Re Greycaine Ltd

 

Re Greycaine Ltd

COMPANY; Insolvency: TRUSTS: ADMINISTRATION OF JUSTICE; Courts

CHANCERY DIVISION

LORD UTHWATT, SITTING AS AN ADDITIONAL JUDGE OF THE CHANCERY DIVISION

26, 30 NOVEMBER, 3, 7, 10 DECEMBER 1945, 30 JANUARY 1946

Companies – Receivers – Remuneration – Receiver appointed at agreed remuneration by trustees of trust deeds securing debentures – Compulsory winding up

– Application by liquidator for remuneration of receiver to be fixed by the court – Jurisdiction of the court – Law of Property Act, 1925 (c 20), ss 101(1) (iii),

(3), 109(6) – Companies Act, 1929 (c 23), s 309.

Under trust deeds securing debentures issued by a company, the trustee was empowered in certain events to appoint a receiver at a remuneration payable out of

the mortgaged premises at a rate not exceeding that allowed by the Law of Property Act, 1925, s 109, but the amount to which the percentage was to be

applied was not stated. In 1936, a receiver was appointed by the trustee and, contrary to the provisions of the Law of Property Act, 1925, s 109, he was

authorised to retain, out of the mortgaged premises and moneys to be received, all costs and charges, as well as commission at the rate of 5 per cent of the

gross amount of all moneys received. In 1937, an additional receiver was appointed. The company’s works having been destroyed by enemy action in 1940,

in 1941 the remaining stock and plant were sold. In 1944, an order was made for the compulsory winding up of the company. The receivership was still on

foot and the total sums received by the receivers amounted to almost a million pounds, about three-quarters of which represented trading receipts. On 25 May

1945, the liquidator applied to the court, under the Companies Act, 1929, s 309, to fix the remuneration of the receivers. Two questions were raised 􀂭 329􀀉 as

to the construction of sect 309: (i) whether the court had any jurisdiction where a receiver had been appointed at an agreed remuneration; (ii) whether an order

could be made which covered the past, or whether the jurisdiction could be exercised only in respect to the future. In regard to the first question, it was

contended on behalf of the receivers that sect 309 only applied where there had been no effective agreement as to a receiver’s remuneration:—

Held – (i) Since sect 309 applied only where a receiver had been appointed and his remuneration would, normally, have been expressly agreed, the court had

jurisdiction under the section to fix the remuneration of a receiver even where he had been appointed at an agreed remuneration.

(ii) the jurisdiction of the court could only be exercised in respect to the future, because the jurisdiction given by the section was not to fix the amount

payable, but the amount “to be paid.” The object of the section was to enable the court, on the application of the liquidator, to regulate the course of business

as regards a receiver’s remuneration after a winding up had begun; it was not intended to enable the court to re-open matters that had been duly carried out

before an application under the section had been made.

Notes

Sect 309 of the Companies Act, 1929, contained a new provision whereby the court may, on the application of a liquidator, fix the remuneration of a receiver

appointed under powers contained in any instrument. It is now held that this power of the court overrides any agreement as to remuneration made at the time

of appointment, but does not extend to granting remuneration at a different rate to that agreed for the period previous to the order of the court.

For Application of Liquidation to Fix Remuneration of Receiver, see Halsbury, Hailsham Edn, Vol 5, p 516, para 837.

Motions

Motions to discharge an order of the registrar made on an application to the court under the Companies Act, 1929, s 309. The facts are fully set out in the

judgment.

H Wynn-Parry KC and V R Aronson for the liquidator.

J W Brunyate for Bernard Harry Brigham, the receiver.

C W Turner for the personal representative of John Wilcock, the additional receiver.

Cur adv vult

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30 January 1946. The following judgment was delivered.

LORD UTHWATT. By virtue of deeds dated 8 July 1929, and 16 November 1934, Greycaine Ltd a company incorporated under the Companies Acts,

charged its undertaking to a trustee as security for moneys payable under debentures issued by the company. The deeds provided that in certain events the

trustee might appoint a receiver of the mortgaged property, the trustee being empowered to invest the receiver with such powers and discretions as he might

think expedient. The provision made as to the receiver’s remuneration was as follows:

‘The remuneration of such receiver shall be payable out of the mortgaged premises and shall be at such rate not exceeding that provided in the Law

of Property Act, 1925, s. 109, as the trustee may from time to time determine.’

