Tesco v Constain - Thomson Reuters

[1912] 2 Ch. 125 Page 11912 WL 17392 (Ch D)(Cite as: [1912] 2 Ch. 125)*125 Northern Assurance Company, Limited v. Farnham United Breweries,LimitedChancery DivisionCh DJoyce J.1912 Feb. 27, 28, 29; March 8Company--Debentures--Trust Deed--General Meeting--"Extraordinary Resolution"--Power of Majority to bind Minority--Power to sanction Modification of Rights--Redeemable Debentures--Conversion into Irredeemable--Special Circumstances--Condition Precedent--Additional Powers--"Modification"-- "Redeemable"--"Irredeemable"--Meaning of.A debenture trust deed conferred upon a general meeting of the debentureholdersa power, exercisable by extraordinary resolution passed by a majority ofnot less than three-fourths of the number of persons voting thereat, to sanctionany modification or compromise of the rights of the debenture-holders against thecompany or against its property, whether arising under the debentures, or thetrust deed or otherwise, and provided that an extraordinary resolution dulypassed should be binding upon all the debenture-holders:--Held, that the conversion of redeemable debentures into irredeemable orperpetual debentures was a modification of the rights of the debenture-holderswithin the meaning of the power, and that the existence of some serious orspecial circumstances was not a condition precedent to the exercise of the power.The meaning of "redeemable" and "irredeemable" as applied to debenture stock,and the modification of the rights of stock holders effected by the conversion ofredeemable stock into irredeemable stock, discussed by Eve J. in In re JosephStocks & Co., post, p. 134, n.ACTION.The defendant company was incorporated in 1889 under the Companies Acts, 1862to 1886, with limited liability. The nominal capital was 225,000l. divided into10,000 ordinary shares of 10l. each and 12,500 preference shares of 10l. each.In 1890 the defendant company raised a sum of 200,000l. by the issue of aseries of first mortgage debentures for 100l. each bearing interest at 4l. 10s.per cent. per annum. By each of the debentures the company covenanted to pay theprincipal moneys thereby secured on September 30, 1909, or on such earlier dateas the same should become payable in accordance with the conditions thereunderwritten, and in the meantime to pay interest thereon half-yearly at the rateabove mentioned, and thereby *126 charged with such payment its undertaking andall its property described in the schedule to the trust deed hereinaftermentioned.Condition 2 provided that the principal moneys should immediately becomepayable if (inter alia) the company made any default referred to in the trustdeed hereinafter mentioned.Each debenture also provided that the holders of the debentures were to beentitled, pari passu, to the benefit of, and to be subject to, the provisionscontained in the trust deed whereby the company vested and covenanted to vestcertain property of the company therein specified in the trustees therein namedfor securing payment of the principal moneys and interest payable in respect ofthe debentures.The trust deed contained inter alia a covenant that the company would duly payCopr. © West 2004 No Claim to Orig. Govt. Works