La Lainière de Roubaix v Glen Glove Company
| Jurisdiction | Scotland |
| Judgment Date | 07 November 1925 |
| Date | 07 November 1925 |
| Docket Number | No. 12. |
| Court | Court of Session |
Lord Hunter, Lord Ormidale, Lord Anderson, Lord Justice-Clerk (Alness).
CompanyManagementCompromises and arrangementsProposed arrangementApproval by statutory meetingsSanction by the CourtRegularity of proceedings at meetingsCreditors' proxiesTimeousness of lodging of proxiesSecured and unsecured creditors voting togetherReasonableness of arrangementAlleged preferential treatment of certain creditorsCompanies (Consolidation) Act, 1908 (8 Edw. VII. cap. 69), sec. 120.
A petition by creditors of a company for a winding-up order was opposed by the company, who proposed a scheme of arrangement, and obtained from the Court authority to convene meetings of shareholders and creditors to have the scheme approved. The chairman of these meetings having reported that the requisite statutory majorities, both of shareholders and of creditors, had approved of the arrangement, objections were lodged by dissenting creditors, who maintained that the arrangement should not be sanctioned, in respect (1) that certain statutory requirements had not been complied with, and (2) that, in any event, the arrangement was not reasonable. It appeared that the chairman had disallowed certain proxies which had been lodged by creditors within forty-eight hours of the meeting; and that all the creditors had voted together, although these creditors included (1) a bank which, under the proposed scheme of arrangement, appeared to be secured, by guarantee or otherwise, to the extent of 20s. in the ; (2) trade creditors, who were offered an immediate composition of 5s. in the ; and (3) depositors, who were offered either 5s. in the , or 6s. 8d. if they allowed their money to lie five years at interest.
The Court (diss. Lord Anderson) refused to sanction the scheme, and ordered the company to be wound up, holding (1) that the chairman had wrongly rejected the proxies in question, there being no statutory provision that creditors' proxies (like shareholders' proxies) should be lodged at any particular date; that the bank, being a secured creditor, ought not to have voted with the unsecured creditors; that, in the absence of the bank as a voting creditor, the necessary three-fourths in value would not have been obtained; and, accordingly, that the procedure had not complied with the provisions of sec. 120 (2) of the Companies (Consolidation) Act, 1908; (2) that, in any event, the scheme was not one which, in the circumstances, the Court should sanction, in view of the apparent preferential treatment accorded to the bank, the reason for which had not been adequately explained by the company.
On 23rd May 1925 La Lainire de Roubaix, Socit Anonyme, Roubaix, Nord, France, as trade creditors of the Glen Glove and Hosiery Company, Limited, incorporated under the Companies Acts, 1908 and 1913, and having its registered office at Union Glen, Aberdeen, presented a petition craving the Court to order that the company should be wound up, and to appoint an official liquidator. William Archibald, Son, & Company, Limited, also trade creditors of the company, supported the petition, and were sisted as parties to the process.
Answers to this petition were lodged by the Glen Glove and Hosiery Co., who resisted the prayer of the petition and stated that a scheme of arrangement, which would avoid the necessity of liquidation, would in due course be submitted to the Court for approval. On 11th July procedure in this petition was accordingly sisted in hoc statu.
On 16th July 1925 the Glen Glove and Hosiery Co. presented a petition to the Court for authority to call and hold meetings of shareholders and creditors for the purpose of considering a scheme of arrangement proposed by them.* The Court ordered these
meetings to be held, and directed the chairman of the meetings to report to the Court. The meetings were duly held, and the chairman reported the result of the meetings, to the effect that the necessary statutory majority had voted in favour of the scheme of arrangement.
