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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tion is passed. Ex parte Eitton, 13 C. Div. 320; Re Pari;, 59 L. T. 925; and see
Terrell Y. Button, 4 H. L. C. 1091. When in any such case the assistance of the


taxing master was required, the usual course was for the chief clerk to request
the taxing master to tax the bill, and the claim meantime stood over. But
now all this is done in the office of the registrar, who is the taxing officer. And
see Chap. XLVIII.

Crown Debts.

The Crown not being expressly mentioned in the Act of 1862, is entitled to be
paid out of the assets in priority to all other creditors. Henley ^ Co., 9 C. Div.
469 ; In re Bonham, 10 C. Div. 595. And sect. 10 of the Judicature Act, 1875,
has not affected this right. Re Oriental Bank Corporation, 28 C. D. 643. And see
Ex parte Postmaster-General, 10 C. D. 595 ; West London, S;c. Bank, 38 C. D. 364 ;
Attorney-General Y. Leonard, ib., 622; Exchange Bank v. Meg., 11 App. Cas. 157.
But the Crown's priority is to some extent modified as to assessed taxes, land tax,
and property and income tax, by the Preferential Payments in Bankruptcy Act
(51 & 52 Vict. c. 62), see notes to Form 451a.

Qucere, whether Crown debts have priority over fees due to the Board of Trade as
a Government Department.


Damages for breach of contract, whether liquidated or unliquidated, may be
proved. Unliquidated damages, arising otherwise than by reason of a contract,
promise, or breach of trust, are not provable. Sect. 37 of the Bankruptcy Act, 1883,
supra, p. 329.

As to contracts providing for the payment of liquidated damages, see In re New-
man, 4 C. Div, 724 ; Waller v. Smith, 21 C. Div. 243 ; Chitty on Contracts.

As to interest and other sums by statute payable as liquidated damages, see
London and Universal Bank v. Earl of Clancarty, (1892) 1 Q. B. 689 ; Lawrence v.
Willcocks, (1892) 1 Q. B. 696.

Double Proof,
There cannot be two proofs in respect of one and the same debt. Oriental Com-
mercial Bank, 7 Ch. 99.


The liquidator can apply to expunge any proof. R. 112 of 1890.

And a creditor or contributory can likewise apply. R. 113 of 1890.

It becomes necessary to expunge a proof or reduce its amount generally when
" after a creditor has been admitted to prove, circumstances are disclosed which, if
known at the time of proof, would have excluded him from the right to prove,
either altogether or to the extent to which proof was allowed. Again, circiun-
stances may arise after proof materially to change the state of the debt;" e.g.,
fraud, or the fact that the debt is statute-barred. See Robson on Bankruptcy,
5th cd., 404 et scq.


As to official receiver filing all j^roofs before payment of any dividend, see E.. 116
of 1890.

As to filing proof after receiving notice of appeal from creditor, see R. 118 of
1890. And Hcc Chap. XLIX.

Ad to liquidator filing proofs, rco R. 117 of 1890,

!FiusT Meetings.
As to proof and voting at, see Chap. XVII. and Sched. I. to Act of 1890, there
Bet out.


Fraudulent Preference. See Chap. XLV.

Future Debts.
See " CoNTmoENT and Future Debts." Future rent, see Chap. XXXV.


Proof may be made on a contract by the company to indemnify. British Prov.
V. Anglo- Australian Co., 4 W. R. 48 ; 10 L. T. 32G ; National Financial Co., 3 Ch.
791 ; Hardy v. Fothergill, 13 App. Cas. 351.

As to interest, see Hughes'' Claim, 13 Eq. 623 ; McKewan'' s Case, 6 C. D. 45o.


Where a company is insolvent, a creditor cannot prove for interest accruing or to
accrue after the commencement of the windiug-up. Warrant Finance Co., 4 Ch.
643 ; He Collie, 17 C. Div. 334 ; Hughes' Claim, 13 Eq. 623 ; London, ^-c. Hotel Co.,
(1892) 1 Ch. 639. As to proof for a lump sum or instalments including interest,
see E.v parte Butt, 22 C. D. 450. He may, however, enter a claim for the amount,
and if the company should ultimately prove to be solvent, he will bo paid.

