Rofe v Campbell - [1931] HCA 16

RESPONDENT, CAMPBELL

ON APPEAL FROM THE SUPREME COURT OF

NEW SOUTH WALES. Company-Capital-Memorandum of association-Ordinary and preference shares

Power of directors to issue preference shares-No positive provision in articles, r SYDNEY,

Although the memorandum of association of a company empowers the April 14;

division of its original capital into preference as well as into ordinary shares, May 1.

such power cannot be exercised by the directors unless authorized so to do by positive provision in the articles of association; such provision being either Gavan Duffy

in express terms or by necessary intendment.

The articles of association of a company by art. 10 provided that The shares shall be under the control of the directors who may allot or otherwise dispose of the same to such persons on such terms and conditions and at such times as the directors think fit and with full power to give to any person the call of any shares either at par or at a premium and for such time and for such consideration as the directors think fit. The directors may reserve any of the shares in the original or increased capital of the company upon such terms as to payment for same and otherwise as they may deem expedient."

Held, that this article did not deal with the classification of shares but only with the terms and conditions of their allotment and disposal.

Decision of the Supreme Court of New South Wales (Harvey C.J. in Eq.) reversed on this point.

Art. 117 provided that "The management of the business of the company shall be vested in the directors who in addition to the powers and authorities by these presents or otherwise expressly conferred upon them may exercise

45 CLR 83

all such powers and do all such acts and things as may be exercised or done by the company and are not hereby or by statute expressly directed or required to be exercised or done by the company in general meeting but subject never- theless to the provisions of the statutes and of these presents and regulations from time to time made by the company in general meeting. Provided that no regulations SO made shall invalidate any prior act of the directors which would have been valid if such regulations had not been made."

Held, that this article was concerned with the management of the business of the company and not with the relations of the members inter se. It did not operate to authorize the directors to issue original capital as preference

Decision of the Supreme Court of New South Wales (Harvey C.J. in Eq.) affirmed on this point.

APPEAL from the Supreme Court of New South Wales.

In a list of contributories compiled by William Harrington Palmer, as official liquidator of Marlow Rolls Theatres Ltd., the name of Thomas Ernest Rofe appeared as being the owner in his own right of 8,000 £1 preference shares. An application to settle such list, by the official liquidator to the Supreme…

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 Rofe v Campbell

Details

AGLC: Rofe v Campbell [1931] HCA 16
Case: [1931] HCA 16
Decision Date: 1 May 1931

CaseChat Overview and Summary

This case concerned an appeal to the High Court of Australia from the Supreme Court of New South Wales. The dispute arose when Thomas Ernest Rofe was placed on a list of contributories for 8,000 preference shares in Marlow Rolls Theatres Ltd. Rofe contended that these preference shares were never validly created or allotted to him, as the company's memorandum and articles of association did not authorise their issue.

The High Court was required to determine whether the directors of the company had the authority, under the company's articles of association, to issue shares from the original capital with preferential rights attached. Specifically, the court had to interpret articles 10 and 117 of the company's articles of association to ascertain if they conferred such power on the directors, or if such power was reserved for the company in general meeting.

The Court held that while the memorandum of association empowered the company to divide its capital into different classes of shares with preferential rights, this power could not be exercised by the directors unless expressly authorised by the articles of association. The Court found that Article 10, which dealt with the control and allotment of shares, did not grant the directors power to classify shares or attach preferential rights; it merely governed the terms of their disposal. Similarly, Article 117, which vested the management of the company's business in the directors, was concerned with the operational management and not with the internal relations between members or the classification of shares. Therefore, the directors lacked the authority to issue original capital as preference shares.

Consequently, the High Court allowed the appeal, discharged the order of the Supreme Court of New South Wales, and remitted the matter to that court to be dealt with further. The costs of the appeal were ordered to be paid out of the company's assets.

Orders