TMI Blog1969 (7) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... principally concerned, both were accordingly in positions of responsibility in Capital. For brevity, I shall refer to Mr. Veitch and Mr. Snow collectively as "the applicants." The motion raises undecided points of substance and procedure under an important and extraordinary branch of the companies winding-up jurisdiction. The matter arises out of the liquidation of Rolls Razor Ltd., which I shall call " Rolls." This company is in a creditors' voluntary winding up under an extraordinary resolution passed on August 27, 1964. Mr. Kenneth Russell Cork, who is the liquidator of Rolls, is the respondent to the motion, and Mr. Brightman appears for him. The transactions in question relate to some hire-purchase agreements, with a very considerable value, which Rolls assigned to Capital in April and May, 1964, before any question of winding up arose. It seems that on July 14, 1964, a meeting between representatives of the two companies took place at which 'there was some discussion about substituting certain other hire-purchase agreements for some of the agreements already assigned which had proved ineffective, in the sense that payments were not being made under them. Mr. Snow was at tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this will be "just and beneficial." The terms of section 268 are, of course, drastic and far-reaching; but the section is no novelty, having been section 115 of the Act of 1862, section 174 of the Act of 1908 and section 214 of the Act of 1929. The summons thus sought an order under both subsection (2) and subsection (3) of section 268, relating to examination and to production of documents respectively. In accordance with the established practice, the application was made ex parte to the registrar of the Companies Court. In the words of Jessel M.R. in In re Gold Co. [1879] 12 Ch. D. 77, 82. " The liquidator, according to the practice of the court, comes ex parte, and, as a general rule, he makes no affidavit, for a very good reason, that it is not desirable for him to put anything upon the files of the court which can be inspected by the person against whom he intends to proceed, and which, if so inspected, might afford information which would enable him to defeat any proceeding to be taken against him." On March 7, 1969, the registrar heard the application and signed an indorsement on the back of the summons, which I read : "Leave to examine James Alistair MacPha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring with him and produce all books, papers, deeds, writings and other documents in his custody or power in anywise relating to the company : I follow substantially the wording of the order as now drawn up in this case. In his opening, Mr. Heyman accordingly devoted part of his endeavours to a demonstration that it would be wrong to require the applicants, who were no longer in any position of high authority in the company, to produce documents that belonged to the company. In due course, Mr. Brightman in terms disclaimed any contention that the order as drawn up ought to contain any requirement relating to documents ; and as the order as now drawn up does contain such words, he does not seek to support them. In those circumstances, certain observations seem to be appropriate. First, as I have already said, I think that in all ordinary circumstances the order should be drawn up before any application or appeal relating to it is launched. Second, I consider that the indorsement ought to make it explicit whether what is being ordered is a summons for examination under section 268 (1) and (2), or whether there is also a requirement to produce documents under subsection (3). Third, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to the conclusion that in the exercise of his discretion he ought to order an oral examination of both the applicants, he refused the application for what in effect was a stay of the examinations. On May 21, the applicants issued a notice of motion; and it is pursuant to this notice that I have heard this motion. The notice seeks relief under three paragraphs. Paragraph 1 asks for the discharge of the registrar's order of March 7 quoad the applicants. This is substantially the application which was not pursued before the registrar. However, it seems that the reason for this was that the registrar considered it inappropriate that he should be asked to discharge his own order, so that no question arises here of the applicants proceeding on a point that was not taken below, or was abandoned. Paragraph 2 seems to me to be virtually nugatory. It asks in the alternative that the registrar's order of May 13 be discharged. Apart from dealing with the costs, all that this order did was to make no order. If that order is discharged, the only result is to expunge the registrar's refusal to give the applicants the relief they seek, giving them nothing in its place. Paragraph 3, however, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sometimes in such cases a short affidavit is sworn verifying the written statement, so that an inspection of the file would reveal nothing of the contents of the statement. It is possible to read some words of Jessel M.R. in Gold Company 's case ( supra ), as perhaps exempting the liquidator in a voluntary liquidation from filing any affidavit; but the primary consideration appearing in those words is, I think, that of secrecy, and I do not think that he could be said to be dealing with an affidavit merely verifying the written statement. Accordingly, I see no reason for not following what seems to me to be the proper practice in the case of any liquidator who is not an officer of the court, namely, that he should file an affidavit verifying his statement. Such an affidavit is required