ments, seques executions to 163. Where any company is being wound up by the Court Certain attachor subject to the supervision of the Court, any attachment, trations, and sequestration, distress, or execution put in force against the estate or effects of the company after the commencement of the winding-up shall be void to all intents (a). (a) Conf. ss. 85, 87, 153, 197, 198, 201, 202. be void. This section must be read with, and is controlled by, the 85th and 87th Effect of sections. For the joint effect of these sections, and the cases which have section. been decided under them, see sects. 85 and 87. The N. Company, having a credit account with the M. Railway Com- Lien. pany for the carriage of goods under an agreement whereby the railway company were to have a lien on goods in their hands for moneys due to them and unpaid, were indebted to the M. Company for carriage at the time of the presentation of a petition to wind up the N. Company. The official liquidator then sent goods to be carried by the railway company, and subsequently a winding-up order was made. The M. Company claiming a lien on the goods in their hands for the moneys previously due, it was held that the official liquidator must pay the debt to the M. Company if he wished to obtain possession of the goods in their hands (a). In the following similar case goods were sent after the winding-up order. An iron company, having a credit account with a railway company under an agreement that the latter should have a general lien upon the waggons and goods of the iron company for all moneys due to them, was ordered to be wound up. It was held that the general lien was put an end to by the winding-up order, at any rate as respects property acquired by the iron company after the order (b). Whether the section applies to an execution on a judgment obtained Execution. against a company in a proceeding brought by the liquidators, quære (c). In In re United English, &c., Co. (d) an action at law by a judgment creditor of the company against an alleged debtor of the company as a garnishee in respect of his judgment, was allowed to proceed, but an injunction was granted to restrain the creditor, if he should obtain a verdict, from putting in force any attachment, sequestration, distress, or execution against the estate or effects of the company in the hands of the garnishee. preference. 164. Any such conveyance, mortgage, delivery of goods, Fraudulent payment, execution, or other act relating to property as would, if made or done by or against any individual trader, be deemed in the event of his bankruptcy to have been made Western Railway Co., L. R. 6 Q. B. 101, (a) Re Northfield Iron Co, 14 L. T. 695. 776. (c) Ex parte Smith, L. R. 3 Ch. 125. (b) Wiltshire Iron Co. v. Great Fraudulent preference. Power of Court to assess damages or done by way of undue or fraudulent preference of the Where directors of a company were authorized to borrow money "upon mortgage, or otherwise," debentures issued under an arrangement with creditors in payment for goods actually supplied were held valid; and, although the company was insolvent at the time of such issue, the debentures were held not to constitute a fraudulent preference within this section, the scheme being, not in contemplation of a winding-up, but its whole object being to avoid a winding-up (a). To constitute a fraudulent preference, there must be a contemplation of winding up, and an absence of pressure on the part of the creditor (a). A security given by an insolvent company to a director, who is cognisant of the state of the company's affairs, is a fraudulent preference; and the fact that he has pressed for payment will make no difference. It is impossible to predicate of a director of a company pressure against the company while he remains a director (b). Where, before a winding-up, a company executed a deed of inspectorship, under which a dividend was paid to some creditors, and not to others, there being no question of fraudulent preference, it was held that those who had not received any dividend under the deed were not entitled to any priority in the distribution of the assets in the windingup over those who had (c). 165. Where in the course of the winding-up of any company under this Act, it appears that any past or present other liquidator, or any officer against delin- director, manager, official or quent directors and officers. (a) In re Inns of Court Hotel Co., L. R. 8 Eq. 82. Gaslight Improvement Co. v. Terrell, L. R. 10 Eo 16; and see Haber shon's Case, L. R. 5 Eq. 286. (c) Ex parte Ashbury, L. R. 5 Eq. 223; and see s. 133. of such company, has misapplied or retained in his own hands, or become liable or accountable for any moneys of the company, or been guilty of any misfeasance or breach of trust in relation to the company, the Court may, on the application of any liquidator, or of any creditor or contributory of the company, notwithstanding that the offence is one for which the offender is criminally responsible (a), examine into the conduct of such director, manager, or other officer, and compel him to repay any moneys so misapplied or retained, or for which he has become liable or accountable, together with interest after such rate as the Court thinks just, or to contribute such sums of money to the assets of the company by way of compensation in respect of such misapplication, retainer, misfeasance, or breach of trust, as the Court thinks just. (a) By 24 & 25 Vict. c. 96, Directors fraudulently appropriating property (s. 81), or keeping fraudulent accounts (s. 82), or wilfully destroy ing books (s. 83), or publishing frau- The summary power given by this section is not to be exercised only Power, when to in cases where the charge against the director or officer is clearly and be exercised. distinctly made out, and there is no question of law to be determined. The Court is empowered to "examine into the conduct" of the director. This section and the 101st section "were introduced in order that by proceedings under the Act, without any double process, or double set of proceedings, complete justice might be