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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Brenner v Revenue & Customs [2005] EWHC 1611 (Ch) (21 July 2005) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2005/1611.html Cite as: [2005] EWHC 1611 (Ch), [2005] 1 WLR 3880, [2005] WLR 3880 |
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CHANCERY DIVISION
COMPANIES COURT
Strand. London. WC2A 2LL |
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B e f o r e :
____________________
Jeffrey Mark Brenner |
Applicant |
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- and - |
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Her Majesty's Revenue & Customs |
Respondents |
____________________
Mr Michael Gibbon (instructed by The Solicitor to Her Majesty's Revenue & Customs) for the Respondent
Hearing date: 12th July 2005
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Crown Copyright ©
Mr Justice Warren
Introduction
The facts
a. As at 13 September 2004, Jet Support Centre Ltd ("MJSC") had liabilities to HM Revenue and Customs ("the Revenue") in respect of P AYE and NIC totalling £51,961.
b. On that date an officer of the Revenue (Kent Recovery Office) attended at MJSC's offices to distrain upon certain of its vehicles, machinery and equipment. MJSC entered into a "walking possession" agreement (the nature of which is succinctly described by Templeman J at first instance in In re Herbert Berry Associates Ltd [1976] 1 WLR 783). This enabled MJSC to retain use of the distrained assets whilst preserving the Revenue's rights as a result of having levied distress.
c. On 15 September 2004, notices convening meetings of shareholders and creditors of MJSC were issued and on 8 October 2004 MJSC went into creditors voluntary winding-up. The applicant, Mr Brenner, was appointed as liquidator.
d. According to MJSC's Statement of Affairs, there was, as at 8 October 2004, a deficiency as regards creditors of £2,428,196. None of the Revenue's debt has been paid.
The statutory provisions
A. TMA 1970
a. Under subsection (1) "the collector may distrain upon the goods and chattels of the person charged (in this section referred to as "the person in default")". The quoted words were substituted in the subsection by Finance Act 1989.
b. Under subsections (2) and (3) provision is made for the breaking into any house or premises pursuant to a warrant issued by a justice of the peace, to be executed by or under the direction of the collector.
c. Under subsection (4), a distress levied by the collector shall be kept for five days following which, under subsection (5), the assets distrained are to be "appraised" and then sold by auction. The collector retains from the proceeds what is due plus various costs and charges, and accounts to the owner of the distrained assets for the balance.
IA 1986
"(1) Where a creditor has issued execution against the goods or land of a company or has attached any debt due to it, and the company is subsequently wound up, he is not entitled to retain the benefit of the execution or attachment against the liquidator unless he has completed the execution or attachment before the commencement of the winding up."
"Subject to the provisions of this Act as to preferential payments, the company's property in a voluntary winding-up shall on the winding-up be applied in satisfaction of the company's assets pari passu ..... "
Distress/distraint and execution
"The term "distress" primarily connotes a summary remedy by which a person is entitled without legal process to take into his possession the personal chattels of another person, to be held as a pledge to compel the performance of a duty, or the satisfaction of a debt or demand. By almost universal sanction the term "distress" is now used to designate both the process of taking, and the chattels taken, though originally it applied only to the taking. By statute, remedies referred to as "distress" have been introduced for the recovery of rates and taxes and for the enforcement of certain fines imposed by or orders of magistrates' courts ..... "
"The word "execution" is not defined in the Act. It is, of course, a word familiar to lawyers. "Execution" means, quite simply, the process for enforcing or giving effect to the judgment of the court: and it is "completed" when the judgment creditor gets the money or other thing awarded to him by the judgment. That this is the meaning is seen by reference to that valuable old book Rastill Termes de la Ley, where it is stated: "Execution is, where Judgment is given in any Action, that the plaintiff shall recover the land, debt, or damages, as the case is; and when any Writ is awarded to put him in Possession, or to do any other thing whereby the plaintiff should the better be satisfied his debt or damages, that is called a writ of execution; and when he heath the possession of the land, or is paid the debt or damages, or heath the body of the defendant awarded to prison, then he heath execution." And the same meaning is to be found in Blackman v. Fysh,[1892] 3 Ch 209,217 (C.A.) when Kekewich J. said that execution means the "process of law for the enforcement of a judgment creditor's right and in order to give effect to that right." In cases when execution was had by means of a common law writ, such as fieri facias or elegit, it was legal execution: when it was had by means of an equitable remedy, such as the appointment of a receiver, then it was equitable execution. But in either case it was "execution" because it was the process for enforcing or giving effect to the judgment of the court."
