Amble Assets Llp ((in Administration)) and Another v Longbenton Foods Ltd ((in Administration))

JurisdictionEngland & Wales
CourtChancery Division
Judgment Date21 July 2011
Neutral Citation[2011] EWHC 3774 (Ch)
Docket NumberCase No: 1753 of 2010, 2065 of 2010

[2011] EWHC 3774 (Ch)




Mr Andrew Sutcliffe QC, Sitting as a Judge of the High Court

Case No: 1753 of 2010, 2065 of 2010

In the Matter of Amble Assets Llp (in Administration)

And in the Matter of Northumberland Foods Limited (in Admnistration)

And in the Matter of the Insolvency Act 1986

(1) Amble Assets Llp (in administration)
(2) Northumberland Foods Limited (in administration)
Longbenton Foods Limited (in Administration)

Mr Mark Cawson QC (instructed by Squire Sanders & Dempsey (UK) LLP) for the Applicants

Mr John McGhee QC (instructed by Eversheds LLP) for the Respondent

Hearing date: 18 May 2011





The Applicants ("Amble" and "Northumberland"), both companies in administration, seek a direction permitting their joint administrators to make a distribution to secured creditors forthwith. The particular issue I have to decide is whether monies paid by the Respondent ("Longbenton") by way of deposit under an agreement dated 21 October 2010, which have become forfeited upon the failure of Longbenton to complete, are arguably recoverable by Longbenton.

The Facts


Amble and Northumberland went into administration on 27 and 18 August 2010 respectively. Between them, they owned the leasehold interest in a frozen potato processing plant at Coquet Industrial Estate, Amble, near Morpeth ("the Property") and the plant and machinery contained within that plant ("the Equipment"). Both companies had been unsuccessful in their attempt to achieve a sale of the Property and the Equipment, and it was the failure to achieve a solvent sale that resulted in them entering into administration.


Upon appointment, the joint administrators carried out a marketing exercise with a view to achieving a sale of the Property and the Equipment. Ultimately, two serious purchasers emerged, namely Longbenton and Gravis Group based in India ("Gravis").


By email dated 27 September 2010, Longbenton offered £1.9m for the Property and the Equipment, apportioned as to £1.2m for Equipment, with the consideration for the Equipment being paid "on signing of documents", and that for the Property on completion (target 30 days). This was accepted "subject to contract" by email on the same day, but by 29 September 2010, the joint administrators had received a higher offer from Gravis with completion within 7 days which they decided to explore.


There proved to be difficulties with the Gravis offer. By email dated 7 October 2010, the Applicants' solicitors confirmed that Longbenton was the preferred bidder "on the basis that both parties work together to conclude this deal ASAP". This email made reference to the Gravis offer and to new lawyers being instructed by Gravis and pointed out that whilst Longbenton was "ahead of the game", this would not remain so "unless you are instructed to proceed with the transaction".


It transpired that Longbenton was not in funds to exchange, and the joint administrators were not prepared to exchange unless they were. They decided to seek to re-engage with Gravis (by emails dated 15 October 2010 and 19 October 2010). However, on 18 October 2010, in response to an email dated 15 October 2010 chasing exchange by 3pm on 18 October 2010 on threat of selling to an alternative bidder, Longbenton's solicitors stated that "we will be in funds to exchange today".


This did not happen, but by email dated 20 October 2010, Longbenton's solicitors stated that they were in a position to exchange "if the administrators accept £800,000 plus VAT on exchange and the balance in 30 days". By email in reply, the Applicants' solicitors confirmed that this was accepted if the £800,000 plus VAT was paid as a "non-refundable deposit".


It was on this basis that the Applicants proceeded to conclude a contract with Longbenton and matters were not pursued further with Gravis. On 21 October 2010 Amble, Northumberland and their administrators entered into a contract to sell the Property and the Equipment to Longbenton for the total sum of £1,900,000 plus VAT ("the Agreement"). Completion was to occur on the Transfer Date of 22 November 2010 but Longbenton was entitled to occupy the Property as licensee in the meantime.


By clause 4 of the Agreement a "non-refundable deposit" of £800,000 plus VAT was payable to Amble and Northumberland on execution of the Agreement with the balance of £1,100,000 plus VAT payable on completion. Clause 4.1 provided: "In the event that [Longbenton] does not complete the contract on or before the Transfer Date in accordance with the terms of this agreement [Longbenton] acknowledges that it forfeits the Deposit." Clauses 3 and 4 of the Agreement provided for the payments to be apportioned as follows:





Equipment (except Northumberland Assets)








Northumberland Assets









A comparison between clause 4.2 and clause 3.1 of the Agreement shows that this represents a 10% deposit for the Property, a 49.3% deposit for the equipment belonging to Amble, and a 50% deposit for the assets belonging to Northumberland.


