Re Compania de Electricidad de la Provincia de Buenos Aires Ltd

JurisdictionEngland & Wales
Judgment Date1978
CourtChancery Division

1978 Jan. 11, 12, 13, 17, 18; Feb. 8

Slade J.

Company - Winding up - Voluntary liquidation - Potential claims to dividends and repayment of capital by holders or former holders of shares share warrants to bearer and bonds - Whether such holders to be treated as members or contingent creditors of company - Whether assets held in trust for members - Companies Act 1948 (11 & 12 Geo. 6, c. 38), ss. 212 (1), 302, 343 (1)F1 - Companies (Winding-up) Rules 1949 (S.I. 1949 No. 330 (L. 4)), r. 106 (1) (2)F2 - Limitation of Actions - Period of limitation - Debt - Company in voluntary liquidation - Potential claims by holders or former holders of shares and bonds - Whether action upon speciality or simple contract - Whether company's balance sheets acknowledgment of debt - Limitation Act 1939 (2 & 3 Geo. 6, or simple contract - Whether company s balance sheets acknowledgment of debt - Limitation Act 1939 (2 & 3 Geo. 6, c. 21), ss. 2 (1) (a) (3), 18 (1) (5), 24 (2)F3

The company, which was incorporated in 1911 with a capital of £1,000,000 divided into 1,000,000 ordinary shares of £1 each in order to carry on business in the supply of electricity in Argentina, went into members' voluntary liquidation in 1975, following the decision of the Argentinian Government to nationalise the undertaking. In 1911 the company had, pursuant to its articles of association, issued £900,000 of first mortgage gold bonds to bearer of £20 each bearing interest at 5 per cent. per annum. In 1918 a scheme or arrangement, sanctioned by the court, provided that interest on the bonds at certain specified dates should be satisfied by the issue of deferred interest warrants upon delivery of the relevant coupons. In 1921 by another scheme it was provided that the company should issue 174,044 8 per cent. non-cumulative pre-preference shares of £1 each and make a cash payment of 4s. per bond in respect of interest due upon the bonds down to March 31, 1921. The scheme of 1921 also provided that the nominal amount outstanding in respect of the bonds should be reduced to £696,176 by reducing the nominal amount of each bond from £20 to £16, such capital deduction being satisfied by the issue of a further 174,044 8 per cent, pre-preference shares of £1 each. In 1930 the bonds were redeemed but holders of 47 bonds failed to claim their entitlement to the 8 per cent. pre-preference shares.

Meanwhile the capital of the company had undergone changes including the creation of 8 per cent. non-cumulative participating preference shares of £1 each, of which 175,000 were issued as a result of the scheme of arrangement of 1921, and a further 350,000 in 1926. As a result of the scheme of arrangement of 1921, the nominal amount of the ordinary shares became £2 each of which 131,250 were in issue. In 1965 the issued 8 per cent. pre-preference shares were cancelled, pursuant to a special resolution, the capital thereon becoming returnable to the holders; 416 of such shares, which had not been issued, however remained extant. Under a scheme of arrangement of 1967 the ordinary shares of £2 each and the 8 per cent. participating preference shares were to be cancelled and the capital paid up thereon returned to holders and, on such reduction, new ordinary shares of 5p each were to be allotted and distributed, credited as fully paid, amongst the preference and ordinary shareholders in the proportion of seven new ordinary shares for every preference share and 52 new ordinary shares for every existing ordinary share. Despite the fact that all notices required by the articles of association or the terms and conditions upon which the various classes of shares and the gold bonds had been duly given, and appropriate advertisements inserted in newspapers, as required by rule 106 of the Companies (Winding-up) Rules 1949, a number of potential claimants to return of capital or dividends or interest remained unaccounted for. The joint liquidators sought directions, under section 307 of the Companies Act 1948, as to how they should deal with the potential claims.

On the question whether the potential claimants were to be treated as creditors or as members and the extent to which the potential claims were barred by the operation of the Limitation Act 1939: —

Held, (1) that the present and former shareholders of a company to whom the company owed money by way of dividends or repayment of capital were to be treated in any winding up as creditors for the purposes of sections 264, 265, 302 and 303 (2) of the Companies Act 1948, subject only to the provisions for deferment contained in section 212 (1) (g) of the Act, that, accordingly, the provisions of rule 106 (1) of the Companies (Winding-up) Rules 1949 applied, thus enabling the joint liquidators to fix a certain date by which such shareholders or former shareholders must prove their debts or claims, and to exclude those who failed to do so from the benefit of any distribution of assets (post, pp. 333B–D, 334A–C).

