(1) Ve Vegas Investors IV LLC v (1) Henry Shinners
| Jurisdiction | England & Wales |
| Judge | Mr Registrar Jones |
| Judgment Date | 08 February 2018 |
| Neutral Citation | [2018] EWHC 186 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2017-005669 |
| Date | 08 February 2018 |
[2018] EWHC 186 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
COM PANIES COURT
In The Matter Of VE INTERACTIVE LIMITED (In Administration)
And In The Matter of THE INSOLVENCY ACT 1986
Royal Courts of Justice
Rolls Building, Fe tte r La ne, Londo n
Mr Registrar Jones
Case No: CR-2017-005669
Mr Barry Isaacs Q.C. and Mr Andrew Shaw (instructed by CLARION SOLICITORS LIMITED) for the Applicants
Ms Marcia Shekerdemian Q.C. and Mr Kavan Gunaratna (instructed by EDWIN COE LLP) for the Respondents
Hearing dates: 16–19 and 22–23 January 2018
Judgment Approved
Introduction
The Applicants are creditors of Ve Interactive Limited (In Administration) (“the Company”) and other than the 4th Applicant continue to apply for the removal of the Respondents as the administrators. The Respondents are members of Smith & Williamson LLP (“S&W”). The Applicants wish them replaced by Mr Butters and Mr Harding, members of Deloitte LLP. The 4th Applicant has served a purported notice of discontinuance dated 30 November 2017. The 4th Applicant can discontinue with the consent in writing of each Applicant or permission of the Court (see CPR Part 38 Rule 38.2(2)(c)).
The Application is made on the basis that new administrators are required to investigate potential claims against the Company's directors and/or S&W relating to a pre-pack sale of the Company's business and assets (as specified) to Rowchester Limited on 26 April 2017 for £1,750,000. It is argued that investigations are required to assess whether there were breaches of duty by the directors and/or S&W which prevented other options being pursued and/or caused the sale to be at an undervalue. It is submitted by Mr Isaacs Q.C. for the Applicants that the Respondents are unable to investigate and should be removed from office in particular because of their conflict of interest.
The Application was opposed by the Respondents with the support of some of the other creditors until conclusion of the cross-examination of Mr Hardman, who had followed Mr Shinners into the witness box, on the 5th day of the hearing. Whilst it was at one stage suggested that the Respondents were adopting a neutral approach in the context of there being differing degrees of neutrality (even assuming that it is possible), it was at all times plain that the Respondents were arguing that the Application was misconceived and in any event should not be granted. This is opposition not neutrality (see Lehman Commercial Conduit & Anor. v Gatedale Limited (In CVL) [2012] EWHC 848 at [30–31], Vos J., as he then was).
At that conclusion I was informed by Ms Shekerdemian Q.C. (having had time within an adjournment to obtain instructions) that the Respondents would not call their other witnesses. I was also informed that “In the light of the way that the evidence has progressed over the course of the last week”, the Respondents or some of them would be resigning on the ground of conflict of interest prescribed in Rule 3.62(1)(c)(i) of the Insolvency (England and Wales) Rules 2016 (“the Rules”) pursuant to paragraph 87 of Schedule B1 to the Insolvency Act 1986 (“Schedule B1”), sub-paragraphs (1) and (2)(a).
After a variety of submissions, the Respondents provided their letter of intention to resign dated 22 January 2018 which reads:
“We … resign our positions as joint administrators … with effect from 30 January 2018 on the grounds set out in IR r.36(1)(c)(i) namely that the further discharge of the duties of the administrators is now prevented or made impractical by a conflict of interest (actual or potential) relating to the issues which are to be investigated with regard to the sale of the business and assets of the Company to Rowchester Limited and with regard to the conduct of immediate post management, the joint administrators recognising in light of the proceedings before the Court from 16 to 22 January 2018 that there may be a perception that the court or creditors would not have confidence in the continued discharge of their functions relating to those investigations”.
