Halesowen Presswork & Assemblies Ltd v Westminster Bank Ltd

JurisdictionUK Non-devolved
JudgeViscount Dilhorne,Lord Simon of Glaisdale,Lord Cross of Chelsea,Lord Kilbrandon
Judgment Date26 January 1972
Judgment citation (vLex)[1972] UKHL J0126-2
Date26 January 1972
CourtHouse of Lords
National Westminster Bank Limited
and
Halesowen Presswork & Assemblies Limited

[1972] UKHL J0126-2

Viscount Dilhorne

Lord Simon of Glaisdale

Lord Cross of Chelsea

Lord Kilbrandon

House of Lords

Upon Report from the Appellate Committee, to whom was referred the Cause National Westminster Bank Limited against Halesowen Presswork & Assemblies Limited, that the Committee had heard Counsel as well on Monday the 8th, as on Tuesday the 9th, Wednesday the 10th, Thursday the 11th and Monday the 15th, days of November last, upon the Petition and Appeal of the National Westminster Bank Limited, whose registered office is at 41 Lothbury, London, E.C.2, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 29th of July 1970, might be reviewed before Her Majesty the Queen in Her Court of Parliament, and that the said Order might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of Halesowen Presswork & Assemblies Limited, lodged in answer to the said Appeal: and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 29th day of July 1970 complained of in the said Appeal, be, and the same is hereby. Reversed, and that the Judgment of the Honourable Mr. Justice Roskill of the 5th day of November 1969, thereby Set Aside, be and the same is hereby Restored: And it is further Ordered, That the Respondents do pay, or cause to be paid, to the said Appellants the Costs incurred by them in the Court of Appeal, and also the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Queen's Bench Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.

Viscount Dilhorne

My Lords,

1

The Respondent Company's account with the Halesowen branch of the Appellants was in February, 1968, overdrawn to the extent of £11,339. Mr. F. I. Lewis was at all material times a director of the Respondent Company. He was also interested in two other associated companies, Lewis Distributors Ltd. and Jack Lewis Properties (Halesowen) Ltd., both of which had accounts with the Appellants which were in debit in February, 1968, the Bank being owed £143,289 by Lewis Distributors Ltd. and £8,943 by Jack Lewis Properties (Halesowen) Ltd.

2

The Bank being concerned about the position, their Assistant Manager in Birmingham saw Mr. Lewis on the 23rd February and, after their meeting, wrote him a letter dated the 23rd February. In the letter he recorded that he had stated at the meeting that the accounts of the Respondent Company and Lewis Distributors Ltd. were "unacceptable to the Bank, which itself needs to reserve all its rights of action". The Assistant Manager said that additional security was required in the absence of cash as an initial measure and enclosed debentures and guarantees to be issued and given by Lewis Distributors Ltd. and the Respondent Company which, he said, had been prepared "in accordance with what you agreed".

3

Mr. Lewis then consulted a Mr. Bernard Phillips, an accountant and member of the firm of Bernard Phillips & Co., who wrote to the Assistant Manager on Mr. Lewis's behalf in reply to the letter of the 23rd February. In his letter Mr. Phillips said that from a draft statement of affairs which had been prepared, it was "clear that a proper realisation of the company's assets would enable the company to discharge all its debts and obligations in full" but that "a forced realisation would show a position of insolvency". Consequently, he said, if the directors were to comply with the Bank's request, they might be accused of attempting a fraudulent preference, or if the company were to be wound up within twelve months, the debenture would prove invalid. He went on to say that active steps had been taken to dispose of the business as a going concern and that the figures involved in such a transaction would "certainly" enable all the creditors of the Respondent Company to be paid in full and he asked that a reasonable opportunity should be given to the directors "to effect a transaction which will enable all the company's liabilities to be dealt with equally".

4

On the 15th March, 1968, Mr. Phillips wrote to the Bank saying that no one had shown any interest in making an offer for the Respondent Company's factory and that the Bank were right in assuming that the Respondent Company's banking business was being passed through the company's account at Lloyd's Bank, Halesowen. The account at Lloyd's had been opened, as Mr. Lewis admitted at a meeting on the 4th April, as he was afraid to pay in receipts to the Bank's branch at Halesowen lest the Bank should freeze on to them. The account at Lloyd's was conducted on a credit basis.

