Southard & Company Ltd Re
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BRIDGE,LORD JUSTICE TEMPLEMAN |
| Judgment Date | 27 June 1979 |
| Judgment citation (vLex) | [1979] EWCA Civ J0627-3 |
| Docket Number | No: 003231 of 1978 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 June 1979 |
In the Matter of Southard & Co. Limited and
In the Matter of the Companies Act 1948
[1979] EWCA Civ J0627-3
Lord Justice Buckley
Lord Justice Bridge and
Lord Justice Templeman
In The Supreme Court of Judicature
Court of Appeal (Civil Division)
In Appeal from The High Court of Justice
Chancery Division
Companies Court
(Mr. Justice Brightman)
MR. JEREMIAH HARMAN Q.C. and MR. OLIVER ALBERY (instructed by Messrs. Janners, Solicitors, London WIY 2HD) appeared on behalf of Seton Trust Limited and Scandic Credit & Commerce Limited (Appellants).
MR. J. LINDSAY (instructed by Messrs. Evan Davies, Solicitors, London SW1E 6DZ) appeared on behalf of Seven Opposing Creditors.
A LORD JUSTICE BUCKLKY: This is an appeal from an order of Mr. Justice Brightman refusing to make an order for the compulsory winding up of a company called Southard & Co. Limited which I shall call "the company". The company is the wholly owned subsidiary of the petitioning creditors, Seton Trust Limited, which is itself a subsidiary of a company called Seton Securities Limited. There was one supporting creditor, Scandic Credit & Commerce Ltd., company which I shall call "Scandic" for short. That is a subsidiary of a company called Ramor Investments Ltd, which is the subsidiary of a company called Seton Investments Ltd, which is a subsidiary of Seton Securities Ltd. So the supporting creditor was in the same group of companies and a sub-subsidiary of Seton Securities Ltd, of which the petitioning creditor and the company were also members.
The company carried on a business as wine merchants, and in May of 1978 it was heavily indebted to its bankers, who were then the National Westminster Bank. The indebtedness to the bank then exceeded 175,000.
On or about 24th Hay 1978 that indebtedness was paid off by Barclays Bank Ltd, who took a debenture from the company which was a debenture in a normal bank form, securing payment on demand of all monies due from time to time from the company to the bank, secured by a floating charge upon the undertaking of the company. That debenture was guaranteed by Seton Trust Ltd.
On 18th September 1978, at an Extraordinary General Meeting of the company the shareholders (that is to say, in effect Seton Trust Ltd) passed a resolution for the voluntary liquidation of the company. No declaration of solvency was made and accordingly the winding-up so set on foot was a creditors' voluntary winding-up.
Thereafter there was some confusion about the proper procedure to be followed, and the proper procedure was not in fact followed. What happened was that the shareholders' nominee for the office of voluntary liquidator of the company, a Mr. Stevens, who was in fact an accountant employed by Ramor Investments Ltd, a company in the group that I have already mentioned, convened a meeting of creditors. The meeting should have been convened by the board, but no point is now taken about that Incorrect procedure. The meeting was held on 10th October 1978; it was a tumultuous meeting. Before the meeting took place, Seton Trust Ltd. had assigned to twenty-four assignees 600-worth in each case of the company's indebtedness to Seton Trust Ltd. in order to secure a majority in number at the meeting. That was clearly a device for that purpose, but I daresay it is the kind of device which is frequently employed; at any rate, it was employed in this case. It seems to have engendered a good deal of indignation. As I say, the meeting was a tumultuous meeting; Mr. Stevens resigned from his position as shareholders' nominee for the office of voluntary liquidator and the meeting passed, or purported to pass, a resolution appointing two gentlemen, a Mr. Curtis and a Mr. Auger, to be voluntary liquidators. They are two professional accountants, members of well-known firms of accountants, and are both of them experienced in liquidation work. No criticism is made of their independence, integrity or ability. That was on 10th October 1978.
On the next day, Seton Trust Ltd. presented a petition for the compulsory winding up of the company. One can only suppose that that was prompted by the fact that they had been unsuccessful in getting their own nominee, Mr. Stevens, into the chair as voluntary liquidator of the company.
