Anthony Peter Davidison (as liquidator of Finnan Developments (Raynes Park) LLP) v Sean Patrick Finnan
| Jurisdiction | England & Wales |
| Judge | Mr Hugh Sims |
| Judgment Date | 24 June 2020 |
| Neutral Citation | [2020] EWHC 1607 (Ch) |
| Docket Number | Case No: CR-2019-005359 |
| Court | Chancery Division |
| Date | 24 June 2020 |
[2020] EWHC 1607 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST
CHANCERY DIVISION
IN THE MATTER OF FINNAN DEVELOPMENTS (RAYNES PARK) LLP (IN LIQUIDATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Hugh Sims QC SITTING AS A DEPUTY JUDGE OF THE HIGH COURT
Case No: CR-2019-005359
Jonathan Titmuss (instructed by Howes Percival LLP) for the Applicant
Steven Thompson QC (instructed by Keystone Law Ltd) for the Third Respondent
Hearing date: 2 June 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Hugh Sims QC:
Introduction
This summary judgment application arises out of a claim made by a liquidator, Anthony Peter Davidson (“the Liquidator”) for alleged wrongdoing by members of a limited liability partnership, Finnan Developments (Raynes Park) LLP (“Finnan LLP” or “the LLP”). In particular the Liquidator seeks to recover monies and/or seek compensation in relation to payments which were made by the LLP to the respondents many years before the LLP entered into liquidation, but when its trading life was close to an end. The central issue, so far as this application is concerned, relates to what provision should be made in relation to a contingent liability and whether, with a suitable provision, the LLP was insolvent or likely to become insolvent as a result of entering into a settlement agreement with a retiring member, the third respondent, Mr Paul Christopher John Capra (“Mr Capra”), under which it agreed to pay him £1.35m.
By application notice dated 16 January 2020 Mr Capra seeks reverse summary judgment against the Liquidator, and asks for the dismissal of the £1.35m misfeasance claim against him. Mr Capra contends that, applying the summary judgment test under CPR 24.2, Mr Davidson has no real prospect of succeeding on his claims against Mr Capra, and there is no other compelling reason for those claims to be disposed of at trial. The test to apply under CPR 24.2 is well traversed (see Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15] (Lewison J, as he then was), approved by the Court of Appeal in AC Ward & Sons Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098 at [24] (Etherton LJ). There are five particular principles which are worth having in mind for this application:
a. The test is whether or not there is a real prospect of success on the claim or issue, the burden being on the person seeking summary judgment to show that;
b. This is not to be assessed solely by reference to what is before the court, but also on the basis of evidence which can reasonably be expected to be available at trial;
c. The court should not conduct a “mini-trial”, and so seek to resolve issues of fact which are substantial and best left to trial;
d. Even where there is no obvious conflict of fact at the time of the application, the court should hesitate about making a final decision where there is reason to believe a fuller investigation into the facts would add to or alter the evidence available and so affect the outcome;
e. Where however there is a short point of law, or an issue which does not involve any substantial dispute of fact, which can be disposed of summarily, the court should grasp the nettle, or pluck the flower, and decide it.
In short, I am not satisfied that the entirety of the claims against Mr Capra are so fanciful, and lacking in merit, that they should be disposed of now, summarily. And there would be a real risk of this exercise becoming a mini-trial should I attempt to resolve all of the issues arising on the claims, on the evidence as it currently stands. Some of the claims, or bases for the claims, against Mr Capra do, however, fall into that category, as I explain further below (and which were to some extent conceded during the course of oral submissions). And the application has usefully identified a (if not the) key factual issue, relating to the value to be placed on a contingent liability, which needs to be focussed on by the parties, so far as the claims against Mr Capra is concerned, which should enable a more expeditious and efficient disposal of the dispute.
I will now set out the relevant background facts, to set the context for the claims against Mr Capra, dealing with factual matters which are uncontroversial, or not a matter of serious controversy. I will then turn to identify the issues arising, and the further facts relevant to those issues, focussing on facts which are controversial, and explaining the reasons for my determination of the issues.
