David Rawnsley and Another v Weatherall Green & Smith North Ltd and Another
| Jurisdiction | England & Wales |
| Judgment Date | 04 May 2011 |
| Neutral Citation | [2009] EWHC 2482 (Ch),[2009] EWHC 2393 (Ch) |
| Date | 04 May 2011 |
| Court | Chancery Division |
| Docket Number | CASE NO:8LS30407,CASE NO: 8LS30407 |
[2009] EWHC 2393 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
LEEDS DISTRICT REGISTRY
CASE NO:8LS30407
1. Introduction
There are before the Court applications by the Defendants for summary judgment and/or to strike out the claims in two consolidated actions in effect brought by Mr Rawnsley the principal director of and a major shareholder in Canal Dyeing Company Limited (“the Company”).
The claims arise out of the insolvency of the Company and the sale of its principal asset by the Liquidator Mr O'Hara having received valuation advice from Weatherall Green & Smith North Limited (“Weatheralls”). Mr Rawnsley believes that Weatheralls advice was negligent and that Mr O'Hara failed to market the property properly with the result that the sale was for less than the price that ought to have been achieved. He also believes that Mr O'Hara failed to institute proceedings against Weatheralls for negligence. In addition to the claims by Mr Rawnsley there is in addition a claim by the Company acting by its other Joint Liquidator—Mr Poxon.
Mr Rawnsley sues in various capacities; in part he sues as a shareholder; in part as a creditor pursuant to an assignment from a major creditor and in part pursuant to an assignment authorised by an order of the Court one day before the expiry of the limitation period against Weatheralls.
Mr O'Hara challenges the proceedings in a number of ways. He submits that the Court order did not authorise proceedings against him; in so far as the proceedings are properly brought he submits that they have no realistic prospect of success.
Weatheralls challenge the effectiveness of the Assignment made pursuant to the Court Order. In so far as it is effective they contend that the claims face insurmountable problems on the issue of causation.
Mr Rawnsley accepts that some of Mr O'Hara's challenges are unanswerable. However he maintains that it is well arguable that Mr O'Hara was negligent and that the Company thereby lost the opportunity of selling the property for a higher sum. Accordingly he submits the proceedings do have a realistic prospect of success. He disputes Weatheralls' challenge to the assignment and contends that the question of causation is essentially a matter for the trial.
Although Mr Poxon authorised the Company to institute proceedings against Mr O'Hara and Weatheralls he has taken no further part in the proceedings. He appears to be content to rely on the effectiveness of the Assignment in favour of Mr Rawnsley.
2. Representation
Mr Rawnsley has been represented by Miss Eleanor Temple instructed by Taylors of Rawlings House, Exchange Street, Blackburn, BB1 7JN. Mr O'Hara has been represented by Mr Paul Mitchell instructed by Beachcroft LLP of 7 Park Square Leeds LS1 2 LW. Weatheralls have been represented by Miss Anneliese Day instructed by WHCG LLP of 6 th Floor 40 Lime Street, London EC3M 7 AW.
I have received full and helpful skeleton arguments from all Counsel involved. I am most grateful to them.
3. The Underlying Facts
The Insolvency of the Company
One of the principal assets of the Company was property known as Old Lane Dyeworks, Old Lane, Halifax (“the property”).
Weatheralls were well known surveyors with offices in Wellington Street, Leeds.
Mr O'Hara is an insolvency practitioner. Following a meeting with Mr Rawnsley on 7 th February 2002 and with the Company's accountants on 20 th February 2002, Mr O'Hara was instructed on 13 th May 2002 to assist the directors in convening meetings of members and creditors with a view to placing the Company in voluntary liquidation. On 29 th May 2002 Mr O'Hara was appointed liquidator of the Company by its members and creditors.
The sale of the property.
In order to assist with the preparation of the statement of affairs and report to creditors Mr O'Hara, as agent for the Company, instructed Weatheralls to provide a valuation of the property. The report was provided to Mr O'Hara on 23 rd May 2002 and is central to the allegations against Weatheralls.
Weatheralls attributed the open market value of the property at £295,000 and the Estimated Restricted Realisation Price at £175,000. The report suggested that the price of £295,000 might take 12 – 18 months to sell. The report went on to suggest a marketing strategy including direct mailing of local owners, occupiers, investors, and regional developers, advertisements in both local and regional press and (possibly) trade magazines. Particulars should be placed on Weatheralls' web site.
