Scottish Court of Session Decisions

The petitioner, who resides at Via Vittorio Veneto, 54/E-00187, Rome, Italy, seeks an order for the restoration to the Register of Companies in Scotland of Management Strategy Ltd, hereinafter referred to as "the Company" in terms of section 653 of the Companies Act 1985. Answers to the petition have been lodged by Ueberseebank A.G., a company incorporated under the laws of Switzerland, having their Registered Office at Limmatquai 2, 8024, Zurich, Switzerland. The circumstances in which the petitioner seeks the foregoing remedy are set out in the Petition. The position of the respondents, who resist the granting of the order sought, is set out in their Answers to it.

When this matter came before me for a hearing, counsel for the petitioner began by explaining in detail and by reference to the documentation which has been produced the circumstances in which the remedy concerned was sought. He stated that the Company had been incorporated under the Companies Acts 1948 to 1981 as a private limited company on 17 January 1984, as appeared from the Certificate of Incorporation, No 6/13 of process. The petitioner himself had been a subscriber on the incorporation of the Company, when there were allocated to him 2,000 shares of £1 each. The petitioner remained a member of the Company throughout its existence and had that capacity at the time of its dissolution. He was also a director of the Company at the outset and remained so throughout its existence, as appeared from No 6/11 of process.

On 10 April 1989, there took place a meeting of the Board of Directors of the Company at 54/B Via Vittorio Veneto, Rome, of which the petitioner was chairman. A minute of this meeting is No 6/1 of process. It appears from paragraph 2 of that minute that the petitioner then reported to the Board his intention to have a commitment due from Banque Leu of Geneva made in favour of the Company and thereafter to assign this commitment to Kimble International S.A. of Panama. It was narrated that the commitment referred to arose from the "Vlasto affair", which was then the subject of litigation before the Italian Courts. In paragraph 2 of the minute it is narrated that the petitioner stated to the Board that the Company would be acting in a purely fiduciary capacity on behalf of Kimble International S.A. and sought the approval of the Board to act in the above mentioned transaction and exercise the power of the Company with his sole signature. As appears from paragraph 4 of the minute, it was resolved unanimously to approve the use of the Company for the above mentioned transaction and to confer upon the petitioner authority to sign solely.

Counsel for the petitioner explained that the commitment referred to in the minute of the Board of the Company, dated 10 April 1989 was that contained in a document by Banque Leu Genève S.A., dated 17 April 1989, which was No 6/2 of process. A translation of the document is attached to it.

As appeared from the minute of the Board meeting mentioned above, it had been proposed that there should be an assignation of the commitment concerned. That assignation was the document No 6/3 of process, dated 17 April 1989 from the Company to Banque Leu Genève S.A. It indicated that the proceeds of the commitment were to be paid in favour of Kimble International S.A. Counsel for the petitioner indicated that an issue had arisen relating to the effect of this document.

On 25 January 1991, there took place a further meeting of the Board of Directors of the Company, a minute of which was No 6/4 of process. At that meeting, the petitioner was once again the chairman. He reported to the Board that the Company had acted in a fiduciary capacity only since its incorporation and currently held no assets. It was also reported that there were no outstanding claims against the Company. It was proposed and resolved that an application should be made to the Registrar of Companies in Edinburgh for the Company to be struck off the Register. Pursuant to that decision, the Company wrote a letter to the Registrar of Companies in Scotland, in which it was stated that the Board of the Company had resolved that it should be struck off. An application was accordingly made to the Registrar for that purpose. That letter was signed by the petitioner on behalf of the Company. The letter is No 6/5 of process. Following that request, the procedure for striking the Company off the Register contained in section 652 of the Companies Act 1985 was carried through, with the result that, on 12 July 1991, the Company was indeed struck off the Register.

Subsequently the suspensive condition attached to the commitment by Banque Leu Genève S.A. was purified, the litigations against the Italian Government having come to an end. Accordingly, Banque Leu Genève S.A. was then obliged to pay the monies referred to in the commitment. However, there had taken place a further assignation between Banque Leu Genève S.A. and the respondents, Ueberseebank A.G. affecting the right of the former to the proceeds of the litigations. This document was No 7/3 of process.

