§ House in Committee (on re commitment) (according to order).
§ THE LORD CHANCELLORMy Lords, I have only a few words to say in explanation of my now moving the Amendments which appear on the Paper. The fact is, that those Amendments were only delivered at 3.40. p.m. on the day on which the Committee met, and the result was that neither I nor the noble Lord who is in charge of the Bill had the opportunity of dealing with them, or I should have done in Committee what I propose now to do in your Lordships' House. I hope that these Amendments, together with those which are proposed by my noble Friends, will bring the Bill more into harmony with the Bill as it came from the other House. A practically new Bill would, I think, be in peril of not passing into law, which, I am sure your Lordships will agree, would be a matter of regret. I thought it right to explain that, because I should be very sorry if it should be supposed I am doing anything to impair the efficiency of the Grand Committees, or that would be disrespectful either to the Committee or to my noble Friends, who have taken great pains to put the Bill into shape.
§ LORD HERSCHELLMy Lords, of course the Amendments which are proposed by my noble and learned Friend will be carefully considered, but I feel 618 bound to say a word or two with regard to what my noble Friend has just said. The truth is, that when this Bill came from the House of Commons, it was in many respects rather a sketch of a Bill than a Bill. There has been no single word introduced into it in this House which has been intended in the slightest degree to affect its principle or its scope. The only object has been to make a perfect machinery whore, before, a very imperfect machinery existed, and to remove the probability of difficulties and litigation, where, according to the judgment of many, those probabilities were before very great. I must confess I cannot myself think so badly of the House of Commons as for a moment to suppose that when a Bill of this sort goes back to them, with no single principle interfered with, but only the machinery made more effectual, they will dream of rejecting the Bill simply because it is made rather longer than when it left that House. Of course, if we had altered the scope of the Bill, or in any way made it a different measure in that sense to that which it was before, I could understand the view taken of it by my noble and learned Friend and those who take the same view; but unless they can show either that those provisions are unnecessary, or will be mischievious in their effect, I cannot believe that the House of Commons will reject the Bill simply because it has been made a better one in respect of its machinery.
§ THE LORD CHANCELLORI think the language of Clause I becomes extremely awkward and inconvenient unless the words are used which were originally in the Bill—"in England or Ireland by the High Court, and in Scotland by the Court of Session." If my noble and learned Friend's Amendments are taken, it would, I think, become necessary to make other provisions.
§ LORD MACNAGHTENOn the contrary, I propose to use the definition of "Court," which is used in the Act of 1869; that is, the Superior Court which has jurisdiction to make an order for winding up the company. That will include the Chancery Court of the Duchy of Lancaster. That Court does continually make winding-up orders.
§ THE LORD CHANCELLORThat is true, but it is not a Superior Court; on the contrary, it has always been excluded from the definition of a Superior Court.
§ LORD MACNAGHTENThen leave out the word "superior," and say "a Court which has jurisdiction to make a winding-up order." That is the definition of the Act of 1869.
§ THE LORD CHANCELLORI would not object to the words leaving out the word "superior."
§ LORD HERSCHELLI think it would be an improvement, because, of course, the noble and learned Lord opposite intends to follow that up by another Amendment relating to the Court of Chancery in the County Palatine of Lancaster. I think there are strong objections to the clause which the noble and learned Lord opposite is about to propose which will be entirely covered by accepting the Amendment of my noble and learned Friend, because the "High Court" may apply as regards companies within the jurisdiction of the Court of Chancery of the County Palatine, and that leaves it uncertain in the case of what companies the Court of Chancery of the County Palatine might exercise its jurisdiction. I do not know what is meant by "being within their jurisdiction; "being within their jurisdiction for the purpose of winding up is quite intelligible. My noble and learned Friend confines it to that, and I think that is a proper mode of dealing with it, whether in the County Palatine or elswhere. I think that would avoid the necessity of the Amendment of the noble and learned Lord.