Given that I do not intend to give summary judgment on any issues which involve contentious issues of fact which cannot easily be resolved, I have restrained myself from a lengthy recitation of the factual background to the case, which may obscure, rather than illuminate, my core reasoning.
The factual background
The LLP was incorporated at Companies House on 4 March 2008 under the Limited Liability Partnerships Act 2000 (“the 2000 Act”), as a limited liability partnership (under partnership no. 0C335253). It was incorporated for the purpose of acquiring and developing a freehold site at 213 Worple Road, Raynes Park, London, SW20 8QY (“the Property”). The Property was purchased on 28 March 2008 for £2.42m, with the benefit of a loan from Investec Bank Plc of £2.5m and loan capital introduced by members of the LLP: £205,566.07 from Mr Capra and £205,566.07 from the other members of the LLP.
On the same date, on 28 March 2008, the LLP entered into a limited liability partnership agreement (“the LLP Agreement”) to set out the basis on which the LLP was to be organised and the rights and obligations of the members of the LLP (“the Members”). The Members, all of whom were defined as designated members, entitled to participate in the management of the LLP, were the first respondent, Mr Sean Patrick Finnan (“Sean Finnan”), his brother, Mr Stephen Finnan (“Stephen Finnan”), the second respondent, Mr Capra, the third respondent, and Finnan Developments Limited (“Finnan Developments”), the fourth respondent. Whether all of the Members were involved in the management of the LLP, and the extent of their involvement, is of some controversy. I shall refer to the first, second and fourth respondents as “Finnan” for short. In broad terms, the LLP Agreement provided for a 50:50 split between Mr Capra and Finnan, both as to capital contributions and the sharing of profits and losses. However in time Mr Capra came to contribute more than Finnan and the parties agreed to vary their entitlements accordingly, seemingly on a pro rata basis, as reflected in the accounts signed off during the period leading up to 2013.
The fifth respondent, Finnan Land & Property Limited (“Finnan Land & Property”) is a subsidiary of Finnan Developments. It was the recipient of four payments, which commenced on 12 August 2013, which the Liquidator seeks to recover, totalling £896,860. These payments occurred after the date of Mr Capra's resignation from the LLP, and the Liquidator does not seek to suggest he should be liable for these payments.
The LLP Agreement defined the business of the LLP (“the Business”) as the obtaining of planning permission for and the development and disposal of the Property (or such other business as may be determined in accordance with the LLP Agreement). The development involved the creation of commercial units on the ground floor of the Property, which were let to Costa Coffee and Sainsburys on or about 1 March 2012, and nine flats above that, which were sold, with the freehold, during the course of 2013. The LLP entered into voluntary liquidation on 8 November 2016 when the Liquidator was appointed. Its only business activity, during the period from September 2013–2016, appeared to be its involvement in an arbitration dispute with the main contractor, G&S Construction Limited (“G&S”).
According to the estimated statement of affairs signed by Sean Finnan shortly before the liquidation, on 4 November 2016, it has a net estimated deficiency of just over £3m, which is almost entirely made up of a debt owed to G&S. That debt is based on certain arbitration awards made in its favour against the LLP between 2013 and 2017, which I shall refer to further below. G&S and the LLP had entered into a contract executed on 8 October 2011 in the form of a JCT Design and Build Contract 2005 Revision 2 (DB) for the design and construction of the retail units and dwellings and associated works (“the Contract”), which included an arbitration clause. The Contract was not in the bundle before me and nor, at present, does the Liquidator have all the documents which were referred to in the arbitration.
G&S was, at least ostensibly, set up by Gareth Fishburn, a builder, who became its sole director and shareholder. It was appointed as the main contractor for the development of the Property. I say ostensibly as there has been some speculation as to who the “S” in “G&S” is a reference to, and whether it is a reference to Sean Finnan, and whether G&S was ultimately controlled by Sean Finnan/Finnan, as the arbitrator concluded in his awards; indeed he goes so far as to suggest the LLP...
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