5

A memorandum of that meeting on the 4th April, prepared by a District Manager of the Bank, records that Mr. Lewis "mindful in particular of the incidence of interest on the large debts, said that in no circumstances would he persist in his endeavour to sell" the Respondent Company "as a going concern for more than six months. In fact, he might in four months' time come to this decision so as to sell on a break-up basis in the two month remaining period".

6

Later the memorandum stated "if we" (the Bank) "are able to arrange for Mr. Lewis to have the time which he seeks, it was agreed that an active credit amount would be reopened at Birmingham Branch with the existing indebtedness there … entirely frozen."

7

On the 17th April, 1968, the Assistant General Manager of the Bank wrote to Mr. Lewis, saying inter alia:—

"In an endeavour to resolve the present somewhat disastrous situation of your two companies, we have now obtained approval to proceed on the lines we discussed with you on the 4th April…."

"So far as the existing account at our Birmingham Branch of Halesowen Presswork & Assemblies Limited is concerned, this is to be frozen at its present figure and no further transactions save for permanent reduction are to take place thereon. ….

"As part of the arrangements it was agreed that all the Company's current business should be passed through Westminster Bank, and I look to you, therefore, to arrange for the account with Lloyd's Bank to be closed so that all transactions henceforward may be passed through a new account to be opened at Birmingham Branch. This new account is, of course, to be maintained strictly on a credit basis and you should bear in mind that the bank charges, including interest on the indebtedness at Birmingham, will, in the usual way, be debited to this new account."

"There is, I feel, no need for me to underline the Bank's concern regarding the overall indebtedness and in acknowledgement of this you undertook to come to a decision regarding a sale of Halesowen Presswork & Assemblies Limited, or failing this the disposal of its assets, within the next four months, and in the absence of materially changed circumstances in the meantime we for our part will adhere to the present scheme of arrangements for this period of time."

8

Mr. Lewis replied to this letter on the 22nd April saying that he accepted the conditions and arrangements that had been laid out.

9

A new account, called No. 2 account, in the name of the Respondent Company was opened at the Halesowen branch of the Appellants.

10

Then, on the 20th May, 1968, just a month later, the Respondent Company gave notice (received by the Appellants on the 24th May) that on the 12th June a meeting of creditors would be held for the purposes mentioned in ss. 294 and 295 of the Companies Act, 1948. This notice was acknowledged by the Bank by letter dated the 28th May, 1968, in which they Said:—

"Needless to say, in the light of these events the Bank wishes the Company's No. 2 Account to be maintained in credit at all times and I am sure that we can rely on your co-operation to provide cleared funds in the Account to meet cheques which may be presented."

11

It was common ground that the giving of the notice of the meeting of creditors was a material change of circumstance which would have entitled the Bank to treat the arrangement made in the letters of the 17th and 22nd April as at an end. The letter of the 28th May shows that they did not do so. They were, despite that material change of circumstance, prepared to allow the Respondent Company to continue to operate the No. 2 account provided that it was kept in credit.

12

On the 12th June a cheque drawn by Girlings Ltd. in favour of the Respondent Company for £8,611 5s. 10d. was paid into the No. 2 account at the Appellants' Halesowen branch before the creditors' meeting was held that afternoon. At that meeting a resolution was passed for the voluntary winding-up of the company and Mr. Bernard Phillips was appointed liquidator.

13

The amount of £8,611 5s. 10d. was credited to the No. 2 account on the 13th June and the cheque was cleared on the 14th June.

14

By letter dated the 19th June the Bank told the liquidator that they considered their claim in the liquidation would be "for the net balance between all accounts, plus outstanding interest and commission". On this basis they said that the net amount due to the Bank was £3,219 17s. 10d.

15

Mr. Phillips did not agree. He maintained that the Bank were in no better position than any other creditor and claimed to be entitled to the £8,611 5s. 10d. and asserted that that could not be set off against the...

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