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TMI Blog1971 (3) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... ders of the company at all relevant times were Mr. and Mrs. Hay, with 250 shares each, Mr. Kinslow with 250 shares, Mr. Bailey with 50 shares and the fertilizer company with 200 shares. The board of the company considered originally of the four individual shareholders--Mr. and Mrs. Hay, Mr. Kinslow and Mr. Bailey, Mr. Kinslow being the chairman. Mr. Bailey Was the chairman of the board of the fertilizer company and Mr. Kinslow was the managing director. Accordingly, Mr. Kinslow and Mr. Bailey and the fertilizer company in which they held high office could exercise 50 per cent, of the voting power of the company at general meetings. The company's year ended on June 30. During its first broken year it traded at a loss of about £11,000, and during its second year, ending on June 30, 1965, it traded at a loss of £5,000. On September 16, 1965, Mr. Kinslow and Mr. Bailey resigned from the board of the company. On November 24, 1965, notices were sent to the shareholders convening an extraordinary general meeting of the company. The notice was for the purpose of considering, and if thought fit, passing the following resolutions as extraordinary resolutions : "(a) That it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, if not for a certainty, be passed. On December 9 the meeting of shareholders was held. Those present consisted of Mr. Hay, a proxy for Mrs. Hay, Mr. Kinslow, Mr. Bailey and Mr. McGonigal, as the representative of the fertilizer company. The resolution to wind up was put; it was passed by the votes of Mr. and Mrs. Hay without any dissentient voice, as Mr. Kinslow and Mr. Bailey and Mr. McGonigal must have known would be the case. The shareholders' meeting was followed by the statutory meeting of creditors. At the latter meeting Mr. Tickler was appointed liquidator. The statement of affairs showed an estimated deficiency as regards unsecured creditors, subject to costs of realisation, in excess of £25,000. I quote, for reasons which will appear later, from the liquidator's report dated December 30, of the statutory meeting of creditors. Messrs. W. H. Cork, Gully & Co. say this: "Confusion also exists concerning the motor vehicles of the company and the correct title of these assets. Certain vehicles have been transfer red out of the company into other names, and Mr. Hay has also been paying out the hire-purchase on two of the vehicles concerned. An independent valuation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view as to Mr. Kinslow's proposition that the resolution to liquidate was invalid. Later he considered the matter, and in January or February, 1966, he reported back to Mr. Kinslow, that Mr. Kinslow was probably technically correct, so that the meeting was not validly convened. He did not communicate this view to Mr. Tickler at that time. In the meantime a point arose in connection with a lorry which was the subject matter of a hire-purchase agreement made by the company but which the fertilizer company had agreed to bay from the company. Mr. Kinslow, writing again in his capacity as managing director of the fertilizer company, addressed the following query to Mr McGonigal in a letter of January 27, 1966 : "... this lorry now is a burden to us. It must have been misused at Midhurst. It is costing to us too much to run, and we propose to get rid of it. However, in view of Bailey, Hay being in process of liquidation, and also there is a hire-purchase agreement concerned, we with to know the legal position before actually selling the vehicle." There followed a correspondence between Messrs. Coward, Chance & Co. and Messrs. W. H. Cork, Gully & Co. It began with a letter of March 8, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of loss sustained will be the basis of a claim in the liquidation upon which a dividend will be payable if admitted. This I am prepared to agree, provided that the claim does not include a figure for damages other than expenses incurred and moneys paid away, for which no benefit has been received." Finally, on May 16, from Messrs. Coward, Chance & Co. to Mr. Tickler, a letter in these terms : "Bailey, Hay & Co. Ltd. (In liquidation). Bedford truck...Thank you for your letter of May 11. We agree that any claim to be made by our clients will be a claim in liquidation upon which a dividend will be pay able if admitted. We do not feel that at this stage we can agree to limit our clients' claim to expenses incurred and moneys paid out for which no benefit has been received. We have not investigated the quantum of any claims which our clients might have as at this stage they do not propose to raise any. We hope you will be satisfied with this position." And I believe that in the end, no proof was lodged in the liquidation by the fertilizer company. The committee of inspection bad instructed Mr. Tickler to engage accountants to make a preliminary investigation into the affairs of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruce is adamant that Mr. Kinslow confined himself to saying merely that the meeting of December 9 was convened by short notice. Mr. Kinslow, Mr. Bailey and Mr. McGonigal go further, and say that Mr. Kinslow positively asserted that Mr. Tickler's appointment as liquidator was therefore invalid. The meeting of March 22, 1966, was the first occasion on which the short notice of the meeting was openly raised. If was also the first occasion on which the possible invalidity of Mr. Tickler's status as liquidator was openly raised, if in fact it was so raised at all. It was also the last occasion on which either point was openly raised until Mr. Kinslow and Mr. Bailey swore their affidavits in these proceedings in December, 1969. Neither Mr. McGonigal, Mr. Kinslow nor Mr. Bailey possess any notes of what transpired at the meeting of March 22, although Mr. McGonigal recalled in the witness-box that he thought he had at one time possessed such notes. None of them even wrote to Mr. Bruce or Mr. Tickler to put on record that objection was taken to the validity of Mr. Tickler's appointment. Mr. McGonigal said that he did not feel that he was under any duty at all to write formally to