H A Stephenson and Son Limited (In Liquidation) v Gillanders Arbuthnot and Company [1931] HCA 47

H A Stephenson and Son Limited (In Liquidation) v Gillanders Arbuthnot and Company [1931] HCA 47 - HCA 1931 case summary — Zoe

[87]

But when an attempt is made to apply such principles to the construction of the memorandum of H. A. Stephenson & Son Ltd., the difficulties are great in assigning a scope to the instrument or in discovering a fitness of matter or thing in the random collection of seemingly unrelated purposes which it contains. In face of clauses which specify flour-milling, farming, dealing in and making machinery, and shipowning, it seems impossible to regard the purpose of carrying on the business of a produce merchant as predominant. - Doubtless it is the initial purpose, the immediate purpose which the promoters had in view, and the first purpose which the Company proceeded to fulfil. But the other objects, although perhaps w written they were no more than expressions of distant hopes, cannot _ be treated as subservient. Secondary in point of time and illusor in point of fact they may be. In potency they rank as equal and independent of the object with which the memorandum begit and of one another. Further they are directed to subjects defy any construction ejusdem generis. Shipbuilding, farming flour-milling are not pursuits which can be assigned to one ge They are genera. Yet it is not for a Court to resign as hopeless task of rationalizing the clauses of the memorandum, and to content itself with condemning them as grotesque and meaningless a1 It is not unreasonable to find in the instrument an intention so to constitute the Company as to enable it, if it could, to go from its primary business onwards by an expansion of its undertaking any direction where commercial enterprise might conceivably lead produce merchant. Thus, the produce merchant may become a farmer, the grain merchant a miller, the farmer a dealer in live sto the dealer in live stock may slaughter and freeze carcasses ; merchant, miller and carcass butcher may need freight and cha ships. The scope of the memorandum is to give capacity to of an imaginary progress through a gamut of activities. In th case of specific powers the Company might, of course, have proceeded per saltum or from one to another, or its undertaking might hay expanded by the more usual process of gradual extension into t1 or businesses with which its existing activities bring a connecti contact or association. If such is the rationale of the mem: the widely expressed general power to carry on any other bu

[88]

should be interpreted as an attempt to provide against the possibility of avenues for extension appearing which have not been foreseen and expressly authorized. It cannot be construed as merely : ancillary: because another clause exists conferring all incidental powers and, although tautology and redundancy are to be expected in memoranda of association, two such clauses cannot be supposed. The true meaning of the object would appear to be to authorize the Company to carry on any business found to be connected or associated with any existing business of the Company. When it speaks of such business as the Company may deem expedient, it fails to supply in terms any criterion of expediency. The rest of the memorandum suggests that it does not simply mean such businesses as the Company may choose to carry on, but such businesses as it may consider convenient to carry on because they are connected with or arise out of the course of business adopted by the Company. Wide as such a definition is, it does not appear to be considered too indefinite to pass muster as a lawful object, and upon this memorandum no greater restriction of the general words _ is justified. There yet remains the difficulty of applying this construction of the "' object' to the facts of the case. Was the _ purchase of jute germane to the business carried on by the Company under its specific powers? If so, was buying jute by way of speculation an extension which might reasonably be considered expedient because connected or associated with or arising out of the business so carried on? The first of these two questions must be answered in the affirmative. It appears that of the sacks purchased in 1926, a little over ten per centum, and of those _ purchased in 1928 for delivery in that year, a little under ten per ~-centum were supplied to farmers, and that in 1928, 135 bales were 80 disposed of. The objects specifically conferred included the business of grain merchants as well as the businesses already -teferred to. The second question is more difficult. It must be answered without regard to the actual manner in which Stephenson junior was led to imperil the Company's assets in the jute trade. On the contrary, it is more useful to consider what aspect the transactions might bear to an intelligent stranger who studied the memorandum

[163]

The question arises whether upon the true construction of its

memorandum of association, the appellant had power to enter into these contracts. Having regard to the large quantities of jute which were purchased and the circumstances in which the contracts were made, the suggestion that these purchases of this commodity could have any relation to the businesses or enterprises enumerated in clauses 2 (a) to 2 (2), inclusive, of the memorandum of association, any of them, is quite untenable. These contracts cannot be supported by reference to the statement of the objects of the lompany which is embraced by those clauses. But it is submitted that the contracts are within the contemplation of clause 2 (j), which is in these terms: "To carry on any other businesses whether manufacturing or otherwise as the Company may deem expedient." If a subsidiary role should not be assigned to this clause, there does _ not appear to be any doubt that it is wide enough to empower the Company to engage in speculative enterprises, even on such a azardous field as the jute market. The question whether clause (j) should be read as the expression of a substantive object or nerely as an incidental or ancillary clause should be determined by the fair construction of the memorandum as a whole. Upon consideration of the clauses of the memorandum from 2 (a) to 2 (h) it is clear, I think, that 2 (6) is not incidental to 2 (a), nor is 2 (c) incidental to 2 (a) or 2 (b); and so on with respect to clauses 2 (d), 2 (e),2 (f),2 (g) and 2 (h) respectively. The businesses and enter- ises which are enumerated in each of the clauses from 2 (a) to (h) respectively may fairly be described as activities which the ompany was established to pursue. The question now arises whether the succeeding clauses, including clause 2 (j), add to the of these primary or dominant objects. I do not think that y have that effect. Upon a perusal of the remaining clauses, I it will be apparent that the compilation of the list of clauses,

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Court

Decision date

Before

Source

Judgment (184 paragraphs)

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