CAS (Nominees) Ltd v Nottingham Forest Plc

JurisdictionEngland & Wales
Judgment Date27 March 2002
Neutral Citation[2002] EWHC 701 (Ch)
Docket NumberNo: 1HC 81/02
CourtChancery Division
Date27 March 2002
Arthur D Little (In Administration)
Claimant
and
Ableco Finance LLC
Defendant

[2002] EWHC 701 (Ch)

Before

Mr Roger Kaye QC

Sitting as a Deputy Judge of the High Court

No: 1HC 81/02

CHANCERY DIVISION

IN THE HIGH COURT OF JUSTICE

Royal Courts of Justice

The Strand

London WC2A 2LL

MR S MORTIMER and MISS WALTON (Instructed by Messrs Nabarro Nathanson) appeared on behalf of the Claimant

MR G MOSS QC and MR J GOLDSMITH (Instructed by Messrs Ashurst Morris Crisp) appeared on behalf of the Defendant

1

Wednesday, 27th March 2002

2

THE DEPUTY JUDGE:

3

1. This matter raises two interesting and related points. First whether, and if so to what extent, Chapter 2 of Part XII of the Companies Act 1985 dealing with the registration of charges in Scotland is part of the law of England and Wales; second, whether an English charge, unregistered in Scotland, granted to a US finance company by a Scottish company, now in administration of shares in its own English subsidiary is a fixed or floating charge, and if floating, is it in consequence void as against the administrators.

4

2. I heard this matter on Friday and Monday of this week. It is necessary, for reasons I shall explain in a moment, to give judgment urgently. Unfortunately, owing to that urgency, I have not been able to prepare as full a judgment as I would have wished having regard to the full, helpful and extensive arguments submitted to me by counsel on both sides, and the authorities cited or referred to. It is only for these reasons of urgency that I have dealt with those arguments, authorities and reasoning rather more succinctly than I would have preferred, but I hope in the process not unjustly.

5

3. These issues arise in the following way. By a claim form issued on 15th March 2002 under Part 8(A) of the Civil Procedure Rules, the claimant, Arthur D Little Ltd ("the Company") seeks a declaration as to whether a guarantee and debenture granted by the Company on 11th June 2001 ("the Debenture") to the defendant Ableco Finance LLC ("Ableco") is, in respect of certain of the security charged by that debenture, a fixed or floating charge. This question arises in relation to the shares the Company holds in its wholly owned subsidiary company, Cambridge Consultants Ltd ("CCL"), together with the "Distribution Rights" arising in respect of those shares.

6

The relief actually sought is, so far as relevant, as follows:

"The claimant company acting by its administrator seeks the answers to the questions:

1. Whether on its true construction and in the events which have happened, the charge on subsidiary shares together with distribution rights each as defined, from time to time accruing thereto contained in clause 3.1(d) read with clause 8.5 of the guarantee and debenture dated 11th June 2001 issued by the claimant to the defendant, the charge, is a fixed charge as it purports to be or a floating charge.

2. If the court determines that the charge is or comprises a floating charge, whether it or any part of it is void against the claimant in administration for failure to register the charge under section 4(10) of the Companies Act 1985.

3. If the court determines that the charge is or comprises a fixed charge, whether it or any part of it is valid against the claimant in administration, notwithstanding a failure to register it under section 410 of the Companies Act 1985."

7

4. The Company was incorporated and registered in Scotland. It has an issued share capital of �100,000, all of which is owned by two United States' companies, Arthur D Little International Inc ("International") as to 99,999 shares, and Arthur D Little Inc ("Inc"), 1 share. The Company carries on the business of supplying business and management consultancy services.

8

5. The Company's subsidiary, CCL, was incorporated in and is registered in England and Wales. It is apparently a highly successful design and development company. The shares in this company are said to have an estimated value of some US $20 million, or more.

9

6. On 5th February 2002 the Company's two shareholders, International and Inc, each filed for Chapter 11 bankruptcy protection in Delaware, though this has since been moved to Massachusetts.

