Ian Barry Dearing v Mark Skelton
Jurisdiction | England & Wales |
Judge | Jones |
Judgment Date | 29 May 2020 |
Neutral Citation | [2020] EWHC 1370 (Ch) |
Date | 29 May 2020 |
Court | Chancery Division |
Docket Number | Case No: CR-2017-009508 |
[2020] EWHC 1370 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (Ch D)
In The Matter Of ASA RESOURCE GROUP PLC (In Administration) (No. 02167843)
And In The Matter Of THE INSOLVENCY ACT 1986
Royal Courts of Justice
Strand, London, WC2A 2LL
Skype Business Remote hearing
I.C.C. JUDGE Jones
Case No: CR-2017-009508
The Applicant, Mr Dearing, appeared in person
Mr Stephen Robins (instructed by Shoosmiths LLP) for the Respondents
Hearing dates:
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.
I.C.C. JUDGE Jones
A) The Application
The application of Mr Dearing as a stated member and creditor of ASA Resource Group Plc (“the Company”) may on its face appear reasonably straight forward. The administration of the Company will soon end, successfully. The Respondents (“the Administrators”) anticipate paying all creditors in full before returning the management of the Company, its business, property and assets to its appointed director. The Company's articles as amended require four directors and Mr Dearing is the remaining one. He wants to prepare the Company for hand over by first appointing another three and then, as possible steps, opening a bank account, rectifying the share register and managing the Company's assets to the extent that the administrators are not able or willing to do so. This may include the appointment of new directors for the Company's subsidiaries and taking steps to recover debts in the region of £5 million. There is no dispute before me that the Company's Articles confer power on a remaining director(s) to appoint others to fill vacancies or summon a General Meeting.
In those circumstances he applies under paragraph 74(1) of Schedule B1 to the Insolvency Act 1986 for a direction that the Administrators should agree to the proposed appointment of directors, should not remove them without further order of the Court and should use their reasonable endeavours to agree a protocol with the directors for the Company to carry out its and its subsidiaries' proper activities whilst the administration remains in force. He does so on the basis (in summary) that the Administrators have breached their duties by refusing to permit the steps he proposes. Paragraph 74 requires him to establish on the balance of probability that the administrators have acted unfairly to harm his interests as a creditor or member (whether alone or in common with others) and to satisfy the Court that relief ought to be granted.
The application is far from straight forward: First, there is the question whether directors should be allowed to exercise powers whilst the administrators are appointed. Although maintaining a neutral approach at the hearing before me, the Administrators have not been prepared to consent to the steps Mr Dearing requires, because: (i) those steps do not seem to the Administrators to be necessary to achieve the purpose of administration; (ii) they are concerned that taking those steps would be likely to involve expenditure or give rise to liabilities which could prejudice shareholders and, potentially, creditors; (iii) the precise steps proposed are not adequately particularised; (iv) insofar as those steps are identified, they appear to fall outside the Administrators' remit; and (v) there is no urgency when the Administrators are on the cusp of final distribution and their appointment ceasing to have effect.
Second, there is the fact that there are disputes as to who owns the Company's issued share capital. Rich Pro Investments Limited by letter dated 13 May 2020 has informed the administrators that as majority shareholder it wants different directors to those proposed by Mr Dearing. It also wants the actions of the new, interim board to be limited to convening a members' meeting immediately after the Company exits from administration at which the interim board will resign.
Third, there is the distinction of legal personality between the Company and its subsidiaries to be borne in mind. Fourth, this adjourned hearing remains in the urgent applications list to be determined without the evidence being tested.
B) The Context
Those questions arise in the following, summarised context. The Company is a holding company incorporated in 1987. It also provided treasury and management functions for its group, which was principally concerned with the exploration and mining of minerals in Zimbabwe and the Democratic Republic of Congo. Its shares were listed on the Alternative Investment Market. Administrators were originally appointed by the directors on 1 August 2017 on the basis that the Company was unable to pay its debts as they fall due.
On 30 November 2017, in the context of legal proceedings brought by Rich Pro Investments Limited, the Court ordered that appointment to cease and this administration to begin. The Administrators' proposals were approved by the creditors on 6 February 2018 with three purposes: to rescue the Company as a going concern; to achieve a better result for the Company's creditors as a whole than would be likely if the Company were to be wound up; and to realise property in order to make a distribution to one or more secured or preferential creditors. In briefest summary, the intention was principally to achieve the first or second options through the sale of subsidiaries' shares. The options to exit included the return of control of the Company to the directors.
The Administrators believe they have realised sufficient assets, in excess of £23.1 million, to pay the Company's creditors in full with statutory interest. Subject to receiving and determining proofs, they therefore believe they have rescued the Company as a going concern.
On 20 March 2020, I.C.C. Judge Mullen permitted them to make a distribution to creditors. He directed that the administration of the Company will cease with effect from the filing of the Order with the Registrar of Companies in accordance with paragraph 86(2) of Schedule B1. The Administrators will be discharged from all liability arising from any action or omission as administrators of the Company, with effect from the same date.
On 3 April 2020, the Administrators gave notice in the Gazette of their intention to declare a dividend to creditors of the Company. Creditors are required to submit final proofs of debt by 13 May 2020. The Administrators must admit or reject all claims by 27 May 2020. Following that date, subject to any appeal against any admission or rejection of any proof of debt, the Administrators will make a final distribution. They anticipate the process will be completed within two months from 13 May 2020. At the termination of the Company's administration, the Company's creditors will have been paid in full (with statutory interest). As matters stand, the Company will be restored to the control of Mr Dearing, as the sole director.
The Administrators are concerned that the relief sought by Mr Dearing will impact upon the surplus which they anticipate will be available to the Company upon the cessation of their appointment. Their evidence refers in particular to the request for an open-ended indemnity. Article 145 of the Company's Articles of Association, relied upon by Mr Dearing, requires the Company to indemnify the directors in respect of all costs, charges, losses and expenses incurred (“the Indemnity”). Their concern means they do not consider it appropriate to permit directors to cause the Company whilst in administration to obtain indemnity insurance, open a bank account, obtain legal advice in relation to the duties and functions of the directors or to take steps to recover money due to the Company or its subsidiaries.
They are also prudently concerned that no criticism or liability should fall upon themselves on account of the appointment of new directors and/or their subsequent management. By letter dated 22 January 2020 they explained to the members of the Company that (in summary and amongst other matters) they did not intend any further realisations. They would ensure the Company would be in a position to make a distribution to creditors but otherwise would take no further action in relation to the Company's and/or subsidiaries' business and/or assets.
The letter also included an “asset summary” which essentially provided a snap-shot of the key matters relevant to each remaining subsidiary. For example, in the case of “Zani Kodo (Mizako Sarl)” they explained that neither they nor the Company would be appealing a relevant Presidential Order and any shareholder wishing to mount an appeal should seek their own advice. In the case of “Maligreen JV (Mali Green Mining Company (Private) Ltd)” the summary stated that the Group owned 50% of its mining operations but it apparently owes c$785k under a joint venture agreement in respect of expenses incurred by the project between 2013 and 2019.
In addition, the Administrators referred to the Company being owed a £4.9m deposit “from a previous bidder”, guaranteed by the Reserve Bank of Zimbabwe. The Administrators explained that they were “not in a position to incur costs recovering this deposit and will not be taking any action in that regard”. Its recovery will be the responsibility of the directors and shareholders once their appointment ceased. They emphasised generally that their duties did not “permit them to spend the creditors' monies for the benefit of the Company's shareholders or permit [them] to take any further action in relation to the Company's subsidiaries' business or...
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