County Leasing Asset Management Ltd and Others v Mark Glenn Hawkes
| Jurisdiction | England & Wales |
| Judge | Lord Justice Briggs:,Lady Justice King,Lord Justice Jackson |
| Judgment Date | 04 December 2015 |
| Neutral Citation | [2015] EWCA Civ 1251 |
| Docket Number | Case No: A3/2014/1407 & 1480 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 December 2015 |
[2015] EWCA Civ 1251
Lord Justice Jackson
Lord Justice Briggs
and
Lady Justice King
Case No: A3/2014/1407 & 1480
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
MRS. JUSTICE ANDREWS
HC13B01684
Royal Courts of Justice
Strand, London, WC2A 2LL
Christopher Boardman (instructed by SUMMERS NIGH LAW LLP) for the 1 st, 2 nd, 3 rd and 4 th Appellants
Geraint Jones QC and Mark Brittain (instructed via Direct Access) for the 5 th and 6 th Appellants
Bridget Williamson (instructed by SHAKESPEARES SOLICITORS) for the Respondent
Hearing dates: Wednesday 4 th November 2015
Introduction
This appeal from the Order of Andrews J in the Companies Court dated 11 th April 2014 concerns the principles applicable to the court's discretion, when making an order for the restoration to the register of a dissolved company, to order that the running of time for the bringing of claims by the company for the purposes of the Limitation Act 1980 should be suspended during all or part of the period when the company was dissolved. An order made in the exercise of that discretion is commonly called a "limitation direction".
Sections 1029 and following of the Companies Act 2006 confer power on the court to order the restoration of a company to the register where it has been dissolved (or deemed to be dissolved) at the conclusion of an insolvency process or struck off after becoming defunct, or voluntarily. In the insolvency context, the court may order restoration of the company to the register if it considers it just to do so: see section 1031(1)(c).
Section 1032 provides, so far as is relevant, as follows:
"(1) The general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register.
…
(3) The court may give such directions and make such provision as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register."
It is by means of the discretion conferred by Section 1032(3) that limitation directions are made.
There is nothing new in these provisions. The first limitation direction made in any reported case was in Re Donald Kenyon Limited [1956] 1 WLR 1397, when the discretion was conferred in virtually identical terms by section 353(6) of the Companies Act 1948. That was a case where the discretion was exercised, in effect, against the company, for the benefit of creditors in respect of whose claims the limitation period had expired during the company's dissolution. Roxburgh J said, at page 1401:
"… When a company has been dissolved and therefore nobody can sue it without getting it restored to the register, it is only common fairness that, if the contributories for purposes of their own, want to get it restored to the register years afterward, the period between the dissolution and the restoration to the register should be disregarded for the purposes of the Statute of Limitations."
Earlier, he had explained that he was only considering creditors who had not been statute-barred at the date of dissolution. He considered that, by doing so, he was fulfilling what had earlier been described by this court as the purpose of the provision now to be found in section 1032(3), namely to achieve both for the company and third parties an "as-you-were position" where justice required it: see Tyman's Limited v Craven [1952] 2 QB 100, per Evershed MR at page 111.
The only reported case (other than the present) in which the question whether the discretion should be exercised in favour of a restored company, so as to enable it to pursue claims against third parties which would otherwise be statute-barred, is Regent Leisuretime v Natwest Finance Limited [2003] EWCA Civ 391, when the relevant discretion was conferred by section 653(3) of the Companies Act 1985. Having rejected a submission that the court had no jurisdiction to make a limitation direction in favour of (rather than against) the restored company, Jonathan Parker LJ continued as follows, at paragraphs 89–90:
"89. Although, for reasons given earlier, I have concluded that there is jurisdiction to give a limitation direction in favour of the company being restored, the scope of giving such a direction must in my judgment be extremely limited. To my mind, the jurisdiction ought only to be exercised in exceptional circumstances. My reasons for this conclusion are as follows.
