engineers ; and Mr. W. E. J. Cotton, railway manager. The three experts did, in accordance with instructions, make examinations of the affairs of the Company in the three respective branches, and furnished their respective reports to the said Committee-the said Messrs. Mackay and M'Intyre in the year 1887, and the said Mr. Cotton on or about the 7th February, 1888. These three reports were fully considered by the Committee; and at a meeting held on the 17th February, 1888, and attended by all the members except Mr. Martin, it was understood that the Committee would recommend to the Directors that the reports of the experts should be laid before a special meeting of the shareÂÂholders, and that they should have full time to consider same, in order that they might for themselves see what the real state of the Company's affairs was; but no such recommendation was embodied in the report subsequently made by six members of the said ComÂÂmittee to the shareholders, and for that reason and others both Mr. Martin and I refused to sign. The majority of the ComÂÂmittee, on or about the 17th February, 1888, furnished to the Directors of the Company their report. Owing to the refusal of the majority of the...