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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and M. do jointly and severally pay to the sd E., as off liqr of the sd coy,
the sum of 67^. 16*. Qd. in respect of the transactions afsd, and order
them jointly and severally to pay to the sd E. his costs of the applicon,
to be taxed. Nathl. Holmes, Limtd, Kay, J., 27th March, 1885.
B. 366.

The above order was made not only under sect. 1G5 of 18G2, but under the follow-
ing- provision : —

S. 164 of 1862. — Any such conveyance, mortgage, delivery of goods, payment, Fraudulent
execution, or other act relating to property as would, if made or done by or against pieierence.
any individual trader, be deemed in the event of his bankruptcy to have been made
or done by way of undue or fraudulent preference of the creditors of such trader,
shall, if made or done by or against any company, be deemed, in the event of such
company being wound up under this Act, to have been made or done by way of
undue or fraudulent preference of the creditors of such company, and shall be

N N 2



548 WINDING-UP BY THE COURT. [ChAP. XLV.

invalid accordingly ; and for the purposes of this section the presentation of a peti-
tion for winding-up a company shall, in the case of a company being wound up by
the Court or subject to the supervision of the Court, and a resolution for winding-
up the company shall, in the case of a voluntary winding-up, be deemed to corre-
spond with the act of bankruptcy in the case of an individual trader ; and any con-
veyance or assignment made by any company formed under this Act of all its
estate and effects to trustees for the benefit of all its creditors shall be void to all
intents.

This section renders the bankruptcy law for the time being in force applicable.

Liverpool Guarantee Co., 30 W. R. 378; W. N. (1882) 18.

Incorporation S. 48 of Bankruptcy Act, 1883. — (1) Every conveyance or transfer of property,

01 bankruptcy or charge thereon made, every payment made, every obligation incurred, and every

^ ' judicial proceeding taken or suffered by any person unable to pay his debts as they

become due from his own money in favour of any creditor, or any person in trust

for any creditor, with a view of giving such creditor a preference over the other

creditors shall, if tlie person making, taking, paying, or suffering the same is

adjudged bankrvtpt on a bankruptcy petition presented within three months after

the date of making, taking, paying, or suffering the same, be deemed fraudulent

and void as against the trustee in the bankruptcy.

(2) This section shall not affect the rights of any person making title in good
faith, and for valuable consideration, through or under a creditor of the bankrupt.

The above section is almost in the same terms as sect. 92 of the Bankruptcy Act,
1869, but that section was not to "affect the rights of a purchaser, payee, or incum-
brancer in good faith and for valuable consideration," and on those words it was
held that a debtor might prefer a creditor, provided that the latter accepted pay-
ment in good faith and for value {Butcher v. Stead, L. R. 7 H. L. 839) ; whereas
the above section deprives the creditor himself of this protection.

Under sect. 48 (as under sect. 92 of the former Act) the act will be a fraudulent
preference where it appears that the substantial and dominant view with which it
was done was in order to prefer. Ex parte Griffith, 23 Ch. Div. 69 ; Ex parte Hill,
23 Ch. Div. 695 ; Land Development Co., 39 Ch. Div. 259. It is not sufficient that
the creditor was in fact preferred. Ex parte Taylor, 18 Q. B. Div. 295.

Bond fide pressure will take the act out of the section, but a director whilst in
office cannot exercise such pressure. Gas Light Co. v. Terrell, 10 Eq. 168.

Creditor in the section includes contingent creditor. In reFaine, (1897) 1 Q. B. 122.

In Re Inns of Court Hotel Co., 6 Eq. 82, debentures were held good though the
company was in difficulties when they were issued. See also Poolers case, 9 Ch. Div.
322, where du-ectors had paid up their shares and applied amount in satisfaction
of a debt which they had guaranteed, and it was held that the transaction was
unimpeachable. But payment by directors in advance of calls, and repayment
thereout of fees with a view to preference, was held fraudulent and void. JFash-
ington Diamond Co., (1893) 3 Ch. 95.

A payment made fraudulent and void by this section is a misfeasance by the
directors within sect. 10 of the Act of 1890. Ibid. p. 115.

Debenture holders cannot rely on this section. Willmott v. London Celluloid, 34
Ch. Div. 147.

And SCO Sharp v. McHenry, 38 Ch. D. 427.

See also Williams on Banlcruptcy, p. 210.

Form 635. Upon tlic aiiplicon of ofT liqv of coy and of B., a wliole life policy
Ord»r a-'airiHt ^■-'^*^^'^" *^^ '^^J' ^^ fiu'tlicr procccd -svitli iLo summons in tlicso matters,
dir(<;t.,rM after issued 2Gth May, 1879, and upon liearing, &c., Order that, pursuant to
inquiry.