10

7. In consequence of the Chapter 11 proceedings, on 8th February 2002, the Company petitioned in Scotland for an administration order under section 8 of the Insolvency Act 1986. Three partners of the firm of Grant Thornton were immediately appointed interim managers. On 22nd February 2002 the Court of Session in Scotland made an administration order. The provisions relating to administration orders contained in Part 2 of the Insolvency Act 1986 apply in Scotland by virtue of the Insolvency Act 1986, section 440(1). The purposes for which the administration order was made were those under section 8(3)(b) (the approval of a voluntary arrangement) and (c) (the sanction of a scheme under section 425 of the Companies Act 1985). The same three partners of Grant Thornton were appointed joint administrators.

11

8. The present estimated financial position of the Company is thought to be as follows: preferential creditors amount to some �524,000 and non-preferential unsecured creditors to some �13 million. This excludes inter-company liabilities and the amount due to Ableco under the Debenture. In addition, a major unsecured creditor is the group pension scheme which the Company shares with CCL and which is thought to be significantly under-funded.

12

9. The Debenture was entered into in June 2001, as I have said, to secure financing of some US $64 million (it may have been more from what I have been told) made by Ableco to the Company's ultimate parent, Inc, and to other US entities under a financing agreement also dated 11th June 2001. The Debenture was one of a number of cross-guarantees and security given by companies in the Arthur D Little group. Under the Debenture the Company guaranteed the liabilities of Inc and of International to Ableco arising under the finance agreement. The principle debt now totals (allowing for subsequent increases of facilities and interest) about US $73 million.

13

10. Included in the property charged by the Company as security in favour of Ableco under the Debenture was, as I have said, the Company's entire shareholding in CCL. It was expressed to be a charge by way of first fixed charge. By clause 28.1 of the Debenture it was provided that it was to be "governed by and construed in all respects in accordance with English law".

14

11. Ableco attempted to register the Debenture with the registrar of Companies for England and Wales. This resulted in what has become known as a Slavenburg letter being issued by the registrar, i.e., a letter in which the registrar acknowledged that particulars of the charge and the relevant documentary evidence had been delivered from the overseas company and listed in the Slavenburg index, that is the alphabetical index of the names of overseas companies in respect of which such particulars have been delivered. (This procedure arose from the registrar's practice of not accepting particulars of charges for registration from overseas companies not registered in England, see NV Slavenburgs Bank v. Intercontinental Natural Resources Ltd [1980] 1 WLR 1076).

15

12. Particulars of the Debenture and documentary evidence thereof were, however, not delivered to the Registrar of Companies in Scotland and the Debenture was not registered in Scotland.

16

13. The administrators, who are the persons effectively bringing the present proceedings in the name of the Company in accordance with the recognised procedure (see Smith v. Bridge End County Borough Council [2001] 3 WLR 1347 at 1356, para 31 per Lord Hoffmann) contend that the Debenture, insofar as it secures a charge over the shares of the Company in CCL is to be truly categorised as a floating charge which is void as against the administrators by reason of non-registration pursuant to section 410(2) of the Companies Act 1985 contained in Chapter 2 of Part XII of that Act. In consequence, the administrators submit, they are free to sell the shares for which they have already received expressions of interest around, or in excess of, the value that I have mentioned. On the other hand, if the charge is, as Ableco contend, a valid, fixed charge, the administrators would need the leave of the court under section 15(2) of the Insolvency Acct 1986 to sell the CCL shares. Moreover, Ableco have indicated that they would wish to enforce their charge over the shares and realise them as part of the Chapter 11 bankruptcy sales process being conducted in relation to the two US parent companies in the United States of America.

17

14. The application is urgent because on 2nd April next an auction process in those Chapter 11 proceedings is due to commence. Ableco wish to include the CCL shares, assuming their security is not void against the administrators in that auction. However, the administrators consider that they can obtain more for the shares outside the auction process (this is to some extent disputed by Ableco) and if Ableco is right in its contention that the charge over the shares is a fixed charge, the administrators would need to make application to the court as a matter of urgency under section 15(2) of the Insolvency Act 1986 for leave to sell the shares outside the Chapter 11 auction. Hence both sides wish to know where they stand as soon as possible.

18

15. Section 410 of the Companies Act 1985 (as amended) provides, so far as relevant to these proceedings, as follows:

"(1) The following provisions of this chapter have effect for the purpose of securing the registration in Scotland of charges created by companies.

(2) Every charge created by a company, being a charge to which...

