RE CARRIAN HOLDINGS LTD

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BETWEEN

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AND

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BETWEEN

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Coram: Hon. Jones, J. in Chambers

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J U D G M E N T

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1. I have before me two summonses under Section 186 of the Companies Ordinance in two liquidations that have been heard together. Section 186 reads:-

"186. When a winding-up order has been made, or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company except by leave of the court, and subject to such terms as the court may impose."

2. The summonses have been issued on behalf of BBMB Finance (Hong Kong) Limited (BBMB) for leave to institute third party proceedings against Carrian Holdings Limited (CHL) and Carrian Investments Limited (CIL) which companies were the subject of winding-up orders made on the 7th November 1987 in High Court Action No. A4064 of 1987, the action having been instituted against BBMB by China Underwriters Life and General Insurance Company Limited (CUL) which is itself in liquidation. Mr Barlow, counsel for CHL, has opposed the application whilst Mr Bunting, counsel for CIL has adopted a neutral stance.

3. The facts relating to the action have been conveniently summarised in an affidavit of Mrs Rundle-Smith, the solicitor for BBMB made on the 23rd May 1989 which I adopt with some adaptations from the relevant paragraphs which I set out as follows :-

4. Plaintiff's Claim

"4. (i) Prior to June 1981 the majority shareholder of CUL was Ayala International Holdings Company Limited ("Ayala") which held 93.65% of CUL's issued share capital.

(ii) On 26th June 1981 the Carrian Group through Metin Investments Limited ("Metin"), being one of its subsidiaries, purchased from Ayala 50% of its shareholdings in CUL and Bentley Ho became a director of CUL to represent the interests of the Carrian Group.

5. On 7th December 1981, CIL confirmed that it would purchase the balance of Ayala's shareholding in CUL for HK$230,420,300.

6. Ibrahim Jafaar ("Jaafar"), the then General Manager of BBMB, had been approached by George Tan seeking a loan of HK$238 million for CHL and George Tan, to the knowledge of Bentley Ho, expressly told Jaafar that :-

(i) The loan was required to finance the takeover of CUL by the Carrian Group.

(ii) CUL's investment funds which George Tan said would be placed with BBMB could be used as security for a loan to CHL.

7. (i) On 19th December 1981, BBMB sent a cheque post dated to 22nd December 1981 for HK$230,420,300 to CHL representing the full amount of the loan to CHL.

(ii) On 24th December 1981, CHL paid HK$230,420,300 to BBMB, via CIL, in respect of CIL's purchase of Ayala's remaining shareholding.

(iii) On 24 December 1981, CUL deposited HK$230 million with BBMB for a period of 6 months.

(iv) On 24th June 1982, CUL's deposit with BBMB matured and interest of Hk$16,055,890.41 became due from BBMB to CUL but was wrongfully witheld by BBMB who also, without CUL's authority, refixed the former's deposit for a further 4 days.

(v) On 28th June 1982, CUL's deposit with BBMB matured and interest of HK$327,671.23 became due from BBMB to CUL but was wrongfully witheld by BBMB who also, without the former's authority, placed the deposit on call.

(vi) In either September or December 1982, BBMB wrongfully appropriated CUL's deposit by using it to discharge the loan that it had made to CHL.

8. As a result of the foregoing CUL says that BBMB is liable to it because:-

(i) CUL's own money, namely HK$20 million, was in fact used for the purchase of its own shares and there was therefore a breach or Section 48 of the Companies Ordinance to which BBMB was a party.

(ii) That in so far as BBMB treated CUL's deposit as security for its loan to CHL, then the same was not authorised and BBMB was therefore a constructive trustee for the full amount of the deposit for and on behalf of CUL.

(iii) That BBMB owed CUL a duty of care in both contract and in tort and it is liable in damages as it failed to exercise reasonable skill and care, which had it in fact exercised, would have caused BBMB to realise that the pledging of CUL's deposit as security for the loan to CHL could not have been for the benefit of CUL."

5. Leave to institute third party proceedings and to issue third party notices against George Tan and Bentley Ho was granted last November.

6. BBMB's case against CHL and CIL is as follows :-

"10. (i) It is accepted that BBMB took both a deposit from CUL and made a loan to CHL and treated the former as security for the latter.