In the case of a solvent company, the creditor whose debt carries interest is
entitled to be paid both principal and interest.

Rule 104 of 1890 specifies certain cases in which interest may be proved for, but
it is merely affirmative, and does not preclude proof for interest in other cases
where interest is due.

It in effect re-enacts the provisions of sect. 28 of 3 & 4 Will. 4, c. 42, with an
important alteration, viz., that whereas the rule fixes the rate at 4 ^ev cent., and
thus liquidates it, under the Act the claim for interest is for unliquidated damages.

As to what is a sufficient demand in writing under the Act and the rule, see
Hhgmney Rail. Co. v. Rhgmney Iron Co., 25 Q. B. Div. 146, in which it was held
that a writ in an action was not an effective demand in writing ; although it has
been held that a summons in a winding-up is sufficient. Ex parte Alison, 15 Eq.
397 ; East of England Bank, 4 Ch. 14. As to what is a time certain, see L. C. ^- D.
Rail. Co. V. S. E. Rail. Co., (1892) 1 Ch. 120 ; (1893) A. C. 429.

As to the rate of interest under the Act, see the case last mentioned, but R. 104
now fixes it.

It was long since settled that at common law interest was not i)ayable on ordi-
nary debts unless by agreement, or by mercantile usage. Higgins v. Sargent, 2 B.
& C. 348 ; Page v. Newman, 9 B. & C. 378 ; Foster v. Weston, 6 Bing. 709. This
was changed to some extent by 3 & 4 Will. 4, c. 42 ; and other statutes occasionally
provide for payment of interest. Moreover, interest was and is commonly allowed
on equitable debts or demands. Prima facie, therefore, a debt or claim does not
carry interest. It is for the claimant to show that he is entitled to prove for inte-
rest by reason of (a) a contract express or implied, or (b) by mercantile usage, or
(c) by statute, or (d) on equitable principles. As regards express contract, the rate
of interest, and the time from which the interest runs, depend on the term of the
contract. An implied contract may arise from a course of dealing between the com-
pany and the claimant, e.g., if on similar transactions the claimant has been allowed
interest by the company. The fact that an account charging interest has remained
unquestioned does not imply an agreement to pay interest. Re Edwards, Go L. T.
453. And where the contract j)rovides for payment of interest up to a certain date,
there is no implied contract for subseqiient interest at the same rate. Cook v. Foivler,
P. V, B



L. R. 7 H. L. 27. As to interest payable by Statute, see 3 & 4 "Will. 4, c. 42, above
referred to, and 1 & 2 Vict. c. 110, s. 17, under which judgment debts carry interest
at 4 per cent, per annum. See R. S. C. Ord. XLII. r. IG ; Ord. LVIII. r. 19.

As a contract is merged in a judgment, the judgment creditor must take the in-
terest on the judgment at the statutory rate, emd csmnot pritnd facie cl-a,ixa the higher
rate, if any, reserved by the contract. See European Co., 4 C. D. 33. But this rule
may be controlled by the contract. Fopple v. Sylvester, 22 C. D. 98 ; Ex parte
Fewings, 25 C. D. 338 ; Ex parte Sughes, 4 Ch. 34, n.

As to the cases in which interest is payable in respect of equitable debts or de-
mands, see L. G. ^ D. Rail. Co. v. -S". E. Rail. Co., (1893) A. C. 429 ; and Phillips
V. Somfraij, (1892) 1 Ch. 465. See further as to interest, Chitty on Contracts, 12tli
ed. p. 659 ; Shelford, R. P. Stats., p. 192.

As to interest varying with profits, see Re Ulldesheim, (1893) 2 Q. B. 357.

As to distraining for interest under power in mortgage, see Higginshaw 3Iills and
Spinning Co., (1896) 2 Ch. 514.

As to dividend where proof includes interest exceeding five per cent, per annum,
see the Bankruptcy Act, 1890 (53 & 54 Vict. c. 71, s, 23).