To continue reading

Request your trial
44 cases
  • Avanti Communications Ltd ((in Administration))
    • United Kingdom
    • Chancery Division
    • 25 April 2023
    ...intended to create, such as the labels fixed and floating; see Arthur D Little Ltd (In Administration) v Ableco Finance LLC [2002] EWHC 701 (Ch) [2002] 3 W.L.R. 1387 at [31]. The court is fundamentally concerned with the nature of the rights and obligations the parties intended to create;......
  • Mike Hilton and Others v D IV LLP and Others
    • United Kingdom
    • Chancery Division
    • 12 January 2015
    ...Limited [1943] 1 Ch 220 at 222 and has been applied consistently ever since as was demonstrated by Evans-Lombe J in CAS (Nominees) Limited v. Nottingham Forest plc and others [2002] BCC 145 at [14]–[17]. There is no justification for treating the members of LLPs any differently from shareho......
  • Khaira v Shergill (No 2)
    • United Kingdom
    • Chancery Division
    • 23 March 2016
    ...quoted in one of the cases to which I was referred, that appears to have been what happened in Morris v Bank of America National Trust [2001] 1 All ER 954. According to those extracts, Leading Counsel for the receiving party sought an order for "an immediate detailed assessment" and for pay......
  • Mrs Ashley Judith Dawson-Damer v Taylor Wessing LLP
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 11 March 2020
    ...see Woodhouse & Co Ltd v Woodhouse (1914) 30 TLR 559; In re Hydrosan Ltd [1991] BCLC 418, CAS (Nominees) Ltd v Nottingham Forest FC plc [2002] 1 BCLC 613 and Arrow Trading and Investments Est 1920 v Edwardian Group Ltd (No 2) [2005] 1 BCLC 696”. 33 “Joint privilege” has also been recognised......
  • Request a trial to view additional results
7 books & journal articles
  • DISCLOSURE OF THE COMPANY'S PRIVILEGED DOCUMENTS TO SHAREHOLDERS AS AN APPLICATION OF JOINT INTEREST PRIVILEGE
    • Singapore
    • Singapore Academy of Law Journal No. 2020, December 2020
    • 1 December 2020
    ...& Investments Est 1920 v Edwardian Group Ltd [2004] BCC 955 at [25], per Blackburne J; CAS (Nominees) Ltd v Nottingham Forest plc [2001] 1 All ER 954 at [12] and [19]. 48 Victor Joffe QC et al, Minority Shareholders: Law, Practice and Procedure (Oxford: Oxford University Press, 6th Ed, 2018......
  • The statutory unfair prejudice remedy for minority shareholder protection in Pakistan. Difficulties of section 290 of the Companies Ordinance 1984
    • United Kingdom
    • Journal of Financial Crime No. 20-1, December 2012
    • 28 December 2012
    ...39; Re Saul D Harrison & Sons plc [1995] 1 BCLC 14;Re BSB Holdings (No. 2) [1996] 1 BCLC 155; CAS (Nominees) Ltd v. Nottingham Forest plc;[2002] BCC 145; Re McCarthy Surfacing Ltd [2008] EWHC 2279; In the matter of SouthernCounties Fresh Food; Ltd [2008] EWHC 2810; Oak Investment Partners X......
  • Subject Index
    • United Kingdom
    • International Journal of Evidence & Proof, The No. 9-4, December 2005
    • 1 December 2005
    ...(SC) ........................................103Carella v California, 491 US 263 (1989) ... 22CAS (Nominees) v Nottingham Forest plc[2001] 1 All ER 954 ....................................1 93Chan Wei Keung v R [1967] 2 AC 160 .....224Condron v United Kingdom (2000) 31 EHRR1 .....................
  • Table of Cases
    • United Kingdom
    • Wildy Simmonds & Hill Partnership and LLP Law - 2nd edition Contents
    • 30 August 2018
    ...1 All ER 213, [1981] RPC 429, PC 22 Campbell v Campbell [2017] EWHC 182 (Ch) 18, 61, 64, 151 CAS (Nominees) Ltd v Nottingham Forest plc [2002] BCC 145 110 Catch a Ride Ltd v Gardner [2014] EWHC 1220 (Ch) 143 Certain limited partners in Henderson PFI Secondary Fund II LP (a firm) v Henderson......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT