Ferguson & Forrester, Ltd v. Buchanan and Others [1920] ScotLR 152 (20 December 1920)

Ferguson & Forrester, Ltd v. Buchanan and Others [1920] ScotLR 152 (20 December 1920)

The Court held that the language of the special resolution, particularly the use of 'preferential dividend' and the structure of the charges on profits, entitles 'B' preference shareholders to cumulative dividends. The omission of 'cumulative' does not negate the cumulative nature, as the ordinary meaning of 'preference' in this context imports cumulation unless expressly excluded.

Citation
[1920] ScotLR 152
Parties
First Party: Ferguson & Forrester, Limited; Second Party: Walter Buchanan (for himself and as representing the whole body of 'A' preference shareholders); Third Party: George Prentice (for himself and as representing the whole body of 'B' preference shareholders); Fourth Party: James Haddow & Company, Limited (for themselves and as representing the whole body of ordinary shareholders)
Jurisdiction
Scotland
Judgment Date
20 December 1920
Procedural Posture
Special Case / Inner House, Second Division, Court of Session
Outcome
First question of law answered in the affirmative; second (alternative) question answered in the negative.
Legal Topics
Preference Shares, Dividend Rights, Shareholder Rights, Interpretation of Company Resolutions
Company Law Preference Shares Dividend Rights Shareholder Rights Interpretation of Company Resolutions

Case Brief

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Parties

Ferguson & Forrester, Limited

First Party

Walter Buchanan (for himself and as representing the whole body of 'A' preference shareholders)

Second Party

George Prentice (for himself and as representing the whole body of 'B' preference shareholders)

Third Party

James Haddow & Company, Limited (for themselves and as representing the whole body of ordinary shareholders)

Fourth Party

Procedural Posture

Special Case / Inner House, Second Division, Court of Session

Legal Issues

  1. 1 Whether holders of 'B' preference shares are entitled to cumulative preferential dividends for each year in which profits were insufficient, payable out of subsequent profits, or only out of profits of each year.

Ratio Decidendi

The Court held that the language of the special resolution, particularly the use of 'preferential dividend' and the structure of the charges on profits, entitles 'B' preference shareholders to cumulative dividends. The omission of 'cumulative' does not negate the cumulative nature, as the ordinary meaning of 'preference' in this context imports cumulation unless expressly excluded.

Court Disposition

First question of law answered in the affirmative; second (alternative) question answered in the negative.

Orders

  • 'B' preference shareholders are entitled to cumulative preferential dividends at 5% per annum for each year in which profits were insufficient, payable out of subsequent profits.