AI Drafter 
TaxTMI 
TaxTMI 
1955 (6) TMI 7
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....or, after a considerable hearing, was to the effect that the proceedings should go on against both these gentlemen, subject to certain limitations, which I need not consider ; and he gave directions accordingly for points of claim, points of defence, and so forth. Each of them, the receiver, Mr. Aizlewood, and the liquidator, Mr. Browne, has appealed to this court; but the cases which they have presented are not entirely the same, and for this reason. The receiver has put in the forefront of his appeal that, in any event, he (having been, as I say, receiver and manager appointed by the bank) is not within the category of persons to whom section 333 (and, indeed, its predecessors) is applicable. He further says that, even if he is within the compass of the section, the conditions of the section are not satisfied, in that the summons which the plaintiff took out does not, upon the face of it, allege against the receiver such matters of fact as would bring the charges (if true) within the purview of the section-in other words, that they are not "misfeasances" as contemplated by the section. The receiver, thirdly, was prepared to argue (though in the event we have not thought it nec....
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....uoting from the plaintiff's pleading) made up his mind to put an end to the active operations of this somewhat speculative company ; and in fact he did so. The natural-perhaps inevitable result of that was that in January, 1948, the unsecured creditors thought that they should look after themselves, and they presented a petition for the compulsory winding up of the company., A winding-up order was made on January 27, 1948; and later, following the usual meeting of creditors, Mr. Browne and a Mr. Booth, who died in 1952, were appointed joint liquidators. The receiver was, however, still in possession and was not discharged of his receivership and managership until May 19, 1949. It is a feature of the case (and this is one reason why I have mentioned the dates) that when I come to look at the application made against the receiver the charges are limited to the period of time from the receiver's appointment in August, 1947, until January 26, 1948; and, on the face of the summons, no complaint is made of him, or of his performances, after that latter date-a date which, it will now be appreciated, is some seven and half years ago. I have no doubt that the plaintiff busied himself wit....
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....benture, or both, treated as the agent of the company, in order that they may be able to deal effectively with third parties while in possession of the company's assets and exercising the various powers conferred upon them. But, in such a case as the present at any rate, it is quite plain that a person appointed as receiver and manager is concerned, not for the benefit of the company but for the benefit of the mortgagee bank, to realise the security ; that is the whole purpose of his appointment; and the powers which are conferred upon him, and which I have to some extent recited, are (as Sir Lynn observed, and I think fairly observed) really ancillary to the main purpose of the appointment, which is the realization by the mortgagee of the security (in this case, as commonly) by the sale of the assets. All that is perhaps elementary, but it bears upon what I shall have to say later on as regards the charges made against the receiver; for it appears to me inevitably to negative the proposition that a person appointed, as Mr. Aizlewood was appointed, owes some duty to the company to carry on the business of the company and to preserve its goodwill. For the moment, however, I have ....
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....therefore, able to reject, and do reject, the view that any help can be had from the definition of the word "officer." The question remains, however, whether any person of Mr. Aizlewood's position is a " manager " as that word is itself used in the sub-section. Contrary to the view of the Vice-Chancellor, and with all respect to him, I have come to the conclusion that he is not. I have already indicated (as is well known) that a person in Mr. Aizlewood's position, though called a " receiver and manager," is, in fact, one who is appointed a receiver, not with any duties to carry on the business of the company, in the best interests of the company, but in order to realize for the debenture holders or mortgagees the security which they have got; and only for that limited purpose is he given powers of management. The limit or special nature of his functions as manager is, I think, well illustrated in the Act itself. Sir Lynn directed our attention to the other sections of the Act (beginning at section 367) which concern receivers and managers. It would be taking undue time if I read them ; but those sections seem to me to state, plainly and deliberately, that a person appointed as rece....
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.... My second point is, in a sense, but a development of the first, but I mention it because it is of significance also to the liquidator's argument. Section 333, it has been many times said, is a purely procedural section. I do not in the least seek, by so stating, to lessen its significance : I mean (to re-state it) that it does not create any new cause of action ; it only provides a method of litigating particular claims ; and, in providing a method, it is not exclusive. Prima facie (though, as will be later seen, there are difficulties in the plaintiff's way in this case), if the procedure of section 333 is not open against any person who is within the section, the claimant may proceed by ordinary action. But there is this procedural difference, which may, I think, indicate the kind of case to which it is indended to refer : whereas, in an ordinary action, it would be open to the person charged to bring in (if it were proper procedurally to do so) some third party whom that person might seek to make responsible; in a case under section 333 no such third-party procedure appears to be available. I have already said that the receiver indicated, when he took possession, that he p....
