Cohen v Davis
| Jurisdiction | England & Wales |
| Judge | Richard Sheldon QC,RICHARD SHELDON QC,(SITTING AS A DEPUTY JUDGE OF THE HIGH COURT) |
| Judgment Date | 06 April 2006 |
| Neutral Citation | [2006] EWHC 768 (Ch) |
| Docket Number | Case Nos: 4531 and 4332 of 2004 |
| Court | Chancery Division |
| Date | 06 April 2006 |
[2006] EWHC 768 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Richard Sheldon Qc
(sitting As A Deputy Judge Of The High Court)
Case Nos: 4531 and 4332 of 2004
In The Matter Of International Championship Management Limited And In The Matter Of The Insolvency Act 1986
(1)Mathew John Davis
(2)Michael Canty
(3)William Thomas Dubey
(4)Terence Frank Shepherd
(1)Mathew John Davis
(2)Michael Canty
(3)Terence Frank Shepherd
In The Matter Of Mall Corporate Events Limited
And In The Matter Of The Insolvency Act 1986
(1)William Thomas Dubey
(2)Terence Frank Shepherd
Elizabeth Weaver (instructed by Henmans) for the Part 20 Defendant
Susan Brown (instructed by Bernard Clarke) for the Part 20 Claimants
Hearing date: 28 March 2006
I direct pursuant to CPR PD 39A para 6.1 that no official shorthand note shall be taken of this judgment and that copies of this judgment as handed down may be treated as authentic
April 2006
(SITTING AS A DEPUTY JUDGE OF THE HIGH COURT) RICHARD SHELDON QCIntroduction
The Part 20 Defendant, KS Tan & Co ("Tan") applies under CPR 3.4(2)(a) to strike out the Part 20 Claims brought against Tan by certain of the Respondents in each of two proceedings brought under the Insolvency Act 1986 (" IA 1986"). In the alternative, Tan applies under CPR 24.2 for summary judgment against the Part 20 Claimants.
CPR 3.4 (2)(a) states –
"The court may strike out a statement of case if it appears to the court that the statement of case discloses no reasonable grounds for bringing or defending a claim".
CPR 24.2 states –
"The Court may give summary judgement against a claimant or Defendant on the whole of a claim or on a particular issue if –
(a)it considers that –
(i)that the claimant has no real prospect of succeeding on the claim or issue; or
(ii)that the defendant has no real prospect of successfully defending the claim or issue; and
(b)there is no other compelling reason why the case or issue should be disposed of at trial.
(Rule 3.4 makes provision for the court to strike out a statement of case or part of a statement of case if it appears that it discloses no reasonable grounds for bringing or defending a claim)."
The grounds for the applications are, in short, that the Part 20 Claims for contribution against Tan are misconceived because the statutory requirements for claiming contribution under the Civil Liability (Contribution) Act 1978 ("the 1978 Act") are not satisfied in the present case.
Tan denies the allegations made in the Particulars of Claim in the Part 20 Claims but accepts that, for the purposes of the applications, the court cannot determine any disputed factual issues. I therefore have to decide the matter on the basis that the allegations made by the Part 20 Claimants are true.
The factual background
The relevant factual background can be summarised quite briefly from the Part 20 Particulars of Claim ("the Part 20 POCs") as follows.
Tan is a firm of Licensed Insolvency Practitioners. At the relevant times, Mr Cyril Gold was employed by Tan as an insolvency consultant.
Mall Corporate Events Limited ("MCE") traded as a supplier of corporate hospitality packages for sporting events through a telesales operation. Its directors and shareholders were Mr Shepherd and Mr Dubey.
International Championship Management Limited ("ICM") also carried on business supplying corporate hospitality packages through a telesales operation. Its registered directors were Mr Davis and Mr Canty: both are described as "non-executive directors". Mr Shepherd accepts that he was a shadow director of ICM. In the proceedings brought by the liquidator of ICM which I describe further below, Mr Shepherd and Mr Dubey are alleged to have been de facto directors of ICM.
Pall Mall Corporate Hospitality Limited ("PMCH") acted on behalf of ICM and MCE in the purchase of tickets, hotel rooms and other goods and services needed for the corporate hospitality packages.
By 25 May 1998, ICM and MCE, through PMCH who acted on their behalf, had sold a number of corporate hospitality packages for the 1998 Football World Cup in France which started on 10 June 1998. For these purposes, tickets for the World Cup were to be supplied by, among others, Worldwide Tickets. On 25 May 1998, Mr Shepherd was informed by Mr Leigh of Worldwide Tickets that there were delays in obtaining the tickets. By 9 June 1998, it had become apparent that the orders placed with Worldwide Tickets could not be fulfilled. Mr Leigh said that ICM and MCE should buy the necessary tickets on the open market at whatever price and that Worldwide would make good any deficiency by supplying, in addition to the tickets already ordered, additional tickets for the final at a reduced price.
