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HCCW000026/1978
| IN THE HIGH COURT OF JUSTICE |
COMPANIES (WINDING UP) |
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NO. 26 OF 1978 |
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IN THE MATTER of Emsworth Limited
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IN THE MATTER of The Companies Ordinance Cap. 32
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Coram: Li, J. in Chambers
Date of Judgment: 9 March 1979
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JUDGMENT
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1. In this summons Emsworth Ltd., (hereinafter referred to as the Company) applies for an order that:-
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(1) |
The Petition is sued on the 2nd day of May, 1978 be dismissed; |
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(2) |
The Official Receiver be discharged as the Provisional Liquidator of the said Emsworth Ltd; |
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(3) |
That the Petitioner do pay the costs incurred by the Official Receiver whilst acting as Provisional Liquidator herein; and |
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(4) |
That costs be provided for. |
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2. This summons was heard on 10th November last year when I made an order in terms of paras. (1) and (2) of the summons but adjourned the matter asked for in para. (3) of the summons until I have heard full arguments from counsel for both the Company and for the Petitioner. The facts giving rise to this application may be summarised as follows:-
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One Theodore Norman (hereinafter referred to as the Petitioner) is a creditor of one Cape Yachts Ltd., for a substantial sum of money. The Cape Yachts Ltd., went into receivership and the receiver sold the assets and business of Cape Yachts Ltd., to the Company in the middle of 1977. On 10th February 1978 the Petitioner served a notice to demand payment of the debt owing by the Cape Yachts Ltd., alleging that the Company is responsible for the payment of such debt owing by the Cape Yachts Ltd., by virtue of Section 3 of the Fraudulent Transfers of Business Ordinance. At that time one Mr. Burdett had a pending action in the High Court against the Company for a debt owing to him by the Cape Yachts Ltd., and also relied on the same point under the provisions of Section 3 of the Fraudulent Transfers of Business Ordinance Mr. Burdett's action was tried by my brother McMullin who decided in favour of Mr. Burdett holding that the Company was liable under the Fraudulent Transfers of Business Ordinance. The judgment was delivered on 29th April, 1978. On 5th May, 1978 the petitioner filed his petition to have the Company wound up on the ground that the Company was unable to pay its debt for failing to pay up after demand was made after three weeks. There was an affidavit in support of this petition. Nothing was done by the Company. On 26th May, 1978 the Company lodged an appeal against the decision of my brother McMullin. The hearing of the petition was set down on 1st June, 1978. There was, up to then, no affidavit by the Company to oppose the petition but it was adjourned to 16th June, 1978 for some reason which is not known to me. There is no record in the file containing papers of the Petition and no reason given for the adjournment. There is only one document in the said file which was a notice to the Official Receiver saying that the hearing would be adjourned to 16th June. On 13th June, 1978 a director of the Company applied to the Court for sanction to pay out some money for future expenses and that indicated an intention to oppose the petition on the part of Company. On 14th June, 1978 the Petitioner took the precaution of making an ex parte application to appoint a Provisional Liquidator in order to protect the assets of the Company. The petition came before my brother Leonard and in the course of the hearing of the petition Mr. Mills-Owens, learned counsel for the Petitioner suggested the appointment of a Provisional Liquidator. No one raised any objection to such suggestion and without further argument the Official Receiver was appointed the Provisional Liquidator. For this reason the Petitioner did not have to proceed with his ex parte application. Since then work had been done by the Provisional Liquidator. On 20th October, 1978 the appeal was heard and determined by the Court of Appeal which set aside the judgment of my brother McMullin. Thus from that time onwards there appeared no debt owing by the Company to the Petitioner. As such there was no basis for the Petition to go on. Hence this application dated 27th October, 1978. The Order to dismiss the Petition and to discharge the Provisional Liquidator was not opposed in anyway. However the application that the Petitioner should pay the costs incurred by the Official Receiver while acting as Provisional Liquidator is strongly contested by the Petitioner. |
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Mr. Donnelly, learned counsel for the Company contends that the petition presented was an abuse of process. The only basis of his contention is that the Petitioner had no locus standi because on 10th February, 1978 the Petitioner was not a creditor. However he concedes that at best the Petitioner was then a contingent creditor. He cites two cases to me which, in my opinion, are not directly on the point. In the case of Man & Another v Goldstein & Another 1968 2 All England Reports 769, it was held that where there is a substantial defence to a claim of debt; the claimant had no locus standi as a creditor therefore had no right to present a petition. Accordingly an injunction was granted to restrain the Petitioner to pursue the petition. In Holt Southey Ltd., v Catnic Components Ltd., in 1978 2 All England Reports 276 it was held that a contingent creditor may present a petition despite a substantial dispute as to the sum owed to that creditor. Learned counsel for the Petitioner has drawn my attention to the case of re Lanaghan Bros Ltd., reported in 1977 1 All England Reports 265. In that case a petition relying on the judgment debt was dismissed on the ground that the judgment debt had been set aside. Mr. Justice Brightman said as follows:-
