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TMI Blog1965 (11) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... ph ( c ) of the subsection the court cannot confirm the reduction in the face of the objection of any creditor on the list unless the company secures payment of that creditor's debt or claim, in which case the court may dispense with the creditor's consent. Such payment must be secured by appropriating, as the court may direct, the following amount: "( i ) if the company admits the full amount of the debt or claim, or, though not admitting it, is willing to provide for it, then the full amount of the debt or claim ; ( ii ) if the company does not admit and is not willing to provide for the full amount of the debt or claim, or if the amount is contingent or not ascertained, then an amount fixed by the court after the like inquiry and adjudication as if the company were being wound up by the court." This procedure is obligatory unless the court otherwise directs. But under section 67(3): "Where a proposed reduction of share capital involves either the diminution of any liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, the court may, if, having regard to any special circumstances of the case, it thinks proper so to do, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e landlords' claims. Occasionally, and in special circumstances, a bank guarantee covering possible claims by landlords for a period of, say, ten years has been accepted without any consents or postponements on the part of any landlord. In the present case it is contended that having regard to the decision of Roxburgh J. in In re House Property and Investment Co. Ltd. [1954] Ch. 576; [1953] 3 WLR 1037; [1953] 2 All. ER 1525 t possible claims by landlords can be ignored. The evidence with regard to the company's leasehold properties is that of the 29 properties owned by the company 21 are held on terms as to rent or otherwise which are significantly below current market rates and for a period which is long enough to give the leases held by the company an appreciable value. It follows that if the company were to be wound up in the immediate future it would either be able to dispose of the residue of the respective terms for sums reflecting their varying values or, in cases where liquidation would operate to determine the leases, the lessors would benefit from the termination by being able to negotiate fresh leases on more favourable terms and in consequence would have no claims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voluntary winding up. In that liquidation the lease was sold for a large sum to a substantial assignee. There then remained upwards of 70 years of the term unexpired. The rent was 5,000 a year. A rack-rent would have exceeded 9,000 a year. The company was amply solvent, the value of its assets being estimated to exceed its liabilities by over 2,000,000. The assignee tendered rent to the lessor, who refused to accept it, claiming to be entitled in the winding-up of company B to have sufficient assets of that company set aside to meet all future rent and obligations under the lease. Roxburgh J. held that that was wrong, that the landlord had no right to refuse to accept the rent tendered by the assignee and that the tender pro tanto discharged company B. He further held that the lessor had no right to insist upon any fund being set aside to answer any future claims by him against company B under the covenants, although this was a course that the court might adopt. He thought, however, that occasion to do so would seldom, if ever, arise in future cases. After referring to James Smith Son (Norwood) Ltd. v. Goodman [1936] Ch. 216, CA, the judge said: "This is a decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into liquidation, then, having regard to the beneficial nature of the majority of the leases and what I may call the neutral character of the rest, being neither beneficial nor onerous the company's landlords would be in a position to prove only in very modest sums, if at all, in respect of future liabilities under the leases. A reduction of capital by repaying paid-up share capital is, he says, of the nature of a "partial liquidation of the company, and he submits that the company's landlords/tan insist on no more favourable treatment in the one case than in the other. Therefore, he concludes, no provision for meeting potential claims by landlords need be insisted on in the present case as a condition of a direction under section 67(3) that section 67(2) shall not apply to any class of creditors of the company. It seems to me that that argument ignores the fact that the company remains in possession of the leaseholds and, so far as I know, is likely to continue to do so for. some years. There are no assignees whose performance of the tenants' obligations under the leases would relieve the company of any obligations they might otherwise be under by reason of covenants on the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before it was assigned, surrendered or disclaimed. Down to that date the landlord could prove for all rent accrued. Upon the assignment of the lease he might also be able to prove, if the company were the original lessee or otherwise bound by covenant, for what Roxburgh J. described in a passage I have read as the value of the lessee's covenants [1954] Ch. 576, 592. But, since that value is one which takes into account the probability of an assignee duly discharging the tenant's obligations under the lease, it would, in my judgment, be clearly unfair to assume for the purposes of the notional liquidation that the liquidator had made, or would make, such an assignment; for there is no present prospect, so far as I am aware, of the companyassigning any of its leaseholds and consequently no prospect of there being any assignees from whom the landlords can expect anything. An inquiry and adjudication under section 67(2)( c ) should, in my judgment, accordingly proceed on the footing that the company will for an indefinite period remain in possession of the leaseholds, during which period the landlords will be entitled to prove for all rent accruing due. As the position is such that in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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