1961 (5) TMI 42 - HC - Companies Law

Judgment on Costs in Petition by Creditor: Importance of Status and Actions

The judgment delivered by Pennycuick, J. addressed the issue of costs in a petition raised by a judgment creditor. Referring to established practices and ... Winding up – Powers of tribunal on hearing petition Issues:Costs of the petition raised by the petitioning creditor.Analysis:The judgment delivered by Pennycuick, J. pertains to the question of principle regarding the costs of the petition raised by the petitioning creditor, who is a judgment creditor in this case. The practice regarding costs in such situations has evolved over time, as highlighted in previous cases like Sharman Ltd. [1957] 1 WLR 774. The practice was modified to consider the circumstances where a judgment creditor presents a petition but is prevented from obtaining an order due to opposition from other creditors. In such cases, the fair practice was deemed to make no order as to costs. The judgment emphasized the importance of considering the status of the petitioner as a judgment creditor and the intervention of opposing creditors in determining the cost implications.The judgment referenced the case of Flagstaff Silver Mining Co. of Utah In re [1875] LR 20 Eq. 268, where the court's approach to costs was discussed. It was noted that the court usually hesitates to interfere with existing practices, but in cases involving judgment creditors, the practice was considered to require variation. The judgment highlighted the unfairness of ordering a judgment creditor to pay costs when an overwhelming majority of creditors oppose the petition, thereby depriving the petitioner of their costs. The judgment concluded that, at least concerning a judgment creditor, the fair practice would be to make no order as to costs when dismissing the petition.The judgment further referred to the decision in A.B. C. Coupler and Engineering Co. Ltd. In re [1961] 1 WLR 243, where a similar approach was followed. It was emphasized that the practice introduced by the Sharman case [1957] 1 WLR 774 is appropriate when the petitioning creditor has acted reasonably in presenting and prosecuting the petition. However, it was noted that the petitioner cannot benefit from the relaxation in costs unless they have acted reasonably in the circumstances of the case. The reasonableness of the petitioner's actions in presenting and prosecuting the petition is crucial in determining the cost implications.In the present case, the judgment analyzed the facts and circumstances surrounding the petition. It was observed that the petitioner was aware of the company's situation and the likelihood of the petition's failure due to the opposition from other unsecured creditors. The petitioner's debt was significantly lower compared to the claims of other creditors, indicating a high probability of the petition's failure. Consequently, the judgment concluded that the petitioner had acted unreasonably in presenting and prosecuting the petition, leading to the direction that the petitioner must pay the costs of the company and the opposing creditors.