Brian Glasgow (the bankruptcy trustee of Harlequin Property SVG Ltd) v Els Law Ltd and Others The Bar Council of England and Wales (Intervener)
| Jurisdiction | England & Wales |
| Judge | Robin Dicker |
| Judgment Date | 28 November 2017 |
| Neutral Citation | [2017] EWHC 3004 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2017-000422 |
| Date | 28 November 2017 |
[2017] EWHC 3004 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Robin Dicker Q.C.
(sitting as a Deputy High Court Judge)
Case No: CR-2017-000422
and
Mr Andreas Gledhill Q.C., Mr Jamie Carpenter, andMr Martin Ouwehand (instructed by Jones Day) for the Applicant
Mr Benjamin Williams Q.C. and Ms Fiona Dewar (instructed by Herbert Smith Freehills LLP) for the 1 st, 2 nd, 3 rd and 4th Respondents
Mr Alex Hutton Q.C. and Mr Mark James (instructed by Kennedys Law LLP) for the 9 th Respondent
Mr Gerard Clarke (instructed by Mr Ashley Netherclift of DAS, Mr Ian Coleman of Elite and Mr David Kearns of Acasta) for the 10 th, 11 th and 12 th Respondents
Mr Nicholas Bacon Q.C. and Mr Alan Tunkel (instructed by Simpson Millar LLP) forthe Intervener
Hearing dates: 3 rd, 4 th, 5 th and 6 th July 2017
Judgment Approved
Robin Dicker Q.C.:
This judgment concerns an application for directions by the Applicant, the bankruptcy trustee of Harlequin Property SVG Limited ("the Company") pursuant to section 168(3) of the Insolvency Act 1986 and article 21(1)(g) of Schedule 1 to the Cross-Border Insolvency Regulations 2006 ("the CBIR").
The application was issued to determine the rights of various respondents to a sum of approximately £7.9 million ("the Fund"), held by the Court Funds Office, representing the net proceeds of a successful claim by the Company against the ninth Respondent ("Wilkins Kennedy") following a trial before Coulson J last year, in the Technology and Construction Court.
Following settlements, including settlements between the Applicant and the first, second, third and fourth Respondents ("the Legal Team") at the start of the hearing and between the Legal Team and Wilkins Kennedyafter the conclusion of the hearing, the remaining issues that still require to be decided are those between the Applicant and the tenth, eleventh and twelfth Respondents ("the Insurers").
The Company's claims against Wilkins Kennedy were pursued with the benefit of various insurance arrangements provided by the Insurers, including legal expenses policies provided by the tenth and eleventh Respondents and a financial guarantee policy provided by the twelfth Respondent. Under the terms of these policies, the Insurers claim payment of premium totalling some £3,020,600.
The Insurers contend that they have a proprietary claim over the Fund in respect of the sums due to them in respect of premium, by way of a lien analogous to the common law and equitable lien which a solicitor has over the proceeds of a judgment recovered for the client in the course of litigation by the solicitor's exertions. They also rely, in the alternative, on the principle in Ex p James; In re Condon (1874) LR 9 Ch. App 609.
The Applicant contends that the Insurers' claims rank only for proof as unsecured claims in the Company's bankruptcy in St. Vincent and the Grenadines.
The background
The Company was incorporated under the St. Vincent and the Grenadines Companies Act 1994.
The Company's main asset is a property at Buccament Bay, the construction of which was funded by deposits from individual investors who wanted to purchase cabanas or apartments, either at Buccament Bay or at other resorts planned by the Company. Although more than 1,900 deposits were taken by the Company for units at the Buccament Bay property, only approximately 116 units were fully completed and approximately 60 other units were partially completed. The deposits were not segregated from the general assets of the Company and were not used exclusively for the purposes of construction works at the Buccament Bay property.
In 2014 the Company issued proceedings against its former accountants and professional advisors, Wilkins Kennedy, claiming damages for breach of contract and professional negligence ("the Proceedings").
On 12 December 2016, Coulson J handed down judgment in the Proceedings. He found in favour of the Company, awarding damages of US$11,630,970.50 plus interest and costs. His judgment is reported at [2016] EWHC 3188. In light of the serious misgivings which he expressed about the probity of the Company's business methods, he directed that this sum be paid into court, rather than to the Company.