Proof may be made on a judgment, but the judgment is not conclusive in
winding-up, and it may be shown that it was obtained by collusion ; and the
Court can examine into the consideration. Re Lennox, 16 Q. B. Div. 315 ; Ex parte
Revett, 13 Q. B. D. 720 ; Ex parte Anderson, 14 Q. B. D. 606 ; Ex parte Banner, 17
C. Div. 480, where judgment obtained by fraudulent compromise.


The Statutes of Limitation cease to run as from the winding-up order, so that a
creditor whose claim is not then baiTed will not be barred by subsequent delay.
General Rolling Stock Co., 7 Ch. 646. But a debt barred before the winding-up is
not admissible to proof. MitchelVs Claim, 6 Ch. 822.

And sect. 107 of 1862 must be borne in mind. Moreover, if a creditor stands
by for years and allows the assets to be distributed, he may lose his right. See
cases cited in Lindley, p. 1309.

List of Pkoofs.
Official receiver to file. R. 116 of 1890.
Liquidator to file. R. 117 of 1890. See " Filing," supra.

Creditor cannot vote at first meeting until lodgment. E. 108 of 1890.

Mutual Credit Clause.
See as to this, " Set-off," infra.

Negotiaele Instruments.
As to production, see R. 107 of 1890. And see supra, " Bills of Exchange."

Periodical Payments.
As to proof for, sec R. 103 of 1890. And sco Chap. XXXV. .

CREDlTOliS. 371

Policies of Insurance.

If before proof no fire has occun-ed, the policy-holder can only prove for a con-
tingent liability, but if a fire has occurred before the commencemeiit of the winding-
up, or even after the commencement of the winding-up, and before proof, he will
prove for the damage sustained. Macfarlane' s Case, 17 C. D. 337.


The Life Assurance Companies Act, 1872 (35 & 3G Vict. c. 41), provides as
follows : —

Sect. 5. — Where a life assurance company is being wound up by the Court, or
subject to the supervision of the Court, or voluntarily, the value of every life
annuity and life policy requiring to be valued in such winding-up shall be estimated
in manner provided by the first schedule to this Act, but this section shall not apply
to any company the winding-up of which has commenced before the passing of this
Act, unless the Court having cognizance of the winding-up so order, which order
that Coiirt is hereby empowered to make, if it think it expedient so to do, on the
application of any person interested in the winding-up of such company.

Sect. 6. — The rules in the first and second schedules to this Act shall be of the
same force as if they were rules made in pursuance of the one hundred and seventieth,
one hundred and seventy-first and one hundred and seventy- thii'd sections of the
Companies Act, 1862, as the case may be, and may be altered in manner provided
by the said sections, and rules may be made under the said sections for the purpose
of carrying into effect the pro-vdsions of tliis Act with respect to the winding-up of

Sect. 7. — Where a company, either before or after the passing of this Act, has
transferred its business to or been amalgamated with another company, no policy
holder in the first-mentioned company who shall pay to the other company the
jjremiums accruing due in respect of his policy shall by reason of any such payment
made after the passing of this Act, or by reason of any other act done after the
passing of this Act, be deemed to have abandoned any claim which he would have
had against the first -mentioned company on due payment of premiums to such
company, or to have accepted in lieu thereof the liability of the other company,
unless such abandonment and acceptance have been signified by some writing
signed by him or by his agent lawfully authorized.

Sect. 8. — This Act shall be construed as one with the Life Assurance Companies
Acts, 1870 and 1871 ; and those Acts and this Act may be cited together as "The
Life Assurance Companies Acts, 1870 to 1872;" and this Act may be cited as
"The Life Assurance Companies Act, 1872."

First Schedule. (Sects. 5, 6.)

liulefor valuing an Annuity.
An annuity shall be valued accordmg to the tables used by the company which
granted such an annuity at the time of granting the same, and where such tables
cannot be ascertained or adopted to the satisfaction of the Court, then according to
the table known as the Government Annuities Experience Table, interest being
reckoned at the rate of four per centum per annum.

Rule for valuing a Tolicg.
The value of the policy is to be the difference between the present value of the
reversion in the sum assured on the decease of the life, iucludiug any bonus or addi-

13 B 2


tion thereto made before the commencement of the wiuding-up, and the present
value of the future annual premiums.

