1933 (5) TMI 14

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....the company appeared, and it was adjourned in order that the preference shareholders might be represented, as is now the case. It will be convenient to refer to them in this judgment as the respondents. The interests of the ordinary shareholders, whose special representative does not appear, are identical with those of the appellants. Three questions were submitted for the determination of the Court, of which the third is alone the subject of the appeal. It is in the following terms:- "(3)-(a) Is it intra vires of the Directors of the Company to use and dispose of the said Reserve Fund of GBP50,000 for all or any of the purposes set out in sub-section (14) of Clause 119 of the Articles of Association of the Company ? (b) If yes, is....

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....eference shares shall in a winding-up have priority as to return of capital over all other shares in the capital for the time being of the Company but shall not have any further right to participate in profits or assets. (3)Any Reserve Fund formed under the provisions herein before contained shall be invested outside the Company's business. (4)The right hereby attached to the said Participating Preference shares (including the provisions hereinbefore contained as to the Reserve Fund) may be modified in accordance with Clause 54 of the accompanying Articles of Association but not otherwise and that clause and also Clause 155 of the said Articles shall be deemed to be incorporated herein and have effect accordingly. (5)Subject at afo....

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....ociation : and that reading the two together it should be held that the company has the powers which it claims. Article 119(14) empowers the Directors of the Company "to set aside out of the profits of the Company such sums (in addition to the sums provided by Article 5, sub-section (1) of the Memorandum of Association to be set aside as the Reserve Fund therein mentioned) as they think proper as a Reserve Fund to meet contingencies or for special dividends on for repairing, improving and maintaining any of the property of the Company and for such other purposes as the Directors shall in their absolute discretion think conducive to the interests of the Company ; and to invest the several sums so set aside both under Article 5, sub-sec....

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....read together at all events so far as may be necessary to explain any ambiguity appearing in the terms of the memorandum, or to supplement it upon any matter as to which it is silent. They find themselves, however, in agreement with the learned Chief Justice as to the object for which this special reserve fund was to be created, namely, for the benefit and protection of the respondents, and they think that this object would be nullified if the fund could be applied, like any ordinary reserve fund, for the benefit of the company generally. There is not, in their Lordships' view, any ambiguity in the terms of Clause 5 of the memorandum which requires explanation, nor any lacuna which requires filling in, and it is clear by sub-clause (4) t....