Re United Railways of Havana and Regla Warehouses Ltd; Tomkinson v First Pennsylvania Banking and Trust Company

JurisdictionEngland & Wales
Judgment Date08 December 1958
Judgment citation (vLex)[1958] EWCA Civ J1208-3
Date08 December 1958
CourtCourt of Appeal
In the Matter of United Railways of the Havana and Regla Warehouses, Limited
In the Matter of The Companies Act, 1948

[1958] EWCA Civ J1208-3


Lord Justice Jennins

Lord Justice Romer and

Lord Justice Willimer.

In The Supreme Court of Judicature

Court of Appeal

Mr. JOHN MEGAM, Q.C., Mr. KENNETH Q.C., and Mr. Richard Hunt (instructed by Messrs Norton, Rose & Co.) appeared on behalf of the Liquidators, Appellants.

Mr. R.O. LBERFORCE, Q.C., and Mr. R.B.S. INSIONE (instructed by Messrs. Herbert Smith &. Co) appeared on behalf of the Applicants, the Pennsylvania Company for Banking and Trusts, Respondents.


: The judgment I am about to deliver is the Judgment of my brother Homer and myself. It is concurred by my brother Willmer except on certain aspects of the case as to which he will be delivering a separate Judgment.


This is an appeal by' the Liquidators in the winding up of United Railways of Havana and Regla Warehouses Ltd. (a company incorporated in England in the year 1898 and here in after called "the Company") from an Order of Mr. Justice Wynn-Parry dated the 19th November, 1957, to the effect that a proof of debt lodged on behalf of the Trustee for the holders of an issue of Certificates known as "United Railways of Havana 15-year 7 Equipment Trust Certificates" should be admitted for a SUE to be computed in the manner described in such Order.


The present Trustee for the holders of these Certificates and Respondent in this appeal is the First Pennsylvania Banking & Trust Co., a corporation of the commonwealth of Pennsylvania in the United States of America, and is the successor in office of the Commercial Trust Company of Philadelphia, another Pennsylvania corporation?which was the original Trustee. References in this judgment to "the Trustees" are to be understood as meaning the original Trustee or its successor as the contest may require.


Mr. Justice Wynn-Parry's full and careful survey of the documents, acts and events leading up to the present dispute enables us to go straight to the points at issue in this troublesome case, referring to particular facts and documents as and when relevant to the matter under discussion.


The basic question in the case is whether at the commencement of the voluntary winding-up of the Company on the 4th March, 1954, the Company was indebted to the Trustee under the covenant by the Company for the payment of rentals contained in the Lease of the 13th April, 1931, of the rolling stock by the Car Company to the Company, the benefit of which was assigned by the Car Company to the Trustee under the Trust Agreement of even date.


If this question fell to be determined according to English law, it would admit of only one answer. According to the express terms of the covenant the Company was bound to pay the stipulated rentals, and it was not in dispute that such rentals were in fact in arrear and unpaid, as to the interest element since the 14th August, 1934, and, as to the element representing installments of capital, from and including the installment due on the 14th February, 1931, down to and including the final installment due on the 14th February, 1936, a total of eleven half-yearly installments in all.


It is no doubt true that the Trustee could not in the end be entitled to any greater sum than was required to give full effect to the rights of the holders of the 221 outstanding Certificates plus any sum properly allowable for its expenses, and if it in fact received more than the amount so required, would have to account for the surplus to the Liquidators, It is also true that this necessary limitation, coupled with questions as to the rates of exchange from to £ appropriate to the calculation, might well leave room for argument as to the proper way of quantifying the amount for which the Trustee could prove in the winding-up in inspect of this indebtedness; but there could be no doubt whatever that it was a provable debt.


Mr. Megaw, for the Liquidators, did in fact raise a subsidiary argument of some weight as to the quantum of the trustee's proof, to which we will later return, but according to his submission this question does not arise, for the simple reason that the right to receive and obligation to pay the debt outstanding under the Lease was governed by the law of Cuba either (a) because the situs of the debt was in Cuba, or (b) because the proper law of the contract constituted by the Lease was Cuban law. If he was right in claiming the application of Cuban law to the debt on either of these grounds, it followed according to his argument that under Cuban law the sale of the Company's undertaking to the Cuban State on the 1st December, 1953, had the effect of transferring the liability for the debt from the Company to the Cuban State, or, in other words, brought about a compulsory novation by virtue of which the Trustee was compelled to accept the Cuban State as its debtor in lieu of the Company.


