Company in receivership — Owner of unoccupied property — Failure to pay rates — Council obtaining judgement against company for rates due — Unsuccessful attempt to levy distress — Petition for winding up of company — Petition refused as not in interests of class of unsecured creditors
The company was a member of the Mountleigh Group with liabilities amounting to £544m and assets to £56m. Joint administrative receivers were appointed in respect of the company by a syndicate of banks, who were creditors to the extent of £386m. The company was freehold owner of 14 Lovat Lane, London EC3. The property had remained unoccupied for a considerable period. A petition was presented to the court for the compulsory winding up of the company by the Common Council of the City of London based on a debt of £70,983 in respect of rates levied on the property as an unoccupied hereditament. On November 5 1992 the council had obtained a liability order from the City of London Magistrates against the company in respect of that sum. After an attempt to levy distress in respect of the unpaid rates, the council presented the petition on March 19 1993. Objections were raised against the petition by the company itself through the receivers, Barclays Bank, as security trustee for the bank syndicate of lenders with the £386m debt, the members of the syndicate and various other companies in the same group as the company.
Held The petition was dismissed.
1. If the council were correct in their claim that, following a winding-up order, they were entitled to recover rates from the receivers or the debenture holders, their reason for seeking to wind up the company was not to swell the estate of the company or otherwise to improve the lot of the unsecured creditors, but to gain for themselves a preference over the secured and unsecured creditors alike. That attitude was not acting in the interests of the class of unsecured creditors and the voice of one who acted against the interests of the class was to be disregarded.
2. In the case of non-domestic unoccupied property, section 45 of the Local Government Finance Act 1988 provided for the rates to be levied on the owner of the property. Section 65(1) defined the owner as the “person entitled to possession” of the relevant hereditament. The council argued that a winding-up order would cause the receivers to cease to be agents of the company and that they, in a personal capacity, or the debenture holders, would accordingly become the persons entitled to possession of the property and hence liable for rates thereof. The company and opposing creditors argued that the agency of the receivers was deemed to terminate on liquidation only for certain limited purposes and that in any event the company’s possession of the property would not cease on liquidation in the absence of positive steps by the receivers to dispossess the company.
3. However, in the circumstances the court would not decide the question as it made no difference to the decision in this case and the appropriate forum for the decision was a court before which it came as the main question at issue.
Lloyd Tamlyn (instructed by the City Solicitor) appeared for the council; Elizabeth Gloster QC and Richard Gillis (instructed by Clifford Chance) appeared for the company and opposing creditors.
