1. This suit raises an important and rather difficult question, and although no evidence has been recorded, he arguments have lasted several days. This is a suit by a share-holder in the vlaneckji Petit Manufacturing Company, limited, on behalf of himself and all their share-holders against the company or a declaration that the extraordinary ??? meting of 15th February 1927 ??? not duly convened in accordance/th the law, and that the resolutions ??? to have been passed thereat re invalid and inoperative and void, ??? that the company, its directors, ervants and agents may be restrained ??? an order and injunction from ??? into effect the said resolutions.
2. The issues are:
1. Whether the notice referred to in the ???, dated 4th February 1927, was insufficient, ??? or ineffective in law.
2. Whether the meeting of 15th February 327, was duly convened in accordance with ???, and whether the resolutions passed thereat; re valid and operative.
3. The only question in this case is of ??? sufficiency of the notice convening an meeting. The meeting in question as convened for the purpose of adopting new Articles of Association and entering into an agreement with the managing agents of the company. The case for the plaintiff is that the notice convening the meeting and the circular accompanying it did not give the shareholders information that important changes were in contemplation. Consequently they did not attend the meeting, and in their absence resolutions were passed bringing into force new Articles of Association and sanctioning an agreement with the managing agents by which the interests of the shareholders were seriously affected to their detriment. It is admitted that three of the directors are members of the firm of the managing agents D.N Petit Sons & Co., and it is argued that this fact was concealed from the shareholders. The managing agents of the company have admittedly been the agents for fifty years ever since the mills were started but up till now there had been no formal agreement between them and the company. It was at this meeting that a formal agreement was entered into and the Articles of Association were brought up to date. There is no doubt that the alteration of the Articles of Association and the agreement entered into with the managing agents are matters of the greatest importance to the interests of the company. In the course of the arguments in this case counsel had dealt in detail with the numerous Articles which have been altered and the new articles and the terms of the agency agreement. It will be necessary to go into details, but put broadly, the changes in the articles are alleged to increase the powers and lessen the responsibilities of the directors and servants of the company imposing a corresponding obligation upon the shareholders, and with regard to the agreement with the managing agents the two main points are first that an agreement for compensation in the event of the mill being wound up has been made by which the agents are entitled to receive as compensation their average bonus for seven years prior to the date of winding up and what is almost as important, a clause has been inserted by which in the event of the mills changing hands, it is to be a condition of the sale that the purchaser should employ the same managing agents. The managing agents are also given the power to assign or transfer the agency and the company is compelled to employ as agents their transferees or assigns. Of course, if the shareholders so desire, they can enter into any agreement they like with the managing agents and we are only concerned with the question of notice but in considering the sufficiency of notice it is necessary to go into some of these details, especially in view of the large number of decisions of the Court of Chancery and the Court of Appeal in England which have been quoted in this case. I shall begin by setting out the notice and the circular accompanying it because in judging of the sufficiency of the notice the terms of the notice and circular are material. The notice Ex. A, states the resolutions which are to be put before the shara-holders, viz. (1) the adoption of the new Articles of Association and sanctioning the agency agreement referred to in Article 147 of the new Articles and (2) alteration of the provisions of the Memorandum of Association of the company by authorizing the investment of the funds in banks. No objection has been taken to the latter. The notice states that:
“A copy of the new Articles of Association together with a copy of the said agency agreement may be inspected at the registered office of the company at any time during office hours prior to the date of the meeting.”
4. This is a provision on which very great stress has been laid by the learned counsel for the company. This notice was accompanied by a circular Ex. B, and as the case depends to a great extent on the terms of the circular, it will be necessary to give the substance of it. The circular says:
“Accompanying this letter is a notice convening an extraordinary general meeting of the company for 15th February 1927, to consider and if thought fit to approve the adoption of new Articles of Association in substitution for and to the exclusion of all the existing Articles of Association, to approve an agency agreement between the company and the agents and to alter certain of the provisions of the Memorandum of Association.
The share-holders of the company will no doubt desire to know the reason for the proposed changes.
The company was incorporated and registered in the year 1876 with the existing Articles of Association as its regulations since when the Companies Act 1882 and the Companies Act 1913 have been passed and considerable alteration in the law of companies has been made.
Your directors have therefore thought it advisable to bring the articles of association of the company more up to date and into line with the provisions of the Companies Act 1913 as amended up to 1920.
