Scottish Court of Session Decisions

William Waddell, C.A., Glasgow, had, as alleged, been employed by the directors of the company to write up the books and prepare a balance sheet, and for that purpose had been placed in possession of certain books and papers of the company. These he claimed right to retain until paid his fees. The liquidator demanded delivery that he might proceed with his duties. Mr Waddell asserted a right to retain.

The attitude adopted by the parties was this—the liquidator offered to accept the books and papers subject to any lien Mr Waddell might have, and when the question of lien came to be considered undertook to treat the books and papers as still in Mr Waddell's possession. Mr Waddell declined, but intimated his readiness to deliver either on payment of his fees or on the liquidator recognising his lien and in respect thereof undertaking to admit his claim as preferential.

The liquidator has presented this petition under the Companies Act 1908, sections 164, 174, and 193, for an order on Mr Waddell to deliver the books and papers without prejudice to any lien competent to him. It was conceded that Mr Waddell was really employed in the position of auditor of the company. It is a question which has not been authoritatively settled, and which may depend upon circumstances, whether an auditor is an officer of the company in the sense of certain other sections of the Act. But I think that there can be no doubt that he is not among the officers intended to be covered by section 164. It is therefore necessary in the present matter to have recourse to section 174, under which, by virtue of section 193, the Court can act in a voluntary as well as in a judicial winding up. Section 174 applies not merely to officers of the company, but to any person known or suspected to have in his possession any property of the company, or any person whom the Court deems capable of giving information concerning the trade dealings, affairs, or property of the company, and the Court (sub-section 2) may examine him on oath concerning the same, and (sub-section 3) may require him to produce any books and papers in his custody or power relating to the company. But then the sub-section adds, “but where he claims any lien on books or papers produced by him, the production shall be without prejudice to that lien, and the Court shall have jurisdiction in the winding-up to determine all questions relating to that lien.”

There are two practical questions which appear to me to arise. First, is Mr Waddell entitled to have the matter of his lien admitted before he hands over the books and papers. In other words, is “without prejudice to” equivalent to the admission to a preferential ranking. I think not. It means what it says, without prejudice to his lien such as it is, leaving open the question whether it is good or bad and of its extent. It is only equivalent to a right to a preferential ranking if his lien is established, as it may be established, within the liquidation. For preferential ranking is the limit of the lien-holder's right— Adam v. Winchester, 11 R. 863.

It is a matter of convenience and circumstances when that question should be determined. The determination of the question is not as of right to stay the liquidator getting possession of necessary books and papers. The latter may be urgent, the former may take time and involve inquiry, as in the case of the Lochee Sawmills Company, 1908 S.C. 559. But where circumstances admit of its being immediately determined, then I think it ought to be immediately determined, expedition in incidental matters being in the interest of the liquidation. Such a case is the present. The admissions of parties give the Court all necessary information. Whether Mr Waddell was merely an accountant employed by the company to do certain work, or was in the full sense of the term auditor of the company, or whether he was auditor of the company and something more, the authority of the case of Meikle & Wilson v. Pollard, 8 R. 69, appears to be directly in point. I do not think that an accountant employed to audit or do any other piece of work, whether for an individual or a company, has any general lien such as a law-agent. But he has a right of retention of papers put into his hands for the purpose of the work on which he is employed until he is paid the counterpart of his employment. The matter “resolves itself into a case of the relative duties of parties under a contract,” That case was followed— dubitante Lord Rutherfurd Clark—in Robertson v. Ross, 15 R. 67. I am inclined to think that that case might have been distinguished on the facts. Because it would rather appear that the factor who claimed a lien had in his hands papers placed with him generally, and not for the purpose of and necessary for his particular work as factor; and I rather think that this may explain the grounds of Lord Rutherfurd Clark's doubt. But be that as it may, as authorities for a case of the circumstances of the present these two decisions are binding, and to that extent I see no reason to doubt their soundness. I therefore think that Mr Waddell is entitled to the right of retention he claims, though he may not have a lien properly so called.

But the second question is—Can the liquidator demand exhibition of books and documents the subject of lien before taking up his attitude of requiring delivery of them? If by operation of this section the claimant of a lien over books and papers can, with a view to giving inspection to a liquidator, be compelled to produce the books and papers, it is very difficult to understand how this can in many cases be “without prejudice to that lien” except on the footing that the call to produce on that condition involves the concession of the lien and the admission to a preference. On the other hand, there are many cases

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