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2 K. B.

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87

and existing distinction which ought to be reaffirmed. In C. A. the circumstances I feel bound to follow the decision of this 1932 Court in Roberts' case, and to hold that this appeal should be MOHGAN
Appeal dismissed.
INSURANCE

Co., In re.

Solicitor for appellants : J. Murray Napier, for C. James Hardvncke & Co., Cardiff. Solicitors for respondents : Collyer-Bristow <c Co., for f D. Granville West, Newbridge.
W. H. G.

IBERIAN TRUST, LIMITED v. FOUNDERS TRUST AND INVESTMENT COMPANY, LIMITED.
Practice—Attachment—Order against Corporation—" Order . . . . to do an Act"—Order not served within Time limited to do the Act—Order not Indorsed with Memorandum as to Penal Consequences of Disobedience— Disobedience—Enforcement by Attachment of Director—Rules of Supreme

Feb 22

1932 - > 26-

Court, 1883, Order sxi., r. 5 ; Order XLH., r. 31. The plaintiff company, which had transferred certain shares in another company to the defendant company upon certain terms, brought an action against the defendant company in order to recover a certain proportion of those shares, and obtained an order against the defendant company for the " return " of those shares within fourteen days of the date of the order. That order was not served upon the defendant company or its directors until the lapse of six weeks from the date of the order. The copy of the order which was served upon the defendant company and upon its directors did not have indorsed upon it, as required by Order x u . , r . 5, a memorandum stating the penal consequences of disobedience to the order. The defendant company having failed to comply with the order the plaintiff company sought to enforce the order by attachment of two of the directors of the defendant company under Order XLn., r. 3 1 : — Held, (1) that the judgment or order for the " return " of the shares was not a judgment or order to do an act and therefore could not be enforced by attachment. (2.) That the order was unenforceable also, because it was not served on the defendant company or its directors until after the expiration of the time limited by the order for the " r e t u r n " of the shares. Duffield v. Elwes (1840) 2 Beav. 268 followed. (3.) That the order could not be enforced by attachment of the directors of the defendant company, because they had not been served

88 1932 I TBXJST L D . v. FOUNDERS INVESTMENT Co.

KING'S BENCH DIVISION..

[1932]

with a copy of the order indorsed with a memorandum as to the penal consequences of disobedience, as required by Order xix, r. 5. (^") That the remedy against a director of a company by attachment given by Order xin., r. 31, was an alternative remedy, and the plaintiff company could not pursue that remedy unless they were also in a position to proceed against the defendant company, and that they could not do because the copy of the order served upon the defendant company did not comply with Order XLI., r. 5. SUMMONS heard before Luxmoore J. sitting as an additional judge of the King's Bench Division. The summons was taken out by the Iberian Trust, Ld., for leave to issue writs of attachment against Alfred Ernest Holt and John William Watson Shuttleworth, directors of the Pounders Trust and Investment Company, Ld., on the ground that that company had not complied with an order made against it by Rowlatt J. on July 7, 1931. By an agreement dated January 14, 1929, made between the Iberian Trust, Ld., and the Pounders Trust and Investment Company, Ld., the Iberian Trust, Ld., agreed that, in consideration of the Pounders Trust Company undertaking to procure that a company known as Radium Springs, Ld., would be in receipt of sufficient capital to carry on its business and to meet its obligations, the Iberian Trust, Ld., would cause to be allotted or transferred to the Pounders Trust Company such numbers of preferred and deferred shares in Radium Springs, Ld., as should be equivalent to 22£ per cent, of the total amount of financial assistance the Pounders Trust Company should procure for Radium Springs, Ld. It was also agreed that the Founders Trust Company should receive 33 J per cent, of their commission in preferred shares and 66| per cent, in deferred shares in Radium Springs, Ld. The Iberian Trust, Ld., by letter dated March 18, 1929, addressed to Radium Springs, Ld., caused to be allotted or transferred to the Pounders Trust Company 13,000 preferred shares and 300,000 deferred shares in Radium Springs, Ld., which were the property of the Iberian Trust, Ld. The Iberian Trust, Ld., brought an action against the Pounders Trust Company in which they alleged that the Founders Trust Company had not procured financial assistance

