Adrian Charles Hyde v Antony David Nygate (in His Capacity as Representative of the Estate of James Joseph Bannon, Former Joint Administrator of One Blackfriars Ltd Appointed Under CPR 19.8(1))
| Jurisdiction | England & Wales |
| Judge | John Kimbell |
| Judgment Date | 18 June 2019 |
| Neutral Citation | [2019] EWHC 1516 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2017-007339 |
| Date | 18 June 2019 |
[2019] EWHC 1516 (Ch)
John Kimbell QC
(sitting as a Deputy Judge of the High Court)
Case No: CR-2017-007339
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
IN THE MATTER OF ONE BLACKFRIARS LIMITED (IN LIQUIDATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice, Rolls Building
Fetter Lane, London EC4A 1NL
Simon Davenport QC and Tom Poole (instructed by Humphries Kerstetter LLP) for the Applicants
Justin Fenwick QC and Ben Smiley (instructed by Mayer Brown International LLP) for the Respondents
Hearing date: 24 May 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand not shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
A. Introduction
This is an application by the joint liquidators (the ‘ JLs’) of One Blackfriars Ltd (‘ the Company’) to amend their claim against the former Administrators of the Company (the ‘ FAs’). The First Respondent is the representative of the estate of Mr Bannon, who was the joint administrator of the Company along with the Second Respondent. Mr Bannon died on 12 May 2018.
An earlier application to amend the Particulars of Claim was made at a case management conference on 9 November 2018. That application was unsuccessful for the reasons set out in my judgment [2018] EWHC 3267 (Ch) of 28 November 2018.
This application to amend is made under an application notice issued on 8 April 2019. It is accompanied by a draft amended particulars of claim (‘ DAPOC’).
Many of the amendments are not objected to by the FAs. I was provided with a helpful table identifying the amendments to which objection was taken (in whole or in part) and which were consented to. The proposed amendments to paragraphs 4, 5, 6, 10–12, 16(1), 26,41, 44–46A, 47–49, 50–53, 54(1)-(4), 55, 56, 57 and the Prayer are not opposed.
Between the last application and this application disclosure has taken place based on the existing pleadings. This has clearly informed some of the amendments. The FAs have a few outstanding complaints about some of the amendments they have consented to. These have been set out in correspondence and they have reserved their right to serve Part 18 requests but I am satisfied that it is appropriate to grant permission for the unopposed amendments pursuant to CPR 17.1(2)(b).
The amendments which are opposed by the FAs are those which set out a case that the FAs were negligent in failing to pursue a rescue of the Company as a going concern under paragraph 3(1)(a) of Schedule B1 to the Insolvency Act 1986 (‘ Objective 1’).
Paragraph 55C of the DAPOC pleads that:
“Expert evidence will show that … the Company would have secured a joint venture partner and the finance necessary to continue to trade until completion of the Site”.
Paragraph 55E pleads that the loss arising from the negligent failure to pursue Objective 1 is £250 million. This may be contrasted with the more modest claim in the current Particulars of Claim (‘ POC’) which is in following terms:
“53. … The Respondents' breaches as aforesaid resulted in the sale of the Site at substantially below the best price reasonably obtainable.
54. The Applicants say that this price was at least £115,000,000 so that the Company (and by it the creditors) sustained a loss of at least £37,600,000 or such other sum as the Court may find”
The FAs did not seek to resist the amendments which relate to the Objective 1 claim in on the ground that they did not have reasonable prospects of success.
The FAs object to all the amendments which relate to the Objective 1 claim on two grounds:
(1) The Objective 1 claim is a “new claim” with the meaning of Section 35 (1) of the Limitation Act 1980 and it involves a new cause of action which does not satisfy the condition in Section 35(5) and CPR 17.4 i.e. that it arises out of the same facts or substantially the same facts as are already in issue.
(2) As a matter of general discretion permission should not be granted. The FAs rely on prejudice and the lateness of the application.
The JLs accept that if the Objective 1 claim is a new claim which does not meet the requirements of Section 35 of the Limitation Act 1980 and CPR 17.4, then it is statute barred. They do not seek to obtain permission in the form referred to in Mastercard Inc & Others v Deutsche Bahn AG [2017] EWCA Civ 272 at [3] i.e. to introduce a non-statue barred version of the Objective 1 claim without the benefit of ‘relation back’.