§ THE LORD CHANCELLORLeave out the word "superior" and insert the words "which is authorised to make an order for the winding up of the company."
§
Amendment moved, in page 2, at the end to insert—
(5.) The power by this Act given to the High Court may, as regards companies within the jurisdiction of the Court of Chancery of the County Palatine of Lancaster be exercised by that Court."—(The Lord Chancellor.)
§ On Question, agreed to.
§ LORD MACNAGHTENAfter the words "entitled to object," in line 20, I propose to insert the words—
And who signifies his objection in manner directed by the Court, or by rules of Court.
§ THE LORD CHANCELLORIf the noble and learned Lord would omit the words, "or by rules of Court," I have no objection to that Amendment.
§ LORD MACNAGHTENCertainly.
§
Amendment moved, in line 20, after the word "object" to insert the words—
And who signifies his objection in manner directed by the Court."—(The Lord Macnaghten.)
§ On Question, agreed to.
§ THE LORD CHANCELLORThe Amendment I here propose is to take the place of my noble and learned Friend's Clause 3—
Provided that the Court may in the case of any person or class of persons for special reasons dispense with the notice required by this section.The Amendment proposed by my noble and learned Friend is to add that—The Court may on special grounds dispense with any notice required by this Act.I think that is too wide.
§ LORD MACNAGHTENI quite agree. I think it would come in better as the Lord Chancellor proposes.
§
Amendment moved, after line 23, to insert the words—
Provided that the Court may, in the case of any person or class of persons, for special reasons, dispense with the notice required by this section."—(The Lord Chancellor.)
§ On Question, agreed to.
*LORD ZOUCHE OF HARYNG-WORTHIn Clause 1, page 2, line 2, I propose to leave out from the word "creditors" to the end of the clause, and perhaps I may be allowed to explain to your Lordships in a very few words the object of this Amendment. The part of the clause which I am moving to have struck out is, I think, an innovation upon the Bill, as it was when it came tip to us from the House of Commons. The Bill was referred, as your Lordships know, to the Standing Committee on General Bills, and a very long discussion took place upon it, extending over two days. A great deal of the discussion turned upon this very important question, and upon the important principle which is contained in it. Your Lordships are, of course, aware that this Bill provides for the alteration of a Memorandum of Association of a company; and in order to enable companies to vary the conditions on which they trade, it is pro- 621 vided that the now objects are to be cognate or ancillary to the original one. Then it was proposed that if there were dissentient members, they might apply to the Court to be paid off, and to have their names accordingly removed from the register of members. That is to say, if they did not approve of the proposed change in the objects of the company, they could go to the Court and say that the constitution of the company was being altered to something else, something different to what it was when they embarked in it and took their shares, and that they wanted to be paid off. It was impossible not to see the justice of that proposition, and that some provision ought to be made for those dissentient shareholders: but again and again when the question arose in the Committee, it was never quite fully answered how that proviso was to be carried into effect, because this difficulty at once arose: out of what funds are the dissentient members to be paid? It was pointed out by one or two noble Lords on the Standing Committee that they could not very well be paid off out of the existing capital, because it is against the provisions of the present law that companies should buy their own shares; companies are not allowed to purchase their own shares, and consequently they would be using the capital of the company in an absolutely illegal manner. Well, then, are the dissentient shareholders to be paid out of the profits of the company? If that were to be done it might seriously hamper the company, who might be otherwise benefited by the change. Then there was a third proposition suggested in the Committee, namely, that the assenting shareholders—that is to say, the majority—or the winning side in regard to the proposed change of aim, should in some way contribute out of their private means, or make up something in the nature of a private purse in order to pay off the dissentient shareholders. The amount to be paid might possibly represent one-fourth of the capital. I think under the Companies Act, with which this Bill is to he read, there are certain provisions laid down as to the manner in which special resolutions are to be passed, namely, that the resolution must be passed by a majority of three-fourths, and then that it must be subsequently confirmed, though on that occasion there need only 622 be a bare majority. In any case, the one-fourth of the