In calculating such present values the rate of interest is to be assumed as being
four per centum per annum, and the rate of mortality as that of the tables known
as the Seventeen Offices' Experience Tables.

The premium to be calculated is to be such premium as according to the said rate
of interest and rate of mortality is sufficient to provide for the risk incurred by the
office in issuing the policy, exclusive of any addition thereto for office expenses and
other charges.

Second Schedule. (Sects. 5, 6.)

Where an assurance company is being wound up by the Court or subject to the
supervision of the Court, the official liquidator in the case of all persons appearing
by the books of the company to be entitled to or interested in policies granted by
such company, for life assurance, endowment, annuity, or other payment, is to
ascertain the value of such policies, and give notice of such value to such persons,
and any person to whom notice is so given shall be bound by the value so ascer-
tained unless he gives notice of his intention to dispute such value in manner and
within a time to be prescribed by a rule or order of the Court.

The right of the policy-holder or annuitant to prove is clear. RolPs case, 9 Eq.
716 ; Wilson's case, 9 Eq. 721.

And it is not affected by non-payment of a premium payable after the commence-
ment of the winding-up. CooJce's Folicy, 9 Eq. 703.

Where the hfe drops before proof, the proof may be for full amount. Wilson'' s
case, 9 Eq. 721 ; Macfarlane' s case, 17 C. D. 337.

A participating policy-holder cannot prove in respect of his claim of future profits :
SoWs case, 9 Eq. 717.

A policy-holder whose policy has matured before the winding-up has no priority
over the holders of current policies. BelVs case, 9 Eq. 7U6.

And prima facie a policy, even though made payable out of or expressed to be
charged on the assets, does not amount to an eqiiitable assignment.

As to set-off against mortgagees, see Ex parte Price, 10 Ch. 648 ; Sovereign Life
V. Bodd, (1892) 2 Q. B. 573.


The same principles apply as in the case of fire policies. See supra.
As to the names of the imderwriters being specified in the policy, see Ex parte
Hargrove, 10 Ch. 542.

As to mutual insurance, see Liun Mutual v. Fackcr, 12 Q. B. D. 176.

Pkeferential Payments,

As to Crown debts, see supra, p. 368, and the Act of 1888, infra, p. 397.

As to rates, see note to Form 392c.

Salaries and wages, see below.

As to execution creditors, see Chaps. XXXIII. and XXXIV.

As to secured creditors, see p. 373.

As to landlords, see Chap. XXXV.

Ah to expenses incurred in the winding-up, see Chaps. XXIV. and XLVIII.

In the course of a winding-up, debts are from time to time incurred which ought
to be paid in full, e.g., costs, valuations, repairs, rent, materials supplied, «&c. Under
tlie old piactice, whrro no general order liad been made giving the requisite
authority, the liquidator from time to time applied for liberty to pay such debts.


In many cases no order was drawn up on such application, but the Rummons was
indorsed with a note that the liquidator might i^ay, and was to be allowed the
amount in his next account.

Under the new practice the liquidator need not go to the Court ; in practice the
official receiver, when liquidator, pays these sums, but outside liquidators must apply
to the Board of Trade in the ordinary way for cheques to pay off the amounts.

In cases where difficult questions are involved, an application for the direction of
the Court should be made under sect. 23 (4) of 1890.

As to payment of rent in full, see Chap. XXXV.

Rates. See supra, note to Form 392c.

Eent. See Chap. XXXV.


As to liquidator's power of rejection, see Rr. 110 and 120 of 1890.

As to ofScial receiver's power, see R. 115 of 1890, and R. 29 of April, 1892.

Salaries and Wages.

As to limited priority given to salaries, see the Act of 1888, note to Form 451a.

It has been held that where the articles require a director to be a member, he
cannot prove for his remuneration in competition with the other creditors. Ex parte
Cannon, 30 C. D. 629. Qucere, however, whether this case can stand with Dale v.
Plant, 43 C. D. 255.

