Re Webb & Company (Smithfield, London)
| Jurisdiction | England & Wales |
| Date | 1922 |
| Court | Court of Appeal |
Company - Voluntary Winding Up - Crown Debts - Prerogative - Right to Priority of Payment -
Since the passing of the Preferential Payments in Bankruptcy Act, 1888, In re Henley & Co. (
APPEAL from the decision of P. O. Lawrence J.F1
Under the provisions of the New Ministries and Secretaries Act, 1916, and certain regulations made under the Defence of the
The liquidator appealed.
Sir J. Simon K.C., R. M. Montgomery K.C. and L. W. J. Costello for the appellant. It is now admitted that the debt is a Crown debt, but the learned judge was wrong in holding that the case is governed by the decision in In re Henley & Co.F2 With regard to the legislation on this subject a distinct line of division was drawn in 1888. Before that date there was no provision such as was made by the Preferential Payments in Bankruptcy Act, 1888, which brought the distribution of assets in the winding up of a company into line with the distribution in the bankruptcy of an individual. The legislation has now been brought together in the Companies (Consolidation) Act, 1908.
Sect. 209 of that Act may be traced back to s. 1 of the Preferential Payments in Bankruptcy Act, 1888, while s. 207 is to be traced back to s. 10 of the Judicature Act, 1875.
Contrasting the position in bankruptcy with that in winding up, before 1888, the Bankruptcy Act, 1883, s. 150 provided: “Save as herein provided the provisions of this Act relating to the remedies against the property of a debtor, the priorities of debts, the effect of a composition or scheme of arrangement, and the effect of a discharge, shall bind the Crown.” There was no such provision in the Bankruptcy Act, 1869. Sect. 40 of the same Act of 1883 also bound the Crown, giving priority of payment to certain taxes, and enacting, by sub-s. 4, that “subject to the provisions of this Act all debts proved in the bankruptcy shall be paid pari passu.” Sect. 40 of the Act of 1883 is in substance the same as s. 32 of the Bankruptcy Act, 1869. Taking the position as it used to be under winding up, it is clear that under the Companies Act, 1862, the Crown was not bound. Next comes the question of the effect of s. 10 of the Judicature Act, 1875, which provided that “in the administration by the Court of the assets of any person who may die after the commencement of this Act, and whose estate may prove to be insufficient for the payment in full of his debts and liabilities, and in the winding up of any company … whose assets may prove to be insufficient for the payment of its debts and liabilities and the costs of winding up, the same rules shall prevail and be observed as to the respective rights of secured and unsecured creditors, and as to debts and liabilities provable, and as to the valuation of annuities and future and contingent liabilities respectively, as may be in force for the time being under the law of bankruptcy with respect to the estates of persons adjudged bankrupt.” That section has been construed to include the principles applicable to the priorities of debts as well as to their proof and to assimilate the rights of creditors of a company in liquidation to those of creditors of a bankrupt.
Reference may now be made to the following authorities: In re LengF3; In re HeywoodF4; and In re WhitakerF5, in which In re MaggiF6 was disapproved by the Court of Appeal. The effect of those three decisions is to show that the words in s. 10 of the Judicature Act, 1875, “the same rules shall prevail as to debts provable” are wide enough to bring in that part of the bankruptcy law which directs which kind of debt is to be paid in priority to others. In other words the rules in bankruptcy as to debts and liabilities provable include all rules as to priorities expressly enacted by any statute and made applicable in the event of bankruptcy. It is submitted that when Parliament dealt with this matter by way of consolidation in the Companies (Consolidation) Act, 1908, it had regard to these decisions. But then came the decision in In re Oriental Bank CorporationF7 that “The provisions of the Bankruptcy Act, 1883, which take away the priority of the Crown over other creditors in the distribution of assets in bankruptcy, have not, by virtue of the assimilating provisions contained in the Judicature Act, 1875, s. 10, been incorporated in the Companies Act, 1862, so as to bar the prerogative right of the Crown to issue process and thus to obtain payment in full, in priority over other creditors, in respect of a debt due from a company in the course of liquidation under the Companies Act.” After that decision came the Preferential Payments in Bankruptcy Act, 1888, which repeated s. 40, sub-s. 4, of the Bankruptcy Act, 1883, and added in the distribution of assets of any company being wound up under the Companies Act of 1862, and thus brought the winding up of companies for certain purposes within the ambit of a rule which had hitherto escaped. The result was that it drew Crown debts within the ambit of the winding up of companies. The Crown is therefore now affected by winding up as it never was before. The reason why s. 10 of the Judicature Act, 1875, did not previously draw in the rules of bankruptcy for the purposes of winding up was because previously the winding-up law did not touch the Crown at all. The conclusion to be drawn from all this is that from 1888 onwards Crown debts in liquidation only have priority if they come within the class of certain debts, such as income tax and so on, which are specially mentioned. The legislation is now all brought together in the Companies (Consolidation) Act, 1908, and the argument is as follows: Sect. 209 provides that in winding up there shall be paid in priority certain classes of debts there mentioned, some of which are debts due to the Crown. Then by s. 207, in the winding up of a company the same rules shall prevail with regard to debts provable as are in force for the time being under the law of bankruptcy, and under that law, as now enacted in the Bankruptcy Act, 1914. Further, by s. 186 of the Act of 1908: “The following consequences shall ensue on the voluntary winding up of a company: (1.) The property of the company shall be applied in satisfaction of its liabilities pari passu.”
So that we have, (1.) a provision that Crown debts are debts in the winding up; (2.) a provision that certain Crown debts are to have priority over other debts; (3.) a provision that the rules of bankruptcy with regard to debts provable, which have been held to include priority, are to prevail; and (4.) a provision that liabilities are to be discharged pari passu. Therefore on the Act of 1908 the argument of the appellants must succeed.
With regard to the authorities, In re Henley & Co.F8 proceeds upon two views, (1.) that the Crown was not bound by the Companies Act, 1862, not being mentioned therein, and (2.) that the Crown had its remedy by writ of extent.
In In re GalvinF9 the matter was usefully expounded by Palles C.B. That was a decision upon the
It is submitted that the authorities are not inconsistent with the argument of the appellants. See also...
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