1906 In re THE AUSTRALIAN TRADERS LTD. CUSSEN, J. by the Melbourne Chilled Butter and Produce Company Proprietary Limited, or by persons acting for that company. Prior to incorporation a Mr. Plowman, who was apparently acting under the directions of officers of that company, which was then in existence, had visited PRODUCERS AND the Swan Hill district, and, as appears from his own affidavit, which is not contradicted, obtained applications for the whole of the shares taken up in that district. He told each applicant that in subscribing for shares they were perfectly safe, as the company would not utilize their money for anything but the erection of a butter factory at Swan Hill, and that in the event of a factory not being built, their money would be returned intact, without any deduction whatever. He offered to put this upon the receipts he gave for the money he got, and in some few cases did so. He states in his affidavit that he had full authority from the general manager to give this undertaking. But he must mean the manager of the promoting company. I think that the first of those now appearing to whom shares were allotted was Mr. Gray, who had 100 shares allotted to him on 9th August 1904, I should judge, as inducement to him to become a director, because it is so provided by article 84. (His Honor read the article.) Mr. Gray, having obtained these shares, was elected a director of the company on the 31st of August 1904, and he as director immediately moved a resolution that a call of 1s. per share should be made, and that it be payable on 1st October 1904. The call was made. He was also present at the directors' meetings held on 17th January and 28th February, 1905, and at the latter meeting he seconded the resolution for the call made at that meeting. Mr. Gray having been allotted shares, and probably being the representative man in the district, the company on 15th September 1904 purported to allot shares to all the other persons who are now appearing in this matter except one, and allotted shares in respect of all the applications, which are in the ordinary form. With one, or perhaps two exceptions, all the allotments were made on the 28th September 1904; the other allotment was made on 16th March 1905. Perhaps I ought to mention that in an exhibit to the affidavit of the liquidator are a number of dates-15th of September 1905 and 28th September 1905 which it is admitted ought to be the 15th of September CUSSEN, J. 1906 THE AUSTRALIAN TRADERS LTD. 1904 and 28th September 1904. A number of other calls were subsequently made, in respect of some of which Mr. Gray moved or seconded resolutions. On the 12th June 1905 an extraordinary resolution to wind up the company voluntarily was passed. PRODUCERS AND On the 13th of December 1905 the Court made an order that the company be wound up compulsorily. This matter then comes before me in connection with the settlement of the list of contributories. The names of all the persons appearing here are now on the register, and before I deal with what I conceive to be the law I shall refer to Mr. Gray's affidavit, which I take to be a representative affidavit, because the others have not filed affidavits. In paragraph (1) he says:-"The Company was incorporated on the 30th March, 1904, and the circumstances under which I became a shareholder in the Company are as follows." I think that statement alone, if it was not shown to be a misapprehension or mistake, would go far to settle this case. But I do not think there is any mistake; I think he is stating the position accurately--that he did agree to become a shareholder, but on the understanding that the money to be derived from his shares was to be applied in a certain way. Paragraph (2) sets out that Mr. Plowman canvassed the Swan Hill district with the object of getting residents to take shares. He said that the company when formed would be prepared to erect a butter factory at Swan Hill if sufficient money were provided by the local residents; that the manner in which it was proposed the money should be obtained was that the residents should apply for shares in the company, and that all money paid by them in respect of shares should be used for the purpose of erecting the factory, which would then becon.e their own property, and that he was prepared to receive applications for shares upon those terms, and to give a guarantee that if the factory was not erected the money paid by the applicants would be returned to them, and to give receipts for the money expressly so stating. In confirmation of this statement he afterwards produced letters and telegrams showing that the directors guaranteed to refund the application money without any deduction if the required amount for building the factory was not subscribed. The receipt given in one instance states "This cheque to be returned if factory be not erected in Swan Hill." Mr. Gray then goes on to state in CUSSEN, J. 1906 In re THE PRODUCERS AND LTD. another part of his affidavit that the money which was obtained from what may be called the Swan Hill shares-as I understandin respect of calls made by the company, was paid into a separate AUSTRALIAN account in a bank at Swan Hill, in order that it might be applied TRADERS LAD solely in building the factory, and he says that the shares were taken up on the distinct understanding that no calls would be made except for that purpose. He then points out that the directors fully intended to carry out this obligation, and sets out a great number of minutes showing this. Unfortunately a sort of vis major intervened, and the company is now being wound up. Mr. Gray concludes: I would certainly under no circumstances have become a member of the company except upon the express terms that all money paid on my shares should be used for the erection of a factory, and that the money would be returned if the factory was not erected." Those being the facts of the case, I will apply the law on the subject as it appears to me. It is provided by the Companies Act 1890, sec. 24, that "Every person who has