shareholders, who might possibly represent as much as or even more than one-fourth of the capital, might go to the Court and say, "We object to the proposed change, and we ask the Court to order that the other shareholders who have beaten us shall pay us off." At once the question arises, how is that to be done? I need hardly point out to your Lordships that if there were any idea of the majority making up anything like a private purse to pay off the dissentient shareholders, that opens out a most dangerous innovation, and would practically do away with the safeguard of limited liability, because those people who would be called upon to provide possibly very large funds in that way would, in point of fact, be saddled with a liability far greater than that which they undertook when they subscribed for or bought their shares. I think, my Lords, I have said quite enough to show the great difficulties in which this proposition would land us; and I may further say that those difficulties were very apparent to the Standing Committee. There was, as I have said, a great deal of discussion upon it, and at last the Committee came to a Division; in fact, there were several Divisions, and in the last Division this proposition was only carried by a majority of 3 in a Committee of 33; that is to say, there were 18 for the proposition, which, I think, was moved by my noble Friend Lord Balfour, and 15 against. I venture to express a hope that the House may think fit to accept the Amendment, after what has been said by the noble and learned Lord on the Woolsack, when he said it was desirable that this Bill should, as far as possible, be kept in the same shape as when it left the House of Commons. I beg, my Lords, with these few words to move the Amendment.
§ Amendment moved, in page 2, line 2, to leave out from the word "creditors" to the end of the Clause.
*THE SECRETARY TO THE BOARD OF TRADE (Lord BALFOUR of BURLEIGH)My Lords, I hope the House will not consent to omit these words. The noble Lord who has moved their omission has given a very full and, I believe, accurate account of what took place in Standing Committee on the subject. It is 623 not, therefore, necessary for me to go over the same ground. I concur entirely in saying that it would not be right that the dissentient shareholders should be paid off either out of the capital of the company, or out of any profits made by the company. I do not share the opinion of the noble Lord that the majority will suffer any hardship by being obliged, in the discretion of the Court, to find from their private means a fund whereby the dissenting shareholders can be paid off. It seems to me that if they desire the alteration to be made at all, it is not unfair to prove them by such a test as this. And I would point out that it is not to be an absolute order that they shall have to find this money; but it is only if the Court, in its discretion, shall think the objections of the minority so reasonable and well-founded that they ought to be allowed to give up their shares and to be compensated for them. As to the point that it does away with limited liability, I cannot concur in that view, because it is a matter of choice for the shareholders; there is no compulsion upon the majority to take the action which they are to be presumed to have taken before this state of matters can arise; and if their liability is at all increased, it is increased by their own action and for their own purposes, the value and benefit of which to themselves they have presumably fairly and properly considered. My Lords, I go back to the general ground on which this Bill was promoted. It is desired by this measure to relax the hard and fast conditions which prevent the alteration of any Memorandum of Association of a company except by the sanction of Parliament: but I think the House will agree that while you relax it; is not desirable that it should be unduly or excessively relaxed, but that certain conditions should be attached. That seems to me to be reasonable, and I hope, under all the circumstances, that the House will not assent to this proposal to reverse the decision of the Standing Committee.
§ LORD HERSCHELLThis was a provision which was inserted in your Lordships' House, and, therefore, we need not have any tenderness in dealing with it, as we have been warned by my noble and learned Friend to have as regards the provisions contained in the Bill as it came from the other House. The noble 624 Lord who has just sat down has said that under this provision there would be no power to pay off dissenting shareholders out of the capital of the company. I do not know why the noble Lord says so. It appears to me perfectly manifest that if the Bill is passed in this form it will be understood that there is authority to do that. The provision is that when the company is applying for this alteration, the Court may order that any shareholders dissenting from the alteration may be paid off. Who are to be the subjects of the order? The application is made by the company.
