Edward Williams v Carraway Guildford (Nominee A) Ltd
| Jurisdiction | England & Wales |
| Judge | Mr James Morgan |
| Judgment Date | 14 November 2019 |
| Neutral Citation | [2019] EWHC 3073 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: 8276 of 2018 |
| Date | 14 November 2019 |
[2019] EWHC 3073 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BIRMINGHAM
INSOLVENCY AND COMPANIES COURT (ChD)
IN THE MATTER OF REGIS UK LIMITED (IN ADMINISTRATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Birmingham Civil Justice Centre
The Priory Courts
33 Bull Street
Birmingham
B4 6DS
Mr James Morgan QC SITTING AS A DEPUTY HIGH COURT JUDGE
Case No: 8276 of 2018
Mr Matthew Weaver (instructed by Pinsent Masons LLP) for the Applicants
Mr Patrick Harty (instructed by Hogan Lovells International LLP) for the 1 st to 19 th Respondents
Hearing dates: 11 th and 14 th November 2019
Mr James Morgan QC sitting as a Deputy High Court Judge:
INTRODUCTION
On 27 th November 2018, the 1 st to 19 th Respondents (“ the Landlords”) applied for an order revoking or suspending the decision of the creditors of the 20 th Respondent (“ the Company”) on 26 th October 2018 to approve a company voluntary arrangement (“ the CVA”) (“ the CVA Challenge Application”). The respondents to that application are the Company and the Applicants as supervisors of the CVA (“ the Supervisors”).
By an application dated 5 th November 2019, the Supervisors apply for an abridgement of time for service and to strike out the CVA Challenge Application against them, or for summary judgment pursuant to CPR Part 24 (“ the Application”).
For the reasons explained below, the Application has been issued on an urgent basis and requires speedy determination. Accordingly, oral submissions were limited to just over half a day. I am grateful to both counsel for their clear and economical presentation of their respective cases.
THE FACTS
The Company operates hair and beauty salons. The Landlords are commercial landlords, all of whom have let properties to the Company and are creditors of it. As a result of financial difficulties, on 8 th October 2018, the directors of the Company issued proposals for the CVA in respect of which the Supervisors were then the Nominees. On 26 th October 2018, just over 79% of the Company's creditors approved the proposals, the CVA came into force and the Supervisors were appointed.
The Landlords responded by issuing the CVA Challenge Application pursuant to section 6, Insolvency Act 1986 (“ IA 1986”) alleging that the CVA unfairly prejudiced their interests and/or that there were material irregularities at or in relation to the meeting approving it. Following directions, the Landlords served Points of Claim setting out 14 broad grounds of complaint. A flavour may be gained from the following summary:
(1) Failure to provide the Company's creditors with adequate information regarding antecedent transactions entered into by the Company;
(2) The debenture purportedly executed by the Company in favour of Regis Corp on 2 nd August 2018 (“ the Debenture”) and the purported undertaking of the debt (“ the IBL Debt”) to International Beauty Limited (“IBL”) were unlawful and void and therefore should not have been admitted to vote at the creditors' meeting to approve the CVA, the result of which would have been that the CVA would not have been approved by the requisite 75% majority;
(3) Regis Corp and IBL should not have been included as “Critical Creditors” and as a result the CVA is unfair;
(4) The Statement of Affairs and Estimated Outcome Statement were materially inaccurate and incomplete;
(5) The discounting of the Landlords' claims for voting purposes was materially irregular and unfair;
(6) The impairments to the Landlords' leases and other changes in the terms were unfair;
(7) The purported modification of the CVA by the Company was ineffective; and
(8) The CVA did not meet the statutory definition of a CVA and therefore was not a CVA at all.
In respect of two of the grounds (summarised in (1) and (4) above) it was alleged that the Supervisors were in breach of their duties as Nominees. There was also a catch-all allegation that they were in breach of their duties by reporting to creditors that “there is no material unfairness” in the proposed terms of the CVA.
