Austin Securities Ltd v Northgate & English Stores Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE EDMUND DAVIES |
| Judgment Date | 05 February 1969 |
| Judgment citation (vLex) | [1969] EWCA Civ J0205-3 |
| Date | 05 February 1969 |
| Court | Court of Appeal (Civil Division) |
[1969] EWCA Civ J0205-3
The Master of The Rolls (Lord Denning) and
Lord Justice Edmund Davies.
In The Supreme Court of Judicature
Court of Appeal
Appeal (by leave) from order of Mr. Justice Milmo on 27th November, 1968.
Mr. MORRIS FINER, Q. C., and Mr. B. CAPSTICK (instructed by Messrs. D. J. Freeman & Co.) appeared on behalf of the Appellant Plaintiffs.
Mr. GEORGE BEAN, Q. C., and The Honourable Christopher BATHURST (instructed by Messrs. Linklaters & Paines) appeared on behalf of the Respondent Defendants.
The Judge has dismissed this action for want of prosecution. The plaintiffs appeal to this Court.
The plaintiffs are agents who sue for commission for introducing a purchaser. But they are not house agents. They are licensed dealers in securities and they specialise in takeover bids. The defendants are a big public company called Northgate & English Stores, Ltd. In November 1963 letters passed between the plaintiffs and defendants whereby the plaintiffs say that a contract was concluded to this effect: If the plaintiffs introduced a business which the defendants bought, the defendants would pay 2% of the consideration up to £200,000, and thereafter 1%, but payable only in the event of business materialising. The plaintiffs say that in April 1964 they introduced a company called Daintifyt Brassiere (Holdings) Ltd.; and after some months, in February 1965, the Northgate & English Stores, Ltd., bought up that company. The plaintiffs claim commission on the deal.
W are not concerned with the merits of the claim or defence, but with the course of the legal proceedings. The plaintiffs went to a solicitor of good reputation. On 15th February, 1966, on their behalf he issued a writ. The defendants accepted service and entered an appearance on 22nd February, 1966. I am afraid after that time nothing was done for over two years. The explanation was that the solicitor was very ill. He was suffering from high blood pressure. Very shortly after he had issued the writ, in March 1966, he had a stroke. He was two months away from his practice. He handed over his work to another firm to conduct for him, including this action, but I am afraid they did nothing. They let nine monthspass with nothing done. The solicitor recovered somewhat and he asked for the papers back. He got them back in the beginning of 1967. But his health was still very bad. He did not, or could not, do any real work. He was in and out of hospital a good deal. He got worse and worse, and died on the 9th February, 1968.
Meanwhile, however, much had been happening on the defendants' side which is very material. Early in 1966 (soon after the issue of the writ) the defendants decided to reorganise their businessand to split up into two separate companies - on the one hand the Northgate side and on the other hand the English Stores side. In order to make this reorganisation, the defendant company went into a members voluntary liquidation. On 22nd August, 1966, a resolution was passed for voluntary winding-up. Liquidators took over. The assets were £3 1/2 million. These were to be handed over to the two new companies. But before distributing the assets, it was the duty of the liquidators to deal with all outstanding claims. It is the duty of a liquidator to enquire into all claims, to see whether they are well founded or not, to pay the good claims, to reject the bad, to settle the doubtful, or, if need be, to contest them. It is only in this way that a liquidator can fulfil his duty under section 302 of the Companies Act 1948, of seeing that the property of the company is applied in satisfaction of its liabilities parl passu. In Pulsford v. Devenish, 1903, 2 Ch. at page 631, Mr. Justice Farwell said: "I consider it to be the duty of a liquidator, not merely to advertise for creditors, but to write to the creditors of whose existence he knows, and who do not send in claims, and ask them if they have any claim," In Re Armustrong Whitworth Securities Co. Ltd., 1947, 1 Ch. at pages 689 and 691, Mr. Justice Jenkins said: "The cardinal principle in a winding-up is that shareholders are not entitled to anything until all the debts have been paid……. The duty of the liquidator was to take all steps reasonably open to him to ascertain whether any of the former employees concerned did make any such claim.
Now in this case the liquidators did not fulfil that duty. They had knowledge of this claim by Austin Securities Ltd. and yet they did not deal with it. That is shown by an account which the then solicitors to the company (not the present solicitors) sent to the liquidators, dated May 1967. It said:-
"Austin Securities Limited. Professional Charges in connection with a claim made by th abov for commission alleged to be due arising from the purchase of the Share Capital of Daintifyt Brassiere (Holdings) Ltd. Repudiating all liabilityand following the issue of a Writ entering an appearance on your behalf. Thereafter investigating fully the background circumstances of the claim; attendances on and correspondence with you and other interested parties, with a view to preparing the Defence, but the matter was not pursued: £78. 15s.0d."
I can well understand that the liquidators, after receiving that account, would think they need do nothing. They were lulled to sleep. But they should not have been. The solicitors were at fault. They should not have been. The solicitors were at fault. They should have advised the liquidator to clear up the position. And they did not. All slept until the death of the plaintiffs' solicitor on 9th February, 1968.
Soon after his death, the plaintiffs instructed other solicitors. They acted promptly. On 3rd April, 1968, they gave notice of intention to proceed. It was a month's notice. That month is given by the Rules so as to enable the defendants to consider their position, and to apply, if so advised, to dismiss the action for want of prosecution. The defendants did not apply within the month. So the plaintiffs on 9th May, 1968, delivered a statement of claim. The defendants' then solicitors accepted it. But then on 21st May, 1968, the defendants went to new solicitors. These new solicitors asked for their time for defence to be extended. This was granted. But then on 27th May, 1968, the new solicitors said that they intended to apply under section 307 of the Companies Act, 1948, for the action to be stayed. (This is a section which, with section 226, enables the Court to stay actions against a company in winding-up. It has nothing to do with dismissal for want of prosecution.) If was not until 18th July, 1968, that they did so apply under section 307, and in their summons they added, almost by an afterthought,...
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