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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> The Athole Hydropathic Co. and Liquidator v. The Scottish Provincial Assurance Co. [1886] ScotLR 23_570 (19 March 1886)
URL: http://www.bailii.org/scot/cases/ScotCS/1886/23SLR0570.html
Cite as: [1886] SLR 23_570, [1886] ScotLR 23_570
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SCOTTISH_SLR_Court_of_Session
Page: 570↓
Court of Session Inner House Second Division.
v.
Facts:
Held that section 163 of the Companies Act 1862, which provides that “where any company is being wound up by the Court, or subject to the supervision of the Court, any attachment, sequestration, distress, or execution put in force against the estate or effects of the company after the commencement of the winding-up shall be void to all intents,” does not apply to prevent a heritable creditor from proceeding to carry off the moveables by a poinding of the ground, because the object of the section is to prevent the obtaining of preferences after liquidation is begun, and the action of the heritable creditor is only the making available of an existing preferable security.
The Athole Hydropathic Company was incorporated under the Companies Acts 1862 and 1867 on 18th June 1873.
On 8th August 1876, 11th October 1876, and 3d October 1877, the company granted in favour of the Scottish Provincial Assurance Company three heritable bonds for £7000, £7000, and £6000 respectively over the heritable property belonging to the company. These bonds were respectively recorded on 12th August 1876, 16th October 1876, and 4th October 1877.
On 7th August 1885 the Assurance Company called up the bonds at Martinmas 1885. At Martinmas 1885 neither principal nor interest was paid.
At an extraordinary general meeting of the company, held on 23d January 1886, a resolution was passed that the company should be wound up voluntarily, and that Mr Morison, Perth, be the liquidator. This resolution was intimated in the Gazette in terms of the Companies Acts.
On Monday, 1st February 1886, a petition was boxed by the company and the liquidator, and by creditors and a shareholder, to the First Division, praying that the voluntary winding-up should be continued under the supervision of the Court. The object of the petition, as set forth therein, was to avoid difficulties through the separate action of creditors.
On Saturday 30th January the Assurance Company, as heritable creditors, had signeted a summons
Page: 571↓
of poinding the ground against the company, which was served on the company at the registered office in Perth on Monday 1st February. On Tuesday 2d February the petition for a supervision order was in the Single Bills and order for advertisement was pronounced.
On 3d February the company and liquidator presented a note to the Lord President setting forth the service of the Assurance Company's summons of poinding the ground, and the desirability of restraining the heritable creditors from acquiring after the commencement of the liquidation a preference over the general body of creditors contrary to the provisions of the Companies Acts, and craving his Lordship to move the Court to restrain them “from taking any further proceedings in the said action of poinding the ground or in any other action, suit, or proceeding against the company having for its object to attach or affect the property of the company.” Reference was made in the note to the power given to the Court by section 85 of the Companies Act 1862, at any time after the presentation of a petition for winding up, and before making a winding-up order, upon the company's application, to restrain proceedings in any action, suit, or proceeding against the company.
Section 148 was also referred to. It provides that “a petition praying wholly and in part that a voluntary winding-up should continue, but subject to the supervision of the Court, and which winding-up is hereinafter referred to as a winding-up subject to the supervision of the Court, shall, for the purpose of giving jurisdiction to the Court over suits and actions, be deemed to be a petition for winding-up the company by the Court.”
Section 163 was also referred to. It provides that “where any company is being wound up by the Court or subject to the supervision of the Court, any attachment, sequestration, distress, or execution put in force against the estate or effects of the company after the commencement of the winding-up, shall be void to all intents.”
By section 130 a voluntary winding-up shall be deemed to commence at time of the passing of the resolution authorising such winding-up.
The Assurance Company lodged answers. They maintained “that a poinding of the ground at the instance of a heritable creditor is not a proceeding which, under the Companies Acts, the Court should restrain. Further, the heritable subjects disponed to the respondents in security of their loan to the company consist principally of an enormous building intended to be used for the business of a hydropathic establishment, but which experience has shown to be much too large for the purpose of carrying on such a business to a profit. The respondents believe that it will be next to impossible to find a purchaser for the said subjects at the price which will cover their bonds and interest. There are other similar buildings in Scotland at present in the market, which have been, and are, unable to find purchasers, and the respondents believe that it will be long before they recover any portion of their loan and interest from a sale of the heritable subjects disponed to them in security. In these circumstances the respondents submit that they ought to be allowed to proceed to make effectual their right to the moveables on the said security subjects, in ordinary form of law, and that the prayer of the note ought to be refused.”
