Mann v Goldstein
| Jurisdiction | England & Wales |
| Judgment Date | 1968 |
| Date | 1968 |
| Court | Chancery Division |
Company - Winding up - Petition - “Creditor” - Debt disputed on substantial grounds - Whether prosecution of petitions abuse of process of court -
The plaintiffs and the first defendant and his wife were equal shareholders in two companies, J. Co. Ltd. and C. Co. Ltd. The first plaintiff managed J. Co. and the first defendant C. Co. Proposals were made to buy each other out but no agreement could be reached. The first defendant presented a creditors' petition to wind up J. Co., alleging a debt of £1,869 for director's fees. The second defendant presented a petition to wind up C. Co. as a creditor for goods sold and delivered to that company.
The plaintiffs sought an injunction to restrain the defendants from advertising or taking any further steps in the prosecution of their respective petitions on the grounds that the defendants were not creditors at all, or, alternatively, that their debts were disputed on substantial grounds, that the petitions were not bona fide but an abuse of the process of the court and that the companies were solvent:—
Held, granting the injunctions, (1) that a creditors' winding-up petition could only be presented by a creditor and since the debts upon which both the defendants founded their petitions were substantially disputed, neither of the petitioners were established as “creditors” of either of the two companies; and that, accordingly, neither was entitled to present a petition as neither had any locus standi in the Companies Court.
(2) That even though it appeared from the evidence that the companies were insolvent, as the debts were substantially disputed the defendants ought to be restrained from proceedings on their petitions.
(3) That to invoke the winding-up jurisdiction when a debt was disputed on substantial grounds after it had become clear that it was so disputed was an abuse of the process of the court.
MOTION.
The plaintiffs, Peter Mann and his wife Anita Mann, and the defendant, Sidney Bernard Goldstein and his wife were equal shareholders in two companies carrying on hairdressing businesses, Joanita Ltd. and Charmaine Coiffeur d'Art Ltd.
The first plaintiff managed Joanita and the first defendant Charmaine. Differences arose between them and proposals were made to buy each other out but no agreement was reached.
On October 12, 1967, the first defendant filed a petition to wind up Joanita “… for loans made to or monies left in the company, the present amount of such indebtedness being £1,869 16s. 3d.” He alleged that the sum represented director's fees. It was not disputed that this sum had been voted by Joanita in 1959–60 and that no fees had been voted since. The plaintiff alleged that from October, 1965, to June 12, 1967, the first defendant had drawn £15 per week from Joanita which, when grossed up at the appropriate rate of tax, amounted to a sum in excess of £1,869. The first defendant denied that the drawings were fees but even if so treated the weekly sums drawn were only £7 per week thus leaving a substantial amount owing.
The second defendants, Wallands Laboratories Ltd., presented a petition on October 12, 1967, to wind up Charmaine Coiffeur d'Art Ltd. on the ground that the company was indebted to the petitioner in the sum of £340 16s. 6d. in respect of goods sold and delivered. The second defendants' main dealings were with a subsidiary of Charmaine, Charmaine Marguerite Ltd., which originally carried on its business at the same premises. The plaintiffs alleged that the debt was owed by Charmaine Marguerite Ltd.
On a motion the plaintiffs sought injunctions to restrain the defendants until trial or further order from advertising or taking further steps in the prosecution of their winding-up petitions.
P. S. A. Rossdale for the plaintiffs.
G. M. Godfrey for the first defendant.
P. J. Millett for the second defendant.
The cases cited in argument are referred to in the judgment.
November 15. UNGOED-THOMAS J. read the following judgment. This is an action by Mr. Peter Mann and his wife against Mr. Sidney Bernard Goldstein and Wallands Laboratories Ltd. The notice of motion asks that the first defendant, Mr. Goldstein, might be restrained until trial of the action or further order from advertising or taking any further steps in the prosecution of a winding-up petition against Joanita Ltd. And it also asks for an injunction in similar terms against the second defendant in respect of a petition against Charmaine Coiffeur d'Art Ltd. Leave was given to amend so as to join those two companies as defendants and enable the plaintiffs to sue, in a representative capacity, for shareholders in those companies, other than the defendant, Mr. Goldstein.
Each of the companies carries on a hairdressing business and the shares in each company are held equally between Mr. Mann on the one hand and Mr. Goldstein on the other hand, or between Mr. and Mrs. Mann on the one hand and Mr. and Mrs. Goldstein on the other hand. Mr. Mann managed the Joanita business in Pinner and Mr. Goldstein the Charmaine business in Haverstock Hill. Since July, there have been strained relations between Mr. Mann and Mr. Goldstein, apparently, partly because Mr. Mann thought that he did not have a fair deal over the sale of a subsidiary company of Charmaine called Charmaine Marguerite Ltd., which was sold to Mr. Goldstein. It was also partly due to friction over Marguerite's business continuing to be conducted from the Charmaine premises at Haverstock Hill after that sale.
Proposals for one side to buy out the other in Charmaine and Joanita were made, but no agreement was reached, and in these circumstances Mr. Goldstein presented a creditor's winding-up petition to wind up Joanita — and I quote from the petition — “… for loans made to or monies left in the company, the present amount of such indebtedness being £1,869 16s. 3d.” And the defendant company, Wallands, presented a petition to wind up Charmaine as creditor for £340 for goods sold and delivered to Charmaine.
The hostility between Mr. Mann and Mr. Goldstein has become acute and there is, apparently a deadlock between them over the conduct of the two companies, Joanita and Charmaine But Mr. Goldstein's petition is not based upon deadlock; nor has deadlock been relied upon by either side in the submissions made to me. The plaintiffs claim that they are entitled to the injunctions mentioned in the notice of motion, on the grounds that (1) the defendants are not creditors at all of these companies; or, alternatively, (2) that their debts are disputed on substantial grounds; (3) that the petitions are not bona fide petitions but are an abuse of the process of the court; and (4) that the companies are solvent. Each of these grounds involves questions of fact and of law and it will be convenient to deal first with the law.
It is well established that this court has jurisdiction to restrain the presentation or advertising of a winding-up petition and restrain all further proceedings on it. That jurisdiction is a facet of the court's inherent jurisdiction to prevent an abuse of the process of the court. It will be exercised where a winding-up application is presented or prosecuted otherwise than in accordance with the legitimate purpose of such process. (See, for example, In re A Company.F1
The presentation of a petition is governed by statutory provision. Section 224 of the Companies Act, 1948, provides that an application to wind up a company shall be by petition presented, so far as material for present purposes “… by any creditor or creditors ….” The section seems to me plainly, on the face of it, exhaustive, so that a person not within its ambit cannot petition. This conclusion is in accordance with the note in Buckley on the Companies Act (13th ed. (1957), p. 462), based on the observation of Wynn-Parry J. in In re H. L. Bolton Engineering Co. Ltd.F2 Of course, a person not named in section 224 as a person entitled to present a winding-up petition, does not become so named because the company is insolvent. Therefore, so far as material to our case, if the defendants are not creditors they are not entitled to present or advertise their petitions or apply for a winding-up order; they have no locus standi, and their petitions are bound to fail even though the company be insolvent. So if a creditor's petition is not restrained by such an application as is now before me and comes before the Companies Court, that court will, in limine, before proceeding further, consider the petitioner's claim to be a creditor. As stated in Buckley on the Companies Act, 13th ed. (1957) p. 451, in a passage quoted with approval by Lord Greene M.R., in In re Welsh Brick IndustriesF3:
“Some years ago petitions founded on disputed debt were directed to stand over till the debt was established by action. If, however, there was no reason to believe that the debt, if...
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