Changtel Solutions UK Ltd ((in Liquidation)) v G4S Secure Solutions (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Barber |
| Judgment Date | 01 April 2022 |
| Neutral Citation | [2022] EWHC 694 (Ch) |
| Docket Number | CR 2021 000136 |
| Court | Chancery Division |
[2022] EWHC 694 (Ch)
ICC JUDGE Barber
CR 2021 000136
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF CHANGTEL SOLUTIONS UK LIMITED (IN LIQUIDATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
7 The Rolls Building
Fetter Lane
London
EC4A 1NL
Stephen Robins QC (instructed by Walker Morris LLP) for the Applicants
Julian Wilson (instructed by G4S Legal Department) for the Respondent
Hearing dates: 2 December 2021, 18 and 24 January 2022
Approved Judgment
This judgment was handed down remotely by circulation to the parties' representatives by email. It will also be released for publication on BAILII and other websites. The date and time for hand-down is deemed to be 9.30 a.m on 1 April 2022
ICC Judge Barber
On 22 January 2021, Changtel Solutions UK Limited (‘the Company’) and its liquidators (together, ‘the Applicants’) issued an application (‘the Application’) against sixteen respondents, seeking to recover various sums allegedly paid by the Company to such respondents in the period between the presentation of a winding up petition against the Company on 7 June 2013 and the making of a winding up order against it on 28 January 2015.
This judgment addresses five payments totalling £47,053.28 alleged to have been made by the Company to the eighth respondent, G4S Solutions (UK) Limited (‘the Respondent’) in the period between 7 June 2013 and 28 January 2015. The Applicants allege that the five payments were made on the following dates and in the following sums:
(1) 11 June 2013: £9,564.33
(2) 16 August 2013: £9,411.98
(3) 17 September 2013: £9,306.00
(4) 7 November 2013: £9,358.99
(5) 10 December 2013: £9,411.98 Total: £47,053.28
The Applicants maintain that all five payments are void under s.127 Insolvency Act 1986. They seek repayment of the sums together with interest.
The Respondent opposes the application. It maintains that:
(1) the Applicants' claim to recover the payments is time-barred under section 9 of the Limitation Act 1980 (‘the 1980 Act’);
(2) the first of the payments (in the sum of £9,564.33) (‘the First Payment’) was actually made before presentation;
(3) the court should validate the payments under section 127 of the 1986 Act; and/or
(4) the Respondent changed its position and has a defence to the restitutionary claim arising by reason of section 127 of the 1986 Act.
In reply, the Applicants contend that:
(1) the claim is not time-barred under section 9 of the 1980 Act, because the Application was issued less than 6 years after the making of a winding-up order;
(2) although the cheque in respect of the First Payment was signed before presentation of the petition, the Company's bank account was debited after the presentation of the petition, with the result that the First Payment is void under section 127 of the 1986 Act;
(3) the Respondent has not applied for validation and in any event, validation of the payments would not be of any benefit to the Company's creditors and there are no other grounds to justify the making of an exception to the basic principle of pari passu distribution;
(4) the ‘change of position’ defence is not available in a section 127 context. Alternatively even if it is, the Respondent has not discharged the burden of establishing a change of position defence.
Evidence
For the purposes of this judgment, I have read the witness statement of Nicholas Reed dated 22 January 2021 and the witness statement of Alan Cameron dated 8 March 2021. I have also considered other documents contained in agreed hearing bundles, to which reference will be made where appropriate.
Background
On 18 April 2013, Her Majesty's Revenue & Customs (‘HMRC’) presented a petition for the winding up of the Company (‘the First Petition’).
HMRC agreed not to advertise the First Petition. In breach of this agreement, however, HMRC advertised the First Petition. The Company applied for the First Petition to be struck out and, on 6 June 2013, Birss J struck out the First Petition.
On 7 June 2013, HMRC presented a further petition for the winding up of the Company (‘the Petition’).
The Company applied to strike out the Petition. This application was heard at the end of January 2014. On 21 March 2014, Mr David Donaldson QC (sitting as a Deputy Judge) (the Judge) acceded to the Company's application and struck out the Petition.