(ii) BBMB was fully entitled to take the deposit and treat it as security for the loan to CHL as this was done pursuant to specific instructions given by George Tan who was Chairman of the Carrian Group and who held himself out as having full power and authority to act for and on behalf of CUL. Further, the discussions in relation to the taking of the deposit and the fact that it was to stand as security for the loan to CHL took place in the presence of Bentley Ho, who was, in fact, a director of CUL and who at no time, asserted that George Tan did not have power to act for and on behalf of CUL.

11.     In relation to the offsetting of the interest due to CUL against the interest due to BBMB from CHL on 24th June 1982 and 28th June 1982, CUL can have no claim as this was expressly authorised by George Tan as a de-facto director of BBMB.

12.     CUL's deposit with BBMB was fully repaid on or about 8th December 1982 by BBMB's cheque number 018424 in the sum of HK$238,144,520.55 made payable to CUL and handed to Bentley Ho which cheque was endorsed by Bentley Ho in his capacity as a director of CUL to be to the benefit of CHL.

13.     BBMB was fully entitled to accept and act on Bentley Ho's endorsement of the cheque as Bentley Ho was a director of CUL and had full apparent authority to make the endorsement and act for and on behalf of CUL.

14.     In so far as CUL's monies might, in fact, have been used to enable CUL's own shares to be purchased, BBMB was unaware of the same and cannot be liable for a breach of Section 48 of the Companies Ordinance without the requisite knowledge,"

7. The only response to the evidence of Mrs Rundle-Smith is an affidavit of Mr Stevenson, one of the joint liquidators of CHL who, whilst conceding that the legal issues involved in the action are very complex, seeks to oppose the making of an order on the grounds that the costs in the action might be as high as $2,500,000 and that to be involved in the proceedings will be inconvenient. The matter of inconvenience is wholly irrelevant so the issue is restricted to the high cost of litigation as compared with the less expensive proceedings in the liquidations. In fact, a draft proof of debt has already been lodged by BBMB in the CHL liquidation.

8. It is agreed that the appropriate test to be adopted by the Court in exercising its discretion whether or not to grant leave is to decide what is right and fair in the circumstances see In re Aro Company Limited [1980]1 Ch. 196.

9. Although Mr Barlow submitted that the liquidators of CHL are not in a position to present any evidence upon the factual matters involved, he went on to say that the main questions of fact are not, in any event, in dispute. He said that the liability of CHL is entirely dependent upon the knowledge of George Tan and Bentley Ho and whether that knowledge can be imputed to the company. This, he said, was a matter of law that can be properly determined in the liquidation where the cost will be less expensive than in the action. Mr Bunting did not agree with Mr Barlow's submission that the only issue was that of knowlege by George Tan and Bentley Ho while the liquidators of CIL may have evidence to put forward.

10. The action brought by the liquidators of CUL is a heavy piece of litigation involving a claim for over $230,000,000 which, I am told, with interest now exceeds $450,000,000. It is conceded by the liquidators of CHL as I have said that there are complex matters of law and from my perusal of the pleadings, I am satisfied that the factual issues are not simple. If I accede to Mr Barlow's submission by refusing to make the order sought, there could be a duplication of proceedings which may result in inconsistent findings for neither CHL nor CIL would be bound by the result of the action. The costs of the action will admittedly, in all likelihood, be much higher than by proceeding in the liquidations, but I see no reason as was suggested by Mr Bleach, counsel for BBMB, why the liquidators for CHL cannot adopt a passive role and agree to be bound by the result of the action particularly as they do not intend to adduce any evidence. As it is the duty of a liquidator to act fairly in the interests of all the creditors and not to take sides, the very substantial sum for costs referred to by Mr Stevensan could be avoided.

11. In my Judgment, it would be inappropriate for the issues to be determined in the liquidations having regard to the complex points of law and facts involved and the weight of the litigation. These issues can be more conveniently tried in the High Court action. This course will also avoid a multiplicity of proceedings and inconsistent findings.

12. For these reasons, I am quite satisfied in the exercise of my discretion that the applications should be granted upon undertakings that any judgment obtained against either company should not be enforced without the leave of the court. The issue of costs will be adjourned generally with liberty to restore.

