Credit Enterprise v Woodcocks Sussex
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WILLMER,LORD JUSTICE UPJOHN |
| Judgment Date | 15 December 1960 |
| Judgment citation (vLex) | [1960] EWCA Civ J1215-3 |
| Date | 15 December 1960 |
| Court | Court of Appeal |
[1960] EWCA Civ J1215-3
Lord Justice Ormerod
Lord Justice Willmer and
Lord Justice Upjohn
In The Supreme Court of Judicature
Court of Appeal
MR R.A.K. WRIGHT (instructed by Messrs Burton, Yeates & Hart, agents for Messrs Nye & Donne, Brighton) appeared as Counsel on behalf of the Appellants (Petitioners).
MR A.L. FIGGIS (instructed by Messrs Aldrich & Crowther, Brighton) appeared as Counsel on behalf of the Respondent (Respondent).
I am sorry that Lord Justice Ormerod is not able to be here today, but I am authorised to say that he concurs in the Judgment which I am about to deliver.
I have come to the conclusion that no sufficient reasons have been shown for interfering with the Order made by the learned County Court Judge. When a right of appeal from the County Court on questions of fact was conferred by section 12 of the County Courts Act, 1955 (now replaced by section 109 of the Act of 1959), no such right of appeal on fact was conferred in relation to proceedings for the winding up of a company. This appeal, therefore, could succeed only if it could be shown that in making the Order which he did the learned Judge fell into some error of law.
The law which the learned Judge had to administer was that set out in sections 222 and 546 of the Companies Act, 1948. It is unnecessary to quote the words of section 222, as no argument has turned on the provisions of that section. The argument has been mainly directed to section 346, the material provisions of which are as follows: "(1) The Court may, as to all matters relating to the winding-up of a company, have regard to the wishes of the creditors or contributories of the company, as proved to it by any sufficient evidence….(2) In the case of creditors, regard shall be had to the value of each creditor's debt."
The first ground of appeal put forward by the Appellants in their Notice of Appeal is in the following terms: "That in the circumstances of this case the learned judge was bound to dismiss the said petition having regard to the number and value of creditors opposing the same in the absence of evidence showing special circumstances why the wishes of such creditors should not be given effect to."
In my judgment this ground of appeal will not bear examination. To say that the Court is bound to dismiss the petition is to deprive the Court of the discretion which Parliament has conferred by the clear terms of section 346(1) of the Act. If such were the case the Court would be left, as I see it, with no judicial function to perform. The argument involves that in all cases the decision would have to be arrived at by a mere counting of heads. Had this been the intention, Parliament would surely have Said so in plain terms, and the wording of section 346 must have been quite different.
The main argument has been directed to the second ground put forward in the Notice of Appeal, which is in the following terms: "That in so far as the learned Judge had a discretion to make the said order he exercised the same under a mistake of law as to the regard which ought to have been paid to wishes of the creditors appearing in opposition to the petition and in disregard of the principles upon which such regard should have been paid." What has been said is that, in the absence of proof of special circumstances, there was only one way in which the learned Judge could properly have exercised his discretion, namely, by giving effect to the wishes of the majority of the creditors. No evidence as to special circumstances having been tendered, the failure of the learned Judge to give effect to the wishes of the majority amounted, it is said, to a failure to exercise judicially the discretion vested in him.
In support of this contention our attention was drawn to the notes to section 222 of the Act, as contained in Buckley, 13th Edition, at page 450. There the learned editor, after explaining that as between himself and the company a creditor who cannot obtain payment of his debt is entitled ex debito justitiae to a winding-up order, proceeds as follows: "This right of the creditor, however, is not his individual right but his representative right as one of a class. If a majority of the class, namely, the creditors of like degree, take a different view, the Court, in the absence at ell events of special circumstances making an order 'just and equitable', gives effect to such right as the majority desire to exercise. The Court, under section 346, then has regard to the wishes of the majority and may refuse to make any order."
