Winding-up jurisdiction permits scrutiny of judgment debts, and an unauthorised ex parte decree was held not binding on the company.

In winding-up proceedings, the court may go behind a judgment debt and examine whether it should bind the company, even without proved fraud or collusion. Applying that principle, the managing agents had no authority under the articles to borrow for the company, the advance was not reflected in the company's books, and there was no satisfactory proof that the company received the benefit. The transaction was treated as being for the managing agents' own purposes, and the creditor-shareholder was bound to check the limits of their authority before advancing money. The ex parte decree was therefore not binding on the company, and the liquidator could resist execution.

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Issues: Whether, in winding-up proceedings, the liquidator could go behind an ex parte decree obtained against the company and resist execution on the ground that the managing agents had no authority to incur the debt and that the decree was not binding on the company.

Analysis: In insolvency and winding-up jurisdiction, the court is entitled to go behind a judgment debt and inquire into its basis. Such inquiry is not confined to cases of proved fraud or collusion, and may be undertaken where the circumstances show that there ought not to have been a judgment at all. On the facts, the managing agents had no power under the articles to borrow money on behalf of the company, the advance did not appear in the company's books, there was no satisfactory evidence that the company received the benefit of the amount, and the transaction was in substance for the managing agents' own purposes. The decree-holder, being a shareholder, was bound to ascertain the limits of the agents' authority before advancing the money.

Conclusion: The decree was not binding on the company and the liquidator was entitled to resist execution. The injunction granted by the District Judge was upheld and the appeal failed.

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