Your directors would assure you in the first instance that no greater powers are conferred upon the Board by the new Articles except as regards the proposal to increase the power of investment of surplus funds, which is confined at present to Government securities, so as to permit the placing of surplus funds on deposit at interest with banks.
The principal alterations in the existing Articles are as follows:
Provision is now made for the holding of shares in joint names and also for the holding of as many shares as may be desired in any one or more name or names. The existing Articles oblige a member who desires to sell his shares ??? offer them in the first instance to the Board of Directors. This Article has now been omitted.
Under the existing Articles the voting power of members was according to a graduated ???, but opportunity has now been taken to follow the more usual practice of giving to each member one vote upon a show of hands and upon a poll one vote for every share held by him.
Under the existing Articles, the vote of a member being a lunatic, an idiot, or a minor cannot be recorded, but under the new articles the more usual practice of permitting a vote in such a case to be recorded by the committee, curator bonis, or other legal guardian of the member, has been adopted.
The opportunity has been taken of including in the new Articles the usual provisions for the creation of a Provident Fund and for granting pensions and annuities to employees and exemployees of the company,
Opportunity has also been taken of incorporating in the new Articles the usual provision for the appointment of a debenture director, which appointment is usually now required if and when a debenture loan is raised.
The agents of the company having ??? a desire to have an agreement with the company which will fix the duration of their agency and define more clearly their powers, the directors recommend to the approval of the share holders an agreement on the lines of the draft agreement which has been prepared and has been approved by the agents and is open to in ??? by any share-holder at the register office of the company at any time during office hours, when the draft new Articles of Association can also be inspected.
Apart from the fixing of the duration of ??? agency at 30 years from 1st January 1927, the only real difference between the existing term of the agency and the proposed agreement ??? be found in Cl. 17 which provides for the payment of compensation to the agents in ??? event of the company being wound up ??? for the purpose of reconstruction or ???. This is in accordance with the preset day practice in Bombay, which practice ??? directors consider should be followed in the ca of this company more particularly having ??? to the long and valuable services extern ??? over more than 50 years rendered by ??? agents and their predecessors in business to ??? company.
“As regards the proposed alteration in the memorandum of ??? para, (o) and (p) of Cl. 3 have become illegal and therefore inoperative by reason of Section 55(1) of the Companies Act, 1913. Para. (n) restricted the investment of surplus funds to Government Securities. The directors are of opinion that this restriction is too narrow under present day conditions and that batter use can be made-of the surplus funds of the company if the power of investment is enlarged so as to permit the surplus funds to be placed on deposit at interest with banks.”
5. It is contended that the notice and the circular give the share-holders sufficient notice of what was intended to be done at the meeting. It is contended on behalf of the plaintiff that the notice is misleading or tricky in the words of the Court of Chancery it is designed to lead the shareholders to believe that the business to be placed before the meeting was of a formal character. I may here say that with regard to the question of notice we are governed in this case not by Table A in the Companies Act, but by the old Articles of Association of the Maneckji Petit Manufacturing Company Ex. 8, Cls. 48 and 52. Cl. 48 says:
“Seven days' notice at least of every general meeting ordinary or extra ordinary and of every meeting for taking a poll, shall be given by advertisement in any two English and two vernacular daily newspapers published in Bombay or by writing sent to the registered addresses of the share-holders respectively through the post or by a messenger. The notice shall specify the day place and hour of meeting and the objects and business of the meeting and save as hereafter is mentioned no-business other than the business specified in the notice shall be transacted at the meeting.
6. Clause 52 says:
“With the exceptions mentioned in the foregoing articles as to the business which may be transacted at any ordinary general meeting without notice no general meeting ordinary or extraordinary shall be competent to enter upon discuss or transact any business which has not been specially mentioned in the notice or notices upon which such meeting was convened.”
7. It is contended that the notice and the circular comply with these Articles the objects of the meeting, viz., to sanction the new Articles of Association and the agreement with the agents and the changes in the memorandum are mentioned, and the business of the meeting viz. the details of the resolutions that are to be put before the meeting are mentioned in the circular. Now putting all details aside, there can be no doubt that extensive changes are made in the constitution of the company by the new Articles of Association and so far as the agreement with the agents of the company is concerned, the arrangement to pay seven years' average profits as compensation, and the clauses regarding the right to assign and the right to require that the agency should be continued in the event of the company changing hands are matters of the greatest importance to the share-holders, and can by no stretch of imagination be described as formal business. Probably this was the most important meeting that the company has ever held in the course of its 50 years of existence, and the question is whether the notice indicates to the share-holders in the company the importance of the subjects which were to be discussed at the meeting. If it did then the fact that share-holders did not attend is their own fault. If it did not, that is to say, if the share-holders were misled into supposing that the matters in question were merely formal, then they are entitled to have the resolutions set aside, and the matter submitted for reconsideration. The difficulty which arises in this case, and which haled to the length of time which the case has occupied, is due to the fact that it is not possible to apply general principles to a case of this character. Each case has to be considered on its own merits with reference to the nature of the Articles of the company concerned, the nature of the notice given, and the nature of the business placed before the meeting.
