Zambia Eagle Developments Limited (In Liquidation) And In Re The Companies Ordinance (1971/HP/1141) [1971] ZMHC 20 (29 November 1971)

ZAMBIA EAGLE DEVELOPMENTS LIMITED (IN LIQUIDATION) AND IN RE THE COMPANIES ORDINANCE (1971) ZR 71 (HC) I HIGH COURT 40 DOYLE CJ 29th NOVEMBER 1971 (1971/HP/1141) Flynote Company - Winding up - Official liquidator - Powers under r. 77 of the 45 Companies Winding up Rules - Companies Ordinance - Court's powers ■ under s. 154. 1971 ZR p72 DOYLE CJ Headnote The applicant who was appointed official liquidator by a court on the application of a creditor for the winding up of the company, wrote to the receiver appointed by the holder of the debenture and floating charge over 5 all the assets of the company, requiring him under r. 77 of the Companies Winding Up Rules to deliver all books and papers of the company to him. No date or time for delivery was specified in the letter. The receiver declined on the grounds: (a) Form 37 was not used; (b) there was no enumeration of the papers and property required. The applicant applied to the High Court under s. 154 of the Companies Ordinance for an order for the 10 Receiver to deliver all the assets and papers of the company. Held: ■ I (i) Mere failure to use a specific form does not make a notice invalid if the notice contained the matters required in the form. (ii) Rule 77 enables the liquidator to exercise the powers conferred on 15 a court by s. 154 of the Ordinance but whereas s. 154 enables a court to require the delivery "forthwith or within such time as the court directs", r. 77 requires the liquidator to specify in his notice the time within which the delivery must be made. ■ (iii) Whereas a court may make an order for the delivery of documents 20 on the application of ■ the liquidator, it may decline to make an order for the delivery of the property when in its opinion the effect of granting an application will be to damage the security of the debenture. At least until the receiver is displaced by a court order, he is prima facie entitled to the property of the company 25 under the debenture. ■ Cases cited: (1) In Re Henry Pound, Son & Hutchins (1889) 42 Ch. D 402. (2) Strong & Carlyle Press [1893] 1 Ch. 268. I (3) Joshua Stubbs Ltd [1891] 1 Ch. 475. 30 (4) British Linen Co v South American & Mexican Co. [1893] 1 Ch. 108. (5) Engel v South Metropolitan Brewing & Bottling Co. [1892] 1 Ch. 442. Legislation referred to: Companies Ordinance (Cap. 216), s. 154. I Companies Winding Up Rules, (Cap. 216), r. 77. 35 Companies Act, 1929 (England), s. 204. Judgment Doyle CJ: This is an application under s. 154 of the Companies Ordinance by the official liquidator of Zambiri Limited and Zambia Eagle Developments Limited for an order that the receiver and manager and his deputy for the time being of the aforesaid companies do deliver all the 40 assets, papers and effects to the official receiver. The facts are as follows. The Standard Bank Limited holds a debenture and floating charge over all the assets of the two companies. Under this debenture a receiver and ■ manager was appointed Subsequently on a creditor's petition an order for winding up was made by the court and Mr 45 Irwin, the present applicant, was appointed official liquidator. ■ 1971 ZR p73 I ■ ■ DOYLE CJ On the 4th November, 1971, Mr Irwin wrote a letter to the receiver requiring him to deliver all books and papers belonging to the company. No date or time for delivery was specified in the letter. The receiver declined to comply. Mr Fluck for the receiver takes the point that the application is 5 premature as r. 77 of the Companies Winding Up Rules has not been complied with. He puts forward two reasons. (1) The sidenote to the rule refers to a form 37 which has not been used, and (2) there is no enumeration of the property and papers required. I would be slow to hold that the mere failure to use a specific form 10 made a notice invalid if the notice contained the matter required in the form. In fact, however, Mr Irwin's letter does not contain all such matter. As far as enumeration is concerned, it seems to me unnecessary to enumerate where all the papers are claimed. Rule 77 enables the liquidator to exercise the powers conferred on the court by s. 154 of the Companies' 15 Ordinance (s. 204 in the English Companies Act 1929). There is, however, one significant difference; s. 154 enables a court to require the delivery "forthwith or within such time as the Court directs". Rule 77 requires the liquidator to specify in his notice the time within which delivery must be made. Mr Irwin's letter does not specify any such time and, therefore, 20 does not in my opinion comply with r. 77. I do not, however, consider that this disposes of the application which is made under s. 154. The liquidator is empowered to exercise the