Re the Newbridge Sanitary Steam Laundry Ltd

• Jurisdiction: Ireland
• Judgment Date: 14 December 1915
• Docket Number: (1915. No.490.)
• Date: 14 December 1915
• Court: Chancery Division (Ireland)

In re the Newbridge Sanitary Steam Laundry, Ltd.

M. R.

Appeal.

(1915. No. 490.)

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 — Winding up — Shareholders' Petition — “Just and Equitable” Clause — Companies (Consolidation) Act, 1908 (8 Edw. 7, c. 69), sect. 129, sub-s. 6 — Appropriation of Profits by Managing Director — Vicious Career.

The power of the Court to order the winding up of a company as being just and equitable under sub-s. 6 of sect. 129 of the Companies (Consolidation) Act, 1908 (corresponding to sect. 79 of the Companies Act, 1862), is not confined to cases the circumstances of which are ejusdem generis with those mentioned in the preceding sub-sections.

L., the managing director of a laundry company, entered into contracts in his own name for work to be done by the company, the profits of which amounted to £3268, of which L. accounted to the company for £1038 only. This he alleged was done with the consent of his co-directors. The capital of the company consisted of 2000 £1 shares, the majority of which were controlled by the managing director, and a co-director who was a business partner of L. In an action brought by two shareholders against the company and L., to compel an account of the profits so received, an order was made that he should so account; but no payment was made or account rendered by L., and no steps were taken by the company to compel him to account, and subsequent to the action a resolution of confidence in his management was passed by a majority of shareholders at a general meeting.

The plaintiffs in the action having presented a petition to wind up the company on the ground that in the circumstances it was “just and equitable” that the company should be wound up:

Held, by the Court of Appeal, affirming the decision of the Master of the Rolls, that a winding-up order should be made.

Petition.

This was a petition to wind up the company presented by two shareholders, Alexander Cockburn and Louisa Cockburn.

The petition stated that the company was incorporated under the Companies Acts in November, 1896, with a nominal capital of £2000, divided into 2000 shares of £1 each, of which 1990 were ordinary shares, and ten founders' shares. The amount of capital paid up, or credited as paid up, was £2000. There were only thirteen shareholders. Alexander Cockburn held 100 ordinary shares; Louisa Cockburn held 540 ordinary shares, and four founders' shares. There were three directors, viz., William Thornton, Henry Church, and Thomas J. Llewellyn. The last-named was managing director. He held 275 ordinary shares, and two founders' shares. William Thornton held 100 shares. William Beck, the secretary, held 200 shares.

Henry Church was not a shareholder, nor a member of the company. The company was established to carry on the industries of laundry work, dyeing, and cleaning, and carpet-beating, &c. The last dividend was declared in June, 1912, but not paid until November, 1912, after the petitioners had made representations to the Board of Trade. The petitioners alleged that if the accounts were properly taken, and the accounting parties made responsible, there would have been large surplus profits after paying the 8 per cent. dividend mentioned in the memorandum of association. The petition further stated that the managing director, Thomas J. Llewellyn, had entered into numerous valuable contracts in his own name, and had had the work done by the company, and had not accounted for the profits.

The petitioners instituted an action on behalf of themselves and all other shareholders against the company and the managing director, seeking to have him declared liable to account to the company for the profits. By an order of the Court of Appeal on November 13th, 1914, in the action, the defendant Thomas J. Llewellyn was declared to be a trustee for and liable to pay to the company all sums he received on foot of the contracts referred to, and an inquiry was directed what sums the said defendant had so received: Cockburn v. Newbridge Steam Laundry Company, Ltd. (1). The chief clerk's certificate, filed on the 23rd April, 1915, found that £2230 1s. 7d. was due by Thomas J. Llewellyn to the company. Since the commencement of the action the petitioners had ascertained that Thomas J. Llewellyn, who was a coal merchant, had been paid about £400 by the company for coals alleged to have been supplied by him to the company, and that another director, William Thornton, had been allowed a discount of 33¹/₃ per cent. on the amount of the work done for him by

the company, and the petitioners charged that the said work was done at a loss to the company. The petitioners submitted that the officials of the company were answerable to the company in a winding up for the losses accruing to the company by reason of the said irregularities.