Mr. Tickl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for £5 or £10. Mr. McGonigal attended that meeting, ostensibly as Messrs Coward, Chance's representative, but actually on behalf of the fertilizer company, which paid him for that purpose. There is no evidence as to who attended the shareholders' meeting if there were one. On September 1, 1967, Messrs. Donald Bruce & Co. presented their second report on the affairs of the company. On March 26, 1968, Messrs. Cork, Gully & Co. submitted a long questionnaire to Mr. Kinslow. The questionnaire was answered through Messrs. Coward, Chance & Co. on June 28,1968, no objection being taken to the status of Mr. Tickler. There was some further correspondence. Finally on August 25,1969, the present summons was issued claiming that certain payments made between July and September, 1965, by the company were a fraudulent preference of the fertilizer company. As I have indicated, the preliminary answer of the fertilizer company is that the company is not, and never has been, in liquidation. This highly equivocal attitude of the fertilizer company, of Mr. Kinslow and Mr. Bailey as its responsible officers, can be illustrated, if not explained, by certain extracts from the correspondence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situation was this and I so find. Mr. Kinslow and Mr. Bailey as officers of the fertilizer company had no objection whatever to the company being liquidated, although they personally regretted that their names were associated with a bankruptcy. They were, however, very dissatisfied with the state of the company's affairs, as indeed were the creditors, as appears from Mr. Tickler's report of December 30, 1965. Mr. Kinslow and Mr. Bailey had misgivings in the first instance as to whether Mr. Tickler would really cause a full and thorough investigation to be made into the company's affairs, misgivings which Mr. McGonigal told me, and I think told his clients, he did not really share. Mr. Kinslow and Mr. Bailey reserved mentally the right to object to his appointment in case they wanted to challenge the way in which he was conducting the investigations and get somebody to replace him. I say " mentally " because the only time that the reservation, as it were, surfaced into public view was at the meeting of March 22, 1966. In the end it seems to me Mr. Kinslow and Mr. Bailey were perfectly content with Mr. Tickler as liquidator, but now the point has been resuscitated for a wholly diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppreciate the force of what Mr. Millett submits, but I think it is important to bear in mind the broad picture of this case. In 1965 the fertilizer company is a shareholder in the company. The company is hopelessly insolvent. The shareholder receives a 14-day notice of a meeting at which voluntary liquidation is proposed. The shareholder is advised by a qualified solicitor and is represented by him at the meetings No one realises at the meeting that it has been convened, at short notice. The shareholder suffers resolution to be passed and sees the company ostensibly placed in liquidation. Within the next fortnight the shareholder realises that the notice was short by one day but does not openly disclose this fact until a farther three months have elapsed. The shareholder deals with the liquidator as liquidator in a dispute over a lorry and reserves the right to prove in the liquidation. The shareholder even attends the statutory creditors' meeting under borrowed colours. The shareholder raise no effective objection to the liquidation until three and a half years after it began. The shareholder qua former creditor is then called upon to discharge an obligation, or alleged obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g them as having agreed to the liquidation- I observe that in a paragraph from a letter written by Mr. Kinslow on January 2, 1967, which I have already read, Mr. Kinslow himself apparently saw nothing strange in the remark that "I was given inadequate notice of the meeting at which the liquidation was agreed." It seems to me that that was a very appropriate observation. Secondly, the fertilizer company is in my view, barred by laches from now disputing that the company is in liquidation. The fertilizer company as setting up a positive case against the liquidator, a case which inevitably involves a claim that the liquidator has no status whatever and is wrongly in possession of the company's assets. In my judgment, the equitable doctrine of laches is applicable to that situation just as if the fertilizer company were seeking a remedy against the liquidator. It will be sufficient for present purposes to cite a passage from the speech of Lord Blackburn in Erlanger v. New Sombrero Phosphate Co. [1878] 3 App. Cas. 1218, 1279 ; "In Lindsay Petroleum Co. v. Hurd [1874] L.R. 5 P.C. 221, 239 it is said : the doctrine of laches in courts of equity is not an arbitrary or a technical doctri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any is in any event barred by their laches. I have purposely left to the conclusion of my judgment one dispute of fact which I think is really the only disputed fact in the case: that is to say, whether at the meeting of March 22, 1966, Mr. Kinslow asserted that the appointment of Mr. Tickler as liquidator was invalid so that he had no status. I do not think that the point is very material because nothing was ever done about it by Mr. Kinslow or Mr. Bailey, or the fertilizer company, and as Mr. Heyman observed, there is no such thing as a "with out prejudice" liquidation. But in case the matter goes further, I think I ought to record my own view that it is unproven that any such assertion was made by Mr. Kinslow. I reach this finding for these reasons. I have seen in the witness-box all persons who attended that meeting. I have heard what they have said and I am certain that all did their best to recall the truth. However, Mr. Bruce took a most careful note of the five points made by Mr. Kinslow that Mr. Kinslow wanted passed on to Mr. Tickler. It was said in evidence that the points were produced by Mr. Kinslow deliberately and in a manner which enabled them to be recorded. Inde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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