WINDING UP

265
A few matters in which it behoves the liquidator to be
specially careful may be noticed. In carrying on the
business of the company for the purposes of its beneficial
winding up, he will do well to consider carefully the precise
effect of any proposed step, for a new contract might, in
many instances, be made in excess of his duties; in case of
doubt, application to the Court may often be desirable.
Again, he should hesitate before embarking on costly litiga-
tion; for although in general an unsuccessful liquidator will
be allowed his costs out of the assets of the company, yet it
has been held that the Court has jurisdiction to order him
to pay them personally, and, in case of an action being
improperly or recklessly brought, he may find himself
ordered to pay the costs out of his own pocket. Too much
care cannot be exercised by the liquidator in avoiding all
payments or dealings with the company’s assets which are
not expressly or obviously authorised.

In certain circumstances a liquidator may be removed
from his position. It is not open to the shareholders them-
selves to remove a liquidator; the power of removal lies in the
Court alone. S. 249 of the Act provides that ‘the Court may,
on cause shown, remove a liquidator, and appoint another
liquidator.” Contributories or creditors may apply for the
removal of a liquidator, and the matter is one for the dis-
cretion of the Court, which, however, can only act ‘on
cause shown.” It is impossible to predicate with certainty
what circumstances will, or what will not, amount to ‘cause.’
It may, however, be safely assumed that gross misconduct,
such as wrongful dealing with the company’s assets, will
constitute sufficient cause; and although pecuniary interest
in the winding up, apart from the liquidator’s remuneration,
might not be sufficient unless it is calculated to interfere with
the proper performance of his duties, flagrant breaches of
Rules 159 and 160 of the Companies (Winding up) Rules 1929
might afford a ground for removal. Gross immorality is a
factor to be considered, but in many cases it would not
alone be sufficient to warrant a liquidator’s removal. The
dominant principle on which the Court acts in this, as in
all matters connected with the winding up, is that the benefit
of the company and the wishes of the shareholders are to
be first considered; and, unless the facts proved upon the
application are sufficient to show that the continuance of
the liquidator in office will be prejudicial to the company’s
welfare, that is, to the creditors and the contributories,
or is for adequate reasons distasteful to the shareholders
or creditors, the liquidator will not be removed. By Rule 166

Removal of
Liquidator.