D. & W. Henderson & Co. v. Stewart and Others

Subject_1 Company Subject_2 Liquidation under Supervision of Court Subject_3 Compromise with Creditors Subject_4 Sanction of Court — Reduction. Facts: Where it is found in the liquidation of a company, while matters are still entire, that the sanction of the Court to a compromise between the liquidator and creditors has been obtained by concealment or non-disclosure of material facts, although with no fraudulent intention, such compromise cannot stand.

In an action at the instance of unsecured creditors of the company, the Court ( aff . judgment of Lord Stormonth Darling) reduced the interlocutor sanctioning the compromise, on the ground that it had been pronounced by the Lord Ordinary in ignorance of material facts, which it was the duty of the liquidator to place before the Court.

A new account was accordingly opened with the bank upon the guarantee of the directors, who received as security bills of sale of the reversion of the steamers belonging to the company which had been previously mortgaged to the bank, dated and registered 17th February 1891.

Upon 4th March 1891 the company resolved to go into voluntary liquidation, and Mr Alexander Moore, C.A., Glasgow, was appointed liquidator, with a committee of advice composed of Mr Reid Stewart, two of the other directors, and three shareholders.

In April 1891 the steamers which had been mortgaged to the bank were sold for £65,500, out of which the bank received payment of their whole advances, and discharged their mortgages upon the vessels. After payment of the debt due to the bank and other preferable charges there remained a surplus of about £11,300. The directors maintained that they had a valid security over this surplus for the debt of £20,000 still due to them.