Barron v Potter, [1914] 1 Ch 895

Introduction

Barron v Potter is a UK company law case on the balance of power between the Board of Directors and the decisions taken in a general meeting. It relies on the principle that when the Board is incapable of taking any decision or action, the power to take decisions is transferred to the stakeholders to take decision in a general meeting.

Facts

Canon Barron and Mr. William James Potterwere not on talking terms with one another. They were the directors of the British Seagumite Co. Ltd. Whereas, Mr. Potter was thechairman of the Board with a casting vote. Mr. Canon had been refusing to cometo the meetings therefore Mr. Potter came to him, and as he got off the trainon a Paddington station platform, he told Mr. Barron that they were now holdinga board meeting to appoint more directors. Barron objected whereas Mr. Pottermentioned that he was using his casting vote for the same.

The meeting was held and Mr. Potter againannounced to add new directors to the board of the British Seagumite Co. Ltd. whereas,when both of them met, Mr. Barron had already told him about his objection toadding new directors and to this Mr. Potter replied that he is using hiscasting vote to take this decision and left from the platform.

Issues

1. Can Mr. Canon Barron contend that the meeting on the platform was nosort of meeting?
2. Whether the general meeting’s resolution was invalid on the ground that theboard was the only organ that could appoint more directors?
3. Whether the casting vote of Mr. Potter can be challenged?

Summary of judgement

Warrington Jheld that because of the deadlock, the power reverted to the general meeting.In this case, the appointments were valid. Even if there was no proper boardmeeting on the train platform, the shareholder meeting was effectiveafterwards.  The Articles of Associationof the company gave to the Board of Directors the power of appointingadditional directors. Indeed, the general point was so decided by Eve J in Blair Open Hearth Furnace Co v Reigart.

Analysis

As per my analysis, the decision given by the court is proper because as per the principle, if the Board of Directors are not able to make a decision then the power is transferred to the shareholders to take the decision in a general meeting. Those observations express a principle which seems to me applicable to the case of a limited company incorporated under the Companies (Consolidation) Act 1908, or as the case may be under the Companies Clauses Consolidation Act 1845. Moreover this principle is founded on plain common sense.  The directors in the present case being unwilling to appoint additional directors under the power conferred on them by the Articles of Association, in my opinion, the company in general meeting has the power to make the appointment. The company had passed a resolution for that purpose, and though a poll was demanded no date or place has yet been fixed for taking it. The result, therefore, is that I must grant an injunction on the motion in Mr. Canon Barron’s action and refuse the motion in Mr. Potter’s action.

Conclusion

Thus in Barron v Potter [1914] 1 Ch 895,Mr. Potter tried to call a general meeting. Mr. Barron intended to boycott thismeeting but his train was met at Paddington by Mr. Potter, who proceeded to tryto hold a meeting on the platform. He proposed Charles Herbert, William GeorgeWalter Barnard and John Tolhurst Musgrave as additional directors. Barronobjected and Potter purported to use his casting vote as chairman of theCompany. The court held that this was an ineffective meeting. In thecircumstances, it was held that because of the deadlock on the board ofdirectors, the powers were exercisable by the members in general meeting.