Representation:

Mr John Bleach (Robert W.H. Wang Co.) for Applicant BBMB

Mr Barry Barlow (Simmons & Simmons) for Respondent CHL

Mr Michael Bunting (Baker & McKenzie) for Respondent CIL

Headnote

Summons by Miramar Hotel & Investment Company Limited and others to commence proceedings against Carrian Holdings Limited notwithstanding an order to wind up - cross summons by the joint liquidators of Carrian Holdings Limited to disclaim the property of the company the subject matter of the action on the grounds that it is an unprofitable contract - indemnity offered by Miramar not accepted by the joint liquidators - in view of the indemnity offered and the likelihood of serious prejudice that may be caused to Miramar by depriving it of its right of action application for disclaimer refused and order made for leave to commence proceedings.

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JUDGMENT

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1. By a sale and purchase agreement dated the 4th August 1981 Beaux Estates Limited (Beaux) agreed to purchase from Miramar Hotel & Investment Company Limited (Miramar) a plot of land occupied by the old wing of the Miramar Hotel for the sum of HK$2,800 million. A deposit of 15% was paid on the 4th August 1981, and a further 18% on the 4th February 1982. The payments were made from monies advanced to Beaux by its holding company Armatys Estates Limited (Armatys) who in turn received advances from their shareholders, Snowbright Company Limited (S.C.L.), Gwynedd Investments Limited (G.W.I.L.), Miramar and Wise Maneon Investment Limited (Wise) in proportion to their beneficial shareholding. The balance of HK$1,876 million was due to be paid on completion which was to be on or before the 4th May 1983. However, by a subsequent agreement completion was deferred until the 4th May 1984. By the sale and purchase agreement it was provided that Miramar would arrange to finance payment of the balance under a mortgage over a period of three years.

2. On the 11th November 1982 a joint venture agreement was entered into between S.C.L., G.W.I.L., Chaintower Company Limited (Chaintower), Wise, The Hong Kong Land Company Limited (Hong Kong Land), Armatys and Beaux. S.C.L. is a wholly owned subsidiary of Carrian Investments Limited (C.I.L.) which in turn is a subsidiary of Carrian Holdings Limited (C.H.L.). G.W.I.L. is a wholly owned subsidiary of Hong Kong Land whilst Chaintower and Wise are wholly owned subsidiaries of Miramar.

3. By the joint venture agreement the shareholders in Armatys ratified and adopted their rights and obligations in respect of the sale and purchase agreement. The monies loaned by the shareholders were to be unsecured and repayment was to be deferred to all building costs and third party borrowings. On the same date as the joint venture agreement Hong Kong Land, C.I.L. and Miramar entered into a guarantee for their respective subsidiaries obligations under that agreement.

4. On about the 3rd September 1983 C.H.L. acquired 15,000 shares at Hk$1.00 each from G.W.I.L. in the capital of Armatys. The shares were registered on the 21st September 1983. By a Deed of Accession dated the 21st September 1983 C.H.L. entered into an agreement with the original parties to the joint venture agreement to be bound by the terms of the agreement. After the Deed of Accession had been executed the shareholders in Armatys and their respective proportions were as follows:-

5. A petition to wind up C.H.L. was presented on the 10th October 1983 and a winding up order was made on the 7th November 1983.

6. The validity of the transfer of the shares in Armatys from G.W.I.L. to C.H.L. was challenged in the High Court in an action by Miramar, Chaintower and Wise against C.H.L., S.C.L.,  Hong Kong Land, G.W.I.L. and Armatys, but it was held to be valid by Rhind J. in a judgment delivered on the 28th February 1984. C.H.L. took no part in these proceedings.

7. A second action was commenced by Miramar, and its two subsidiaries against the same parties on the 12th April 1984 claiming inter alia damages for breach of the joint venture agreement and specific performance. A defence has been filed by each of the defendants except C.H.L. The gist of the defence is that the joint venture agreement has been terminated and the guarantee discharged, or in the alternative has been frustrated. I am told that the action is likely to be heard in October 1985. A separate action has been instituted by Miramar against Beaux.

