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Petitioner: THE NATIONAL BANK OF AUSTRALASIA, LIMITED VS Respondent: THE SCOTTISH UNION AND NATIONAL INSURANCE COMPANY
P L D 1952 Privy Council 169
P L D 1952 Privy Council 169
Present : Viscount Simon, Lord Normand, Lord Oaksey, Lord Tucker and Lord Cohen
THE NATIONAL BANK OF AUSTRALASIA, LIMITED --Appellant
versus
THE SCOTTISH UNION AND NATIONAL INSURANCE COMPANY and others‑Respondents.
Privy Council Appeal No. 8 of 1952, decided on 10th July, 1952, from the High Court of Australia.
Bank incorporated in Queensland (Australia), having also an office in London receiving deposits‑Bank suspending payment ‑Scheme of arrangement "old" prepared to secure moratorium, by which creditors in satisfaction of their claims accepted certain securities‑"Old" scheme found insufficient to enable Bank to find its feet‑"New" scheme sanctioned by which stock was allotted to holders of said securities‑Worlds creating such stock‑Construction of‑Whether stock of uniform nature and payable in Australian pounds irrespective of the place of registra tion.
The Bank was incorporated as a limited liability company in Queensland in the year 1872. In 1878 it opened an office in London. A local board of directors was appointed with powers delegated by the Bank. In the course of its operations the London branch accepted deposits the amount of which by March 1893, exceeded 2,900,000. These deposits carried interest at the rate of 4 to 5 per cent. per annum.
On the 15th May, 1893 the Bank suspended payment. Petitions to wind‑up the Bank were presented in Queensland, New South Wales and in England. A scheme of arrangement "the old scheme" was prepared with a view to securing for the Bank a moratorium and was brought before the appropriate Courts in Queensland. It provided that the debt owing to the Queensland Government was to be paid in full in terms of an agreement between the Bank and the Government, and that creditors other than the Government were to accept, in satis faction and discharge of their claims against the Bank, certain securities described in the scheme as deposit receipts. These were made interchangeable in certain events into negotiable deposit receipts or inscribed deposit stock.
Pursuant to the old scheme the winding‑up proceeding in each country were stayed. By the end of the year 1896 it had become clear that the moratorium provided by the old scheme was insufficient to enable the Bank to find its feet and a new scheme was prepared.
The scheme was approved by the requisite majorities at. the meetings held in New South Wales, Queensland and England respectively and was sanctioned by the Supreme Court of New South Wales on the 15th April, 1F97, by the Supreme Court of Queensland on the 12th May 1897, and by the High Court of Justice in England on the 4th June, 1897.
By the same order the High Court of Justice stayed all proceedings in the winding‑up except for the purpose of carrying the order and scheme into effect.
Among the chief relevant provisions of the new scheme were :
Clause 3. Within six months of the new scheme being sanctioned by the Court, the Bank was to create and allot to the registered holders of the said securities, stock carrying interest at the rate of 3 per cent. per annum to an amount equal to 75 per cent. of the principal moneys so secured after deducting from such principal moneys any fractional part of 1 owing to such registered holders respectively.
Clause 4. Each registered holder of the said securities was to surrender his securities under the old scheme at the office where such securities were payable and to accept in discharge thereof an amount of stock equal to 15s. in the upon the principal moneys thereby secured. The interest on the stock was to be paid half‑yearly at the office in Queens land, Sydney and London respectively at which the stock was registered.
Among the chief relevant provisions of the schedule to the new scheme was
Clause 3. Any registered holder of any stock was entitled to require the manager at the office where the stock was for the time being registered to have the stock transferred at his own expense to the register kept at any other office and upon such transfer being effected the said stock was to be deemed to be registered at the last mentioned office.
Until the year 1942 the Bank drew up all its balance sheets on the basis that the English and the Australian were interchangeable at par, but in the year 1942 pursuant to an order made by the Treasurer of the Commonwealth of Australia in the exercise of powers conferred on him by the National Security (War‑time Banking Control) Regulations it converted for purposes of its balance sheets its indebtedness in respect of stock inscribed on the English register into Australian s at the then current rate of exchange.