The pleaded claim for relief, which on the face of it was claimed against the Company and the Supervisors, was for revocation or suspension of the CVA or for a further meeting of creditors pursuant to s.6(4), IA 1986. Ancillary relief was sought in the prayer as follows:
“(3) further or alternatively, an order under s 6(6)…that the Nominees repay to the Company the fees and remuneration received by them (whether as nominees or supervisors in relation to the CVA);
(4) further or alternatively, such other orders and directions under s 6(4) (b), (c) and/or 6(6) as the Court may consider appropriate;
(5) …
(6) further or other relief;
(7) costs.”
The Company filed detailed Points of Defence denying the claim. So too did the Supervisors: they specifically denied that the CVA was unfairly prejudicial to the Landlords or that there were any material irregularities. They further denied that the Landlords were entitled to the relief claimed in paragraph (3) of the prayer including on the basis that they acted entirely appropriately and consistent with their duties. It is clear that s.6(6) is parasitic on s.6(4) and the Supervisors challenge the entitlement to any relief under s.6(4) as well as consequential relief under s.6(6).
By virtue of an order of HHJ Judge Simon Barker QC on 4 th July 2019, the CVA Challenge Application is listed for a 12-day trial commencing on 2 nd December 2019, probably to be heard by Sir Alistair Norris. Each party has served substantial lay and expert evidence.
However, on 23 rd October 2019, Messrs Hardy and Cowlishaw of Deloitte LLP (“ the Administrators”) were purportedly appointed as administrators of the Company by Regis Corp pursuant to a power contained in the Debenture. The Landlords took issue with the validity of the appointment, but matters were resolved on 1 st November 2019 with an order effectively by consent that (1) the Administrators' purported appointed be terminated (if valid) and (2) they be retrospectively appointed from 23 rd October 2019 on an application for an administration order that the Landlords had made on 27 th September 2019.
By virtue of the appointment(s) of the Administrators, there was an automatic moratorium in respect the CVA Challenge Application as against the Company pursuant to paragraph 43(6), Schedule B1, IA 1986. Further, pursuant to clause 35.6 of the CVA, a valid appointment of the Administrators resulted in the CVA automatically terminating. The Supervisors have drawn fees and remuneration as Nominees of £15,000 and as Supervisors of £30,000 (£45,000 total).
On 24 th October 2019, solicitors then acting for the Administrators, Shoosmiths LLP, sent an email to the other parties' solicitors stating that “The Administrators have confirmed to us that they will not be seeking to continue to defend the CVA challenge proceedings…”.
In following correspondence the Supervisors' solicitors (“ Pinsent”), wrote to the Landlords' solicitors (“ Hogan Lovells”) suggesting an indefinite stay of the CVA Challenge Application failing which they would apply to strike out the claim as against the Supervisors. Hogan Lovells' response to the suggestion of a stay was in terms that preparation for trial should continue but with extended deadlines.
On 1 st November 2019, Pinsent sent Hogan Lovells a draft of the Application. As already noted, it was issued on 5 th November 2019 and was supported by a witness statement from Mr Williams dated 1 st November 2019. At 5.20pm on Friday 8 th November 2018, Hogan Lovells served evidence in answer from Mr Ditchburn, a solicitor at that firm. The Landlords opposed the Application and, as something of a volte face from their previous position, sought (without issuing or serving an application) an adjournment of the trial principally on the putative basis that the Administrators needed more time to consider their position.
On the same day, new solicitors for the Administrators, Addleshaw Goddard LLP (“ Addleshaw”) wrote to Pinsent stating that they did not intend to appear on the Application and had not had not been requested to (and had not) granted permission to lift the moratorium in respect of the CVA Challenge Application. There is no evidence that the Administrators' position has changed from that set out by Shoosmiths on 23 rd October 2019, or that they would not grant permission if requested. In any event, it is open to the court to grant permission on the application of either the Landlords or the Supervisors if it sees fit.
Although there is not yet a joint report from the experts because the Landlords have “stood down” their expert and have failed to deal with the trial bundle as directed, subject to the moratorium, it was not submitted to me that the trial could not otherwise proceed as listed between the Landlords and the Supervisors. The imminence of the trial and the preparation necessary for it is the reason for the Application being made on an urgent basis.
Pursuant to clause 28.13 of the CVA, the Supervisors have...
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