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TMI Blog1960 (12) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... n 109 of the Act of 1959), no such right of appeal on fact was conferred in relation to proceedings for the winding up of a company. This appeal, therefore, could succeed only if it could be shown that in making the order which he did the judge fell into some error of law. The law which the judge had to administer was that set out in sections 222 and 340 of the Companies Act, 1948. It is unnecessary to quote the words of section 222, as no argument has turned on the provisions of that section. The argument has been mainly directed to section 346, the material provisions of which are as follows : "(1) The court may, as to all matters relating to the winding up of a company, have regard to the wishes of the creditors or contributories of the company, as proved to it by any sufficient evidence ... (2) In the case of creditors, regard shall be had to the value of each creditor's debt." The first ground of appeal put forward by the appellants in their notice of appeal is in the following terms : "that in the circumstances of this case the judge was bound to dismiss the said petition having regard to the number and value of creditors opposing the same in the absence of evidence showi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any order." As authority for this proposition Crigglestone Coal Co. Ltd. In re [1906] 2 Ch. 327 ; 22 T.L.R. 585 C.A., is cited, where Buckley J. said Ibid. 331-332 : "... the order which the petitioner seeks is not an order for his benefit, but an order for the benefit of a class of which he is a member. The right ex debito justitiae is not his individual right, but his representative right. If a majority of the class are opposed to his view, and consider that they have a better chance of getting payment by abstaining from seizing the assets, then, upon general grounds and upon section 91 of the Companies Act, 1862 "[now replaced by section 346 of the present Act] " the court gives effect to such right as the majority of the class desire to exercise. This is no exception. It is a recognition of the right, but affirms that it is the right not of the individual, but of the class; that it is for the majority to seek or to decline the order as best serves the interest of their class. It is a matter upon which the majority of the unsecured creditors are entitled to prevail, but on which the debtor has no voice." It is to be remarked that in that case there was no question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the judge, who certainly did not suggest that the onus of proof was upon the opposing majority. What he actually said was : "I doubt whether any question of onus of proof arises. As I see it, it is for the court to weigh up all the relevant matters and decide whether the prima facie right of the petitioning creditor to an order should give way to the wishes of a majority of creditors expressed by the bare fact of opposition coupled with the nature of their debts." On the other side, counsel for the petitioning creditors argued that the effect of section 346 is to confer on the court an unfettered discretion to make or not to make the order sought. It was contended that, if the petition is opposed by a majority of the other creditors, the court is entitled, and is indeed bound, to look at such reasons as may be advanced for opposing what is prima facie the right of the petitioning creditor ex debito justitiae. In support of his argument, counsel referred us to the statement contained in Palmer's Company Law, 20th ed., p. 701, which is in the following terms: "This right to a winding-up order is, however, qualified by another rule, viz., that the court will regard the wis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this court in Vuma Ltd. In re [1960] 1 W.L.R. 1283 ; [1960] 3 All E.R. 629 ; 31 Comp. Cas. 254 The case had not been reported at the time of the argument, but we had the advantage of reading the transcript of the judgments delivered by Lord Evershed M. R. and Harman L. J. The facts of the case were rather special, but it is perhaps of some significance that it resulted in a minority creditor obtaining a winding-up order against the opposition of the majority. Substantially the same argument as in the present case appears to have been addressed to the court on behalf of the opposing creditors, but it did not meet with much favour. Lord Evershed, in the course of his judgment, pointed out that the submission on behalf of the opposing creditors was at variance with the statement in Palmer which I have already quoted, and which he himself quoted without any adverse comment. He summarised his view as follows Ibid 1285 ; 31 Comp. Cas. 254 , 257: "I have no doubt that the opposing creditors have formed the view in their own, quite natural, material interests that if the petition is dismissed they will get something, and perhaps in due time everything, from whomsoever is providing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of creditors can claim to override the wishes of the minority, they must at least show some good reason for their attitude. In saying this I am not to be taken as necessarily expressing the opinion that the view put forward in Buckley is wrong. I do not think this follows at all. I have no doubt that where a majority of creditors do for good reason oppose a petition for the winding up of a company, then, prim a facie, they are entitled reasonably to expect that their wishes will prevail, in the absence of proof by the petitioning creditor of special circumstances rendering a winding-up order desirable in spite of their opposition. But I am certainly not prepared to accept the view that the bare fact of the opposing creditors being in a majority is of itself sufficient, still less conclusive. So to hold would be to leave the court with virtually no judicial function to perform, and to take away from it the discretion which the words of the Act plainly confer. In the present case the opposing creditors have not seen fit to explain the reasons for their opposition. We were informed that affidavits from some of them were available ; but they were not put before the judge, who