Eiffel Steelworks Ltd
| Jurisdiction | England & Wales |
| Judge | Mr A Hochhauser |
| Judgment Date | 15 January 2015 |
| Neutral Citation | [2015] EWHC 511 (Ch) |
| Docket Number | Case No: 8288/2014 |
| Court | Chancery Division |
| Date | 15 January 2015 |
[2015] EWHC 511 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building
Fetter Lane
London EC4A 1NL
Mr A Hochhauser QC
(Sitting as a Judge of the High Court)
Case No: 8288/2014
Mr Peter Arden QC appeared on behalf of the Applicants
Approved Judgment
THE JUDGE:
Introduction
This is an application by Eiffel Steelworks Ltd ("the Company") and Mr Adam Henry Stephens and Mr Matthew Duncan, the joint administrators of the Company. By their application they seek a variety of forms of relief, which they put in the alternative and further alternative. First, they seek a declaration that the appointment of the joint administrators of the Company, pursuant to a notice of appointment filed with the Court on 17 November 2014 is valid, notwithstanding that a notice or copy of a notice of intention to appoint administrators was not given to the Company pursuant to paragraph 26.2 of Schedule B1 to the Insolvency Act 1986 ("1986 Act") and rule 2, point 20(2) of the Insolvency Rules 1986 ("1986 Rules").
In the alternative, they seek an order under paragraph 104 of Schedule B1 of the 1986 Act that the appointment of Mr Stephens and Mr Duncan as joint administrators pursuant to the notice of appointment filed with the Court on 17 November 2014 and all acts carried out pursuant thereto be regarded as valid, notwithstanding any defect in their appointment; in the further alternative, an order under paragraph 11 of Schedule B1 of the 1986 Act that Messrs Stevens and Duncan be appointed as joint administrators of the company with effect from 17 November 2014, in other words a retrospective appointment of their administration.
The issue in the present case is whether the directors, who are appointing administrators with immediate effect, are obliged to give a separate notice to the Company of which they are directors of their intention so to do and, if so, what is the result of a failure to give that notice?
The applicants today have been represented by Mr Peter Arden QC. I am grateful to him for the arguments which he has advanced on this issue and also for drawing a number of important authorities to my attention. One thing is clear: there are many first instant authorities which consider this issue and it is somewhat of an understatement to say that they do not all speak with one voice. The matter has yet to be considered and clarified by the Court of Appeal.
Background
Before turning to the law, I will shortly summarise the facts. They are to be found in two witness statements that were served in support of the application. The first is the witness statement of Elizabeth Helen Elliott, dated 12 January 2015. She is a solicitor and a partner in Stephenson Harwood LLP, solicitors who are instructed by the applicants and indeed their parents within the group. The second witness statement is that of Jacques Huillard, also dated 12 January 2015, and he makes it as a director of Company.
The Company carried on business as a subcontractor manufacturing structural steelworks for the larger steel companies, both national and international. It was incorporated on 23 November 2006, initially with the name SHOO 297 Ltd. By a special resolution dated 22 February 2007, the Company changed its name to its present name, Eiffel Steelworks Ltd. Prior to 17 November 2014, the registered office of the company was Unit 40 Wigan Enterprise Park, Seaman Way, Ince, Wigan. Following the sale of the business and assets of the Company, to which I shall refer shortly, the registered office has now been to the change of Smith & Williamson LLP at 3 rd Floor, 9 Cromwell Road, Birmingham E3 2BJ.
The Company's directors are Messrs Max de Mareuil, Jacques Huillard and Glen Mawdesley. The immediate parent of the company is Eiffel UK Ltd, a company registered in England and Wales and it in turn is a subsidiary of a French company called Eiffage Construction Metallique SAS ("ECM"), which is incorporated under French law and is part of the French Eiffage Group. The Eiffage Group is a very substantial French construction group, which carries on business in various EU countries. Both the parent, Eiffel UK Ltd, and the Company have the same directors. The Company has no outstanding security over its assets and its administrative manufacturing headquarters are situated in England and Wales. The directors, therefore, have been proceeding on the basis that the Company's centre of main interest was and remains within England and Wales and as a consequence the EC Regulation on Insolvency Proceedings 2000 applies to the proceedings.
The Company's financial position as at 14 November 2014
From the filed accounts of the Company for the year ended 31 December 2013, it can be seen that turnover fell by 60 per cent to £965,552. There was an operating loss of £1,259,846 and there were net liabilities of £4,158,574. From the Company's management accounts as at 31 October 2014, although turnover had risen to £2,058,608.03, there was an operating loss of £710,825.22 together with net liabilities of £4,869,813.91.
Messrs Stephenson Harwood were instructed by ECM in August 2014 because of a concern on its part as to the financial viability of the Company and its parent. Although the Company had no bank debt, it and the parent were funded mainly by intercompany lending, primarily from ECM. The management accounts as at 31 October 2014 showed substantial intercompany liabilities exceeding £3.9 million due to ECM and over £2.7 million to Eiffel UK Ltd. Stated shortly, the UK branch of the group had run out of money.
As a consequence, the accountants, Smith & Williamson LLP, were retained to assess the financial position of the Company and if possible to undertake an accelerated sales process. Despite a number of parties expressing interest and signing non-disclosure agreements, only one offer was received for the company's business and assets. That offer was submitted by one of the Company's directors, Mr Mawdesley, on 7 November 2014. However, it was rejected on the basis that it would have resulted in a nil recovery for the Company's creditors, since it involved the assets being sold for £1 and, further, it required significant financial support from ECM, comprising an aggregate capital injection exceeding £1 million through additional equity contributions and loans to be made by that company.
On 12 November 2014, ECM wrote to both the Company and Eiffel UK Ltd and confirmed that it would not be providing any further financial support to either Company. Accordingly, the directors of both the Company and its parent agreed to convene board meetings at the offices of Stephenson Harwood for the purposes of considering whether administrators ought to be appointed over the company and whether Eiffel UK Ltd ought to be placed in creditors' voluntary liquidation.
The appointment of administrators
At the board meeting on 14 November the directors of the Company unanimously resolved to appoint the joint administrators as administrators of the company. The directors had the power to make such appointment under paragraph 22 of Schedule B1 of the 1986 Act. There was, in this instance, no person entitled to appoint either an administrative receiver or an administrator under paragraph 14 of Schedule B1 of the 1986 Act, upon whom a notice of intention to appoint had to be served.
Further, the directors were not aware of any enforcement officer charged with execution or other legal process against the Company or any person who had distrained against the Company or its property who ought to be provided with a copy of a notice of intention to appoint pursuant to rule 22.20(2) of the 1986 Rules. Finally, there was supervisor of a voluntary regime who similarly needed to be notified.
The draft appointment documents were sent by email to the directors of the Company on 13 November 2014, prior to the board meeting. As will be noted in the email, it included the draft documents in respect of the proposed liquidation of Eiffel UK Ltd and the directors, as indicated earlier, were the same in both companies. All relevant parties, therefore, were aware of the proposed appointment of the joint administrators; the shareholders of the Company, as well as the directors themselves and indeed they participated in the exercise. It has also been made clear in the...
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