8. There are before me two summonses. The first issued by Miramar, Chaintower and wise is an application for an order to commence proceedings against C.H.L. in the second action notwithstanding the order to wind up, The second issued by the joint liquidators of C.H.L. seeks leave pursuant to Section 268 of the Companies Ordinance to disclaim the following property of the company:-

"(1)	15,000 shares of HK$1,00 each in ARMATYS ESTATES LIMITED, which shares were registered in the name of he Company on the 21st September 1983; and
(2)	The Deed of Accession dated the 21st September 1983 whereby the Company covenanted and undertook to be bound by the terms of an Agreement dated the 11th November 1982 ("the Joint Venture Agreement"); and
(3)	The Joint Venture Agreement;"

9. The relevant parts of Section 268 read as follows:-

"(1) Where any part of the property of a company which is being wound up consists of land of any tenure burdened with onerous covenants, of shares or stock in companies, of unprofitable contracts, or of any other property that is unsaleable, or not readily saleable, by reason of its binding the possessor thereof to the performance of any onerous act, or to the payment of any sum of money, the liquidator of the company notwithstanding that he has endeavoured to sell or has taken possession of the property, or exercised any act of ownership in relation thereto, may, with the leave of the court and subject to the provisions of this section, by writing signed by him, at any time within 12 months after the commencement of the winding up or such extended period as may be allowed by the court, disclaim the property:

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(2) The disclaimer shall operate to determine, as from the date of disclaimer, the rights, interest,and liabilities of the company, and the property of the company, in or in respect of the property disclaimed, but shall not, except so far as is necessary for the purpose of releasing the company and the property of the company from liability, affect the rights or liabilities of any other person

(3) The court, before or on granting leave to disclaim, may require such notices to be given to persons interested, and impose such terms as a condition of granting leave, and make such other order in the matter as the court thinks just.

(4) .....................................................................

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(5) ...................................................................

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(6) The court may, on an application by any person who either claims any interest in any disclaimed property or is under any liability not discharged by this Ordinance in respect of any disclaimed property and on hearing any such persons as it thinks fit, make an order for the vesting of the property in or the delivery of the property to any persons entitled thereto, or to whom it may seem just that the property should be delivered by way of compensation for such liability as aforesaid, or a trustee for him, and on such terms as the court thinks just, and on any such vesting order being made, the property comprised therein shall vest accordingly in the person therein named in that behalf without any conveyance or assignment for the purpose:

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(7) Any person injured by the operation of a disclaimer under this section shall be deemed to be a creditor of the company to the amount of the injury, and may accordingly prove the amount as a debt in the winding up.".

10. Pursuant to directions given by Mayo J. at preliminary hearings the other parties to the second action and Beaux were given notice of the hearing of the summons by the joint liquidators and were invited to file evidence. They were represented at the hearing before me, but took a neutral stance. No evidence was filed on their behalf.

11. I am principally concerned with the summons of the joint liquidators. If it succeeds Miramar's summons must necessarily be dismissed. Miramar can then if they succeed in the action prove in the liquidation under Section 268(7) as a debt for any damages awarded. On the other hand if an order is refused leave should be given to Miramar to commence proceedings

12. Two valuations of the site with vacant possession were made on the 27th March 1984. An estimate of HK$431 million was submitted by Jones Lang Wootton and HK$450 million by Richard Ellis. Accordingly the joint liquidators are of the opinion that the balance of 15% to be contributed by C.H.L. viz. HK$281 million greatly outweighs any long term benefit that may result from participating in the joint venture agreement. Lack of security and postponement to third party borrowing lead the joint liquidators to believe that it is unlikely that any profit will accrue to C.H.L. Miramar and their two subsidiaries oppose the joint liquidators application principally on the ground that they are willing to give a written deed of guarantee.

13. It is contended by the joint liquidators that as Miramar is not a party to the joint venture agreement it is only indirectly concerned with the result that it is not an interested party within the meaning of section 268. Accordingly C.H.L. could not be held liable to Miramar for breach of the joint venture agreement. Further Miramar is not a shareholder in Armatys.

14. However, In re Katherine Et Cie Limited (1932) 1 Ch. 70 it was held that in exercising its discretion the court should take into consideration the injury of persons not directly interested. Maugham J. in his judgment at page 78 had this to say:-

".......... sub-s. 2, of s. 267, tends to show that disclaimer is not intended to affect the rights and liabilities of third persons. In my opinion the Court may properly balance the advantages and disadvantages of a disclaimer to be gained by the liquidator in the liquidation of the assets and by persons affected by the disclaimer.".

