David Emanuel Merton Mond v Synergi Partners Ltd
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Hodge |
| Judgment Date | 20 February 2015 |
| Neutral Citation | [2015] EWHC 964 (Ch) |
| Docket Number | Case Number: 2134 of 2015 |
| Court | Chancery Division |
| Date | 20 February 2015 |
[2015] EWHC 964 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
Manchester Civil Justice Centre
1 Bridge Street West
Manchester
M60 9DJ
His Honour Judge Hodge QC
sitting as a Judge of the High Court
Case Number: 2134 of 2015
Re: Synergi Partners Ltd
Mr Louis Doyle appeared on behalf of the Applicant
There was no appearance by the Respondent
His Honour Judge Hodge QC:
This is my extemporary judgment in the matter of Synergi Partners Limited, case number 2134 of 2015. This is a somewhat unusual administration application. The application was issued on 4 February 2015 by Mr David Emanuel Merton Mond in his capacity as a creditor of the company for the purposes of paragraph 12(1)(c) of Schedule B1 to the Insolvency Act 1986 as amended. The application is supported by Mr Mond's witness statement of 22 January 2015, together with Exhibit DEMM/1.
The applicant appears before me today by Mr Louis Doyle of counsel. What is sought is an administration order in terms to take effect retrospectively from 23 November 2010, almost four years and three months ago.
The background to the application is as follows: On 22 November 2009 Mr Mond, in his capacity as a qualifying floating charge holder, appointed Mr Jonathan Avery-Gee as administrator of the company. The period of administration was not extended and therefore the period of administration automatically terminated on 22 November 2010. During the course of the administration, and on 29 January 2010, creditors had approved the administrator's proposals. Those proposals were modified by a meeting of creditors on 3 November 2010, some 19 days before the administration terminated automatically, so as to allow for the company to be moved into creditors' voluntary liquidation and for Mr Gerald Krasner and Mr Julian Pitts, both of Begbies Traynor's Leeds office, to be appointed as joint administrators. Unfortunately it was not until 23 November 2010, and thus one day after the one-year period of administration provided for in paragraph 76(1) of Schedule B1 had expired (so that the administration had by then ended), that Mr Avery-Gee in fact completed Form 2.34B 'Notice of move from administration to creditors' voluntary liquidation'. It is apparent from the stamp endorsed on that form by Companies House that the notice was not registered there until 27 November 2010. There is authority that a notice under paragraph 83 of Schedule B1, moving a company from administration to creditors' voluntary liquidation, only takes effect when registered: see Re Globespan Airways Ltd, Cartwright v The Registrar of Companies [2012] EWCA Civ 1159; [2013] 1 WLR 1122.
It is accepted by Mr Mond, and also by Mr Krasner and Mr Pitts, that those two individuals were never validly appointed as liquidators of the company, as envisaged by the notice. As such, and as Mr Mond points out, those two individuals have been acting without any standing in the name of the company for a period now in excess of four years. As Mr Doyle points out, this is not a case in which there is a defect in appointment which might be capable of cure. Rather, the appointment is simply void because it never happened. What Mr Mond therefore seeks is a retrospective administration order to the day immediately following the termination of the original administration on 22 November 2009. Mr Doyle suggests that if the court were minded to grant the order sought, it might be just as well to make the order effective from 22 November 2009, so as to provide what he describes as a 'seamless join' between the end of the original one-year period ending on that date and the commencement of the administration order.
The reason why a retrospective administration order is sought is as follows: Synergi was part of a group of companies engaged in the provision of what may be termed 'consumer financial debt solutions'. During the four years since their purported appointment, Mr Krasner and Mr Pitts have been investigating potential claims against the company's former directors for wrongful trading. A letter before claim with lengthy enclosures dated 2 June 2014 has been addressed to each of the directors by a firm of solicitors in Manchester, Irwin Mitchell. Mr Mond makes it clear that those letters were sent to each of the directors before it had been appreciated that there was any problem with the appointments of Mr Krasner and Mr Pitts. The value of the wrongful trading claim, in terms of potential recovery, is put at approximately £7 million. According to the company's statement of affairs dated 8 February 2010, the company's secured creditors totalled some £4.43 million, with unsecured creditors totalling in excess of a further £6 million. Without a retrospective administration order at this stage, the wrongful trading claim would necessarily have to be abandoned because it is intimated on behalf of individuals who have no standing to bring it as liquidators. That abandonment, it is said, could only work to the detriment of creditors.