The practical problem which had now arisen related to the effectiveness of the assignation in favour of Kimble International S.A. The nature of the problem could be seen from a letter, dated 27 February 1998 from Banque Leu to the respondents, No 7/1 of process. It was indicated in that letter that if the commitment in favour of the Company referred to in the letter of 17 April 1989 proved to be or became "cancelled, ineffective, extinguished, and/or non-enforceable," the value of the claims against the Italian State was to be released to the respondents.

Counsel for the petitioner explained that, by letter dated 8 July 1997, No 6/9 of process, lawyers acting for Kimble International S.A. wrote to Banque Leu demanding payment of the commitment. The reply was to be found in a letter dated 6 August 1997, No 6/7 of process. It was to the effect that it was considered that the Company had not validly transferred its rights in respect of the commitment to Kimble International S.A. A further letter concerning this issue from lawyers acting on behalf of Kimble International S.A. was No 7/4 of process, dated 24 October 1997. The correspondence showed that Banque Leu was withholding payment under its commitment because its creditor, the Company, had gone out of existence. Counsel for the petitioner next referred to a letter dated 8 June 1998 from Kimble International S.A. to the petitioner, in which it was indicated that arbitration proceedings between Banque Leu S.A. and Kimble International S.A. were in being, to decide the question of whether the transfer by the Company to Kimble International S.A. of its credit from Banque Leu was still valid notwithstanding its dissolution.

Against the foregoing background, counsel for the petitioner submitted that the courts ought to order that the Company's name should be restored to the Register, under section 653 of the Act of 1985. Sub-section (1) of that section made it clear that the machinery provided by sub-section (2) would operate "if a company or any member or creditor of it feels aggrieved by the company having been struck off the Register ..." In the present circumstances, there was a reasonable basis for the petitioner, who was at all material times a member of the Company, feeling aggrieved by the Company having been struck off the Register. There was nothing in section 653(1) which showed that a person could not be aggrieved if they themselves knew of the striking off of the company from the Register, or they engineered it. Looking at the circumstances set forth in section 653(2) in which the court might order that the name of a company should be restored to the Register, it was plain that that might be done where the court was satisfied "otherwise that it is just that the company be restored to the Register". There was no question but that the petitioner possessed a title and interest to seek the remedy concerned. By contrast, the respondents had no legitimate interest to oppose the granting of that remedy. They were not creditors of the Company and they were not due money from Kimble International S.A., their rights were against Banque Leu. However, it was accepted that, if the assignation of the commitment was not effective, the respondents would derive a practical benefit, as appeared from the letter of 27 February 1998, No 7/1 of process. It was apparent from a letter written on behalf of Banque Leu, dated 3 November 1997, No 6/8 of process, that Banque Leu would be prepared to pay to the Company under the commitment concerned, if it was restored to the Register. That would obviate the need for the arbitration proceedings to which reference had been made. Restoration of the Company to the Register would remove the risk that Kimble International S.A. might suffer loss because of the striking off of the Company. It was submitted that it would be unjust for Banque Leu or the respondents to obtain a windfall of substantial proportions in consequence of what had happened. In the whole circumstances, it would be just for the Company to be restored to the Register. The prayer of the petitioner should be granted.

Counsel for the respondents submitted firstly that, on the petitioner's own averments, he did not qualify for the exercise of the court's discretion. That situation was a consequence of the statutory language used in the Act of 1985, rather than any lack of patrimonial interest. Accordingly the petition ought to be dismissed. Secondly, under reference to authority, section 653 could appropriately be used only when a petitioner came to the court and was able to say that the only way in which a particular asset could be dealt with at all was by means of the restoration of the Company to the Register. In other words, the remedy provided by that section was one of last resort. A significant feature of the case was that arbitration proceedings were in progress in Switzerland which provided a means by which Kimble International S.A. could assert its rights. For these reasons also, the petition ought to be dismissed.

On the assumption that the first two submissions for the respondents were wrong, it would be going too far for the court simply to grant the prayer of the petition on the basis of ex parte statements made on behalf of the petitioner. The de quo of the matter was that there was a competition for the same fund, held by Banque Leu. The scope, nature and purpose of the arbitration proceedings referred to in the correspondence was not clear. In these circumstances, at the very least, some kind of enquiry would be necessary before it could be concluded that restoration of the Company to the Register was "just".

