Francis Beaufort Palmer.

Company precedents for use in relation to companies subject to the Companies acts, 1862 to 1890 ... (Volume 2) online

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without] a committee of inspection.

Dated this day of , 189—.

See K. 64 of 1890, supra.



Form 185.

Advertise-
ment of ap-
pointment of
committee of
inspection
(where official
receiver
remains
liquidator).



In the matter of the Companies Acts, 1862 to 1890,

and

In the matter of P. and Sons, Limited.

Take notice, that by an order, dated the 2nd day of , 1895, made

by the High Ct of Justice upon the applicon of G. S. B., the off recr and
liqr of the above-named coy, it was ordered that the following persons
be appointed a committee of inspection to act with the sd off recr and
liqr, viz., W., of &c., L., of &c., holding a general power of attorney
from B. and S. of the same address, and J., of &c. [And it was ordered
that the sd J. do withdraw from the meetings of the sd committee
during any discussion by the sd committee of any question as to the
debentures issued by the sd coy, the conduct of the directors thereof
or the relations of Messrs. J. Coy, Limtd, with the sd coy.]

Dated this 8th day of , 1895.

G. S. B., Off Eecr and Liqr,
33, Carey St., Lincoln's Inn, London, W.C.

The duty of inserting this advertisement falls on the official receiver as liquidator.
Sec E. 64 of 1890, supra.



Form 186.



Another.



In the matter of the A. Company, Limited.
Take notice, that by an order dated Friday the 30th day of Sept.
1892, made by Mr. Registrar Brougham uj)on the applicon of the off
recr and liqr, It was ordered that the following persons be appointed a
committee of inspection to act with the sd liqr, viz., &c.

Off Eecr and Liqr,

33, Carey St., Lincoln's Inn, London, W.C.



{Title.)
To the Registrar of Joint Stock Cos.

Take notice, that by an order in tlie above matter made the

day of , I, tlie undersigned, was appointed liqr of the above-
named coy [and that I have given security to the satisfaction of the
of liquidator. Board of Trade].

Dated this day of , 189—.

\_Signature and Address.^
Sco as to this, sect. 4 (3) of 1890, supra, p. 110.



Form 187.

Notice to
Registrar of
Joint Stock
Comi)anic8 of
appf)intmcnt



LIQUIDATOR AND COMMITTEE OF INSPECTION. 197

(Address, date, mid title.') Form 187a.

Sir, — I am desired by the off recr in cos liquidation to acquaint you Notice to

that in this matter there is due to him the sum of , as appears by litiuidator.

the coy's cash book, which sum you are requested to Y>tiy into this
department. The coy's cash book, the record book, the proofs of debt,
and all other books and documents to which you, as liqr, are entitled,
upon payment of the debit balance, will be handed to you on applicon.
I am, Sir, your obedient Servant,

A. B., Assistant Off E,ecr.

A notice is also sent to the liquidator of any further payments made by the
official receiver, and a notice is sent to the Board of Trade of any further receipts
after the handing of the official receiver's account to the liquidator.

Advices to Board of Trade.

When an outside liquidator is appointed, the official receiver advises the Board of
Trade that the cash book has been closed, and that there is either (1) a balance due
to the office, or (2) a balance to the credit of the company, or (3) no balance on the
account.



in



■WINDING-UP BY THE COURT. 1_ChAP. XIX.



CHAPTER XIX.



SECURITY or LIQUIDATOR AND SPECIAL MANAGER.



Security by
outside liqui-
dator.



Dispensing-
"with security.

How security
given.



Bond.



Failure to
give security.



Sect. 4 (3) of 1890. — When a person other than the official receiver is appointed
liquidator of a company .... such a person shall not be capable of acting as
liqmdator until he has notified his appointment to the Registrar of Joint Stock
Companies, and given security in the manner prescribed to the satisfaction of the
Board of Ti-ade.

As appears above, p. 97, it is considered that this section does not apply to an
interim provisional liquidator. Mercantile Bank of Australia, (1892) 2 Ch. 204 ; and
see North Wales Gunpowder Co., (1892) 2 Q. B. 220. But see note to Form 86.

Havingregardto the above section, and sect. 33 of 1890, the Court seems to have
no power now to dispense with security, as it had under the old practice. See
sect. 92 of 1862.