In the year 1947 the appellant became the holder either in its own name or in the name of its nominees of all of the shares in the Bank. and thereafter the Bank was placed into voluntary liquidation by resolution passed on the 30th October, 1947. As a result of the liquidation of the Bank the principal moneys secured by the stock became payable and the liquidator was faced with the question as to the amounts in Australian s for which he should admit proofs in such liquidation in respect of such principal moneys.
Held, that the obligations of the Bank in respect of the stock sounded only in Australian currency irrespective of the place of registration.
The question to be determined is not strictly speaking the construction of a contract though the consent of three quarters of the creditors concerned was needed before the scheme could be sanctioned. It is a question of construction of the words creating the stock. No doubt the document setting out the terms of the scheme must be looked at as a whole and in the light of relevant surrounding circumstances, but the real question to be decided is as to the nature and incidence of the stock.
The language of clauses 3 and 4 which deals with the creation and allotment of the stock seems better adapted to describe stock of a uniform nature than to describe stock with the peculiar rights recognised by the order of the High Court. Moreover the very use of the words stock itself connotes uniformity.
The feature of the stock which is most significant is the fact that the holder of it was given the right to transfer from one register to another just as he might please. The original depositors had no such right nor were they given any such right by the old scheme. It was the circumstance that their deposits had been made at a definite place and were repayable there and only there which is the strong reason for saying that under the old scheme they were entitled to be repaid the face value of the deposit receipts or other security which they held in the currency of the place of registration. But in as much as the interminable inscribed deposit stock which was substituted for the old securities could be moved about from register to register as the holders pleased, this a new feature which goes far to establish that the stock did not give the various holders thereof a different right of repayment according to where it might for the time being be registered.
The liability of the Bank in respect of the stock is for a fixed amount in Australian pounds and that the Bank's liability ‑the stock‑is and always has been limited to paying to each registered holder, on the occurrence of an event making the principal moneys payable, Queensland pounds equal to the nominal value of the stock held by him and in the meantime to paying in Queensland pounds interest on the said principal moneys at the rate of 3J per cent. per annum.
G. E. Barwick. Q. C. and G. A. Lucas, for Appellant.
Solicitors : Markby Stewart and Wadesons.
D. J. Menzies, Q. C., Frank Gahan, Q. C. and G. LeQpesne, for Respondents.
Solicitors : Parker Garrett & Co.
Date of hearing : 12th May, 1952.
JUDGMENT
LORD COHEN.‑This appeal raises the question whether the liability of the Queensland National Bank Limited (herein after called the "Bank") in respect of its interminable incribed deposit stock created under a scheme of arrangement between the Bank and its creditors which was sanctioned in the year 1897 sounds in English pounds or Australian pounds or partly in one currency and partly in the other. The facts relating to the matter are as follows
The Bank was incorporated as a limited liability company in Queensland in the year 1872 In 1878 it opened an office in London. A local Board of directors was appointed with powers delegated by the Bank. In the course of its operations the London branch accepted deposits the amount of which by March, 1893, exceeded 2,900,000. These deposits carried interest at the rate of 4 to 5 per cent. per annum.
On the 15th May. 1893 the Bank suspended payment. Petitions to wind up the Bank were presented in Queensland, New South Wales and in England. A scheme of arrangement (hereinafter referred to as "the old scheme") was prepared with a view to securing for the Bank a moratorium and was brought before the appropriate Courts in Queensland, New South Wales and England. At that time the Bank owed the Queensland Government more than 2,000,000 and it owed creditors other than the Government, in England 2,897,000, in New South Wales 110,000 and in Queensland 1,860,000. The old scheme was duly sanctioned by the Courts concerned. It provided that the debt owing to the Queensland Govern ment was to be paid in full in items of an agreement between the Bank and the Government, and the creditors other than the Government were to accept, in satisfaction and discharge of their claims against the Bank, certain securities described in the scheme as deposit receipts. These were made inter changeable in certain events into negotiable deposit receipt or inscribed deposit stock. A moratorium was thus provided for the discharge of the Bank's indebtedness to its creditors. Pay ment of the principal moneys and interest due in respect of the deposit receipts was to be made at the places where they had been payable before the old scheme became operative.