MISFEASANCE AND BEEACII OF TRUST. 549

tho sd order of 15th March, 1880, and the chief clerk's certificate,
dated 27th July, 1880, the several persons named in the first column
of schedule hereto, being some of the directors of coy, do, on or before
31st March, 1881, or subsequently within fourteen days after service
of this order, pay to off liqr, at his office, situate, &c., the respive simis
set ojiposite their respive names in the second column of schedule,
being the simis for which such persons resply are liable in respect of
uninvested premiums on whole life policies of sd coy, and \^responde7its
to pay costs of applicons^. Schedule, showing bonus and amounts.
British Giiardian Life Assurance Co., Hall, V.-C, 17th March, 1881.
A. 643.



The applicon by summons dated, &c., of S. W., the off recr and Form 635a.
liqr., &c., order and declare that the sd H. is liable to contribute Order on
to the assets of the cov the sum of £ (being the aggregate of <iirector to

T -n- f. 1 n 1 1 repay amount

certain sums reed by the sd H. out of the assets of the above-named received
coy in respect of an alleged liability of the above-named coy to the sd through
X.), with interest thereon at the rate of £4 p.c. -p. a. from the dates when tor^
such sums were pd by the above-named coy, which interest at the date

hereof amounted to tho sum of £ . And it is ordered that the sd

H. do, within four days after the service on him of this order, -paj the

sd several sums of £ and £ (less income-tax), together with

further interest (less income-tax), on the sd sum of £ , at the rate

afsd, from the date hereof until payment, to the applicant, the sd
S. W., as such off recr and liqr. And it is ordered that the sd H. do
pay to the sd S. W. his costs of this application, such costs to be
taxed. /. W. Hobbs Sf Co., 00119 of 1892, Wright, J., 13 Dec. 1893.

The Court has jurisdiction to order the liquidator to give security for costs. lie
Seventh Hast Central Building Society, 51 L. T. 109 ; Stroufj v. Carhjle Press (No. 2),
W. N. (1893) 51 ; and compare Foole:/ v. Whetham, W. N. (1884) 176 (in bank-
ruptcy), and see the order following and the notes thereto.

Upon the applicon of A., named as one of the respondents to the Form 636.
summons issued in this matter by B., the liqr of the coy, on, &c., and Lkmidator
upon hearing the solors for the applicant, &c., Order that the sd B. do ordered to
give security by bond to the sd A. in the sum of 100^., conditioned to fo\!costTof*^
answer the costs, in case any costs shall be ordered to be pd by the sd summons for
B., as such liqr, to the applicant A., as such respondent, to the sd misfeasance,
summons, such bond to be settled in Chambers in case the parties
differ ; but the sd B., as such liqr, is to be at liberty, instead of giving
such security, to pay 100^. into Ct to the credit of "In the matter of
[the Acts and of the coy] security for costs in favour of A., respondent,
to summons." And it is ordered that, until such security is given or
payment made, the sd B. do not take any further proceedings under



Sotf WINDING-UP BY THE COURT. [ChAP. XLV.

tlie sd summons against the sd A. ; and costs of appllcon to abide
result of summons. Pearson, J., lOtli May, 1884. lie Wcd(jeivood Co.,
B. 2258.

But in a recent case, when the respondents to a misfeasance summons taken out
by the official receiver and liquidator, applied for an order for security for costs, and
the application was opposed, Homer, J., expressed the opinion that the liquidator
was personally liable to pay costs at the hearing, and that the Court in considering
whether an order for costs should be made against him would have regard to the
fact that he had opposed an application for security. The application for security
was refused on the ground of the Court's having jurisdiction to order personal pay-
ment, but without costs. IF. Powell and Sons, (1896) 1 Ch. 681. This decision was
followed by Stii-ling, J., in Chambers, in Western Counties, ^-c. Co., on the 4th May,
1896. See the order below.



Form 636a. Upon the applicon of P. and P. (two of the respondents to the
summons issued herein, on the day of , 18 — ), asking that



Order refus-
ing security
on liquidator
admitting lia-
bility for
costs.



