Tongkah Compound NL v Meagher [1951] HCA 41

High Court of Australia Dixon, McTiernan, Webb, Fullagar and Kitto JJ. Tongkah Compound NL v Meagher [1951] HCA 41

ORDER Appeal dismissed.

Cur. adv. vult.

The following written judgments were delivered:—

July 23 Dixon J.

This is an appeal from an order made on originating summons by Lowe A.C.J., which in effect declared that the appellant company may not return capital to its members and extinguish liability in respect of uncalled capital in the manner proposed by a special resolution adopted by the company at an extraordinary general meeting. The company was incorporated in Victoria in 1910. It is a mining company and it was incorporated on the no-liability principle. It is governed by the Companies Acts 1938-1940 Vict., Part II., under which, by virtue of s. 398 (1), it is deemed to be incorporated.

From time to time the capital of the company has been increased and it now consists of £250,000 divided into 250,000 shares of £1 each. All except 1,464 of the shares have been issued and they have been paid up to the amount of 16s. 8d.

The rules for the management and purposes of the company made under the power conferred by s. 450 of the Act upon a majority in number and value of the shareholders contain an article, No. 7, which purports to enable the company by special resolution to reduce its capital by paying off capital, cancelling capital which is lost or is unrepresented by available assets, reducing the liability on the shares, and cancelling shares not taken or agreed to be taken by any person, or otherwise as may seem expedient. The rule goes on to say that capital may be paid off on the footing that it may be called up again or otherwise.

The resolution which has been held ineffectual was passed in purported pursuance of rule 7. By the first clause of the resolution it was resolved that the capital of the company be reduced from £250,000, divided into 250,000 shares of one pound each to £125,000 divided in 250,000 shares of ten shillings each and that such reduction be effected (a) by paying off paid-up share capital, which is in excess of the wants of the company to the extent of ten shillings a share on each of the 248,536 shares that have been issued, and (b) by reducing the nominal amount of each of the 250,000 shares from £1 to 10s. each, and (c) by extinguishing the liability in respect of uncalled capital on the 248,536 shares that have been issued to the extent of 10s. a share. By the second clause of the resolution the respondent was chosen to represent himself and all other ordinary shareholders in proceedings before the Supreme Court "for the clarification by the court of the company's right to return capital".