Pursuant to the old scheme the winding‑up proceedings in each country were stayed. By the end of the year 1896 it had become clear that the moratorium provided by the old scheme was insufficient to enable the Bank to find its feet and a new scheme was prepared. Meetings of creditors were convened in South Sydney and Brisbane pursuant to orders of the Courts of New Wales and Queensland respectively. In England, as it was impossible to obtain the sanction of the Court to a scheme of arrangement unless the Bank was being wound‑up, a petition was presented for the winding‑up of the Bank and a winding‑up order was duly made. A meeting of creditors was then convened in England to consider the scheme. The scheme was approved by the requisite majorities at the meetings held in New South Wales, Queensland and England respectively and was sanctioned by the Supreme Court of New South Wales on the 15th April, 1897 by the Supreme Court of Queensland on the 12th May. 1897 and by the High Court of Justice in England on the 4th June, 1897. By the same order the High Court of justice stayed all proceedings in the winding‑up except for the purpose of carrying the order and scheme into effect.
The chief relevant provisions of the new scheme may be summarised as follows :‑
Clause 1. "Court" was defined as the Supreme Court of Queensland ; "Stock" as interminable inscribed deposit stock created in pursuance of Clause 3 of the new scheme; and "The said securities" as deposit receipts, negotiable deposit receipts and the coupons thereof, and inscribed deposit stock issued or given to creditors under the old scheme or held by the Bank for security for any advances made to them by the Bank, and all similar documents held by creditors of the Bank at the date of the old scheme and which had not been exchanged for any of the mentioned securities.
Clause 2. The Queensland Government was to receive in discharge of all principal moneys and interest then owing to such Government 15s. in the upon the principal moneys payable id five annual instalments beginning in 1917 carrying interest at the rate of 3 per cent. per annum and a further 5s. in the upon such principal moneys payable without interest out of profits or in so far as not so paid on the 1st July, 1921.
Clause 3. Within six months of the new scheme being sanctioned by the Court, the Bank was to create and allot to the registered holders of the said securities, stock carrying interest at the rate of 3 per cent. per annum to an amount equal to 75 per cent. of the principal moneys so secured after deducting from such principal moneys any fractional part of 1 owing to such registered holders respectively.
Clause 4. Each registered holder of the said securities was to surrender his securities under the old scheme at the office where such securities were payable and to accept in discharge thereof an amount of stock equal to 15s. in the upon the principal moneys thereby secured. The interest on the stock was to be paid half‑yearly at the Office in Queens‑1 land, Sydney and London respectively at which the stock was registered.
Clause 5. On default for six months in the payment of any interest payable on the stock, if the Government or regis tered holders of stock to an amount equal to two‑thirds of the stock for the time being unredeemed, calculated at its par value, should call in the principal moneys secured by the stock or on an order being made or an effective resolution being passed for winding‑up the Bank, the principal moneys were immediately to become payable.
Clause 6. The stock was to be issued and held subject to the provisions of the new scheme and to the conditions set forth in the schedule thereto.
Clause 7. Each half‑year, of the Bank's profits not re served to meet contingencies, one‑quarter was to be paid to the Government until 5s. in the of its debt had been paid, and one‑half (or when the Government had received 5s. in the , three‑quarters) was to be carried to a special fund and, as the directors might determine, be distributed amongst the stock‑holders rateably until an aggregate amount or bonus equal to 5s. in the on the 'principal money secured by the said securities had' been paid and thereafter .the special fund was to be applied in payment of moneys due to the Govern ment under the new scheme. The remaining quarter of the Bank's profits was to be carried for at least ten years from the 31st March, 1897 to the Bank's ordinary reserve fund.
