Re Lough Neagh Ship Company; ex parte Workman

• Jurisdiction: Ireland
• Judgment Date: 30 January 1895
• Date: 30 January 1895
• Court: Chancery Division (Ireland)

In Re Lough Neagh Ship Company; Ex parte Workman.

M. R.

CASES

DETERMINED BY

THE CHANCERY AND PROBATE DIVISIONS

OF

THE HIGH COURT OF JUSTICE IN IRELAND,

AND BY

THE COURT OF BANKRUPTCY IN IRELAND,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL.

1895.

Company — Subrogation — Implied power of borrowing — Question of borrowing ultra vires — Equity of lender to be subrogated to rights of creditors paid out of money borrowed — Interest on loan.

A Company formed to purchase and work the ship “Lough Neagh,” when the ship was ready for delivery, requested J. W. (who was one of the directors of the Company), to advance to them the sum of £7500, which was owing to the builders in respect of the price of the ship in order to have it released and to obtain possession of the same. J. W. agreed to lend the money, to be repaid with interest at 7 per cent. The money was bonâ fide advanced by the firm of J. & R. W., merchants (of which firm J. W. was a member), and was paid to the shipbuilders by the Company. The ship was in consequence released and became the property of the Company. The Company had not at the time any means (without borrowing) available and sufficient for the payment to the shipbuilders, and but for the loan the Company would not have obtained delivery of the vessel. There was no express power, authorizing the borrowing of money for the purpose of paying for the ship itself, or of providing capital for the undertaking, contained in the memorandum of association of the Company. The Company was being wound up under an order of the Court, and J. & R. W. claimed the amount of their loan and interest at 7 per cent. per annum:—

Held, that J. & R. W. were entitled to be subrogated into the position of creditors of the Company in respect of the loan of £7500:—

Held also, that as there was nothing before the Court to show that the shipbuilders were specifically entitled to interest in respect of the debt due to them, and as the claimants were simply placed in their position as regards the £7500, they were not entitled to interest on the loan at 7 per cent. or any other agreed rate, but that they should be allowed interest on the loan at the Court rate of 4 per cent.

Appeal from a ruling of the chief clerk disallowing certain claims by J. & E. Workman, merchants, against the “Lough Neagh” Ship Company, which was being wound up under an order of the Court.

The circumstances and facts of the case, so far as they are material for the purposes of this report, are stated in the judgment of the Master of the Rolls.

Gordon, Q.C., and J. H. Moore, for the claimants, J. & R. Workman.

Meredith, Q.C., and Jefferson, for the Liquidator of the Company.

The following authorities were referred to:—Australian Auxiliary Steam Clipper Company v. Mounsey (1); Bryon v. Metropolitan Saloon Omnibus Company (2); Blackburn Benefit Building Society v. Cunliffe, Brooks & Co. (3); Baroness Wenlock v. The River Dee Company (4); Small v. Smith (5); In re Patent File Company (6); Laing v. Reid (7); Ex parte Pitman and Edwards (8); Campbell'sCase (9); General Auction Estate Company v. Smith (10); In re Cork and Yoaghal Railway Company (11); Gibbs and West'sCase (12); Bluck v. Mallalue (13); Re the Cardiff, etc., Company (14); Buckley on Companies' Acts, pp. 165, 505.

Gordon, Q.C., and J. H. Moore, for the claimants, J. & R. Workman.

Meredith, Q.C., and Jefferson, for the Liquidator of the Company.

The Master of the Rolls:—

The Company was incorporated in January, 1891, for the objects stated in the memorandum of association, which were as follows:—

(a) To purchase the steel barque “Lough Neagh;” to own and work same.

(b) To purchase or otherwise acquire, charter, or otherwise hire, equip, load on commission, sell, repair, let out to hire, and trade with the said vessel.

(c) To carry on the business of shipowners in all its branches, and any other business connected with the said vessel, or which may for the time being be expedient to be carried on therewith.

(d) To purchase or otherwise acquire shares in this Company, and to dispose of the same by sale or otherwise, or to extinguish or re-issue same.

(e) To employ as ship's husbands, managers, and general agents of and for the said ship, any person, firm, or company.

(f) To sell, improve, alter, manage, or dispose of the said ship, her tackle, stores, and appurtenances.

(g) To insure the whole or any part of the said ship, her freight, cargo, or other property, on behalf of this Company.

(h) To mortgage or charge the said ship or other property of the Company to secure payment of any moneys due from the Company for repairs, insurance, payment of salvage claims, or of obtaining discharge of the said ship from arrest; and expenses incurred in earning freights or prosecuting voyages; and all liabilities or expenses properly incurred by the managers or ship's husband on account of the said ship; and all debts and liabilities of the Company whatever; and all moneys advanced to pay or discharge moneys or claims so due or incurred as aforesaid; or any debts or liabilities of the Company.

(i) To do all such other things as are incidental or conducive to the attainment of the above objects.

The capital was to be £12,000 in 1200 shares of £10 each, which were to be—and I presume were so far as issued—fully paid up on allotment. How many shares were actually allotted I am not at present exactly aware; but it appears that there was difficulty in getting in the money promised by the public, and when the vessel was ready for delivery there was still due to the builders £7500 or so of the contract price of £11,350. The remaining £3850 would appear to have been paid under the contract.

Mr. John Workman was a director of the Company, and a member of the firm of J. & R. Workman, merchants; but so far as appears neither he nor J. & R. Workman were connected in any way with the firm of Workman & Clarke, the shipbuilders who built the “Lough Neagh.”

In these circumstances Messrs. M'Williams, Smyth & Co., who were the agents for the ship, and entrusted by the Company with its management, applied to Mr. Workman for assistance in order to enable them to release the ship, on which Workman & Clarke had, of course, a lien for their unpaid purchase-money. This he agreed to render upon terms which are incorporated and set out in a few letters, which I shall now read. On the 24th November, 1891, M'Williams, Smyth & Co., write:—

“Dear Sir,—This vessel is now about finished, and will be ready to leave here to-morrow morning for Newport, from whence she has been chartered by Harrower and Workman for Freemantle, W. Australia.

We had promised to give Messrs. Workman, Clarke & Co. a further payment on account of the vessel, and shall be glad if you can see your way to let us have a cheque for the £500 you promised to invest in the Company.

We are now making a vigorous effort to collect all the promised money, as it is now required, seeing that the vessel is ready for sea. You can make the cheque payable either to ‘Lough Neagh’ Ship Company, limited, or to the builders direct.”

Then came the letter of the 3rd December:—

“Dear Sir,—This vessel is now at Newport, loading, and as Messrs. Workman, Clarke & Co. are anxious for settlement, would esteem your assistance in the matter as we have not yet received one-half of the share money that has been promised to us.

The contract price for the vessel is £11,575.

To release the vessel in the meantime we will require £7500 to £8000, and shall be pleased to have your assistance in the matter. The greater part of this will only be for a very short time, and, if agreeable to you, would give you acceptance, ¹/₄ at 3 months, which we would take up at maturity, ¹/₄ at 6 months, which we would also take up, and perhaps pay off another £1000. Then the balance in about eighteen months. The 3 and 6 months' bills we would be...