International Power Co. v. McMaster University / In re Porto Rico Power Co.

International Power Co. v. McMaster University / In re Porto Rico Power Co.

Under R.S.C. 1906 s.49 and on construction of the by-laws the preference shareholders had a priority to receive cumulative 7% dividends and priority repayment of capital at par, but otherwise retained ordinary shareholder rights; because both classes had been repaid in full at par, any surplus assets are to be distributed pari passu between preferred and common shareholders; however the claim that preferred shareholders are entitled to equalization of past dividends above 7% is rejected as dividends are limited to the contractual 7% absent express provision.

Citation
[1946] SCR 178
Parties
Appellant (common Shareholder Representative): International Power Company Limited; Respondents (preferred Shareholders): McMaster University and others; Liquidator (petitioner / Respondent Below): Montreal Trust Company ès qual.
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
24 January 1946
Procedural Posture
Company Winding Up / Distribution of Surplus Assets (commercial/company Law) / Final Appeal and Cross Appeal to Supreme Court of Canada From Court of King's Bench (quebec) — Judgment on Appeal
Outcome
Appeal and cross-appeal dismissed; Court of King's Bench judgment affirmed in substance by majority (with Chief Justice partial dissent). Preferred shareholders entitled to share pari passu in surplus after repayment; claim for equalization of past dividends dismissed.
Legal Topics
Winding Up, Preference Shares, Dividends, Distribution of Surplus Assets, Interpretation of by Laws, Shareholder Equality, Cumulative Preference
Source Language
English
Commercial Law Company Law Bankruptcy and Insolvency Winding Up Preference Shares Dividends Distribution of Surplus Assets Interpretation of by Laws +2 more

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Parties

International Power Company Limited

Appellant (common Shareholder Representative)

McMaster University and others

Respondents (preferred Shareholders)

Montreal Trust Company ès qual.

Liquidator (petitioner / Respondent Below)

Procedural Posture

Company Winding Up / Distribution of Surplus Assets (commercial/company Law) / Final Appeal and Cross Appeal to Supreme Court of Canada From Court of King's Bench (quebec) — Judgment on Appeal

Legal Issues

  1. 1 Whether preference shareholders are entitled to share pari passu in surplus assets after repayment in full at par
  2. 2 Whether preference shareholders are entitled to an equalization of past dividends exceeding the fixed 7% rate
  3. 3 Construction of by-law language granting preferences and priority and scope under Companies Act R.S.C. 1906 ss.47,49

Ratio Decidendi

Under R.S.C. 1906 s.49 and on construction of the by-laws the preference shareholders had a priority to receive cumulative 7% dividends and priority repayment of capital at par, but otherwise retained ordinary shareholder rights; because both classes had been repaid in full at par, any surplus assets are to be distributed pari passu between preferred and common shareholders; however the claim that preferred shareholders are entitled to equalization of past dividends above 7% is rejected as dividends are limited to the contractual 7% absent express provision.

Court Disposition

Appeal and cross-appeal dismissed; Court of King's Bench judgment affirmed in substance by majority (with Chief Justice partial dissent). Preferred shareholders entitled to share pari passu in surplus after repayment; claim for equalization of past dividends dismissed.

Orders

  • Distribute $500,000 among holders of preference shares in proportion to their holdings (as ordered below) with interest at 5% per annum from Feb 2, 1944 as per Court of King's Bench order
  • Any further surplus assets remaining after repayment in full at par of preference and common shares shall be divided pari passu between preference and common shareholders