E. 67 of 1890. — In the case of a special manager or a liquidator other than the
o£Bcial receiver the following rules as to security shall be observed, namely : —
(1.) The security shall be given to such officers or persons and in such manner as

the Board of Trade may from time to time direct.
(2.) It shall not be necessary that security shall be given in each separate
winding-up ; but security may be given either specially in a particular
winding-up or generally to be available for any winding-up in which the
person giving security may be appointed either as liquidator or special
manager.
(3.) The Board of Trade shall fix the amount and nature of such security, and
may from time to time, as they think fit, either increase or diminish the
amount of special or general security which any person has given.
(4.) The certificate of the Board of Trade that a liquidator or special manager
has given security to their satisfaction shall be placed on the file of pro-
ceedings.
(5.) The coat of furnishing the required security by a liquidator or special manager
shall be borne by him personally, and shall not be charged against the
assets of the company as an expense incurred in the winding-up.
The Board of Trade has issued no special rules, instructions, or forms, on the
subject of security by liquidators and special managers. The Board, however,
invariably requires such security to be in the form of a bond, issued by an approved
guarantee society — no other form of security being accepted.

No specific form of bond has been prescribed by the Board. Each society submits
its form of bond for ai)proval in the first instance, after being placed on the list of
approval (jnnrunlec societies.

K. 68 of 1890. — (1) If a liquidator or special manager fails to give the required
security within the time stated for that purpose in the order appointing him or any



ftECUEITY OF LIQUIDATOR AND SPECIAL MANAGER. 109

■extension thereof, the official receiver shall report such failiu'c to the C()urt, who
shall thereupon rescind the order appointing the liquidator or special manager.

If a liquidator or special manager fails to keep up liis security, the official receiver Removal of

shall report such failure to the Court, who may thereupon remove the liquidator or liqmtlator or
special manager and make such order as to costs as the Court shall think fit. °

For order rescinding appointment of liqmdator, see Fonn. 182.

{Title.) Form 188.

This is to certify that A. B. of , wlxo was on tlie day of Certificate

, 189 — , appointed liqr [or special manager] of the ahove-named tnat liqui-

coy, has duly given secm-ity to the satisfaction of the Board of Trade, special

Dated this day of , 189—. manager has

'' ' given

By the Board of Trade, security.

(Signed) J. S. Form 35 of



1890.



Deduction of Security.

Under the old practice orders were frequently made reducing the security given
by a liquidator and his sureties, e.(/., when, by reason of the progress of the
winding-up, the security originally given had become excessive. See Thermo
Ekctric Co., 19th July, 1878, A. 902, reduction from 1,000^. to 200?.; Britannia Iron
Works, 7th March, 1878, A. 480, 10,000/. to 200?.; Western of Canada, B. 1559,
10,000?. to 500?., and (in a voluntary winding-up) General Credit Co. (00264 of 1893).
Hope, Eeg. 1st Oct. 1896.

Such reductions wUl, it is presumed, in future be carried out by agreement in
writing with the approval of the Board of Trade. See E. 67 (3) of 1890 above.



Upon the appKcon of S., the off liqr of the above-named coy, by Form 189.
summons, that it might be declared that B., having made default in Order on
payment of the sum of 1,000?. into the bank to the credit of this matter, guarantee
pursuant to the order dated 18th Jan. 1886, the respts, the Gr. Society, ammint on
were liable, and might be ordered to pay the same into the bank to default of
the credit of the account of the off. liqr of theF. &c. coy, in liquidation, ^^^
or that in the alternative the off liqr might be at liberty to bring an
action in the Q. B. Div. on the bond of such society, enrolled the 16th
March, 1883, to enforce the payment thof ; And also that an inquiry
might be ordered of what was due from the sd society including all
costs and interest, and the costs of the late liqr's removal and the
appointment of S., his successor ; and upon hearing the solors for the
applicant and the respts, the G. Society, and W., the mortgagee, and
reading an order dated &c., the bond of the sd respts, the G. Society,
enrolled 16th March, 1883, an order dated &c., an afft of S. filed &c.,
and the certificate of the Bank of England of the non-payment by
B., the late off liqr, of 1,000?. as directed by the sd order dated &c. ;
The judge doth declare that the respts, the G. Society, are liable to
pay the sd sum of 1,000?. into the bank, pursuant to the said order



200 WINDING-UP BY THE COURT. [ChAP. XIX.

dated 18th. Jan. 1886, as sureties for the sd B. And tlie judge doth,
order that the respts, the Gr. Society, do within seven days after service
of this order upon the secretary or other proper officer of the sd respts,
the Gr. Society, pay into the bank, to the credit of the F. &c. coy in
liquidation, the sum of 1,000^. ; And it is ordered that the question of
the liability (if any) of the sd G. Society for costs stand over, without
prejudice to any question, with liberty to any of the parties to apply.
French Bate Coffee Co., Chitty, J., 21st April, 1886.