On 20 November 1936, Brigham, called in the deed “the receivers,” was duly appointed receiver by the trustee and by the terms of the appointment the

receiver agreed to act as receiver, and the following provision was made as to his remuneration:

‘The trustee authorises the receivers to retain out of the mortgaged premises and/or the moneys to be received by the receivers hereunder: (a) for

their remuneration a commission at the rate of 5 per cent. of the gross amount of all moneys received by them; (b) all costs charges and expenses

reasonably and properly incurred by them in the exercise of their powers as receivers.’

On 8 April 1937, Wilcock was appointed an additional receiver. On 8 March 1944, an order was made for the compulsory winding up of the company.

On 30 October 1944, Wilcock died.

The business of the company was carried on by the receivers from 1936 to 1940. In 1940 the works of the company was destroyed by enemy action and

in 1941 the remaining stock and plant were sold for over £100,000. The receivership is still on foot, as other assets remain to be got in. The total sums 􀂭 330􀀉

received by the receivers were little short of a million pounds, approximately three-quarters of this sum representing trading receipts. The 5 per cent specified

in the instrument of appointment when applied to the receipts works out at a very large sum, and the receivers have out of the moneys come to their hands

retained their remuneration. On 29 May 1945, the liquidator took out a summons under the Companies Act, 1929, s 309, to which Brigham and the legal

personal representatives of Wilcock were made respondents, asking the court to fix the remuneration of Brigham and Wilcock as receivers. Sect 309 runs as

follows:

‘The court may, on an application made to the court by the liquidator of a company, by order fix the amount to be paid by way of remuneration to

any person who, under the powers contained in any instrument, has been appointed as receiver or manager of the property of the company, and may

from time to time, on an application made either by the liquidator or by the receiver or manager, vary or amend any order so made.’

On that summons the registrar made the following order on 23 October 1945, after reciting the order to wind up and an order dated 7 June 1945, for delivery of

accounts by Brigham, and certain affidavits:

‘It is ordered that the remuneration of the said Bernard Harry Brigham and Frederick Wilcock deceased as such receivers as aforesaid be and the

same is hereby allowed at the sum of £15,000.’

The matter comes before me on motions to discharge that order. The order is obviously unsatisfactory in form, but it is common ground that it was intended to

operate as an order determining the total remuneration properly payable to the receivers in respect of the period beginning with the commencement of the

receivership until a recent date. The registrar has informed the court that he intended to apply a scale in which receipts were taken into account, and,

presumably, the period covered ends with the date of the last receipt taken into computation. To this there must be added that the registrar informed the court

that he had made a slip in working out the scale he had in mind.

In these circumstances, the normal course would be to discharge the order and remit the matter back for reconsideration by the registrar without further

ado; but the parties desire to have decided by the court two questions of construction of sect 309 of the 1929 Act, which were raised before the Registrar. The

first question is whether the court has any jurisdiction at all where a receiver has been appointed at an agreed remuneration; the second is whether an order can

be made which covers the past, or whether only the future can be dealt with. I propose to deal with these questions so far as raised by the facts of this

particular case. I propose to assume that the receivers were duly appointed and that some remuneration was duly allotted to the receivers on a percentage basis

applicable to receipts as they come in. I observe only in passing that, in the trust deeds, the amount to which the percentage was to be applied was left to

inference and that in the appointment, contrary to the provisions of the Law of Property Act, 1925, s 109, the receivers were to be entitled to expenses as well

as commission.

In considering sect 309 of the 1929 Act, there are various matters which should be borne in mind. The first is that, under the Law of Property Act, 1925,

s 101(1)(iii), there is, subject to any contrary intention expressed in a mortgage deed, given to a mortgagee of any property power “to appoint a receiver of the

income of the mortgaged property” (and in certain exceptional cases, where the property is of the nature of income, a receiver of the property itself)—the

power being capable [under subsect (3)] of extension or variation. Sect 109(6) of the 1925 Act contains a consequential provision as to the remuneration of a

receiver so appointed. Save in rare cases, securities given by a company registered under the Companies Acts fall within the term “mortgage deed” as defined

in the Act of 1925. Secondly, in the case of trust deeds securing debentures or debenture stock and in the case of debentures not supported by a trust deed, it

is, and has for many years been, the common practice to give to the trustees, in the first case, and to a debenture holder, in the latter case, power to appoint a

receiver of the mortgaged property itself. The practice has been to deal with the receiver’s remuneration in terms. In the case of trust deeds, the usual

provision was, and is, that the trustees may fix his remuneration subject in certain cases to a limitation. In the case of debentures, the provisions of the Law of

