NOKES V. DONCASTER AMALGAMATED COLLIERIES (1940) AC 1014

NOKES V. DONCASTER AMALGAMATED COLLIERIES

(1940) AC 1014

FACTS

The Appellant is a coal miner and between January, 1937, and June 4, 1937, a contract existed between him and the Hickleton Main Colliery Company wherein he worked at the colliery and received wages from the company itself. On June 4, 1937, an order was made by the Chancery Division of His Majesty's High Court of Justice under Section 154 of the Companies Act, 1929 dictating a transfer to the Respondent company a transfer of the rights powers, liabilities and duties of many Colliery Companies including the Hickleton Main Colliery Company. The order also provided that the transferor companies should be dissolved without being wound up.

The Appellant worked at the Hickleton Main Colliery until October 7, 1937, and received wages from the Respondents however he was under the impression that he was still under contract with the Hickleton Main Colliery Company. The company however ceased to exist once the order by the Chancellor came into existence. On 7th October, the Appellant was absent from work and ideally he would have received wages under Section 4 of the Employers and Workmen Act, 1875, however he refused to regard being in a contract of service under the Respondents.

ISSUE

The issue pertaining to the current scenario is whether under Section 154 of the Companies Act, 1929, when an order is passed transferring all the property and liabilities of the transferor company to the transferee company, does the contract of service existing between the individual and the transferor company gets transferred to the transferee company.

RULES

Section 154 of the Companies Act, 1929 discusses the allotment of the Director Identification Number

Section 4 of the Employers and Workmen Act, 1875,

JUDGEMENT AND ANALYSIS

1. The principles of construction used to interpret Sections are well established, the difficulty arises in their adaptation of particular cases. The golden Rule emphasises that the statute must prima facie be given its ordinary meaning. Normally the judges aren't called upon to give their opinions to modify the plain meaning of the ordinary words but where the construction of the general words isn;t entirely plain, their opinions may be required and a narrower construction may be adopted. Lord Viscount Simon similarly stated that if there is a choice between two interpretations, the narrower of which would fail to achieve the purpose of the legislation, the narrower one should be avoided as it would reduce the legislation to futility. Rather, a more bold choice should be adopted as the Parliament would legislate only for the purpose of bringing about an effective result.
2. The intention of the Section 154 of the Companies Act, 1929 was also heavily discussed by this Hon'ble Court. The wider interpretation of the Section involved that an order under it would strike out the name of the transferor company and substitute the name of the transferee company as part of the contract. Consequently, all current contracts of service would be transformed, without consulting the servant, by substituting the new employer for the old. However it would be foolish to assume that such an activity would remove all the difficulty related to the transfer.
3. The court further claims that after close scrutiny of the Section, it observed that the Section doesn’t automatically transfer contracts of personal service. The word "contract" does not appear in the Section at all and this court did not agree with the decision of the Court of Appeal that a right to the service of an employee is the property of the transferor company. It observed that such a right is not the subject of gift or bequest; it cannot be bought or sold; it forms no part of the assets of the employer for the purpose of administering his estate.
4. This Hon'ble court examines that when the Section provides for "transfer", it  is providing for the transfer of those rights which are not incapable of transfer and is not contemplating the transfer of rights which are in their nature incapable of being transferred.
5. The court held that if the legislature wanted workmen to be transferred to a new employer without their consent, plainer words could have been used to express their intention. Hece it was concluded that contracts of personal service are not automatically transferred by an order made under  Section 154 of the Companies act 1929.

RELEVANT THEORY

The Golden Rule is a rule wherein the words of a statute must be given their ordinary meaning. Natural and ordinary meaning of the words should not be departed from unless it can be shown that the legal context in which the words are used requires a different meaning. It is a rule considered as the modified principle of the grammatical interpretation. As observed in the Sussex Peerage “The only rule for the construction of Acts of Parliament is that they should be construed according to the intent of the Parliament which passed the Act. If the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to explain the words in their natural and ordinary sense. The words themselves alone do, in such cases, best declare the intention of the law-giver.” Parke J. observed in Becke v Smith that “If the precise words used are plain and unambiguous, in our judgement, we are bound to construe them in their ordinary sense, even though it does lead, in our view of the case, to an absurdity or manifest injustice. Words may be modified or varied where their import is doubtful or obscure, but we assume the function of legislators when we depart from the ordinary meaning of the precise words used merely because we see, or fancy we see, an absurdity or manifest injustice from an adherence to their literal meaning.” Further it was observed that the term “Golden Rule” was adopted in Grey v Pearson.