Clause 9 of the Agreement provided that no personal liability should fall upon the joint administrators, and clause 9.13(d) provided that: "no sums due from the Administrators (if any) or the Seller (if any) by reason, directly or indirectly, of the terms of this agreement shall be charged or payable as an expense or remuneration of the Administrators, or otherwise as is mentioned in paragraphs 99(3) and 99(4) of Schedule B1 of the Act, but shall only rank as an unsecured claim against the Seller [that is, Amble and Northumberland]". I consider later in this judgment the effect of this clause.


As mentioned above, pending completion, Longbenton was allowed into possession upon the terms of a Licence to Occupy dated 21 October 2010 ("the Licence"). The Licence provided that Longbenton was obliged to "keep all goods and chattels from time to time at the Premises fully insured" (clause 7.10), and not to cause damage (clause 7.17). By clause 3, the Licence was expressed to "automatically determine" on the Transfer Date (22 November 2010) unless determined earlier in accordance with clause 10.


After Longbenton had been allowed into possession following the exchange of contracts, a fire occurred damaging certain of the Equipment. In breach of clause 7.10 of the Licence, Longbenton had failed to insure.


Although Longbenton paid the sum of £940,000 (being the deposit of £800,000 plus VAT) on exchange of contracts, it failed to complete on 22 November 2010. By email dated 29 November 2010, the joint administrators indicated that they would be prepared to extend completion to 29 November 2010, or to 3 December 2010 if a further non-refundable deposit of £200,000 was paid. This was not agreed. On 1 December 2010, the Applicants' solicitors wrote requiring Longbenton to vacate the Property by 4pm on 2 December 2010 on threat of an application to court. Longbenton failed to vacate, so on 3 December 2010, the Applicants applied without notice to the court for an order for delivery up of possession. The court ordered delivery up of possession, and adjourned the application to 10 December 2010, when the matter was further adjourned to 14 December 2010.


Longbenton did vacate the Property when served with the court's order on 6 December 2010. Longbenton contended that the injunction should not have been granted and that the effect of the injunction had been to prevent it raising funds to complete. Nevertheless, negotiations continued between the parties because Longbenton wished to resume occupation of the Property and to use the Equipment in order to recommence production.


By email dated 9 December 2010, Longbenton's solicitors offered to pay or provide a bank guarantee in the sum of £500,000 on 10 December 2010 "by way of non refundable deposit, but in reduction of the overall price on completion" on condition that the injunction was lifted on 10 December 2010, thus enabling manufacturing to commence immediately at the Property. The offer also proposed that completion would take place on 22 December 2010 and that Longbenton would pay the Applicants' reasonable costs incurred as a result of the failure to complete.


The Applicants' solicitors responded by email the same day (9 December) indicating that the joint administrators would not agree to lift the injunction unless they were in cleared funds for all outstanding balances. However, negotiations continued and at the adjourned hearing on 14 December 2010, Judge Kaye QC stood the matter down to give the parties an opportunity to see if anything could be agreed. The negotiations resulted in agreed variations to the Agreement. These were recorded in a consent order made on 14 December 2010.


The effect of those variations to the Agreement, embodied in the Court's order of 14 December 2010, was that (i) a further "non-refundable deposit" of £500,000 was to be paid; (ii) the purchase price was increased so that the balance due on completion (including VAT) was to be £974,803 (reflecting an increase in the price of £182,303 in respect of agreed interest and damages for late completion); (iii) the Transfer Date was amended to 22 December 2010; and (iv) breaches of the Licence and the Agreement to the date thereof (which had been denied by Longbenton) were waived.


On 20 December 2010 Longbenton paid the further deposit of £500,000 but it failed to complete on 22 December 2010. On 5 January 2011 the Applicants served notice to complete on Longbenton under condition 8.8 of the Law Society's Standard...

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  • Large Deposits In Land Transactions: Are They Penalties?
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    • Mondaq UK
    • 10 Diciembre 2014
    ...retained, but not otherwise. Amble Assets: an unreasonably large deposit is not a penalty In Amble Assets LLP v Longbenton Foods Ltd [2011] EWHC 3774 (Ch) the High Court refused to follow Workers Trust and reached a different conclusion. Amble Assets concerned the sale by an administrator o......

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