Rofe v Campbell

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.