We propose to begin by examining this argument on the assumption that Cuban law was on one or other of the grounds above" stated applicable to this debt. The question then is whether on that assumption the sale to the Cuban State did according to Cuban law have the effect of bringing about the compulsory novation for which Mr. Megaw has contended.


The expert witnesses on Cuban law (Dr. de Cubas for the Liquidators and Dr. Gorrin for the Trustee) were by no means at one in their answer to this question. Before considering the effect of their evidence we should refer to some of the provisions of the Law Decrees and Agreements under which the sale to the Cuban State took place.


By Law Decree 980 (Document 20, Exhibit "" 5A) dated the 23rd July, 1953, Article 3rd, the Minister of the Treasury was authorised to negotiate for the purchase by the State of the railroad system of the Company and its collateral, subsidiary or affiliated companies by voluntary agreement or expropriation with the object of conveying it to a company to be formed. By Article 6th provision was made for the formation of the new company under the name." of Ferrocariles Oocidenicles 3.A. (here in after called "Occidentales"). By Article 5th it was provided that the State should convey the properties in question to Occidentales and that the latter should assume the liabilities which the State should have contracted by the acquisition of such properties.


By a Preliminary Agreement dated the 5th September, 1953, the Company and a subsidiary called "the Havana Terminal Railroad Company" (ye will refer to them together as "the Vendors") agreed to sell and the State of Cuba agreed to purchase for the purposes contemplated in Law Decree 960 all the assets and properties of the Vendors in the Republic of Cuba at the price of £13,000,000.


By paragraph Fourth (3) (Document 20, Exhibit T.W.4A) it was agreed that "The price agreed upon shall be received by 'The Uniteds' and 'The Terminal' free from all responsibility with respect to liabilities outstanding in Cuba, represented by debts, obligations and responsibilities, arising out of the operations of the properties which are to be acquired by the State, whether involving operations prior to the 10th June. 1949, on which date said properties passed to the management of the Interventors of the Government of Cuba, or subsequent to that date."


Annex A to this Agreement contains in Part I a list of the assets included, in the sale and makes (in paragraph D) the following reference to the Certificates: "Annex A. Assets that will be included in the sale:- …(D) £1,867,000.00 of nominal value, amount of Uniteds holdings of the 7 Equipment Trust Certificates. This amount added to £333,000.00 of nominal value in the hands of third parties and therefore not included among the assets sold, completes the total of £2,200,000 of said certificates now in circulation, which are the only ones now in circulation the remainder up to£6,000,00.00 of which the issue originally amounted to having been paid and cancelled."


Law Decree 1197 dated the 26th November, 1953 (Document 20, Exhibit T.W.5B) contained the following recital - it is the second recital referred to: "Whereas: In accordance with the provisions of Military Order No. 34 of 1902, it was agreed in Section B) of Clause Fourth of the Preliminary Agreement executed betwoen the Government and the United Railways of the Havana and Regla Warehouses, Limited, Havana Terminal Railroad Company and The Marianao and Havana Railway Company, Limited, that the said companies as vendors would receive the agreed price free from all responsibility with respect to liabilities outstanding in Cuba, represented by debts, obligations and responsibilities arising out of the operations of the properties to be acquired by the State, and it is therefore -appropriate to declare that the provisions of Section u), Article 1 of Chapter V of the aforesaid Military Order are inapplicable to the liquidation of the three selling companies, since upon the passing of such liabilities to the Cuban Government the latter shall adopt such measures as it may deem appropriate for the liquidation thereof."


Article Second of this same Law Decree was in the following terms: "Article Second: Section u), Article 1, Chapter V, of Military Order No. 34 of 1902 is declared inapplicable to the liquidation and dissolution of the United Railways of the Havana and Regla Warehouses Limited, Havana Terminal Railroad Company and The Marianao and Havana Railway Company, Limited."


Then by a deed of sale dated the 1st December, 1953, the Vendors under the Preliminary Agreement, together with an additional subsidiary company and the State of Cuba, ratified the Preliminary Agreement and completed the sale. 3y Article Twonty Second the Vendors under this deed of sale waived any right to compensation they might have in...

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