of sec. 11, and that also sub-sec. (e) might be held to apply to the facts, but it was objected that these clauses had no application to a company incorporated under the laws of Ontario. There is no doubt that where an Ontario corporation is shewn to be insolvent, a creditor may, by application to the Court, obtain the benefit of the Dominion Winding-up Act, this being legislation upon insolvency which falls within the jurisdiction of the Federal Parliament: Re Union Fire Ins. Co. (1887), 14 O.R. 618, (1889) 16 A.R. 161, (1890) 17 S.C.R. 265. The attempt made here is to apply the provisions of the Dominion Act to a company that has no creditors, the clause that relief is sought under providing that a winding-up order may be made when the capital stock of the company is impaired to the extent of twenty-five per cent. Now, the Steel company in question, not being insolvent, and being a corporate body brought into existence under the Ontario Companies Act, is, of course, subject to the Ontario Winding-up Act, but I am unable to see how it can be brought under the provisions of the Dominion Winding-up Act. If this latter Act provided that the clause in question should apply to provincial corporations, whether insolvent or not, I think it would clearly be ultra vires, but it does not so provide, so it is fair to presume that it was intended to apply to such companies as were subject to Federal control or companies incorporated under the Dominion Companies Act. I think it is clear that the order cannot be made under sec. 11. It was also contended that the order might be made under sub-sec. (b) of sec. 6,* as the material shews the company is in process of a voluntary liquidation or winding-up. I think the same objection applies to this section-or, in other words, the only clauses of the Dominion Act that can be made to apply to an Ontario corporation are those dealing with insolvency. The facts shew a proper case for a winding-up order, and as the motion fails only upon the ground that the Dominion Act does not apply, it is dismissed without costs. Mabee, J. 1908 RE CRAMP STEEL G. G. 6. This Act applies to incorporated trading companies doing business in Canada wheresoever incorporated and, (b) which are in liquidation or in process of being wound up, 1907 Nov. 2. [MULOCK, C.J., EX. D.] KELLY ET AL. V. ELECTRICAL CONSTRUCTION CO. Company Election of Directors Parties-Proxies By-law Regulating-Bylaw Proper for Directors-General Power of Shareholders-R.S.O. 1907, ch. 191, sec. 47-7 Edw. VII. ch. 34, sec. 87. Action by certain shareholders of a company, on behalf of themselves and all other shareholders, except the individual defendants, to have the election of the latter as directors set aside for irregularity: Held, that the action must be dismissed unless the plaintiffs obtained the consent of the company to sue in the company's name; as, however, the company was a party defendant and all necessary parties before the Court, it was proper to dispose of the case on the merits, conditionally on such consent being obtained and the record amended. Under sec. 47 of the Ontario Companies Act, R.S.O. 1897, ch. 191 (7 Edw. VII. ch. 34, sec. 87), by-laws regulating the requirements as to proxies are to be made by directors, and shall have force only until the next annual meeting of the company, and, unless confirmed thereat, shall cease to have force. The shareholders, themselves, therefore have no power to initiate and pass such a by-law at general meeting; and, in the absence of any valid by-law regulating the matter, nothing more is necessary to a proxy than valid execution by the shareholder. THIS was an action to set aside the election of the board of directors of the defendant company, and for other relief, under the circumstances set out in the judgment. The action was tried before MULOCK, C.J. Ex.D., sitting without a jury, at London, on April 2nd, 1907. G. C. Gibbons, K.C., and G. S. Gibbons, for the defendants, raised the preliminary objection that the action was not properly constituted, and that it should have been brought in the name of the company: Macdougall v. Gardiner (1875), 1 Ch.D. 13; Mozley v. Alston (1847), 1 Ph. 790; Hattersley v. Earl of Shelburne (1862), 10 W.R. 881, 31 L.J. Ch. 873. T. G. Meredith, K.C., and J. W. G. Winnett, for the plaintiffs, contended that the objection was too late, misjoinder not being ground for demurrer: Holmested and Langton's Judicature Act, p. 376; and that the case was properly constituted: Dickson v. McMurray (1881), 28 Gr. 533; Davidson v. Grange (1854), 4 Gr. 377; Sadgrove v. Bryden, [1907] 1 Ch. 318. The Court overruled the objection, and the case proceeded. Meredith and Winnett, for the plaintiffs, contended that any .. by-laws regulating proxies, were required to be passed by the directors, not, as here, by shareholders at a general meeting: Ontario Companies Act, R.S.O. 1897, c. 191, sec. 47; that the by-laws of the directors were not confirmed by the shareholders at the next shareholders' meeting, as required by the Act; that the statuté gave the shareholders the right to vote by proxy, and that right could not be interfered with. They referred to Dickson v. McMurray, 28 Gr. 533. G. C. Gibbons, for the defendant, contended that sec. 47 gave the power to pass the by-law respecting the requirements as to proxies: Bombay Burmah Trading Corporation v. Dorabiji, etc., [1905] A.C.213; Palmer's Company Precedents, 8th ed., p. 599; that what was done here afforded no opportunity of examining proxies, which is the object of the statute: Harben v. Phillips (1883), 23 Ch.D. 14, at p. 32; that the action was not brought on behalf of the company or of all the shareholders, but for the plaintiffs personally, who were estopped because they were at the meeting of shareholders that passed the by-laws in question; that the by-laws not having been revoked remained the lawful by-laws of the company: Stephenson