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TMI Blog1964 (5) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... ny time of a receiver and manager of the undertaking property and assets charged and continued : "A receiver so appointed shall have power (i) to take possession and get in all or any of the property and assets hereby charged and for that purpose to take any proceedings in the name of the company or otherwise as may seem expedient, (ii) To carry on and manage or concur in carrying on or managing the business for the time being carried on by the company, (iii) To sell or concur in selling the undertaking of the company and any of the property and assets hereby charged. "Clause 13(5) provided that the receiver" shall be deemed to be the agent of the company and not of the bank and the company shall be solely responsible for the acts or defaults of such receiver and his remuneration and liable under any contracts or engagements entered into by such receiver." On or about March 20, 1963, the receiver proceeded to reconstitute the board of T.G. Tickler Ltd. replacing the existing directors by himself and two nominees. The new board then arranged to sell the whole or virtually the whole of the shareholding in Atholl Houses Ltd. for a price which was a gross under-value, viz., not less t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 20, 1963, and the notice was served on the Board of Trade on December 24, 1963. Raymond Walton Q.C. and H. K. Wool for the Applicant Company. Michael Wheeler Q.C. and E. B. Stamp for the Respondent Board of Trade. JUDGMENT May 5. Lord Parker, CJ. Phillimore J. will give the first judgment. Phillimore, J. read the following judgment. Mr. Walton moves on behalf of St. Martins Preserving Co. Ltd. for an order of mandamus directed to the Board to Trade to require them to investigate the affairs of the applicant company pursuant to the provisions of section 165(a)( i) of the Companies Act, 1948. [His Lordship stated the. facts as set out above and continued :] Section 164 of the Act of 1948 gives the Board of Trade discretion to appoint an inspector to investigate the affairs of a company. Inasmuch as the power is discretionary Mr. Walton does not seek to rely upon the section. Section 165 provides: "Without prejudice to their powers under the last foregoing section the Board of Trade-(a) shall appoint one or more competent inspectors to investigate the affairs of a company and to report thereon in such manner as the board direct if (i) the company by special resolution ; or (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his duty or to require information from him. He further submits that, as a matter of history, the power conferred on a company to require an investigation of its affairs derives from section 60 of the Companies Act, 1862. This power-perpetuated in successive Companies Acts-has never (or so we were informed) been invoked so as to extend to the investigation of the affairs of a receiver and manager of the property of a company. The Board of Trade was first interpolated in this connection in the Act of 1947. Surely, argues Mr. Wheeler, Parliament cannot have intended to confer on a body of shareholders acting by special resolution a power that they have never been known to invoke and indeed which the company itself has never invoked. The power to obtain by special resolution an investigation of its affairs was intended, it is submitted, to enable a body of disgruntled shareholders to have the actions of the board of the company (that is, its normal management) investigated : see The Grosvenor and West-End Railway Terminus Hotel Co. Ltd. [1897] 13 TLR. 309 ; 76 LT. 337, CA. It was intended as a fact-finding inquiry to enable a minority to discover what was going on and not to enab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shareholders of the applicant company ? Mr. Wheeler himself concedes that on proof of fraud on the part of the receiver and manager the applicant company could or might have rights. Why, if not because "its affairs" had been dealt with fraudulently. In Farrar v. Farrars Ltd. [1888] 40 Ch. D 395, CA. Lindley L.J. put it in this way Ibid : "...every mortgage confers upon the mortgagee the right to realise his security and to find a purchaser if he can, and if in the exercise of his power he acts bona fide and takes reasonable precautions to obtain a proper price, the mortgagor has no redress." I would comment: If the mortgagee is not dealing with the affairs of the mortgagor how does the mortgagor acquire rights in the absence of bona fides. I am content to adopt the words of Lord Halsbury L.C. in Gosling v. Gaskell and Grocott [1879] AC. 575, 583; 13 TLR 544, HL : " The company is still the person solely interested in the profits, save only that it has mortgaged them to its creditors. It receives the benefit of the profits as they accrue, though it has precluded itself from applying them to any other purpose than the discharge of its debts. The trade is not carried on by, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present motion. True what was done was primarily an affair of T. G. Tickler Ltd. but it was also as I think an affair of the applicant company. Turning to Mr. Wheeler's second point I cannot think that the remedies are truly alternative, a view in which I am encouraged by his diffidence in advancing the argument. On the third point-namely the discretion of the court-I am satisfied that there is no special factor here which should deter this court from granting the remedy sought-in circumstances where, as I think, the Board of Trade's duty is clear in the light of the language used by Parliament. The only factor that has troubled me in this regard is Mr. Wheeler's argument that inasmuch as companies are apt to view with suspicion the activities of receivers and managers appointed by debentureholders, the Board of Trade may be inundated by special resolutions requiring it to investigate and that it is likely that in many cases the expense of so doing may prove irrecoverable. No doubt this is a problem which is capable of solution by recourse if necessary to Parliament itself, but in any event it is not an objection to which I am entitled to listen in face of the clear and