Halls and Another v O'Dell and Others
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BALCOMBE,LORD JUSTICE TAYLOR,LORD JUSTICE MCCOWAN |
| Judgment Date | 29 October 1991 |
| Judgment citation (vLex) | [1991] EWCA Civ J1029-1 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 91/0995 No. 004414 of 1985 |
| Date | 29 October 1991 |
[1991] EWCA Civ J1029-1
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
(MR JUSTICE MILLETT)
Royal Courts of Justice
Lord Justice Balcombe
Lord Justice Taylor
Lord Justice McCowan
91/0995
No. 004413 of 1985
No. 004414 of 1985
In the Matter of Latchford Construction Limited
And In the Matter of the Companies Act 1948
And In the Matter of Latchford Homes (Somerset) Limited
And In the Matter of the Companies Act 1948
MR JOHN BRIGGS, instructed by Messrs Kingsford Stacey, London Agents for Bretherton Price & Elgoods (Cheltenham), appeared for the Appellant (Plaintiff Defendant).
MR WILTON PAWLAK, instructed by Messrs Lyons Davidson (Bristol), appeared for the Respondent (Plaintiff Defendant).
These are appeals, with the leave of the judge, from orders of Millett J. made on 13th December 1990 whereby, reversing the decision of Mr Registrar Buckley in misfeasance proceedings by joint liquidators against the former directors of two companies in liquidation, he dismissed the proceedings for want of prosecution.
In July and September 1979, Latchford Construction Limited ("Construction") entered into contracts with each of its three directors to build houses for them at fixed prices. In the course of the work costs were incurred in foundation and piling works on the three sites, and the greater part of these costs was defrayed by Latchford Homes (Somerset) Limited ("Somerset") a company of which the same three persons were the only directors. On 2nd June 1980, Construction went into creditors' voluntary liquidation, at which stage work on two of the three plots was practically complete, and work on the other plot was partially complete. The directors then completed the houses at their own expense. Somerset went into creditors' voluntary liquidation on 10th July 1980. The same two individuals, both chartered accountants, are the joint liquidators of both Construction and Somerset.
In 1981 the liquidators first intimated that they might have a claim against the directors, but it was not until 1983 that they had obtained an expert's report and were ready to proceed. The respondents' solicitors sought confirmation from the liquidators' solicitors that proceedings would not be issued until there had been an opportunity to explore the possibility of compromise. They repeatedly sought either a letter before action or some other formulation of the claim in order to make it comprehensible so that detailed negotiations could begin. None was forthcoming until April 1984, when the liquidators served on the directors draft points of claim. The judge described the nature of the claims by citing a passage from the judgment of the Registrar, to which he added some comments of his own:
"The claim made in the proceedings, put briefly, is that the three directors were guilty of misfeasance or breach of trust in causing…Construction…in 1979 to enter into and perform contracts to build houses, one for each of the [directors], at fixed prices which did not reflect the actual cost of construction and the ancillary costs involved, let alone provide for the normal profit which the company should have made on works which it carried out. The liquidators therefore claim reimbursement by the [directors] of whatever is found to be the benefit obtained by each of them from their respective contracts…Somerset…is concerned in these transactions because it defrayed the greater part of the costs of foundation piling works on the sites of the three houses. That company was not, I think, otherwise involved in the construction works.'
To that short description of the claims I should add only that the liquidators sue the [directors] jointly and severally for the whole of the loss to each company on the grounds that each was guilty of breach of trust and misfeasance in procuring the company to enter into the contract or defray the expenditure in question, and in the alternative the liquidators claim reimbursement from each director of the benefits obtained for himself in consequence of the transactions. The total claimed by the liquidators is approximately £100,000."
