Official Receiver v Sontag (Civ. App. No. 8 of 1938.) [1938] EACA 95 (1 January 1938)

## COURT OF APPEAL FOR EASTERN AFRICA

## Before SIR JOSEPH SHERIDAN, C. J. (Kenya); SIR LLEWELYN DALTON, C. J. (Tanganyika); and WHITLEY, C. J. (Uganda).

## OFFICIAL RECEIVER, Tanganyika Territory, as Liquidator of Bagamoyo Planting and Trading Co., Ltd., in liquidation, Appellant (Original Defendant)

## v. GERHARD SONTAG, Respondent (Original Plaintiff) Civ. App. No. 8 of 1938.

Appeal from decision of Wilson, J. (Tanganyika).

Attachment of immovable property—Execution completed by seizure--Liquidation-Companies Ordinance (Tanganyika), secs. 173, 176 and $263$ (2).

On 30-10-36 the respondent obtained an order for attachment. before judgment of certain immovable property of the defendant company. The attachment was effected on 11-11-36 and was confirmed on $17-11-36$ by judgment in respondent's favour. Thereafter a petition was filed by another creditor and on 18-12-36 an order was made winding up the company and appointing the appellant to be official receiver for winding up purposes. The respondent applied to have the properties attached sold in satisfaction of this judgment; the appellant unsuccessfully objected to this application and appealed from the order thereon.

Held (21-11-38).—That the attachment had been duly completed by seizure: and that the application for sale had properly been allowed.

Appellant appealed from the following JUDGMENT of Wilson, $J:$ —

"In this matter the judgment-creditor obtained judgment by consent against the defendant company on 17th November, 1936, on a claim for a considerable sum of money due to him for arrears of He had previously on 30th October, 1936, obtained an salary. attachment before judgment of the immovable property of the defendants and on his obtaining judgment that attachment was confirmed by the Court.

On 18th December, 1936, on the petition of another creditor, the defendant company was wound-up and the Official Receiver appointed liquidator of the company's assets.

The defendants' property has since remained under attachment and I am informed that in the interval negotiations have been proceeding between the judgment-creditor and the liquidator as to whether he should be treated as a secured creditor, but this claim has been refused by the liquidator. The judgment-creditor has now applied to the Court for sale of the attached property in satisfaction. of his decree.

A notice has been served on the liquidator to show cause why the application for sale should not be granted and he has appeared to show cause. Judgment-creditor's advocate has suggested that the issue of such a notice was unnecessary in view of the proviso to O. 21, r. 22 (1) of the Indian Civil Procedure Code, but I do not think the point has any substance. His appearance at this stage will obviate his making an objection application to the Court later in support of his interests as liquidator. The proviso quoted does not forbid the issue of a notice to show cause but only says it shall not be necessary to issue it in certain circumstances.

The liquidator objects to the sale in execution on the ground that such a sale will defeat the interests and rights of the other creditors to share rateably in the distribution of the assets of the liquidated company. He argues that section 173 and 176 of the Companies Ordinance stand in the way of the present application. He also argues that in the present case there has been no 'seizure' of the property such as section 263 of the Ordinance requires before an execution 'shall be deemed to be completed'.

In reply judgment-creditor's counsel has submitted that his client's right to execute his judgment has not been affected by the winding-up order made subsequent to his attachment of the property in execution and he argues that the execution was complete within the meaning of section 263 because the process of attachment by the Court broker in this country corresponds fully with the English procedure of seizure by the sheriff under a writ, and that it is equally effective in establishing the rights of his client as a secured creditor.

To decide the latter point first I have no hesitation in finding that the local process of attachment in execution, whereby in the case of immovable property the Court broker enters on the property and affixes a copy of his warrant thereon and a prohibitory order is served on the judgment-debtor in respect of any transfer of the property under attachment, is as effective a seizure of the property as the sheriff's seizure in England. It has a similar effect in removing the property from any power of disposal by the owner unless and until he satisfies the judgment debt. I find therefore in the present case that for the purpose of section 263, Companies Ordinance, the execution had been completed by seizure before the company was wound up. The actual seizure was effected on 11th November, 1936, about a fortnight before the winding up petition was filed on 24th November, 1936. It therefore in my opinion constituted a completed execution within the terms of section 263 of the Companies Ordinance and the restriction on the executing creditor's rights laid down in that section cannot operate. In this connexion the decision in the case of In re London and Devon Biscuit Co. (1871, 12 Eq. 190) is of interest. Equally, in view of the above finding, the terms of section 173 of the Ordinance cannot operate against the present applicant for his attachment was put in force before and not after the commencement of the winding-up.

