Abbey Forwarding Ltd v Hone and Others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE MORGAN |
| Judgment Date | 14 May 2010 |
| Neutral Citation | [2010] EWHC 1532 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No HC0900297 |
| Date | 14 May 2010 |
[2010] EWHC 1532 (Ch)
Before: Mr Justice Morgan
Claim No HC0900297
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Marc Glover (instructed by Bark & Co) appeared on behalf of the Respondent/Claimant
Mr Peter Shaw (instructed by Moon Beevra) appeared on behalf of the Applicants/Defendants
J U D G M E N T
MR JUSTICE MORGAN:
This is an application in the case of Abbey Forwarding Limited (in liquidation) (“Abbey”) against Mr Hone and others. The Application Notice was issued on 21 April 2010 and was by the second and third defendants, Patrick Daniel Owen and William James Owen.
The application is for an order that an earlier freezing order, which has been made against the second and third defendants, be varied to allow them to make a loan of money to a company called Wingpitch Limited (“Wingpitch”).
This application was part-heard on 7 May 2010 when the legal principles were identified and the basic facts were established. I indicated on the last occasion that I was not prepared to deal with the matter finally on that day as it seemed to me that many matters I had been told should be verified by a witness statement and many matters that I was asked to assume should also be the subject of evidence on which I could make a more confident finding, rather than assuming matters to be so. I gave directions for the applicants, Messrs Owen, to put in further evidence. They did not as such comply with that direction. They did not serve the evidence in the time permitted, but today I have a witness statement of William James Owen dated 12 May 2010, which touches on some of the matters discussed last week.
The claimant, Abbey, who is the respondent to this application, does not ask for an adjournment and is content for the matter to go ahead and for me to take into account the witness statement of William James Owen. I shall proceed accordingly.
The freezing order, which is referred to in the Application Notice, was made by Blackburne J on 4 February. I do not pretend to know the full detail of the litigation in which this freezing order has been made, but in very brief outline I can indicate some of my understanding. Abbey occupied warehouse premises in the London Borough of Greenwich. It was asserted by Her Majesty's Revenue and Customs that goods had gone missing from the warehouse in circumstances whereby payments of duty, which ought to have been made to HMRC, were being avoided. HMRC asserts that the payments of duty payable by Abbey to HMRC are of the order of £5.95 million. HMRC applied to appoint a provisional liquidator of Abbey, and I understand a provisional liquidator was appointed. Abbey, then under the control of the provisional liquidator, applied for freezing injunctions against three directors of Abbey, namely Mr Hone and the two Messrs Owen. That was the freezing order that was made.
The hearing for the appointment of the provisional liquidator and the application for the freezing injunction were both ex parte, but there was no subsequent attempt to set aside the appointment of the provisional liquidator or any subsequent winding-up order, nor to set aside the freezing injunctions. Instead the claim, brought by Abbey against the three former directors, is to proceed to trial. Although I do not pretend to understand the detail of the claim, I proceed on the basis that what is being said by the company Abbey is that the three directors have acted in breach of duty owed to the company in placing the company under a liability to HMRC which the company is not able to meet. If the claim were to succeed, Abbey would at best recover the £5.95 million from the directors.
I am told that the matter is to be defended. The trial is fixed for a date in July with a time estimate of fifteen days. I remind myself that I am in no position whatever to judge who is right and who is wrong in relation to the issues which will be determined at the trial. I must proceed on the basis that it is just as probable that the directors will succeed on every point as it is that they will fail on every point. I have no ability to determine today which of those eventualities is more likely.
The freezing order contained standard form provisions in paragraph 10 of the order. Paragraph 10(1) permitted payments to be made for reasonable living expenses and for legal advice and representation. Paragraph 10(2) is in these terms:
“This order does not prohibit the respondent from dealing with or disposing of any of his assets in the ordinary and proper course of business.”
Paragraph 10(3) refers to the possibility of the parties agreeing variations of the order. It was therefore contemplated that the order was one which could be varied, certainly by agreement.
