AMP Enterprises Ltd v Hoffman
| Jurisdiction | England & Wales |
| Judge | MR. JUSTICE NEUBERGER |
| Judgment Date | 25 July 2002 |
| Neutral Citation | [2002] EWHC 1899 (Ch) |
| Docket Number | 4237 of 2002 |
| Court | Chancery Division |
| Date | 25 July 2002 |
[2002] EWHC 1899 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Mr. Justice Neuberger
4237 of 2002
MR. M. ROBERTS (instructed by Messrs. Hacking Ashton, Newcastle under Lyme) appeared on behalf of the Applicant.
MS. J. GIRET Q.C. (instructed by Messrs. Sprecher Grier Halberstam LLP) appeared on behalf of the Respondents.
(As Approved by the Judge)
This is an application by AMP Enterprises Limited, the applicant, to remove Mr. Bernard Hoffman and Mr. Ian Yerrill as liquidators of Music Box UK Limited, the company.
THE FACTS
The company sold CDs and DVDs from about 20 retails outlets in England. On 28th March 2002 notices were sent to its creditors, including the applicant, of a meeting to take place on 12th April with a view to placing the company in voluntary liquidation. On 11th April 2002 the applicant lodged a proof of debt in the sum of some £126,000 with a form of proxy, and seeking to appoint Mr. Stephen Swaden of Leonard Curtis as the liquidator.
At the meeting on 12th April, Mr. Sahota of BKK the company's accountants, stated that his firm could not act as liquidators as it had been connected with the company. He suggested that Mr. Hoffman and Mr. Yerrill of Gerald Edelman, the respondents, be appointed liquidators.
That proposal was accepted by a majority of the creditors. A decisive vote was that of an entity called Cavern Records (Cavern), who, through Hillier Hopkins, a firm of accountants, had lodged a proof of debt for some £286,000 which was objected to, and recorded as objected to, although they were given the right to vote. They were supported by at least two other creditors, one called Rolled Gold.
The statement of affairs prepared by a director of the company, Mr. Catlin, as at 12th April, showed assets with a book value of some £400,000 which were expected to realise some £31,000, preferential debts of about £171,000 of which that to the Customs and Excise Commissioners amounted to £103,000, and unsecured creditors, including the applicant, of around £1 million.
At the meeting, Mr. Swaden raised various matters which he said required investigation, including the question of whether Mr. Catlin had been guilty of trading while insolvent, and the question of stock sold prior to the liquidation.
Within a month of the appointment of the respondents, the applicant's solicitors had approached three other creditors, the Commissioners, who, as I have mentioned, were owed about £103,000, and two others who were owed about £127,000 in aggregate, to support an application to remove the respondents as liquidators on the basis that:
"The affairs of the company ought to be properly investigated by a wholly and truly independent liquidator".
This proposal was agreed to in writing by the Commissioners in a letter of 24th June, and by the two other creditors in letters a month earlier.
Meanwhile, on about 15th May, the applicant's solicitors had approached Hillier Hopkins asking about the Cavern's proof, and why Hillier Hopkins were described as "trustee of the assignee" of that debt. Hillier Hopkins wrote on 12th July to "confirm" that Cavern was the creditor and that,
"our office merely acts as a postal address for them in this matter".
On 10th June the applicant's solicitors wrote a detailed letter to the respondents, including the following:—
"… Mr Catlin makes reference to Rolled Gold … as a substantial supplier with whom the company had a credit facility in excess of £1 million pounds. This was subsequently reduced to £50,000.00. The concern here is that Rolled Gold may well have been paid in preference in order to achieve the reduction in credit facility …
One apparently major creditor which proved in the liquidation in the sum of £286,000 or thereabouts is Cavern Records. Their address is given as care of Hillier Hopkins. In a subsequent list of creditors, the creditor is given as Hillier Hopkins "as trustee of the assignee". We enclose a copy of our letter to Hiller Hopkins, which has gone unanswered. Our clients have made enquiries of other major wholesalers and retailers in this market. None of them are aware of Cavern Records as a major supplier of records …
The last trading accounts … for the year ended 31st August 2000 disclosed that the company was loss making at that time and was experiencing problems. Mr Catlin is said to have invested £200,000 but the accounts also note that he is indebted to the company in the sum of £667,215.00. The accounts raise questions over whether in fact the directors should have appreciated that the company was trading insolvently at a much earlier date and should have brought down the curtain much earlier …
Mr Clark, one of company's shop managers, has acquired four of the shops believed to be the best retail outlets. He acquired these shops in the last few days of trading. Mr Catlin stated at the creditors meetings that he had allowed Mr Clark to acquire the shops, which he held in his name as leaseholder. It was not possible to obtain details of the transaction at the creditors meeting".
