Gray & others v GTP Group Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE VOS |
| Judgment Date | 07 May 2010 |
| Neutral Citation | [2010] EWHC 1772 (Ch) |
| Docket Number | Case No: GLC210/09 |
| Court | Chancery Division |
| Date | 07 May 2010 |
[2010] EWHC 1772 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mr Justice Vos
Case No: GLC210/09
MR J GOLDRING (instructed by Dundas & Wilson LLP) appeared on behalf of the Applicants
MS L IFE (instructed by Oglethorpe Sturton & Gillibrand) appeared on behalf of the Respondent
Approved Judgment
Introduction
This is an application dated 22 April 2009 for (1) a declaration that a Declaration of Trust dated 22 June 2006 between Floors-2-Go Plc (now F2G Realisations Limited and hereinafter “F2G” or the “company”) and G-T-P Group Limited (“G-T-P”) is void against the liquidators as a unregistered floating charge on F2G's property; and (2) an order for payment of the monies in the bank account in the name of G-T-P which amounted to £113,397 on 8 August 2008 to the administrators (now the liquidators) of F2G. The sum of £12,839.23 was paid over by G-T-P to the administrators on 5 September 2008. The sum of £11,340 has also now been paid over to the administrators. This application, therefore, concerns only the sum of £89,218 plus accrued interest.
Background
F2G was a retailer of laminated floors. G-T-P supplies store debit card services. Sums paid by F2G's customers using these debit cards would be paid into an account originally at HSBC and later at RBS (the “account”). By a Declaration of Trust dated 22 June 2006 and made between G-T-P as trustee and F2G as the beneficiary, the way in which the monies in the account were to be dealt with was provided for. Since the terms of the Declaration of Trust are of central importance to the issues that have arisen in this case, I shall set them out extensively.
The Declaration of Trust provided as follows:
“Whereas:
1. The Trustee [G-T-P] entered into certain agreements with the Beneficiary [F2G] for the supply of (inter alia) transaction processing services (“the Agreements”);
2. Arising from the Agreements, certain monies will be deposited into the following bank account to be managed by the Trustee on behalf of the Beneficiary … (“the Bank Account”).
Now This Deed Witnesses as follows:
“1. The Trustee declares that it holds the balances from time-to-time in the Bank Account on trust for the Beneficiary.
2. The Trustee declares and agrees that, except in the circumstances referred to in clause 3, it will at the request and cost of the Beneficiary transfer the said balances without any withholding, deduction or set-off to the Beneficiary or to such person or persons at such time or times and in such manner or otherwise deal with the same as the Beneficiary shall direct or appoint.
3. The Beneficiary agrees that the Trustee may withdraw from the bank account such sums as are then properly due to the Trustee from the Beneficiary, having deducted any sums properly due from the Trustee to the Beneficiary under the Agreements (provided thatthe Trustee must at the time of withdrawal provide a clear and detailed statement of the calculations of the amount withdrawn) if:
3.1 the Beneficiary commits any material breach of the terms of the Agreements;
3.2 any money payable by the Beneficiary to the Trustee under the Agreements is more than 14 days overdue in accordance with the terms of the Agreements;
3.3 the Beneficiary becomes insolvent or the Trustee reasonably apprehends that the Beneficiary may become insolvent;
3.4 an encumbrancer takes possession or a receiver is appointed over any of the property or assets of that the (sic) Beneficiary;
3.5 the Beneficiary makes a voluntary arrangement with its creditors or becomes subject to an administration order;
3.6 the Beneficiary goes into liquidation; or
3.7 the Beneficiary ceases, or threatens to cease, to carry on business”.
The Declaration of Trust was not registered with the Registrar of Companies pursuant to section 395 of the Companies Act 1985.
On 29 September 2006, F2G and G-T-P entered into what is entitled “G-T-P Group Limited Service Agreement” (the “service agreement”). The terms of the service agreement are not material for the purposes of the dispute that has come before me today, but it provided in detail for the fees and charges that G-T-P would charge for its trade card provision to F2G's customers, and in schedule 1 it provided a list of the services that it would be rendering including account administration services which were to include:
“Payment processing and settlement Collection of debts by direct debit Crediting accounts with collected payment Forwarding money to client”.