Under the new practice, however, the Eoard of Trade will probably sue the
society on its bond, and then the action can be transferred to the winding-up Court
and dealt with there.



201



CHAPTER XX.

APPOINTMENT OF SOLICITOR.

Sect. 97 of 1862 empowered an official liquidator, with the sanction of the Court,
to appoint a solicitor or law agent to assist liim in the performance of his duties ;
but this section is repealed by sect. 33 of the Act of 1890.

Sect. 12 (4) of 1890.— The liquidator of a company which is being wound up by Sanction of
order of the Court may, with the sanction either of the Court or of the committee of Court or
inspection, emjiloy a solicitor or other agent to take any proceedings or do any
business which the liquidator is unable to take or do himself. The sanction afore-
said must be a sanction obtained before the employment, except in cases of urgency,
and in such cases it must be shown that no undue delay took place in obtaining
the sanction.

The liquidator is under no personal responsibility to the solicitor for the costs Liquidator's
when the sanction is obtained. Ex parte JFatkin, 1 Ch. D. 130. See London liability.
Metallimjical Co. (No. 2), W. N. (1897) 61. Although the windmg-up order does
not defeat a lien existing when the winding-up i)etition was presented, a solicitor
cannot assert, in respect of documents coming to his hands pending the winding-up,
such a lien as will interfere with the prosecution of the winding-up. Capital Fire
Association, 24 Ch. Div. 408.

For an order by the Court imder this section, see Form 190, infra.

Where there is no committee of inspection, the liquidator (not being the official Sanction of

receiver) can apply to the official receiver for liberty to employ a solicitor. This o™cial

receiver or
application is made under K. 169 of 1890 and sect. 9 (9) of 1890. See below. Board of

Where the official receiver is liquidator, and there is no committee of inspection, Trade.
he usually applies to the Board of Trade for liberty to employ a solicitor. See
Form 191. The application is made under the section and rule following : —

Sect. 9 (9) of 1890. — If there be no committee of insiDection, any act or thing or
any dii-ection or permission by tins Act authorized or requii'ed to be done or given
by the committee may be done or given by the Board of Trade on the application of
the liquidator.

R. 169 of 1890. — Where there is no committee of inspection, any functions of the
committee of inspection which devolve on the Board of Trade may, subject to the
directions of the Board, be exercised by the official receiver.

The official receiver usually emx^loys the solicitor acting for the petitioner, but in
important matters, especially where a question of princixjle is involved, he is
frequently rej)resented by the solicitor to the Board of Trade, c.c/., in Great
Kruger Co., (1892) 3 Ch. 307.

It has not yet been decided, though the point has been raised, whether the official
receiver may, in opposed matters, be heard in Court jjcrsonally, or must be repre -
sented by counsel. See the rules set out in Cliap. XV., j). 141.

R. 174 of 1890.— Where the attendance of the liquidator's solicitor is required on Attendance of
any proceeding in Coiu-t or Chambers, the liquidator need not attend in person, 1^ ^wi.
except in cases where his presence is necessary in addition to that of his solicitor, or
the Court directs him to attend.



202



WINDING-UP BY THE COUKT. [ChAP. XX.



rorm 190.

Sanction of
Court to
appointment
of solicitor.



{Title.)

The Ct sanctions the liqr appointing a solor to assist him in the per-
formance of his duties. X. Y., Eegi*.

I hby appoint Mr. A. B., of &c., to he my solor in this matter with
the sanction of the Ct.

Dated the 1st day of Nov. 1892. G. A., Liqr.

/. H. Evans ^ Co., 0034 of 1892, Eegr. Filed 15th Nov. 1892.



Form 191.

Application
for liberty to
employ

solicitor.



The Cos (Winding-up) Act, 1890.

Application for authority to employ a solor. [^Insert three columns
headed resply "coy," "Ct," and " numher of matter."]

I apply for the authority of the Board of Trade to employ a solor
under the following circumstances : —

Natui'e of busiaess for wliich solor is required.

Name of solor proposed to be employed.

Terms (if any) as to remuneration. {Subject to taxation.)

Amount of assets (if any) available for payment of costs.

Estimated amount of off recr's costs £

Estimated costs of tlie other side, which might have
to he paid in the event of the decision being against the
off rccr £ : :



Form 191a.

Sanction of
Board of
Trade to
appointment
of solicitor.



Total estimated amount previously submitted on No.



