Gresham International Ltd v Moonie
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE PETER SMITH |
| Judgment Date | 20 May 2009 |
| Neutral Citation | [2009] EWHC 1093 (Ch) |
| Docket Number | Case No: NO 3995 OF 2003 |
| Court | Chancery Division |
| Date | 20 May 2009 |
[2009] EWHC 1093 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Peter Smith
Case No: NO 3995 OF 2003
Peter Shaw (instructed by Moon Beever) for the Applicants
George Bompas QC (instructed by Wedlake Bell) for the Respondents
Hearing date: 23rd April 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Peter Smith J:
INTRODUCTION
There were originally 2 applications for determination in this matter. First there was an application issued on 8th December 2008 by the Applicant for various declarations and directions concerning sanctions for bringing of the current proceedings. The First Applicant Gresham International Ltd (“Gresham”) is a company in compulsory liquidation. The Second Applicant (Ms Brittain) is its Liquidator.
The second application was an application issued by the Defendant on 7th January 2009 for an order pursuant to section 726 Companies Act 1985 that Gresham provides security for costs in the sum of £469,783.
That second application was resolved by the parties before the hearing by the provision of a bond which the Respondents consider is sufficient security for their costs for the present.
BACKGROUND
Gresham was compulsorily wound up by the Court on 22nd May 2003 on the petition of HM Customs and Excise (“HMCE”). The petition was based on excise duty assessments which were not appealed.
Until its liquidation it traded in the business of wholesale distribution of alcoholic and soft drinks from premises in the Epsom/Tolworth Surrey area. Trading was also undertaken from warehouses in Barnsley, Cardiff and Calais.
It is the Applicant's case that from 2001 Gresham which has historically been profitable fell into financial difficulties. In the year to 30th June 2001 it made a pre-tax loss of £829,000. It was owed very substantial sums from a number of associated French companies that were unable to pay. In particular Alliance International SA was a debtor of Gresham in the sum of £1,448,000. On 21st January 2002 it entered into an agreement with Gresham whereby the debt was scheduled to be paid over 10 years the first payment not to be paid until March 2003. Gresham's solvency was entirely dependent on the ability of the French associated companies to meet their indebtedness. In the event they could not and eventually they all went into liquidation by early 2004.
In addition Gresham had various disputes with HMCE.
There were disputes between Gresham and HMCE with Gresham being subject to investigation like many other companies engaged in alcohol sales in the Calais area. Demands were made by HMCE for £1,808,343 and £1,265,423. Gresham's bank had provided a guarantee of £300,000 per month in respect of its liability to HMCE and pursuant to that guarantee HMCE made demands totalling £600,000. There then remained a balance outstanding of £2,473,76Gresham whilst it took issue with HMCE's action in writing to its suppliers it did not dispute the demands in question.
STATEMENT OF AFFAIRS OF GRESHAM
According to paragraph 108 of Ms Brittain's first witness statement dated 26th November 2007 the total creditors appear to be £8,646,057.39 with assets only of £18,220.17. Since then she has received a dividend of €654,463 from the liquidator of the French company Alliance in 2008.
There were 3 creditors on the liquidation committee namely HMCE (£2,400,000 approximately), Scottish and Newcastle (£3,900,000 approximately) and Scottish Courage Brands (£436,000 approximately). Some of the Respondents have been admitted as creditors of Gresham for approximately £600,000.
ISSUE
The issue primarily relates to the Applicants seeking declarations that the sanction granted by the Secretary of State on 13th August 2007 (“the Secretary of State sanction”) to the liquidator for the bringing of legal proceedings as specified in that sanction is valid and that the liquidator is entitled to an indemnity out of the assets of Gresham in respect to costs and adverse costs orders in respect of those claims. In the alternative the Applicants seek an order that the Court sanction the claims pursuant to section 167 (1) (a) and Schedule 3 Insolvency Act 1986 and the liquidator is consequently entitled to like indemnity. Finally the Applicants seek an order sanctioning fresh claims as set out in the schedule thereto with a like claim for indemnity in respect of them.