v. Vokes (1896), 27 O.R. 691, pp. 270, 697. Meredith, in reply, referred to Holmeşted and Langton's Judicature Act, p. 206; Pender v. Lushington (1877), 6 Ch.D. 70. November 2. MULOCK, C.J.:-This is an action to set aside the election of the board of directors of the defendant company, and for other relief. The company was incorporated by letters patent issued on March 17th, 1897, under the authority of the Act respecting the Incorporation of Joint Stock Companies by Letters Patent, being ch. 157 of the Revised Statutes of Ontario, 1887, and now by virtue of sec. 5 of the Ontario Companies Act, R.S.O. 1897, c. 191, it is subject to the provisions of secs. 17 to 105 of that Act. On February 5th, 1907, the annual meeting of the shareholders of the company was held for, amongst other purposes, the election of a board of five directors. A poll was opened, and on the conclusion of the voting the chairman declared Messrs. Campbell, Workman, Gorman, Heman and Thomas elected, and they have ever since acted as members of the board. 1907 KELLY v. ELECTRICAL TION CO. Mulock, C.J. 1907 KELLY The plaintiffs contend that they and C. W. Sifton, and not Workman, Gorman, Heman and Thomas, were elected, and they bring this action on behalf of themselves and all other shareholders, V. except the individual defendants, and ask to have the election set ELECTRICAL CONSTRUC- aside, and that defendant Campbell, who was chairman at the meeting, be ordered to declare the plaintiffs and C. W. Sifton to have been elected directors, or for a declaration that the plaintiffs and C. W. Sifton were duly elected in place of the other individual defendants. TION CO. The defendants, including the defendant company, by their statement of defence contend that the plaintiffs are not entitled to maintain this action, and that the election was conducted in accordance with the requirements of the by-laws of the company. The substance of the plaintiffs' complaint is that the individual defendants are usurping the office of directors to the exclusion therefrom of the plaintiffs and C. W. Sifton. As stated below, the evidence does not, I think, shew that a majority of votes was tendered in support of the plaintiffs and Sifton, and therefore the case is narrowed down to the one point-whether the election should be set aside at the instance of these plaintiffs. If the directors were not duly elected their usurpation of office is an invasion of the rights of the corporation to manage its own internal affairs. The election of directors is a matter under control of a majority of the shareholders. If the majority are satisfied that the present board should remain in office until the expiration of the statutory term of office, no useful purpose would be served by unseating them, for it would at once be in the power of the majority to restore them to office. In the management of a company's domestic affairs the board may frequently err as to the manner of doing what the company is entitled to do, as, for example, by doing irregularly or illegally what it has the right to do in a regular or legal manner. In any such case the majority of the shareholders may waive such irregularity or illegality, and it would be purposeless for the Court to entertain an action at the instance of individual shareholders and set aside a transaction of the company, when the next moment the majority of the shareholders might in substance repeat their former action, though in a manner not open to objection. For 1907 instance, what purpose would be served by the Court setting aside Mulock, C.J. an election of a board of directors if the majority of the shareholders were opposed to such action and could at once render it nugatory by re-electing the unseated members? To avoid such fruitless litigation, the rule, as laid down in Foss v. Harbottle (1843), 2 Ha. 461; Mozley v. Alston (1847), 1 Ph. 790, and later cases, is well established that in respect of acts within the powers of the company, and thus capable of confirmation by the majority of the shareholders, the Court will not interfere at the instance of individual shareholders. Therefore, I think that unless the plaintiffs obtain the consent of the company to sue in the company's name, the action should be dismissed. It is, I think, . a proper case in which they should be given an opportunity for obtaining, if possible, such consent. The board might give it, or it might be obtained from the shareholders in some manner, as, for example, at a special general meeting convened under the provisions of sec. 52 and following sections of the Ontario Companies Act, R.S.O. 1897, c. 191. The company is at present party defendant, and all necessary parties, either as plaintiffs or defendants, are now before the Court, and have taken part in the real issue of the case. Therefore, it is advisable, I think, that instead of giving effect at this stage to the defendants' objection and dismissing the action, I should, conditionally upon the record being amended, as above indicated, dispose of the case upon the merits. Dealing, then, with the facts and circumstances of the case, it appears that the dispute as to the result of the election has arisen in consequence of four absent shareholders, represented at the meeting by proxy, not having been allowed to vote. If they had been, the plaintiffs contend that they and C. W. Sifton would have been elected. The four absent shareholders were E. Holden, the holder of 20 shares; Chas. Sifton, the holder of one share; Chas. W. Sifton, the holder of 13 shares; and G. Gerrard, the holder of 44 shares. It was shewn that J. B. Campbell, without authority, voted on 7 shares owned by Messrs. Olmstead and Macpherson, and that Thos. Dealy was the holder of 20 shares, which he had pledged to the Dominion Bank, and it was contended by the plaintiffs that under sec. 36 of the Ontario Companies Act, R.S.O. 1897, ch. 191, KELLY v. ELECTRICAL TION CO. |