Priority of Liquidator preserved - secured creditors may pursue mortgage suit but receiver cannot oust the liquidator.

Secured creditors were granted leave to continue a pre-existing mortgage suit during winding up to quantify their charge, but the court refused to displace the Official Liquidator's possession in favour of a court-appointed receiver, applying the discretionary principle that the liquidator's custody is ordinarily preferred to avoid conflict with winding-up administration; consequently the applicants were ordered to pay the Official Liquidator's costs. The operative ratio states that, in competition between a receiver and a liquidator, the court will ordinarily preserve the liquidator's possession.

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Issues: (i) Whether the secured creditors should be granted leave to proceed with their suit after a winding up order; (ii) Whether the receiver appointed in the suit should be permitted possession of mortgaged property in the face of an Official Liquidator in possession; (iii) Whether the applicants should be ordered to pay the costs of the Official Liquidator.

Issue (i): Whether the secured creditors should be granted leave to proceed with their suit after a winding up order.

Analysis: The petitioners are secured creditors seeking leave under the winding-up provisions to continue a suit to ascertain amounts due on a mortgage that pre-existed acquisition by the company. The Court treated the mortgage-encumbered property as company assets subject to charge and noted established principles permitting secured creditors to seek determination of their rights while a winding up is pending.

Conclusion: Leave to proceed with the suit is granted in favour of the applicants.

Issue (ii): Whether the receiver appointed in the suit should be permitted possession of mortgaged property in the face of an Official Liquidator in possession.

Analysis: There is a conflict between a court-appointed receiver (at the instance of secured creditors) and an Official Liquidator appointed on winding up. Applying the established discretionary principle that, in competition between a liquidator and a receiver, preference is ordinarily given to the liquidator, and having regard to the statutory purpose of avoiding conflict between receivers and liquidators, the Court refused to oust the Official Liquidator's possession in favour of the receiver.

Conclusion: The application for possession by the receiver is refused; the decision is against the applicants on this point.

Issue (iii): Whether the applicants should be ordered to pay the costs of the Official Liquidator.

Analysis: Although the applicants obtained leave to proceed with the suit, their application for possession provoked opposition and required the Official Liquidator to appear and resist the claim to possession.

Conclusion: The applicants are ordered to pay the costs of the Official Liquidator.

Final Conclusion: The Court allowed leave to continue the pending suit to determine the secured creditors' mortgage claim, refused to permit the receiver to take possession from the Official Liquidator, and directed that the applicants pay the Official Liquidator's costs; overall the decision is partly in favour of the applicants.

Ratio Decidendi: Where a competition arises between an Official Liquidator and a receiver appointed at the instance of secured creditors, the court will ordinarily exercise its discretion to preserve the liquidator's possession and prefer the liquidator to avoid conflict between winding-up administration and receivership.

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