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PREFERENTIAL RIGHTS OF | time no dividend was paid to the “A” share-

holders and since 1904 no dividend was
paid to the “B” shareholders. The arrears

of dividend on the “A” preference shares Questions of some nicety occasionally

have now however been paid up to date and arise in ascertaining the rights of the re

there remained a substantial balance after spective classes of shareholders in a com

providing for depreciation and reserve at pany. The imporant point practically is to see that in drawing the constitution of

the credit of profit and loss account availthe company the position and privileges of

able for division among the shareholders. the various classes be clearly defined. If

The question then arose and this was the this is done it will save much trouble and

point on which the opinion of the Court possible recrimination afterwards. A re

was sought, whether the “B” Preference cent decision here, while it does not intro shareholders were entitled to receive out of duce any novel principle into company law,

the distributable profits in any year not only reaffirms some points of much practical a preferential dividend of 5 per cent for moment. As in all such case the decision that year but also a similar dividend for expended on the construction of certain each and every preceding year in which the clauses in the articles but principles of in- distributable profits had not sufficed for the terpretation emerged which are of general payment of a dividend on the “B” Preferimportance.

ence shares in preference to the rights of The case was brought for the purpose of

the ordinary shareholders and other post

| poned interests. settling certain questions which had arisen between the “A” Preference and the "B".

In dealing with this question the Court Preference shareholders. It seems the

in the first place pointed out that the words company some years ago was in financial difficulties and its creditors agreed to i

of the special resolution referred to proscheme whereby they compounded their

vided for payment out of the profits of claims for “A” Preference shares and the

the company and reminded the parties of original preference shares were cut down

the well marked distinction in company in value and became “B” Preference. In law between providing that dividends are carrying out this arrangement a special to be paid out of “the profits of the comresolution was passed that out of the profits | pany” and to be paid “out of the profits of of the company after making due provision each year” of the company. In this case for depreciation and reserve fund the “A” | they could not read the words of the resoPreference shareholders should receive as lution "out of the profits of the company” a first charge thereon a cumulative prefer as meaning anything else than that the ential dividend at the rate of 8 per cent, profits there referred to were the whole and that the holders of the “B” Prefer

profits of the company. ence should receive as a second and post

The argument was next used as against poned charge a preferential dividend at the rate of 5 per cent.

the B Shareholders that as regards the

holders of the A preference shares their For some years after this re-organiza

dividend was stated to be a "cumulative tion the revenue of the company did little preferential dividend” whereas the word more than meet current expenses. For some

"cumulative” was not related as regards

the preference dividend of the B prefer(1) Ferguson & Forrester, Ld., v. Buchanan, 1920, 1 S. L. T. 85.

ence shareholders. The relation of this point to the way in which the profits were | dent there said this: "The fourth rule is defined in the special resolution was shown that ‘in payment to the preferential shareto be very material. According to the defini- holders if any of their dividends according tion in Stroud's Dictionary of Law Terms to their respective priority.'” With regard "a preferred dividend is prima facie | to that rule it is said that the words "all cumulative so that the failure of profits arrears' which occur in rule 1 are omitted wherewith to pay it in any one year will be and it is therefore contended that the direcmade good out of any profits that may be tors are not entitled to pay arrears of made in a subsequent year;" and Palmer in these dividends. I think that it is far too his Company Law points out that the use strict, I may say too fanciful a construction of the word cumulative prevents doubt. of the rule. If the rights of preference But on the construction of the resolution shareholders are such as I have stated them before them in which that word was omitted | to be I cannot think they can be cut off as regards. the “B” shares, the Court held by any such construction of the articles of no hesitation in finding that a preference association." And accordingly the omisdividend out of profits implies a dividend sion of these words in regard to the diviout of the whole profits and not out of the | dend to one set of shares was not held suffiprofits of an, particular year thus effecting a cient to deprive them of the preferential "cumulative preference.” “If support for character so as to make them non-cumulathis position were needed it will be found in tive. the case of Foster v. Coles. There the

In short the use of the terms preferential dividend was originally declared to be a

and "cumulative preferential" in describcumulative preference dividend. In a sub

ing dividends is not conclusive, the reality sequent amended set of articles the word |

of the matter has to be looked at and the "cumulative” was struck out and it was

| reality of it is in the manner in which a simply left to be a preference dividend. But it was held that though the change had

preference dividend is paid—whether out

of the profits of each year or out of the been effected it made no difference as re

profits of the company. The Lord Justice gards the cumulative character of the right

Clerk in the case we are dealing with tersely for in any event, as the judge in that case

stated the position in the following words: observed, the preference share holders were

"Reading the clause as a whole it seems to entitled to have any deficiency in their divi

me that the A Preference shareholders and dends made up out of the profits of the sub

the B Preference shareholders are given a sequent years. And again there is the case

charge on the profits which entitles them of Patrick Hillhead and Maryhill Gas Co. Ld. v. Taylor. There was a distinction

to get out of the profits whether they were

for the year actually in question or for any taken there between certain of the divi

subsequent year that would make their dends in respect that one of them was de

dividends preferential dividends in the orclared to be a charge for dividend for the year and "all arrears” whereas these words

dinary sense of the term and that to my

mind means a preferential cumulative divdid not occur as regards certain of the other

idend. I think if there had been no other dividends; it was urged therefore that divi

word than preferential that that would dends where the words did not occur were not to be cumulative. But the Lord Presi

involve that it was cumulative.”