The JLs' application is thus an all or nothing application.
B. Evidence
The JLs relied on two witness statements by Toby Starr, the first dated 8 April 2019 (‘ Starr 1’) and the second dated 14 May 2019 (‘ Starr 2’). Mr Starr is a solicitor and partner in the firm of Humphries Kerstetter LLP (‘ HK’). The JLs also relied on a witness statement of Adrian Hyde dated 8 April 2019.
The FAs relied on a witness statement by Mr Oulton dated 2 May 2019. Mr Oulton is a solicitor at Mayer Brown International LLP (‘ MBI’).
C. Statutory context
Central to this application is paragraph 3 of Schedule B1 to the Insolvency Act 1986 (the “ IA 1986”), which provides as follows (with additions in [ ] for the purpose of this Judgment):
“(1) The administrator of a company must perform his functions with the objective of—
(a) rescuing the company as a going concern [“ Objective 1”], or
(b) achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration) [“ Objective 2”], or
(c) realising property in order to make a distribution to one or more secured or preferential creditors [“ Objective 3”].
(2) Subject to sub-paragraph (4), the administrator of a company must perform his functions in the interests of the company's creditors as a whole.
(3) The administrator must perform his functions with the objective specified in sub-paragraph (1)(a) unless he thinks either –
(a) that it is not reasonably practicable to achieve that objective, or
(b) that the objective specified in sub-paragraph (1)(b) would achieve a better result for the company's creditors as a whole.
(4) The administrator may perform his functions with the objective specified in sub-paragraph (1)(c) only if –
(a) he thinks that it is not reasonably practicable to achieve either of the objectives specified in sub-paragraph (1)(a) and (b), and
(b) he does not unnecessarily harm the interests of the creditors of the company as a whole.”
Mr Davenport QC, who appeared on behalf of the JLs, submitted that paragraph 3 of Schedule B1 to the IA 1986 is structured as a hierarchy of objectives with Objective 1 as the paramount objective. Paragraph 3(3) is sufficient to demonstrate, he says, that Parliament clearly intended to prioritize the rescue of the company, or at least its business, over piecemeal realization of the company's assets for the benefit of secured creditors. Mr Fenwick QC, who appeared for the FAs, did not dispute this.
Mr Davenport also submits (and I accept) that the power to pursue the ‘lower priority’ objectives is made available to the administrator only if an appropriate combination of the conditions listed in subparagraphs (3)(a) and (b), and (4)(a) and (b) are satisfied.
Mr Davenport emphasised that the alleged failure of the FAs to obtain a proper valuation of the Site has been at the heart of the claim from the outset. He says that this fundamental criticism of the FAs is a common component to a claim that they failed to pursue Objective 1 and the existing claim in the POC. I accept what Mr Davenport says. However, for companies in administration with a single asset to develop and sell, the choice between Objective 1 and Objective 3 is stark. They are diametrically opposed and mutually exclusive objectives.
This can be illustrated by the following comments made by Snowden J in Davey v Money [2018] 766 (Ch) about the alleged failure by the administrators in that case to pursue Objective 1 in respect of a company called Angel House Developments Limited (‘AHDL’ in the passage below). His comments in my judgment apply equally well to the Company in this case:
283. Before considering the specific complaints in this regard, it is worth identifying clearly what Ms. Davey's case in relation to Objective 1 would have to amount to. The concept of rescuing a company as a going concern is not achieved by successfully realising all of its assets so that distributions of surplus monies can be made to shareholders after paying creditors in full. It connotes the retention of all or a material part of the business of the company together with the restoration of the solvency of the company so that the company can properly continue to trade as a going concern.
284. AHDL was essentially a one-asset company, whose business entirely depended upon owning and managing Angel House. The concept of rescuing AHDL as a going concern would necessarily preclude selling Angel House. As a practical matter there was, moreover, simply no question of achieving Objective 1 by improving trading performance to such an extent that AHDL could generate sufficient cash internally to pay off all its creditors (including Dunbar) or by persuading the creditors (including Dunbar) to agree to waive a substantial proportion of their debts so as to restore the company to solvency. The only...
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