O.R.

oa:



30



What security (if any) for repayment of costs, or what prosj)ect thereof.
Period during which employment is likely to last.
Special reasons justifying the application.

Dated, «S:c. (Signature),

OffRecr.

\^Here insert three cols, headed resply "coy," " Ct," " num.her of matter."]
Upon the applicon of the off recr, the Board of Trade hby sanction
the employment of Mr. C, of &c., as solor for the off recr in the specific
matter hereunder mentd, the taxed costs of such solor to be a charge
upon the assets of the coy, e.g.^ " to ajjpear upon motion by debenture-
holders for leave to realize the stock-in-trade of the coy, and generally
in the action," [or] " to act in relation to the sale of the coy's ppty,"
[or] "to act in proceedings against X. and Y., promoters of the coy,"
[or] " to take proceedings to recover certain moneys payable under the
terms of a policy of insurance effected by the above-named coy, dated

the day of , 18 — ," [or'] "to appear and proceed as may be

necessary in the applicon of certain shareholders for the removal of
their names from the list of contributories " [or as the case may be~\.

(Signed) A. B.,
Inspector in Cos Liqiiidation authorized in thai behalf
by the Presidetit of the Board of Trade.

Dated 29th July, 1892. Filed 30th July, 1892.

ThiH is tlio form used wlion the official receiver is liquidator, and there is no com-
mittee of inspection. Sec sect. 12 (9) of 18U0, supra, and lie Luncan, 3G S. J. 330.



APPOINTMENT OF SOLICITOIt. 203

^Here msert address a7id date.'] Form 192.

Sii-, — I liavo obtained and filed with the xiroceedings in Court the Retaiuer to
authority of the Board of Trade to employ you as solor in the above solicitor,
matter for the following purposes \_state 2nirposes']. I hereby retain
you for such purposes accordingly. It is to be understood that the

costs to be incurred in this matter shall not exceed L, without

my sanction in writing, and that they shall only be payable out of the
available assets of tho coy. Particular attention is drawn to the fact
that the costs are limtd to the above sum, and that the off recr or liqr
cannot be responsible in any way for costs incurred in excess thof
without a further authority from the Board of Trade for an increased
allowance.

I am, Sir,

Youj obedient Servant,
G. S. B.,

Official Receiver.
To \_state solor'' s name].

\_Three columns as above, and address and dafe.] Form 192a.

Sir, — Under the authority of tho Board of Trade in respect of my r

employment as solor herein, communicated to me on [date], I have solicitor on
[Aere state nature of proceedings taken or business tratisacfed]. The Proceedings

costs incurred, which were limtd by you to a sum not exceeding 1.,

now amount to 1., and for the purpose of Inhere state further steps

necessary] I apply that further costs, not exceeding 1., may be

incurred.

To the Off Eecr. (Signed) A. B.



204



WINDING-UP BY THE COURT. [ChAP. XXI.



CHAPTER XXI.



DUTIES AND POWERS OF LIQUIDATORS.



Liquidator
is officer of
Court.



Duty to be
impartial.



To rcHpcct
securities and
contracts.



In the performance and exercise of liis duties and powers the liquidator should bear
in mind that — at any rate as regards many of such duties and powers — ho is acting;
as an officer of the Court, and must act in a perfectly impartial manner. Even
before the Act of 1890, the fact that an official liquidator was an officer of the Coiu't
was fully recognized. "In truth" — said James, L.J. — "it is of the utmost
importance that the liquidator shotdd, as the officer of the Court, maintain an even
and impartial hand between all the individuals whose interests are involved in the
winding-up. He should have no leaning for or against any individual whatever.
It is his duty to the whole body of shareholders, and to the whole body of creditors,
and to the Court, to make himself thoroughly acquainted with the affairs of the
company, and to suppress nothing' and to conceal nothing which has come to his
knowledge in the course of Ms investigation, which is material to ascertain the exact
truth in every case before the Court. And it is for the judge to see that he does
his duty in this respect. If a person interested in any such case desires to see any
books or papers, it is the duty of the liquidator to give him not only access to
them, but to give hiTn every assistance and facility in finding out which are the
relevant books and papers he requires ; and if the liquidator has ali-eady ascer-
tained any books or papers bearing on the subject, he should frankly place this
infonnation at the service of the party." GoocVs case, 7 Ch. 207, 211.

In a recent case Stirling, J. , said : ' ' Even if this were a compulsoiy winding-up
the liquidator is only put in the position of an officer of the Court when he is dis-
charging the duties imposed by sect. 98 of 1862." lu rellilVs JFatcrfall, <§-c. Co.,
(1896) 1 Ch. 947, 954.