I would respectfully follow this authority. Although Miramar is not directly involved as it is not a party to the joint venture agreement it is indirectly involved by virtue of the guarantee. Therefore in my opinion the interests of Miramar should be taken into consideration when exercising my discretion.

15. A further matter in issue is the effect of Clause 5(8) of the joint venture agreement which relates to the consequences that may arise if C.H.L. becomes a defaulting party. Miramar contends that in such event C.H.L. could benefit by receiving the par value of the shares, but the joint liquidators do not share this view. The joint liquidators also consider that a heavy contingent liability could be imposed on C.H.L. under this clause. However, Miramar respond by saying that any potential liability will be covered by the indemnity that has been offered. It was also submitted by Mr. Rattee who appeared for Miramar that if the application to disclaim is granted the disclaimer could be relied upon by Hong Kong Land and G.W.I.L. to support their defence of frustration. This issue and other matters of legal complexity cannot be decided at this stage, but must await determination at the trial.

16. It appears that Miramar is not entitled to a vesting order under section 268(6) for the shares that C.H.L. holds in Armatys as a transfer might be in breach of Article 33 of the Memorandum and Articles of Association and Clause 10 of the joint venture agreement which set out the requirements for the transfer of shares.

17. Miramar has offered an indemnity to the joint liquidators in wide terms the relevant parts of which read as follows:-

"1. In consideration of the provisions of Clause 2 hereof Miramar HEREBY COVENANTS with each of Snowbright CIL and CHL that it Miramar will indemnify each of Snowbright CIL and CHL and the liquidator of each of them from and against all liability which it or he might otherwise be under to any party to the Joint Venture Agreement or the Deed of Accession or the CIL Guarantee or any of them (a) to lend or procure to be lent moneys to Armatys as provided by the Joint Venture Agreement or (b) to indemnify any party to the Joint Venture Agreement for any loss caused by its or his failure to make or procure to be made any such loan to Armatys.

2. In consideration of the provisions of Clause 1 hereof each of Snowbright CIL and CHL acting by such liquidator as aforesaid HEREBY DECLARES that it does and will henceforth hold on trust for Miramar absolutely (a) Subject to the effect (if any) on this declaration of Article 33 of the Articles of Association of Armatys and Clause 10 of the Joint Venture Agreement ALL THOSE shares in Armatys and all interests or rights of any nature in shares in Armatys which it holds or to which it is entitled or which it may hereafter hold or to which it may hereafter become entitled (b) ALL THOSE the indebtedness of Armatys to it and interests or rights of any nature in indebtedness of Armatys to which it now is or may hereafter become entitled (c) ALL THOSE (if any) other rights or interests of any nature against or in Armatys or the assets of Armatys to which it is now or may hereafter become entitled and (d) ALL THOSE (if any) other rights of whatsoever nature to which it may be or become entitled by virtue of the Joint Venture Agreement or the Deed of Accession or the Articles of Association of Armatys or the Miramar Guarantee or the HKL Guarantee.

3. It is hereby expressly declared for the avoidance of doubt that the full force and effect of the provisions of Clause 1 hereof shall not be prejudiced or in any way affected by the effect (if any) of Article 33 of the Articles of Association of Armatys or Clause 10 of the Joint Venture Agreement on the declaration of trust in Clause 2(a) hereof.''

Although the draft deed has been drawn in favour of S.C.L., C.I.L. and C.H.L. Mr. Rattee said that it can be drawn in favour of C.H.L. alone if necessary.

18. The decision that I have to make in this case is the exercise of a discretionary power. There is no doubt upon the evidence before me that the joint liquidators have established that the joint venture agreement has become an unprofitable contract and in ordinary circumstances they would be entitled to an order to disclaim. However, they were offered an indemnity in correspondence on the 12th June 1984 by Miramar's solicitors. No reply was made to this offer nor to subsequent correspondence. In fact in his affidavit of the 28th November 1984 Mr. Stevenson one of the joint liquidators merely says that the offer does not represent a satisfactory alternative to disclaimer, but neither he nor Mr. Sussex in his submission was able to put forward any reason why it is not acceptable. In my opinion it affords adequate protection to the joint liquidators.