powers conferred upon the court by that section. That does not take away the power of the court. No doubt it is much more convenient for the liquidator 25 to exercise the powers without reference to the court. I do not, however, find anything which states that the liquidator must first use his powers under s. 77 before coming to the court. It may be that a court would in its discretion decline to act under s. 154 until the liquidator had exhausted his powers. In the instant case it is clear that the receiver 30 would have made the same reply even if Mr Irwin had correctly acted under r. 77. I see no reason therefore to decline to act under s. 154. The present application is not merely for the delivery of all papers belonging to the companies. It is an application for the delivery of all the property of the companies. Counsel for the applicant submits that the 35 liquidation may be stultified if the order is ■ not made. No doubt the duties of the liquidator will be seriously hampered. This is, however, no reason why a debenture holder should be excluded from his remedy. In Re Henry Pound, Son & Hutchins (1) receiver was appointed under a debenture after an official liquidator had been appointed. The court gave 40 leave to the receiver to take possession of the property of the company. In making this order Cotton, LJ, said this: "But it is said that this will put an end to the winding - up and that it will entirely withdraw the winding - up ■ ■ ■ ■ from the control of the Court. To some extent no doubt it would, where a company which 45 is being wound up has entirely parted with all its property, be giving a simple mortgage over the whole of it. That would ■ 1971 ZR p74 DOYLE CJ paralyse the winding - up and would paralyse the action of the liquidator, and would certainly take away any provision for the costs of the liquidation; and this might be the case even although the mortgage did not include (as this does) various chattels which 5 are necessary and important for carrying on the business of the company. No doubt that would be a very awkward position for those engaged in the liquidation, and I have seen myself several instances in which all the property has gone, and the liquidator has not been able to do anything effectual or useful in the winding 10 up of the company, except selling something like the goodwill or something of that shadowy sort. ■ I But I do not think that here the receiver appointed under this deed (who is there called a receiver, which raised the presumption that he is like a receiver appointed by the Court), can do all the 15 things which are mentioned in the stipulation contained in the debenture, because he certainly cannot carry on the business of the company after the winding - up; he cannot make calls; he cannot use the company's name in any proceedings. There are a great variety of things which we do not interfere with by allowing the 20 receiver to take possession, for this reason, that, so far as my present information goes, the altered position of the company is such as to prevent various things which this deed authorises the receiver to do, being done. Therefore, I think it is the right of the mortgagees or the debenture-holders (I treat them as mortgagees) 25 to take possession of the mortgaged property, the winding - up not in any way interfering with that, or with their selling the property, and the liquidator still being enabled for the purpose of the winding - up, to employ and use in ■ ■ ■ ■ ■ carrying on the business of this company, as he may do for the purpose of the winding - up, 30 that which is not the property of the company, but which is the property of the debenture-holders, that is to say, the mortgagees." Strong & Carlyle Press (2) came to the same conclusion in declining to discharge a receiver in favour of the official liquidator. Joshua Stubbs Ltd (3) is to the same effect though British Linen Co. v South American & 35 Mexican Co. (4) clearly shows that the court can displace a receiver by the official liquidator in certain circumstances. No application is made here to displace the receiver appointed by the bank. The effect of granting this application will be to damage the security of the debenture. It seems to me that at least until the receiver is displaced 40 by a court order, he is prima facie entitled to the property of the company under the debenture. It is, of course, correct that the liquidator is entitled to some of the books or documents, and there is a discretion on the court to give him others - vide Engel v South Metropolitan Brewing & Bottling Co. (5). When 45 an application is made for the delivery of such documents, it may well be granted. The present application is for the delivery of the entire property of the companies. It must be refused with costs. Application refused. ■ I