Scottish Court of Session Decisions

Whitbread (hotels) Ltd v. Whitbread (gc) Ltd [2002] ScotCS 4 (4th January, 2002)

OUTER HOUSE, COURT OF SESSION
P579/01	OPINION OF LORD EASSIE in the petition of WHITBREAD (HOTELS) LIMITED First Petitioners: and WHITBREAD (GC) LIMITED Second Petitioners: for For an Order in terms of Section 653 of the Companies Act 1985 for the name of Walkmore (95) Limited to be restored to the Register of Companies ________________

First Petitioner: Tyre, Q.C. and Devlin; Drummond Miller, W.S.

Second Petitioner: Mrs S. Wolffe; Simpson & Marwick W.S.

4 January 2002

1. The petitioners in this application under Section 653 of the Companies Act 1985 - "the Act" - are two associated companies within what I understand to be the Whitbread group of companies. The first petitioners own and operate an hotel in Swansea. The second petitioners own and operate an hotel in Slough. The petition, in its adjusted form, seeks two things - firstly an order that the name "Walkmore (95) Limited" be restored to the Register of Companies and secondly, an order that the period between the date of that company's being struck off the Register of Companies and the date of the order restoring the name of that company to that Register, should not be counted for the purposes of any enactment laying down a prescriptive or limitation period within which any proceedings against the company must be brought.
2. Walkmore (95) Limited, the company which it is sought to have restored to the Register of Companies, was incorporated in Scotland on 28 February 1986 under the original name of Cobban & Lironi Limited. I was told that following incorporation it acquired the practice carried on by a partnership under the name of Cobban & Lironi which offered the services of professional architects and structural engineers. On 23 June 1995 the company so incorporated changed its name to Walkmore (95) Limited - hereinafter referred to as "WM". On 17 November 1995 application having been made on behalf of WM by its directors, the Registrar of Companies published in the Edinburgh Gazette a notice in terms of Section 652A(3) of the Act to the effect that, unless cause to the contrary were shown, at the expiry of three months from the date of that notice the name of the company would be struck from the register and the company would then be dissolved. No such cause having been shown WM was struck from the register and was in due course dissolved on 8 March 1996. Among the duties imposed on directors applying under Section 652A for dissolution of a company, are those contained in subsection (6) of Section 652B of the Act which stipulates that:-

"A person who makes an application under 652A on behalf of a company shall secure that a copy of the application is given, within 7 days from the day on which the application is made, to every person who at any time on that day is -

....

(c) a creditor of the company.

..."

3. Each of the petitioning companies has undergone various changes of name, the precise details of which need not be mentioned. The first petitioners were at one time known as Allied Innkeepers (UK) Limited and, when enjoying that name, in 1988 and 1989 engaged WM to provide professional services in connection with the construction of an hotel in Swansea. The second petitioners were at one time known as Scotts (SG) Limited and, when enjoying that name, in 1990 and 1991 were also the recipient of professional services from WM in connection with the building of an hotel in Slough. The names of the hotels in question have also changed at stages over the years and I shall simply refer to them as the Swansea Hotel and the Slough Hotel respectively. It is averred on behalf of the petitioners that, put very shortly, defects have emerged in each of the hotels and the first purpose of the present petition is to restore the company in order to enable claims for damages to be advanced against the company once it has been restored to the register.
4. As respects the Swansea Hotel, proceedings have been instituted in England by the first named petitioners, and various other pursuing parties, against a number of defending parties, the ninth of whom bears to be WM (the dissolved company). The documents produced in the present petition process include certain substitute or amended particulars of claim (numbers 6/2 and 6/3 of process) whence it appears that, put shortly, the primary claim advanced by the plaintiffs in those English proceedings is directed against the tenth defendant in those proceedings, namely a company Cobban & Lironi Limited (formerly known as Cobban & Lironi (93) Limited), which provided architechtual and engineering services to remedy the averred long standing water penetration defects in the hotel. It is contended by the plaintiffs that those services, which were provided in order to remedy the defects, were furnished negligently or in breach of contract. The liability alleged against WM on the other hand, arises on an essentially alternative basis given the terms of paragraphs 13 and 22 of the "amended, substituted particulars of claim" number 6/3 of process. It appears from the terms of the particulars of claim, that at the time of raising the action in England the first named petitioners were unaware of the earlier dissolution of WM.
5. As respects the defects in the Slough hotel, all that is averred in the petition before me is that -

"In 1999 brickwork movement joist problems were discovered in the premises known as the Slough/Windsor Hotel. The brickwork movement joist

problems were found to have been caused by the negligent professional services provided by [WM]. Substantial replacement works will require to be undertaken in order to obviate the said problems.".

