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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Findlay (Liquidator of the Scottish Workmen's Assurance Co., Ltd) v. Waddell [1910] ScotLR 478 (18 March 1910) URL: http://www.bailii.org/scot/cases/ScotCS/1910/47SLR0478.html Cite as: [1910] ScotLR 478, [1910] SLR 478 |
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Page: 478↓
The liquidator of a company which was being wound up voluntarily claimed delivery of certain books and papers belonging to the company which had been placed in an accountant's hands to write up the books and to prepare a balance-sheet. The accountant having refused to hand them over unless the liquidator either paid his fees or recognised his lien therefor, the liquidator presented a petition to the Court under sections 164, 174, and 193 of the Companies Consolidation Act 1908 for their delivery, but that “ without prejudice” to any right of lien competent to the respondent.
Held that while delivery without prejudice to an alleged right of lien did not involve its admission, it did not in any way prejudice it if it existed, and that as delivery of the books was necessary for liquidation purposes the petitioner was entitled to the delivery craved.
Opinion that the respondent had a good right of retention on the ground of implied contract, though not a good right of lien properly so called.
Opinion ( per Lord Johnston) that an auditor is not an “officer” of a company
Page: 479↓
within the meaning of section 164 of the Companies Consolidation Act 1908.
The Companies Consolidation Act 1908 (8 Edw. VII, c. 69), enacts—Section 164—“The Court may, at any time after making a winding-up order, require … any trustee, receiver, banker, agent, or officer of the company to pay, deliver, convey, surrender, or transfer forthwith, or within such time as the Court directs, to the liquidator any money, property, or books and papers in his hands to which the company is prima facie entitled.”
Section 174—“(1) The Court may, after it has made a winding-up order, summon before it any officer of the company or person known or suspected to have in his possession any property of the company. … (3) The Court may require him to produce any books and papers in his custody or power relating to the company; but where he claims any lien on books or papers produced by him, the production shall be without prejudice to that lien, and the Court shall have jurisdiction in the winding-up to determine all questions relating to that lien.”
Section 193 enacts—“(1) Where a company is being wound up voluntarily the liquidator … may apply to the Court … to exercise … all or any of the powers which the Court might exercise if the company were being wound up by the Court.”
On 18th December 1909 James Findlay, C.A., Edinburgh, liquidator of the Scottish Workmen's Assurance Company, Limited, then being wound up voluntarily, presented a petition to the Court under sections 164, 174, and 193 of the Companies (Consolidation) Act 1908, for delivery of certain cash books and papers belonging to the company, then in the possession of the respondent William Waddell, C.A., Glasgow, “but that without prejudice to any lien” that might be competent to the respondent.
The petitioner stated that in order to proceed with his duties as liquidator he had written to the respondent requesting delivery of the cash books and documents in question (which had been placed in the respondent's hands in order that he might write up the books and thereafter prepare a balance sheet), but that he (the respondent) had declined to deliver them unless the petitioner either paid his fees for balancing the books or recognised his lien therefor. He further stated—“That of this date, 2nd December 1909, the petitioner informed the said William Waddell that he was prepared to accept the said books and papers subject to any lien the said William Waddell might have, and that when the question of said lien came to be considered the petitioner would treat the books and papers as still being in the said William Waddell's hands, and requested the said William Waddell to deliver to him the said books and papers on that footing, but of this date, 3rd December 1909, the said William Waddell replied that he could not comply with the petitioner's request.
The petitioner is unable to proceed with his duties as liquidator until he obtains delivery of said cash books and papers, and loss to the company may accrue through the delay occasioned by the said William Waddell. The petitioner is not at present in a position to admit any right of lien over said cash books and papers in favour of the said William Waddell, but he is willing, as stated above, that any such lien shall not be prejudiced by the delivery to him of said cash books and papers.”
The respondent lodged answers, in which he stated that his fees for preparing a profit and loss account and balance sheet, which had been adopted by the directors of the company, were still unpaid, and that while he claimed a right to retain the books and papers, he was willing to hand them over on the liquidator either making payment of his fees, or recognising that in respect of his lien he had a preference therefor.
Argued for petitioner—The petitioner as liquidator of the company was entitled to delivery—Companies (Consolidation) Act 1908 (8 Edw. VII, c. 69), secs. 164, 174, 193. The respondent's right to a preference (if any) would not be prejudiced, for decree was only craved subject to reservation of his rights— Benny and Webster v. Myles and Murray, February 8, 1847, 9 D. 619. In any event the petitioner was entitled to inspect the books. Reference was made to the following authorities— Robertson v. British Linen Company, December 12, 1890, 18 R. 1225; Reid, Petitioner. October 31, 1893, 1 S.L.T. 273; Liquidator of Donaldson & Company, Limited v. White and Park, 1908 S.C. 809, 45 S.L.R. 231; Rorie (Liquidator of Lochee Sawmills Company, Limited) v. Stevenson, 1908 S.C. 559, 45 S.L.R. 469; Buckley on Companies (9th ed.), p. 407; In re South Essex Estuary and Reclamation Company (1869), L.R., 4 Ch. App. 215.