After the hearing of the action on the 29th April, 6th and 7th May, 1914, pending the judgment, Thomas J. Llewellyn transferred the majority of his shares in the company, viz., 275 ordinary shares, to Messrs. Heiton & Co., Ltd., and retained only two founders' shares. The petitioners contended that the transfer was irregular and void, and that the transfer was made to Messrs. Heiton without or for a past consideration. All the shares, save the petitioners', and possibly Messrs. Heitons', were controlled by Thomas J. Llewellyn and William Thornton, and the petitioners and the remaining independent shareholders (if any) were in a minority, and could not control the action of the company. The company had carried on a highly successful and valuable business, and the assets, if properly realized, would have left a large balance for distribution amongst the petitioners and other shareholders, after paying all the liabilities in full.

Having regard to all these matters, the petitioners submitted that it was just and equitable that the company should be wound up compulsorily. The petition was supported by an affidavit made by the petitioner Alexander Cockburn.

Mr. William Hewat, managing director of Messrs. Heiton & Co., made an affidavit stating that the paragraph in the petition alleging that the transfer of the shares to Messrs. Heiton & Co. was made to them without or for a past consideration was wholly inaccurate. The fact was that in December, 1913, Thomas J. Llewellyn was indebted to Messrs. Heiton in the sum of £2000. This was a liability of years' standing, and had arisen in connexion with the supply of coal by Messrs. Heiton to him for sale when in his business at Naas and Newbridge, and Messrs. Heiton agreed with him to take over his coal business and premises, together with certain shares in the laundry company. Thomas Llewellyn did not inform the company that the shares were pledged or deposited with any bankers or person, but when Messrs. Heiton & Co. referred the matter to their solicitors to take over the deeds of the premises, they found that the certificate for these shares had been deposited by Llewellyn with the Hibernian Bank, and were held by it as security for two accounts. Further inquiries of the bank elicited that these shares were held not only as security for the private account of Thomas J. Llewellyn, but also as security for a separate joint account of Thomas J. Llewellyn and William Beck, the secretary of the laundry company, and in order to release the scrip, the Hibernian Bank required that Messrs. Heiton should obtain the consent of Mr. Beck. Eventually, in order to release these securities, Messrs. Heiton decided to pay off the personal obligation of Thomas J. Llewellyn to the bank as distinct from his obligation on the joint account with Mr. Beck, which account he (Mr. Hewat) was informed stood in the books of the bank as Llewellyn & Co., and accordingly paid the bank £575 12s. 10d., in exchange for the deeds of the premises and the scrip of the shares. If the petition intended to suggest that there was any collusion whatever between Messrs. Heiton & Co. and Thomas J. Llewellyn for the purpose of prejudicing or defeating the claims of the third parties against him, he (Mr. Hewat) absolutely repudiated any such suggestion, and stated that the only motive that inspired Messrs. Heiton in taking such transfer was to protect their interest in relation to the heavy indebtedness of Thomas J. Llewellyn.

An affidavit was made by William Beck, the secretary, to resist the application for winding up. He stated that the fact that no dividend was paid since the year 1912 was solely due to the action brought by the petitioners, and that all the available cash had to be requisitioned to defend that action. It was not true that the reason of there being no dividend paid since 1912 was because the accounts had been improperly taken and the accounting parties had not been made responsible. The only contracts entered into by Thomas J. Llewellyn in his own name or otherwise, the work of which was carried out by the company, were the contracts for the military hospital washing, which was the subject-matter of the action brought by the petitioners. It was true that Llewellyn did supply coal to the company, but that was with the full sanction and knowledge of all the shareholders, including the petitioners, and was not considered wrong or illegal. It was true that Thornton was allowed a discount of 33¹/₃ per cent. on his washing account with the connivance of Llewellyn; but that arrangement was well known to all the company, and all the directors received the benefit of it, including the petitioner, Louisa Cockburn, while she was a director.

As regards the statement that Llewellyn had parted with his shares, he stated that under old Table “A,” under which the company was incorporated, no qualification as to holding shares was necessary to validate the holding of office by a director. It was not true that all the shares except the...