19. Whilst it is highly desirable that steps should be taken to proceed as expeditiously as possible with the winding up, the liquidation of C.H.L. is wholly exceptional for it is the biggest and one of the most complex liquidations that Hong Kong has ever experienced. It is most probable that several years will elapse before the liquidation is completed. The action will most likely be concluded before that time. Mr. Sussex commented that C.H.L. will incur heavy legal costs in defending the action if an order of disclaimer is not made. But he gave no reason why C.H.L. could not adopt the same course that was taken in the previous proceedings by agreeing to be bound by the result. Indeed it would not seem to be practical to order specific performance against a company in liquidation.

20. Having regard to the indemnity that has been offered and to the likelihood of serious prejudice that may be caused to Miramar by depriving it of its right of action, and to the fact that the joint liquidators cannot be prejudiced if they await the trial, I am of the opinion that the application for a disclaimer should be refused. There will be an order in the terms of the summons for leave to commence proceedings against C.H.L. in the action.

Representation:

Mr. C. Sussex (Simmons & Simmons) for Liquidators.

Mr. D. Rattee, Q.C. & Mr. R. Kotewall (Lovell, White & King) for Miramar Hotel & Investment Co. Ltd., Chaintower Ltd. & Wise Maneon Investment Ltd.

Mr. A. Friedlander (Baker & McKenzie) for Snowbright Co. Ltd.

Mr. R. Riberio (Slaughter & May) for Gwynedd Investments Ltd.

Mr. A. Li (Herbert Smith & Co.) for Armatys Estates Ltd.& Beaux Estates Ltd.

HEADNOTE

Rights of a landlord to re enter premises and to distrain for arrears of rent in companies winding up proceedings.

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Coram: The Honourable Mr. Justice Jones in Chambers.

Mr. Winston Poon (Johnson, Stokes & Master) for Applicant

Mr. Clement-Jones for Official Receiver.

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JUDGMENT

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1. A debenture was created by the applicant Halkirk Company Limited (hereafter referred to as Halkirk) on the 28th January 1982 in favour of Wardley Limited acting as the agent for a consortium of banks and financial institutions under which the Carrian Centre and all the property and assets of Halkirk were charged to Wardley Limited to secure a loan facility of US$83,000,000. Halkirk is a subsidiary of Carrian Investments Limited (hereafter referred to as C.I.L.) which in turn is a subsidiary of Carrian Holdings Limited (hereafter referred to as C.H.L.)

2. By a tenancy agreement dated the 1st February 1982 the 19th-24th floors of the Carrian Centre were let by Halkirk to C.H.L. at a monthly rental of $1,162,176 exclusive of rates and management fees for a term of 27 months and 15 days from the 16th March 1982. On the 28th February 1982 Halkirk assigned the rental income of Carrian Centre to Wardley Limited. A petition was presented to wind up C.I.L.on the 8th October 1983 and provisional liquidators were appointed on the same day. On the 17th October 1983 Wardley Limited appointed under powers contained in the debenture Mr. Etches and Mr. Deacon to be Receivers and Managers of the Carrian Centre and the entire undertaking of Halkirk. On the same day the provisional liquidators of C.I.L. were appointed Receivers and Managers by the court in High Court Action. 12656/83 for the property and assets of 57 defendants, including Halkirk, the 27th defendant. The appointment was without prejudice to the rights of any creditors holding any mortgage, charge, or lien over the property or assets of any of the defendants.C.H.L.vacated and surrendered the lease of the 19th, 20th and 21st floors of the Carrian Centre on the 30th April 1983, but remained in occupation of the other floors at a rental of $552,960 per month. No rent has been paid since the 16th August 1983.

3. A petition to wind up C.H.L. was presented on the 10th October 1983. Provisional liquidators were appointed on the 10th and 17th October 1983. By a letter dated the 27th October 1983 a demand for payment of arrears of rent was made on behalf of the Receivers and Managers under the debenture, but no payment has been made.

