Tesco v Constain - Thomson Reuters

[1912] 2 Ch. 125 Page 61912 WL 17392 (Ch D)(Cite as: [1912] 2 Ch. 125)majority of the debenture-holders to alter the character of the debentures so faras it existed--if it did exist--was conferred by sub-paragraph (2.) of clause 13in the power to sanction any modification or compromise of the rights of thedebenture-holders against the company or against its property, and so on.In the first place the plaintiffs' counsel, founding themselves upon theobservations of Vaughan Williams L.J. in the case of Walker v. Elmore's Germanand Austro-Hungarian Metal Co. [FN13]--where, however, the terms of the clauseconferring the powers were quite different from those in the present case--contended that the power conferred by sub-paragraph (2.) of clause 13 could notbe exercised unless or until some serious occasion arose, which, to put itbroadly, in the judgment of the Court or some one else--I scarcely know whom--rendered it absolutely necessary or plainly expedient that recourse should be hadto the exercise of the powers in question, and that the existence of thisnecessity was in effect a condition precedent to any exercise of the power tomodify the rights of the debenture-holders. I do not find any such conditionexpressed or necessarily implied anywhere in the document, and I may refer to thejudgment of Lord Esher M.R. in Hamlyn & Co. v. Wood & Co. [FN14] on the subjectof implying clauses, a case which was cited to me by Mr. Gore-Browne, although,of course, there cannot be a compromise in the absence of any dispute or unlesssome question or other has arisen.FN13 85 L. T. 767.FN14 H[1891] 2 Q. B. 488, 491.What Fry L.J. said in the case of Mercantile Investment and General Trust Co.v. International Co. of Mexico [FN15]was nothing about any implied condition, butmerely this: "Is this transaction a modification or compromise of the rights ofthe debenture-holders against the American company or against its property? Ifthis question be answered in the affirmative, the *134 defendants are right; ifin the negative, the plaintiffs." What I have to ask myself in this case, Ithink, is this: Is the transaction in question a modification of the rights ofthe debenture-holders against the company, or against its property, or is it not?Apart from this contention or theory with respect to the existence of a conditionprecedent, the plaintiffs advisedly abstained from any attempt to adduce evidenceto shew that the conduct of the majority was actually or technically fraudulent,or that the vote was otherwise than perfectly bona fide, regular, and proper,although they did contend that the alteration made or sanctioned could notpossibly be regarded as a modification or modifications of the rights of thedebenture-holders, but amounted to something much more extensive, and, I supposewould almost say, destroyed their rights. Upon consideration, as I have alreadyintimated, I cannot accede to, this contention as to implying a conditionprecedent to the meeting or voting of the debenture-holders. I am of opinion anddecide that the resolutions, so far as they altered the character of thedebentures, did not amount to anything more than modifications of the rights ofthe debenture- holders against the company and its property.FN15 [1893] 1 Ch. 484, n., 490, n.This was the principal question, no doubt, in the action, which but for thisobjection with reference to altering the character of the debentures would not Ithink have been brought. [His Lordship dealt with some other matters not materialto this report, and then concluded:]Upon the whole, I think that this action fails, and I do not see my way to takeany other course than to dismiss it.RepresentationCopr. © West 2004 No Claim to Orig. Govt. Works