where the application is made by a contributory : see In re Imperial Continental Water Corporation [1886] 33 Ch. D. 314, 317, In re Sir John Moore Gold Mining Company [1877] 37 LT 242, 243. No reason for distinguishing the liquidator in a voluntary winding up has been suggested. The relevant distinction seems to me to be not between liquidators and others, but between officers of the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very court the registrar may, under the general or special direction of the judge, hear and determine any application or matter which under the Acts and rules may be heard and determined in chambers.' I have power to give a special or general direction, and I hereby give a general direction that when a person desires to have an order made by the registrar in chambers discharged, he must move before me in court to discharge the order of the registrar." So far as I know, that general direction has never been revoked ; and I do not think that the continued validity of the direction is affected by the replacement of the rules by later rules to substantially the same effect (see rule 7 of the Companies (Winding-up) Rules, 1949). The effect, as it seems to me, is that in this case the registrar was quite right in his view that it was inappropriate for him to be asked to discharge his own order. In saying this, I reserve the question whether the registrar could not vary or discharge his order at any time before it was drawn up, in accordance with general principles. The direction given by Buckley J. does not, however, in terms relate to an application to vary the registrar's order, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the term is frequently used to describe the Chancery Division of the High Court when exercising its jurisdiction under the Companies Act, 1948. As Wynn-Parry J. said in that case, at page 867 : "The phrase 'Companies Court' is a modern term introduced into the forms made pursuant to the Companies Act, 1929, in place of the phrase in the previous forms 'Companies Winding-up', in order to soothe the susceptibilities of those who desired to apply to the court for some relief in the case of entirely solvent companies (as, for instance, confirmation of the reduction of the capital of a company by the return of surplus capital to its members) and who disliked that the title to the necessary proceedings should contain a reference to winding up." What I am concerned with is merely a part of the jurisdiction exercised by one Division of the High Court, and nothing more esoteric than that. Next, there is the change of procedure that took place after the Companies (Winding-up) Act, 1890, and the Companies (Winding-up) Rules, 1890 and 1892, had come into force. Before these changes, the company work of the Chancery Division was dealt with in the same way as the other business of the Div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r application in court may be adjourned to be heard and dealt with in chambers." Rule 35 (1) provides that : '' 'Registrar' shall in the High Court mean and include any of the registrars in bankruptcy of the High Court, and any person who shall be appointed to fill the office of registrar under these rules, and where a winding up matter is in the district registry of Liverpool or Manchester shall mean the district registrar." By rule 37, the Rules of 1890 and 1892 are to be deemed to be "one set of Rules." The result of these changes was therefore that the companies work formerly done by the chief clerks was thereafter done by the registrar. With those considerations in mind, I turn to the question of discretion. As is well known, the general rule in the Chancery Division is that the master exercises his functions as a deputy for the judge, and any litigant who is dissatisfied with a decision of the master is entitled to have the proceedings adjourned as of right to the judge. Thereupon the judge determines the matter de novo : indeed the strict rule is that it should not even be mentioned to the judge what the decision of the master was. If a discretion has to be exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court, was intended to exercise a discretion which could not be interfered with save on what I may call appellate grounds. One must remember, too, that what is made is an order of the High Court; and in that court the judge and the registrar both hold office. A litigant who moves from one to the other remains within the court. He is not moving to a different court, as he would be if he went to the Court of Appeal. What the order of the High Court is to be in any case is to be determined by the officer of the court who exercises the jurisdiction of the court. If the matter stays with the registrar, he is that officer; if it is brought before the judge, it is he; and if it is the judge, then it should be his discretion. At one stage, in answering a question, Mr. Brightman was constrained to say that the judge and registrar each constituted a separate court; but he could cite no authority for this view, and it seems to me to be impossible to sustain it. Accordingly, apart from the authorities, my conclusion would be that before me the matter is at large, and the exercise of the discretion is mine, unfettered by the decision of the registrar. In saying this, I have not forgotte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ator in an insolvent company is necessarily placed. He usually comes as a stranger to the affairs of a company which has sunk to its financial doom. In that process, it may well be that some of those concerned in the management of the company, and others as well, have been guilty of some misconduct or impropriety which is of relevance to the liquidation. Even those who are wholly innocent of any wrongdoing may have motives for