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....ought within the section by the mere expedient of adding epithets to the negligence charged, calling it "gross" or "deliberate." Nor, by that expedient', without more, can what in truth is mere negligence be converted into something else, namely, breach of trust. But in between the two extremes that I have mentioned there is obviously a large range of conduct which may (or may not) be within the section. I shall follow others in not attempting any precise definition of what does or does not fall within it. I would like, however; to cite a passage from the judgment of Maugham J. in In re Etic Ld. [1928] Ch. 861, 873. In that case the Judge made reference to Coventry and Dixon's Case [1880] 14 Ch. D. 660 and certain other cases, and then he said [1928] Ch. 861, 873. this, of the language of Sir George Jessel M. R. in Ex parte Petty [1882] 21 Ch. D. 492 : "The language of Sir George Jessel in dealing with the matter in his decision in Ex parte Pelly [1882] 21 Ch. D. 492 strongly tends to show that in his view section 215" (now section 333 of the Act of 1948) "really only applies where there has been some wrongful act by the director, manager, liquidator, or other officer of the compan....
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....t involve any misapplication of the assets of the company. The object of this section of the Act is to enable the liquidator to recover any assets of the company improperly dealt with by any officer of the company, and must be interpreted bearing that object in view. It doubtless covers any breach of duty by an officer of the company in his capacity of officer resulting in any improper misapplication of the assets or property of the company." Those passages may, I think, be taken as authority, or as included among the authorities, establishing that a simple case of negligence at common law would not be within the section. But in my judgment Lindley L.J. and Lopes LJ. did not intend to lay it down by inference that any breach of duty, including a breach of trust, which did not involve a misapplication of assets, was outside the section. What they were saying was the converse: that, were a breach of duty had been committed, which did in fact result in a misapplication of the company's property, then such a transaction would be within the ambit of the section. With this introduction, I will turn to the summons in the present case, which is an exceedingly elaborate document. I wi....
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....is under no such duty to the mortgagor to obtain the best possible price for the property charged. I return, however, to paragraph 4, and, as I have earlier indicated, some expansion of the rather general allegations in the paragraph is to be found in the document called the points of claim, which was in fact delivered on or about April 20 last. The points of claim much expand and elaborate the subject-matter which I have already mentioned. They use the epithets I have quoted-that the action of the receiver in failing to continue to carry on the business was " deliberate and wrongful "; and, as an illustration of those allegedly deliberate and wrongful acts, it is said that he abandoned a contract with the Liverpool Warehousing Co. Ltd. the value of which was no less than GBP28,000. The answer, however, to my mind, is quite simple : in order to complete the contract with the Liverpool Warehousing Co. Ld. it would have been necessary to continue the business of the company, B. Johnson & Co. (Builders) Ld.; and, as I have already indicated, the receiver appointed for the purpose of realizing the debenture holders' security was under no obligation to the company or its contributori....
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.... of the summons, that matter is expanded in paragraphs 15 and following in the points of claim. It is said, for example, in paragraph 15, that the land was put up for sale on December 18, 1947, that it contained 45 acres, and that in the auctioneers' catalogue it was described as subject to a particular planning lay out approved in 1931. " Before the auction the applicant orally informed the receiver . . . that this description was inaccurate. The applicant further informed the receiver that it ought to have been described as having been the subject of planning approval ... in 1946 . . . The said land was therefore within " (certain sections of the Town and Country Planning Act, 1947) "and if sold with the correct description would have then fetched a figure of approximately GBP23,000." The pleader says that the error in description was not corrected and, therefore, that in December, the only bid being for GBP5,000, the property was withdrawn. The paragraphs go on further to say that the property was sold in February, 1948-as I have pointed out, outside the period for which the receiver is now charged-at a price of GBP6,250, as compared with the figure of GBP23,000 that I have alre....
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.... allow an amendment which would deprive the receiver of a defence which would or might otherwise be available to him. I therefore do not think it would be right to allow the amendments. For reasons that I have already given, I do not think that, on the face of the summons, the charges made in paragraphs 10 and 11 are charges which could be sustained or prosecuted under the section. I add only, that in paragraph 9 of the summons there is also an allegation that the receiver, having received certain sums of money on sales, failed to account to the plaintiff for GBP482. The answer to that again is short and simple : The receiver is not, and never was, an accounting party to the plaintiff. I am therefore disposed to think (if it were necessary) that Sir Lynn Ungoed-Thomas is right also on this, his second point. He had a third point, namely, that it was discretionary in the court to allow or not to allow the matter to proceed under section 333, and that, in any event, it would not be right to allow the proceedings to continue against the receiver under this section. But I do not find it necessary to go into that matter. For the reasons I have given, particularly my view, that Mr. Ai....
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....evelopment profit. As the summons stands, that is the only claim made against the liquidator. It is, I think, tolerably clear that an applicant under section 333 must establish that he has a real interest in the subject matter as to which he proposes to claim. (See, for example, the judgment of Maugham J. in the Etic case [1928] Ch. 861). The facts in this case show that, by an extremely narrow margin, namely, GBP83 or so, there was just sufficient to pay the secured creditors; but that, on the facts before us, there are claims of unsecured creditors in addition (for whom only the GBP83 is available) amounting to over GBP10,000. It is obvious, therefore, that the difference between GBP8,600 and GBP4,500, even with some further sum for loss of development profit added, would be quite insufficient to provide in full for the creditors and leave anything at all for the contributories. On that ground, therefore, I think it quite clear that the plaintiff has failed to show a sufficient interest in the subject matter of his claim and that it would not, therefore, be right to .permit any amendment which might reconstitute or make somewhat more convincing (if I may say so) the charges ma....