On 13th October, Seton Trust, being as I have said guarantors of Barclays Bank's debenture, paid a sum of upwards of 175,000 to Barclays Bank in discharge of that obligation and took a transfer of the debenture; and on that very same day, in exercise of the power of appointing a receiver contained in that debenture they appointed Mr. Stevens to be the Receiver of the company.
On 18th October Seton Trust Ltd. launched a motion to restrain Messrs. Curtis and Auger from acting as voluntary liquidators. When that matter initially came before the court undertakings were given by those two gentlemen that they would not act as voluntary liquidators pending an adjournment of the motion.
On 24th October an opposing creditor, Gilbey Vintners Ltd, a trade creditor of the company, launched a motion for confirmation of Messrs. Curtis and Auger in the office of voluntary liquidators. Those two motions eventually came on for hearing together - that is, Seton Trust's motion of 18th October 1978 and Gilbey Vintners, motion of 24th October 1978. They were heard by Mr. Robert Wright Q.C., sitting as a Deputy Judge of the Chancery Division, who, on 6th November dismissed Seton Trust's motion and confirmed Messrs. Curtis and Auger in their offices as voluntary liquidators. On the next day an ex parte application was made by Seton Trust Ltd. to the Court of Appeal for an injunction restraining the voluntary liquidators from acting in that capacity and a temporary injunction was granted; but on 13th November, when the matter came before this court inter partes, the injunction was not continued and from that time forward Mr. Wright1s order confirming Messrs. Curtis and Auger in their office as voluntary liquidators has been in effective operation.
The winding up petition first came before the court on 13thNovember, when it was stood over for further evidence; it came on for effective hearing on 21st November 1978, and on 23rd November 1978 Mr. Justice Brightman dismissed the petition and it is from that order that the present appeal comes.
The position as regards supporting and opposing creditors at that hearing was this: the petitioning creditor - that is to say, Seton Trust Ltd - claims to be an unsecured creditor in the sum of 47,140.00. It also claims to be a creditor in respect of the debenture debt. Seton Trust Ltd. valued its security - that is to say, the whole of the assets and undertaking of the. company - at 150,000, leaving a balance of 25,348.00 of the debenture debt unsecured; so that the total debts claimed to be due by the company to the petitioner as unsecured debts amounted to 72,488.00, but the petition was supported by Scandic, claiming to be a creditor in the sum of 49,000.00, so that the total indebtedness on that side was 121,488.00. No other creditor supported the petition. There were eight opposing creditors admitted to the list before the court, for an aggregate amount of 13,226.00. The learned Judge disregarded one very small debt due to an employee of the company named Beetley, for 66.00, because he thought that that was in all probability a preferential debt; and he to some extent discounted the debts of two other employees because some part of their debt was likely to be preferential. So the amount of opposing indebtedness which the learned judge took into account as being debts due to opposing creditors was somewhere between 12,000 and 13,000 - very much less in amount than the debts of the petitioner and the supporting creditor taken together.
The petitioner and the supporting creditor appeal; they base their appeal upon the contention that where a petition for acompulsory winding up is brought by a creditor who has an undisputed debt, that creditor is prima facie entitled, ex debito justitiae, to a winding-up order, and that where there is a diversity of view amongst the creditors of the company as to whether a winding-up order should or should not be made, the court should have regard, pursuant to section 34-6 of the Companies Act 1948, to the value of the debts on either side and should pay attention to, and give effect to, the views of the majority in value.
It is a well recognised fact that if a creditor petitions for the winding up of a company and he is a creditor in respect of a debt which is not disputed by the company, as between himself and the company he has what has in many of the cases been referred to as a right ex debito justitiae to & winding-up order. But of course his interest is not the only interest which the court must take into account. The court must take into account the position with regard to the other creditors of the company; indeed, it may have to take into account the position of the members of, or the contributors to, the company. The petitioning creditor and the creditors of the company who are in equal degree with the petitioner have in some cases been described as having a class interest in this respect, but Mr. Harman says that it is not right to describe it as a class interest, because they are not truly a class; each of them has an individual right of a similar kind and the court has to pay regard to the views and the wishes of all the persons who are creditors of the company in the same degree as the petitioner. That position is recognised by section 346 of the Companies Act 1948, which provides that the court may - and the word used is "may" - as to all matters relating to the winding up of thecompany have regard to the wishes of the creditors or contributories of the company as proved to it by any sufficient evidence. Then the section goes on to say how...
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