simple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number of matters or alleged matters following upon the phrase "by reason of matters set out in a certain circular to members" and referred more specifically to certain alleged transactions, arrangements and understandings. These constituted the substance of the grievances, real or supposed, which had induced the members of the applicant company to pass the resolution. I entertained some doubt during the hearing of this motion whether, upon the proper construction of the special resolution read as a whole, or as a matter of the interpretation which the Board of Trade would naturally give to it, the resolution is to be regarded as declaring: (1) That certain matters therein set out ought to be investigated, or (2) that the affairs of the company ought to be investigated by reason of certain matters therein set out. It is to be observed that when the Board of Trade by letter December 10, 1963, declined to appoint an investigator, on the ground that in the board's view such an investigation as was sought was not one which they were empowered to set up under either section 164 or 165 of the Act, they stated that it appeared to them that the special resolution "declares that the affa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther's judgment, and I would say no more about them than this, that rightly or wrongly the members of the applicant company deprecate the commercial effects of those matters from their point of view. It is to be observed and emphasised that if and in so far as any such transactions relating to Atholl Houses Ltd. did take place, they must have been effected by T. G. Tickler Ltd., although caused to take place by the receiver. Qua receiver, he controlled the shares of T. G. Tickler Ltd., which were the property of the applicant company, and the right to vote attached to those shares. But decisions of the members of the board of T. G. Tickler Ltd. could not be taken by him any more than by the other two members qua receiver as distinct from director. Returning now to the main question of construction of the words " affairs of the company "in section 165(1), and to the applicability of those words to such alleged activities of the receiver and of T. G. Tickler Ltd., and their effect upon the applicant company and its members, it is appropriate first to consider Mr. Wheeler's submission. As I understand it Mr. Wheeler agreed that the prima facie and natural meaning of the phrase" affa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he construction of ambiguous terms, I am unable myself to think that there is any ambiguity about the expression which falls to be construed such as would lead to the adoption of that process of construction in this case. Further it seems to me that such force as a reference to those headings might other wise have had is weakened when reference is made to the Companies Act, 1862, by which first there was provided in section 60 a power for the company itself to appoint by special resolution inspectors for the purpose of examining into "the affairs of the company". That section in that Act was comprised in Part 3 of the Act; there was no Part which related specifically to receivership. The heading to Part 3 of the Act of 1862 was "management and administration of companies and associations under the Act," but that heading was further sub-headed for a fasciculus of sections, numbered from 39 to 48, "provisions for the protection of creditors," and for the fasciculus in which section 60 was included, namely, 49 to 61, "provisions for protection of members." Since I do not think that the position of section 165 affords any clear guide to the solution of the present problem, I have thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... session of the colliery he found that the whole of the then available output would be required to satisfy existing forward contracts which had been entered into by the company at a time when the price of coal had been lower than it was when he took possession. If he were to disregard those contracts he could sell the coal at an increased price which would have realised an extra profit of some GBP200 a week. The receiver sought leave to break the existing contracts and sell the coal more profitably under fresh contracts. The Master of the Rolls, after considering and contrasting the position which would have obtained if the mortgagee had elected simply to take an appointment of a receiver of the property, said Ibid 472 : "If he elects to obtain the appointment of a receiver and manager of the business including the stock in trade and book debts, it is just as much the duty and the business of the receiver and manager to protect the goodwill and to guard against the destruction of the business or injury to the goodwill, as it is the duty of the receiver of mortgaged property, not being manager also, to take care that the property is preserved so far as it reasonably may be for the be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illustration of the commercial importance which transactions by a receiver and manager appointed under a debenture may have for a company is afforded by William H. Parsons v. Sovereign Bank of Canada [1913] AC. 160, PCwhich came on appeal to the Privy Council. There it was held that where the receiver had supplied goods under contracts with the company subsisting at the time of the appointment which were subsequently cancelled the purchasers of such goods were entitled to set off against the price claimed for them damages for breach of their contract with the company. In my judgment transactions effected by a receiver and manager, even one appointed by the court and therefore not an agent of the company, and still more clearly those of a receiver appointed under deed as agent of the company and manager of its undertaking property and assets, are, within the meaning of section 165(a) of the Companies Act, 1948, affairs of the company, I think that at any rate that proposition applies to transactions brought about by a receiver and manager by the use of property or powers possessed by the company but effected by a separate legal persona which is a subsidiary company of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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