Re Carrian Holdings Ltd

Case No.

Court

Date—

Judge—

Case Document

100%Judiciary

HCCW000244C/1983

HEADNOTE

Rights of a landlord to re enter premises and to distrain for arrears of rent in companies winding up proceedings.

IN THE HIGH COURT OF JUSTICE

COMPANIES (WINDING-UP)

NO. 244 OF 1983

	IN THE MATTER of the Companies Ordinance
	and
	IN THE MATTER of CARRIAN HOLDINGS LIMITED

_________________

Coram: The Honourable Mr. Justice Jones in Chambers.

Date: 8th November 1983

Mr. Winston Poon (Johnson, Stokes & Master) for Applicant

Mr. Clement-Jones for Official Receiver.

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JUDGMENT

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1. A debenture was created by the applicant Halkirk Company Limited (hereafter referred to as Halkirk) on the 28th January 1982 in favour of Wardley Limited acting as the agent for a consortium of banks and financial institutions under which the Carrian Centre and all the property and assets of Halkirk were charged to Wardley Limited to secure a loan facility of US$83,000,000. Halkirk is a subsidiary of Carrian Investments Limited (hereafter referred to as C.I.L.) which in turn is a subsidiary of Carrian Holdings Limited (hereafter referred to as C.H.L.)

2. By a tenancy agreement dated the 1st February 1982 the 19th-24th floors of the Carrian Centre were let by Halkirk to C.H.L. at a monthly rental of $1,162,176 exclusive of rates and management fees for a term of 27 months and 15 days from the 16th March 1982. On the 28th February 1982 Halkirk assigned the rental income of Carrian Centre to Wardley Limited. A petition was presented to wind up C.I.L.on the 8th October 1983 and provisional liquidators were appointed on the same day. On the 17th October 1983 Wardley Limited appointed under powers contained in the debenture Mr. Etches and Mr. Deacon to be Receivers and Managers of the Carrian Centre and the entire undertaking of Halkirk. On the same day the provisional liquidators of C.I.L. were appointed Receivers and Managers by the court in High Court Action. 12656/83 for the property and assets of 57 defendants, including Halkirk, the 27th defendant. The appointment was without prejudice to the rights of any creditors holding any mortgage, charge, or lien over the property or assets of any of the defendants.C.H.L.vacated and surrendered the lease of the 19th, 20th and 21st floors of the Carrian Centre on the 30th April 1983, but remained in occupation of the other floors at a rental of $552,960 per month. No rent has been paid since the 16th August 1983.

3. A petition to wind up C.H.L. was presented on the 10th October 1983. Provisional liquidators were appointed on the 10th and 17th October 1983. By a letter dated the 27th October 1983 a demand for payment of arrears of rent was made on behalf of the Receivers and Managers under the debenture, but no payment has been made.

4. Winding-up orders were made in respect of C.H.L. and C.I.L. on the 7th November 1983.

5. By the present summons the applicant Halkirk seeks the following orders:-

	(1)	the Applicant may be at liberty to issue a Warrant of Distress to distrain upon the goods and chattels of the above named Company for the sum of $663,552.00 being that part of the arrears of rent due from the above named Company to the Applicant for the period between 10th October, 1983, and the date hereof in respect of the premises known as 22nd, 23rd and 24th floors Carrian Centre, 151 Gloucester Road, Hong Kong and now occupied by the above named Company; and
	(2)	the Applicant may be at liberty to commence an action in this Court against the above named Company for the recovery of all arrears of rent, rates and management fees, the forfeiture of the lease in respect of the said premises and the re-entry of the same.

6. In his affidavit in support of the summons dated the 2nd November 1983 Mr. Etches avers that the provisional liquidators have since their appointments been in occupation of the premises conducting the business and affairs of various associated and subsidiary companies of C.H.L. and C.I.L. He describes the premises as the seat of management for the entire Carrian Group of Companies.

7. Mr. Poon who appeared for Halkirk submitted the following propositions:-

	(1)	Rent accrued before the petition to wind up is presented and distraint is not allowed by the Court.
	(2)	For rent accrued after winding up proceedings have commenced distraint is allowed by the Court if the company or the liquidator retains possession of the premises for the convenience of the win ding up.
	(3)	If the landlord has a right of re-entry for non payment of rent leave will be granted to the landlord to issue proceedings against the company as a matter of course despite the commencement of the winding up proceedings. The company and or the liquidator can only resist a claim for re-entry if payment of rent in full is made by the company including those portions of rent accrued before the commencement of the winding up.

