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in a manner which the judge may properly consider to be vexatious and frivolous,
and wastefu'' of the property which he has to administer. He is not justified in so
acting merely because a stuj^id committee of inspection — it may be at his own
suggestion — have told him to do so, however honest he may be in the sense that ho
never meant to do anything for his own personal advantage. The paramount
authority of the Court is even clearer in a winding-up than under the Bankruptcy
Act, for sect. 12 (3) of 1890 and other sections expressly declare that the exercise of
the liquidator's powers is " subject to the control of the Court."

Cave, J., sitting in bankruptcy, on more than one occasion expressed the opinion Questions of
that the liquidator ought not to apply to the Court for directions unless there was law.
some question of law to be decided. Re Parker, 51 L. T. 667 ; Re Blalcesley, 29 S. J.
103.

But it is submitted that the power to apply for directions under the Act of 1890
is not limited in this way, and that the liquidator has a clear right to apply to the
Court for directions in regard to any particular matter, whether it involves a
question of law or a question as to the management or realization of the property
of the company. It has always been the practice hitherto in winding-up to allow
to the liquidator, whether official or voluntary, every opportunity of taking the
directions of the Court as to any question of difficulty in regard to which he wishes
for guidance. For example, shall he sell part of the assets at a price offered, or
postpone the sale in the hope of getting a better price ? Shall he stop the business,
and thus destroy the goodwill, or shall he keep it going for a while, and thus have
to risk further assets ? Shall he borrow money, although he can only obtain it on
onerous terms? Shall he engage in litigation which may fail? Shall he appeal to
the Court of Appeal? Shall he compromise a claim or endeavoiir to enforce it?
Such matters may involve most difficult questions of expediency, especially where
the liquidator and creditors or contributories or the members of the committee of
inspection are not of the same oijinion, and it may be highly desirable to take at
once the directions of the Coiirt, and, as we have seen, under sect. 12 (3) of 1890,
the Court has full jurisdiction to give directions in relation to any particular matter ;
and it would seem that to decline to exercise that jurisdiction merely because a
matter does not involve a question of law is contrary to the intention.



Dividends.

The liquidator must of course from time to time pay dividends to the creditors,
and to the contributories if there are any funds available. See, as to dividends to
creditors, infra, Chap. XXXYII. ; and as to dividends to contributories, infra.
Chap. XXXIX.



Examination.

As to the public examination under sect. 8 of 1890, the official receiver must take
the initiative in obtaining and conducting it ; but the liquidator, whether he is or is
not the official receiver, may take part in it, and he should therefore consider
■whether it is expedient so to do, and shoidd, if necessary, obtain the sanction of the



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

committee of inspection or of the Court, and instruct the solicitor accordingly.
See, further, Chap. XLIV.

As to private examinations (under sect. 115 of 1862) for the purpose of obtaining
information, see Chap. XLIII.

File of Peoceedings.

Although R. 33 of April, 1892, does not so provide, there can be no doubt that
the liquidator is entitled to examine the file which is kept iu the High Court by the
registrar pursuant to R. 11 of April, 1892, and in other Courts pursuant to R. 31.
See also R. 161 (3) of 1890.

See supra, p. 32, as to filing with the proceedings a memorandum referring to
advertisements.

Infoematioj^' by or to Official Receiver.

The liquidator is bound to give information and aid to the official receirer under
sect. 4 (3) of 1890, and under sect. 2.5 (2) of 1890 is bound to answer inquii-ies of
Board of Trade; and see sect. 20 (3) of 1890.

On the other hand, the official receiver is bound to give information to the
liquidator under R. IGl (3) of 1890.

L^\:XDLORDS.

The liquidator must have regard to the rights of landlords of any property held
by the company, and must protect the assets of the company as far as may be.
See Chap. XXXV.

Where the company holds leaseholds and is insolvent, the liquidator should
consider carefully whether it is or is not desirable to keep the leaseholds for the
benefit of the winding-up. The Companies Acts, 1862 to 1890, do not invest the
liquidator with any power to disclaim leaseholds ; nevertheless, if he gives notice to
the landlord abandoning them, the landlord cannot claim payment of the rent in
full as part of the expenses of the liquidation, and accordingly cases may arise in
which it is desirable thus to abandon the asset. On the other hand, if the liquidator
keeps on leaseholds for the benefit of the winding-up he will generally have to pay
the rent in full as part of the expenses of the winding-up.

