Dixon v Kennaway & Co
Rule established
A company is estopped from making calls on shares that have been certified as fully paid; the share certificate operates as a representation upon which holders are entitled to rely
Facts
- The company issued share certificates stating that the shares were fully paid up.
- Subsequently, the company attempted to make calls on these shares, claiming they had not in fact been fully paid.
- The shareholder relied on the certificate as evidence that no further liability existed.
Issue
- Whether a company can make calls on shares after having issued a share certificate representing them as fully paid.
Held
- The Court held that the company was estopped from denying the truth of the statement in its own share certificate. Having represented the shares as fully paid, the company cannot subsequently assert otherwise to the prejudice of those who relied on the certificate in good faith. The share certificate creates an estoppel against the company.
Ratio Decidendi
A share certificate issued by a company is a statement under the company's seal (or authority) that the person named therein is the holder of the specified shares, and that the amount stated has been paid up. This constitutes a representation by the company upon which third parties are entitled to rely. By the doctrine of estoppel, the company cannot later deny the truth of statements made in its own certificates to the detriment of bona fide holders.
How to use it in an exam
- Deploy this case when discussing the legal effect of share certificates, particularly the doctrine of estoppel by certificate. Essential for questions on whether a company can resile from representations made in its certificates. Pair with Balkis Consolidated v Tomkinson for the extension of estoppel to transferees.
- Key quotable line: "The company having represented the shares as fully paid is estopped from making calls inconsistent with that representation."
Source
Source: [1900] 1 Chancery 833
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.