6. No proceedings had been instituted in England (or elsewhere) respecting this claim. Mr Tyre Q.C., who appeared for the petitioners, told me that he had been given sight of a draft expert report which attributed responsibility for the problems, which only emerged in 1999, to certain design deficiencies of which he mentioned one illustrative instance attributable allegedly to the fault of WM who had unquestionably provided professional design services at the time of the construction of the Slough hotel in 1992.
7. As I have already indicated, WM was struck off and dissolved pursuant to the provisions of Section 652A of the Act. Where a company has been dissolved pursuant to those provisions, Section 653(2B) of the Act provides what have elsewhere been described as three "gateways" to restoration of the defunct company to the register. Only two of those gateways are invoked by the petitioners in these proceedings. The first is set out in subparagraph (a) of subsection (2B) of Section 653. That gateway consists of a failure in the statutory duty to give notice to a creditor of the company whose dissolution was sought. Counsel for the petitioners pointed out that in relation to the duty to notify a creditor of the company, the definition of "creditor" included, in terms of Section 652D(8), a "contingent or prospective creditor". In submitting that the petitioners were prospective or contingent creditors of WM at the time of striking off, counsel for the petitioners referred to what had been said by the Court of Appeal in England in City of Westminster Assurance Company Limited v Registrar of Companies and Another [1997] BCC 960. Counsel drew attention to the quotation by Millett LJ (with whose judgment the other members of the court agreed) from the judgment given by Megarry J in Re. Harvest Lane Motor Bodies Limited [1969] 1 CH 457 and set out by Millett LJ at 962D. Counsel for the petitioner further referred to the observations anent the intention of the section made by Millet LJ at 964A -

"The section is intended to provide a remedy for a person who has a claim, whether against the company or a third party, which can be enforced only if the company is restored to the register. He is a person who, being a creditor of the company, has a legitimate grievance if the company is dissolved and he is no longer able to enforce the liability. It does not matter whether he seeks to enforce the claim against the company itself or whether he needs to establish the company's liability in order to make a claim against a third party such as the company's insurer or guarantor.".

8. Since the first petitioners were at least prospective creditors in the event of liability being established there was, said counsel, a duty upon those seeking dissolution of WM to give the petitioners notice of the application for striking off, even though at the time the directors making that application for the removal of WM from the register were unaware of the prospective claims.
9. It was further, and alternatively, submitted on behalf of the petitioners that they might enter through the third "gateway" in section 653(2B), namely para (c) which provides for restoration if the court is satisfied "that it is for some other reason just to do so". Counsel submitted, in light of the purpose of the section described by Millett LJ, that it would be just to enable the petitioners to pursue their claims against WM, who were insured.
10. In her response to this branch of the petitioners' argument Mrs Wolffe, counsel for the compearing respondents, who are the directors of WM, noted that

counsel for the petitioners had recognised an artificiality in the concept of a duty to give notice to prospective creditors of whose existence the person charged with the duty was unaware. Mrs Wolffe described as tempting the argument that the provisions of Section 652B(6) ought not to be construed in a manner productive of such an artificiality. However, she expressly stated that she resisted all such temptation and abstained from advancing any argument that the duty to give notice to contingent or prospective creditors was qualified by knowledge of their existence, or potential existence. As respects the Slough Hotel counsel observed however that since damage was averred only to have emerged in 1999 there was no conceivable basis for the existence of any prospective liability in 1995. But, as I understood her, Mrs Wolffe recognised that, if WM were restored on the basis of the application by one of the petitioners, in its re-incarnated state WM would be open to claims from other creditors. She accordingly moved her argument to the issue whether it would be "just" to order restoration. In these circumstances, having heard no contradictory argument on the proper construction of the terms of section 652B(6)(c) and the duty to notify creditors, including prospective and contingent creditors, I refrain from expressing any opinion on that matter.