C, the deputy off recr and liqr of the above-named coy, the appKcant
in the sd summons, might be ordered to give security in the sum of
300^. conditioned to answer the costs in case any costs should be
ordered to be pd by the sd C, as such liqr to the applicants, and that
until such security was given the sd 0. might be directed not to take
any further proceedings under the sd summons against the sd appli-
cants. And upon hearing counsel for the applicant and for the sd C,
and upon reading the affit of H., filed, &c., and the several exhibits
therein referred to, and the sd C, the deputy off recr and liqr of the
sd coy, by his counsel admitting that he is personally responsible for
any costs the Ct might order him to pay of the sd summons of, &c,
[the misfeasance summons']. The judge doth not make any order as to
costs or otherwise. Western Counties Bakeries, ^"c. Co., Stirling, J.,
4th May, 1896.

An order for personal payment of costs by the liquidator was afterwards made by
the Court of Appeal. See (1897) 1 Ch. 632.



Report to Board of Trade.

When the official receiver proceeds under sect. 10, at the conclusion of the pro-
ceedings he makes a report of the result to the Board of Trade.



Bankruptcy Proceedings under the Order.

By sect. 1 of the Companies (Winding-up) Act, 1893, an order for payment of
money made under sect. 10 of tlic Act of 1890, is to be deemed a final judgment
within para, (g) of sub-sect. 1 of s, 4 of the Bankruptcy Act, 1883.



551



CHAPTER XLYI.

PROSECUTION OF niRECTORS AND OTHERS.

S. 167 of 1862. — Where any order is made for winding-up a company by the Court may
Court or subject to the supervision of the Court, if it appear in the course of such order prose-
winding-iip that any past or present director, manager, ofEcer, or member of such '^^^^^ ^^
company has been guilty of any offence in relation to the company for which he is '

criminally responsible, the Court may, on the application of any person interested
in such winding-up, or of its own motion, direct the official liquidators, or the
liquidators (as the case may be), to institute and conduct a prosecution or prosecu-
tions for such offence, and may order the costs and expenses to be paid out of the
assets of the company.

S. 168 of 1862. — Where a company is being wound up altogether voluntarily, if
it appear to the liquidators conducting such winding-up that any past or present
director, manager, officer, or member of such company has been guilty of any offence
in relation to the company for which he is criminally responsible, it shall be lawful
for the liquidators, with the previous sanction of the Court, to prosecute such offender,
and all expenses properly incuiTed by them in such prosecution shall bo payable out
of the assets of the company in priority to all other liabilities.

Under the old practice (R. 51 of November, 1862), every apphcation under the Howapplica-
167th and 168th sections of the said Act was to be made by petition, and a petition ^^^^ made,
is still the proper mode of application under sect. 168, or perhaps in supervision
proceedings. See R. 17 of April, 1892.

f An order on petition made by Homer, J., on the 19th Dec. 1896, in Myers and
Reeves, Limtd.

But the rule of November, 1862, having been annulled so far as regards compul-
sory winding-up (R. 180 of 1890), it is apprehended that the proper course in such
a windiug-up in the High Court, under the new practice, is to apply by summons
ex parte. If deemed expedient, the summons can be adjourned to the Judge in
Chambei's, or into Court.

R. 5 of 1890. — In Courts other than the High Court, the following matters and Where heard.

applications to the Court shall be heard in open Court (c) Applications

under sect. 167 of the Companies Act, 1862. . . .

Looking, however, to the expense of prosecution, and to the delay and risk, the
Coiu't has heretofore rarely given leave to take proceedings. According, however,
to the present practice, the Official Receiver makes a report to the Board of Trade
as to whether there are grounds for prosecuting, and the materials are in a proper
case transmitted by the Board to the Director of PubHc Prosecutions. But occa-
sionally application by petition is made to this Court for leave to prosecute.

Let, &c., that the applicant may be at liberty to institute and conduct Form 637.

a prosecution of A. B. for certain offences committed by him in relation ~ ;;

*■ Summons for



552



WINDING-UP LY THE COURT. [ChAP. XLVI.



leave to
prosecute.



Affidavit.



to the above-named coy and the members and creditors thof, and that
the applicant may be indemnified, in such manner as the Ct may direct,
against any costs to be incurred by him in such proceedings out of the
assets of the coy, or such other order as to the Ct may seem expedient.

The summons will be ex parte, and should be supported by an affidavit showing a
strong case for prosecution, and also the extent of the assets and liabilities. The
Court is not willing, when the assets are small, to sanction proceedings which may
swallow up or largely reduce those assets.

The form following is a specimen of a petition for liberty to prosecute. The
afEdavit in support, when the application is by summons, must set out the facts in
like detail.



Form 638.

Petition for
liberty to
prosecute
directors.



Title and commencement. See infra^ Form 750.
1,2, 3. [Particulars as to constitution of coy. D. to be chairman,
&c.]

4. The coy carried on business until the resolution to wind up
voluntarily, passed 23rd June, 1880, supervision order made 26th June,
1880.