concealing what was done. In any case, there are almost certain to be many transactions which are difficult to discover or to understand merely from the books and papers of the company. Accordingly, the legislature has provided this extraordinary process so as to enable the requisite information to be obtained. The examinees are not in any ordinary sense witnesses, and the ordinary standards of procedure do not apply. There is here an extraordinary and secret mode of obtaining information necessary for the proper conduct of the winding up. The process, borrowed from the law of bankruptcy, can only be described as being sui generis. In such a process, it seems to me that the court must give great weight to the views of the liquidator, with his detailed knowl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urned to the judge at this stage. Later, certain examinees moved before the judge to postpone the examination until after the trial of a certain action; and on the ground of suppression of material facts before the chief clerk, Chitty J. granted the stay. On appeal, the Court of Appeal refused to interfere with the judge's decision. At page 320, Cotton L.J. spoke of " the discretion of the judge, " and Lopes L.J. said, at page 322 : "The exercise of those powers is within the discretion of the judge below, who knows more than we of the affairs of the company being wound up, and has the control of the winding-up of the company. It is a discretion which I think ought not to be interfered with except in extreme cases." That, of course, points to the discretion being that of the judge; but the case arose in the day of chief clerks and not registrars. The distinction between appealing from the High Court to the Court of Appeal and bringing the matter from the registrar to the judge within the High Court is well brought out by In re London and Lancashire Paper Mills Co. Ltd. [1888] 59 LT 362, 365. That, too, was of course still in the days of chief clerks, and the matter came bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd refuse to answer the questions that he objected to. Instead, the proper course was for the examinee to move to discharge the order. If that is the proper course to take, it is difficult to see why on the motion the examinee should be refused a rehearing that for him is no more than an initial hearing, and be told that he is confined to four heads of objection. Once let him be heard, and he ought to be fully heard. Points that might have had some technical cogency in denying him a hearing at all do not seem to me to provide any reason for restricting him to the grounds upon which he could have complained if he merely had a right of appeal, particularly when I can see no justice in such a restriction. In my judgment Mr. Brightman's strictures on the judgment of North J. are without foundation. I turn to Maville Hose Ltd's case ( supra ) which I have already mentioned. This, of course, was decided when the modern system of the registrar making the orders formerly made by the chief clerk had long been in operation. The registrar had made an order under the predecessor of section 268, and the examinee moved before Simonds J. to discharge or vary the order as being oppressive an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the applicants are persons who are likely to be able to give information on matters of considerable importance in the winding up. In those circumstances the case for making an order under the section is overwhelming. I have duly considered Mr. Heyman's submissions, and in particular a submission that he based on attempts by the liquidator to see certain correspondence and documents which he wanted, he said, before he could consider or submit a questionnaire. But neither this nor the gap in the correspondence of some six months prior to the making of the order by the registrar, with no warning of the intended application, seem to me to affect what in my judgment is the obvious conclusion. In view of the confidential nature of the liquidator's statement, and the purpose of the section, I do not think it desirable for me to say any more about the grounds for my decision. As Baggallay, LJ. said in In re Gold Company 12 Ch. D. 77, 86 : "It is not desirable in a case of this kind for the judge to go too far in stating the ground on which he deems these persons capable of giving information because it might prejudice the prosecution of the subsequent inquiries." Accordingly, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... look at the facts of the case as a whole, without yielding to pre conceptions ; and in doing this, the court should give all proper weight to the views of the liquidator without, of course, abandoning the proper exercise of its discretion, or treating the liquidator's views as being in any way decisive of the matter. The prior submission of written questions will sometimes aid and speed the ascertainment of the relevant facts ; but sometimes it may hamper or delay the process. There may be a marked difference between the information obtained from unsworn written answers which may have been drafted by lawyers and that obtained from viva voce answers on oath. In all the circumstances of this case, in the exercise of my discretion, I hold that there ought to be an oral examination without any prior submission of written questions being made requisite. I would have reached the same conclusion even if (contrary to my opinion) there were any rule, whether of law or of practice, that prima facie there should be no oral examination unless written questions had first been submitted. If, contrary to my judgment, the discretion was the registrar's, then I hold that he exercised it correctl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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