Property Act, 1925, or its predecessor, the Conveyancing 􀂭 331􀀉 Act, 1881, were, and are, incorporated with certain variations. The common method of

fixing remuneration is by reference to a percentage based on the value of receipts from transactions into which the receiver from time to time enters and, so far

as I am aware, the commercial practice is that the amount or scale of remuneration is agreed when the receiver is appointed. Powers wider than those implied

by the Acts—eg, powers of sale or carrying on a business—were, and are, usually given to receivers appointed under a debenture and, where there is a trust

deed, the practice has been either to give these powers to the receiver or to enable the trustees to delegate to him all or any of the powers and discretions as to

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sale and otherwise given to the trustees under the terms of the deed. The result is not satisfactory. In any negotiation as to the terms of a security, the question

of the receiver’s remuneration is hardly likely to be discussed at all. Common form is adopted. The effect of the application of statutory provisions, designed

to deal with the case where the receiver is receiver of income only, to a case where the receiver may also deal with the corpus is not a matter which the persons

concerned are likely to have in mind. Again, it would be difficult, perhaps impossible, to upset an exercise in good faith by the trustees of their power to fix

remuneration. Lastly, remuneration assessed by reference to the value of transactions may or may not work fairly. Logically, the value of the property dealt

with is irrelevant (though in practice one may be driven to it) if the end sought to be achieved is fair reward for skill and labour. One further matter may be

mentioned. One usually finds, where debentures are outstanding, that the appointment of a receiver precedes the commencement of a winding up. It is, I

think, legitimate to approach the construction of sect 309 with these considerations in mind.

As regards the first question, I have no doubt. Sect 309 applies only where a receiver “has been appointed,” and, normally, his remuneration will have

been expressly agreed. To hold that the section applied only where there was no effective agreement as to remuneration would be to disregard entirely the

position which required to be dealt with and to reduce the ambit of the section to a microscopic quantity. That microscopic quantity would be ascertained in

this way: “Fix” is said to mean “make certain what is not certain.” There may be cases where there is no provision in operation. The receiver in such a case

would be entitled to be remunerated on a quantum meruit basis; and the function of the section is to give the court, in its winding up jurisdiction, power to fix

the amount in fact payable. This argument disregards reality. The grammatical meaning is clear; and no absurdity or departure from the intent of the

legislation, as appearing in the section, is involved in adhering to it. “Fix” means fix, operative agreement or not. Just as under the Companies Act, 1929, s

79, the liquidator and creditors have rights which override the company’s bargain, so, under this section, the liquidator has rights denied to the company.

There is more substance in the second point raised. It was argued that, as the discretion given to the court was a judicial discretion, there was no reason

why sect 309 should not be widely construed. The court would be bound to take into account all the surrounding circumstances, including, in particular, the

fact that services had been rendered on the basis of a bargain duly made, and the further fact, if it were the fact, that the agreed remuneration referable to those

services had been duly satisfied. No injustice would arise. This may be true, but it is not an argument directed to the construction of the section. In my

opinion, the jurisdiction can be exercised only as respects the future. The jurisdiction is not to fix the amount payable, but the amount “to be paid,” and these

words point to regulating the course of events in the future, not to the possibility of reviewing the past. The section, to my mind, is directed to enabling the

court, on the application of the liquidator, to regulate the course of business as regards a receiver’s remuneration once a winding up has begun, and not to

enabling the court, when a winding up has begun, to re-open matters that have been duly carried out before an application under the section has been made.

It is not necessary for the purposes of the particular case before me to define the construction more closely. The parties here are not concerned with the

question whether “remuneration to be paid” means remuneration to be paid in the future, whenever the services were rendered, or remuneration to be 􀂭 332􀀉

paid as respects future services. I propose to express no opinion upon that point. Nor, again, are they concerned with the question whether what I have called

the future means the date of the application or the date of the order, but it is, in my view, clear that the date of the application is the material date.

Whether I am right or wrong in my construction of the section, the order, in view of the registrar’s slip, must be discharged. With a view to enabling the

matter to be effectively considered by the Court of Appeal, I propose to remit the matter to the registrar, with a direction—the form of which is dictated by the

particular facts of the case—that any order made by him is not to relate to remuneration which, pursuant to the terms of the trust deed and the instrument

appointing the receivers, has, prior to the date of the liquidator’s application, accrued payable to the receivers.

Order discharged. Matter remitted to the registrar to be reconsidered in accordance with the direction given.

Solicitors: Cosmo Cran & Co (for the liquidator); F C Hampshire, Harpenden (for the receiver); Roney & Co (for the personal representative of the additional

receiver).

B Ashkenazi Esq Barrister.

[1946] 1 All ER 333