On the 6th day Ms Shekerdemian Q.C. informed the Court that the Respondents also accepted that: (i) they should pay the litigation costs on an indemnity basis; (ii) they will not yet apply for a date for their discharge from liability under paragraph 98 of Schedule B1, sub-paragraphs (1) and (2)(d); (iii) their legal costs will not be borne by the Company; and (iv) they had agreed to meet with Mr Butters and Mr Harding to achieve hand-over the next day.
Issues
Those facts gave rise to the following applications/issues between the parties:-
(i) Whether the Court should grant an oral application made on behalf of the Respondents to abridge time for service of the notice of intention to resign upon the creditors' committee?
If so:
(ii) Whether the Court should no longer decide whether to remove the Respondents as administrators?
If appropriate instead:
(iii) Whether the Court should exercise its discretion to remove the Respondents as administrators pending their resignation on 31 January 2018?
(iv) If deciding to remove, whether a reasoned judgment should be delivered?
January 2018 Orders
This judgment sets out the reasons for the following of the Orders made on 23 January 2018: (1) Refusal of the application to abridge time; (2) Removal of the Respondents as administrators from that day; (3) Immediate appointment of replacement administrators; and (4) Permission to the Company to apply in this Application for directions to exclude work of the Respondents as a cost and expense of the administration to the extent it has become unnecessary or wasted because of their removal and/or to claim from the Respondents costs and expenses for work incurred as a result of their removal (without double counting).
Abridgement of Time
Rules 3.62 and 3.63 permit resignation by an administrator on the ground that “the further discharge of the duties of administrator is prevented or impaired by (c)(i) a conflict of interest” and require the administrator to give at least five business days' notice of intention to resign to (on the facts of this case) the creditors' committee. It was submitted by Mr Isaacs Q.C. that such abridgement will not assist the Respondents because the intention expressed within their notice is to resign with effect from 30 January 2018. I agree.
The Court has power to abridge all time periods under the Rules unless a Rule provides otherwise. In this case abridgement would give effect to any intention to resign before expiry of the five business days required for service of the notice of intention. It would allow, for example, notice to be given on 23 January 2018 of an intention to resign the same day.
However, there is no notice of intention to resign on 23 January 2018. The letter of resignation, which has been given to the creditors' committee, states that resignation will take effect from 30 January 2018. It does not state that it will take effect on 23 January 2018 whether time to give notice is abridged or otherwise.
Therefore, abridgement of time in this case would only abridge the time for giving notice of the express intention to resign with effect from 30 January 2018. That is not this application, it is unnecessary and the application was refused.
I would have refused the application in any event. The grounds submitted for abridging time (assuming there was a notice of intention to resign on 23 January 2017) are: (i) it will make it unnecessary to decide the issue of removal – not only will there no longer be an issue between the parties needing a decision but further Court time and costs will be avoided; and/or (ii) a reasoned judgment dealing with the application to remove will be unnecessary and such a judgment should not be delivered when the issue has become otiose.
I accept that in principle abridgement can be granted to achieve an objective and that those grounds can be legitimate objectives. A more obvious example would be if resignation was tendered at the beginning of the 6 day hearing, even if no good reason existed for the delay which caused the need for abridgement. I do not accept Mr Isaacs Q.C.'s submissions to the contrary. However, a decision to abridge must depend upon all the circumstances and I do not consider it right to exercise the Court's discretionary powers in this case.
In reaching that “in any event” decision I took particular account of (individually and cumulatively): (i) the stage at which the application was made; (ii) the grounds justifying removal; (iii) the appropriateness of giving reasons for removal; (iv) the (potential) relevance to consequential relief and future issues; and (v) the interests of creditors and the public.
Dealing with those matters in turn:
i) The evidence was complete when the application was made. The Applicants opposed and continued to pursue the relief of removal. Submissions had to be heard and a decision reached. Reasons would have had to be given to deal with the matters identified within paragraph 15 above, whatever the outcome.
This was not a case requiring further work to reach a decision on removal. Abridgement was sought at a stage when it was obvious to the Respondents and not disputed that an Order for removal (at least of Mr Shinners and Mr Hardman) would otherwise be made. In practice the submission of saving time and cost only concerned the additional work delivering this judgment. However, that could be and has been achieved without adversely affec ting the Court's resources or the...
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