See as to proofs by landlords in respect of future rent, &c. Fanther Lead Co.,
(1896) 1 Ch. 978; Kew Oriental Bank Corporation (No. 2), (1895) 1 Ch. 753.

Litigation.

The liquidator may bring or defend any legal proceedings in the name and on behalf
of the company, but only with the sanction of the Court or of the committee of
inspection (sect. 12 (1) of 1890) ; and if no committee, see R. 169 of 1890, supra,
p. 181.

It would seem that the sanction is only required as regards external proceedings
which have to bo taken in the name of the company. No such sanction is required
in the case of legal proceedings by the liquidator in his official name to recover moneys
duo from a contributory, nor, it is conceived, in the case of applications in the
winding-up which the liquidator can make in his official name, e. g., under
sect. 10 of 1890, or sect. 23 (.3) of 1890.

As to a hquidator allowing proceedings to be taken by another person in his
name, see W. N. (1894) 160 ; Anglo- Sardinian Antimony Co., W. N. (1894) 166.



DUTIES AND POWERS OF LIQL'IDATOKS. 215

The liquidator in bound to collret aud get in the assets, and for that purpose to
take all necessary legal proceedings ; and accordingly ho shoidd ascertain what
rights and claims there are which it appears to be proper to enforce by legal pro-
ceedings, and what legal proceedings against the company it is desirable to defend
and resist, and he should obtain the sanction of the committee of inspection to his
taking or defending such proceedings, and to his employing a solicitor for the
purpose ; and if the committee of inspection refuses to sanction that which he
considers it proper to do, the liquidator should go to the Court for directions,
under sect. 23 (3) of 1890 ; and even if the committee gi'ants its sanction it seems
proper for the liquidator to go to the Court where he considers that the proceedings
may involve the assets in risk, and that it is desirable to obtain the approval of the
Court.

As to costs of legal proceedings : —

(a) As between the liquidator and the assets —

Prima facie the liquidator is entitled to be paid out of the assets his costs of all
proceedings properly taken or defended by him. Silver VuUeij, 21 C. D. 381. But
costs improperly incurred may be disallowed {S. C), even though the proceedings
were sanctioned by the committee. 17 Q. B. D. 492.

{b) As between the liquidator and the other party to the proceedings —

If the other party is successful, he should get his costs {Bailey and Leathani's
case, 8 Eq. 97 ; Ex parte Smith, 3 Ch. 125 ; Home Investment Society, 14 C. D.
167) ; and the liquidator, even where he is also the official receiver, should bear in
mind that if he is unsuccessful he may, in special cii'cumstances, be ordered per-
sonally to pay the costs, and left to take his chance of getting recouped out of the
assets. Hoiinshw Brewery Co., W. N. (1S9G) 45 ; IF. PoivcU and Sons, (1896) 1 Ch. 681.

The Court of Appeal generally deals thus with a liquidator who upon an appeal
is unsuccessful {Fcrrao''s case, 9 Ch. 355 ; City and County Co., 13 C. D. 483 ;
Silver Valley Co., 21 C. D. 381 ; Ex parte Strawbridgc, 25 C. Div. 2G6). In Salisbury-
Jones'' case, (1895) 1 Ch. 333, it was laid down in the Coui-t of Appeal that the order
should be to pay " out of the assets," aud that it was not the practice to order the
liquidator to pay the costs personally, unless he had done something to make
himself personally liable. But the application in that case was by a conti'ibutory
whom the liquidator had placed on the list. In settling the list the liquidator
fulfils duties of a (^wrtsi-judicial character. A Court of first instance has not uncom-
monly ordered a liquidator who fails in some proceeding before the Court to pay
the costs to the other party, and to take them out of the assets, SichelVs case, 3
Ch. 119 ; Freehold Land Co. v. Spargo, W. N. (1869) 160 ; Borough Commercial and
Building Society, Vaughan Williams, J., 14 Eeb. 1893; and Forms 428, 509, and
662a. And see Ex parte Leicestershire Banking Co., 14 Q. B. D. 48 ; and Ex parte
Strawbridgc, 25 C. Div. 266.

More commonly where there is no suggestion that the assets are or may be
deficient, the order directs the liquidator to pay the costs out of the assets of the
company. As to the effect of such an order and the priority which it gives, see
London Metallurgical Co., (1895) 1 Ch. 758, where the authorities are all fuUy dis-
cussed, including Home Investment Society, 14 C. D. 167 ; Dominion of Canada
Plumbago Co., 27 C. D. 33 ; Ex parte Bentley, 12 C. D. 857 ; Cape Breton, 17 C. D.
205 ; Ex parte Percival, 6 Eq. 519 ; Re Dronfield Co., 23 C. D. 519 ; and Staffordshire
Gas and Coke Co., (1893) 3 Ch. 523.