Clause 10. After the Government had been paid in full, the Bank might after notice redeem and cancel the whole or any part of the stock held by any stock‑holder at its market value but at not less than the par value together with so much of 5s. in the upon the amount of the principal moneys secured by the said securities in exchange for which such stock was allotted as had not been previously paid out of profits. The holder in accordance with such notice was bound to surrender the stock to be redeemed in exchange for payment including interest. Such surrender delivery and payment was to be made at the office where such stock was registered.
Clause 12. So long as 500,000 was unredeemed one London director, not necessarily a shareholder of the Bank, was to be appointed by the registered stockholders, and in Brisbane there were to be five directors, three of whom (not necessarily shareholders) were to be elected by the registered holders of the stock, each of whom was to have one, two, three or four votes according to whether his holding of stock was not less than 500, 2,000 or 5,000 or exceeding 5,000,
Clause 13. As soon as conveniently might be after the new scheme was finally sanctioned by the Court, the nominal capital of the Bank was to be reduced from .2. 1,600,000 divided into 200,000 shares of L 8 each to L 1,000,000 divided into 2,00,000 shares of 5 each.
Clause 14. The Bank was, as soon as practicable after the new scheme had been finally sanctioned by the Court, to make all necessary amendments or alterations in its Articles of Association for the purpose of giving effect to the scheme.
The chief relevant provisions of the schedule to the new scheme may be summarised as follows :‑
Clause 1. Registers of the stock were to be kept by the Bank at its head office in Brisbane or at its branch offices in Queensland, Sydney or London (as the case might be) at which the securities in exchange for which such stock was allotted were at the time of such allotment payable, or at the office of the Bank to which such stock might be transferred as provided by clause 3 of the Schedule.
Clause 3. Any register holder of any stock was entitled to require the manager at the office where the stock was for the time being registered to have the stock transferred at his own expense to the register kept at any other office and upon such transfer being effected the said stock was to be deemed to be registered at the last‑mentioned office.
Clause 5. Every registered holder was to be entitled to a certificate of the stock in the form or to the effect following :‑
THE QUEENSLAND NATIONAL BANK LIMITED Interminable Inscribed Deposit Stock.
No.
Bearing interest at the rate of 3 per cent. per annum, payable on the 31st day of March and the 30th day of September in each year.
This is to certify that______________of______________is the registered holder of_____________of the above stock, which stock is constituted pursuant to the provisions of the scheme of Arrangement sanctioned by the Supreme court of Queensland on the_____day of ______189___and is issued subject to the provisions and conditions therein and n the schedule thereto respectively contained.
Clause 10. Prescribed the form of transfer. This expresse d the transfer to be made "in consideration of the sum .__________
Clause 14 provided for a fee of 2s. 6d. being payable for the registration of each transfer.
Clause 21 provided for the payment of a sum not exceeding 2s. 6d. for and new certificate issued in replacement of certi ficates worn out, defaced lost or destroyed.
The whole of the indebtedness of the Bank to the Govern ment had been discharged before the resolution to wind‑up the Bank hereinafter mentioned was passed.
Pursuant to the new scheme, the Bank created stock to an amount of 3,116,621 of which 1,083,097 was inscribed on the Australian register and 12,033,524 was inscribed on the London register. Transfers of stock between persons and between registers took place and the Bank from time to time itself bought various amounts of the stock. In the result at the date of the winding‑up resolution there was 729,269 of the stock registered on the Australian register and 1,829,817 thereof registered on the London register.
The bonus of 5s. in the to which the stockholders were entitled under clause 7 of the scheme had been paid to them in full by the end of the year 1918.
From the commencement of the scheme the Bank paid interest on stock registered on the London register in English currency at the rate of 3 per cent. per annum on the face value thereof, although it was at the same time paying interest on stock registered on Australian registers in Australian cur rency at the same rate on the same face value. It continued so to do until the commencement of the winding‑up.
Until the year 1942 the Bank drew up all its balance sheets on the basis that the English E and the Australian were in terchangeable at par, but in the year 1942 pursuant to an order made by the Treasurer of the Commonwealth of Australia in the exercise of powers conferred on him by the National Security (War‑time Banking Control) Regulations it converted for purposes of its balance sheets its indebtedness in respect of stock inscribed on the English register into Australian b at the then current rate of exchange.