Mr Doyle acknowledges that there is no useful purpose in an administration order other than the retrospective order sought. The two conditions for the making of an administration order appear in paragraph 11 of Schedule B1 in the following terms: "The court may make an administration order in relation to a company only if satisfied – (a) that the company is or is likely to become unable to pay its debts, and (b) that the administration order is reasonably likely to achieve the purpose of administration." The latter condition requires reference back to paragraph 3(1) of Schedule B1. That provides that; "The administrator of a company must perform his functions with the objective of – (a) rescuing the company as a going concern, or (b) achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration, or (c) realising property in order to make a distribution to one or more secured or preferential creditors."
As Mr Doyle points out, the first of the two threshold conditions — that the company is or is likely to become unable to pay its debts — is uncontroversial. The company was heavily insolvent as at 8 February 2010. That leaves the question of whether the second of the threshold conditions can be satisfied: whether there is a real prospect of one of the statutory purposes of administration being achieved. Mr Doyle submits that that is addressed in terms in paragraph 19 of Mr Mond's supporting witness statement as follows: "In my opinion the purpose of the administration, namely achieving a better result for Synergi's creditors as a whole than would be likely if Synergi was wound up (without first being in administration) would be achieved: see paragraph 3(1)(b) of Schedule B1 to the Act. This is so because the claims can only be brought after Synergi has gone into insolvent liquidation. Therefore placing Synergi into insolvent liquidation and ensuring that Mr Krasner and Mr Pitts are appointed liquidators is required to properly prosecute the claims; and a necessary first step is to place Synergi into administration."
At paragraph 22 of Mr Mond's witness statement he states that he has been informed by Messrs Krasner and Pitts that it would be their intention immediately on appointment to send out proposals to creditors and that those proposals would include the proposal immediately to terminate the administration and to place Synergi into creditors' voluntary liquidation. Mr Mond observes that the court will be aware that as a qualifying floating charge holder he could simply have placed Synergi into administration under paragraph 14 of Schedule B1 to the Act. However, in the circumstances he says that he was keen to avoid any suggestion at any future date by any interested party that the invalid appointment of Messrs Krasner and Pitts had not been brought to the court's attention and had therefore been hidden.
Mr Doyle had originally submitted that, although somewhat unusual, there was no conceptual difficulty in the purpose of administration being achieved by reason of the administration facilitating a liquidation in which claims can be pursued for the benefit of what would be, in both the administration and the subsequent liquidation, the company's creditors. In other words, he says that administration would bring about a better return for creditors than would otherwise arise in an insolvent liquidation. He points out that only a liquidator may pursue a wrongful trading claim under section 214 of the 1986 Act. Mr Doyle acknowledges that that submission may beg the question as to why Mr Mond did not simply petition for the company's winding up. The answer to that is said to lie in paragraph 20 of Mr Mond's witness statement, where he points out that the court would have no power in a compulsory winding up to appoint Mr Krasner and Mr Pitts as liquidators, and so they would be reliant on either a Secretary of State's appointment, or on an appointment following a meeting of creditors convened by the Official Receiver. What Mr Mond is essentially said to be driving at is the risk of the loss of Messrs Krasner and Pitts, and their state of knowledge based upon their involvement with the company in the four years preceding the letters before claim. Mr Doyle submits that that is not an unreasonable stance for Mr Mond to take; any fresh appointee would have, effectively, to start again.
Mr Doyle submits that there would be no detriment or prejudice to creditors whatsoever by reason of the...
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