Cape Breton Company v Fenn
| Jurisdiction | England & Wales |
| Date | 1880 |
| Year | 1880 |
| Court | Court of Appeal |
Wining-up - Leave to sue in Name of Company.
An order was made on the application of R., in a winding-up, directing that he should receive his costs of the application out cf the assets. H. & Co. were his solicitors in this application, but had no other connection with the company or its affairs. The costs were not paid, and R. became bankrupt. Subsequently Malins, V.C., made an order, on the application of H. & Co., that they should be at liberty, on giving such indemnity as the Judge should direct, to institute such proceedings as they might be advised against the former directors and promoters, to recover certain sums from them, the applicants undertaking to pay into the bank to the credit of the liquidators whatever was recovered, and also to abide by any order the Court or Judge might make as to the costs of such proceedings. H. & Co. thereupon commenced this action in the name of the company, against the former directors and promoters, without having taken any steps to have the indemnity fixed by the Judge. The Defendants moved that all further proceedings might be stayed, or the suit and all proceedings under it set aside, on the ground that the action had been commenced without proper authority. This application was refused by Malins, V.C., who expressed his opinion that the undertaking of H. & Co., contained in the order, was a sufficient indemnity:—
Held, on appeal, that as H. & Co. were strangers to the company, being neither creditors nor contributories, and having no charge on the assets, there was no jurisdiction to give them leave to sue in the name of the company:
Held, also, that if there had been jurisdiction to make such an order, the action would still have been commenced without authority, the condition precedent of H. & Co. giving indemnity not having been complied with:
Held, therefore, that the action must be dismissed, as having been instituted without authority, and that H. & Co. must pay the costs of all parties, including the official liquidators; the costs of the company being taxed as between solicitor and client, and the other costs as between party and party.
ON the 31st of July, 1875, an order was made for winding up the Cape Breton Company. On the 8th of February, 1878, an order was made, on the application of Michael Rooney, removing one of the liquidators, and directing payment to Rooney of his costs out of the assets of the company. Messrs. Harper, Broad, & Battcock were the solicitors of Rooney on this application. Rooney had since become bankrupt. The costs had been taxed at the sum of £376 19s. 4d., but had not been paid.
On the 15th of November, 1880, Vice-Chancellor Malins, on the application of Messrs. Harper, Broad, & Battcock, made in Chambers an order “That the applicants be at liberty, upon giving such indemnity as the Judge shall direct, to institute such proceedings as they may be advised, in the name and on behalf of the said company, against the former directors and the promoters of the said company, to have it declared that they, or some of them, are liable to pay certain moneys to the said company, and to obtain an order for payment thereof accordingly; the applicants undertaking to pay into the Bank of England to the credit of the liquidators whatever moneys they may receive from such former directors and promoters of the said company, or any of them, and also undertaking to abide by any order the Court or Judge may hereafter make as to the costs of and occasioned by such proceedings.” Liberty was given to apply as to any moneys which might be paid into the bank by the applicants under their undertaking, or by the former directors or promoters.
Messrs. Harper, Broad, & Battcock were neither creditors nor contributories, and had no farther interest in the affairs of the company than as above stated.
On the 16th of December, 1880, Messrs. Harper, Broad, & Battcock issued the writ in this action against four gentlemen who had been promoters of the company, seeking to have them declared jointly and severally liable to the company for a large sum of money in respect of certain alleged acts of misfeasance, and a statement of claim was delivered at the same time. The action was attached to the Court of Vice-Chancellor Malins, and no steps had been taken to have the indemnity fixed by the Judge.
On the 11th of January, 1881, the Defendants moved, before Vice-Chancellor Malins, that all further proceedings in the action might be stayed, or the writ and all proceedings thereon be set aside, the same having been commenced without proper authority, and that the Defendants' costs of the action and of the present application might be taxed, and that Messrs. Harper, Broad, & Battcock might be ordered jointly and severally to pay the costs, when taxed, to the Defendants and the liquidators of the Plaintiff company.
Farwell, for the motion, referred to Morgan and Davey on CostsF1, Hall v. BennettF2, and Hubbart v. PhillipsF3.
Norton, for the liquidators, supported the motion.
Higgins, Q.C., and Northmore Lawrence, for Messrs. Harper, Broad, & Battcock, referred to In re Bank of Gibraltar a MaltaF4 and In re Imperial Bank of ChinaF5.
MALINS, V.C.:—
In November last the gentlemen who had acted as solicitors for Mr. Rooney in obtaining the order of the 8th of February, 1878, represented to me in Chambers that there was a strong case for making the Defendants liable to refund a considerable sum of money. Mr. Harper attended before me, and was confident that if he could use the name of the company he could succeed in the litigation, at all events he was willing to undertake the risk of it. I thought that it was a case in which I was bound to give the parties who made the claim leave to use the name of the company, but of course I could only do so upon the usual terms of their indemnifying the company and the liquidators against the costs of the litigation. I therefore made it part of the order that they should give such indemnity as the Judge should direct. That indemnity would have to be given to the liquidators, because the liquidators instituting these proceedings in the name of the company would be liable for the costs if the Defendants succeeded. If the action was dismissed with costs the liquidators would be liable for those costs, inasmuch as the name of the company was used, and therefore the liquidators were the persons entitled to indemnity against the costs. I cannot see that the Defendants ought to have any indemnity. When they find themselves sued by the liquidators they are entitled to say, “We are sued by the liquidators of an insolvent company, we are entitled to security for costs,” and their proper application would have been that the liquidators should give them security. The application should have been against the liquidators. Instead of that, the present application is made, and I am surprised to find the liquidators...
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