Meetings.
As to meetings of creditors and contributories, see sect. 23 of 1890, Rr. 47 — 57
of 1890, and R. 25 of April, 1892, Chap. XXXVI,



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

MlSFEAS.^'CE.

It is the duty of the liquidator to investigate the afPairs of the company in
detail, and to ascertain whether any of the officers or employes commit any mis-
feasance or breach of trust. Tor that purpose he shoiild examine the books and
documents of the company, and make all necessary inquiries, and should, if need
be, examine persons capable of giving information under sect. 115 of the Act of
1862, and further, if necessary, should take proceedings under sect. 10 of 1890, or
by action, as he may be advised. See, further. Chap. XLV.

Possession.

See, as to possession, Er. 89, 90, and 91 of 1890, supra, p. 207.

Having regard to R. 90, any interference in the possession of the liquidator is
a contempt of Court, and may be punished by committal or restrained by injunction.
Ames V. Birkenhead Bock, 30 Beav. 332 ; Haiuhins v. Gatliercole, 1 Drewry, 12 ;
Helmore v. Smith, 35 C. D. 447 ; Oswald on Contempt, 2nd ed. p. 77. The proper
course for a person whose rights are prejudiced by the appointment, or wrongfully
impeded by the possession of the liquidator, is to apply to the Court. Russell v.
East Anglian Eailivay, 3 Mac. & G. 117; Henry Tound, Son, and Stdchins, 42
C. D. 402,

In the matter of taking possession, the liquidator must exercise much discretion.
Thus, as regards leaseholds, the question whether it is expedient to take possession
or not is one which may require the most careful consideration. See Chap. XXXV.

Again, as to property which is in mortgage, it may be that in taking possession
the liquidator would be bound to make heavy outlay in order to preserve the pro-
perty, and yet it may be doubtful whether, after realisation, there will be any
margin for the company, so that in the result the liquidator may spend on the
asset for the benefit of the secured creditor moneys which would otherwise be
applicable to the payment of dividends for the unsecured creditors. Accordingly,
in such cases the liquidator should take the utmost care to ascertain that there is
an assured margin, and that the expenditure of any of the free assets will enure
for the benefit of the unsecured creditors, and not for the benefit of the secured
creditors. Unless the liquidator is satisfied as to this, he ought to apply to the
Court for directions, or should leave the secured creditors to themselves to take
possession and make the best they can of the asset.

Eates akd Taxes.

As regards rates and taxes, see Blazer Firelighter, (1895) 1 Ch. 402, and infra,
pp. 34G, 397—400.

Eelease.

When the winding-up is completed, the liquidator should apply for his release.
The matter is dealt with in Chap. LI.

Eemuneration.
The remuneration of the liquidator is dealt with in Chap. XXIII.

Eestraining Actions.

It is the duty of the liquidator, as far as possible, to prevent any waste of the
assetfl by undue litigation. Sect. 87 of the Act of 1862 expressly provides that



I



DUTIES AND POWERS OF LIQUIDATORS. 217

" when an order has been made for the winding-up of a company under this Act,
no suit, action, or other proceeding shall be proceeded with or commenced against
the company except with the leave of the Court, and subject to such terms as the
Court may impose"; and accordingly, if any action or proceeding is commenced
or proceeded with in violation of this enactment the liquidator should take the
necessary steps to stop it. See, further, Chai). XXXIII.

Sales of PRorERXY. -

It is the duty of the liquidator to sell and realise the property of the company,
and he can do this, under sect. 12 of 1890, without the sanction of the Court or of
the committee of inspection. See further, as to sales, Chap. X.

Solicitor or Agent (Appointment of).
As regards the appointment of solicitors and agents, see Chaps. XX. and XXXI.

Special Manager.

When the official receiver becomes liquidator, whether provisionally or otherwise,
he has power to apply for the appointment of a special manager. See Chap. XI.

Transfer of Actions.
As to the transfer of actions and proceedings, see Chaps. XLI. and XLII.

Trustee : Liquidator hotv far.

The assets are to some extent impressed with a trust. Oriental Inland Steam Co.,
9 Ch. 557; Knowles v. Scott, (1891) 1 Ch. 717; Eilh Waterfall Co., (1896) 1 Ch.
947.

Two OR more Liquidators.