Originating summonses seeking relief against the directors under section 333 of the Companies Act 1948 were issued by the liquidators on 27th June 1985. The originating summonses were in the general form set out on page 202 of Atkins Encyclopaedia of Court Forms (2nd ed.) Vol 10 (1981 issue) at page 292, which does not specify a return date for the first hearing of the summons. It was therefore incumbent upon the liquidators' solicitors to obtain an appointment from the Registrar for the first hearing of the originating summonses, at which the Registrar could give directions as to pleadings, evidence and other matters. This was never done. Instead, by a letter dated 9th July 1985, under cover of which the originating summonses were served, the liquidators' solicitors proposed that the proceedings be treated as adjourned generally with liberty to restore. To this the directors' solicitors replied on 18th July 1985:
"We are only too happy for the matter to be adjourned generally for the moment."
The judge dealt with this in the following passage from his judgment:
"It seems to me that the only correct approach I can make to this case is to treat the liquidators as being at fault in failing to take an appointment before the Registrar in the first place and the [directors] to have waived that defect, or acquiesced in it, treating the proceedings as if an appointment had been taken and the matter adjourned generally with liberty to restore, while the parties then got on with the litigation, according to whatever timetable the parties seem to have adopted rather than the Registrar directed."
I agree with that approach.
There the matter rested for nine months; delay for which the liquidators were responsible but in which the directors acquiesced. On 2nd April 1986 the liquidators' solicitors wrote to the directors' solicitors requiring a defence to be filed within 28 days: this ignored the fact that no pleadings had then been directed by the Registrar and that, in any event, no points of claim had then been served. This latter error was not appreciated until July 1986, when the directors' solicitors wrote asking that they be served with points of claim. Four and a half months later, on 24th November 1986, the liquidators' solicitors served points of claim which were identical to the draft which had been supplied two and a half years earlier.
Meanwhile, on 30th June 1986, Mr O'Dell, one of the directors, issued a separate writ against the liquidators claiming arrears of interest due to him under debentures issued to him by Construction, Somerset and other companies in the group. This writ was not served until 18th June 1987. It would appear that this action ("the debenture action") may have been conceived by Mr O'Dell as a tactical move in the misfeasance proceedings, but in any event the other two directors were not concerned in the debenture action.
On 22nd October 1987, the liquidators' solicitors wrote to the directors' solicitors saying that the liquidators had refrained from pursuing the misfeasance action against the directors pending negotiation relating to the debenture action, but that they were not prepared to wait indefinitely. On 20th November 1987 they wrote requiring service of the points of defence within 28 days. The directors sought and obtained an extension of time by consent and on 27th January 1988 they finally served points of defence, 14 months after they had received the points of claim. The judge commented that this long delay was obviously the fault of the directors, although the liquidators were content with this desultory progress of the proceedings.
On 8th February 1988, the directors requested further and better particulars of the points of claim. These have never been given. On 9th March 1988, the liquidators served a reply to the points of defence and on the same day served a request for further and better particulars of the points of defence. These, too, have never been given. There, as the judge said, the litigation effectively came to an end.
During 1988 the liquidators' solicitors were trying to obtain documentary evidence which was in the possession of the bank, in which they ultimately succeeded. However, they were less successful in trying to locate the invoices relating to the work done on the sub-structure of the houses, some of which have been lost. Also, during 1988 the liquidators were trying to negotiate a settlement of the debenture action, but received no co-operation from Mr O'Dell. They then applied to strike out the debenture action for want of prosecution, but were unsuccessful. However, that action has since gone to sleep again.
The last six months of 1988 were occupied in fruitless attempts to arrange meetings to negotiate a settlement of the misfeasance proceedings and the debenture action. The directors' solicitors constantly asked for an agenda for the meeting which was to settle the misfeasance proceedings, did not receive one, and were ultimately told that none would be forthcoming.
On 16th December 1988, the directors issued a summons in the Construction proceedings to strike out the originating summons for want of prosecution; they issued a similar summons in the Somerset proceedings on 7th March 1989. Both matters came before Mr Registrar Buckley on 20th July 1989. He gave judgment on...
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