8. It has been contended that the average commission earned by the agents of two and a half per cent on the sales of the company is four lakhs of rupees and that the seven years' compensation would, therefore amount to about thirty lakhs of rupees. That however depends on the amount of sales of the company. In the present state of the textile industry the commission might be little or nothing. I understand the mill is not working at present. It is common knowledge that the Bombay mill industry is passing through a time of depression. The notice, as I have already said, refers to the passing of new Articles of Association and of the sanctioning of the agency agreement, the resolutions to be passed being annexed to it. The first resolution regarding the passing of the new Articles of Association and the agency agreement did not give any details as to the nature of the changes. The second resolution with regard to the memorandum of association gives in detail the changes necessitated by reason of Section 55 of the Companies Act, 1913, and the paragraph relating to the investment of the funds of the company in banks. No objection is taken to the alteration in the memorandum, and this clearly gives sufficient notice of the proposed changes in that respect, Prima facie it might be supposed that an intimation given to a share-holder that new Articles of Association were to be approved would put him on inquiry as to what the differences were between the new and the old Articles. But that has not always been held to be sufficient by the Court of Chancery. The notice ends by saying that a copy of the new Articles of Association and a copy of the agreement may be inspected at the registered office of the company. Turning to the circular, this begins by saying:
“The shara-holders of the company will no doubt desire to know the reason for the proposed changes,”
9. And after refrering to the incorporation of the company in 1876, and subsequent alterations in the law, it goes on to say:
“Your directors have therefore thought it advisable to bring the Articles of Association of the company more up to date and into line with the provisions of the Companies Act 1913 as amended up to 1920.”
10. And the next paragraph is one which has given rise to a great deal of controversy, viz.:
“Your directors would assure you in the first instance that no greater powers are conferred upon the Board by the new Articles except as regards the proposal to increase the power of investment of surplus funds, which is confined at present to Government securities, so as to permit the placing of surplus funds on deposit at interest with banks.”
11. The contention of the plaintiffs is that this is a misleading statement, because as a matter of fact the new Articles confer greater powers upon the board, a fact which they say it is designed to conceal from the share-holders. The circular goes on to give the principal alterations in the existing articles, and the contention of the plaintiffs is that while dealing with unimportant matters, the circular omits any reference to various important changes tending to increase the power of the direotors to the detriment of the share-holders. The references in the circular to the new Articles are to the holding of shares in joint names, the abolition of the rule by which a member is obliged to offer his shares in the first instance to the Board of Directors, alterations in the voting power, provisions for the recording of votes of lunatics, idiots and minor, provisions in the new Articles to the creation of a provident fund and appointment of a debenture director. Secondly, as regards the proposed agency agreement, the circular goes on to state that the only real difference between the existing term of the agency and the proposed agreement will be found in Cl. 17 which provides for the payment of compensation to the agents in the event of the company being wound up except for the purpose of reconstruction or amalgamation. Now although this part of the circular calls attention to Cl. 17 of the proposed agency agreement, it is contended that it should have stated that the compensation provided for is seven years' commission prior to the winding up, and no reference is made to the very important clauses by which the managing agents had the power of assigning their agency, and the still more important clause by which they bind the company in the event of a transfer to stipulate for the continuance of the agency by the new company, and it is contended that this clause would have a serious effect on the purchase price to be paid by the acquiring company, inasmuch as they might not wish to continue the same agents, and would be compelled to do so against their will. The remaining paragraph of the circular refers to the investment of surplus funds, as to which, I have already said, there is no dispute.