2 K. B.

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for Radium Springs, Ld., in pursuance of the agreement, or 1932 that they had only procured financial assistance to a limited IBEBIAN extent, and they claimed that they were entitled to the T B U S J-' L D return of all the shares with the exception of 1820 preferred FODDERS
r

*

TRUST AND

shares and 42,000 deferred shares which represented 22-| per INVESTMENT cent, of the financial assistance procured by the Founders Trust Company for Radium Springs, Ld. The Iberian Trust, Ld., accordingly claimed a declaration that they were entitled to the return of 11,180 preferred shares and 258,000 deferred shares in Radium Springs, Ld. The action was tried before Rowlatt J., who on July 7, 1931, gave judgment for the plaintiffs for a declaration that they were entitled to the return by the defendants of the 258,000 deferred shares and 11,180 preferred shares in Radium Springs, Ld., within fourteen days. The operative part of the order, which was dated July 7, 1931, was as follows: " I t is this day hereby adjudged and declared that the plaintiffs are entitled to the return by the defendants of the following shares, viz., 258,000 deferred shares and 11,180 preferred shares in Radium Springs, Ld., within 14 days from the date hereof. And it is further adjudged that the plaintiffs do have a return of the said shares within 14 days from the date hereof." A copy of the order, dated July 7, 1931, was served upon Alfred Ernest Holt on August 19, 1931, at the registered offices of the Founders Trust Company, and a copy of the order was served upon J. W. W. Shuttleworth on November 7, 1931. In neither case did the order have an indorsement on it of a memorandum as to the consequences of disobedience such as is required by Order XLI., r. 5, of the Rules of the Supreme Court. (1)
(1) Rules of the Supreme Court: Order XLI., r. 5 : " Every judgment or order made in any cause or matter requiring any person to do an act thereby ordered shall state the time, or the time after service of the judgment or order, within which the act is to be done, and upon the copy of the judgment or order which shall be served upon the person required to obey the same there shall be indorsed a memorandum in the words or to the effect following, viz.:— " If you, the within named A. B., neglect to obey this judgment [or order] by the time therein limited, you will be liable to process of execution for the purpose of

90 1932
IBBKIAN

KING'S BENOH DIVISION.

[1932]

The Founders Trust Company did n o t comply with t h e order a n d transfer t h e shares. TKUSJ/ L D On J u n e 18, 1930, when t h e action was commenced b y t h e FOUNDERS Iberian Trust, Ld., against t h e Founders Trust Company TBUST AND » » e r J
INVESTMENT the
Co<

directors of the defendant company consisted of A. E. Holt, J. W. W. Shuttleworth and two others, one of whom resigned his directorship on December 12, 1930, and the other went to America at some time after August 7, 1930, and the remaining directors were not aware of his address. According to a statement in Holt's affidavit a Board meeting of the defendant company was held on February 19, 1931, at which it was resolved that all the shares of Radium Springs, Ld., should be handed over to him and his son as security against their loans to the defendant company and that transfers of the shares were to be executed by the defendant company whenever desired by Holt and his son, and that a formal document of charge was to be prepared. The share certificates were there and then placed in Holt's custody and had remained with him ever since, and Holt held same on behalf of himself and his son, but no transfer or document of charge had ever been prepared. The shares claimed by the Iberian Trust, Ld., and referred to in the judgment of Rowlatt J., were comprised in two share certificates each for a larger number of shares than those ordered to be returned under the order, one being a certificate for 13,000 preference shares of Radium Springs, Ld., and the other a certificate for 300,000 deferred shares in that company. Shuttleworth in his affidavit said that he was willing to comply with the terms of the judgment but that it was not in his power to do so, as the shares were in the possession of
sequestration against the corporate property, or by attachment against the directors or other officers thereof, or by writ of sequestration against their property."

compelling you to obey the same jugdment [or order].' " Order xiii.,r. 31: "Any judgment or order against a corporation wilully disobeyed may, by leave of the Court or a judge, be enforced by

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91
IBERIAN
TETJST, L D .
V.

his co-director Holt as security for advances made by Holt and his son to the defendant company.

