Standish v Ross and Another (C.C. 88A 1930 (Msa.).) [1930] EACA 81 (1 January 1930)

### ORIGINAL CIVIL

#### Before THOMAS, J.

# J. S. STANDISH, Receiver of the Estate of S. C. GREEN & CO., LTD. $(Objector)$

$\boldsymbol{v}$ .

#### MESSRS. ROSS & CHRISTIE

# (Respondents) (Attaching Creditors). C. C. 88A 1930 (Msa.).

The Companies Ordinance (Cap. 93), section 144—appointment of Auditors.

Appointment of a Receiver.

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$Held:$ That the onus of proving that the Defendant Company has failed in its obligations under the debenture deed and that the Receiver has been properly appointed rests on the Objector. Also held that the words "the Company's Auditors" in the<br>debenture deed refer to the auditors appointed under the<br>Ordinance, and that a Receiver cannot be appointed upon a certificate that the liabilities of the Company exceed its assets unless such certificate has been given by Auditors who have been appointed under the Ordinance.

JUDGMENT.—Messrs. Ross and Christie the plaintiffs in Civil Case No. 88 of 1930 obtained Judgment against the defendants S. C. Green and Co., Ltd., and proceeded to enforce their judgment by levying execution against certain motor cars belonging to the defendant company. Those cars were claimed by Mr. John Selwyn Standish, and objection proceedings were commenced by him in his own name as receiver of the estate of S. C. Green and Co. Ltd.

An application was made in Chambers and adjourned into Court by consent of the judgment-creditor and the receiver.

An affidavit in support of his claim has been sworn by Mr. Standish in paragraph 1 of which he refers to a debenture deed made between the defendant company and Messrs. Carr Lawson and Co. In paragraph 2 he states that the debenture holders became entitled to take possession of defendant company's property and that he was appointed receiver.

In my opinion the onus of proving that the defendant company had failed in its obligations under the debenture deed and that the receiver had been properly appointed rest on the objector. There has been no attempt beyond the affidavit of Mr. Standish to discharge this onus. Neither the debenture deed nor any office copy thereof has been put in. A copy has, however, been procured by the judgment-creditors, and it is

admitted by counsel for the objector that the ground on which the receiver was appointed comes under clause 12 $(d)$ and is contained in the following words: "If the company's auditor for the time being shall certify that the liabilities of the company exceed its assets."

No such certificate has been put in. The Court, moreover, is informed that no auditors have ever been appointed under the -Companies Ordinance, Chapter 93, s. 144, or at all, but that some sort of audit has been made by a firm of accountants and that it is on their report that the receiver has been appointed.

That seems to me to be a very unsatisfactory way of placing these matters before the Court. But even assuming that an audit has been made, it is obvious that it has not been made by the company's auditors. In my opinion there can be no doubt as to what was intended by the words of the debenture deed. The company's auditors is a well-known expression. They are the auditors appointed under the Ordinance. They have special powers to require the production of documents; they have special facilities to obtain information from which they are able to discover the real position of the company. It seems to me that it would be dangerous to shareholders and debentureholders alike to allow anybody to be appointed to make an audit who was not clothed with such power. If the debenture deed had contemplated any such audit then it should have so stated. The company's auditors are referred to and that is a position recognized by law. No auditors have been appointed by the company and therefore no certificate can be given. Steps should first have been taken to have auditors appointed. No such course has been adopted. I must hold that the action by Messrs. Carr Lawson and Co. in appointing a receiver is premature, and that the receiver not being properly appointed had no right to take possession of the property of the defendant company.

In view of my decision on this point it is unnecessary to consider the other points raised by the judgment-creditor.

Objection dismissed with costs.