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....irections of expert surveyors. In so far, therefore, as it might be said or alleged that he should not have accepted the surveyors' advice, it is obvious that a person so charged might desire to bring in as third parties the professional advisers. As I have earlier pointed out, it is not possible in proceedings under this section to bring in third parties ; and that is, perhaps, another ground for not permitting this matter to go on by amendment. Finally (and this, perhaps, is the real answer to much of the plaintiff's complaints), he has, in my judgment, throughout misapprehended his proper remedy. If he was dissatisfied with the way in which the liquidator was carrying on his duties as liquidator, he was entitled under section 246 to make an appropriate application to the court, and the court would then have looked into the matter and, where necessary, have controlled and regulated the activities of the liquidator. I add also in that, connexion : it may well be that, as against the receiver, the plaintiff could have more profitably turned to section 268. That, however, is another matter. For the reasons I have given, I think that both appeals must be allowed ; and that the ....
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....officer. Finally, it may be argued that, upon its true construction the section, referring specifically, as it does, to a manager of the company, includes in its scope any manager of the company, whether he is an officer of the company or not. I find it unnecessary to assess the relative merits of these arguments. For the purposes of the present case, it is enough to say that proceedings under section 333 cannot lie against Mr. Aizlewood, unless it can be held, either that his appointment as receiver and manager for the debenture holders in itself made him an officer of the company within the meaning of the section, or alternatively, that such appointment made him a manager of the company within the meaning of the section. As to the former alternative, I think it reasonably plain that a receiver and manager for debenture holders of a company, appointed by them under powers contained in their debenture (as in the present case), is not an officer of the company within section 333 of the Act of 1948-apart, that is, from the question whether he is a "manager of the company" within the meaning of the section and on that ground to be' treated for the present purpose as an officer of t....
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....the claims of the debenture-holders, they hold it for the company; but I do not think they can properly be said to be, officers under the company." The judge then went on to consider the question whether a debenture trustee held a place of profit under the-company, and came to the conclusion that he did. This reasoning seems to me to apply with added force to the case of a receiver and manager for debenture holders appointed by the debenture holders under a power in their debenture, as opposed to being appointed by the company, as were the debenture trustees in Astley v. New Tivoli Ld. [1899] 1 Ch. 151. The question whether a receiver and manager for debenture-holders, such as the defendant Aizlewood was in this case, is a manager of the company within section 333 presents more difficulty. Little light on the meaning of the phrase "manager of the company" is to be derived from the language of section 333 or from the definition in section 455, or from the slight differences in the language of the earlier enactments to which I have already referred. More significant, to my mind, is the special treatment of receivers and managers under Part VI of the Act of 1948, where they are ....
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.... default, namely, any officer of the company, any liquidator of the company and any receiver or manager, shall be liable to a fine of twenty pounds." It is to be observed that express separate reference is there made to "any receiver or manager," although the list of persons liable also includes "any officer of the company," which expression, as I have already mentioned, is denned in section 455 as including "a director, manager or secretary." That suggests that a receiver or manager is treated as distinct from a manager of the company, at all events so far as section 370 is concerned. These indications, for what they are worth, suggest that the Act regards the receiver and manager of the property of a company as in a special category, distinct from that of a manager of a company. But the decisive consideration, to my mind, is that the phrase "manager of the company," prima facie, according to the ordinary meaning of the words, connotes a person holding, whether de jure or de facto, a post in or with the company of a nature charging him with the duty of managing the affairs of the company for the company's benefit; whereas a receiver and manager for debenture-holders is a per....
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....t of view of the company, as distinct from the debenture-holders, the terms might be regarded as disadvantageous. In a word, in the absence of fraud or mala fides (of which there is not the faintest suggestion here), the company cannot complain of any act or omission of the receiver and manager, provided that he does nothing that he is not empowered to do, and omits nothing that he is enjoined to do by the terms of his appointment. If the company conceives that it has any claim against the receiver and manager for breach of some duty owed by him to the company, the issue is not whether the receiver and manager has done or omitted to do anything which it would be wrongful in a manager of a company to do or omit, but whether he has exceeded or abused or wrongfully omitted to use the special powers and discretions vested in him pursuant to the contract of loan constituted by the debenture for the special purpose of enabling the assets comprised in the debenture holders' security to be preserved and realized. That seems to me to be an issue wholly outside the scope of section 333. Accordingly, I agree with my Lord that the proceedings under section 333 cannot He against Mr. Aizle....