J. W. Morris and P. B. E. Browne for the Iberian Trust, Ld. FOUNDERS
' THUST AND

The order of Rowlatt J. dated July 7, 1931, must be construed INVESTMENT as an order requiring the Founders Trust Company to return the shares mentioned in the order, otherwise the order would have no meaning. It is the duty of the person who is required to do an act, and against whom an order has been made, to find out himself the proper mode of complying with the order : Attorney-General v. Walihamstow Urban Council (1); Lewis v. Pontypridd, Caerphilly, and Newport Ry. Co. (2) If the order of July 7, 1931, is one requiring the Founders Trust Company to do an act, i.e., transfer the shares, the order has been wilfully disobeyed within the meaning of Order XLII., r. 31, of R. S. C. The expression " wilfully " in that rule only excludes a casual or accidental omission : see Stancomb v. Trowbridge Urban Council. (3) If the order of July 7, 1931, has been wilfully disobeyed, then the directors of the Founders Trust Company are liable to attachment. There is no rule requiring service on the directors of the judgment. McKeown v. Joint Stock Institute, Ld. (4), however, shows that directors should in practice be served with the order which requires that the act should be done, and this was in fact done in the present case. If the directors of a company are served with a copy of the judgment, there is no rule which requires that the memorandum set out in Order XLI., r. 5, should be indorsed on the copy so served. Order XLI., r. 5, by its terms does not apply; that rule only applies where the judgment or order is made against a person who is himself a defendant in the cause or matter requiring that person to do an act thereby ordered, because the notice required to be indorsed on the copy of the judgment or order served upon the person refers to " you, the within named A. B." The directors of the Founders Trust Company are not named in the judgment and are not liable for costs. The language of
(1) (1895) 11 Times L. R. 533. (2) (1895) 11 Times L. R. 203. (3) [1910] 2 Ch. 190, 194. (4) [1899] 1 Ch. 671.

92 1932
IBERIAN r. 5, applies TRUST, LD. s e q u e s t r ation

KING'S BENCH DIVISION.

[1932]

Cozens-Hardy L.J. in In re Tuck (1) indicates that Order XLI., only to a defendant. If proceedings by way of had been taken against the property of the com anv TRTOT°AND P > ** might perhaps have been contended that there INVESTMENT had not been a proper service of a copy of the judgment owing to the omission therefrom of the indorsement of the memorandum. But this fact does not alter the point that the order of the Court has been wilfully disobeyed. The directors of the Founders Trust Company, by their affidavits, adhere to their intention not to transfer the shares, and do not take the point that they were unaware of the consequences of non-compliance with the order. In these circumstances the Court can say that there has been a waiver of the strict requirements of the rule : see Rex v. Poplar Borough Council (No. 2). (2) Hon. S. 0. Henn Collins for Holt. These proceedings for attachment are entirely misconceived. Assuming that service of the order dated July 7, 1931, on Holt, who was the chairman of the Founders Trust Company, at the offices of that company on August 19, 1931, was service on the company, that service was ineffectual, because the time limited by the order— namely, fourteen days from the date of the order—within which the shares were to be returned had already expired when the order was served. It was held in Duffield v. Elwes (3) that an order limiting the time within which an act was required to be done should be served so as to make it possible for the person upon whom it is served to obey it within the time limited, and that if the order is not served upon the person till after the expiration of the limited time he cannot be said to be guilty of contempt or disobedience by not doing the act within the limited time. The plaintiffs, therefore, could not proceed to enforce the order by sequestration of the property of the Founders Trust Company, and the directors of that company cannot be in a worse position than the company itself, and an individual director could not be guilty of contempt for not obeying the order. The action was
(1) [1906] 1 Ch. 692, 696. (2) [1922] 1 K. B. 95,108,112,119. (3) 2 Beav. 268.