In the year 1947 the appellant became the holder either in its own name or in the name of its nominees of all of the shares in the Bank, and thereafter the Bank was placed into voluntary liquidation by resolution passed on the 30th October, 1947. As a result of the liquidation of the Bank the principal moneys secured by the stock became payable and the liqui dator was faced with the question as to the amounts in Austra lian ;Cs for which he should admit proofs in such liquidation in respect of such principal moneys. He issued a summons in the Supreme Court of Queensland for the determination of this question on the 21st December, 1948.
At the date of the commencement of the winding up of the Bank there existed the following classes of stockholders :‑
(i) Those whose stock was at that date registered on the London register and had been at all times so registered :
(ii) Those whose stock was at that date registered on the London register but which had been transferred thereto from an Australian register ;
(iii) Those whose stock was at that date registered on an Australian register and had been at all times so registered ;
(iv) Those whose stock was at that date registered on an Australian register but which had been transferred thereto from the London register ;
(v) Those whose stock was at that date and at the date of issue thereof registered on the London register but which had at an intermediate period been registered on an Australian register ; and
(vi) Those whose stock was at that date and at the date of issue thereof registered on an Australian register but which had at an intermediate period been registered on the London register.
The Supreme Court of Queensland made representation orders under which class (i) was to be represented by the 1st respondent, class (ii) by the 2nd respondent, and classes (iii) and (iv) were to be represented by one Edward Robert Crouch. No representation orders were made as regards class (v) or class (vi), but at the hearing of the motion below mentioned argument was addressed on behalf of class (v) by the 2nd respondent and on behalf of class (vi) by Mr. Crouch.
On the 24th December, 1948, the Liquidator gave notice of motion raising with greater particularity the points to be decided on the summons. The notice of motion contained questions framed so as to cover every possible alternative. Their Lordships do not find it necessary to set the questions out in full. In substance they all raise the same point, namely whether a unit of the stock gives different rights to the holder when such unit is redeemed according to the place where the unit was registered either (a) at the date of issue of the stock or (b) at the date of commencement of the winding‑up.
Macrossan, C. J., held that the place of registration at the date of original issue of the stock was the governing factor and that accordingly the liquidator must admit proofs on the footing that the Bank's obligations in respect of stock originally registered in London were obligations in English currency, that its obligations in respect of stock originally registered in Australia were obligations in Australian currency and that no regard was to be had to any subsequent change of registration. He directed that the equivalent in Australian currency of the face value of principal and interest payable in English currency be ascertained as at the date of the commencement of the winding‑up.
From this order the appellant appealed to the High Court of Australia contending that the obligation of the Bank in respect of all the stock was an obligation to pay Australian currency without regard to the place of registration. The 2nd respondent entered a cross‑notice of appeal contending that the critical date in determining liability of the Bank was the date of liquidation and not the date of the original issue of the stock. Mr. Crouch did not appear on the hearing of that appeal : nor has he taken any part in the proceedings before this Board.
The High Court (Dixon, Williams, Webb and Fullagar JJ., Latham C. J. dissenting) allowed the cross‑appeal and in view of their conclusion on the cross‑appeal directed a further varia tion of the ori51er of the Supreme Court to give effect to their opinion that the material matter in deciding whether the obli gation sounded in English pounds or Australian pounds was the place of registration at the date of commencement of the winding‑up and not the place of registration at the date of issue of the stock. Subject to this variation the High Court dismissed the appellant's appeal. Latham C. J., would have allowed the appeal and would have dismissed the cross‑appeal being of opinion that the obligations of the Bank in respect of the stock sounded only in Australian currency irrespective of the place of registration. It is from the decision of the High Court that the present appeal is brought.
Their Lordships agree with Latham, C. J. that the question to be determined is not strictly speaking the construction of a contract though the consent of three‑quarters of the creditors concerned was needed before the scheme…
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