The liquidator obtained an order requiring a creditor who had attached assets in India to return them to the company in liquidation.
Sir W M James LJ said: ‘The winding-up is necessarily confined to this country. It is not immaterial to observe, that there could now be no possibility, having regard to the decision of the Supreme Court of Calcutta, in Bank of Hindustan v. Premchand, which we must take to be quite right, of treating this case as if there were an auxiliary winding-up in India. If this is so with regard to a company domiciled in England, but having its business and assets in India, there would be no ground for the contention on the part of the Appellants that they would obtain an equitable and rateable distribution of the assets between the creditors. All the assets there would be liable to be torn to pieces by creditors there, notwithstanding the winding-up, and there would be an utter incapacity of the Courts there to proceed to effect an equitable distribution of them. The English Act of Parliament has enacted that in the case of a winding-up the assets of the company so wound up are to be collected and applied in discharge of its liabilities. That makes the property of the company clearly trust property. It is property affected by the Act of Parliament with an obligation to be dealt with by the proper officer in a particular way. Then it has ceased to be beneficially the property of the company; and, being so, it has ceased to be liable to be seized by the execution creditors of the company.
There may, no doubt, be some difficulty in the way of dealing with assets and creditors abroad. The Court abroad may sometimes not be disposed to assist this Court, or take the same view of the law as the Courts of this country have taken as to the proper mode of dealing with such companies, and also with such assets. If so, we must submit to these difficulties when they occur.
In this particular case there is no such difficulty. There were assets fixed by the Act of Parliament with a trust for equal distribution amongst the creditors. One creditor has, by means of an execution abroad, been able to obtain possession of part of those assets. The Vice-Chancellor was of opinion that this was the same as that of one cestui que trust getting possession of the trust property after the property had been affected with notice of the trust. If so, that cestui que trust must bring it in for distribution among the other cestuis que trust. So I, too, am of opinion, that these creditors cannot get any priority over their fellow-creditors by reason of their having got possession of the assets in this way. The assets must be distributed in England upon the footing of equality.’
Sir G Mellish LJ said: I quite agree that the 87th section of the Act of 1862, providing that no action shall be brought without the leave of the Court, and the 163rd section, enacting that no execution shall issue, apply only to the Courts in this country. Of course, Parliament never legislates respecting strictly foreign Courts. Nor is it usually considered to be legislating respecting Colonial Courts or Indian Courts, unless they are expressly mentioned. Still, that appears to me not to prevent the general application to this case of the principles which have been established in cases of bankruptcy.
No doubt winding-up differs from bankruptcy in this respect, that in bankruptcy the whole estate, both legal and beneficial, is taken out of the bankrupt, and is vested in his trustees or assignees, whereas in a winding-up the legal estate still remains in the company. But, in my opinion, the beneficial interest is clearly taken out of the company. What the statute says in the 95th section is, that from the time of the winding-up order all the powers of the directors of the company to carry on the trade or to deal with the assets of the company shall be wholly determined, and nobody shall have any power to deal with them except the official liquidator, and he is to deal with them for the purpose of collecting the assets and dividing them amongst the creditors. It appears to me that that does, in strictness, constitute a trust for the benefit of all the creditors, and, as far as this Court has jurisdiction, no one creditor can be allowed to have a larger share of the assets than any other creditor.
Then it is said that the assets are subject to the law of the place where they are. I quite agree that if the law of the place where they are had given a charge of that nature on the assets prior to the time when the petition for winding-up was presented, or possibly prior to the time when the winding-up order was made, and a judgment, for instance, had been put on the register, that might, by the law of Bombay, have constituted a charge on the property of the company, and then the trust for the benefit of the creditors would have been subject to that charge. But here there is no allegation that the judgment in Bombay, any more than a judgment here, simply qua judgment, operates as any charge at all. It is quite clear that it does not, and that until the execution and attachment have issued and been executed, there is no actual charge on the property. That charge is subsequent to the creation of the trust, and is made by the particular Appellants here with full notice of the trust.
The consequence necessarily follows, that in this Court these creditors cannot be allowed by such means to obtain priority; and that they must give up, for the benefit of the creditors, what they have so obtained.’
Judges:
Sir W M James LJ, Sir G Mellish LJ
Citations:
(1874) LR 9 Ch App 557
Jurisdiction:
England and Wales
Cited by:
Cited – Harms Offshore AHT Taurus Gmbh and Co KG v Bloom and Others CA 26-Jun-2009
The court had granted to the liquidators of a company a mandatory injunction requiring the appellant German companies to attempt to obtain the release of assets from attachment by the court in new York.
Held: The appeal was dismissed. The . .
Cited – In re Nortel Companies and Others SC 24-Jul-2013
The court was asked as to the interrelationship of the statutory schemes relating to the protection of employees’ pensions and to corporate insolvency.
Held: Liabilities which arose from financial support directions or contribution notices . .
Lists of cited by and citing cases may be incomplete.
Insolvency, International
Updated: 15 May 2022; Ref: scu.375968