In elaboration of his first submission, counsel for the respondents drew attention to the terms of section 653 of the Act of 1985. It created a discretion in the court; there was no right to relief in any particular case. An unusual feature here was that the petitioner, a member of the Company, was not seeking relief on account of his own interest. Furthermore, the striking off of the Company from the Register had taken place with the consent of the petitioner, indeed at his request. This gave rise to doubt as to whether the present procedure was correct and as to whether it was at the instance of the correct party. Had Kimble International S.A. brought these proceedings, the matter would have been different. The position was that the petitioner might be embarrassed at the situation which had developed, but he could be no more than that. There was no suggestion that he had any legal liability in connection with the transactions involved. In short, the respondents contended that the petitioner could not be "aggrieved" by the Company having been struck off the Register, since he had been instrumental in achieving that.

In connection with this submission counsel for the respondents referred to Harrop v Bayley &c (1856) 25 L.J.(M.C.)(C.A.) 107. In that case, it had been decided by the Court of Appeal that, where a local Act gave a right of appeal to any person thinking himself aggrieved by any order of the Commissioners appointed by it, a person who had been present at a meeting and had concurred in a resolution upon which the order appealed against was founded, could not appeal. Reference was made particularly to the observations of Campbell, C.J. at pages 108-109, Erle, J. and Crompton, J. at page 109. This case showed that the petition must fail, since the petitioner himself had been instrumental in having the Company struck off the Register.

There was a further difficulty for the petitioner, since he said that in 1989, when the Company was in fact struck off the Register, he was not aggrieved. He had become an aggrieved person by virtue of a change of circumstances. That was an impossible position, according to the law. Before the remedy could be made available, the claimant must be in a position to show that he had a grievance at the time of the striking off of the company. That was apparent from In re A.G.A. Estate Agencies Ltd 1986 P.C.C. 358. In that case it was held that a petitioner seeking restoration of a company to the Register had no locus standi to present the petition because, since the debt involved had been incurred after the company had been struck off the Register, it could not be said that the petitioner was a person who felt aggrieved by the striking off. Reference was made in particular to the observations of Harman, J. at page 365. That decision followed one in In re New Timbiqui Gold Mines Ltd [1961] 1 Ch. 319. It was made clear in that case that a member of a company could not say that he was aggrieved by a company having been struck off the Register unless he was a member of that company at the material time. In the present case, the petitioner's position was hopeless. He became aggrieved only when Kimble International S.A. encountered difficulty in obtaining payment from Banque Leu. Accordingly, the petition should be dismissed.

A further reason for dismissal of the petition lay in the fact that the remedy provided under section 653 of the Act of 1985 was one of last resort. It was clear here that an alternative method of resolving the problem existed in the arbitration proceedings, to which reference had been made. That approach was explained in Re Priceland Ltd 1997 B.C.C. 207, at page 211. That same approach had been adopted in Beith Unionist Association Trustees, Petitioners 1950 S.C. 1, at page 4 and in Charles Dale Ltd, Petitioners 1927 S.C. 130, at page 132. In the present case, it could not be said that the restoration of the Company to the Register was the only effective method of addressing the problem which had arisen. There were arbitration proceedings in Switzerland and Kimble International S.A. had agreed that the question of its rights against Banque Leu should be the subject of those proceedings. If it were to be that the arbiter concluded that the only way in which Kimble International S.A. could enforce its rights was to have the Company restored to the Register, that would be an entirely different situation. For this reason also, the petition was irrelevant and ought to be dismissed.

In any event, if the court was not prepared to dismiss the petition at this stage, it should not grant the prayer without enquiry. There had been a lack of candour on the part of the petitioner, since he had revealed that he had had an involvement in the striking off of the Company from the Register only after calls had been made upon him to specify certain matters. In the original petition, the petitioner's part in having the Company struck off the Register was not disclosed. The importance of a full statement of circumstances in a petition such as this had been emphasised in England in a Practice Note published in [1974] 1 W.L.R. 1459. Certain averments made in the original petition here were in conflict with what was now said. That emphasised the importance of any enquiry prior to a remedy being granted. Furthermore, where, as here, there had been substantial delay, strong reasons had to be advanced for the grant of the remedy. In that connection reference was made to In re New Timbiqui Gold Mines Ltd at page 328.

