The barbados companies act, cap. 308 and receivers' duties

• Author: Andrew D. Burgess
• Position: Dean and Senior Lecturer in Law, Faculty of Law, University of the West Indies
• Pages: 318-344

THE BARBADOS COMPANIES ACT, CAP. 308

AND RECEIVERS' DUTIES

ANDREW D. BURGESS *

1. INTRODUCTION

The Barbados Companies Act. Cap. 308 contains substantial

provisions dealing with the duties of receivers and receiver-managers.

These provisions are not intended, it appears, to supplant pre-existing

rules of equity and common law on receivers' and receiver-managers'

duties: they are intended merely to supplement these rules. One

important consequence of the statutory interventions in the

Companies

Act.

Cap.

308 is the need not only to explain the operation of the

statutory provisions which seek to regulate receivers' and receiver-

managers' duties, but also the inter-relationship between these

provisions and the already complex pre-existing rules of equity and

common law.

This article attempts to provide such an explanation. It examines the

duties of receivers and receiver-managers under the six broad heads of

general duties. duties in respect of companies assets, administrative

duties, accounting duties, duties in respect of distribution of

companies* assets and duties associated with the bringing of

receivership to an end. The meaning of statutory provisions and their

inter-relationship with pre-existing rules of equity and common law is

explored under these various heads.

2.

GENERAL DUTIES

(a) Under the

Companies

Act, Cap. 308

(i) Duty to

realise security interest

of the

debentureholder

The primary duty of

a

receiver or receiver-manager of any property

of a company as laid down in the

Companies

Act,

Cap.

308 is, subject

Dean and Senior Lecturer in Law, Faculty of

Law,

University of the West

Indies.

to the rights of secured creditors, to receive the income from that

property, pay the liabilities connected with the property and to realise

the security interest of those on whose behalf he was appointed.1 A

receiver is under no duty to carry on the business of the company and

may do so only if, and to the extent permitted by the court.2 A

receiver-manager, on the other hand, is able to carry on the business

of the company to protect the security interest of his appointor without

the intervention of the court,3 Both a receiver and a receiver-manager

is bound to comply strictly with the terms of his appointment and with

any directions of the court made in respect of his appointment.4

A receiver's and receiver-managers duty to realise the security

interest of his appointor has been equated to that of a mortgagee.5 It

has been suggested that there is an important qualification to this

equation.6 It is that whereas a mortgagee is under no duty at any time

to exercise his powers as mortgagee to realise his security,7 a

receiver is duty bound not to remain passive but to act to protect and

preserve the security over which he is appointed.8 It is submitted that

this suggestion is open to substantial doubt, for good reasons. First,

there is no express provision for such a duty in the Companies Act,

Cap.

308.

The only statutory hint of such a duty in Cap. 308 is the

provision in s.281(b), which imposes a duty on a receiver and receiver-

manager to deal with the company's assets in his possession in a

commercially reasonable manner. However, dicta in the recent Ontario

1 S.276. See also Re B. Johnson & Co.

(Builders)

Ltd. (1955) Ch.634; R.A.

Price v. Henderson [1989] 2 N.Z.L.R. 257, 262; Downsview Nominees

Ltd. v. First City Corpn. Ltd. [1993) 2 A.C. 275.

2 S. 276.

3 S. 277.

4 S. 280.

Re B Johnson & Co. (Builders) Ltd, [1955] Ch.34; R.A. Price v.

Henderson (1989) 2 N.Z.L.R. 257, 22, Downsview Nominees

Ltd.

v. First

City Corpn. Ltd, [1993] 2 A.C. 275, Levy-Russett Ltd. v. Tecmotiv Inc.

[1994] 13 B.L.R. (2d) 1.

6 See Lightman and Moss. The Law of Receivers of

Companies

(London:

1994)112.

7 China Sea Bank Ltd. v. Tan Soon Gin (alias George Tan) [1990] 1 A.C.

536.

See Lightman and Moss op. cit. supra n. 6, who cite the judgment of

Browne-Wilkinson V.C. in Knight v. Lawrence [1991] B.C.C. 411 as

authority for this proposition.