On 21 December 2016 a further hearing took place before Coulson Jto determine consequential matters following his judgment. At this hearing he converted the judgment sum into sterling and ordered that Wilkins Kennedy should pay the Company 60% of its costs to be assessed on the standard basis if not agreed and should make an interim payment on account of the Company's costs in the sum of £2,000,000.
Pursuant to that order, sums totalling £10,540,866.84, including interest, were paid into court by Wilkins Kennedy on 13 January 2017.
On 3 October 2016 the Company commenced restructuring proceedings under Part V of the Bankruptcy and Insolvency Act of St. Vincent and the Grenadines ("the B&I Act") naming the Applicant, a partner of KPMG Eastern Caribbean, as the Proposal Trustee. On 17 December 2016, the Applicant applied for and obtained an order from the High Court of St. Vincent and the Grenadines, appointing him interim receiver of the Company's property, pending the outcome of the Part V proposal.
On 19 January 2017 the Applicant applied for and obtained an order from this court recognising the proceedings in respect of the Company as foreign main proceedings under article 17 of the CBIR.
On 24 February 2017, the High Court of St. Vincent and the Grenadines dismissed the last of a series of applications by the Company for an extension of time to file its Part V proposal, with the result that, from 3 March 2017, the Company's affairs have fallen to be administered under the B&I Act and the Applicant has assumed the functions of bankruptcy trustee.
The Company is heavily insolvent, with unsecured claims estimated at some £200 million. The largest single creditor is the UK Financial Services Compensation Scheme, which is owed some £29 million in respect of compensation paid by it to members of the public who lost money by investing in the Company through UK-based independent financial advisers.
The Application
The application was issued on 16 March 2017. At that stage, only the first to eighth respondents were joined to the proceedings. Various developments, since the application was issued, have considerably reduced the scope of the issues that still require to be determined.
The application, as originally issued, primarily concerned a damages based agreement, within the meaning of section 58AA of the Courts and Legal Services Act 1990 and the Damages-Based Agreements Regulations 2013, pursuant to which the Legal Teamhad represented the Company in the proceedings against Wilkins Kennedy. Paragraphs 3.1 to 3.4 of the application sought directions, in short, as to whether that agreement was valid, whether the first and second Respondents' (together "the Solicitors") rightsin or over the Fund extended to the entitlements of the third and fourth Respondents (together "the Barristers") and whether the Barristers had direct rights inor over the Fund.
The Bar Council of England Wales ("the Bar Council") was given permission to intervene to take a position in relation to those issues supportive of the Barristers.
Theissues between the Applicant and the Legal Team were settled by an agreement dated 3 July 2017, andthe hearing proceeded on the basis of submissions on such issues by the Legal Team and Wilkins Kennedy, together with the Bar Council. After the conclusion of the hearing, the issues as between the Legal Team and Wilkins Kennedy were settled by an agreement dated 18 July 2017. In these circumstances, I indicated to the parties that I would, absent any application to the contrary, be proceeding on the basis that it would not be necessary nor an appropriate use of judicial resources to produce a judgment on the issues in paragraphs 3.1 to 3.4 of the Application, andthat is the course that I now take.
The application also sought directions as to whether the fifth to eighth respondents had any proprietary rights in or over the Fund. Prior to the hearing, the Applicant had also reached agreement disposing of those claims, together with a discrete claim made by the fourth Respondent.
The application did not initially join the Insurers as respondents, reflecting the fact that the Applicant did not, at that stage, intend to contest their proprietary claims. Having subsequently concluded that there might be grounds on which to do so, they were joined as further respondents by order of Marcus Smith J of 5 April 2017.
The remaining issues
The Insurers claim premium due totalling £3,020,600 and contendthat they have a lien over the Fund in respect of such sums, alternatively are entitled to an order requiring the Applicant to pay such sums on the basis of the principle in Ex parte James; In re Condon (1874) LR 9 Ch App 609. At an earlier stage, the Insurers also sought to rely on the decision in Lord Napier & Ettrick v Hunter [1993] A.C. 713, but this was not, in the event, pursued by Mr Clarke.
The facts relevant to the Insurers
The Company obtained the benefit of insurance arrangements with the Insurers, including a legal expenses...
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