The proceedings were issued initially on 16th May 2007 in the form of an Originating Application against the 5 named Respondents seeking relief arising out of 3 separate transactions/arrangements in the 2 years prior to the liquidation. The proceedings were in the name of both the Liquidator and Gresham. In summary the claims related to:-
) A transfer in January 2002 where Gresham transferred a property known as Meadow House, Meadow Walk, Walton on the Hill, Surrey to the Fourth Respondent Gresham (Gibraltar) Ltd (“Gibraltar”)
) A transfer in October 2002 by Gresham of a property 92– 102 East Street Epsom to the First and Second Respondents Mr and Mrs Moonie trading as Gresham Consultants
) A transfer between September-October 2002 of the business assets stock and goodwill to the Third Respondent Meadow Trading Company Ltd (“Meadow Trading”). By an amendment to the Originating Application dated 7th September 2007 a declaration was added that a contract to transfer Meadow House by Gresham to the Third Respondent on or about 2001 was a preference pursuant to section 239 of the Insolvency Act 1986. Some of the allegations of transactions at an under value or transactions defrauding creditors as set out in the original application were abandoned.
Mr and Mrs Moonie (the First and Second Respondents) and Mr Dickinson (the Fifth Respondent) were all directors of Gresham. Meadow Trading was a company formed on 26th June 2002. Mr Moonie and Mr Dickinson are its directors. Gibraltar was a company of which Mr and Mrs Moonie were directors.
In their application for permission the Applicants estimated that the likely recovery was around £4,000,000. It also estimated that the costs would be £150,000 and the costs of losing the action would be £150,000. Those latter two figures are optimistic and I am not in a position to comment on the correctness of the assessment of likely recoverability.
NEED FOR PERMISSION
It is accepted that where (as in this case) a company has been compulsorily wound up by the Court the liquidators powers are governed by Parts I and II of Schedule 4. Under Schedule 4 Part I paragraph 3A power to bring legal proceedings under section 213, 214,238, 239, 242, 243 or 423 (that is proceedings in the liquidator's name) requires sanction. Sanction is either by the Court or the liquidation committee if any. Paragraph 3A was not in the original Insolvency Act 1986 but was inserted by Enterprise Act 2002 s.253 which came into force on 15th September 2003. Prior to that it was considered that commencement of proceedings in the liquidator's name was covered by Part III paragraph 13 which did not require sanction.
I should also refer to rule 4.184 of the Insolvency Rules 1986 which provides as follows:-
“(i) any permission given by the liquidation committee (or if there is no such committee, a meeting of the company's creditors) or the Court under section 165 (2) or section 167 (1) (a), or under the Rules shall not be a general permission but shall relate to a particular proposed exercise of the liquidators power in question; and a person dealing with the liquidator in good faith for value is not concerned to enquire whether any such permission has been given
(ii) where the liquidator had done anything without that permission, the Court or the liquidation committee may, for the purpose of enabling him to meet his expenses out of the assets, ratify what he has done; but neither shall do so unless it is satisfied that the liquidator has acted in a case of urgency and has sought ratification without undue delay.”
Under Schedule 4 Part II paragraph 4 there is a similar requirement for sanction for the bringing of any proceedings in the name and on behalf of the Company.
It is common ground that no sanction was obtained as required by the section to commence the proceedings before they were commenced.
SANCTION
The present application is stated by the Applicant (see paragraph 17 of Mr Shaw's skeleton who appears for them) to arise out of what are described as accidental omissions that were made by the liquidator in applying to the Secretary of State for the grant of sanction.
It is stated that in May 2007 the liquidator was advised that it was arguable that one of the proposed claims was at risk of becoming statute barred. I pause to observe as Mr Bompas QC who appears for the Respondents submitted that none of the proceedings the subject matter of the permission granted on 13th August 2007 can possibly have been statute barred because they all took place in 2002 which is less than 6 years after the issue of the proceedings. In any event time would only run against the liquidator in relation to those claims commenced by her personally pursuant to sections 238 and 239 Insolvency Act 1986 from the commencement of the winding up which was in May 2003 (or earlier relating back to the presentation of the petition).
It may be that the amended prayer...
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