12. It has been contended by the learned counsel for the company that all the cases quoted by the learned counsel for the plaintiff are cases in which the shareholders had no opportunity of seeing what the proposed changes were before the meeting, with the sole exception of a case which has been frequently referred to during the hearing of this case, viz., Normandy v. Ind. Goope & Co. Ltd. (1), and that in all these cases there was a secret agreement between the directors to get an advantage for themselves at the expense of and without the knowledge of he shareholders. In order to see whether his contention is correct, it will be ??? to go into the various cases quoted, of which there are many. Prima facie ??? would appear that where the directors give the shareholders notice of a copy of she proposed alterations including the agreement relating to the remuneration of directors (there are no managing agents in any of these English cases) that would be a sufficient notice and that it is the shareholders' own fault if they do not take the trouble to go to the office of the company and examine the proposed alterations. But unfortunately in at least two cases where a similar notice was given, that has been held by the Court not to be sufficient, and in order to meet that difficulty very elaborate arguments have been put forward. I think that it would be better to deal separately with the question relating to the managing ??? and the question relating to the new Articles of Association, which are referred to in separate portions of the circular and stand on rather a different basis.
13. In my opinion, the interests of the shareholders will be more affected by the new agreement with the managing agents than by the alterations in the Articles of Association, most of which are of a minor character, and in any event would not involve the company in the payment of large sums of money. With regard to the contention that three of the directors are members of the firm of the managing agents and that the shareholders might not be aware of that, I do not think there is very much in it. The company is called. The Maneckji Petit Manufacturing Co. Ltd. Three of the directors, Sir Dinshaw Maneckjee Petit, Baronet, Jehangir Bomanji Petit, and Maneckjee Cowasji Petit, are also members of the firm of managing agents, D.M Petit Sons & Co., and I can hardly suppose that the shareholders are not aware that the company is controlled by the Petit family, and in view of the very eminent position which that family holds in the business world, I should think it extremely probable that shareholders would regard that as an asset and would be induced to take shares in the company by reason of the connexion of the Petit family with it. This is not a case where the directors are unknown people and the agency firm an unknown firm, so that it might fairly be argued that the shareholders did not know that some of the directors were members of the agency firm nor can I for a moment accept the suggestion put forward by the learned counsel for the plaintiff that any intelligent person would buy shares in the company without knowing who the directors were, and there is this further fact that admittedly this firm had been the managing agents of this company ever since 1876, i.e, for over fifty years. The facts in Normandy v. Ind, Coope & Co. Ltd. were peculiar. The directors had been as a matter of fact receiving half as much again as their authorized remuneration over a considerable period, and the meeting was called for the purpose of sanctioning those payments with retrospective effect and also sanctioning an extra payment of £ 1,000 a year to Mr. Edward Murray Ind, one of the directors, and in those circumstances the company not being in a good financial position, Kekewich, J., held that the fact that a copy of the resolutions to be put to the meeting was available to the holders at the registered office of the company was not sufficient, and that it was the duty of the directors to have sent a copy of the proposed resolutions before the meeting was held, and that will be found in the first portion of the judgment, but the learned Judge was careful to say that proposition was meant to apply to the facts of that particular case; and the point in this case is whether the changes introduced by the new agreement with the managing agents were so far-reaching that it was necessary for the directors to send a copy of the agreement or the essential portions of it to each shareholder prior to the holding of the meeting. The form of the circular, unfortunately does not seem to be given in the report in Normandy v. Ind. Coope & Co., Limited . So far as regards the changes introduced by the agreement between the managing agents and the company are concerned, prior to this meeting for fifty years there was no formal agreement, and the position of the agents was regulated by Cls. 98 and 99 of the old Articles. Cl. 98 said:
“The general management of the ordinary business affairs of the company shall, subject to the control of the Board, be in parsons called the agents of the company, and such agents shall be the persons, for the time being members of the firm of Messrs Dinshaw Maueckjee Petit, Sons & Company, and their remuneration shall be two and a half per cent, on the gross proceeds of sale of all yarn, and other goods, articles and things sold by the company.”
14. Clause 99 says:
“The agents, for the time being of the company, shall, subject to the sanction and supervision of the Board of Directors, have the power of appointing, removing, and remunerating all officers, workmen and servants of the company, and of fixing their salaries, and of making payments in respect of all purchases and receiving moneys in respect of all sales effected by, or on behalf of the company, in accordance with the provisions hereinbefore contained.”
