Ian Edward Walker and Another v National Westminster Bank Plc and Another
| Jurisdiction | England & Wales |
| Judge | Hhj David Cooke |
| Judgment Date | 25 February 2016 |
| Neutral Citation | [2016] EWHC 315 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: B30BM428 |
| Date | 25 February 2016 |
[2016] EWHC 315 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
Birmingham Civil Justice Centre
Bull Street, Birmingham B4 6DS
HHJ David Cooke
Case No: B30BM428
Simon Passfield (instructed by TLT LLP) for the Claimants
Rebecca Loveridge (instructed by Matthew Arnold & Baldwin LLP) for the First Defendant
Tiran Nersessian (instructed by the Government Legal Department) for the Second Defendant
Hearing date: 5 February 2016
Introduction
In this claim the claimants, who are the former administrators of Sunnyside Holiday Park Ltd ("the company"), seek an order that the unpaid balance of their remuneration and expenses is by para 99(3) of Sch B1 Insolvency Act 1986 charged on and payable out of a sum of £62,646.06 said to be payable by the first defendant ("the Bank") to the company as redress in respect of potential mis-selling of certain interest rate swaps. Since they say more than that amount is due to them they seek a consequential order that the Bank should pay the whole redress payment direct to them.
The company is now dissolved, so that any remaining assets are vested in the Crown as bona vacantia. The second defendant is joined as the government department responsible for administration of bona vacantia on behalf of the Crown. The claimants originally sought an order in the alternative that the redress payment be made to the second defendant and paid on by the second defendant to them. That claim has recently been abandoned, but the second defendant continues to participate in the claim because, I am told, similar suggestions are made in many cases and it is concerned to establish its position. The position of both defendants is that the company should be restored to the register and wound up so that any redress payment can be made to a liquidator and administered by him.
The company was incorporated in 1992 and ran a holiday park in Newquay. In 2003 it entered into two straightforward (or "vanilla") interest rate swaps with Natwest in support of its borrowing. It appears the swaps were terminated in November 2004, by which time the company had paid net amounts totalling £36,662.86 under them and in addition incurred bank charges of £1,030 as a result of those payments.
In 2007 the company granted a fixed charge and debenture over all its assets to Lancashire Mortgage Corporation ("LMC"). In March 2008 the claimants were appointed as administrators by LMC, who were owed over £3.9m. The claimants attempted to sell the holiday park but were unsuccessful. Their appointment was renewed several times, but eventually expired in 2012, at which time LMC appointed fixed-charge receivers in their place.
At the time they ceased to hold office, the claimants had recorded time costs of some £164,664, plus disbursements. LMC agreed to pay £60,000 towards these costs out of the proceeds of sale of the holiday park. There is a potential issue as to whether this constituted a binding settlement of the claim for remuneration, since a report to creditors informed them that the administrators had agreed this sum in full and final settlement.
The company was dissolved in November 2013 and its interest in the holiday park (and any other assets) would then have vested in the Crown as bona vacantia (Companies Act 2006 s 1012). This did not affect the interest of LMC as mortgagee and the receivers were still able to arrange to sell the property, which it appears they did in February 2014. At that time the agreed amount of £60,000 was paid to the claimants, but after paying their disbursements and approximately £31,700 towards their own remuneration they are left with over £132,000 of unpaid recorded time cost.
At some point after the claimants' appointment as administrators ended but before the company was dissolved, someone on behalf of the company initiated the process of review of the sale of the swaps under the scheme established by the Financial Conduct Authority ("FCA") in 2012. It is not clear from the evidence who exactly started the process, but I am told it was not the claimants themselves. Any person with an interest in the company or its assets may do so, and nothing turns on it for present purposes.
The result was a letter from the bank dated 19 August 2014 (ie after dissolution). The copy in the bundle is addressed to the second claimant as an "interested party" in the company, but there is nothing in it that relates specifically to the position of the former administrators and it may be that similar letters were sent to other such interested parties. That letter:
i) is headed "Provisional determination of redress (the Assessment)…",
ii) contains the following as its first substantive paragraph:
"The purpose of this letter is to provide information to you as an interested party of the customer [ie the company] as to the provisional determination of redress for the customer, together with the actions required to be taken by you as an interested party of the customer. This letter does not constitute an offer of redress, however if you or another interested party of the customer choose to restore the customer to the Register of Companies … an offer will be made on the same terms as set out in this letter."
iii) states that the bank has reviewed the sale of the two swaps in accordance with the standards agreed by it with the FCA and has "assessed that fair and reasonable redress in this case would be to cancel the products. The assessment would include a full refund of payments made by the customer…"
iv) sets out a calculation of that amount, headed "Provisional redress calculation". In addition to refunding the payments and charges referred to above, interest was added at 8% pa simple to arrive at a "Total redress that would be due to the customer…" of £62,646.06,
v) provides information on how the company may be restored to the register, and the evidence the bank will require that restoration has taken place, and
vi) states that the assessment includes interest but not any redress in respect of additional losses the customer may have incurred and that "if the customer is restored to the register and accepts the redress, it can make a claim for additional losses. Following receipt of evidence of restoration… we will send the customer generic evidence (sic) on how to make a claim for additional losses."
There then followed correspondence in which, to summarise, solicitors on behalf of the claimants sought to persuade the bank and the Treasury Solicitor that payment should be made direct to them, that it should not be necessary to incur the cost and delay of restoring the company since they were the only persons who would be entitled to benefit from the redress payment, and that the Treasury Solicitor could and should consent to such direct payment. That was not agreed and accordingly this claim was issued in October 2015.
Discussion
The first difficulty for the claimants seems to me to be that the moneys they seek to claim against are not yet due to the company. They do not therefore (yet) constitute an asset, or even the proceeds of an asset, that may be subject to the statutory charge created by para 99 of Sch B1, which attaches to "the property of which [the former administrator] had custody or control immediately before cessation [of his appointment]".
Standing back, it presumably would be the case that if the swap products were mis-sold to the company in 2003, it may have had a claim against the bank in contract and/or tort. That chose in action would have been an asset of the company, and no doubt could be considered to have been under the control of the administrators while they held office. However, no claim has been issued, or even threatened, on behalf of the company to enforce any such chose in action.
The FCA review process is, it seems to me, very different from the enforcement of that chose in action, though inevitably there are areas of overlap. The FCA scheme does not depend on the making of a claim in law, or on the establishment of a cause of action. It is a scheme arrived at by agreement between the FCA (or its predecessor the FSA) and certain regulated institutions. To the extent it is enforceable in law, it would appear to be as a matter either of contract between the regulator and those institutions, or the statutory power of the regulator. This is not a point I have to decide; I have not heard any argument as to whether there might be a direct right of enforcement. But the point is that whatever obligations an institution may have under that scheme arise by virtue of the terms of that scheme and the standards of review and offers of redress it provides for, irrespective of whether the customer does or does not have a valid claim in law. For instance, Ms Loveridge submits, the bank has an obligation to offer redress under the scheme in respect of these products which were sold in 2003 and caused loss almost immediately, though it must be likely that the bank would have a good limitation defence to any legal claim.
Even if the company has, and had at the time the administrators left office, a direct right of some sort to enforce the terms of the FSA scheme, it is not a right that has yet resulted in an entitlement to the amount provisionally assessed as the redress amount. It is plain from the terms of the bank's letter that it is not itself an offer capable of acceptance, and that no such offer will be made until the company is restored. The bank's evidence is that any such offer will have conditions attached to it, not least that it will be made in full and final settlement of any claim the company may have, save to the extent it is able to show that the...
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