On 9 June, Mr Shepherd spoke to Mr Gold and retained him to advise ICM and MCE and the directors as to the companies' financial affairs, whether the companies should cease to trade and the implications and consequences (including personal liability) if the companies continued to trade. It is alleged in the Part 20 POCs that on 10 June 1998, Mr Gold advised that ICM and MCE could carry on trading if the directors believed the necessary tickets could be obtained.
It is alleged that thereafter Mr Shepherd kept in daily contact with Mr Gold concerning the ticketing arrangements and the financial status of the companies.
On 22 June, Mr Shepherd was told by Mr Leigh that the promised tickets for further rounds of the World Cup could not be supplied by Worldwide Tickets. On the same day such information was passed on to Mr Gold who advised Mr Shepherd that the companies should cease trading. Both companies ceased to trade with effect from 23 June 1998.
Resolutions for the voluntary liquidation of ICM and MCE were passed on 15 July 1998. Mr Malcolm Cohen of BDO Stoy Hayward and Mr K S Tan of Tan were appointed joint liquidators.
Proceedings under the Companies Directors Disqualification Act 1986 were started against Mr Shepherd, Mr Dubey, Mr Davis and Mr Canty in July 2000. In February 2003, they gave disqualification undertakings. The legal costs and disbursements of Mr Shepherd, Mr Davis and Mr Canty in defending the proceedings were in excess of £100,000. In addition they were ordered to pay a contribution to the Secretary of State's costs.
The main proceedings
On 13 July 2004, Mr Cohen, as joint liquidator of ICM and MCE, ("the Liquidator") issued two originating applications. In the case of MCE, the respondents are Mr Dubey and Mr Shepherd and in the case of ICM the respondents are Mr Davis, Mr Canty, Mr Dubey and Mr Shepherd. There is a substantial overlap in the claims brought in the two originating applications. They both contain claims for wrongful trading brought under s. 214 of the IA 1986 and for misfeasance under s. 212 of the IA 1986. In the case of MCE, there is also a claim in respect of payments made by MCE on 6 May 1998 totalling £109,430.55 under s. 238 of the IA 1986 as a transaction at an undervalue or in the alternative under s. 239 of the IA 1986 as a preference.
It is to be noted that the originating applications were issued two days before the relevant periods of limitation expired. It would seem that the Respondents were not notified of the proceedings until some time thereafter.
For present purposes, the claims made by the Liquidator can be summarised as follows:
a) Wrongful trading under section 214 IA 1986.
MCE—against Mr Shepherd and Mr Dubey;
ICM – against Mr Davis, Mr Canty, Mr Dubey and Mr Shepherd
The wrongful trading claims are based on the contention that by 10 June 1998 (or such other date as the court may find) the relevant Respondents ought to have realized that there was no reasonable prospect that MCE and ICM, as the case may be, would avoid going into insolvent liquidation and that they thereafter failed to take every step to minimise losses to creditors. The relief claimed is that the Respondents make such contribution to the relevant company's assets as the court thinks proper.
b) Transactions at an undervalue/Voidable preferences under section 238/239 IA 1986
MCE—against Mr Shepherd and Mr Dubey
This claim relates to 2 payments of £109, 430.55 made by MCE to Mr Dubey or Mr Shepherd on 6 May 1998. The Liquidator's case is that either there was no consideration for the payments in which case they are transactions at an undervalue or if, as the directors have said, the payments represented repayments of MCE's indebtedness to PMCH then they were payments which preferred Mr Dubey and Mr Shepherd to other creditors of MCE. In either case, the Liquidator seeks repayment of the amounts to him.
c) Misfeasance/breach of duty under section 212 IA
MCE—against Mr Shepherd and Mr Dubey;
ICM – against Mr Davis, Mr Canty, Mr Dubey and Mr Shepherd
The misfeasance/ breach of duty claims arise from payments and transfers from MCE and ICM to PMCH over a period from at least March 1998 to 19 June 1998 which, according to the records of MCE and ICM, represented advances to PMCH. The Liquidator's case is that the payments (totalling some £2,331,238 in the case of MCE and some £1,083,488 in the case of ICM) were either made for no, or no sufficient, valuable consideration and represented transactions at an undervalue under s. 238 of the IA 1986; alternatively the cancellation of PMCH's debts to MCE and ICM by journal entries dated 20 July 1998, constituted preferences under s. 239 of the IA 1986. The Liquidator also contends...
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