There only remains then to consider the effect of section 176, Companies Ordinance. In the case of In re Perkins Beach Lead Mining Co. (7 Ch. 371) it was decided that a sale in execution following on a seizure by the sheriff duly completed before the winding-up of the company was a 'proceeding' within the terms of the English section corresponding to Tanganyika section 176 which reads: -

When a winding-up order has been made, or a provisional liquidator has been appointed, 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.

This section therefore gives the Court a discretion to refuse to allow a sale in execution to proceed even when the execution is held to be a completed one under section 263. In the case of $In$ re Perkins Beach Lead Mining Co. (supra) the Court exercised that discretion against the executing creditor, the grounds of the decision being that the applicant was not a *bona fide* creditor and that the execution was one fraudulently obtained.

Applying that principle to the application now before me, I see no grounds whatever for refusing to allow the sale to proceed. The interests of the other creditors are of importance but there is no authority that I know of for holding that they are of such paramount importance as to operate *per se* to deprive an executing creditor acting bong fide of the fruits of his diligence in levying execution on the debtor company's property before the company was wound up. No fraud or had faith is alleged against the applicant and I see no reason at all for interfering with him in his efforts to realize his decree by proceeding to a sale of the attached property.

I therefore allow with costs the application for sale of the attached property in execution of the decree herein."

Morrison for the appellant.

Houry for the respondent.

The JUDGMENT of the Court was delivered by Sir Llewelyn Dalton, C. J.—The question arising on this appeal is as to the construction of certain words in section 263 (2) of the Companies Ordinance, 1931 (Laws of Tanganvika).

The plaintiff (now respondent) who claimed from the defendant company a sum of Sh. 9,041 in respect of salary alleged to be due to him on October 30th, 1936, obtained an attachment before judgment of certain immovable property of the company. This attachment was effected on November 11th. When the action came on for hearing, the defendant company consented to judgment and on November 17th judgment was entered for the amount claimed with costs. At the same time the order of attachment which had been already made and carried out was confirmed. On December 18th at the instance of another creditor, the Court made an order winding up the company and appointing the Official Receiver in Bankruptcy (the present appellant) to be Official Receiver for winding up purposes.

Thereafter the plaintiff applied to have the properties attached sold in satisfaction of his judgment. The Official Receiver objected to this application in view of the provisions of sections 173 and 176 of the Companies Ordinance and argued further that there had been no execution against the immovable property of the defendant company completed by seizure within the meaning of section 263 (2) of the Ordinance.

The only material question arising on the appeal is whether the learned Judge in the lower Court was correct in holding that the attachment effected on November 11th, confirmed by the order of the Court on November 17th was an execution "completed by seizure". so as to give the plaintiff as judgment creditor the right to retain the benefit of the execution against the liquidator in the winding up.

We have had a long argument from Mr. Morrison who urged that, in view of the source whence section 263 came, namely section 268, the English Companies Act, 1929, we must give the words "execution completed by seizure" if not the meaning which they bear in English law, at least some equivalent to what is provided in English practice and procedure. If one can find no such equivalent he argued that there can be no "execution completed by seizure" in Tanganyika. On the other hand if section 263 is so obscure that one cannot give it a reasonable construction, then he urged one must leave it alone and then proceed to use the discretion given by section 176 of the local Ordinance.

The section however does not appear to us to present the difficulty in construction which Mr. Morrison sees in it. There is only one form of seizure existent in Tanganyika in connexion with immovable property and that is the form prescribed by the Code of Civil Procedure. That form was carried out in this case and on being carried out the execution was perfected subject to judgment being obtained. Judgment was obtained, the seizure was then confirmed, and thereafter a petition was presented by another creditor for the winding up of the respondent company.

It is admitted that the English form of execution and procedure therein does not obtain in this country and unless one were to hold that the form prescribed by the Civil Procedure applied, the result would be to disregard the provisions of section 263 (2) altogether.

We find ourselves so much in agreement with the judgment appealed from on this question and the reasons in support that it is not necessary to say more. We would dismiss the appeal with costs.