Scottish Court of Session Decisions

On June 19, 1914, Argylls Limited, and Robert W. Blackwell, Argyll Works, Alexandria, the liquidator thereof, presented a petition under sections 151, 199 to 204, and 213 of the Companies Consolidation Act 1908 (8 Edw. VII, cap. 69), in which they craved the Court to order that the voluntary winding-up of “Argylls Limited” should be continued, but subject to the supervision of the Court, and that the liquidator should be authorised to carry on the business of the company for a period not exceeding one year. From the petition it appeared that the capital of the company, all of which has been issued and paid up, amounted to £209,802, divided into 419,604 ordinary shares of 10s. each; that the debenture stock outstanding was £142,964; that there were also debenture bonds outstanding to the extent of £74,016; that it had been proved that the company could not by reason of its liabilities continue its business, and that a voluntary winding-up had been resolved on.

On 9th July 1814 a note was presented by the petitioners, in which they stated that at a meeting of creditors of the company, held on 3rd July 1914, in terms of section 188 of the Companies Consolidation Act 1908, it was decided by a majority that Mr J. M. MacLeod, C. A., Glasgow, should be appointed additional liquidator, and craving his appointment accordingly.

The application was opposed by Ritchie & Whiteman, metal merchants, Glasgow, and S. Stevenson & Company, timber merchants, Glasgow, creditors to the extent respectively of £1126, 7s. and £352, 3s. 4d., who objected to Mr MacLeod's appointment.

In their minute the respondents stated—“The minuters object to the appointment of Mr John M. MacLeod as additional liquidator of the company, for the following among other reasons, viz.—1. That his firm of Kerr, Andersons, & MacLeod, C.A., Glasgow, are the present auditors of the company. No proper allowance has been made for depreciation in the annual balance-sheets, and this matter will require to be investigated by the liquidators. There have been many serious complaints with regard to the management of the company, and these also should be independently investigated. Mr Blackwell, the existing liquidator, is its chairman, and the result of appointing Mr MacLeod as additional liquidator would be that there would be no independent officer to investigate the affairs of the company in the interests of the creditors, although the creditors would be put to the expense of two liquidators. The shareholders of the company have no real interest in the liquidation, as the assets will be insufficient to pay the creditors in full. 2. In the course of the liquidation questions are bound to arise between the company and the Motor Vehicles Finance

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Company, Limited, with whom Argylls Limited had extensive dealings. The Motor Vehicles Finance Company, Limited, was formed to finance sales by Argylls Limited of their motor cabs to cabmen who were not able to pay the whole price of the vehicles. This transaction, which was concurred in by Mr Blackwell, the voluntary liquidator, and Mr MacLeod, has proved financially disastrous to Argylls Limited, and the whole circumstances ought to receive careful and independent investigation. In cases where the cabmen fail to pay the balance of the price of the vehicles the Finance Company claim on Argylls Limited for the balance of the sum advanced by the former company; and questions also arise, and will continue to arise, as to the contract quality of the cabs supplied by them, and the liability of Argylls Limited for the cabs going out of order while in the cabmen's possession. Mr MacLeod and the other partners of his said firm of Kerr, Andersons, & MacLeod are the sole managers and directors of the Finance Company, and consequently if Mr MacLeod were appointed liquidator a direct conflict of interest would arise between him as liquidator of Argylls Limited and as a manager of the Motor Vehicles Finance Company, Limited.”

Argued for petitioners—It was competent for the Court in appointing an additional liquidator to have regard to the wishes of the creditors—Companies (Consolidation) Act 1908 (8 Edw. VII, c. 69), sec. 201. The additional liquidator suggested had the support of a large majority of the creditors, the figures being, for Mr Macleod £176,000, against £76,000. Esto that his firm were the auditors of the company and that they were also directors of the Finance Company above referred to, no conflict of interest was necessarily involved When, as here, it was desired to carry on the business and to sell it as a going concern it was an advantage to have as liquidators men fully versed in the affairs of both companies.

Argued for respondents—Where, as here, the existing liquidator was the managing director of the company, it was desirable that the additional liquidator should be an independent person. On that ground, and for the reasons stated in the minute ( vide supra), the respondents objected to Mr MacLeod's appointment. They cited Liquidators of Bruce Peebles & Company, Limited v. Shiells, 1908 S.C. 692 at p. 696, 45 S.L.R. 537,.