Similarly, at p 46 Harman LJ says:
"Now what is execution but the enforcement of a judgment or order? In myjudgement
, the new remedy given by section 35 is merely an alternative method of execution against the debtor's land, replacing the old writ".
"The House has been much assisted by the learning and research of counsel on both sides, and we further have the advantage of the full and carefully reasoned judgment of Goddard L.J. delivered on behalf of the Court of Appeal. [see at [1940] 1 KB 38.D] If the test which would determine the present controversy were completely stated by asking whether the lawyers of 1709 would have regarded the levying of a distress of rates as an execution, there would indeed be a great deal to be said for the learned Lord Justice's conclusion. Ten years before the Act of Anne was passed, Holt C.J. in the deer-stealing case Rex v. Speed had said that "when a statute says money 'shall be levied by distress,' that is an execution." In Hutchins v. Chambers, where the question was whether beasts of the plough were privileged from distress for poor rates and it was decided that they were not, Lord Mansfield quotes with approval the following passage from 3 Salkeld, p. 136: "This common-law exemption of utensils, tools, instruments of husbandry etc. from distress holds only in distress for rent arrear, amerciaments etc., but doth not extend to cases where a distress is given in the nature of an execution by any particular statute; as for poor rates." "Therefore", adds Lord Mansfield, "it is more analogous to an execution than to a distress at common law, and there (in cases of execution) averia carucae may be distrained; although there be other sufficient distress."
At the end of the eighteenth century yet another Chief Justice affirmed the analogy. In Rex v. Benn and Church (3), Lord Kenyon said that a warrant of distress for poor rates was "in the nature of an execution. ""
Approach to construction of IA 1986 and application of previous law
"Those authorities show that, in approaching the language of the 1986 Act, one must pay particular attention to the purposes and policies of its own provisions and be wary of simply carrying over uncritically meanings which had been given to similar words in the earlier Act. It does not, however, mean that the language of the new Act comes to one entirely free of any of the intellectual freight which was carried by words and phrases in earlier bankruptcy or other legislation. Decisions of the court upon the meanings of phrases used in Acts of Parliament may come, in the course of time, to give them the quality of terms of art which Parliament may well be assumed to have intended them to bring with them when used in subsequent legislation. In section 265, for example, terms such as 'domiciled', 'personally present', 'ordinarily resident', have had attributed to them, both in the context of bankruptcy and in that of civil procedure generally, a wealth of refined construction which it is difficult to suppose Parliament did not intend equally to apply when those words were used in the 1986 Act. Is there any reason why that should not apply equally to the words 'has carried on business'? There does not seem to me to be anything in the policy of the new Act which suggests that in this provision Parliament was intending to give those words a different meaning from those which they had been held to bear under the 1914 Act."
"In my judgment, it is not possible to extract distress by the Crown from distress in general in section 319 and include it somehow or other in section 325, which is not dealing with distress."
Miss Shekerdemian says that I should not place any reliance on that because Templeman J did not consider the scheme of CA 1948 as a whole in his judgment. But as I have pointed out, he did note section 302 (albeit in the context of an argument about Crown prerogative) and I have already expressed my view on what he would have done in paragraph 16 above.
"In my judgment, the property of a company, which is directed by section 302 [now section 107 IA 1986] to be applied for the benefit of the creditors subject to preferential payments, is the property subject to such rights as were exercised prior to the date of the winding-up. At the date of the winding-up in the present case, the goods were in the possession of the collector, and he had power to sell them in order to discharge unpaid taxes. The property of the company at the date of the winding-up consisted only of its right to any surplus realised on that sale."
I add, in relation to that approach, that, where an asset of a company is subject to a fixed charge, the property of the company available for distribution takes account of the fixed charge. It is consistent with that treatment to deal with a distress levied (but not completed by sale) in the same way given that distress, prior to sale, is in effect a pledge as security for the debt: see [15] above.
"Finally section 325 cannot avail the liquidator: .... It was suggested that distraint was a form of execution; but Parliament has quite clearly distinguished distress and execution: see section 228 of the 1948 Act [now section 178 IA 1986]"
And then at p 172, after considering submissions that section 319 CA 1948 contained a lacuna, he said this:
"So far as concerns section 325 I cannot conceive a more deliberate restriction to two only of methods of proceeding - I use the word in a non-technical sense - against the property of a company."
"We can see no good reason why the Crown, like any other creditor, should not be bound for all purposes by insolvency proceedings, whether voluntary or compulsory. We accordingly recommend that express provision to this effect should be contained in any future insolvency code, and that any other relevant legislation, such as the Taxes Management Act, 1970, should be amended to remove all anomalies from this branch of the law."
Conclusion