In re Phoenix Oil and Transport Co. Ltd. [1958] Ch. 560 and In re House Property and Investment Co. Ltd. [1954] Ch. 576 applied.

(2) That, although a liquidator in a voluntary winding up could, in a clear case where he was satisfied of the existence of a debt and the identity of the creditor, dispense with the formality of inviting the creditor to make a claim before admitting the debt, the general rule was that the liquidator must invite the creditor to make a claim and the creditor had to make the claim, whether formally or informally, before the debt could be admitted, that, accordingly, the liquidator was not entitled to admit a debt merely because it appeared in the company's books and, since rule 106 (2) of the Rules of 1949 did not preclude the liquidators from invoking rule 106 (1), they could, under sub-rule (1), preclude from any distribution debts of those unidentified persons, who according to the company's books might have a good claim but had taken no steps to make such a claim (post, p. 336A–D, F–G).

(3) That the duty of a liquidator under section 343 (1) of the Companies Act 1948 to pay into the insolvency services account at the Bank of England “any money held by the company in trust in respect of dividends or other sums due to any person as a member of the company” did not extend to moneys held to pay the debts of members, who could not be traced, when those debts had been excluded by the application of rule 106 (1) of the Rules (post, p. 338A–F).

(4) That the unidentified holders of share warrants to hearer representing ordinary shares of £2 each and 8 per cent. non-cumulative participating preference shares of £1 each, who failed to claim their entitlements to ordinary shares of 5p each under the 1967 scheme of arrangement, were not members of the company, even though the ordinary shares were treated as issued or at least allotted in 1967, because the holders had not expressly or impliedly agreed to become a member of the company and, therefore, the holders must be treated simply as contingent creditors in respect of their potential claims that similarly the former holders of gold bonds who failed under the 1921 scheme of arrangement to claim their entitlements to 8 per cent. pre-preference shares of £1 each were to be treated as contingent creditors and not as members (post pp. 341A–B, E, H–342D, H–343H).

Dictum of Stirling J. in Spitzel v. Chinese Corporation Ltd. (1899) 80 L.T. 347, 351 and In re J.N.2 Ltd. [1978] 1 W.L.R. 183 considered.

(5) That the words “an action upon a specialty” in section 2 (3) of the Limitation Act 1939 could refer only to an action to enforce an obligation created or secured by a specialty and not to an action to enforce one merely acknowledged or evidenced by such an instrument; that, therefore, actions to recover amounts due to shareholders in respect of dividends declared or in respect of capital repayable under a scheme or arrangement could not be regarded as actions upon a specialty and, accordingly, the relevant period of limitation was that, under section 2 (1) (a) of the Limitation Act 1939, for an action founded on a simple contract, namely, six years (post, pp. 344G–H, 346E–G, 347A–B).

In re Artisans Land and Mortgage Corporation [1904] 1 Ch. 796 not followed.

Hickman v. Kent or Romney Marsh Sheepbreeders Association [1915] 1 Ch. 881 considered.

(6) That the relevant period of limitation for an action to recover interest on the gold bonds would be six years under section 18 (5) of the Limitation Act 1939, but for an action to recover arrears of principal or capital repayment due on the bonds the relevant period of limitation, by virtue of section 18 (1), was 12 years from the date when the right to receive the money accrued (post, p. 347B–D).

(7) That in the case of an obligation to pay money which arose or was evidenced by a bearer security the document of title must be presented before a cause of action arose in respect of the relevant debt if the contract by which the debtor undertook the relevant liability so provided; that in the present case the company's articles of association did so provide and accordingly the period of limitation in respect of claims based on such obligations would commence to run from the date of presentation; and that the bonds or coupons must similarly be presented before any cause of action arose on the gold bonds (post, pp. 348A–D, 349G–H).

Holmes v. Kerrison (1810) 2 Taunt. 323 applied.

Norton v. Ellam (1837) 2 M. & W. 461 distinguished.

(8) That an acknowledgment could not be said to be made to a creditor or his agent within section 24 (2) of the Limitation Act 1939 unless it was either delivered to the creditor or his agent or was expressly or implicitly addressed to and actually received by the creditor or his agent, that a company's balance sheet must be regarded as implicitly addressed to creditors whose debts were referred to therein...

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