§ LORD HERSCHELLBut it is made on behalf of the company, and when it is provided that the Court may order that the dissenting members shall be paid off, undoubtedly it would be understood to be out of the capital of the company. It must be so, because otherwise it would enable the company to diminish its capital. But that is not the case, and the Bill is clearly so drawn as that it would not be so understood. But I think the form in which it is drawn is ineffectual. Upon whom is the order to be made? Clearly against somebody. If the Court makes the order, it involves that the order is directed against somebody for the purpose of compelling them to pay. Really, what I understand by this provision is that the Court shall not confirm the new arrangement unless the dissenting shareholders are in some way or other arranged with. I would submit to my noble and learned Friend opposite that the proposal which my noble Friend Lord Macnaghten has on the Paper really meets the case, because that provides that, at the instance of the dissenting shareholders, the Court may adjourn the case in order to give an opportunity for an arrangement to be come to. That hangs the matter up until an arrangement is made, and gives the Court a control over the whole thing, so that they are not bound to carry out the arrangement unless they think fit to do so. If the people who propose the alteration think it worth their while to go on, it would, surely, be worth their while to arrange for paying the dissenting shareholders, and then the matter could be completed. That is surely a much 625 better way of doing it than by saying the I Court can make an order that these people shall be paid off without saying how the order is to be enforced.
§ THE LORD CHANCELLORI think, even with my noble and learned Friend's Amendment, there may be some little difficulty about it, because the Amendment, as it stands at present, does not say that the Court is to make the order if an arrangement has not been made. It is, I think, rather vague language—that the Court may
Adjourn the proceedings in order that an arrangement may be made to the satisfaction of the Court for the purchase of the interests of dissentient members.If the meaning of the section is that the order is not to be made unless that is done, I can understand it. Words to that effect might, perhaps, be added to get rid of the objection.
§ LORD MACNAGHTENYou might add that if the Courtis not satisfied it may dismiss the application. But I think that is unnecessary, for it seems to me it follows. Evidently it is quite within the discretion of the Court whether it will confirm the order or not, and if no arrangement was made, of course the Court would reject the application. I think, therefore, that would meet the case; but I should not object to adopt the Amendment suggested by the Lord Chancellor.
*LORD ZOUCHE OF HARYNG-WORTHThe House will understand that I had not the opportunity of reading the Amendments to be moved by the noble and learned Lord Macnaghten. I must say that I think it would be better for that Amendment to be adopted instead of mine. In fact, mine would be quite covered by that; and therefore I would ask the House to allow me to withdraw my Amendment, on the understanding that the noble and learned Lord's Amendment shall be considered.
§ LORD HERSCHELLI think it would be better to leave the words exactly as they stand, and not to add the further words now.
§ THE LORD CHANCELLORThe language is rather vague.
§ Amendment (by leave of the House) withdrawn.
626§ LORD HERSCHELLThen you might add—
And the Court in the event of no such arrangement being come to, may refuse to confirm the alteration.The Court would not sanction the scheme.
§
Amendment moved,
In page 2, leave out lines 3 and 4, and insert "adjourn the proceedings in order that an arrangement may be made to the satisfaction of the court for the purchase of the interests of dissentient members; and the court may give such directions and make such orders as it may think expedient, for the purpose of facilitating any such arrangement or carrying the same into effect; Provided always, that it shall not be lawful to expend any part of the capital of the company in any such purchase."—{The Lord Macnaghten.)
§ Agreed to.
§ Clause, as amended, agreed to.
§ Clause 2.
§ THE LORD CHANCELLORI propose to omit this clause, but I think it is rather a matter of drafting as between my noble and learned Friend and myself. What I propose is, that something should be added later. I quite understand the object of his clause is to take care that the proceedings taken for the confirmation should be made public, but I think it is possible to provide for this in another form. I entirely sympathise with that view, and I think if, at a later stage of the Bill, one were to put at the end, "being confirmed by the Court upon petition," or some similar words, that would effect all he desires much better. The reason I object to the 2nd clause as it stands is that it imports that any application to the Court must be by petition. As my noble Friend knows, an application by petition is a much more expensive form of procedure than an ordinary application to the Court, and I think his object would be carried out by omitting this clause and putting in the words I have suggested at a later stage of the Bill.