15. The principal change made by the memorandum of agreement was the provision as to compensation in the event of the company being wound up, in which event they would be entitled to compensation on the basis of their average commission for seven years preceding the winding up. And that alteration is one to which the attention of the shareholders was pointedly called by the directors in this circular, which says, after referring to the proposed draft agreement, that “apart from the fixing of the duration of the agency at thirty years from 1st January 1927, the only real difference between the existing terms of the agency and the proposed agreement will be found in Cl. 17 which provides for the payment of compensation to the agents in the event of the company being wound up except for the purpose of reconstruction or amalgamation. This is in accordance with the present day practice in Bombay, which praoctice your directors consider should be followed in the case of this company, more particularly having regard to the long and valuable services extending over more than fifty years rendered by the agents and their predecessors in business to the company.”
16. The directors therefore plainly put before the shareholders the fact that the proposed agreement included a clause for compensation and even the number of Cl. 17 is intimated to the shareholders and it is stated in the preceding paragraph that the proposed agreement is open to inspection by any shareholder at the registered office of the company during office hours. I should ordinarily regard this as sufficient notice of the proposed agreement, but it is contended by the learned counsel for the plaintiff that the circular should have stated that the compensation proposed to be given was calculated on the average commission for seven years. I am of opinion that inasmuch as the question of compensation to the agents was specifically brought to the notice of the shareholders, even the clause in which it was to ??? found being stated, the omission to state the amount of compensation, which is not a fixed amount but dependent on the average commission for seven years preceding the winding up, was not a fatal defect, and if that were the only objection on this point I should have put aside this objection as not sufficient in law to invalidate the notice in spite of the ruling in Normandy v. Ind. Coope & Co., Limited, . There are numerous other rulings to which I shall refer later, in which it has been held that notices should not be too strictly construed. Unfortunately the statement in the circular that this clause as to compensation is the only real difference between the existing terms of the agency and the proposed agreement is not strictly correct in view of the clauses to which I have already referred in the agency agreement. The commission remains the same. Cl. 4 of the agreement refers, to the powers of the managing agents in conducting the business and affairs of the company, and I am not prepared to hold, although the powers are more particularly stated, that they go substantially beyond the powers in Article 99. It is contended that Cl. 4(k),
“to purchase and sell and for that purpose to sign, endorse and transfer Government promissory notes or other securities issued by the Government of India and standing in the name of the company or any bonds of any public authority and to collect and give receipts for the dividends or interest from time to time due or to become due on any such securities gives power to the managing agents to raise money, but it is contended that it is not so. Cl. 10 of the proposed agreement says:
“It shall be lawful for the said firm to assign this agreement and the rights of the said firm hereunder to any person firm or company having authority by its constitution to become bound by the obligations undertaken by the said firm hereunder and upon such assignment being made and notified to the company the company shall be bound to recognize the person firm or company aforesaid as the agents of the company in like manner as if the name of such person firm or company had appeared in these presents in lieu of the names of the partners of the said firm and as if such persons firm or company had entered into this agreement with the company and the company shall forth with upon demand by the said firm enter into an agreement with the person firm or company aforesaid appointing such person firm or company the agents of the company for the then residue of the term outstanding under this agreement and with the like powers and authorities remuneration and emoluments and subject to the terms and conditions as are herein contained.”
17. This means that the managing agents are at liberty to substitute their assignees as managing agents, and the company are bound to accept the assignees as such. Clause 16 provides:
“In the event of the company being at any time during the continuance of the agency wound up for the purpose and with the object of transferring its business to another company the company shall make it one of the terms and stipulations of the agreement for transfer of its property and business to such other company as aforesaid that such other company shall appoint the said firm its successors and assigns to be the agents of such new company for the residue of the term aforesaid and with the like powers and authorities to the said firm and on the same terms and conditions as to the remuneration emoluments and otherwise as are herein contained. And it is hereby expressly agreed and declared that save and except with such condition and stipulation as one of the terms of the sale and transfer thereof the company will not sell and transfer its business to any other company.”
18. This means that any company buying the Maneckjee Petit Mill or amalgamating with them is obliged to take the managing agents as its own managing agents, and it is contended that this might seriously affect the purohase price or the terms of amalgamation in the event of an amalgamation taking place, as the new company or the purchasing company would be compelled to take over the managing agents whether they wanted to or not. There is a third clause to which exception is taken, viz., Cl. 2, which gives the managing agents liberty to draw out of the funds of the company at the end of each half-year on account of their commission such sum not exceeding 90 per cent, of the sum which the said firm may fairly consider on the taking out of a trial balance sheet for that half-year to have been earned by the said firm by way of commission during that period.”