90. So far as I can see, the question whether a limitation direction should be given in favour of the company being restored to the register can only arise in circumstances where the company has an asset in the form of a claim based on a cause of action which was not statute-barred at the date of dissolution. The 1980 Act provides a detailed limitation regime under which, in certain specified circumstances, the running of time may be postponed (see, e.g., sections 14A, 32 and 33). The effect of a limitation direction under section 653(3) is completely to override that regime. Whilst considerations of essential fairness may justify the giving of a limitation direction in favour of third party creditors (as they did, for example, in Donald Kenyon), the same cannot so readily be said of a limitation direction in favour of the company being restored to the register: indeed, on the face of it fairness will generally require that the company, like any other claimant faced with a limitation defence, should be left to attempt to meet that defence by recourse to the statutory regime in the 1980 Act."
Keene and Schiemann LJJ agreed. The Court of Appeal affirmed the decision of the judge (HHJ Overend) to delete a limitation direction earlier made in the company's favour by the District Judge, upon the basis that no exceptional circumstances for doing so had been demonstrated.
In the present case the Judge made a limitation direction in favour of the Company. After citing the relevant passages from the judgment of Jonathan Parker LJ in the Regent Leisuretime case, she continued, at paragraph 18:
"Those observations, drawing a distinction between those cases in which the application for restoration is a third party creditor and those in which the applicant is acting on behalf of the company itself, were all obiter. With the greatest of respect, I am not sure that I follow the logic of that distinction. … If five of the six years of the limitation period had expired at the date of dissolution, the limitation direction would give the creditor the further year to which he was entitled under the Limitation Act, by not counting the period of dissolution. Surely, in principle, the same approach should be applied to the company which was unable to bring a claim within time because it had ceased to exist before the limitation period expired."
There is an obvious tension between the clear distinction which the Court of Appeal identified in the Regent Leisuretime case, between limitation directions in favour of a company's creditors, and in favour of the restored company itself, and the Judge's view that, in principle, the two were broadly comparable. It is evident that she did not apply that distinction to the request for a limitation direction in the Company's favour, considering, since the dicta in the Regent Leisuretime case were in her view obiter, that she was at liberty not to do so.
It is therefore necessary to consider both whether the dicta of Jonathan Parker LJ which I have quoted were indeed obiter and, even if they were, whether the principles outlined in Regent Leisuretime are nonetheless correct. If they are, then the question arises whether the present case is sufficiently exceptional to justify the making of the limitation direction in favour of the Company.
The facts
The Company, formerly known as Michael Green Plant Limited but called Telerate Limited by the time of its dissolution, was formed in 1976 and carried on the business of demolition and clearing works. Mr. Hawkes, the first Respondent, was its sole director and shareholder. By 2004 the Company was in serious financial difficulty and in October of that year, HMRC petitioned to wind it up by reason of a debt of about £312,000. The petition was due to be heard on 17 th November 2004.
Being anxious if possible to extract the Company's business from its impending ruin, Mr. Hawkes obtained the assistance of Mr. Andrew Kirkpatrick the third Appellant and Mr. Gordon Cook, the fifth Appellant, in constructing a transaction whereby the Company would sell its assets including in particular forty-five acres of potential development land to the second Appellant, County Leasing Limited ("CLL") of which Mr. Kirkpatrick was a director, for £225,000, on the basis that CLL would then lease the assets back to two new companies formed by Mr. Hawkes, namely MGP 2 Limited and Quotepool Limited, with their liabilities under the leaseback agreements being guaranteed by Mr. Hawkes. The transaction was in part funded by the first appellant County Leasing Asset Management Limited ("CLAM"). Mr. Cook's business called Chard Wallis was to be appointed as an advisor to the Company in relation to the transaction.
The sale and leaseback went ahead in late 2004 (presumably under the protection of a validation order) and the Company was placed into administration in late...
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