This dictum, however, cannot be supported. It is based apparently on the view
that sect. 13 of 1890 and R. 89 of 1890 [both set out below], in providing that, in
specified cases, the liquidator is to act as an officer of the Court, imjaly that in other
cases he is not to be regarded as acting in that capacity. But, looking to the law
laid down long since in GoocWscase [above], and to the general scope of the Acts
and rules, it is submitted that this view is erroneous.

Accordingly, it is no part of the duty of the liquidator to prefer the interests of
unsecured creditors to those of the secured creditors, or to endeavour, directly or
indirectly, to obtain from the secured creditors concessions in favour of the un-
secured creditors which there is no obligation to make. The secured creditors are
not to bo blamed for having secui'ity. If they have security they must have
obtained it either by execution or other process of law, and should be protected ui
the exercise of the rights which the law has given them, or they must have obtained
the security by contract. "Every creditor is entitled to get and to hold the best
Bccurity the law allows him to take." Per Lord Mucnaghtcn, iSaltJiHO/i v. iSahmoH ij-



DUTIES AND POWERS OF LIQUIDATORS. 205

Co., (1897) A. C. 52. "And if there is ono thing which more than another
public policy requires, it is that men of full age and competent understanding shall
have the utmost liberty of contracting, and that their contracts, when entered into
freely and voluntarily, shall be hold sacred, and shall be enforced by Courts of
justice." Per Jessel, M. R., Frintwcj, S;c. Co. v. Samson, 19 Eq. 4G5.

Nor should the liquidator, where there is no substantial dispute, insist on resist- Nottobeover-
ing well-founded claims, and compel litigation which is not really- necessary, litigious.
General Share and Trust, 20 Ch. D. 267, is a good example of the principles on which
the Court acts. There mines were demised to a company by a lease which contained
a power of re-entry if the company went into liquidation. An order to wind up the
company was made, and the landlord applied for liberty to re-enter. Hall, V.-C,
refused to give him leave, but the Court of Appeal was of opinion that he was
entitled to it, and gave him leave accordingly, on the ground that ' ' it would be a
cruel hardship to put the applicant to the expense of bringing an action when the
Court can see that there is nothing to be tried. He might lose his costs, as he
might be proceeding against the liquidator of the company with no assets." See
also Hx parte James, 9 Ch. 609. In that case money had been paid under a mistake
of law to a trustee in liquidation. Application was made for repayment, and was
resisted on the ground that payment had been made under a mistake of law, but
the Court of Appeal held that the trustee was an officer of the Court, and con-
sidered that the money ought to be repaid. "The Court, finding that he has in
his hands money which in equity belongs to some one else, ought to set an example
to the world by paying it to the person really entitled to it. In my opinion, the To act
Court of Bankruptcy ought to be as honest as other people." Per James, L. J. honorably
See also Kv parte Simmonds, 16 Q. B. D. 308. But the principle of the last two and justly,
cases cited, though it clearly applies to a liquidator, must not be so far acted on as
to enable the liquidator to be virtuous at the expense of other people, e.g. , debenture
holders. In re Opera, Limited, (1891) 3 Ch. 260. So, also, the Court has in several
cases directed the liquidator to release, in favour of secured creditors or of trustees
for secured creditors, the company's equity of redemption where the Court was
satisfied that the debt due to the seciu'ed creditors exceeded the value of the
property on which it was charged.

Under the new practice the liquidator is not now so closely fettered as he was Directions to
under the old practice. He may apply to the Court for directions in relation to any liquidator,
particular matter arising under the winding-up (sect. 23, sub-sect. 3, of 1890), but
' ' subject to the provisions of the Comx^anies Acts " he may use his own discretion
in the management of the estate and its distribution among the creditors. Sect. 23,
sub-sect. 4, of 1890. He is not, however, entirely master of the situation. He Duties to
must give the official receiver information, access to books and documents, and aid official
in enabling that officer to perform his duties. Sect. 4, sub-sect. 3. He must act ^^^^•, ' »
in many cases with the sanction of the committee of inspection, if any, appointed inspection,&c.
under sect. 6, or, if no such committee be appointed, with the sanction of the
official receiver acting under direction of the Board of Trade. Sect. 9, sub-sect. 9, and
r. 169. In administering and distributing the property of the company he must
have regard to resolutions of the creditors and contributories, which may override
directions of the committee of inspection. Sect. 23, sub-sect. 1. He is also liable
to have his decisions reversed or modified by the Court at the instance of any



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