Re Belfast Empire Theatre of Varieties Ltd

• Jurisdiction: Ireland
• Judgment Date: 13 February 1963
• Date: 13 February 1963
• Docket Number: (1963. No. 2 Sp.)
• Court: High Court

(1963. No. 2 Sp.)

In re Belfast Empire Theatre of Varieties Ltd.

In the Matter of the Companies Acts, 1908 to 1959,and In the Matter of the BELFAST EMPIRE THEATRE OF VARIETIES LIMITED

PATRICK BUTLER

Plaintiff

and

ROBERTA A. MORRISON and ANASTASIA SHANAGHER

Defendants.

Company - Winding up - Arrears of dividends - Some shareholders unascertainable - Claim by shareholder - Contract Voluntary winding up - Statute of limitations - Notice to prove claim or be excluded - Distribution of assets - Liquidator not trustee - Petition for winding up by the Court - Companies (Consolidation) Act, 1908 (8 Edw. 7, c. 69), ss. 14, 129, 169, 193 and s. 224, sub-s. 4 - Statute of Limitations, 1957 (No. 6 of 1957),s. 11, sub-ss. 1 and 5 - Trustee Act, 1893 (56 & 57 Vict., c. 53), s. 42.

Special Summons by a liquidator to determine questions arising on the voluntary liquidation of the Belfast Empire Theatre of Varieties Ltd. The facts have been summarised in the head-note and appear fully in the judgment of Kenny J., post.

A company which had not paid any dividends from 1895 until 1942 declared a dividend in each of the years from 1942 to 1961. By reason of changes of address and deaths, many of the shareholders or their representatives could not be traced and the relevant dividends remained unpaid. The company wont into voluntary liquidation in July, 1961. On directions being sought by the liquidator in relation to the unclaimed and unpaid dividends and the distribution of the assets, it was

Held 1, A company which declares dividends does not become a trustee thereof for the shareholders; the relationship is that of debtor and creditor and the Statute of Limitations, 1957, therefore applies. Smith v. Cork and Bandon Railway Co. (1870) I. R. 5 Eq. 65; In re Severn and Wye and Severn Bridge Railway Co.[1896] 1 Ch. 559; In re Drogheda Steampacket Co. Ltd.[1903] 1 I. R. 512, applied.

2, The articles of association of a company constitute a contract between the company and each of its members, binding as though under seal. The appropriate period of limitation under the Statute of Limitations, 1957, was therefore twelve years before the company went into liquidation.Oakbank Oil Co. v. Crum(1883) 8 App. Cas. 65 and Hickman v. Kent or Romney Marsh Sheep-Breeders' Association[1915] 1 Ch. 881 applied. Dicta in Smithv. Cork and Bandon RailWay Co. (1870) I. R. 5 Eq. 65; In re Severn and Wye and Severn Bridge Railway Co.[1896] 1 Ch. 559; In re Drogheda Steampacket Co. Ltd. [1903] 1 I. R. 512 and In re Artisans' Land and Mortgage Corporation[1904] 1 Ch. 796, to the effect that tho right of a member of a company to receive dividends comes from the share certificate as governed by the articles of association, disapproved.

3, The declaration of a dividend creates a debt due by the company to each shareholder. A liquidator is not a trustee for creditors or shareholders of a company and consequently cannot discharge his duty in respect of debts due by the company by payment into Court under s. 42 of the Trustee Act, 1893. By virtue of ss. 169 and 193 of the Companies (Consolidation) Act, 1908, on an application to the Court by a liquidator in a voluntary winding up, the Court may make an order such as it might make in a winding up under the supervision of the Court. Accordingly, the liquidator was ordered to notify shareholders by letter post and advertisement to prove their claims within one month or be excluded from the distribution of the amount of the dividends.

Dictum in In re Artisans' Land and Mortgage Corporation[1904] 1 Ch. 796 that a liquidator hag not power to deal with unclaimed dividends until the statutory period of limitation has expired, disapproved.

4, Since a liquidator is not a trustee for the shareholders he may not lodge in Court, under the Trustee Act, 1893, surplus assets payable to shareholders who cannot be traced. The proper course is for him to bring a petition for the winding up of the company by the Court.

In re The Cathedral Savings Bank Ltd. In re Uniacke 78 I. L. T. R. 154not followed.

Cur. adv. vult.

Kenny J. :—

The Belfast Empire Theatre of Varieties Limited (which I shall call "the Company") was incorporated in Ireland on the 6th December, 1894, with a nominal capital of £25,000 divided into 25,000 ordinary shares of £1 each. It was incorporated in, and has always had its registered office in, Dublin. The whole of the authorised capital was issued but, at a subsequent date, 562 ordinary shares were forfeited and for many years the issued capital has been 24,438 ordinary shares of £1 each fully paid. The articles of association of the Company (which excluded Table A in the First Schedule to the Companies Act, 1862) provided (clause 11):—"The capital of the Company shall consist of £25,000, divided into 25,000 ordinary shares of £1 each. The profits in each year shall be applicable to the payment of dividends to the holders of the ordinary shares, in proportion to the capital paid up, or credited as paid thereon."Clause 13 provided:—"The certificates of title to shares shall be issued under the seal of the Company, and signed by two directors, and countersigned by the secretary or some other person appointed by the directors." Clause 133 provided:—"The profits of the Company shall be applicable according to the provisions of the memorandum and articles of association," and clause 134 provided:—"The Company in general meeting may declare a dividend to be paid to the members according to their rights and interests in the profits, as defined by the memorandum and articles of association." Clause 136 provided:—"No dividend shall be payable except out of the profits of the Company, and no dividend shall carry interest." The articles did not contain any provision dealing with unclaimed dividends.

The Company did not pay any dividends from 1895 until 1942 since when dividends have been declared and paid in each year until 1961. The last dividend was declared at a meeting of the Company held on the 10th March, 1961, and was for the year which ended on the 31st December, 1960. When the Company resumed payment of dividends in 1942, many of its shareholders could not be traced as some of them had changed their addresses and had not notified the Company of the new addresses and others had died and the Company did not know the names of their personal representatives. On the 28th November, 1953, £2,299 9s. 11d. was shown in the Company's books as the amount of the dividends then due to and unclaimed by shareholders and this sum was, on the authority of a resolution of the Company, passed on the 5th March, 1954, transferred to the credit of the profit and loss account. There has not been any argument on the validity of this resolution and I express no opinion on this point. On the 10th March, 1961, the amount of unclaimed and unpaid dividends was £4,108 15s. 6d. which was due to 170 shareholders holding 4,556 ordinary shares.

On the 24th July, 1961, the Company passed a resolution that it be wound up and Mr. Patrick Butler, the applicant in these proceedings, was appointed liquidator. The liquidation...