As authority for this proposition the case of In re Crigglestone Coal Co., Ltd., 1906, 2 Chancery, page 327, is cited, where Mr Justice Buckley said, at pages 331-2: "The order which the petitioner seeks is not an order for his benefit, but an order for the benefit of a class of which he is a member. The right ex debito justitiae is not his individual right, but his representative right. If a majority of the class are opposed to his view, and consider that they have a better chance of getting payment by abstaining from seizing the assets, then upon general grounds and upon section 91 of the Companies Act, 1862" — now replaced by section 346 of the present Act — "the Court gives effect to such right as the majority of the class desire to exercise. This is no exception. It is a recognition of the right, but affirms that it is the right not of the individual, but of the class; that it is for the majority to seek or to decline the order as best serves the interest of their class. It is a matter upon which the majority of the unsecured creditors are entitled to prevail, but on which the debtor has no voice."
It is to be remarked that in that case there was no question of opposition to the petition on the part of other unsecured creditors, the issue being between the petitioning creditor on the one hand and the company and the debenture holders on the other. What was said by Mr Justice Buckley as to the right of other unsecured creditors was, therefore, obiter, and this point was not dealt with by the Court of Appeal, to which the case subsequently went. But the remarks of Mr Justice Buckley, and particularly his insistence on the creditor's right being a class right, have been generally accepted as an authoritative statement, and indeed have not been challenged before us on behalf of the petitioning creditors in the present case.
As illustrating the kind of special circumstances which ought to be proved by a petitioning creditor when he finds himself opposed by a majority of the creditors of the same class, we were referred to In re Clandown Colliery Co., 1915, 1 Chancery, page 369, and In re Ithaca Shipping Co., Ltd., 84 Lloyds List Reports, page 507. In the latter case Mr Justice Roxburgh said: "It is said….that….as it is opposed by a majority in value of the creditors, an order ought not to be made. As a general proposition that is quite true, but it is a proposition which is always subject to the proof of special circumstances, and in my judgment, those special circumstances have in this case been clearly demonstrated." These words of Mr Justice Roxburgh were cited with approval by Lord Justice Romer when giving the leading judgment in this Court in Re B. Karsberg, Ltd., 1956, 1 Weekly Law Reports, page 57, at page 66 — a judgment in which Lord Justice Birkett concurred.
In the present case there was no evidence of any special circumstances, and no attempt was made by the petitioning creditors to prove any. In these circumstances it is complained that the learned Judge erred in that, in exercising the discretion conferred upon him, he failed to give effect to the wishes of the class as revealed by the substantial majority of opposing creditors. In particular, it is alleged that he misdirected himself by putting the onus of proof the wrong way round, the onus, it is said, being on the petitioning creditors, in view of the majority against them, to prove the existence of special circumstances justifying the making of an Order. In this respect I think the argument for the Appellants hardly did justice to the learned Judge, who certainly did not suggest that the onus of proof was upon the opposing majority. What he actually said was: "I doubt whether any question of onus of proof arises. As I see it, it is for the Court to weigh up all the relevant matters and decide whether the prima facie right of the petitioning creditor to an order should give way to the wishes of a majority of creditors expressed by the bare fact of opposition coupled with the nature of their debts."
On the other side, Counsel for the petitioning creditors argued that the effect of section 346 is to confer on the Court an unfettered discretion to make or not to make the Order sought. It was contended that, if the petition is opposed by a majority of the other creditors, the Court is entitled, and is indeed bound, to look at such reasons as may be advanced for opposing what is prima facie the right of the petitioning creditor ex debito juatitiae. In support of his argument, Counsel referred us to the statement contained in Palmer's Company Law, 20th Edition, at page 701, which is in the following terms: "This right to a winding-up order is, however, qualified by another rule, namely, that the Court will regard the wishes of the majority in value of the creditors, and if, for some good reason, they object to a winding-up order, the Court in its discretion may refuse the order."
It will be observed that a significant difference is apparent between the above statement in Palmer and that in Buckley, but the former is well supported by authorities to which we were referred. Thus, for instance, in the case of In re Uruguay Central Railway, 11 Chancery...
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