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Aviation History
1916
1916 - 0087.PDF
JANDARV 27, 1916. LEGAL INTELLIGENCE. Bleriot Manufacturing Aircraft Co., Ltd. THE affairs of the Bleriot Manufacturing Aircraft Company, Ltd., on the 18th and 19th inst. came before Mr. Justice Neville in the Companies Winding-up Court on a petition by Mr. J. E. Cassellsfor the compulsory winding-up of the company. Mr. Alex. Grant, K. C., and Sir Denham Warmington appeared for the petitioner Mr. J. E. Cassells; Mr. Frank Russell, K.C., and Mr. Whinney represented the company. A number of other counsel represented other share holders interested. Mr. Grant said this was an application for the compulsory winding-up of the company. The petitioner was John Edward Cassells, who, although holding only ten shares, was supported in the matter by (counsel understood) half the ordinary share capital of the company. The position was this : At a meeting summoned by the directors, against whom the attack was aimed, neld on the previous Thursday, an overwhelming majority was in favour of the petition being granted by the Court and the company being wound up. No notice of opposition had been given. Mr. Grant said he challenged his friend's statement that he appeared for the company or that he could show that the solicitor instructing him was representing the company. He (Mr. Grant) understood that no retainer had been given to anyone to represent the compmy. He understood that Mr. Russell represented a man named Harry John Lawson. Continuing, counsel said that the grounds for launching the petition for winding up were, first, that the substratum of the company was gone; secondly, that the company was in the hands of a fraudulent set of rogues, who were wasting the assets and who would further waste the assets unless the company was wound up. In addition, there were certain technical poinls under the Companies Acts. The company was incorporated on the 19th May, 1915, and its object, according to the prospectus, was to acquire the business of M. Bleriot. The company was promoted by the Army and Navy Contract Corporation, Ltd., which was another name for a person called Lawson, whose connection with the company was the cause of the trouble. The Army and Navy Contract Corporation was controlled by Lawson, and counsel was told that an over whelming majority of the shares were held by Lawson. On the 9th March, 1915, an option was addressed from Paris by Messrs. Bleriot to Mr. Casson (a director of the B16riot Company), in which they agreed to sell their business in England to a limited company, the capital of which was to be £160,000. The option was to become operative on payment of ,£1,000 by the 15th March. On the 19th May the company was incorporated ; the memorandum was signed by seven clerks. On May 22nd, three days after the incorporation ot the com pany, these seven gentlemen purported to hold a meeting at which they passed a special resolution, which purported to have been confirmed on June 14th, and which made alterations in the articles of very grave importance. One resolution converted the company from a private into a public one, while another so altered the articles that holders of ordinary shares had not the right to attend or vote at any general meeting. On June 12th the signa tories appointed the following directors : The Duke of Manchester, Mr. William A. Casson, Admiral Sir Edmund Fremantle and Mr. J. H. Swinburne, a director of the Army and Navy Corporation. On June 17th a meeting of the directors was held, at which an agreement was made for the taking over by the company of trie option which had been assigned to the syndicate. Counsel said that the syndicate had received the remuneration agreed upon in consideration of services rendered, in spite of the fact that the Bleriot agreement had never been converted and was never likely to be. The statutory meeting purported to have been held on June 21st, but the directors as a body were not consulted about it and they never heard of it. As they were the only persons who could summon it, he submitted that no such meeting could be held. On the same day the prospectus was issued, and the appeal for sub scriptions was supported by the National Aero Defence League, which, said counsel, was one of Lawson's concerns. The prospectus was well received, and 94,862 ordinary shares and 43,628 deferred shares were subscribed. On June 26th, however, the company was not ready with the money to carry out the agreement with M. Bleriot. The latter had now seen the alterations in the articles for the first time, and he took advantage of the company's failure to refuse to complete. On July 21 st there was a meeting of the directors, attended by Lawson and Langford, at which Lawson handed in a nomination by the syndicate of himself and Langford as directors of the com pany. Sir E. Fremantle objected to sit at the same board with Lawson, and a resolution was proposed by Mr. Casson and seconded by Sir E. Fremantle against Lawson's being a director. The meeting was adjourned to July 23rd, when Casson and Sir E. Fremantle were outvoted. Thereupon Sir E. Fremantle imme diately resigned his directorship. Sir A. Guinness never attended a board