Joseph v Campbell - [1933] HCA 34

50 CLR 317

CAMPBELL (LIQUIDATOR OF THE LONDON

FURNISHING COMPANY LIMITED (IN

RESPONDENT. LIQUIDATION) )

RESPONDENT,

ON APPEAL FROM THE SUPREME COURT OF Company-Winding up-Contributory-Shares- Payment in cash -Formation of

company-Cross-cheques-Intention of the parties-Concurrent counter payments -Companies Act 1899 (N.S.W.) (No. 40 of 1899), sec. 55.

J. and his wife were the only shareholders of L. Ltd., furniture manufacturers. J. resolved to set up another business and for that purpose to incorporate another company. Delay occurred in the registration of the proposed com- pany, and J, therefore, opened the business under a trade name. He obtained £1,000 from L. Ltd. for the purpose of meeting the expenses of establishing and conducting the business, including the purchase of stock-in-trade. Other stock-in-trade, to the value of £800 16s. 6d., was supplied by L. Ltd. That business was taken over by the new company, F. Ltd., upon its incorporation. No record was made of any terms upon which the business was taken over. F. Ltd. continued the same set of books of account. On 18th April 1928, J. drew in the name of F. Ltd. a cheque for £1,800 in favour of L. Ltd. The bank account of F. Ltd. was not opened until 20th April. On that day L. Ltd. drew a cheque for a like amount in favour either of J. or F. Ltd., it did not appear which, and debited the amount of the cheque in its books as an advance against J. On the same day J. applied to F. Ltd. for 1,800 shares and paid L. Ltd.'s cheque into F. Ltd.'s bank account, thus opening the account. In his application he said: "I have paid to the company's bank at Newcastle

50 CLR 318

the sum of £1,800, being at the rate of £1 per share." On 23rd April, F. Ltd.'s cheque of 18th April was presented for payment and the amount debited to its account. In the books of F. Ltd. the amount of the cheque was treated as a payment on account of the liabilities to L. Ltd. which had been incurred in the establishing of the business taken over by F. Ltd. All the shares in F. Ltd., except six, were held by J. The liquidator of F. Ltd. placed J. on the list of contributories as liable to pay £1,800 for the shares allotted to him.

Held that J. had been wrongly so placed on the list. He had paid for the shares in cash, within the meaning of sec. 55 of the Companies Act 1899 (N.S.W.), and the transaction was not illusory, inasmuch as the payment and counter- payment by cross-cheques were, in the circumstances, no more than a formal expression of the payment of share capital and a concurrent but legitimate application of the share capital by F. Ltd. to discharge an actual liability incurred in the acquisition of its assets.

Decision of the Supreme Court of New South Wales (Harvey C.J. in Eq.): In re The London Furnishing Co. Ltd.; Ex…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Joseph v Campbell

Details

AGLC: Joseph v Campbell [1933] HCA 34
Case: [1933] HCA 34
Decision Date: 14 August 1933

CaseChat Overview and Summary

The appeal concerned Louis Joseph and the liquidator of The London Furnishing Company Limited. Joseph had been placed on the list of contributories for 1,800 shares in the company, with the liquidator asserting that the £1,800 for these shares remained unpaid. Joseph sought to have his name removed from the list, arguing he had paid for the shares in cash. The Supreme Court of New South Wales dismissed his application, leading to this appeal to the High Court.

The central legal issue before the High Court was whether Joseph had made a valid payment in cash for the 1,800 shares he was allotted, within the meaning of section 55 of the *Companies Act 1899* (N.S.W.). This required the court to determine if the transaction involving cross-cheques between Joseph, The London Furnishing Company Limited, and Louis Joseph Pty. Ltd. constituted a genuine payment or if it was an illusory transaction that failed to satisfy the statutory requirement for cash payment.

The High Court found that Joseph had indeed paid for the shares in cash. The court reasoned that while the transaction involved cross-cheques, it was not illusory. The London Furnishing Company Limited had taken over a business established by Joseph, incurring liabilities to Louis Joseph Pty. Ltd. for advances and stock. The cross-cheque transaction, where Joseph paid £1,800 for shares and the company subsequently used its own cheque of the same amount to discharge its actual liabilities to Louis Joseph Pty. Ltd. for the business assets, was considered a legitimate application of the share capital. The court held that this was a formal expression of payment for the shares and a concurrent, lawful discharge of the company's pre-existing liabilities, thereby increasing the company's assets or diminishing its liabilities.

Consequently, the High Court allowed the appeal, ordering that Joseph be settled on the list of contributories as the holder of 1,800 shares fully paid up, rather than shares upon which nothing had been paid. Joseph was awarded his costs in both the Supreme Court and the High Court, to be paid out of the company's assets.

Orders