Sect. 92 of 1862. — * * * In all cases if more persons than one are appointed to the
office of [official] liquidator, the Court shall declare whether any act hereby re-
quired or authorized to be done by the [official] liquidator is to be done by all or any
one or more of such persons.

This power may be exercised at any stage of the winding-up. Midland Land,
^c. Corporation, W. N. (1887) 58.

But in the absence of express authority, the liquidators, where there are several,
must all concur, and have no power to delegate to any one or moi-e of themselves
any of the powers and authorities which are vested in them jointly. It may,
however, be that if they all decide on a particular act {e.g., the acceptance of a
particular bill of exchange), they can authorize one of themselves to sign for all
{London and Mediterranca7i Banh, 3 Ch. 654; 6 Ch. 211) ; but it has not been so
decided, and it would be unwise to act on this footing.

Where, however, by order under sect. 92, less than the full number are empowered
to act, such order is clearly effective, and the authorized number can even convey
the legal estate in property vested in the company unless the legal estate has been
vested in the liquidators under sect. 20 (3) of the Act of 1862. Ebsivorth and Tidy^s
Contract, 42 Ch. Div. 49.



^18 WINDING-UP BY THE COURT. [ChAP. XXI.

Vesting Orders (sect. 203 of 1862).

In the case of an unregistered company the Court may, in certain cases, make an
order vesting the property of such company in the liquidators. The order may bo
made on motion ex parte. Albert Life, 18 W. R. 91. For instances of orders, see
Britannia Permanent Building Society, 63 L. T. 304 ; Ebsworth and Tidy^s Contract,
42 C. Div. 49 ; and Form 192b below. The order in Oriental Bank Corporation
(24 June, 1884) was only partial, viz., " that all such property of the said corpora-
tion, wheresoever situate out of the jurisdiction of the Court, is to be vested in the
official liquidator," &c. In the case of the Bank of Egypt, the winding-up order
made by Stirling, J., 10 Nov. 1887, declared "that all acts to be done by the
official liquidator may be done by the official liquidators hereby appointed jointly,
or by any one or two of them, and ordered that all such property, real and personal,
including all interest, claims, and rights into and out of property as may belong
to or be vested in the company or to or in any person or persons in trust for or on
behalf of the company, do vest in the said official liquidators."

The effect of this order is that the property vests in the liquidator in his official
capacity only, and he cannot be made personally liable in an action. Graham v.
Edge, 20 Q. B. Div. 683.



Form 192b. Upon the aj)plicoii by summons, dated, &c., of tlie above-named
~ bank, and upon hearing the solors for the applicant, and upon reading



company.



in case of the order to "wind uj), dated, «S:c., and the a£ft of, &c. It is ordered that
unregistered ^11 such pptv, real and personal, of the above-named bank, wheresoever
situate, including all interest, claims, and rights of the sd bank in,
to, and out of "^^ij, real and personal, and including things in
action, as belongs to or is vested in the above-named bank, or to or in
any person or persons on trust for or on behalf of the above-named
bank, or any part of such ppty, do vest in C. J. S., the off recr and
liqr of the above-named bank, by his official name. E7iglish, Scottish,
and Australian Chartered Bank, 00102 of 1893, Keg., 5 Aug. 1893.



219



CHAPTER XXII.

committee of inspection (poavers, proceedings, and
remuneration) .

As to nominating and appointing, see Chaps. XVII. and XVIII.

Sect. 9 of 1890. — (1) A committee of inspection appointed in pursuance of tliis Creditors and
Act shall consist of persons being creditors or contributories of the company or per- contributories
sons holding general powers of attorney from such persons in such proportions as ^"^ ?'^
may be agreed on by the meetings of creditors and contributories or as, in case of
difference, may be determined by the Court.

(2) The committee of inspection shall meet at such times as they from time to ]Meetin"-s.
time appoint, and, failing such aj^pointment, at least once a month ; and the liqui-
dator or any member of the committee may also call a meeting of the committee as

and when he thmks necessary.

(3) The committee may act by a majority of their members present at a meeting, Quorum
but shall not act unless a majority of the committee are present at the meeting.

(4) Any member of the committee may resign his office by notice in writing Ilesi"-nation.
signed by him, and delivered to the liquidator.

(5) If a member of the committee becomes bankrupt, or compounds or arranges Vacatin"-
with his creditors, or is absent from five consecutive meetings of the committee office,
without the leave of those members of the committee who together with himself re-
present the creditors or contributories as the case may be, his office shall thereupon
become vacant.