Somewhat curiously, on the same day, the Judge also granted an injunction in favour of the Company, restraining HMRC from advertising the Petition.
HMRC appealed against the Judge's decision.
On 28 January 2015, the Court of Appeal allowed HMRC's appeal and made a winding up order in respect of the Company (‘the Winding Up Order’). The Court of Appeal dispensed with the requirement for advertisement of the Petition.
In the period between presentation of the Petition on 7 June 2013 and the making of the Winding Up Order on 28 January 2015, the Company's bank account was debited with the five payments listed at paragraph 2 above.
By this application, the Applicants are seeking to recover the payments on the basis that the payments are void under section 127 of the Insolvency Act 1986.
I shall now address the four key issues identified by the parties.
Is the entire claim statute-barred?
The Respondent contends that the Applicants' claim to recover all of the payments is time-barred under section 9 of the 1980 Act, because the Application was issued more than 6 years after the payments. The Applicants maintain that the cause of action accrued on the making of the Winding Up Order, which occurred less than six years before the date of the application. The question in respect of limitation is therefore whether the ‘cause of action’ within section 9 of the 1980 Act accrued immediately on the making of the payments (as the Respondent contends) or not until the making of the winding up order (as the Applicants contend).
Section 9(1) of the 1980 Act provides:
‘An action to recover any sum recoverable by virtue of any enactment shall not be brought after the expiration of six years from the date on which the cause of action accrued’.
A claim to recover a post-petition payment is an action ‘to recover any sum recoverable by virtue of any enactment’. The enactment by which the sum is recoverable is the 1986 Act, because no such claim would exist without section 127.
The Applicants maintain the cause of action did not accrue until the making of the winding up order. For these purposes, they maintain that a cause of action is ‘simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person’ ( Letang v Cooper [1965] 1 QB 232 per Diplock at 242–243) and that a cause of action consists of ‘every fact which it would be necessary for the claimant to prove, if traversed, in order to support his right to the judgment of the court’: Coburn v College [1897] 1 QB 702 per Lord Esher MR.
Accordingly, they contend, a cause of action accrues ‘when there are present all the facts which are material to be proved to entitle the claimant to succeed’: Halsbury's Laws vol 68, para 1022, citing Cooke v Gill (1873) LR 8 CP 107 at 116 per Brett J.
Section 127(1) of the 1986 Act provides:
‘In a winding up by the court, any disposition of the company's property …. made after the commencement of the winding up is, unless the court otherwise orders, void.’
The Applicants submit that:
(1) Section 127 begins with the words: ‘In a winding up by the court’.
(2) Until the making of a winding up order, there is no ‘winding up by the court’. There may be a petition but there is not yet any winding up by the court.
(3) It follows that the cause of action accrues with the making of the winding up order.
The Respondent maintains that ‘it is not an ingredient of the accrual of the cause of action under s.127 that a winding up order has been made and the company is in the course of being wound up’: skeleton argument para 20. In support of this contention, the Respondent relies upon Re A I Levy (Holdings) Ltd [1964] Ch 19, in which Buckley LJ (at pp27–28) stated:
‘It appears to me that the object of the section is to protect the interests of the creditors from the possibly unfortunate results which would ensue from the presentation of a petition, and to protect their interests as much during the period while the petition was pending as after an order has been made on it. What the section provides in its present terms is that any disposition of the property of the company made after the commencement of the winding up shall be void in the winding up of the company unless the court otherwise orders; that is to say, if and when the company comes to be put into liquidation the transaction is to be as if it had never taken place.
It does not appear to me, with the utmost respect to Vaisey J., that the language of the section necessarily requires an order to be made in respect of a company which is in fact being wound up by the court at the date when the order under section 227 is made, that is to say after the date of the winding up order. If that were the true effect of the section, the present case would demonstrate that the section is ill designed to meet the kind of risk to the creditors of a company against which one would have expected it to be intended to protect.’
The Respondent maintains that ‘The action under the enactment in s.127(1) IA 1986 accrues when (1) a Petition has been issued; and (2) there has been...
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