19. It is contended that by thus drawing the major portion of their commission half-yearly the company is deprived of interest on the amount. This, I think, is a minor point, but it is very doubtful whether the clause in the circular, which says that the only real difference between the existing terms of the agency and the proposed agreement is Cl. 17 for the payment of compensation, can be regarded as sustainable in view of the omission to refer to the clauses regarding the power of assignment of the managing agency during its continuance in the same firm in the case of a transfer of the company. There is some dispute as to whether this clause refers to sale or amalgamation. It is not necessary to go into that. The cases on which the learned counsel for the plaintiff has relied are: Normandy v. Ind, Coope & Co., Ltd. to which I have already referred, Baillie v. Oriental Telephone and Electric Co. Ltd. (2), MacGonnell v. E. Prill & Co., Ltd. (3), Tiessen v. Henderson (4), and Kaye v. Croydon Tramways Company (5). The learned counsel for the company has argued that the terms of the notice should not be strictly construed, and he-refers to Palmer on Companies, pp. 166 and 168, at which the learned author refers to Normandy v. Ind, Coope & Co., Ltd. as being contrary to this proposition. He further refers to Young v. South African and Australian Exploration and Development Syndicate (6), Par-shuram D. Shamdasani v. Tata Industrial Bank (7) (Shah J.'s judgment), Henderson v. Bank of Australasia (8), Alexander v. Simpson (9), Grant v. United Kingdom Switchback Baihvays Gompany (10), and his main submissions-are as follows:
1. The notice must be in conformity with the Articles of each particular company.
2. Sufficiency of the notice must be decided with reference to the particular circumstances of each case.
3. Where the notices have been challenged, there was some arrangement for secret commission.
4. Except in Normandy v. Ind, Coope & Co., Ltd. the proposed resolutions were never offered for inspection prior to the meeting.
20. This last statement is not quite correct, as there is at least one case, Pacific Coast Coal Mines, Ltd. v. Arbuthnot (11), in which the notice stated that the proposed resolutions were deposited with the Registrar of Companies at Victoria B.C, and it was held that this was not sufficient, apparently on the ground that shareholders residing in other parts of. America might not be able to go to Victoria to inspect them. The plaintiff in the present case, who owns a number of shares, resides in Bombay. It is not in evidence where the other shareholders of the company reside, but presumably they or most of them would be in a position to go to the registered office of the company in Bombay and inspect the proposed resolutions, as intimated by the circular. I think myself that the notices are in accordance with the Articles of the company, but that does not completely meet the argument which has been put forward that the circular is misleading, inasmuch as, while mentioning certain changes, it omits other very important ones. I have already given the details so far as the agency agreement is concerned at an earlier portion of this judgment, and I will deal later with the changes in the Articles of Association, which are of less importance than those in the agency agreement.
21. It has been further argued by the learned counsel for the company that the form of notice and most of the changes in the Articles of Association are of a usual character and are taken from Palmer's Precedents in Company Law, Vol. I. He has referred to them in detail. I am not prepared to hold that because a change in Articles or a clause in an agreement is of a usual character, that therefore a share-holder is precluded from expressing his opinion on it or rather that he should not be given an opportunity of objecting to it if he thought fit. And in this Court we have experience unfortunately, that shareholders can and do object to all sorts of provisions, usual or not. The present case presents a great deal of difficulty, and the point I am on now is whether the circular is misleading inasmuch as it would give a share-holder — and the cases show that in matters of this nature a share-holder must be taken to be an ordinary business man of ordinary intelligence, not an astute financier or on the other hand a person of deficient intellect—notice of the extent and the result of the proposed changes, and if we are to follow Kekewich, J.'s judgment in Normandy v. Ind, Coope & Co. Ltd. , I think there would be some difficulty in holding that the circular did give sufficient notice. Now considering the other cases given above, in Baillie v. Oriental Telephone and Electric Company, Ltd. , the directors were also directors of a subsidiary company in which the principal company held practically the whole of the shares. The directors were drawing remuneration from the subsidiary company without the sanction of the share-holders of the principal company. An extraordinary meeting was convened to pass resolutions ratifying what had been done and authorizing them to retain the remuneration received by them in the past and for the future as directors of the subsidary company. The notice was accompanied by a circular, which set out the proposed resolutions, but neither the notice nor the circular gave particulars of the amount, which was very large, of the remuneration which had been received by the directors in respect of the subsidiary company.