In the present proceedings an attack had been mounted by the petitioner upon the interest of the respondents to oppose the granting of the remedy sought. The fact was that the respondents would come into possession of the funds concerned, if Kimble International S.A. did not. That was enough to establish their interest. Even if the respondents had no right to appear before the court, it still had to be satisfied that grounds for restoration were good. In that connection reference was made to Re Fort's (Manufacturing) Ltd [1994] B.C.C. 84. That case showed that where an order of this kind would directly effect the rights of a third party, irrespective of whether the applicant had any claim against the company, or the company had any claim against the third party, the third party was entitled to be joined in the proceedings. Similar views were expressed in Re Jayham Ltd [1996] B.C.C. 224. If the petition was not to be dismissed and if the court considered that an enquiry was appropriate, the case should be put out By Order with a view to discussion of what nature of enquiry was appropriate.

Counsel for the petitioner made a number of points in reply. Firstly, a By Order roll hearing would be appropriate if an enquiry was necessary; it might be that, in such an event, the appointment of a reporter might not be appropriate. Secondly, the suggestion that there had been a lack of candour on the part of the petitioner was not accepted. The petition had been served on the Registrar of Companies and on the Lord Advocate, neither of whom had thought fit to appear. Thirdly, the cases of In re A.G.A. Estate Agencies Ltd and In re New Timbiqui Gold Mines Ltd did not support the contention that the source of the grievance had to be in existence at the time of the striking off. Fourthly, as regards the point made about the remedy being one of the last resort, it would not be realistic to await determination of the arbitration proceedings. In all the circumstances the respondents were reading far more into the terms of the section than was there. All that was necessary was that the petitioner should show that the remedy was necessary.

Section 653 of the Companies Act 1985 is in the following terms:

These statutory provisions, under which the present petition is brought, do not differ materially from those which preceded them. Accordingly, I consider that it is proper for me to have regard to authorities decided under the earlier provisions in considering the present application. I also consider that it is proper for me to take into account authorities decided in relation to other legislation in which similar language occurs.

In Harrop v Bayley &c, relied upon by the respondents, the court was considering a local Act of Parliament which gave a right of appeal to any person thinking himself aggrieved by any order of the Commissioners appointed under it. It was held that a person who had been present at a meeting and concurred in a resolution, upon which the order appealed against was founded, could not appeal. In that case Lord Campbell, C.J. at pages 108-109 said this:

I take it from these observations and from the decision in that case that, in considering whether a person is aggrieved, it is not sufficient for the court simply to accept what is said by the person concerned; the court must be satisfied that the individual is "fairly to be considered as aggrieved". In a situation in which an individual complains of a state of affairs which he himself was instrumental in bringing into being, the case shows that such a person cannot fairly be considered as aggrieved.

In the case of In re New Timbiqui Gold Mines Ltd, the court was considering section 363(6) of the Companies Act 1948, the predecessor of section 653 of the Act of 1985. The issue in that case was whether the petitioners could properly be considered as a "member or creditor" of the company concerned, the situation being that they acquired shares in the company after it had been struck off the Register of Companies by the Registrar. It was held that, in order to qualify as a "member or creditor" of a company within the meaning of section 363(6), it had to be found that a person was a member or creditor of the company at the date when the company was dissolved. While this case does not bear directly upon the issue of whether a person "feels aggrieved" by a company having been struck off the Register, it appears to me that it demonstrates that, in considering an application such as the present, attention is to be focused on the state of affairs existing at the time when the company is struck off the Register. In my opinion, that emerges clearly from the observations of Buckley, J. At page 327. In that passage, it is made clear that the question for the court is not whether a person says that they are aggrieved, but whether they may properly be said to be aggrieved.