5. During the period that the sd coy carried on business as afsd,
they made in the year 1873 a profit available for dividend, but in no
subsequent year was there a profit properly available for dividend.
Nevertheless, the sd coy pd dividends at the rate of 15 p.c. p. a. in the
years 1874, 1875, 1876, and 1877 on the paid-up capital, and all such
dividends, amounting in the aggregate to 21,600?., were pd out of the
capital of the coy.

6. The sd dividends for the years 1874 to 1877, as above, were
declared and pd under delusive and fraudulent balance-sheets which
were presented to the sd coy, showing in each case a profit available
for dividend, the sd profit being really made up by false and fraudu-
lent entries in the books and balance-sheets of the coy, to which the
sd D. was privy in the manner hnftr appearing, both with intent to
defraud and deceive the then existing members of the coy, and also
to induce persons to purchase shares of the sd coy.

7. In the month of June, 1875, AV., who was a book-keeper of the
coy, prepared a rough balance-sheet for the year 1874, which he
showed to the sd D., who declared his determination to declare a
dividend of 15 p.c, and as the sd rough balance-sheet did not show
profits enough to declare such a dividend, the accounts of the coy
showing assets or overpaid accounts to be treated as assets, were
falsified by direction of sd D., by falsely increasing the amount thof
thereby shown, until a balance of profit was shown sufficient to declare
a dividend at the rate of 15 p.c. p. a., and to carry forward a consider-
able sum to the following year. Tho sd W. prepared similar rough
balance-sheets for tho years 1875, 187G, aud 1877 rosply, each of which
showod a loss, but for each of such years the figures were so falsified



PROSECUTION OF DIRECTORS AND OTHERS. 553

as to sliow a profit available to pay a dividend of 15 p.c. for each year,
and carry forward a considerable sum to tlio following' year, and in
each, case the alterations were made by the sd W. in the presence and
by the direction of the sd D. ; the drafts of the balance-sheets for each
year of the sd years, which were afterwards submitted to the coy, were
made by the sd D. after such alterations as afsd had been made by
his directions, and when presented were by him circulated among and
published to the members of the coy, and the sd balance-sheets had,
in each case, annexed thereto a report of the directors signed by the
sd D. Your petr is informed and believes that the sd D. also showed
the sd balance-sheets to persons to induce them to purchase from him
shares in the sd coy.

8. During the period afsd, namely, 1874 to 1877 inclusive, the sd
D. sold many of his shares in the coy, and afterwards actions were
brought against him by some of the purchasers of such shares on the
ground, as your petr has been informed and believes, that the fraud of
the sd D. in respect of the sd balance-sheets had induced the sd respive
pits in the sd actions to purchase the sd shares. Two of the sd actions
were tried at Leeds Assizes in the month of Feb. 1882, and resulted in
verdicts for pits in each case. Evidence to the effect afsd as to the sd
accounts was given at the sd trials on behalf of pits or one of them,
and the sd D. did not make any denial thof.

9. An applicon was made in the sd winding-up by certain creditors
of the sd coy to this Honourable Ct that the conduct of the sd D. and
others, in respect of the declaration and payment of the sd dividend
under delusive and fraudulent balance-sheets, and in reference to
breaches of trust in relation to the sd coy, might be examined into,
and that the sd D. and others might be ordered to pay to the liqrs of
the sd coy the amount of the dividends so pd.

10. "When the sd applicon, which was adjourned into Ct, came on
for hearing, evidence to the effect afsd was given in respect of the sd
applicon, and on the 26th Nov. 1883, this Honourable Ct was of
opinion that the sd D. and W. were jointly and severally liable for the
sum of 21,600/., with interest at 5 p.c. p. a., and ordered payment thof
and of the costs of the sd applicon to your petr accordingly.

11. The sd D. is insolvent, and so is the sd W., and the sd sums
have not been pd, and it is not likely that any considerable amount
thof will be recovered.

12. Under the circumstances herein set forth your petr is advised
and believes that the sd D. has been guilty of offences in relation to the
sd coy for which he is criminally responsible within the meaning of
sects. 83 and 84 of the Act of 24 & 25 Vict. c. 96, and sects. 166 and
167 of the Cos Act, 1862.

13. Your petr has been requested to make this applicon by a large
number of the creditors of the sd coy, who are desirous that your petr



554



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



should obtain tlie order hnftr prayed. The debts due to the creditors of
the coy above 10/., excluding the debts for which the sd D., and M., his
wife, were admitted creditors, and which debts are now claimed to be
held by the solor of the sd D., and on which no claim whatever can,
as your petr is advised and believes, be made upon the assets of the
coy, and, excluding the amounts owing to C. and C, the mother-in-law
and brother-in-law of the sd D., amount to 14,590/. Creditors to the
amount of 10,550/. have assented to this present applicon.