DONALD MACKAY. (2) 1906 W. N. 107. (3) 1888 15 R. 711 at p. 713.

Glasgow, Scotland.


ridiculous by the absurdity of its reason

ing. * New York has tried to draw a line The fundamental rules respecting judi- | between an absolute discretion in a trial cial discretion to be exercised by trial Court and that which is governed by fixed Courts have been torn to pieces and thrown legal rules; and it must be admitted that in to the winds. Repeated attempts to define this attempt New York is, if anything, a the term “judicial discretion” have led little less logical than Alabama. The looseto almost as much confusion as similar at ness with which language is used in these tempts to define the term "reasonable definitions is well illustrated by the attempt doubt." Does there never come a stage in | of the Supreme Court of Nebraska to point such refinements when further definition out that certain matters are “largely within and division is, at least, ill-advised ?

the discretion of the Court." What guide

such a statement would furnish for a trial Lord Coke defined judicial discretion as Court it is difficult to conceive. Is it not the "science or understanding to discern after all true that Senator Tracy best sizes between falsity and truth, between wrong

up the situation when he says that “What and right, between shadow and substance, is to be understood by a discretion that is between equity and colorable glosses and governed by fixed legal principles is, I must pretenses.” He probably did not obscure be allowed to say, something that I have the matter when he further added that not found satisfactorily explained, and what discretion of Court was an “ability to dis it is not easy for me to comprehend,” and cern by the right line of law and not by the did not the Supreme Court of the United crooked cord of private opinion.” When States lay down the correct rule when it the Colorado Supreme Court, following

said that “Whenever a statute gives a dismany others of high repute, and particularly cretionary power to any person to be exerCalifornia, defined it as "an impartial dis

cised by him upon his own opinion of cercretion, guided and controlled in its exer

tain facts, it is a sound rule of construction cise by fixed legal principles," it certainly

that the statute constitutes him the sole and skidded a trifle. Such a discretion may be conclusive judge of the existence of those so “guided,” but if it may also be so "con facts?” The entire difficulty as to this trolled” there is no discretion. The at

subject is due to a misconception on the tempt to reason away this principle seems part of the people of the functions of a to be prompted by that view of its exercise trial Court and an unconscious eagerness expressed by the Supreme Court of Ala

on the part of appellate Courts to exercise bama when that Court said, “The discretion

their own discretion where no discretion is of a judge is the law of tyrants. It is al

given them. ways unknown. It is different in different

The story of the judge who took evimen. It is casual and depends upon consti

dence to determine whether a certain contution and passion. In the best it is at times

tract in litigation before him was so inequicapricious. In the worst it is every vice,

table in its terms as to shock the conscience folly and madness to which human nature

of the chancellor is well known. The abis liable." Long after, the same Court

| surdity of taking evidence to determine the sought to soften the harshness of that language by attempting to distinguish between that kind of discretion which is vested in a

(4) Brown v. State, 109 Ala. 70.

(5) In Matter of Eldridge, 82 N. Y. 161; P. jury and that kind which is vested in a | ex rel. Gas Light Co. v. Common Council, 78 Court, and succeeded only in making itself


(6) Mulhollan V: Scroggin, 8 Neb. 202.

(7) Judges v. The People, 18 Wend. (N. Y.) (1) Byers v. McPhee et al., 4 Colo. 207. (2) Bailey v. Taffee, 29 Cal. 424.

(8) Martin v. Mott, 12 Wheat. 19; 6 L. Ed. (3) Ex parte Chase, 43 Ala. 303-310.

(L', S.) 537.

Y. 56.


tenderness of his own conscience disap- Court and the province of the jury has pears in view of the rulings in some of the finally been reduced to so shadowy a line cases wherein it has been determined by

| that its location is lost. appellate Courts that, although the chancellor found that his conscience was shocked,

Attempts have been made in many of the there was nothing to shock it; or where he

states to right the rank injustice which ofdetermined that it was not shocked that

ten follows the verdict of a jury, where the it ought to have been.

judge is prohibited the expression of an I come now to the particular application

opinion upon the facts, by authorizing the of a rule of judicial discretion which I de

trial Court to substitute its own judgment sire to point out, and the strange inconsis

for that of the jury, upon a motion for a tency in the law which has arisen by rea

new trial. The logical rule on this subject son thereof. That is, the discretion which has been vested in trial judges to set aside

seems once to have been laid down by Chief the verdicts of juries which do not meet

