Re Cooper (Gerald) Chemicals Ltd

JurisdictionEngland & Wales
Judgment Date1978
Date1978
CourtChancery Division
[CHANCERY DIVISION] In re GERALD COOPER CHEMICALS LTD. (IN LIQUIDATION) [No. 001027 of 1977] 1977 Nov. 2, 3; 22 Templeman J.

Company - Winding up - Fraud - Customer paying company in advance for goods not being produced - Company using moneys advanced to repay loan - Whether business carried on with intent to defraud company's creditors - Company in liquidation - Whether customer entitled to declaration that those accepting repayment of loan personally responsible for moneys advanced - Companies Act 1948 (11 & 12 Geo. 6 c. 38), s. 332 (1)

J lent £150,000 to C Ltd. to purchase and instal plant for the production of indigo, the loan to be returned by June 30, 1976, with an additional payment of £135 million out of the anticipated profits by March 26, 1977. By July 1976, C Ltd. had become insolvent and never began the production of indigo. J agreed to defer the repayment of £150,000 until August 10. On August 19, C Ltd. agreed to deliver to 5000 kilos of indigo during the next month and received, on August 20, payment in advance from H of £125,698.32. on the same day, C Ltd. paid J 110,000 in part discharge of the £150,000 loan due for repayment on June 30. H claimed a declaration under section 332 of the Companies Act 1948F1 that J and its directors were knowingly parties to carrying on the business of C Ltd. with intent to defraud creditors.

On J's summons to strike out H's points of claim as disclosing no cause of action: —

Held dismissing the summons, that, if C Ltd. had accepted an advance payment from H with no prospect or intention. of supplying indigo to H, it was carrying on business fraudulently and the subsequent repayment of part of the loan to J was a fraud on H not merely as a customer but as a creditor of the company; that if J had known that the part repayment of the debt due to it had been made with moneys obtained by fraud on a creditor, then H was entitled to a declaration under section 332 of the Act and, accordingly, since H had established a cause of action, the points of claim would not be struck out.

Murray-Watson Ltd. In re (unreported) April 6, 1977 considered.

The following case is referred to in the judgment:

Murray-Watson Ltd. In re (unreported), April 6, 1977.

The following additional cases were cited in argument:

Cyona Distributors Ltd. In re [1966] Ch. 462; [1966] 2 W.L.R. 761; [1966] 1 All E.R. 825; [1967] Ch. 889; [1967] 2 W.L.R. 369; [1967] 1 All E.R. 28 1, C.A.

Maidstone Buildings Provisions Ltd. In re [1971] 1 W.L.R. 1085; [1971] 3 All E.R. 363.

PROCEDURE SUMMONS

Jimlou Ltd., through its directors, William Jerome Gredley and Anthony James Alexander Helme, lent £150,000 in March 1976 to Gerald Cooper Chemicals Ltd. to set up a factory in Poplar, London, for the production of indigo. By July 1976 the company was insolvent, no payments to Jimlou Ltd. had been made, as promised, from the expected profits and repayment of the initial loan was deferred until August 10, 1976. On August 19, 1976, the company agreed who deliver 5,000 kilos of indigo to the applicants, Harrisons (London) Ltd., who, on August 20, paid in advance the purchase price of £125,698.32. On August 20 the company paid £110,000 to Jimlou Ltd. in part discharge of the £150,000 owing. The applicants claimed a declaration under section 332 of the Companies Act 1948 against the respondents, Jimlou Ltd. and its two directors, that they were knowingly parties to the company carrying on the business of Gerald Cooper Chemicals Ltd. with intent to defraud creditors and for other fraudulent purposes and that they and each of them were responsible without any limitation for the sum of £125,698.32 being moneys due from the company to the applicants.

P. J. Crawford Q.C. and D. J. Richardson for the applicants.

E. C. Evans Lombe for the respondents.

Cur. adv. vult.

November 22. TEMPLEMAN J. read the following judgment. The applicants, Harrisons (London) Ltd., claim a declaration under section 332 of the Companies Act 1948 against the respondents, Mr. Gredley and Mr. Helme, and Jimlou Ltd. By this summons, the respondents seek to strike out points of claim delivered by Harrisons on the grounds that the points of claim disclose no cause of action or no plausible hope of success.

Section 332 (1) provides, inter alia:

“If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company … or for any fraudulent purpose, the court, on the application of the official receiver, or the liquidator or any creditor or contributory of the company. may, if it thinks proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct.”

Harrisons are creditors of Gerald Cooper Chemicals Ltd., now in liquidation. Harrisons claim that the business of the Cooper company was carried on with intent to defraud creditors and that the respondents were knowingly parties to the carrying on of...

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