Scottish Court of Session Decisions

The Companies (Consolidation) Act 1908 (8 Edw. VII, cap. 69), sec. 112, is quoted supra in rubric.

Alexander Ramsay Hill, 5 Southfield, St Andrews, pursuer, raised an action in the Sheriff Court at Dundee against (1) the King's Theatre and Hippodrome, Dundee, Limited (in liquidation); (2) John Easson M'Intyre, C.A., the liquidator thereof; (3) William Black, ironmonger, Murraygate, Dundee, and others, trustees for the first mortgage debenture holders; and (4) the said William Black and others, the trustees for the second mortgage debenture holders of the said company, defenders, for declarator that he was proprietor of certain debentures in the said company. Only the trustees for the second debenture holders lodged defences.

The Sheriff-Substitute ( Neish) pronounced judgment in favour of the pursuer, and in his Note stated—… Notice of appearance was lodged for the liquidator, but he lodged no defences, and the only parties who have lodged defences are the trustees for the second debenture holders.

As regards the liquidator and the company, it is, I think, clear that these parties might have pleaded the provision of secs. 203 and 142 of the Companies (Consolidation) Act, which appear to me to provide in effect that where a winding-up is subject to the supervision of the Court, no action or proceeding shall be proceeded with or commenced against the company except by leave of the Court, and subject to such terms as the Court may impose.

At the first hearing no reference was made to this provision, probably because it had not been pleaded. After considering the case I was impressed by the peremptory terms of sec. 142, and it appeared to me that sitting in the Sheriff Court I should be very careful with regard to making any order which might affect a liquidation which is proceeding under the supervision of the Court of Session. Accordingly I put the case out for further hearing on this point. Technically, of course, the liquidator and the company were again not represented at the second hearing, but I can hardly conceive that this question has not come under their notice, looking to the intimate relation between these parties and the trustees for the second debenture holders. They have taken no steps to put forward the plea of bar in this action. I think I must take it therefore that the liquidator and the company have deliberately refrained from raising this plea just as they stated no defence on the merits.

At the second hearing Mr Little, for the pursuer, referred me to the case of Sinclair v. Thurso Pavement Syndicate Company, Limited. In that case Sinclair raised an action for interdict against the company, which was in liquidation, and the liquidators without having obtained the leave of the Court. The respondents lodged answers, but prior to the closing of the record lodged a minute withdrawing them and consenting to interdict. The complainer moved for expenses against the company and the liquidators. The respondents contended that there should be no award of expenses in respect that the complainer had raised the action without having obtained the leave of the Court. Lord Kyllachy repelled this contention, holding that the question could not now be considered, the respondents having withdrawn their answers and consented to interdict.

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In the present case, as I have said, no defences have been lodged stating the plea of bar.

I had at first some doubt whether it might not be pars judicis to give effect to the provision of sec. 142, but I have come to the conclusion that Mr Little is right when he says that there is no obligation on the pursuer to incur the expenses of the procedure necessary to obtain the leave of the Court when the company and the liquidator have deliberately abstained from raising the objection.

“Accordingly, so far as the whole of the parties who have not lodged defences are concerned, I think the pursuer is entitled to a substantial part of the decree which he craves, although not to the whole.…”

The compearing defenders appealed to the Court of Session, and drew the attention of the Court to the point which, though not pleaded on record, was adverted to by the Sheriff-Substitute in his judgment, namely, that the leave of the Court had not been obtained to allow the action to proceed in terms of the Companies (Consolidation) Act 1908 (8 Edw. VII, cap. 69), sec. 142, and they argued that on that ground the action was incompetent.

Argued for the respondent—The Companies (Consolidation) Act 1908 (8 Edw. VII, cap. 69), sec. 142, was purely in the interest of the company or the liquidator, and if it was waived by them it was not pars judicis to give effect to it. In the case of Sinclair v. Thurso Pavement Syndicate, Limited, October 15, 1903, 11 S.L.T. 364, the Court had by implication given effect to this view. In any event, if the defender were allowed to take that plea now, it could only be allowed on the condition of amending the record and paying all expenses since it had been closed— Clippens Oil Company, Limited v. Edinburgh and District Water Trustees, July 6, 1905, 7 F. 914, 42 S.L.R. 698.

At advising—