11. On the issue whether it be just to restore WM, counsel for the respondents submitted, as I understood it, that as respects the Swansea Hotel, the claim appeared to be directed against the tenth defendants and the basis for involving WM (the ninth defendants) was not only alternative but, she said, tenuous. It was therefore to employ the language of Hoffman L.J. in re. Forte's Manufacturing Ltd, Stanhope Pension Trust Ltd v Registrar of Companies [1994] BCC 84, at 90A-B, which had been quoted by Neuberger, J. in re Blenheim Leisure (Restaurants) Ltd (No 2) [2000] BCC 821, a "shadowy" claim. So far as the claim respecting the Slough Hotel was concerned it was, said counsel, plainly time-barred in terms of the English limitation statutes.
12. I am not persuaded that it would be right for me, as a judge in Scotland, to decline to restore WM to the register on the grounds advanced by counsel for the respondents. The contracts which WM concluded in relation to the construction of both hotels were apparently governed by English law. It was not suggested that the petitioners' claims fell to be adjudicated otherwise than under English law. Although certain statements were made at the Bar respecting the English law of limitation of actions that law is, for me, a foreign law which technically requires proof as a matter of fact. Leaving aside that technical aspect, it is of course clear that in the field of prescription of obligations and limitation of actions there are significant differences between Scots and English law. Counsel responsible for drafting the English proceedings has seen it appropriate to include an alternative claim by the first petitioners against WM in that action. I naturally assume the existence of a professional responsibility broadly equivalent to that expected of those admitted to the public office of advocate in Scotland and it would, in my view be inappropriate in a petition for restoration of the company to enter into any detailed examination of the existence or validity of that claim. In that I am fortified by what was said in the City of Westminister Assurance Company case. In these circumstances I consider that sufficient grounds had been demonstrated to justify restoration of WM to the register and I shall therefore grant the first substantive branch of the prayer of the petition.
13. I turn next to the second branch of the prayer of the petition which asks this court to decree that all of the period of time which has flowed between the date of the dissolution of WM on 8 March 1996 and its restoration to the register pursuant to an order pronounced in these proceedings should be ignored in the computation or reckoning of time for the purposes of any rule relating to the prescription of obligations or the limitation of the bringing of actions by reason of the lapse of time. Since, as Mr Tyre for the petitioners acknowledged, there are distinct time-bar questions surrounding the claims respecting both of these hotels this issue is of obvious importance. The relevant statutory provision, to be found in section 653(3) of the Act, provides that, on making an order for the restoration of a company to the register, the court "may by the order give such directions and make such provisions as seem just for placing the company and all other persons in the same position (as nearly as may be) as if the company's name had not been struck off".
14. Counsel for the petitioners submitted this statutory power ought to be exercised in the manner craved in the prayer of the petition, that is to say, by effectively wiping out the effluxion of time since March 1996. In support of that contention Mr Tyre referred firstly to the decision of Roxburgh J. in In re Donald Kenyon Ltd [1956] 1 WLR 1397 in which the court had stipulated that as regards creditors who were not statute barred at the date of dissolution the period between dissolution and restoration should not count. Secondly, counsel for the petitioners referred to report of the decision in In re Lindsay Bowman Ltd [1969] 1 WLR 1443.
15. In the latter case Megarry J. referred to the former case as an example of the use of the power contained in the closing words of the sub-section, which I have already quoted. Counsel for the petitioners pointed particularly to the observations of Megarry J., 1446, in which he said, respecting the direction made in Donald Kenyon Limited, :-

"Such a direction seems to me to effectuate the general purpose of the concluding limb of the subsection. If a creditor had six years in which to sue the company, and his time ran out after the company had been defunct for five years, he would have had only one year in which he could effectually have sued the company. He may justly say that he ought not to have been deprived of five years. He cannot have the precise five years which he has lost, but he can be given five other years by way of replacement. This will put him 'in the same position as nearly as may be as if the name of the company had not been struck off'. I may add that In re Huntington Poultry Ltd [1969] 1 WLR 204 shows such a provision will be inserted in the order only if sufficient grounds for so doing appear, and not as a matter of routine;".

In support of his contention that it was appropriate that the whole period of time flowing since March 1996 should be discounted, albeit that the present petitioners had taken no steps to institute proceedings until the raising of the current English proceedings respecting the Swansea Hotel, counsel for the petitioners submitted that it was appropriate to make that whole period of dissolution not reckonable for prescription or limitation purposes in order that one might be consistent as respects all of the potential creditors.