2 K. B.

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against the company and the judgment was against the 1932 company; the party proceeding to enforce that judgment IBEMAN must be in a position to enforce it against the company before TKUS J» L D proceeding to enforce it against the directors of the company FOUNDEHS under Order XLII., r. 31. The right under that rule to enforce INVESTMENT a judgment against a company by attachment against the °" directors of the company is not a different right to that against the company, but an alternative remedy for the same light. The order of July 7, 1931, was one which could not be enforced. It did not order the company to do anything ; it merely ordered the return of a certain number of shares. The plaintiff company were not entitled to any particular shares, but only to a certain number of shares out of a larger number, and therefore they could not claim a transfer of certain specified shares. Order XLI., r. 5, of the Rules of the Supreme Court provides that where a judgment or order requires a person to do an act, the copy of the judgment or order served upon the person required to do the act shall have indorsed upon it a memorandum stating the penal consequences to which he would be liable for disobedience. Under Order XLII., r. 31, a judgment or order against a corporation wilfully disobeyed may be enforced by sequestration of the property of the company or by attachment against the directors. Before the property of the company can be sequestrated a copy of the judgment or order must be served upon the company with a memorandum of the penal consequences indorsed upon it. That was not done in this case. There is no provision in the order requiring service upon a director of a copy of the judgment or order properly indorsed with the memorandum required by Order XLI., r. 5, before proceeding by way of attachment against him, but it was held in McKeown v. Joint Stock Institute, Ld. (1) that obedience to an order made against a corporation will not be enforced, under r. 31 of Order XLLT., by the attachment of a director of the corporation, unless the order has been served personally upon the director. That must mean a copy of the order with the memorandum required
(1) [1899] 1 Ch. 671.

94 1932
IBEKIAN BUST, D.

KING'S BENCH DIVISION.

[1932]

by Order XLI., r. 5, indorsed upon it. It is not obligatory to serve a copy of the judgment upon a director of a company ^ it is not intended to enforce against him personally a FOUNDERS judgment obtained against the company, but if it is intended
X RXTST AND

INVESTMENT to

enforce the judgment against the director he must be told what his position will be if he does not obey the order. F. G. Enness for Shuttleworth adopted the argument put forward on behalf of Holt. P. B. E. Browne replied.
LUXMOORE

J. The Iberian Trust, Ld., by this summons ask for leave to issue writs of attachment against Alfred Ernest Holt and John William Watson Shuttleworth, as directors of the Founders Trust and Investment Company, Ld., because that company have not complied with an order made against it on July 7, 1931, by Eowlatt J. [His Lordship, having stated the facts and the form of the order, continued :] The form of the order is a little unfortunate, because, although one may understand what is intended by it, it certainly does not define the precise steps which are to be taken to bring about the transfer of the legal title to the shares in question from the defendant company to the plaintiff company. I think that the proper form of order would have been for a declaration that so many shares standing in the name of the defendant company are the property of the plaintiff company, followed by an order on the defendant company to execute a proper transfer of those shares to the plaintiff company, or as it should direct, such transfer to be settled by the judge in case the parties disagree. There has, in fact, been no transfer of shares by the defendant company, although the plaintiff company appear to have pressed for the transfer of the shares. The plaintiff company ask for leave to issue writs of attachment against the two directors under Order XLII., r. 31. That rule is as follows : " Any judgment or order against a corporation wilfully disobeyed may, by leave of the Court or a judge, be enforced by sequestration against the corporate property, or by attachment against the directors or other

2 K. B.

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officers thereof, or by writ of sequestration against their 1932 property." From this it appears that in order to constitute IBERIAN a contempt of Court for which the directors may be punished Birs J' D' there must be wilful disobedience either by the company or FOUNDERS
* TRUST AND

its servants or directors to do something which it has been INVESTMENT ordered to do. Now, turning back to Rowlatt J.'s order, —'Luxmoore J.

