CALEDONIAN v. SOLWAY JUNCTION
In the Chancery Division of the High Court of Justice on Monday (before Mr. Justice KAY), a case, the Caledonian Railway Company v. the Solway Junction Railway Company, was heard.
This was an action to obtain the decision of the Court upon the proper construction of an Act of Parliament passed on the 10th of August, 1882, for conferring powers for the raising of money upon the Solway Junction Railway Company, to enable them to rebuild a viaduct over the Solway Firth, which had been destroyed by a storm. The viaduct was constructed to connect the English and Scotch sections of the line, and the estimated cost of repairing it was £30,000, which was the sum which was authorised to be raised under the Act. The question for the decision of the Court was whether the plaintiff Company was entitled to subscribe for and take the £30,000 by way of an issue of debenture stock, they having within the time prescribed by the Act made a legal tender of £30,000 in Bank of England notes for the stock, the contention of the defendant Company being that the Act empowered them to raise the £30,000 by debentures or by way of alternative by mortgage in the issue of preference or ordinary shares, and that they elected to do so by way of mortgage.
Mr. FISCHER, Q.C., and Mr. RIGBY, Q.C., appeared for the plaintiff, and Mr. GRAHAM HASTINGS, Q.C., and Mr. THOMPSON, represented the defendant company.
It appeared that the undertaking of the defendant company was worked by the plaintiffs under a working agreement dated the 22nd March, 1867. The agreement provided that the Solway Junction line should be worked by the plaintiffs, but maintained in a proper state of repair by the defendants, and that with the sanction of Parliament the plaintiffs should subscribe £60,000 towards the defendants' undertaking, which should be a preference charge and return a preferential dividend of 5 per cent. The agreement also provided that the defendant company should not create any other or further preference shares or stocks or loans to take precedence or to rank pari passu with the preference shares issued to the plaintiffs without their consent in writing. Parliamentary sanction was subsequently obtained to these conditions by the Act of 1867, under which, however, the plaintiffs were empowered to subscribe as much as £100,000 towards the defendants' undertaking. After the passing of the Act of 1867 the plaintiff company subscribed £60,000 and took preference shares from the defendants to that amount. In 1881 the viaduct on defendants' line was carried away by a storm, and it becoming necessary for the success of the line that it should be replaced, and the defendants having no funds to enable them to rebuild it, they in 1882 went to Parliament to obtain power to raise £30,000 for that purpose, and an Act was accordingly passed. Section 23 of the Act gave power to raise the £30,000 at a rate of interest not exceeding six per cent., and that the money so raised should be a first charge on the property of the defendants in favour of the holders of the stock. In sections 24 and 25 it was enacted that the plaintiffs might subscribe for the stock if the money was raised in that way on the condition that they should not sell or part with it, and that if they failed to do so the defendant company might offer the shares to any one else. Under these circumstances the Caledonian Company having been duly authorised by their shareholders passed a resolution to subscribe £30,000 for the purpose of taking up the issue of this new debenture stock, and wrote to the defendant company informing them of the fact. No notice, however, was taken of this communication by the defendants, but they held a meeting at which they passed a resolution, the effect of which was that the £30,000 should be raised by such of the ways and means provided by the Act of 1882 as the Board of Directors in their discretion should at any time think fit to determine. Having ascertained the terms of this resolution the plaintiffs wrote a letter on the 10th of October offering to pay the £30,000 for the stock, and on the 10th October they tendered the money in Bank of England notes in exchange for the debenture stock, but the defendants refused to accept the money on the ground that they wished to raise the money in some other way. The defendants afterwards stated that the re-building of the viaduct would not cost £30,000, and that they had in fact entered into a contract with a firm of large contractors to restore the bridge for the sum of £24,000, and that the work was not a goo deal progressed. It was argued for the defendants that the act gave them power to raise the money they wanted either by issuing debentures or by way of mortgage, and that as they elected to proceed by way of mortgage they in no way interfered with the Caledonian agreement or injured in any way the preferential position held by the plaintiff company with regard to the money they had already invested in the defendant company.
His Lordship deferred judgement.