§ LORD HERSCHELLThey might come after line 11, in Clause 4.
§ LORD MACNAGHTENI quite assent to that.
§ Amendment moved, "To leave out Clause 2," agreed to.
§ Clause 3 agreed to.
627§ Clause 4.
§ LORD HERSCHELLI would ask my noble and learned Friend to consider at a later stage whether, with regard to the framework of the Bill, especially in view of the provisions with regard to alterations, it might not be well to make this an additional sub-section of Clause 1. It is really a consequence of the other provision, and would, I think, be much better put in there. It would also be more in conformity with the Bill as it came up to this House, and would read better altogether.
§ THE LORD CHANCELLORI think so.
§ LORD MACNAGHTENI have an Amendment upon this clause, at page 2, line 18, after the word "Company" to insert "or to restrict or abandon any of the objects specified in the memorandum of association;" but I do not know that it becomes necessary now.
§ THE LORD CHANCELLORThen the next Amendment I have is to move to leave out lines 19 and 20, in this clause. They are the last two lines of that clause, that the Court may, by order, confirm the alteration in the cases mentioned,
or in any similar or analogous case where the Court thinks it reasonable and proper that the alteration should be confirmed.I confess I am very jealous of those words: I do not know what is "similar" or what is "analogous"; and I do not know what it is that the Court may "think reasonable or proper," under the circumstances. That seems to me to leave a wide field open. My noble and learned Friend has, it appears, gone through the whole matter with great care, and he appears to have swept up a great deal in those general words, leaving to the Court the duty of their interpretation. I suppose this is inserted in substitution for the expression "cognate and ancillary," which I think some of us have had great difficulty in understanding. I think it is much better to leave out these other words, which are, I think, too wide, and would, it seems to me, cause great difficulty if the Judge is to be called upon to interpret them.
§ LORD MACNAGHTENI believe I included everything I could think of, but, of course, I was not vain enough to think that I had included everything 628 which might occur. I would point out that the words to which the Lord Chancellor has objected occur in the Companies' Act, 1862, and they have always been interpreted without any difficulty; but if my noble and learned Friend thinks they had better be omitted I have no objection.
§ Amendment moved, "To leave outlines 19 and 20."—{The Lord Chancellor.)—Agreed to.
§ Clause, as amended, agreed to.
§ Clause 5.
§ THE LORD CHANCELLORI propose the omission of this clause. The only reason I object to it is that no such authority is required. Does my noble Friend not know that by order the Court can deal with costs? The Court has complete authority over costs and everything else.
§ LORD MACNAGHTENI am sorry to say I know quite the reverse.
§ THE LORD CHANCELLORThen it becomes a serious matter, and a matter of substance if Order 65 of the Judicature Act is supposed not to give complete and absolute authority to the Court as to dealing with costs. I think it does; but certainly if there is any doubt to be thrown on Order 65, it ought not to be disposed of in effect by this Statute, but by some amendment of the Judicature Act. In my view, however, absolute discretion in that matter is given already to the Court.
§ Amendment to leave out Clause 5.—{The Lord Chancellor.)
§ LORD MACNAGHTENI am sorry to say that the Court of Appeal has taken a different view to that which my noble Friend takes in the case of re Mill's Estate. That was a decision of a very strong Court, consisting of, I think, Lords Justices Cotton, Bowen, and Fry. There it was held that the rules of the Judicature Act and Order 65 of the Supreme Court do not enable the said Court to order payment of costs by a person who before that Act came into operation, could not have been ordered to pay them; and then it goes on to say—
The effect and intention of those orders being not to give any jurisdiction with regard to costs, but only to regulate the mode in which costs are to be dealt with in cases in which the Court had, antecedently, jurisdiction.