Argued for respondent—The order craved would not be granted unless it were “just and beneficial”—Companies (Consolidation) Act 1908, sec. 193. It could not be so here, for the order if granted would destroy the respondent's right of lien. The respondent was not an “officer” of the company in the sense of section 164 of the Act of 1908, for he was only employed to balance the books. Esto that he had no general right of lien, he was entitled to retain in virtue of implied contract arising out of his employment— Meikle and Wilson v. Pollard, November 6, 1880, 8 R. 69, 18 S.L.R. 56. The case of the South Essex Reclamation Company ( cit. supra) did not apply where, as here, the liquidator was a voluntary, not an official, liquidator. As to the petitioner's right to inspect the books, reference was made to Stewart and Others, Petitioners (1742), M. 6248, and Finlay v. Syme, (1773) M. 6250.
At advising—
Page: 480↓
William Waddell, C.A., Glasgow, had, as alleged, been employed by the directors of the company to write up the books and prepare a balance sheet, and for that purpose had been placed in possession of certain books and papers of the company. These he claimed right to retain until paid his fees. The liquidator demanded delivery that he might proceed with his duties. Mr Waddell asserted a right to retain.
The attitude adopted by the parties was this—the liquidator offered to accept the books and papers subject to any lien Mr Waddell might have, and when the question of lien came to be considered undertook to treat the books and papers as still in Mr Waddell's possession. Mr Waddell declined, but intimated his readiness to deliver either on payment of his fees or on the liquidator recognising his lien and in respect thereof undertaking to admit his claim as preferential.
The liquidator has presented this petition under the Companies Act 1908, sections 164, 174, and 193, for an order on Mr Waddell to deliver the books and papers without prejudice to any lien competent to him. It was conceded that Mr Waddell was really employed in the position of auditor of the company. It is a question which has not been authoritatively settled, and which may depend upon circumstances, whether an auditor is an officer of the company in the sense of certain other sections of the Act. But I think that there can be no doubt that he is not among the officers intended to be covered by section 164. It is therefore necessary in the present matter to have recourse to section 174, under which, by virtue of section 193, the Court can act in a voluntary as well as in a judicial winding up. Section 174 applies not merely to officers of the company, but to any person known or suspected to have in his possession any property of the company, or any person whom the Court deems capable of giving information concerning the trade dealings, affairs, or property of the company, and the Court (sub-section 2) may examine him on oath concerning the same, and (sub-section 3) may require him to produce any books and papers in his custody or power relating to the company. But then the sub-section adds, “but where he claims any lien on books or papers produced by him, the production shall be without prejudice to that lien, and the Court shall have jurisdiction in the winding-up to determine all questions relating to that lien.”
There are two practical questions which appear to me to arise. First, is Mr Waddell entitled to have the matter of his lien admitted before he hands over the books and papers. In other words, is “without prejudice to” equivalent to the admission to a preferential ranking. I think not. It means what it says, without prejudice to his lien such as it is, leaving open the question whether it is good or bad and of its extent. It is only equivalent to a right to a preferential ranking if his lien is established, as it may be established, within the liquidation. For preferential ranking is the limit of the lien-holder's right— Adam v. Winchester, 11 R. 863.
It is a matter of convenience and circumstances when that question should be determined. The determination of the question is not as of right to stay the liquidator getting possession of necessary books and papers. The latter may be urgent, the former may take time and involve inquiry, as in the case of the Lochee Sawmills Company, 1908 S.C. 559. But where circumstances admit of its being immediately determined, then I think it ought to be immediately determined, expedition in incidental matters being in the interest of the liquidation. Such a case is the present. The admissions of parties give the Court all necessary information. Whether Mr Waddell was merely an accountant employed by the company to do certain work, or was in the full sense of the term auditor of the company, or whether he was auditor of the company and something more, the authority of the case of Meikle & Wilson v. Pollard, 8 R. 69, appears to be directly in point. I do not think that an accountant employed to audit or do any other piece of work, whether for an individual or a company, has any general lien such as a law-agent. But he has a right of retention of papers put into his hands for the purpose of the work on which he is employed until he is paid the counterpart of his employment. The matter “resolves itself into a case of the relative duties of parties under a contract,” That case was followed— dubitante Lord Rutherfurd Clark—in Robertson v. Ross, 15 R. 67. I am inclined to think that that case might have been distinguished on the facts. Because it would rather appear that the factor who claimed a lien had in his hands papers placed with him generally, and not for the purpose of and necessary for his particular work as factor; and I rather think that this may explain the grounds of Lord Rutherfurd Clark's doubt. But be that as it may, as authorities for a case of the circumstances of the present these two decisions are binding, and to that extent I see no reason to doubt their soundness. I therefore think that Mr Waddell is entitled to the right of retention he claims, though he may not have a lien properly so called.
But the second question is—Can the liquidator demand exhibition of books and documents the subject of lien before taking up his attitude of requiring delivery of them? If by operation of this section the claimant of a lien over books and papers can, with a view to giving inspection to a liquidator, be compelled to produce the books and papers, it is very difficult to understand how this can in many cases be “without prejudice to that lien” except on the footing that the call to produce on that condition involves the concession of the lien and the admission to a preference. On the other hand, there are many cases
Page: 481↓
The Court granted the prayer of the petition.
Counsel for Petitioner— Fenton. Agents— Cowan & Stewart, W.S.
Counsel for Respondent— J. A. Christie. Agents— St Clair Swanson & Manson, W.S.