22. It was held that the notice did not give a sufficiently full and frank disclosure to the shareholders of the facts upon which they were asked to vote; and that the resolutions were invalid and not binding upon the company. This was a case in which a sum of upwards of £40,000 had been received by the directors in respect of the subsidiary company, a fact which was not referred to in the circular, and it was held by the Master of the Bolls that if any attempt is to be made by the directors to get the sanction of the shareholders, it must be made on a fair and reasonably full statement of the facts upon which the directors are asking the shareholders to vote, and that the notice coupled with the circular was not frank, not open, not clear, and not in any way satisfactory. In MacGomiell v. E. Prill & Co., Ltd. , it was held that notice of a meeting of a company to increase or sanction the increase of the share capital of a company is not sufficient if it merely refers generally to a proposed resolution to increase the share capital; it must show an intention to make the specific increase embodied in the resolution that is actually passed. In Tiessen v. Henderson it was held that notice of an extraordinary general meeting must disclose all facts necessary to enable the share-holders receiving it to determine in their own interest whether or not they ought to attend the meeting, and pecuniary interest of a director in the matter of a special resolution to be proposed at the meeting is a material fact for this purpose. Kaye v. Croydon Tramways Company was a case in which part of the purchase-money of the company was to be paid not to the share-holders but to the directors, and it was held that the notice was artfully framed to mislead the share-holders. That is a very extreme case. The learned counsel for the company has referred to Young v. South African and Australian Exploration and Development Syndicate in which there was a notice of a special general meeting and thereby given in general terms notice of the character of the business to be submitted to it. That seems to be sufficient within Article 35, Table A; and besides that it was apparent on the face of the notice that the intention was to substitute new regulations, and the members of the company were told that they were at liberty to inspect a copy of the proposed regulations at the office of the solicitors of the company, whose address was given, and it was held to be a sufficient notice. Henderson v. Bank of Australasia only says that the notice fairly and reasonably expressed to the share-holders what matters were going to be discussed at the meeting. In Alexander v. Simpson it is laid down that the test is, what is the fair businesslike construction which businessmen in the position of shareholders would place on the document when they received it. Grant v. United Kingdom Switchback Bailtoays Company held that the resolution of the general meeting was not invalidated by the fact that the notice convening it did not suggest any reason why the contract could not be carried into effect without the sanction of a general meeting. In Parshuram D. Shamdasani v. Tata Industrial Bank it was held by Shah, J., after a reference to most of the cases to which I have referred (p. 1003 of 26 Bom. L.R):
“The net result is that where there is any secret agreement or any interest of the directors in the agreement not disclosed in the circular, or in the notice, the Court will view with strictness any omission to refer to it in the notice or in the circular accompanying the notice; and the omission to mention any secret arrangement would constitute a serious defect in the notice. But where no secret agreement is proved or suggested and where there is no indication that there was anything to conceal the Court will as far as possible take a liberal view of the terms of the notice and will not upset the proceedings taken a notice for some defect, which might have been avoided, but which was not avoided on account of some honest mistake.”
23. And reference is made to an observation of Cotton, L.J, in Henderson v. Bank of Australasia , that (p. 343):
“I do not think that a notice calling a meeting ought to be treated very critically in order to see whether we cannot pick out some defect in it.”