§ LORD HERSCHELLI think that makes it rather too doubtful for us to leave any doubt upon the matter. I have not carefully considered the matter, and, therefore, should not like to bind myself to an opinion, but it seems to me that when you are giving a new and independent jurisdiction to the Court, and have to deal, therefore, with an entirely new matter, it is very doubtful whether the general words of the Judicature Act would enable costs to be given. I would suggest to my noble and learned Friend, as I can understand his desire not to alter the Bill more than is necessary, that he might in that clause say, "subject to such conditions as to the Court may seem fit, and the Court may on any such application make such order as to costs as to the Court may seem right;" and then add the provisions as to costs to the 3rd sub-section of the 1st clause.
§ THE LORD CHANCELLORI confess my object was not so much in regard to lengthening the Bill as to casting doubt on Order 65. However, I will accept that as being the decision of the Court of Appeal at present. Whether it is a decision which would commend itself to your Lordships when sitting in another capacity I cannot say; but, in order to get rid of any difficulty on the subject, I think, what my noble and learned Friend opposite has suggested would be sufficient.
§ On Question, "That the Clause stand part of the Bill," agreed to. Clause 6 agreed to.
§ Clause 7.
§ THE LORD CHANCELLORIt is quite unusual, I think, to make a penalty absolute, I propose, therefore, to insert the words "not exceeding."
§ LORD MACNAGHTENI think they were all fixed penalties in the earlier Act?
§ THE LORD CHANCELLORProbably it would be better not to allow that to remain.
§ Amendment moved, in page 3, line 8, to leave out the word "of" and insert the words "not exceeding."—{The Lord Chancellor.)
§ Agreed to.
§ Clause, as amended, agreed to.
§ Clause 8 agreed to.
630§ Clause 9.
§ THE LORD CHANCELLORNow, my Lords, I move to omit this clause. It is entirely beyond the scope of the Bill. Some of the persons who introduced the Bill into the House of Commons have written to me to say they entirely object to this clause, and several of your Lordships have called attention to the absurdity of it. I quite agree that my noble and learned Friend has reduced it into something like sense; but the reason I object to it is that it is entirely beyond the scope of the Bill, and I think would give rise to very serious discussion. I, therefore, propose to omit it, because it has no reference to the matter which was before the Joint Committee. They did not desire to make such an alteration in the law, and it appears to me undesirable to introduce a provision which is alien to the object and purpose of the measure.
§ Amendment moved, "To leave out Clause 9."—(The Lord Chancellor.)
§ LORD MACNAGHTENI only desired to retain the clause in order to make other parts of the Bill intelligible, but if the Lord Chancellor thinks it should be omitted I assent.
§ LORD HERSCHELLI, too, should agree if we could be perfectly sure that the other House would not dissent from our striking out this clause. I have no wish to see it, and certainly, in the form in which it came before your Lordships' House, it would not be worked. I think this has now been made a clause which would work, but I quite admit it is not one which is very close to the purpose and object of this Bill, and striking it out will also reduce the Bill more to the proportions which it had when it went to the House of Commons, which, accord to my noble and learned Friend, is a desirable object. I, therefore, should assent to its being left out.
§ On Question, "That the Clause stand part of the Bill," negatived.
§ Title.
§ THE LORD CHANCELLORI have an Amendment to the title. It is to insert after "certain" the words "instruments under which they may be constituted or regulated," leaving out the words "memoranda of association." I am sure I do not know whether 631 "memoranda" has so far become a word in the English language as to justify its being used in that way.
§ Agreed to.
§ Bill reported, with Amendments.
LORD BALFOUR OF BURLEIGHWould it suit the noble and learned Lord opposite to take the Report of Amendments on Tuesday next?
§ LORD HERSCHELLYes.
§ Report of Amendments to be received on Tuesday next; and Bill to be printed, as amended (No. 162).