4. Winding-up orders were made in respect of C.H.L. and C.I.L. on the 7th November 1983.

5. By the present summons the applicant Halkirk seeks the following orders:-

6. In his affidavit in support of the summons dated the 2nd November 1983 Mr. Etches avers that the provisional liquidators have since their appointments been in occupation of the premises conducting the business and affairs of various associated and subsidiary companies of C.H.L. and C.I.L. He describes the premises as the seat of management for the entire Carrian Group of Companies.

7. Mr. Poon who appeared for Halkirk submitted the following propositions:-

Mr. Poon referred me to In re Lundy Granite Company ex parte Heavan (1871) 6 Ch. App. 462 which held:-

"        Where a Company, being equitable owner of a lease, continues after 'a winding-up order in the occupation of the leaseholds, and leaves goods upon the land, the landlord is not, by sect. 87 6r sect. 163 of the Companies Act, 1862, prevented from distraining upon the goods of the company for rent accrued since the winding-up.".

In considering the circumstances when distress will be allowed for rent accrued after the winding up James, L.J. at page 466 said:-

"          But in some cases between the landlord and the company, if the company for, its own purposes, and with a view to the realization of the property to better advantage, remains in possession of the estate, which the lessor is therefore not able to obtain possession of, common sense and ordinary justice require the Court to see that the landlord receives the full value of the property. He must have the same rights as any other creditor, and if the company choose to keep the estates for their own purposes, they ought to pay the full value to the landlord, as they ought to pay any other person for anything else, and the Court ought to take care that he receives it.".

In re Silkstone and Dodworth Coal and Iron Co. (1887) 17 Ch. D. 158 Fry J. at page 160 said:-

".......... an election by the liquidator to continue in possession of the property, and if he continued in the possession of the property he could only do so upon the terms of the lease, and it is only equitable, if he keeps the lease as an asset of the company and for the purposes of the liquidation, that he should satisfy those conditions upon which the asset remains his; in other words, he should pay the rent in full.".

8. In re North Yorkshire Iron Co. (1878) 7 Ch. D. 661 the landlord was granted leave by the Court to distrain for rent where the liquidator did not offer to surrender a lease but wished to retain possession and to dispose of the company as a going concern.

9. In re Oak Pits Colliery Co. (1882) 21 Ch. D. 322, Lindley, L.J. said:-

"But no authority has yet gone the length.of deciding that.a landlord is entitled to distrain for or be paid in full rent accruing since..the commencement of the winding-up, where the liquidator has done nothing except abstain from trying to pet rid of the property which the company holds as lessee. If the landlord had endeavoured to re-enter and the liquidator had objected, the case might be different , but having regard to the provisions of the Companies Act, 1862, we are of opinion that in the case now supposed the landlord must rely on his right, if any, to re-enter and prove for the arrears due to him, and that he is not entitled to anything more.".

10. The powers of the provisional liquidator in the order of the 10th October where relevant were limited as follows: -

The restricted powers allowed the provisional liquidators to carry on a business were for the purpose of preserving it as a going concern. There was no evidence, and it would have been in breach of the Court Order if there had been, that the provisional liquidators desired to retain possession for the company's benefit. Indeed the application may be justifiably criticised as premature for the summons was issued four days before the winding up order was made.

11. Mr. Clement-Jones who appeared for the Official Receiver whilst contesting the application to distrain concedes that an order for possession should be made, but seeks a stay of execution in order that assets of the company which are on the premises may be removed.

12. General Share And Trust Company v. Wetley Brick And Pottery Co. (1882) 20 Ch.D. 260 and In re Blue Jeans Sales Ltd. (1979) 1 W.L.R. 362 were cited by Mr. Poon as authority enabling the court in its companies jurisdiction to make an order for possession.

13. Upon consideration of the evidence and the authorities cited I am not satisfied that the applicant Halkirk is entitled to distrain for the arrears of rent that have accrued from the date of the presentation of the petition on the 10th October 1983. However, I shall grant leave to amend the summons by including a clause claiming possession. There will be an order for possession of the premises in favour of the applicant Halkirk with a stay of execution for 21 days. The application for rent to be paid as from to-day is refused. Costs of the application to the Official Receiver.

Representation:

Mr. Winston Poon (Johnson, Stokes & Master) for Applicant

Mr. Clement-Jones for Official Receiver.