24. In that case however it was held that there was no essential matter which could be said to have been omitted. In this case the real difficulty is that while the circular pointedly calls the attention of the shareholders to the proposed arrangement for compensation to the managing agents in the event of the company being wound up, it refers to para. 17 of the proposed agreement as containing the only real difference between the existing terms of the agency and the proposed agreement. I hold that so far as the question of compensation to the managing agents is concerned, the share-holders had sufficient notice and the omission to mention the amount of the compensation is not sufficient to invalidate, the notice. The share-holders were put on inquiry to see what the nature and extent of the proposed compensation was. They were given an opportunity of inspecting the resolutions to be proposed at the meeting, and if they did not avail themselves of it and did not attend the meeting, that is their own fault. But the difficulty arises from the fact that no reference is made in the circular to the other alteration in the terms of the agreement with the agents, viz., the power of assignment and the compulsory continuance of the same agency by any company which took over the business. And the question is whether the omission to refer in this circular to these alterations renders the notice insufficient. It might be contended that a shareholder might approve of the proposal to compensate the managing agents for the cessation of their interest, and therefore he might not think it necessary to attend the meeting, but it does not necessarily follow that he would approve of the clauses regarding assignment and the compulsory continuation of the agency in the event of a sale of the mill by the new proprietors, and it might therefore be argued that he was misled by this reference in the circular to Cl. 17 as constituting the only real difference between the existing terms of the agency and the proposed agreement. On the other hand it is quite clear that the directors did give notice to the shareholders that there was to be a change in the terms on which the managing agents were working for the company by the introduction of an agreement with them which contained one important clause regarding compensation which might conceivably involve the company in a large payment and therefore shareholders were put upon inquiry, and given an opportunity of examining the proposed memorandum of agreement. There is no question of any secrecy here, because any shareholder who went to the company's office to see the proposed memorandum of agreement with a view to examine the proposals regarding compensation would in all probability look at the other terms so that the other proposals regarding assignment and the continuance of the agency would be brought to his notice. I think myself it would have been better if in the circular the directors in calling attention to Cl. 17, of the proposed memorandum of agreement, had also called attention to the clauses regarding the powers of assignment and the compulsory continuance of the agency in all events. The question is whether this is sufficient to invalidate the notice. There is no question of a secret agreement here as in some of the cases above quoted, but there is an interest of the directors in the agreement which is not disclosed in the circular or notice, an interest apart from the compensation clause. Now turning to the alterations in the Articles of Association, they are of a minor character. It was at one time contended that by the new Articles of Association the directors were given power to raise money on behalf of the company which they did not possess under the Articles of Association, but that argument has had to be given up since under Articles 75-A and 75 B of the old Articles and Cls. 3(k) and 3(1) of the old Memorandum of Association the power of raising money by debentures was given to the directors: of p. 19 of the old Articles, S. 75, Cl. (i). The learned counsel for the plaintiff had to admit this was a complete answer to his argument on that point. Various objections have been taken to the alterations in the Articles of association, but they are really none of them of very great importance. The one to which much argument has been devoted is the question of the indemnity of the directors under the old and the new Articles. Under the old Articles 85 and 86 and the new Articles 183 and 184 the exceptions to wilful acts and defaults have been omitted, and the words wilful dishonesty substituted. There is nothing about this in the circular. The restrictions on the right of transfer, old Article 30, new Article 44, and the regulations as to the appointment of directors, old Article 78, new Article 133, also the restrictions on the inspection of accounts and discovery of trade secrets, Articles 161 and 180, which are not in the old Articles, are all minor points, but the new indemnity clauses undoubtedly go further than the old by the omission of the clause as to wilful default, there being a considerable difference in law between wilful negligence and dishonesty, as laid down in In re Brazilian Rubber Plantations Estates, Limited (12). It is further contended that the restriction on transfer in Article 44, where the directors have a new power of affecting the share-holder's rights and the right is again restricted by Article 130, which, however requires 14 clear days' notice of candidates for the office of director confer new powers. The assurance in the circular that “no greater powers are conferred upon the Board by the new Articles except as regards the proposal to increase the power of investment of surplus funds”
25. Is not strictly correct, because in the circumstances I have given above the new Articles increased the power of the directors, although many of them, such as the power of restriction on transfer, are powers which are usually exercised in modern Articles of Association, and it has been contended that ordinary share-holders would imagine from this notice that the proposed alterations were merely formal designed to moderniza the Articles. It has been contended that there is no disclosure of the interest of three directors in the agency agreement, but the old Articles showed the names of the directors, and the names of the agency firm, and I do not think that the plaintiff can succeed on that point.
26. However liberal a view is taken of the notice and circular, and eliminating those of the changes in the Articles of Association which are more or less of a formal character or such as are usually found in modern Articles, there are two points, first, alteration in the indemnity given to the directors and officers of the company, and, secondly, as regards the agency agreement the omission to mention the power of assignment and the power conferred on the managing agents to insist on the continuance of their agency in the event of a transfer, both of which are, in my opinion, changes of which no notice was given to the share holders, and are even proposals which the terms of the circular might be said to conceal, and in that respect the circular is misleading. To put the matter as simply as possible, if the directors issue a circular in which they refer to certain alterations, and say that the only important alteration is with regard to cl, 10, whereas there are equally important alterations in cl. Y, can it be said that the shareholders have sufficient; notice of the proposed alterations in cl. Y? I do not think so.
27. The result is that I find on issue 1 that the notice was insufficient, and consequently on issue 2 that the meeting was not duly convened and the resolutions are not valid and operative. The plaintiff will be granted the declarations and injunctions sought in prayers (a) and (b) of the plaint together with costs of the suit.
V.B/R.K
28. Order accordingly.