14. A dividend of 5s. in the pound has already been pd to the creditors
of the coy. Your petr has in his hands assets of the coy sufficient
to pay the expenses of such prosecution as hnftr mentd.

16. Your petr craves leave to refer to the evidence filed in support
of the above-mentd applicon to this Honourable Ct in support of this
peton.

Your petr therefore prays that he may be at liberty to institute
and conduct a prosecution of the sd D. for his offences as
afsd, and to pay the costs and expenses of such prosecution,
and also of this peton, out of the assets of the coy, or that
such other order may be made in the premises as to the Ct may
seem meet.

Petition presented 9tli May, 1884, answered for lOth May, 1884. Order acccord-
ingly that day. Petition not served on any one.

For cases on the above sections, see Eupion Fuel Co., W. N. (1875) 10, where
liberty to prosecute refused.

Re Northern Counties Bank, 31 W. R. 546, liberty refused, but the prosecution was
subsequently taken up by the Treasury.

Re Denham # Co., 32 W. E. 920. Prosecution directed.



Form 639.

Order giving
liberty to
prosecute.



Upon the peton of H., the liqr of the association, on 2nd May, 1882,
preferred, &c., and upon hearing counsel, and upon reading the sd
peton and affts, it is, pursuant to sect. 168 of the Cos Act, 1862,
ordered that the petr H. be at liberty to prosecute Gr., late secretary of
the sd association, in respect of all or any of the defalcations in the
peton referred to. And order that the costs and charges properly in-
curred by the petr II. in sd prosecution be taxed by the taxing master,
and pd out of the assets of the sd association in priority of all other
liabilities. Mercantile Marine Assurance Association, North, J., for
Chitty, J., Gth May, 1882. B. 888. And see Myers and Beeves, Liniid.,
Eomcr, J., I'Jth Dec, 1896.



Form 640.

Order tin to
production of
depoHitions
with a view to
prosecution.



Upon the applicon of the solor for the affairs of her Majesty's Trea-
sury, and upon hearing the solors for the applicant, and reading the
afft of F., filed 25th Sept. 1883, Order that the proper officer do pro-
duce at llic Police Ct, Newcastle-on-Tyno, on 15th Oct. 1883, at ten



PROSECUTION OF DIRECTORS AND OTHERS. 555

o'clock in tlio forenoon, on tlie hearing of a certain summons against
0., and B., and H., and others, and also on such other days, and at
such times, as may be required on behalf of the prosecution, the
original deposition of 0., filed in this matter on 24th May, 1882, and
the original deposition of, &c. Northern Counties Bank, Vacation
Judge for Chitty, J., 30th Oct. 1883. B. 424.

The deposition referred to was taken upon an examination of witnesses under Use of
sect. 115 of the Act. Such a deposition is evidence against the deponent, see ^^positions.
notes preceding Form 589, supra.

In a recent case, when a deponent at a private examination was prosecuted for
perjury, the prosecutor served the registrar, in companies winding-up, with a
suhpa'iia duces tecum in respect of the depositions, and it was not considered necessary
to obtain an order from the judge or registrar, but see R. 1 of Nov., 1895, supra,
Chap. II.

As to using depositions taken at a public examination, see sect. 8 (7) of 1890,
p. 524, supra, and compare R. 27 of April, 1892, supra, p. 540.



556



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



CHAPTER XLVII.



COMPROMISES.



With
creditors.



With contri-
butories and
debtors.



Security.



What sanc-
tion required.



Control of
Court, &c.



Compelling
compromiBC.



Evidence.



Sect. 159 of 1862. — The liquidator may, with the sanction of the Court, where
the company is being wound up by the Court, and with the sanction of an extraordi-
nary resolution of the company where the company is being wound up altogether
voluntarily, pay any classes of creditors in full, or make such compromise or other
arrangement as the liquidators may deem expedient with creditors, or persons
claiming to be creditors, or persons having or alleging themselves to have any claim,
present or future, certain or contingent, ascertained or sounding only in damages,
against the company, or whereby the company may be rendered liable.

Sect. 160 of 1862. — The liquidators may, with the sanction of the Court, where
the company is being wound up by the Court, or subject to the supervision of the



Online LibraryFrancis Beaufort PalmerCompany precedents for use in relation to companies subject to the Companies acts, 1862 to 1890 ... (Volume 2) → online text (page 73 of 134)