(6) Any member of the committee representing creditors may be removed by an Removal,
ordinary resolution at any meeting of creditors of which seven days' notice has been

given, stating the object of the meeting. Any member of the committee repre-
senting contributories may be removed by an ordinaiy resolution at any meeting of
contributories, of which seven days' notice has been given stating the object of the
meeting.

(7) On a vacancy occurring in the office of a member of the committee, the liqui- FiUinsr
dator shall forthwith summon a meeting of creditors or of contributories, as the case vacancies,
may require, for the purpose of filling the vacancy, and the meeting may, by reso-
lution, re-appoint the same or appoint another creditor or contributory to fill the
vacancy.

(8) The continuing members of the committee, provided there be not less than
two such continuing members, may act notwithstanding any vacancy in their body.

(9) If there be no committee of inspection, any act or thing or any direction or Board of
permission by this Act authorised or required to be done or given by the committee Trade to act
may be done or given by the Board of Trade on the application of the liquidator. 'wnen no

E. 169 of 1890. — Where there is no committee of inspection, any functions of the



220



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



Irregularity.



Control by
committee.



Purctase of
assets by com-
mitteeman.



Profits
forbidden.



committee of insjiectlon whicli devolve on the Board of Trade may, subject to the
directions of the Board, be exercised by the official receiver.

E. 127 (2) of 1890. — No defect or irregularity in the appointment or election of a
member of a committee of inspection shall vitiate any act done by Idm in good
faith.

Sect. 23 (1) of 1890. — Subject to the provisions of the Companies Acts, the liqui-
dator of a company which is being wotind up by order of the Court shall, in the
administration of the property of the company and in the distribution thereof
amongst its creditors, have regard to any directions that may be given by resolution
of the creditors or contributories at any general meeting, or by the committee of
inspection, and any directions so given by the creditors or contributories at any
general meeting shall in case of conilict be deemed to override any directions given
by the committee of inspection.

R. 156 of 1890. — Neither the liquidator nor any member of the committee of in-
spection of a company shall, while acting as liquidator or member of such com-
mittee, except by leave of the Court, either directly or indirectly, by himself or any
partner, clerk, agent, or servant, become purchaser of any part of the company's
assets. Any such purchase made contrary to the provisions of this rule may be set
aside by the Court on the application of the Board of Trade or any creditor or con-
tributory, and the Court may make such order as to costs as the Court shall
think fit.

As to the cost of obtaining the sanction, see R. 159, infra.

R. 158 of 1890. — No member of a committee of inspection, in a winding-up, shall,
except under and with the sanction of the Court, directly or indirectly, by himself
or any employer, partner, clerk, agent, or servant, be entitled to derive any profit
from any transaction arising out of the winding-up, or to receive out of the assets
any payment for services rendered by him in connection with the administration of
the assets, or for any goods supplied by him to the liquidator for or on accoimt of
the company. If it appears to the Board of Trade that any profit or payment has
been made contrary to the provisions of this rule, they may disallow such payment
or recover such profit, as the case may be, on the audit of the liquidator's
accounts.

[This rule is taken from R. 317 of the Banki'uptcy Eules, 1886. Having regard
to the decision in Ex parte Gallard, (1896) 1 Q. B. 68, on that rule, the sanction of
the Court cannot be given after the profit has been derived ; it must be obtained
before the business is undertaken. See, also, same case as to what is the profit
derived in the case of a solicitor, and what is the effect of a clerk of the liquidator's
solicitor being on the committee.]

E. 159 of 1890. — In any case in which the sanction of the Court is obtained under
the two last preceding rules, the cost of obtaining such sanction shall be borne by
the persons in whose interest such sanction is obtained, and shall not be payable
out of the company's assets.

K. l')7 only relates to liquidators,

R. 160 of 1890. — Where the sanction of the Court to a pajTnent to a member of a
committee of inspection for services rendered by him in connection with the admi-
nistration of the company's assets is obtained, the order of the Court shall specify
the nature of the services, and shall only bo given where the service performed is of
a special nature. No payment shall, under any circumstances, be allowed to a
member of a coirmiittcc for services rendered by him in the discharge of the duties
attaching to his office as a member of such committee.

But sec Form 207, infra.

As to the taxation of charges, see Rr, 22 to 30 of 1890, and Chap. XLVIII.



Online LibraryFrancis Beaufort PalmerCompany precedents for use in relation to companies subject to the Companies acts, 1862 to 1890 ... (Volume 2) → online text (page 33 of 134)