Because Mr. Yerrill was on holiday there was a holding reply followed by a substantial response from him on 27th June to the following effect inter alia:—
"Regarding the reduction of credit facilities
I understand that Rolled Gold were one of a number of suppliers who reduced credit levels and further understand that this was a general trend within the industry.
I nonetheless note your comments regarding a possible preference and am looking into the same. You will of course appreciate that a decision to accept a reduced facility for continuation of supply may be deemed a commercial one and therefore unlikely to be successfully challenged as a preference.
On the matter of 'Cavern Records' I have noted the concerns that were raised at the creditors meeting and I am taking steps to verify that any claim is supported by appropriate documentation and that such documentation is in turn backed by actual supplies. As an aside you will appreciate that 'Cavern Records' will be provided with an opportunity to prove their debt for dividend purposes as would another apparent creditor.
I note your comments with regard to the balance which appears to have been due from Mr Catlin … I am seeking further explanation and clarification regarding this balance as part of my ongoing investigations but am not in a position to comment further at this stage.
The accounts for the year in question confirm a trading loss of some £6,317 but the Company remained balance sheet solvent at the time with retained profits carried forward of £72,593. It is difficult to take the small loss in isolation as evidence of wrongful trading but I can confirm that the information contained within the accounts will form a part of our investigations into the possibility of an action for wrongful trading along with all other relevant documents.
On the subject of Mr Clarke I would confirm that my initial investigations suggest that the leases concerned vested in Mr Catlin personally and did not form part of the Company's asset base".
This was not regarded as a satisfactory answer by the applicant, and it therefore issued this application. Its evidence consists of two affidavits. The first is from its finance director, who is also a main shareholder, Mr. David Pemblington, and the second is from its solicitor, Mr. David Potts of Hacking Ashton. The basis of the application is described in Mr. Pemblington's affidavit in these terms:
"AMP as a substantial independent is justified in seeking a full investigation in the affairs of the company by a fully independent liquidator. I have been advised by my solicitors … to seek the removal of the existing liquidators and their replacement by someone who can act and will be seen to act in the interests of the unconnected creditors to whom the indebtedness is substantial".
In his affidavit, Mr. Pemblington identifies eight complaints against the respondents. They can be divided into three categories. Category A has two complaints which are concerned with the meeting of 12th April. Category B has four complaints which are material to the liquidation. Category C has two complaints which are relevant to both.
As to Category A, there is (1) an allegation of a conflict of interest on the part of BBK, and (2) a complaint of the attitude of Mr. Catlin who refused to agree to Mr. Swaden's being a joint liquidator on 12th April. Category B includes (3) an alleged failure to freeze the company's bank account on 28th March 2002, (4) an alleged failure of the directors to maintain financial controls, (5) a complaint that the directors traded while insolvent, and (6) a complaint about the sale of assets to Mr. Clarke before the liquidation, a shop manager. Category C has (7) a challenge to the proofs of Rolled Gold who supported the appointment of the respondents and (8) a challenge to the existence of the debt claimed by Cavern. Rolled Gold and Cavern, of course, both supported the appointment of the respondent.
I should say at once there is nothing in the first two complaints, A1 and A2. BKK had previously acted for the company and behaved impeccably by pointing that out at the meeting of 12th April, and indicating that they could therefore not act as liquidators. Secondly, so far as Mr. Catlin's refusal to entertain Mr. Swaden as a joint liquidator is concerned, it is clear that that proposal was put to the creditors and was voted out.
The evidence in reply on behalf of...
To continue reading
Request your trial
-
Alexander M. Fundora Applicant v Nigel Hamilton-Smith Peter Wastell (Joint Liquidators) Respondents [ECSC]
...as it sends a clear message to liquidators that they have an important function which should be effectively conducted (see AMP Music Box Enterprises Ltd v Hoffman [2002] EWHC 1899 per Neuberger J at p 1001 (See Tab 22 of the Legal Authorities)); f. regard to wishes of creditors: the court s......
-
Revenue Commissioners v Fitzpatrick
...in the course of the hearing. 25 Of particular assistance is the judgment of Neuberger J. in AMP Music Box Enterprises Ltd v. Hoffman [2003] 1 BCLC 319, a case in which the Court considered its power under s. 108(2) of the 1986 Insolvency Act to remove a liquidator and appoint another ?on c......
- Yeo Ann Kiat and Others v Hong Leong Bank Bhd and Another
-
SISU Capital Fund Ltd v Tucker
...cases would be encouraged; and there would, of course, be likely to be cost implications: see AMP Music Box Enterprises Ltd v Hoffman [2003] 1 BCLC 319 per Neuberger J at 325F-326G: “[23] In an application such as this, the court may have to carry out a difficult balancing exercise. On the ......