David Ingram (Liquidator of MSD Cash & Carry Plc) v Mohinder Singh
| Jurisdiction | England & Wales |
| Judge | JUDGE,Hodge QC |
| Judgment Date | 04 May 2018 |
| Neutral Citation | [2018] EWHC 1325 (Ch) |
| Court | Chancery Division |
| Docket Number | No. CR-2012-005358 |
| Date | 04 May 2018 |
[2018] EWHC 1325 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS & PROPERTY COURTS
OF ENGLAND & WALES
INSOLVENCY & COMPANIES LIST (Ch D)
Rolls Building,
London
HIS HONOUR JUDGE Hodge QC
(Sitting as a Judge of the High Court)
No. CR-2012-005358
Re: MSD Cash & Carry Plc (In Liquidation)
Mr John Briggs (instructed by Boyes Turner) appeared on behalf of the Applicant.
Mr Jeremy Cousins QC and Mr Andrew Brown (instructed by Rainer Hughes) appeared on behalf of the Respondents.
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INTRODUCTION
This judgment is arranged under ten headings as follows:
(1) Introduction
(2) The application
(3) The hearing
(4) The witnesses
(5) The missing witnesses
(6) De facto directorship
(7) The preference claim
(8) The undated credit note for £996,494.63
(9) The three cash payments of £60,000, £15,000 and £61,478.23
(10) The claim for an account
This is my judgment on the hearing of an application by the liquidator, Mr David Ingram of Grant Thornton, dated 20 September 2016 and issued on 27 September 2016, in relation to the affairs of MSD Cash & Carry PLC (‘ MSD’). The applicant liquidator is represented by Mr John Briggs (of counsel) instructed by Boyes Turner. The respondents are represented by Mr Jeremy Cousins QC leading Mr Andrew Brown (also of counsel), instructed by Rainer Hughes.
On 12 September 2011, a petition to wind up MSD was presented by BDO Stoy Hayward LLP founded on a statutory demand sent to the company on 2 September 2011 in respect of unpaid professional fees. The winding up petition was served on the company on 14 November 2011 and the winding up order was made on 16 January 2012. Mr Ingram was appointed the liquidator of the company on 27 January 2012 on the application of the Official Receiver. MSD had been incorporated on 6 March 1995 and had traded as a wholesale alcohol cash and carry business. From about 2002, it had also traded in excise duty-suspended alcohol products held in bonded warehouses, notably in Seabrooks, before delivery to UK customers.
The respondents' position is that from about March 2010 onwards, MSD's trade purchases and sales were solely in respect of duty-suspended stock held in bonded warehouses or under-bond trading and that it had ceased to trade in domestic cash and carry sales. However, I find as a fact on the evidence that, as contended by the liquidator, from about March 2010 onwards, MSD also continued, albeit to a lesser degree than before and to a varying extent from time to time, to purchase some alcohol goods on behalf of another family-owned and operated company, Dale Wholesale Limited (‘ Dale’), the fifth respondent, for the purposes of the latter's cash and carry business which it had taken over from MSD. MSD continued to do so because it had established a commercial reputation and enjoyed beneficial credit terms with suppliers.
MSD was one of a number of family-owned and operated companies which traded in the Medway area of Kent. The head of the family is the first respondent, Mohinder Singh, to whom, without any disrespect, I shall refer as ‘ Mohinder’, who is now 86 years of age. He owned the majority of the shares in MSD, with the remainder being held by his wife, Mrs Bakshish Kaur. Mohinder acted as the managing director of MSD from February 2000 until he resigned on 6 June 2011 at the age of 79 because his health was said to be being affected by disruption to MSD's business caused by ongoing investigations and enforcement action, dating back to about July 2004, on the part of HMRC in relation to the alleged smuggling of commercial quantities of alcohol into the UK and the large-scale evasion of excise duty and VAT payable on wines, beers and spirits.