what is it that the defendant company have been ordered to do which the company and its directors have failed to do ? In terms, the order does not direct the defendant company to do anything—it says : " that the plaintiffs do have a return of the said shares within fourteen days." Am I to spell out of that an order on the defendant company to do something ? I think not. If the Court is to punish any one for not carrying out its order the order must in unambiguous terms direct what is to be done. In saying this I do not intend to say anything contrary to what was said by Chitty J. in Attorney-General v. Walthamstow Urban Council (1), that it was the duty of the defendants to find out the proper means of obeying the order. Of course, there is such a duty on a defendant where the order either prohibits or orders the doing of a specific act. In the case mentioned the order restrained the defendant council from discharging sewage into a particular brook so as to create a nuisance. That was definite enough in its terms. The defendant council were, as I gather, unable to prevent discharge of sewage into the brook so long as the existing system of drainage or sewage disposal was used by them. The defendant council admitted that they were trying to find a solution of the difficulty while still retaining the existing system. Here, the order does not even provide that the defendant company shall return the shares. What it says is " that the plaintiffs do have a return of the said shares within fourteen days." Personally, I do not think that even an order on the defendant company to return the shares would be sufficiently definite to be enforced by penal proceedings. But the actual order is far more ambiguous than that; the order is no more an order to do an act than an order that the
(1) 11 Times L. R. 533.

96 1932
IBERIAN RUSJ, D.

KING'S BENCH DIVISION.

[1932]

plaintiff is to recover something from the defendant is an order upon the defendant to do an act. It was held by the Q our £ of App ea i ^ j n re Oddy. Major v. Harness (1) that an FOUNDERS order to recover money is not an order on the defendants
TRUST AND _

INVESTMENT to

—1

do anything, and therefore that such order could not be enforced either by a supplementary order for the payment of the money within a fixed time, or by attachment. In my judgment, before the order in the present case be enforced against the defendant company or its directors it is necessary for the plaintiff company to obtain a supplementary order requiring the defendant company and its directors and secretary, within a limited time, to execute a proper transfer of the shares to the plaintiff company. The supplementary order should provide that the transfer should be settled by the judge in case the parties differ. This, however, is not the only objection to the order, and for the purposes of the rest of my judgment I shall assume, contrary to the opinion already expressed, that the order is one which orders the defendant company to do an act— namely, the execution of the transfer of the shares in question. The first question which arises is : whether this judgment has been served on the defendant company within the time limited by the order for the doing of the particular act ? The order in question, which is dated July 7, 1931, was not served upon the defendant company and upon Mr. Holt until August 19, 1931. It was not served on Mr. Shuttleworth until November 7, 1931. So that in each case the time limited by the order for the doing of the act had in fact expired. I think it is quite plain from the decision in Duffield v. Elwes (2) that that order could not be enforced by penal proceedings, because there can be no default in compliance with an order ordering something to be done within a certain .time when the order was not served until after the time within which the act was to be done has expired. That again would be a complete answer to the application for attachment in this case. (1) [1906] 1 Ch. 93. (2) 2 Beav. 268.

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But the matter does not end there; there is a further 1932 objection which I think I must deal with, because it raises a IBEBIAN question of some importance. The order when it was served TBUS*> L D < on the defendant company and on the directors had no FOUNDEBS indorsement on it such as is required by Order XLI., r. 6. INVESTMENT That rule is as follows : " Every judgment or order made in Ji. any cause or matter requiring any person to do an act thereby uxmoore ordered shall state the time, or the time after service of the judgment or order, within which the act is to be done, and upon the copy of the judgment or order which shall be served upon the person required to obey the same there shall be indorsed a memorandum in the words or to the effect following, viz. : ' If you, the within named A. B., neglect to obey this judgment [or order] by the time therein limited, you will be liable to process of execution for the purpose of compelling you to obey the same judgment [or order].' 1 " It is to be noticed that the form of the memorandum is not in any sense a rigid form. It may be altered so long as the effect is in substantial accord with the form. This must give such latitude as is necessary to meet the facts of the particular case. The object of the indorsement is plain—namely, to call to the attention of the person ordered to do the act that the result of disobedience will be to subject him to penal consequences. In the present case it is admitted that no steps can be taken to sequestrate the property of the company, because the order served on it was not indorsed as required by Order XLI., r. 5. It is admitted that service on the defendant company is necessary as a preliminary to enforcement of the order by sequestration. It is argued, however, that Order XLI., r. 5, does not apply to a director of a defendant company who is himself not a defendant to the action. The Orders of the Supreme Court do not, in fact, require service of a copy of the judgment or order on a person who is not required by the order to do a particular act. But in practice the Courts have always required that the order to be enforced should be personally served on the director before it would be enforced against him by attachment. As an authority for this proposition I refer to the decision of North J. in
VOL.