Justice Brewer in this language: “When with their approval; in fact, the order

the evidence is nearly balanced or is such which has been issued to them to do so in

that different minds would naturally and such cases, in the face of the fact that they

fairly come to different conclusions therehave been deprived of any right to control on, the trial judge has no right to disturb those verdicts by the slightest expression the findings of the jury,” but in the same of opinion concerning the facts upon which opinion Justice Brewer sweeps his concluthey are based

sion entirely aside by saying that when Where the English common law rule and the judgment of the trial judge tells the rule of the federal Courts is followed. | that the verdict is wrong, “that, whether that the law is for the Court and the facts from mistake or prejudice or other cause, for the jury, under the guidance of the the jury have erred and found against the Court, and where, so long as the jury's fair preponderance of the evidence, then province is plainly pointed out to them in no duty is more imperative than that of setthe instructions, no mere expression of | ting aside the verdict." In other words, opinion on the evidence by the presiding up to the point where the cause is finally judge is held to be error, little confusion

submitted to a jury, the law is so jealous results. Under such conditions judges ex- 1 of the jury's prerogatives and so suspicious pressed opinions when such expressions

of the fairness and ability of the trial judge were necessary for the guidance of jurors,

that he may not even suggest to the jury or refrained from doing so when they

that he has an opinion upon the facts, but seemed unnecessary. But with the attempts

after jurors, without a ray of light from the by judicial construction, in some of the

bench, have undergone the perspiring grind states where jurors are by constitutional provision made the judges of both the law

of protracted debate, the strenuous strugand the facts, to confine them to the law as

gle of a forty-eight-hour deliberation, taklaid down by the Court in instructions, or

ing desperate chances on a final disagreetell them just what weight they should give

ment, with the necessary result of a long to such instructions in determining what and expensive second trial, and have finally the law is, and constitutional or statutory returned such a verdict as might reasonably enactments under which the slightest sug be expected under such circumstances, “no gestion of opinion on the part of the trial duty is more imperative" upon the trial judge constitutes fatal error, confusion judge than to set that verdict aside if he doubly confounded has come upon us, and the boundary line between the province of (9) K. P. Ry. v. Kinkle, 17 Kas. 145.

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believes that it is “against the fair prepon- some control over those verdicts at the time derance of the evidence." That rule ap when such control should be exercised ? It plied to civil cases has been adopted in has in such states become impossible, and Colorado with respect to criminal cases.10doubtless should be impossible, to convict If trial judges were ever qualified to ex

any man and have sentence pronounced press opinions upon the facts in a civil case,

without the approval of the judge to whom not for the control, but for the guidance of

that' unpleasant duty falls. If an innocent juries, and a civil case ever existed where

man, or one as to whose guilt a reasonable such an expression of opinion was neces

doubt exists, may not be sentenced without sary or justified, it must be conceded as

the approval of the trial judge, is it not doubly true that those rules should apply

equally necessary that the same judge be to criminal cases where, but for the exist- !

at some stage of the trial permitted to exerence and exercise of such a right, a mur

cise some influence to prevent the release of derer may be turned loose red-handed upon

one as to whose guilt no doubt exists? Is a community or an innocent man sent to

it possible that individual rights are held the gallows.

so high and the safety of the public so

cheap that while no man, however guilty, Unquestionably, as the decisions now may be convicted except with the unqualified stand in Colorado and in most of the states, approval of the trial judge, yet the blackest the law is that the trial Court may express criminal may be turned loose upon the pubno opinion upon the facts. If there be lic as the result of the mental and physical any evidence of the guilt of the accused in powers of endurance of a single juror, a criminal case, he may not take the case while the ablest and most conscientious from the jury. If permitted to do so, for trial judge is obliged to sit through weeks mer jeopardy could be pleaded and the de- l of the farce with no right to even hint at fendant finally discharged on a finding of an opinion upon the facts? Is it not true fact made by the Court on disputed evi- that the trial Court should either be free dence; but upon the return of a verdict of to express such opinions as he sees fit or guilty, if such verdict does not meet with | else be prohibited from interfering with the unqualified approval of the conscience those unjust verdicts returned upon conof the Court, irrespective of the amount | Alicting evidence by reason of his failure to of evidence to sustain it, he must set that speak? verdict aside.

So long as the jury system remains the This same rule holds in California, it being said there that, “If the judge con- i

only logical rule is to permit trial judges

a free expression of opinion on the facts scientiously believes that the verdict is

and prohibit their interference with veragainst the truth of the case; that it is con

dicts returned upon conflicting testimony. trary to the weight of the evidence, he is

Any other makes the labor of juries in a bound to grant a new trial. Otherwise, the power of Courts over verdicts is a mere

large percentage of our trials a mere for

mality and their existence in the machinery mockery and delusion."11 Why should a i

of justice as useless as a wagon's fifth state so sensitive about preserving the pow-:

wheel. er of Courts over verdicts be so delicate ! about permitting the trial judge to exercise i There are few officials outside of judi

| cial positions whose powers and duties can(10) Piel v. People, 52 Colo. 1-9.

! not be specifically defined by written law, (11) Hall v. The Bark "Emily Banning." 33 Cal. 522.

I but the most important functions exercised

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