Re Herbert Berry Associates Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BUCKLEY,LORD JUSTICE GOFF,LORD JUSTICE SHAW |
| Judgment Date | 22 February 1977 |
| Judgment citation (vLex) | [1977] EWCA Civ J0222-4 |
| Date | 22 February 1977 |
| Court | Court of Appeal (Civil Division) |
[1977] EWCA Civ J0222-4
In The Supreme Court of Judicature
Court of Appeal
Civil Division
On Appeal from Order of Templeman, J.
Lord Justice Buckley
Lord Justice Goff and
Lord Justice Shaw
In the Matter of Herbert Berry Associations Limited
In the Matter of the Companies Act, 1948
Mr. ALLAN HEYMAN, Q.C. and Mr. MICHAEL CRYSTAL (instructed by Messrs A. Kramer & Co.) appeared on behalf of the Appellant.
Mr. PETER GIBSON (instructed by the Solicitor of Inland Revenue) appeared on behalf of the Respondent.
This is an appeal from a Judgment of Mr. Justice Templemen of the 28th Nay, 1976 relating to a distress levied by the Commissioners of Inland Revenue under the Taxes Management Act, 1970, Section 61, in the following circumstances: The company (which had "been incorporated in the year 1956) carried on the business of joiners. It became indebted to the Crown in substantial sums for P.A.Y.E. tax and for National Insurance contributions, and on the 29th January, 1975 the Commissioners of Inland Revenue levied a distress upon the goods of the company in a sum of The assets which were taken into the possession of the Commissioners, or of the bailiffs, were estimated to produce £10,500. Subsequently, some part of that debt was discharged in cash, and the amount which is now outstanding in respect of P.A.Y.E. is £4", 121.88 and for National Insurance contributions £1,453.04, making a total of £5,574.92.
On the 3rd March, 1975 notices were served to lead to a meeting and the passing of a resolution for a voluntary winding up of the company in a creditor's voluntary liquidation. The appropriate resolution was passed on the 20th March, 1975. The company then went into voluntary winding up. There was a walking possession agreement between the Commissioners of Inland Revenue and the Liquidator. The Liquidator intimated that he proposed to make application to the Court to restrain any sale by the Commissioners of Inland Revenue, but, by agreement between the parties, the goods in question were in fact sold in a sale conducted by the Liquidator and produced about £10,500, their estimated value.
The question then arose as to how those proceeds should be applied, and the Liquidator applied to the Court by OriginatingSummons on the 5th May, 1975 for an Order that all further proceedings on the distress might be stayed and for a declaration that the property and chattels the subject-matter of the distress were available for distribution by the Liquidator amongst the creditors of the company in accordance with the provisions of the Companies Act, 1948. When that Summons was issued I think the sale could not yet have taken place, but it would, of course, apply equally to the proceeds of sale as to the actual assets seized under the distress. The learned Judge dismissed the application, holding that the Commissioners were entitled to the fruits of their distress to the extent necessary to discharge the debts for taxes to which I have referred. From that decision the Liquidator appeals. It has been urged upon us, on a variety of grounds, that the decision of the learned Judge was wrong.
The first of the Liquidator's submissions is that Section 319, sub-section (7), is a section which does not apply to the Crown at all. Section 319 is the section which prescribes what claims against the company shall rank as preferential claims in the winding up. It derives from sections in earlier Companies Acts, first the Preferential Payments in Bankruptcy Act of 1882, Section 1, which was later replaced by Section 209 of the Companies Act, 1908. It now finds its place in Section 319 of the Act of 1948.
Sub-section (7) is in these terms: "In the event of a landlord or other person distraining or having distrained on any goods or effects of the company within three months next before the date of a winding up order, the debts to which priority is given by this section shall be a first charge onthe goods or effects so distrained on, or the proceeds of the sale thereof:
"Provided that, in respect of any money paid under any such charge, the landlord or other person shall have the same rights of priority as the person to whom the payment is made".
Mr. Heyman, appearing for the Liquidator, has urged that that sub-sect ion is one which is liable to give rise to remarkable anomalies between a compulsory winding up and a voluntary winding up, because it only applies, as its language shows, for it contains a reference to the winding up order, in a compulsory winding up. In a compulsory winding up the preferential creditors have the advantage of a charge upon the proceeds of any such distress, as is mentioned in the sub-section, for the amount of their preferential debts in priority to any rights of the distrainor. But he says in fact that sub-section has no application to the Crown, because the Crown is not to be treated as falling within the words "a landlord or other person". So that the Crown is remitted to its preferential rights under sub-section (1) and has no other rights of advantage over other creditors than it can secure by reference to sub-section (1).
In my judgment, that is not a contention which can succeed. Mr. Heyman has said that the words "or other person" should be read ejusdem generis with the word "landlord", so that the sub-section would not apply to a distress under a statutory power for recovering arrears of tax. I can see no justification, with deference to Mr. Heyman, for that view. There is here no series of words from which one can discover arty genus to which the words "other person" could be construedas ejusdem generis; and I do not see any reason for thinking that the words "or other person" ought to be limited in any way. They mean, I think, any person other than a landlord. Accordingly, I think the sub-section is one which is capable, in propel circumstances, of applying to the Crown.
Then Mr. Heyman has said that the distress is ineffective as against the Liquidator because, upon authorities which he cited to us, he contends that the Crown has no preferential rights except those conferred upon it by Section 319, sub-sections (1), and so must have lost the right to retain the fruits of the distress.
The cases to which he has referred us are re H.J. Webb & Co. (Smithfield, London) Limited, reported in 1922 2 Chancery at page 359, and the same case on appeal in the House of Lords under the name Food Controller and Others v. Cork, 1923 Appeal Cases, 647. In that case there had been no distress. The company, H.J. Webb & Company, were indebted to the Food Controller (a Minister of the Crown) in respect of moneys due relating to dealings in frozen rabbits undertaken by the company as agent for the Controller. The company went into liquidation and the Controller made it plain in the liquidation and asserted that the Crown was entitled to an entire priority over all other creditors, founding that claim upon prerogative rights which had prevailed in earlier days, under which the Crown could claim payment in full of any debt to the Crown in priority to the satisfaction of the debts to any other creditors.
In the Court of Appeal and in the House of Lords it was held that the combined effect of, I think it was, Section 186, anyhow, the section which provided that the assets should bedivided amongst the ordinary creditors pari passu and Section 209 of the Companies Act of 1908, being the progenitor of Section 319 in the 1948 Act, relating to preferential claims, were binding upon the Crown and, being binding upon the Crown, the Crown could claim no other preferential rights in the winding up than the rights accorded by Section 209 of the 1908 Act,
The matter was concisely stated, I think, by Lord Birkenhead in the House of Lords at page 657, where his Lordship said: "At the time when the Act of 1908 became law it was fairly arguable that under the general law of prerogative, and in virtue of various statutory provisions, Crown debts were entitled to a general priority on the winding up of the company. No such claim can survive the particular enumeration contained in s.209".
In my judgment, that case decided this, and no more, that the Crown's right to priority in the winding up of any company was regulated by Section 209, and it was not open to the Crown to claim in a winding up any...
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