II. 1932.

H

2

98 1932

KING'S BENCH DIVISION.

[1932]

McKeown v. Joint Stock Institute, Ld. (1) In my judgment, the order so served should, as a preliminary to its enforcement TRUST, LD. a g a m s t the directors, be indorsed with a notice to the effect FOUNDERS of the memorandum prescribed by Order XLI., r. 5, including INVESTMENT in it the name of the particular director served. So far as Comy experience goes this has been the practice in the Chancery
IBERIAN LuxmooreJ.

But apart from this, the remedy against the directors of the company under Order XLn., r. 31, is an alternative one, and I do not see how it can be applicable unless the plaintiffs be in a position to pursue the original remedy against the defendant company. In my judgment, on this ground also, the plaintiff company is not in a position to ask for leave to issue writs of attachment against Holt and Shuttleworth. The objections I have dealt with are, of course, purely technical. The respondents Holt and Shuttleworth have each sworn affidavits. Mr. Holt says that he has a charge upon the shares in question. In para. 13 of his affidavit he says that at a board meeting of the defendants held on February 19, 1931, it was resolved that all the shares of Radium Springs, Ld., " should be handed over to me and my son, as security against our loans to the defendants and that transfers of the shares were to be executed by the defendants whenever desired by myself and my son and that a formal document of charge was to be prepared. The share certificates were there and then placed in my custody and have remained with me ever since, and I hold same on behalf of myself and my son, but no transfer or document of charge has ever been prepared." I have seen a copy of the minute of that meeting, and it appears that only two directors were present at that meeting, of whom one was Mr. Holt, and it would, therefore, seem that the resolution was invalid so far as any charge in his favour was concerned, but it might be valid so far as it authorized a separate charge to be given to Mr. Holt's son. It, however, appears that there are only two directors now. Any transfer of the shares in order to be validly executed must be executed under the seal of the company, and a resolution of the Board
(1) [1899] 1 Ch. 671.

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in the presence of such persons as may be required to comply 1932 with the provisions of art. 71, Table A of the Companies Act, IBERIAN which govern the defendant company. I am unable to say waa£' what form of transfer is required by the articles of the Radium FOUNDERS
n J

TBTFST AND

Springs, Ld. Mr. Holt, in his affidavit, has claimed that the INVESTMENT charge in his son's favour makes it impossible to transfer the — shares to the plaintiff company. For the reasons I have stated, I do not think this charge is vah'd so far as Mr. Holt is concerned, but it may be valid so far as his son is concerned. If the charge in favour of the son is valid it would certainly make a compliance with the order a matter of difficulty. Mr. Shuttleworth says that he is ready to do what is necessary to transfer, but that he cannot do so because of the claims of Mi-. Holt and his son. There may be grounds, therefore, for saying that the refusal to hold a meeting of the defendant company and pass a resolution for the transfer of the shares was not in fact wilful. In my judgment this application for leave to issue writs of attachment against Mr. Holt and Mr. Shuttleworth for disobedience to the order is misconceived and must be dismissed. The plaintiffs must pay the costs. Application dismissed. Solicitors for plaintiff company: Churchill, Clapham <c Co. f Solicitors for Holt: Biddle, Thome, Welsford da Gait. Solicitor for Shuttleworth : H. Davis. R. F. S.