On 21 July 2008, F2G went into administration. On 24 July 2008, the administrators told G-T-P that they had decided not to continue the services agreement and sought repayment of the balance due to F2G. On 4 August 2008, the administrators cancelled the trade card scheme and said they would not retain G-T-P as debt collectors. On 8 August 2008, the amount standing to the credit of the account in the name of G-T-P amounted to £113,397. On 15 August 2008, the administrators sold the business and assets of F2G to Floor My Home Limited.
By emails passing between the administrators and G-T-P between 1 and 3 September 2008 it appears (although I shall deal with these emails in more detail in due course) that it was agreed that a sum of £15,000 plus VAT should be paid by the administrators to G-T-P in respect of a termination fee relating to the services agreement on the basis that the balance of the account was to be paid over to the administrators.
G-T-P now seeks to set off against the sums in the account the following. First, the sum of £29,904 including VAT for operating fees for the three weeks up to the administration. This is reflected in an invoice of 5 August 2008 numbered 31086. Secondly, the sum of £42,300 including VAT in respect of the three months net loss of revenue arising from cancellation of the trade card scheme without notice at the rate of £12,000 per month. This is reflected in another invoice of 5 August 2008 numbered 31112. Thirdly, the sum of £17,625 reflecting the supposed termination fee plus VAT relating to work done after the administration commenced. This is reflected in an invoice dated 31 August 2008 numbered 31131.
On 21 July 2009, the administration became a liquidation under paragraph 81 of Schedule B1 of the Insolvency Act 1986. I shall, therefore, refer to the applicants as the liquidators. The evidence before me is not particularly detailed since the points that have arisen are primarily points of law. I should perhaps, however, refer briefly to the first statement of Mr John Rothwell Verrill of the applicant's solicitors, Dundas & Wilson LLP, where he says the following:
“13. In summary, the Service Agreement provided a mechanism for the provision of store cards to customers of the Company to facilitate the purchase of goods at the Company's outlets.
14. Pursuant to the Service Agreement, the Respondent agreed to administer the transaction processing scheme for the store cards including the collection of debts owed to the company by its customers in return for certain fees and charges set out in Clause 5 of the Service Agreement. …
20. In short, Clause 3 [of the Declaration of Trust] provides that on the occurrence of one of the events of default provided for, the Respondent is entitled to payment of any sums owing to it out of the Bank Account. First, when there is non-payment by the Company or the Company's circumstances threaten lack of payment, Clause 3 purports to allow the Respondent to have recourse to the Company's property.
21. The Administrators will contend that properly characterised the right reportedly granted to the Respondent over the Bank Account by Clause 3 is a security right amounting to a floating charge over the Bank Account.
22. In brief:
a. pursuant to Clause 1 any credit balance in the Bank Account was the property of the Company;
b. the right granted by Clause 3 is a charge over that property and that the effect of Clause 3 is that the balance standing to the creditof the account as appropriated to the satisfaction of the Company's obligation to make ends to the Respondent;
c. that charge is floating because until Clause 3 is triggered the Company is free to use the credit balance in the account as it sees fit, and so withdraw it from the scope of the security”.
Mr David Lawrence Gillibrand, a partner in Oglethorpe Sturton & Gillibrand, G-T-P's solicitors, made a statement in answer on 24 July 2009. He said the following:
“5.1 The Respondent has, since it was incorporated in 2003, provided services for the management of sales ledgers on behalf of about twenty trading distribution companies (including, for example, the DSGi group, the Pilkington Group, part of the Wolseley Group). The model it operates is the same for all those companies; it has been thoroughly vetted by a number of solicitors on their behalf and has never previously been queried. In particular, it has never been suggested that the arrangements (described below) create a registerable security.
5.2 The Respondent's services include the provision and operation of a trade debit card to the customers of a client such as F2G. The Respondent collects the payments from the client's customer and such payments are remitted to a bank account (in the case of F2G initially HSBC Plc, subsequently Royal Bank of Scotland Plc) dedicated to that client. I shall refer to such account as “the escrow account”. The escrow account is mandated to the Respondent so that it is able to...
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