meeting after this, and resigned his directorship in the following September. This left the control of the board and of the company in the hands of Lawson. Meanwhile, M. Bleriot refused to transfer his business to the company, the syndicate, or its nominee, and on July 29th the syndicate began an action for specific performance against M. Bleriot and made the company a defendant, and that action was still pending. On June 28th, a board meeting was held at which the majority of the board passed a resolution appointing Lawson and Langford a committee to draw cheques and exercise all the powers of the directors. Mr. Russell, on behalf of the compiny, said his submission was that there was no case made out for a winding-up order. His learned friend put his case on three grounds : (I) No holding of a statutory meeting ; (2) misconduct, or alleged misconduct, on the part of the directors; (3) substratum gone. With regard to the first point he submitted that the statutory meeting had in fact been held ; it was technically in order ; it was held on June 21st, and there was a record of it in the. minute book. With regard to the alleged misconduct of the directors, or some of them, the evidence put forward covered a very wide field indeed. Certain payments were alleged to have been wrongly made by the directors; even if that were so, that was no ground for winding up, although it might be a ground for bringing proceedings in the name of the company against the directors to make them account for those wrong payments. The most im portant ground given for winding up was that the substratum had gone. This was not the case of a company formed to enter into a specific contract. By clause 3 of the memorandum the company was to make, buy, sell, let or hire and deal in aerial conveyances of all kinds, &c, and also to provide hangars, garages, &c. If it were a fact that all chance of the company ever getting the Bleriot con tract completed had finally gone, then the petitioner might be able to say that the substratum had gone in the sense that the Blcriot business had gone, but he submitted that this was a company with general objects under which it would still be entitled to embark upon the business of manufacturing aircraft other than Bleriot. Without calling upon Mr. Grant to reply, His Lordship gave judgment. He said the first question he proposed to consider was that of substratum. After relating the facts, he said that M. Bleriot found that the company was not in a position to carry out the contract with him. It appeared to him that they were quite incapable of affording the consideration upon which the contract was based. The company had not got the required capital referred to in the option. He did not think that the 43,000 shares which were to be allotted to him came within the description of ordinary shares, and he was satisfied that the company could not set aside the £60,000 of working capital, which was one of the terms of the option. Therefore, in spite of what had been said with regard to the pendency of litigation against M. Bleriot, he did not think he ought to take that into serious consideration. He was therefore brought to the question, always a difficult one, of whether the substratum of the company had gone. It appeared to him that once one knew that the contract with M. Bleriot had no reasonable probability of being carried out, one found that the Bleriot Manufacturing Aircraft Company, Ltd., was a compiny which obviously could not justify its name. The memorandum was wide, no doubt, and the prospectus was wide, and referred to the manufacture of aeroplanes without speci fying that every aeroplane was to be of the Bleriot type. He was satisfied that the reception by the public of the proposition would have been different had the public known that the company would have no right to carry on M. Bleriot's business in this country. It appeared to him that if they were to continue their business by the construction of aeroplanes of different types they would be liable to an injunction restraining them from using the name they at present had, because it would be fraud, and under the law of the land they would be incapable of carrying on business under their registered title. That went a long way to enable him to determine the question whether the substratum had gone or not. The company was, in fact, formed for the purpose of the agreement entered into between the syndicate and the company under which the syndicate agreed to sell to the company the property which they hoped to acquire under the option given to Mr. Casson. In his opinion, therefore, this was a case in which the substratum of the company had gone, and he thought that although no doubt in the primary sense it was a question of the construction of the memorandum, at the same time the surrounding circumstances must be taken into account in considering that document. He added that it appeared to be a case where there was a considerable amount of capital left which might be diverted to other purposes, but only by the consent of all the shareholders. Coming next to the ques tion of the misconduct of the directors, his Lordship observed that 87
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