Scottish Court of Session Decisions

The Companies Act 1862 (25 and 26 Vict. cap. 89), section 87, enacts—“When an order has been made for winding up a company under this Act, no suit, action, or other proceeding shall be proceeded with or commenced against the company except with the leave of the Court, and subject to such terms as the Court may impose.”

The trustees of James Anderson presented a note craving the Court to grant them leave to proceed with an action of sequestration for arrears of feu-duty at their instance against James Donaldson & Company, Limited, for the winding up of which company an order had on 1st June 1907 been pronounced by the Court. The prayer of the note concluded with a crave “to find the company and liquidator, if they or either of them appear to oppose the prayer hereof, liable in expenses.” Answers were lodged for the company and the liquidator, and the petition was opposed by them. On 25th July 1907 the Lord Ordinary officiating on the Bills ( Mackenzie) refused the prayer of the note. The petitioners reclaimed, and on 26th October 1907 the Court pronounced this interlocutor—“The Lords having heard counsel for the parties on the reclaiming note against the interlocutor of Lord Mackenzie, dated 25th July 1907, Recal the same: Find the sequestration at the instance of the reclaimers competent; authorise them to proceed therewith, and decern: Find the reclaimers entitled to expenses, and remit the account thereof to the Auditor to tax and report.”

At taxation the Auditor disallowed, inter alia, all expenses incurred prior to the date of lodging answers.

The petitioners presented a note of objections to the Auditor's report, inter alia, to the disallowance of these expenses.

Argued for the objectors—There being no limitation in the interlocutor the granting of expenses meant expenses in the cause, and not merely those subsequent to or occasioned by opposition. The attempt to restrict expenses had not been made timeously. Assuming the question was timeously raised, there was no reason why the liquidator, if he chose to appear, should not pay expenses. In County of London Electric Lighting Company, Limited v. Pattisons, Limited, and Liquidators (on which the liquidator had proceeded), the expenses for which pursuers held a decree, were not those in the petition, but were the expenses incurred in the action allowed by the petition. That case consequently merely decided that the expenses of one action could not include the expenses in another.

Argued for the liquidator and company—The application to the Court for leave to proceed was necessary under section 87 of the Companies Act, and was not dependent on their opposition, which could not have resulted in additional expense prior to its commencement, the lodging of answers. The petitioners, moreover, in their prayer only asked expenses in the event of opposition, thereby practically admitting they were only entitled to expense caused by opposition. The expenses prior to litis contestatio were clearly separable from those subsequent thereto, and the Auditor was entitled to distinguish them. Prior to the lodging of answers they had caused no additional expense and ought not to be held liable for what they had not occasioned— M'Leod v. Leslie, May 27, 1865, 3 Macph. 840.