In their report Weatheralls noted the limiting effect of “the age arrangement and location” of the property. They also did not see any enhanced value being achieved through residential development.
On 21 st May 2002 Mr O'Hara met insurance brokers on site. On 22 nd May 2002 the brokers produced a report setting out that the main buildings were not insured but that the building was Grade 2 listed. The document does not give a quotation for the cover but Mr O'Hara has alleged that the insurance costs would have been of the order of £10,000 per month.
On 31 st May 2002 Mr O'Hara wrote to HSBC. In the letter he stated that he was actively marketing the property and that there was interest from prospective purchasers. The letter pointed out that he was not in a position to insure the property because of the level of the anticipated premium and the lack of funds. He advised HSBC to make its own arrangements to insure.
On 6 th June 2002 HSBC replied to the letter asking for details of the cost of insurance quoted to Mr O'Hara. Mr O'Hara did not respond to the letter.
Mr O'Hara did not market the property as suggested by Weatheralls. He set a very tight deadline for bidders to make best and final offers (by 7 th June 2002). On 10 th June 2002 he accepted an offer of £400,000 from Lazarus Properties Limited (“Lazarus”). Lazarus occupies as subtenant the same premises as those occupied by Mr O'Hara. The sale to Lazarus 1 completed on 24 th June 2002.
Some months later another property developer, Britannia Developments Limited (“Britannia”) became interested in acquiring the property. An offer of £1.4 million subject to residential planning consent was made in January 2003; this offer was increased to £1.7 million in February 2003. The property was in fact sold to Britannia in 2008 for £1.95 million.
Mr Rawnsley believes that the sale of the property for £400,000 by Mr O'Hara was a sale at an undervalue. He is suspicious of the fact that the sale was to a person occupying the same premises as Mr O'Hara. He also believes that the valuation by Weatheralls at £295,000 was negligent and significantly underestimated the hope value in the property.
Appointment of Mr Poxon as joint liquidator
Among the unpaid creditors of the Company is a pension fund known as The Canal Dyeing Company Limited Pension Scheme (1982) (“the Pension Fund”). Mr Rawnsley is the principal beneficiary and a trustee of the Pension Fund. The Pension Fund is the second largest creditor of the Company being owed £152,000 out a total of £627,773 owed to unsecured creditors.
On 22 nd May 2006 Mr Rawnsley (as a trustee of the Pension Fund and thus a creditor) applied for an order restricting Mr O'Hara's right to vote on a resolution he wished to raise at the annual creditors' meeting. The matter came before Mr James Allen QC sitting as Deputy Judge of the High Court. Mr Allen permitted Mr Rawnsley to amend the application to seek an order for the removal of Mr O'Hara from the office of liquidator.
The amended application came before me on 2 nd August 2006. Both Mr Rawnsley and Mr O'Hara were represented by Solicitors and Counsel. There was a compromise. As a result I made an order by consent which included recitals:
That there should be a creditor's meeting on 5th September 2006 at which Mr Rawnsley would vote against the removal of Mr O'Hara as liquidator that both he and Mr O'Hara would vote in favour of the appointment an insolvency practitioner as joint liquidator.
That the responsibilities of Mr O'Hara and the Appointee would be:
) the Appointee would investigate the circumstances of the sale of the property by Mr O'Hara and would report to the creditors no later 28th February 2007 whether in his opinion there was a reasonable claim against Mr O'Hara and/or his agents on the basis of a sale at an undervalue and/or misfeasance and/or negligence in relation to that sale.
) Mr O'Hara would have responsibility for all other matters in the Liquidation.
The creditors' meeting was duly convened on 5 th September 2006. At the meeting Mr Poxon was appointed as joint liquidator on the terms set out in the consent order.
Mr Poxon's report
Mr Poxon carried out his investigation and prepared a report dated 30 th March 2007 for the benefit of creditors and the Court. His report contained a number of criticisms both of Mr O'Hara and of Weatheralls.
Criticisms of Mr O'Hara
In paragraphs 3.8 to 3.12 of the report he deals in some detail with the marketing of the property. He makes the point that there was only 6 effective working days from the date of the appointment to the acceptance of the offer. In his view this was not a reasonable period to obtain the most favourable realisation for the benefit of the Company's creditors. Mr O'Hara ignored the advice of Weatheralls (in a letter of 30 th May 2002) that a thorough marketing campaign be adopted. It also appears that despite written assurances and assertions by Mr O'Hara Weatheralls were not instructed to...
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