agreed to become a member of a company under this Part of this Act and whose name is entered on the register of members shall be deemed to be a member of the company." And sec. 39 provides that "Where any company formed under this Part of this Act is wound up every present and past member of such company shall be liable to contribute to the assets of the company to an amount sufficient for payment of the debts of the company and the costs charges and expenses of the winding-up and for the payment of such sums as may be required for the adjustment of the rights of the contributories amongst themselves." And by sec. 71 it is provided that "The term contributory shall mean every person liable to contribute to the assets of a company under this Part of this Act in the event of the same being wound up." I am now settling the list of persons who are contributories in this company. The effect of these sections is stated by Baggallay, L.J., in In re Scottish Petroleum Company (f): "Every person who has agreed to become a member of a company, and whose name has been entered on the register of members, is liable as a contributory in the event of the company being wound up. This is, in substance, the combined effect of the 23rd, 38th, and 74th sections of the Companies Act (f) [1883] 23 Ch. D. 413. 1906 In re THE AUSTRALIAN TRADERS LTD. 1862." In settling a list of contributories two questions may arise. CUSSEN, J. Sometimes an objector, while admitting that he has agreed to become a member of the company, and that he is on the register of shareholders, says that he ought not to be on the register, either because he was induced to take the shares by reason of some fraud PRODUCERS AND or misrepresentation on the part of the directors, and that his contract was voidable, and he has avoided it, or because he has transferred his shares, and the transfer ought to have been registered. In other cases an objector says--"I never agreed to become a member of the company, and therefore I ought not to have been put on the register." In cases like this, which nearly approach the present case, the question arises-Has there been an application which is not to be perfected until something has been done, or has there been a contract in præsenti to take shares, with an agreement that something is to be done after membership has been completed? The matter may be stated in this way-Has there been a conditional application or allotment, or a contract with a collateral agreement containing a condition subsequent? But I prefer to state it in the way in which I have done, because the use of these terms is misleading. In matters of this kind collateral agreement does not mean an agreement apart from the transaction, and when the terms condition subsequent and precedent are used, the question arises-subsequent to what, and precedent to what; and thus misapprehension is likely to arise. The term condition precedent ordinarily is applied to conditions which are precedent to a right of action and a right to claim further performance, as well as to those which are precedent to the existence of a contract, but here the term means precedent to membership, the reason being that once membership is established the liability is fixed by statute. There are cases even where there have been conditional applications or allotments in which the parties have by their subsequent conduct shown an intention to waive any right they had to insist on the condition, and have made a new agreement to take and hold the shares without any condition, and it does not matter whether this is shown by an express arrangement or by a course of dealing. This last statement is not unimportant in regard to many of the persons concerned here, because many show clearly by their subsequent conduct that they CUSSEN, J. regarded themselves as members of the company. 1906 In re THE AUSTRALIAN TRADERS LTD. Notices of meetings and of calls were sent to them and they paid the calls. In regard to Gray the case is still stronger, because, knowing the rule which required shares to be allotted to him before he became a PRODUCERS AND director, he had the shares allotted to him and acted as a director of the company. In regard to some of the others, they seem to have done nothing except receive notices and pay application and allotment money. But in regard to them I think it is sufficient to say that they applied for shares in the ordinary way and paid money therefor, and there was no condition precedent in the sense in which the words are used in this class of cases. I may say that I think these principles are to be found in effect in Fisher's Case (g). Fry, L.J., says:"The condition I read to be one which provides for the payment, at some future time, of sums which were to become due at a future time on shares which were to be allotted in pursuance of that proposal. Instead, therefore, of the things contemplated by the condition being things which could be done before the allotment of shares, they were things which in their nature must be done after the allotment of shares, and they were things which could not be done unless shares were allotted, for unless the shares were allotted there was no obligation to pay the sum at all. In its nature, therefore, the condition was a condition subsequent and not a condition precedent." And in that case the word conditional had been written in the allotment book opposite these shares. The learned Judge then proceeds to consider how the applicant acted and how the company acted subsequently, and he thinks those actions only consistent, as I think the action of most of those concerned in this case only consistent, with their being shareholders in the company; but I think that the words I have read apply with great force to this case. The result is that all these gentlemen must be placed on the list of contributories. It is a very hard case, but the question is whether they or the creditors of the company should suffer. Solicitors for the liquidator: Nunn, Smith & Jeffreson. R. H. G. (g) [1885] 31 Ch. D. 120, at p. 126. |