done between the parties, and a complete winding-up effected; the instances are rare in which the jurisdiction ought not to be exercised " (a). In some of the earlier cases (b) a narrower construction was put upon the Act, but the jurisdiction is fully discussed, and its limit defined, in Stringer's Case (c), where the earlier cases were reviewed, and In re Royal Hotel Co. of Great Yarmouth (b) was disapproved; and it is there laid down that on a summary proceeding under this section the Court may examine into the conduct of the officer, and compel him to refund; that a narrow construction ought not to be put upon the section, but that its terms are expressly large and comprehensive to obviate the necessity of filing a bill to impeach the transactions here dealt with. The bankers of the company are not officers of the company so as to Banker. be amenable to the jurisdiction given by this section (4). (a) Per Giffard, L.J., in Stringer's Case, L. R. 4 Ch. 475, 493; and see Rance's Case, L. R. 6 Ch. 104, 114, 120. (b) Re Bank of Gibraltar and Malta, 34 L. J. (Ch.) 617; 34 Beav. 556; L. R. 1 Ch. 69; In re Royal Hotel Co. of Great Yarmouth, L. R. 4 Eq. 244; Re Brighton Brewery Co., Hunt's Cuse, 16 W. R. (c) L. R. 4 Ch. 475. (d) In re Imperial Land Co. of Marseilles, In re National Bank, L. R. 10 Eq. 298. Voluntary winding-up. Extent of power. Penalty on falsification of books. This section is, upon an application under sect. 138, applicable to a voluntary winding-up in exactly the same way as to a compulsory winding-up, or a winding-up under supervision (a). This section is personal only as against the director or officer, and does not apply as against the executors of a deceased director or officer (b). Whether, where the acts of a body of officers are impeached, some of whom are dead, the survivors can be proceeded against under this section, or whether a suit is necessary, quære (b). An order may be made under this section to compel a contributory or director to repay a dividend paid under a delusive or fraudulent balance-sheet (c). Where a dividend or bonus has, after proper investigation, been proposed by directors, and agreed to by shareholders, the Court will not lightly interfere with its payment. But where no profit-and-loss account had been made out, and no allowance made for the risks to which the company was liable, a bonus declared under such circumstances was held to have been declared under a delusive and fraudulent balancesheet within the meaning of Stringer's Case (c), and an order was made upon a director to repay the bonus paid to him (d). A bonus declared and credited to a director against payments due from him on calls is money paid to or retained by him within the section (d). The promoter of a company entered into a secret agreement with four directors, who signed the memorandum of association, to give each of them ten shares, or the money to pay for them. The directors, being empowered under the articles to pay the promoter certain moneys in respect of the promotion of the company, drew a cheque for £400 which the promoter returned to them to pay for the promised shares. The directors, on an application under this section, were held jointly and severally liable to repay the money (e).. 166. If any director, officer, or contributory of any company wound up under this Act destroys, mutilates, alters, or falsifies any books, papers, writings, or securities, or makes or is privy to the making of any false or fraudulent entry in any register, book of account, or other document belonging to the company, with intent to defraud or deceive any person, every person so offending shall be deemed to be guilty of a misdemeanour, and upon being convicted shall be liable to and (a) Rance's Case, L. R. 6 Ch. 104; see s. 138, and In re Bank of (c) Stringer's Case, L. R. 4 Ch. 475. As to the liability of directors, see further, Turquand v. Marshall, L. R. 6 Eq. 112; Ibid. 4 Ch. 376. (e) Re London and Provincial Starch Co., 20 L. T. 390; and see Orgill's Case, 21 L. T. 221. } imprisonment for any term not exceeding two years, with or without hard labour (a). (a) Conf. 24 & 25 Vict. c. 96, s. 83. delinquent directors in 167. Where any order is made for winding up a company Prosecution of by the Court or subject to the supervision of the Court, if it appear in the course of such winding-up that any past or present director, manager, officer, or member of such company has been guilty of any offence in relation to the company for which he is criminally responsible (a), the Court may on the application (8) of any person interested in such winding-up, or of its own motion, direct the official liquidators, or the liquidators (as the case may be), to institute and conduct a prosecution or prosecutions for such offence, and may order the costs and expenses to be paid out of the assets of the company. (a) 24 & 25 Vict. c. 96, ss. 81-84; and v. note to s. 165. (B) By petition, Gen. Order, Nov. 1862, Rule 51. 168. Where a company is being wound up altogether Prosecution of voluntarily, if it appear to the liquidators conducting such directors, &c., winding-up that any past or present director, manager, officer, in case of voluntary or member of such company has been guilty of any offence winding-up. in relation to the company for which he is criminally responsible (a), it shall be lawful for the liquidators, with the previous sanction of the Court (8), to prosecute such offender, and all expenses properly incurred by them in such prosecution shall be payable out of the assets of the company in priority to all other liabilities. (a) 24 & 25 Vict. c. 96, ss. 81–84; and v. note to s. 165. (B) Obtained on petition, Gen. Order Nov. 1862, Rule 51. 169. If any person, upon any examination upon oath or Penalty of affirmation authorized under this Act, or in any affidavit, perjury.. deposition, or solemn affirmation in or about the winding-up of any company under this Act, or otherwise in or about any matter arising under this Act, wilfully and corruptly gives false evidence, he shall, upon conviction, be liable to the penalties of wilful perjury. |