La Lainire de Roubaix and William Archibald, Son, & Co., as creditors of the petitioning Company, lodged objections to the report in respect (1) that the statutory requirements had not been complied with, and (2) that, in any event, the proposed scheme was not one which should receive the sanction of the Court.*
The objectors stated, inter alia:(2) Objection is taken to said report on the ground that the creditors should have voted in different classes, i.e., Class I.Creditors partly secured and partly guaranteed. Class II.Trade creditors who under the scheme are to receive 5s. per . Class III.Creditors who are to receive deposits of 6s. 8d. per . Had this been done, it is averred that there would not have been the requisite majorities in the various classes. The voting would have been as follows:
Class. I.Creditors partly secured and partly guaranteed.
| Total amount present at meeting | 7700 |
| Of which there voted for the scheme | 7700 |
Class II.Creditors who are to receive 5s. per .
| Total amount present at meeting | 6207 | 16 | 41/2 |
| Voted in favour of scheme | 2297 | 13 | 31/2 |
| Voted against the scheme | 3910 | 3 | 1 |
Class III.Creditors who are to receive deposits of 6s. 8d. per .
| Total amount present at meeting | 8632 | 19 | 91/2 |
| Voted in favour of scheme | 7332 | 3 | 0 |
| Voted against scheme | 1300 | 16 | 91/2 |
(3) Objection is also taken to the chairman's ruling against certain
proxies of creditors on the ground that these had not been timeously lodged at the registered office of the Company. Although repeatedly pressed to state his authority for so ruling the chairman refused to state it, and it is averred that no such authority exists in the Companies Acts, or elsewhere. (4) Objection is also taken to the scheme on its merits in respect that a liquidation would furnish the creditors with a far larger dividend than that offered under the scheme of arrangement. (5) The proposed scheme of arrangement which contemplates a transference of the petitioners' undertaking as a going concern to Mr W. Watt Hepburn is not supported by any full and correct statement of the Company's affairs, nor has any independent valuation of its assets been submitted to its members or creditors. The petitioners at various times have purported to assign and convey to the Royal Bank of Scotland, Aberdeen, or to petitioners' own directors as guarantors to said bank, the greater part of their property, heritable and moveable. For many months prior to the presentation of the petition for winding-up by the Court, the petitioners have been trading in commercial co-operation with, and under the direction of, the said bank. The objectors maintain that the alleged transfers of assets to the said bank are invalid and inoperative as against the objectors and other trade creditors. If such assets be included in the assets of the petitioners, there would be sufficient to pay the petitioners' creditors a dividend substantially larger than any composition proposed by the petitioners. (6) For many months prior to the said petition for winding-up order, the present petitioners have also from time to time purported to divest themselves of a large part of their assets to individual directors in connexion with guarantees undertaken by them on behalf of the petitioners. The objectors maintain that these alleged transfers are also invalid, and are inoperative as against the objectors and other trade creditors, and that the assets available for distribution among creditors accordingly fall to be largely increased in amount. (7) On 24th April 1925 the petitioners issued a circular to their creditors, including the objectors, indicating that they were now unable to pay their debts. They urged that no proceedings should meantime be taken, as no one will be allowed to acquire a preference. On the following day 24 cases of manufactured goods, the property of the petitioners, were delivered by them to the London and North-Eastern Railway Company at Aberdeen. The petitioners at the same time presented for signature a delivery warrant or receipt in favour of said bank. This delivery warrant, which was accordingly signed by the custodiers, was incorrectly antedated to 23rd April 1925. On 9th May 1925 the petitioners delivered to the said railway company 27 further cases of manufactured goods belonging to them, delivery warrants in respect of these goods, made out in favour of two individual directors of the petitioners, being at the same time tendered by the petitioners and signed by the said railway company. The objectors believe and aver that the 51 cases referred to contained approximately five tons of manufactured goods of the value of 2500. (8) The said circular letter was accompanied by an Approximate statement of affairs, which showed by estimates but not by valuations available assets to the extent of about 3s. per only, and referred to an Independent valuation of certain assets which was in the course of being made. Even on the figures in said valuation, which was signed by Mr Hepburn who is now the prospective purchaser, the available assets are far greater in amount, and when placed against the said approximate statement of affairs show assets available for the payment of at least 12s. per to creditors. All explanation of the discrepancy has been consistently denied to the objectors and other creditors. Special reference is directed to the last sentence of the valuation, No note is taken of the manufactured goods stored by the railway company. It is believed and averred that the manufactured goods stored with the railway company at the date of the said valuation exceeded the value of 10,000. It is further pointed out that the valuation states that no allowance has been allowed for woollen yarns or cotton yarns still to be uplifted. It is believed and averred that the value of said yarns was at said date at least 4000. The objectors believe and aver that there is a substantial fund of assets...
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