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"On the facts which I have outlined it is clear that the petition will now have to be dismissed. The question is what should be done in relation to costs. The company's counsel has urged before me that where a winding-up petition is presented by a creditor in proper circumstances but in the end is dismissed because, for example, a majority of creditors oppose, the usual order to make is that there shall be no costs on either side. In other words, the petitioning creditor, although he loses his cause, does not have to pay the costs of the respondent company; the respondent company although it is the victor does not get its costs from the petitioning creditor. It is conceded however that the court has a discretion as to how costs should be dealt with in those circumstances, but it is said that the invariable rule is that the petition is dismissed with no order as to costs. |
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Apparently, the only reported case in which a petitioner whose petition has been dismissed has been allowed his costs is Re Newman and Howard Ltd., [1961] 2 All ER 495, [1962] Ch. 257. That, however, was the case of a petition presented by a contributory for failure on the part of the company to provide certain information or accounts that it was bound to provide. The circumstances, therefore, were rather different from the present case. The general rule, no costs on either side, which is advocated by the company in the case before me, is set out in Halsbury's Laws of England, 7 Halsbury's Laws (4th Edn) para.1035. |
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It so happens that, on 9th March 1976, I heard another case, Re M. McCarthy & Co., (Builders) Ltd., (No. 2), [1976] 2 All ER 339, in which a petition had been properly presented but was dismissed in the particular circumstances. The petitioning creditor was in fact a substituted creditor. My reason for referring to it is that I ended my judgment by saying that, if it was the first case in which an unsuccessful petitioning creditor had been awarded his costs of a dismissed petition, then so be it." |
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Section 177 in para. (e) of the Companies Ordinance provides that the company may be wound up for its inability to pay debts; Section 178 provides as follows:-
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"A company shall be deemed to be unable to pay its debts - |
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(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding $5,000 then due, has served on the company, by leaving it at the registered office of the company, a demand under his hand requiring the company to pay the sum so due, and the company has for 3 weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; or |
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(b) if execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part; or |
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(c) if it is proved to the satisfaction of the court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company." |
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Section 179 of the same Ordinance provides that:-
"(1) An application to the court for the winding up of a company shall be by petition, presented subject to the provisions of this section either by the company, or by any creditor or creditors (including any contingent or prospective creditor or creditors), contributory or contributories, or by all or any of those parties, together or separately:
Provided that-
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(a) |
............ ; |
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(b) |
............ ; |
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(c) |
the court shall not give a hearing to a winding-up petition presented by contingent or prospective creditor until such security for costs has been given as the court thinks reasonable and until a prima facie case for winding up has been established to the satisfaction of the court. |
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3. In the present case when the petition was filed no step had been taken to oppose on the ground that the notice on 10th February, 1978 to demand payment or that the petitioner had no locus standi to be a petitioner. No step was taken to restrain him from pursuing the petition. No contention was made that the petitioner was not a creditor. There was no substantial dispute that the debt was then owing. On the contrary it has been conceded even now that the petitioner up to 10th February, 1978 was a contingent creditor. By 29th April, 1978 he was certainly a contingent creditor. He was quite entitled to present a petition under the terms of Section 179 in the Companies Ordinance and the Company, at that time, was unable to pay its debts. If there was any substantial defence or dispute to the debt the Company certainly did not raise it at the hearing on 16th June when the petition was before my brother Leonard. On the contrary the Official Receiver was appointed a Provisional Liquidator by the Court without the Petitioner having to pursue his ex parte application to appoint the Official Receiver as such. The Official Receiver was appointed by the Court without further argument by any party. Even though the appointment was suggested by learned counsel for the petitioner the appointment was made without any demurrer from any party particularly the Company. The position is that on 2nd May the petitioner was definitely in a position to present the petition in view of the provisions in Section 179 of the Companies Ordinance. The appointment of the Official Receiver as a Provisional Liquidator was not entirely the responsibility of the Petitioner's. Work had been done by the Provisional Liquidator and fees are payable for the work therefore I can find less justification to order that the petitioner pays the costs of the Provisional Liquidator's fees. The fees must fall on the Company for which the Provisional Liquidator has done work. However, in view of the facts as I find them and the law as I understand it I don't feel that I'm justified in ordering the petitioner to pay its costs. The reason is that the petition was presented while the petitioner was a contingent creditor having a right to present the petition at the time. Accordingly para. (3) of the application is therefore dismissed. I am ready now to listen to counsel as to costs in this application.
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(Simon F.S. Li) |
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Judge of the High Court |
Representation:
Mr. Donnelly (H.W. & Glynn) for Applicant/Co.,
Mr. Mills-Owens (Denton Hall & Burgin) for Petitioner/Respondent
Mr. McMahon for Official Receiver
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