Argued for the liquidator—The proceedings of the heritable creditor ought to be restrained, and the Court could competently restrain them, because as the commencement of the winding-up was (section 130) the date of the resolution to wind up voluntarily, the effect was to make the supervision order draw back to the date of this resolution. In the present case the effect of this supervision order was to cut down the proceedings of the heritable creditor, because by the 163d section “any attachment, sequestration, distress, or execution” put in force against a company being wound up under the supervision of the Court was declared to be null and void. The present action was of the character of those struck at by this section— Clark v. Hinde Milne & Company, December 18, 1884, 12 R. 347; Emperor Life Association, L.R., 31 Ch. Div. 78; Traders Carrying Company, L.R., 19 Eq. 60; Imperial Land Company, L.R., 11 Eq. 478; Colonial Trusts Company, L.R., 15 Ch. Div. 365. The commencement of the liquidation was the date of the resolution to wind up voluntarily, and it was all one liquidation though begun by the company and ultimately completed under supervision— Universal Disinfector Company, L.R., 20 Eq. 162; Gardiner v. Hughes, July 11, 1883, 10 R. 1138. The diligence not having been saved in the supervision order (which it might competently have been) had fallen.—Ersk. iv. 1, 11; Campbell's Trustees v. Paul, January 13, 1835, 13 Sh. 237; Royal Bank v. Bain, July 6, 1877, 4 R. 985; Lyons v. Anderson, October 21, 1880, 8 R. 24.
Argued for the Assurance Company—Poindings of the ground were outwith the class of diligences struck at by the 163d section. Poinding of the ground did not create a preference; it merely made an existing preference available. A poinding of the ground was pari passu with an action of maills and duties. The moveables were accessories of the solum, and the heritable creditors were merely by their action declaring their right to the moveables which were secured to him by his infeftment.— Dick's Trustees v. Moncrieff, January 28, 1879, 6 R. 586.
Other authorities— Lloyd, L.R., 6 Ch. Div. 339; Longdendale Cotton Company, L.R., 8 Ch, 150; Mitchell v. Scott, June 29, 1881, 8 R. 875.
At advising
Page: 572↓
Now, it appears that the order for supervision was pronounced by the Court on a petition presented on the same day upon which the summons of poinding of ground was served, and an argument upon this point was addressed to us in the course of the discussion. But I do not think it necessary for the purposes of the present decision to determine that point, or to consider whether in a voluntary liquidation continued under the supervision of the Court the commencement of the winding-up is to be held to be the date of the resolution to wind up voluntarily, because I am clearly of opinion that the proceedings which are here sought to be restrained are not within the scope of the 163d section. An action of poinding of the ground is like an adjudication, or the sale of an estate under the powers of a bond, or an action of maills and duties. These are all diligences which are open to a heritable creditor in order to enable him to give effect to his secured preference, and so far as that security extends he can make it effectual even against a trustee in a sequestration, and all the more against a liquidator in a liquidation.
The security which the heritable creditor holds over the moveables is the same as the security which he holds over the fundus of which the moveables are accessories. It may vary, no doubt, from time to time as the moveables vary, but it is secured to him by his infeftment, and accordingly his action of poinding of the ground has not the effect of creating any preference of new, but only of giving effect to a preference already in existence, while in competing actions of poinding of the ground it is priority of infeftment which secures a preference.
It would be an entire misconstruction of the 163d section if it was held to apply to a case such as the present. The object of that section is to prevent anyone in a liquidation under supervision of the Court from acquiring a preference, but as that is not the object of the present action of the respondents I think this note for the liquidator falls to be refused.
With this observation I agree entirely in what your Lordship has said as to the present application. A poinding of the ground cannot in any sense be said to be an “attachment, sequestration, distress, or execution” in the sense of section 163, and in that view of the matter I agree with your Lordship that we must refuse the note for the liquidator.
The Court refused the note.
Counsel for Liquidator— J. P. B. Robertson, Q. C.— Lorimer. Agents— Graham, Johnston, & Fleming, W.S.
Counsel for Scottish Provincial Assurance Co.— D.-F. Mackintosh, Q.C.— Jameson. Agents— Auld & Macdonald, W. S.