The case to which I have just referred was considered in In re A.G.A. Estate Agencies Ltd. In that case, the petitioners sought the restoration of the company to the Register in terms of section 353(6) of the act of 1948 and its compulsory winding up on the ground of insolvency. They alleged that they had been deceived into making an advance to a bank on behalf of the company as a result of criminal deception on the part of the person then in control of the affairs of the company. The advance was made some ten months after the company had been dissolved, but at the date of the hearing freehold property was still registered in the name of the company and its sale, following a winding up, would yield sufficient to meet the petitioners' claim. An issue arose as to the locus standi of the petitioners to apply for the restoration of the company to the Register, because they had not been a creditor of the company at the date of its dissolution, as required by section 353(6) of the Companies Act 1948, and the court had therefore no jurisdiction to entertain the petition. The Registrar of Companies maintained that as the authorities in favour of such an interpretation of section 353(6) were of long-standing, they should be approached with respect and great care. Further, the main authority in support of the approach was correctly decided, since the opening words of section 353(6) showed that logically a creditor must "feel aggrieved" by and at the date of the striking off, which was not the case here as there was no company in existence at the time the petitioner made the advance of which he now sought repayment. The petitioners contended that it was wrong to give a limited meaning to section 353(6) and that the court should give it the widest possible meaning so as to enable it to redress genuine grievances, which it had both a statutory and an inherent discretion to do. It was clear that the petitioners "felt aggrieved" and, giving those words their ordinary meaning, they should be allowed their remedy. The courts held that the petitioners had no locus standi to present the petition because, since the debt had been incurred after the company had been struck off the Register, it could not be said that the petitioners were persons who "felt aggrieved" by the striking off.

Once again it is evident from this case that the court cannot simply accept from a petitioner the assertion that they are a person who "feels aggrieved". The court has to examine the situation with a view to discovering whether that proposition may fairly and properly be stated. At page 365 of the report, Harman, J. said:

In the present petition, while certain aspects of the factual background are obscure, certain others are not. In Answer 7, the respondents aver:

In paragraph 7 of the petitioner's statement of facts, as adjusted, the petitioner admits that the Board of Directors of the Company met on 25 January 1991 and resolved to apply to the Registrar for the Company to be struck off. It is also admitted that the petitioner was present as the Chairman of the Board and signed the relative minute; and that the same day the petitioner wrote to the Registrar applying for the Company to be struck off. Having regard to the foregoing authorities, which I consider to be relevant to the interpretation of the words of section 653 of the Act of 1985, and having regard to the admitted facts concerning the striking off of the Company from the Register, I have reached the conclusion that the petitioner cannot properly be regarded as a person who "feels aggrieved" by the Company having been struck off the Register under section 653(2), since, on the authorities which are relevant, the issue has to be considered as at the date of the striking off. As at that date, the petitioner was plainly not an aggrieved person, since he was instrumental in engineering the striking off of the Company from the Register. In these circumstances, I agree with the submission made firstly by counsel for the respondents that the petition must be dismissed. I should say that I am persuaded that it was proper for me to hear submissions made on behalf of the respondents since they have a clear interest in the outcome of the present proceedings, the criterion which I consider applies in considering whether they have interest to resist the petition. In any event, whether they have an interest to resist the petition or not, the court requires to be satisfied by the petitioner that the requirements of the legislation are satisfied before the remedy can be granted. I have not been so satisfied. Accordingly I shall sustain pleas-in-law 1 and 2 for the respondents and dismiss the petition.

Had I not been persuaded, for the reasons which I have stated, to dismiss the petition, I would have been minded to order an appropriate enquiry into the facts and circumstances of the petition and answers. Although counsel for the respondents, in his second submission contended that the petition could be dismissed because the remedy afforded by section 653 was a remedy of last resort and was not available here, since it was clear that other remedies were available to the petitioner and Kimble International S.A., I would not have felt able, without enquiry, to sustain that argument. While reference is made in the correspondence which has been produced relating to the arbitration proceedings in Switzerland, it is not made clear in anything which is currently before the court exactly what is the scope of those proceedings or what remedies may or may not emerge from them. Accordingly, as matters stand at present, I would have felt unable to say that an alternative remedy was available in those proceedings. Furthermore, I find myself in agreement with the third submission made on behalf of the respondents to the effect that, in the whole circumstances, the court could not grant the prayer of the petition on the basis of ex parte statements without enquiry.