16. For her part, counsel for the respondents disputed the appropriateness of granting the second branch of the prayer in the terms sought. She submitted that, while the petitioners appeared to rely on the decision in In re Donald Kenyon Ltd, it was to be noted that in that case the persons seeking restoration of the company were the contributories who did so for their own advantage and a direction in terms of the direction made in that case should not have been seen as standard. The power contained in the concluding text of Section 653(3) should not be used so as to confer an advantage on a party. Thus, in In re Lindsay Bowman Ltd the court had declined to grant a direction (the In re Rugby Auto Electric Services Ltd direction) which would give an advantage to the creditors of the company. The purpose of the order was to restore the company's legal personality, but not to improve the rights of its creditors. The petitioners in the present case sought the advantage of having discounted for the purposes of the rules on limitation of actions the period between dissolution and the taking of proceedings, during which they had taken no steps at all to prosecute their claims or to have the company restored. Giving that advantage to the petitioners would deprive the company, and its insurers, of the protection of the limitation statutes which they would have enjoyed if the company had not been dissolved. Counsel for the respondents further referred to Smith v White Knight Laundry Ltd [2001] 3 All ER 862 in which it had been stated that in personal injuries claims the normal course would be to make no direction respecting time when making an order for restoration of the proposed defendant, leaving the plaintiff to invoke the discretion given by section 33 of the Limitation Act 1980.
17. In my view there is force in what was said by counsel for the respondents respecting this branch of the argument. It appears to me that to make a direction in the terms sought would indeed confer a benefit on the present petitioners and confer a corresponding prejudice on the company - and its insurers - by removing from the calculation of limitation periods a substantial tract of time after the dissolution of WM in which no steps were taken by the petitioners to prosecute their claims against it. I recognise of course that, as counsel for the petitioners stated, during that period the petitioners could not in fact have sued WM because it had been dissolved. However, there is nothing to suggest that the petitioners made any attempt to sue WM during that period, or indeed that they were aware of the dissolution of the company until a date after they had raised the current proceedings respecting the Swansea Hotel. I am not persuaded by Mr Tyre's suggestion that the justification for a direction in the terms sought is to be found in a supposed need to protect other possible creditors. As counsel for the respondents pointed out, the case of Donald Kenyon Ltd involved an attempt by the contributories to recover certain assets which had emerged subsequent to dissolution and one may see that it is perhaps appropriate in such a case that, before they claim the assets of the company, the creditors be given the right to get their share first. But insofar as they may be inconsistent with what was decided in that case and its illustrative employment in In re Lindsay Bowman, I find more persuasive and pertinent to the present case the views expressed by Buckley J. in In re Huntington Poultry Ltd. In that case the applicants for restoration of the company had claims which were not time-barred. A direction regarding time-bar was therefore unnecessary so far as they were concerned. In his judgment Buckey J. said this (207):-

"There is no indication that any other creditors of the company are affected. There is nothing to suggest that any other creditor would be benefited by inserting in the order any special provision relating to limitation. If a creditor looking after his own interests applies for the restoration of the company to the register and obtains an order restoring the name of the company to the register, I see no reason why he should not have the benefit of his own activities in that respect and why he should be in any way particularly concerned, or why in those circumstances the court should be particularly concerned, in protecting the interests of any other creditors who have not taken the initiative of looking after their own interests.

This is not a case of a contributory's petition, as in In re Donald Kenyon Ltd [1956] 1 WLR 1397. It is a case where a particular creditor is taking steps to protect his own personal interests. In the absence of any indication that there are creditors who would be, or might be, unfairly affected by an order not containing a special provision as to the limitation of actions, I think the order should go in the form which does not contain any such provision.

The position might have been different had the petitioner himself in this case had to ask the court's assistance by inserting some direction so as to exclude the operation of the Statute of Limitations upon his own debt, but that is not the present case. If other creditors have allowed their debts to become statute-barred without themselves taking any step to prevent that result, then I do not think that it is necessary for the court on this application to protect them."

As was implicit in all that Mr Tyre had to say, there is no particular reason why the petitioners should have the consequences of their inactivity in the period between the dissolution of the company and the raising of proceedings respecting the Swansea Hotel undone. Likewise I see no reason why other creditors of the company who have similarly been idle during such a period should have any benefit conferred upon them. Accordingly I am of the view that it would not be right to direct that any period prior to the raising of the Swansea Hotel action should be discounted for the purposes of limitation or prescription. On the other hand it may be said that the period ensuing after the date at which the first petitioners sought to interrupt the effluxion of time for limitation purposes by the commencement of their action respecting the Swansea Hotel during which there was in existence an action, albeit incompetently raised, against the company whose existence it is sought to have restored should not count for limitation purposes. Counsel on both sides were uncertain as to the date upon which the action relating to the Swansea Hotel would properly be treated under English law as having been commenced, for the purposes of the English Limitation statutes, and they jointly requested that, in the event of my reaching the conclusion which I have reached, I should put this case out "By Order" in order that the court might be further informed as to the precise date of that commencement. I am content to adopt that suggested course of proceeding.