Judgments Company Law: Refusal Of Winding-up Petition
>fpChief Justice, at Wellington. * editor petitioned for an order for the c up of the company. Che judgment * hat, if the company wire allowed to f e in business then, h the circum- c of this case, all the creditors could 1 to receive more than *Jiey would get ‘ nding-up order were made. Consethe petition was dismissed. 1
a petition to wind: Garage. Ltd. (here- > as “the com- : hich owed the! creditor £ 172 6s e 15 other credi-' posed the making' ng-up order; their: ounted to a little £l7OO aining three joined! 12 in executing a compromise from* e Chief Justice might be init. although they attended to oppose ion, they were nev- » opposed to it. The y also. opposed the' •mpany had a comta! of £ 1500: but i ’rhaps of some mis- | ”.L in respect of j manager and tore-! dismissed in 1968,, ole assets were not;* -th anything like I r. The realisable I .ere sworn to be * about £370, and the! ay was obviously ua-> o pay its debts. I - grounds for the Batt-I . were (i) that the eam-I iuny was unable to pay ital debts, and (ii) that in the' cii-curr.stances it was just and 1 equitable that it should be wound up. It was not disputed that the company was unable to pav its debts, and that is itself a ground for making a* winding-up order. Counsel for the petitioning: creditor submitted on that! basis, the petitioning creditor was entitled to a windy ing-up order as of right, nk acknowledged, however, as indeed he was bound to acknowledge, that, by vjrute of s. 332 of the Comfianies Act. 1955, “the Couft may, as to all matters relating to the w-inding-up of a company, have regard to the wishes of the creditors or contributories of the company, as! “ovgd to it by any sufficient I •dence.” In the case of! liters regard must be had I *e value ot each credits debt. In the present case, one reditor desired a winding'P. th* other creditors, vho»e debts in the aggre"U vere 10 times as large ns thrt at the petitioning credit®, opposed the wind-ing-up. I The thief Justice said that Uthoufc the opposition of ** ch Majority Of creditors was certinly a relevant con•ideratica, jf was not conclusive. Difficulties Th e . Vestion, therefore, was wheler in all the relevant ciramstances the regard whit the Court ought to have ft the wishes of an almost oveaehelming majority in value and number of creditors nould lead it to nolhse to tram the prayer of the petitm. His Hcc.4r observed that the compay appeared to have been in considerable financial dHculty, if not actually InMvent, for some time. In Deember, 1968. the
< , company called a meeting of 1 its creditors. At that time it i was . -learly insolvent. The i balance-sheet and trading ac- t count for the year ended t ' Augtst 31, 1958. disclosed i debit exceeding £2600; and i i the sssets, even at the value t ! shorn in the balance-sheet 1 I and assuming that the sundry 1 ' deb s were all good, were 1 Jsofre £6OO less than its total i 1 indebtedness. The net loss! J for that year gras £1746 12s. j’ ’At the meeting, it was re- ! ! Served that the company j - s.'ould continue in business:’ f r a further year, and that Is: the end of that year the] ! position would be reviewed, j. A' optnmittee of creditors was apndfaited. i OnTpecember 1. 1959, a fur- : i ther fleeting of creditors was . i held, was attended by 12 Icreditdß (including the peti- , tioner : whose debts represenited £2(w9 of total liabilities of £2718.1 j The committee of creditors ! explained th* financial posii tion of th* company and ! jstated that “in their opinion I (there were only two altema-l (fleet: <i> liquidation, (ii) a igomprwnise with creditors.” i !«ey proposed a scheme of! 'compromise, and the meeting * unanimously resolved that the ■ committee should take steps to "effect a legal compromise.” Compromise A deed of compromise was ' prepared and circulated, and lit had been executed by all j the creditors except the peti- ; ! tioner. Broadly speaking, it '■ provided that one of the' creditors, in the deed refer-i red to as “the mortgagee” should advance and lend to the company as an interestfree and unsecured loan a sum of £520 2s Bd. (How that precise sum was arrived at was not stated.) It was further provided that the company would pursue its legal remedies against a former employee of the com- ■ pany. ■ 1 The Chief Justice said! , there was nothing to show j : whether the company had j any such legal remedies or! , how much was likely to be! . realised from that source: but , he was entitled to infer that . the committee of creditors > (and indeed all the creditors - with the possible exception of . the petitioner) thought the remedies were worth pursut ing. t Hie deed recited that the I committee had assessed the • values of plant, stock and ■ goodwill at £273. £97 and £l5O. In the absence of contradicting evidence, his Honour accepted that these valuations were fair. The deed . provided that the creditors t would accept in full satis- ) faction and discharge of their r respective claims such mont eys as should be received by , the committee of creditors r in respect of the £520. loan, the contemplated proceedings t against the former employee. I j and the plant, stock and] e goodwill and would allow the i t company to continue in busi- * s ness without hindrance by the! e creditors or any of them.
His Honour observed that the deed did not' disclose how or when the committee would be able to receive anything in respect of plant, stock and goodwill, and still allow the company to “continue in business”: but nothing was said about that in the evidence or in the argument. Looking at the scheme of the deed and bearing in mind what was revealed by the balance-sheet and such other ■ accounts as were in evidence, !it seemed to his Honour there was at least a strong probability that, if the scheme was allowed to be put into effect and the company was allowed to continue in business, the creditors could be expected to receive not less than £520 more than ! they would receive if a ; winding-up order was made i That was a circumstance that afforded a substantial reason j for refusing to make a '.winding-up order. Dismissed The Chief Justice held that I when, as here, a great majority of the creditors opposed a petition for winding-up the Court should give effec to their wishes unless thi petitioning creditor coulc give some “valid reason” ot “special circumstances” whj effect should not be given t< those wishes. In the present case, hi: : Honour continued, the com i pany had some assets (no ! many it was true) and, if i | winding-up order were no made, a loan of £520 woul( I be made available to assist i 'in paying its debts. So fa i as he could judge from th: '' evidence, the creditors wen likely to receive substantial!; more if a winding-up orde were not made than the; would receive if the orde were made. The petitioning creditor hai given no evidence to show ! and had made no submissioi , I that, if the order were made I he would receive any advan tage which he would no , receive if the order weri , refused. i There was no suggestioi . that any investigation of th : company’s affairs was calle, i for. Its claims against : ' former employee were beini ' competently investigated. ' The Chief Justice held thai in the circumstances, it wa I not just and equitable tha ■ I the company should b ’ wound up by the Court. Th ,! petition was accordingly dis j missed with the usual conse * quences as to costs. ; Counsel: For the petition ' ing creditor. Inglis; for th ’ company and other creditors ! Castle. , Solicitors: For the petition ; ing creditor. Martin, Murph; and Jeffries (Lower Hutt) , for the company and opposin ; creditors. Castle and Castl j (Wellington).
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Press, Volume C, Issue 29500, 29 April 1961, Page 17
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1,352Judgments Company Law: Refusal Of Winding-up Petition Press, Volume C, Issue 29500, 29 April 1961, Page 17
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