Prima facie, a director is not entitled to remuneration. Dimston v. Imperial Gas,
3 B. & A. 125. But if the articles fix the remuneration, the directors can prove, as
also where they are to receive such sums as the company in general meeting may
fix, and the company has fixed the amount. Mclhado v. Porto Alegre Co., L. R. 9

C. P. 503 ; Orton v. Cleveland Fire Brick, 3 H. & C. 868.

A director who has not taken up his qualification may nevertheless be entitled to
his remuneration.

As to managers and agents, arrears of salary and commission due at the com-
mencement of the winding-up may be proved for. And where the appointment is
for a term of years, proof can be made for a sum equal to the salary for the residue
of the term, less an allowance for the probability of other employment. Yelland's
case, 4 Eq. 350 ; Ee Maclure, 5 Ch. 737. But he cannot prove for futui-e conamis-
sion : S. C.

As to publication of winding-up operating as a discharge of employes, see Chap-
man's case, 1 Eq. 346 ; MacPoioalV s case, 32 C. D. 366 ; Reed v. Explosives, 19 Q. B.

D. 264.

As to workmen's wages, see pp. 380, 397.

Secured Creditors.

A creditor of the company is a " secured creditor" if he has any security for his
claim upon the property of the company.

Thus, a creditor who holds a mortgage or charge from the company is clearly a
secured creditor.

So is a creditor of the company who as such has put in force an execution before
the commencement of the winding-up. Printing, <^c. Co., 8 C. D. 638.


So is a creditor wlio has obtained, and before the eommeneement of the winding-
up served, a garnishee order [Stanhope Co., 11 C. Div. 160), or has obtained and
served a charging order on shares {Haley v. Barry, 3 Ch. 452) ; or as regards
land, has obtained the appointment of a receiver by way of equitable execution.
Ex parte Evans, In re Watkins, 13 C. D. 252 ; Anglo- Italian Bank v. Davies, 9 C. D.

But, strange to say, it would seem from the cases following that the appointment
of a receiver of chattels by way of equitable execution does not make the creditor a
seciu'ed creditor. In re Bickinson, Ex parte Charrington, 22 Q. B. D. 187 (C. A.
1888) ; Be Fotts, (1893) 1 Q. B. 648 ; Croshaw v. lyndhurst Ship Co. (1897), 45 W. R.
370. It is not easy to reconcile all these decisions with the principles laid down in
Zevasseur v. 3Inson and Barry, (1891) 2 Q. B. 73.

As to Scotch arrestments giving security, see Queensland Mercantile Co., (1892) 1
Ch. 219 ; West Cumberland Co., (1893) 1 Ch. 713.

And a landlord or other person having a right of distress who has levied before
the commencement of the winding-up is a secured creditor.

But where the distress is not levied before the commencement of the winding-up
the existence of the right of distress does not in England make the landlord or
other person who has such right a secured creditor. Thomas v. Patent Lionite Co.,
17 C. D. 250. See Me Wanzer Co., Ld., (1891) 1 Ch. 305, as to Scotland.

The creditor is not a secured creditor unless the security is on the property of the
company. Ex parte Bennet, 3 Atk. 528; Ex parte Caldecott,1bQ.\i'\'v. 720; Coupland''s
case, 5 Ch. 167 ; West Riding Union Bank, 19 C. D. 109 ; Re Hallett, (1894) 2 Q. B. 256.

A creditor of a company whose debt is guaranteed by some third party is not to
be considered a secured creditor and bound to value the guarantee as a security even
when the surety holds a counter security from the company by way of indemnity.
Midland Banking Co. v. Chambers, 4 Ch. 398 ; llarman''s Case, 18 S. J. 25 ; Sheffield
Bank V. Clayton, (1892) 1 Ch. 621.

As a general rule, the holder of bills of exchange on which a company is liable is
not to be considered a secured creditor, although other persons may be liable
thereon. Ex parte Schofield, 12 C. D. 337 ; Re Hallett, ubi supra.

A secured creditor is not bound to come in and prove. He may prefer to rest on
his security.