MSD's only other director for almost the whole of the period with which the court is concerned was the third respondent, Mrs Kuldip Basi, who is now in her late 40s. She was reappointed a director of MSD on 15 January 1997 and she served until her resignation on 9 March 2011; but it is common ground, and, if it is not, I find as a fact, that Mrs Basi played no active role in MSD apart from, by way of example, signing off MSD's audited accounts for the year ending 30 April 2008 on 27 November 2008 due to Mohinder's absence on an extended visit to India, and Mrs Basi had little, if any, real knowledge of MSD's affairs. In her evidence, she described her appointment as “a statutory requirement”. Mrs Basi was principally involved in her own company, Medway Soft Drinks Limited, which traded from another part of the same warehouse premises that MSD occupied (until March 2010) at Second Avenue Industrial Estate, Chatham.
The fourth respondent, Mrs Baljit Kuman, Mohinder's elder daughter, who is now in her early 50s, served as MSD's company secretary from 3 August 2000 until 16 December 2011. Mrs Kuman also served very briefly as the director of MSD from 23 November until 6 December 2011. She was appointed when it was appreciated, as a result of insolvency advice taken following the service of the winding up petition, that MSD had been operating without any director since Mohinder's resignation on 6 June 2011. Mrs Kuman resigned both as company secretary and as MSD's sole director on 16 December 2011 following a creditors' meeting on the same day when it became apparent that MSD would not be able to move into creditors' voluntary liquidation, as it had wished, because HMRC, as the company's principal creditor, preferred a member of Grant Thornton to be appointed as liquidator rather than MSD's nominee, Mr John Kelmanson.
The second respondent, Surjit Singh Deol, to whom again, with no disrespect, I shall refer as ‘ Surjit’, is Mohinder's younger son, now aged 50. There is an older son, Manjit, but he has played only a very minor, and peripheral, part in the events leading up to the present application following an apparent family falling out many years ago. However, I find that in November 2011 Manjit did collect the company's books and papers from the company's accountants, damaging his Bentley motor car in the process. The respondents' position is that Surjit was merely employed by MSD as a buyer and manager but that he did not control the administrative elements and affairs of MSD reserved to its directors. It is the applicant's case that Surjit was a de facto director of MSD at all material times.
It is necessary for me to address two further family companies. I have already mentioned one of them. Dale was incorporated on 14 October 2009 and it specialises in the wholesale cash and carry trade in alcohol products. At all times material to the present application, Dale's shares were held equally by Mohinder and his wife, Mrs Bakshish Kaur, who is now aged 76. She was appointed as Dale's sole director on 14 October 2009 and she resigned on 6 June 2011, although she signed off Dale's accounts for the period between 14 October 2009 to 31 March 2011 on 13 June 2011. By then, she had been replaced as sole director by Surjit's wife, Mrs Raminder Deol, who is now aged 44 and was appointed as a director on 1 June 2011.
In about 2013, Mrs Kaur transferred her 50% shareholding in Dale to Mrs Deol. At all material times, Surjit has worked for Dale as its buyer. In or about March 2010, MSD ceased largely to trade in the cash and carry business, at least on its own account, and it sold its existing stock to Dale. Dale took over MSD's cash and carry warehouse at Second Avenue Industrial Estate in Chatham, and MSD moved to Bowen House in Gillingham.
The other family company is Lionheart Limited (‘ Lionheart’). It was incorporated on 25 April 2007. Its first directors were Mohinder and his wife and they were the two equal shareholders. Mrs Kaur resigned as a director on 1 March 2012 but she was reappointed on 1 May 2014 when Mohinder resigned as Lionheart's continuing director. According to Mrs Kuman's fourth witness statement (produced during the course of the trial and dated 22 January 2018), the purpose of incorporating Lionheart was to create a non-trading limited company which would hold the various motor cars belonging to family members and their companies so that they might make use of a less expensive block fleet insurance policy. The company's stated purpose on the Companies House information form was “the sale of other motor vehicles”, which Mrs Kuman understood was the specific numbered category closest to the family's real purpose of “the holding of motor...
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