What has led to the present application is a desire by the two Messrs Owen to make a loan of a sum exceeding £50,000 to a company called Wingpitch. Wingpitch is the long lessee at a ground rent of the warehouse premises formerly occupied by Abbey. Before the appointment of the provisional liquidator, Abbey was either the sub-tenant or the licensee of those premises (I know now which) in circumstances where it paid £33,000 per month to Wingpitch, the long-leasehold owner of those premises. The premises are substantial warehouses comprising two parts: one, a warehouse of 27,000 square feet, and the second, a warehouse of 20,000 square feet (although it can be sub-divided into two parts). The total area is 47,000 square feet.
Before the appointment of the provisional liquidator, the position was very straightforward. Wingpitch held a substantial asset—the lease—at a ground rent and received very substantial rent from Abbey. Indeed, Wingpitch does not have any other business. Its activities are confined to holding this asset and, in former times, receiving a substantial rent from Abbey. The result was that Wingpitch was in a position not to rely on funding or loans from directors or others and was in a position either to return substantial income by way of dividend to its shareholders, or by way of salary to its directors.
Mr Patrick Owen and Mr William Owen are both directors of Wingpitch. Further, they each own 30% of the issued share capital of Wingpitch. The remaining 40% of the shares in Wingpitch are held by members of the families: 50% of the shares by Patrick Owen and his family, and 50% of the shares by William Owen and his family. That was the position so far as Abbey's occupation was concerned prior to the appointment of the provisional liquidator.
With the appointment of the provisional liquidator everything changed. Abbey ceased to trade. The liquidator disclaimed the interest that Abbey had in the warehouses. Wingpitch found itself left with vacant warehouses and no income from Abbey or anyone else. That had a number of consequences, one of which has led to the application today.
Because the premises are unoccupied, the liability to pay the uniform business rate fell upon Wingpitch. I have been given some figures showing the rating position. For the year to 31 March 2010 Wingpitch owes the London Borough of Greenwich a total of £25,500 (in round figures) of unpaid rates, together with legal costs. Wingpitch has also received a non-domestic rates bill for the year beginning 1 April 2010. The sum stated as due for the year is £73,500 (in round figures). The London Borough of Greenwich is prepared to accept payment by instalments and the instalment plan, identified in the bill, provides for monthly payments beginning on 1 April 2010. The payment for the first month is £7,331. Payments for later months are a fraction higher, but of a similar amount.
Payments for the four months, April, May, June and July, up to the date of the trial, total £29,336. The two Messrs Owen wish to make a loan of enough money to enable Wingpitch to pay the £25,500, to which I earlier referred, plus the £29,336, which will cover the payment of rates up to 1 August 2010. It is not clear what the London Borough of Greenwich will do if those payments are not made by Wingpitch. The possibility that has been emphasised in the course of argument today is that the London Borough of Greenwich will wind up Wingpitch, and a liquidator will be appointed. The liquidator will seek to realise the assets of the company. Its principal and only asset is its long lease of the warehouses. That long lease, which currently has a value of hundreds of thousands of pounds, will be sold off by the liquidator and the theory is that the asset will not realise its true or maximum market value.
The other consequence of Wingpitch having a vacant warehouse or warehouses is that it has made efforts to re-let those warehouses. The information about those efforts is not very full. It appears that recent negotiations broke down. Fresh negotiations with a new potential occupier have recently begun, but have not proceeded very far. It is possible (I say no more) that there will be a letting of these premises as the weeks and months go by. It may not be the entirety of the warehouse accommodation. The current negotiations, as I understand it, relate to 27,000 square feet.
The other relevant fact about occupation of the warehouses is that 9,000 square feet are occupied by a partnership called “Abbey Fireplaces”. The two Messrs Owen, with whom I am concerned, are, I am told, partners in that partnership, but, as I understand it, they are not the only partners. It is therefore possible for Abbey Fireplaces to pay to Wingpitch for its occupation of its 9,000 square feet. Indeed, I am...
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