In the case of a solvent company, he may prove for the full amount of his debt,
retaining his security until payment. But in the case of an insolvent company,
sect. 10 of the Judicature Act, 1875, renders the bankruptcy rules applicable (see
supra, p. 359), and negatives the rule establi>ihed in Eellock's Case, 3 Ch. 769. And
until the contrary is proved, a company being wound up is to be regarded as in-
solvent. Milan Tramu-ays Co., 25 C. Div. 587.

In either case a secured creditor who comes in to prove must deduct what he has
realized before sending in his claim. Foricard's Case, 5 Ch. 18 ; Leech's Case,
6 Ch. 388.

Under the bankruptcy rules, a secured creditor may (1) rely on his security and
abstain from proving, or (2) mny realize his security and then prove for the balance,
or (3) may surrender his security and prove for the full amount, or (4) may value
the security and prove for the balance.

Sec Bankruptcy Rules, 9 — 16, supra; an^ Ex parte National, S;c. Bank, Re Xewton,
(1896) 2 Q. B. 403.

A secured creditor has, prima facie, a clear right to apply for and obtain leave to

bring, or proceed with, an action for enforcing his securities. David Lloyd ^ Co., 6

C. Div. 339 ; Longdendalr Co., 8 C. Div. 150 ; Joshua Slubbs S; Co., (1891) 1 Ch. 475 ;

' London, <^r. llotcl Co., (1892) 1 Ch. 639. And a receiver obtained by him will not

always be displaced in favour of the official receiver. Strong v. Carlyle Press, (1893)


1 Ch. 252 ; nrifish Linen Co.x. South American, S;c. Co., (1804) 1 Ch. 108, and

And very commonly a secured creditor applies in the winding-up for a declaration
of his rig-hta, and a direction to the liquidators to realize the security, and pay him.

Where a creditor's security is realized in the winding - up, he is entitled to he paid
out of the proceeds his principal, interest, and costs, subject only to the costs of the
realization. Marine Mansions Co., 4 Eq. 601. See also Oriental Hotels Co., 12 Eq.
126 ; MegenVs Canal Co., 3 C. Div. 411.

And the Court will order the liquidator to give up possession to a receiver
appointed by the secured creditor. Henry Pound, Son S; Co., 42 C. Div. 402, and
Form 391, supra.

Sometimes the mortgagee sells, with or without the concun-ence of the liquidator,
in exercise of a power of sale vested in him by the mortgage.

It is not necessary to obtain liberty to exercise the power of sale, although orders
giving such liberty have sometimes been made.

A secured creditor who realizes his security is entitled to apply the proceeds
in or towards payment of his principal, interest, and costs. London, Windsor, 6;c. Co.,
(1892) 1 Ch. G39.

But he cannot, in the case of an insolvent company, apply the proceeds first in
payment of interest due after the winding-up, and then in reduction of principal,
and then prove for the balance of principal. Ibid. Where the interest exceeds 5 per
cent, he may, notwithstanding sect. 23 of the Bankruptcy Act, 1890 {supra, p. 340),
pay such interest before pi'oving. In re Fox and Jacobs, (1894) 1 Q. B. 438.

Not uncommonly an order for sale is made on the application of the liquidator,
and the mortgagee concurs and obtains payment out of the proceeds.

Orders directing preferential payment to be made to holders of mortgage deben-
tures and other secured creditors are not uncommon.

Operation of Sect. 10 of the Judicature Act, 1875.

As to the limited operation of sect. 10 of the Judicature Act, 1875, see Withernsea
Co., 16 C. Div. 337 (sect. 45 of the Bankruptcy Act, 1883, not applicable) ; Crumlin
Viaduct, 11 C. D. 755 ; Gorringe v. Irivell India Rubber Co., 34 C. D. 128 (order and
disposition clause not applicable).

Sect. 40, giving partial priority to rates and taxes, not applicable. Albion Co.,
1 C. D. 547. Sect. 42, giving a landloi'd a right to distrain for a year's rent, not

Online LibraryFrancis Beaufort PalmerCompany precedents for use in relation to companies subject to the Companies acts, 1862 to 1890 ... (Volume 2) → online text (page 51 of 134)