was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs had obtained a judgment; (b) the fact that they had the support of a not inconsiderable minority ; (c) the fact of the company's indebtedness to the extent of 30,000, of which no explanation was offered ; ( d ) the absence of any evidence as to what, if any, were the assets of what prima facie appeared to be a company in a relatively modest way of business. For myself, I am not prepared to say that any of these were matters which in the light of the evidence or absence of evidence, he was not entitled to take into consideration. He certainly did have regard to the fact that a majority of the creditors were opposed to the making of an order. It has not been suggested to us that there was any other matter which he ought, but failed, to take into consideration. In these circumstances I do not think it is possible for this court to interfere with the judge's exercise of his discretion, and I would, therefore, dismiss the appeal. Upjohn L.J. Where a creditor has proved his right against the company to a winding-up order ex debito justitiae, but other creditors of the company have expressed conflicting views as to the desirability of winding it up, the judge has conferred o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances. Therefore, notwithstanding the view so strongly pressed upon me by Mr. Glasse, I think I am not bound to make the order." Nor must it be forgotten that the power to make a winding-up order is by the very terms of section 222 of the Companies Act, 1948, itself discretionary, and, although an undoubted creditor is as a general rule entitled to an order ex debito justitiae, there may be special cases where, apart altogether from the wishes of creditors generally, the court may not think fit to make an order: see for an example Chapel House Colliery In re 24 Ch. D. 259. Although the statute provides that it is the wishes of the creditors to which the court may have regard, it is quite clear that, as the statute gives a complete discretion, the weight to be given to those wishes in determining whether a winding-up order ought to be made varies according to the number and value of the creditors expressing wishes, and the nature and quality of their debts. I certainly do not accept for one moment the proposition that it is merely a matter of counting heads and that a majority of 51 per cent. opposing a petition will outweigh the views of the 49 per cent, who support the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in value. Apart altogether from prospective or contingent creditors whose position may be difficult to assess, a judge may properly take the view that greater weight should be given to the wishes of a large number of small creditors against the wishes of one or two very large creditors, even though the latter are larger in amount in the aggregate. Then there may be differences in the quality of the creditors. The circumstances may be such that the court is rightly suspicious of the opposing creditors and of the motives which are actuating them. In such a case the court may desire to have evidence before it of their reasons for opposing. It must be a question of discretion in each case whether creditors should be asked to file evidence to support the views they have expressed or not. I do not think it is possible to lay down any prima facie rule one way or the other. The judge may prefer to convene a meeting to ascertain their wishes. Let me refer to two of the reported cases by way of example. In the recent case of Vuma Ltd. In re [1960] 1 W.L.R. 1283 ; 31 Comp. Cas. 254 before this court, the evidence was that the company had no assets at all and the circumstances set out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioning creditor that, as there are no provisions in the Companies Act, 1948, dealing with appeals from winding-up orders made in England, an appeal to this court from a winding-up order made in a county court is governed by section 108 of the County Courts Act, 1959 ; that is to say, the appellant must show that the county court judge has erred in point of law. As the judge was exercising a discretionary remedy, the appellant must show that he has exercised his judicial discretion on wrong, principles. The proper test was put very shortly by Jenkins L.J. in Grimshaw v. Dunbar [1953] 1 Q.B. 408, 413 ; [1953] 2 W.L.R. 332 ; [1953] 1 All E.R. 350, C.A. : "Applying the observations I have just quoted from Croom-Johnson J.'s judgment to the present case, did the judge here exercise his discretion on wrong considerations, or on wrong grounds, or did he ignore some of the right considerations ? If so, then he decided on wrong principles, his error was a matter of law, and this court can interfere." What are the relevant factors? In the first place the number of creditors opposing are very large ; that is to say, both in numbers and amount they are about three-quarters of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." If those are relevant matters to which the judge was entitled to have regard, then the appeal must fail, for it would not have been shown that he had exercised his discretion on any wrong principle. For my part, however, I think the circumstances which weighed with the judge ought not to have been taken into account by him. Reading his judgment, I am not quite certain how far he thought that the amount of paid-up capital of the company really did reflect the amount of its assets. If he did so think, and that circumstance weighed with him, he would, in my judgment, be plainly wrong in law. It is quite impossible to have any views on the amount of the assets of the company merely from a statement of the paid-up capital. With regard to the amount of the indebtedness, it seems to me that to take that into account, without knowing any other circumstance of the company's assets or trading position, was also wrong. There was no suggestion here that the company was trading wildly and in fraud of its creditors. A company setting up in Brighton to deal in furniture no doubt incurs a number of liabilities at the commencement of its trading. It has to find premises and to procure fixtur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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