Mr. Poon referred me to In re Lundy Granite Company ex parte Heavan (1871) 6 Ch. App. 462 which held:-

" Where a Company, being equitable owner of a lease, continues after 'a winding-up order in the occupation of the leaseholds, and leaves goods upon the land, the landlord is not, by sect. 87 6r sect. 163 of the Companies Act, 1862, prevented from distraining upon the goods of the company for rent accrued since the winding-up.".

In considering the circumstances when distress will be allowed for rent accrued after the winding up James, L.J. at page 466 said:-

" But in some cases between the landlord and the company, if the company for, its own purposes, and with a view to the realization of the property to better advantage, remains in possession of the estate, which the lessor is therefore not able to obtain possession of, common sense and ordinary justice require the Court to see that the landlord receives the full value of the property. He must have the same rights as any other creditor, and if the company choose to keep the estates for their own purposes, they ought to pay the full value to the landlord, as they ought to pay any other person for anything else, and the Court ought to take care that he receives it.".

In re Silkstone and Dodworth Coal and Iron Co. (1887) 17 Ch. D. 158 Fry J. at page 160 said:-

".......... an election by the liquidator to continue in possession of the property, and if he continued in the possession of the property he could only do so upon the terms of the lease, and it is only equitable, if he keeps the lease as an asset of the company and for the purposes of the liquidation, that he should satisfy those conditions upon which the asset remains his; in other words, he should pay the rent in full.".

8. In re North Yorkshire Iron Co. (1878) 7 Ch. D. 661 the landlord was granted leave by the Court to distrain for rent where the liquidator did not offer to surrender a lease but wished to retain possession and to dispose of the company as a going concern.

9. In re Oak Pits Colliery Co. (1882) 21 Ch. D. 322, Lindley, L.J. said:-

"But no authority has yet gone the length.of deciding that.a landlord is entitled to distrain for or be paid in full rent accruing since..the commencement of the winding-up, where the liquidator has done nothing except abstain from trying to pet rid of the property which the company holds as lessee. If the landlord had endeavoured to re-enter and the liquidator had objected, the case might be different , but having regard to the provisions of the Companies Act, 1862, we are of opinion that in the case now supposed the landlord must rely on his right, if any, to re-enter and prove for the arrears due to him, and that he is not entitled to anything more.".

10. The powers of the provisional liquidator in the order of the 10th October where relevant were limited as follows: -

	(l)	to take possession of collect and protect the assets of the. Company in Hong Kong and in any other country where there may be assets of the Company but such assets are not to be distributed or parted with until further Order;
	(2)	.....................
	(3)	.....................
	(4)	to carry on the business or businesses of the Company until further order but so far only as may be necessary for the purposes of preserving each business as a going concern;
	(5)	to enter into such Commitments as are necessary to preserve the assets of the Company;
	(6)	.....................
	(7)	.....................

The restricted powers allowed the provisional liquidators to carry on a business were for the purpose of preserving it as a going concern. There was no evidence, and it would have been in breach of the Court Order if there had been, that the provisional liquidators desired to retain possession for the company's benefit. Indeed the application may be justifiably criticised as premature for the summons was issued four days before the winding up order was made.

11. Mr. Clement-Jones who appeared for the Official Receiver whilst contesting the application to distrain concedes that an order for possession should be made, but seeks a stay of execution in order that assets of the company which are on the premises may be removed.

12. General Share And Trust Company v. Wetley Brick And Pottery Co. (1882) 20 Ch.D. 260 and In re Blue Jeans Sales Ltd. (1979) 1 W.L.R. 362 were cited by Mr. Poon as authority enabling the court in its companies jurisdiction to make an order for possession.

13. Upon consideration of the evidence and the authorities cited I am not satisfied that the applicant Halkirk is entitled to distrain for the arrears of rent that have accrued from the date of the presentation of the petition on the 10th October 1983. However, I shall grant leave to amend the summons by including a clause claiming possession. There will be an order for possession of the premises in favour of the applicant Halkirk with a stay of execution for 21 days. The application for rent to be paid as from to-day is refused. Costs of the application to the Official Receiver.

(B.L. Jones)

Judge of the High Court

Representation:

Mr. Winston Poon (Johnson, Stokes & Master) for Applicant

Mr. Clement-Jones for Official Receiver.