OAKLAND OIL COMPANY V CRUM

1. OAKLAND OIL
COMPANY V. CRUM

2. INTRODUCTION
The Article of Association of each company is the preamble of management and
its daily affairs.
The main aspect to be discussed is the significance of constructive notice .The
judgement of the case Oakland oil company v. Crum, which was decided by the
UK privy council in the year 1882 ,is the appropriate case to analyze the law on
this particular aspect.
The 5 judge bench was unanimous on its interpretation of dividends.

3. Facts Of The Case
• The Oakbank oil company was incorporated under the companies act 1862
and 1867.
• The nominal capital of the company was 20,000 pounds in 400 shares of 50
pound each.
• On 16 Nov. 1869 the capital was increased by 20,000 pounds.
• Through special resolution on 21 feb 1873 it was decided that the capital
should be divided in 40,000 of 1 pound each.
• In 1875 the capital was again increased by 20,000 pounds of with the shares
of 1 pound each.

4. Contd.
• Thus out of 60,000 shares of 1 pound each ,of which the 40,000 were fully
paid up whereas 20,000 were paid up to the extent of 5 shillings each.
• The company decided to sanction the payment at the rate of much percent on
the paid up capital.
• The respondent notified the company that company should pay the dividend
equally.
• Later, a special case was arranged bet. The company and the respondent.

5. Issue Of The Case
• Whether the dividends is payable on the paid up capital or in proportion to the
number of shares held by members irrespective of the amount paid upon
them .

6. Contentions From The Both Sides
• -The judgement on the first division court was inequitable as the one who had
fully paid up was receiving only dividend whereas the other without full
payment got dividend and interest.
• The natural construction of article 71 of AOA guaranteed the director with the
power to recommend payment of dividend on basis of paid up shares.
• The respondent argued that on sound construction of AOA the dividend
should be paid according to the proportion of shares held by each member.

7. Judgement
• The learned judge of first division court ruled in favour of the respondent .It
directed the appellant to pay the dividend according to the proportion of the
shares of the member .
• On appeal , the matter was heard by the 5 judge bench of the Privy Council.It
unanimously decided in favour of the respondent and affirmed the decision of
the lower court.