Innes Keochan Berntsen and Another v Matthew Tait and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan |
| Judgment Date | 08 April 2014 |
| Neutral Citation | [2014] EWHC 1100 (Ch) |
| Docket Number | No. 519 of 2010 |
| Court | Chancery Division |
| Date | 08 April 2014 |
[2014] EWHC 1100 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice,
Strand,
London
WC2A 2LL
THE HONOURABLE MR JUSTICE MORGAN
No. 519 of 2010
THE MATTER OF CONISTON HOTEL (KENT) LLP (IN LIQUIDATION) AND IN THE MATTER OF THE INSOLVENCY ACT 1986
(the Members of the above-named LLP)
(the Former Administrators of the above-named LLP)
MR A MIAH (direct access) appeared on behalf of the Applicants.
MISS A DAY QC and MR B SMILEY (instructed by Mayer Brown International LLP) appeared on behalf of the Respondents.
The Application
The application which is before me is made by an application notice dated 17th February 2014. It is an application by the Respondents, Mr Tait and Ms Rayment. By that application the Respondents seek various orders from the court. The first order is that the Applicants' proceedings be struck out, in whole or in part, or, in the alternative, that summary judgment be given for the Respondents. Consistently with that order, the court is then asked to order that the Applicants' claim be dismissed.
In the alternative, there is a further application for an order that the Applicants' claim be summarily dismissed and certain draft pleadings be struck out, in so far as they comprise (a) claims which have already been dismissed and/or claims that the Hotel was sold at an under value and/or an application for an examination of conduct under paragraph 75 of Schedule B1 of the Insolvency Act 1986 on the basis that those claims have no real prospect of success and/or the Members have been in breach of the orders and rules of the court and/or the claims constitute an abuse of process.
The Background
Coniston Hotel (Kent) LLP is a limited liability partnership, which is now in liquidation. It had two Members, the Applicants in these proceedings, Mr Berntsen and Mr Richardson. The LLP owned an Hotel, the Coniston Hotel, in Sittingbourne, Kent. Over a period of years, the LLP had carried out works of refurbishment to that Hotel. By early June 2010, the works to the Hotel were nearing completion, but they were not complete and the Hotel was not open for business. The LLP needed to obtain further funds to enable it to complete the works to the Hotel and to open for business. The source of these funds was suggested to be LLP's Bank, National Westminster Bank PLC. The LLP had already borrowed substantial funds from that Bank. By early June 2010, the Bank's position was that it was not prepared to advance further funds or, at any rate, was not prepared to advance further funds without personal guarantees from one or both Members and these the Members were not prepared to give.
On 22nd June 2010, the Members caused the LLP to be placed in administration by an out-of-court appointment. The Respondents to the present proceedings, Mr Tait and Ms Rayment, two insolvency practitioners from BDO, were appointed as Administrators. The business of the LLP was not rescued in the course of the administration. The Administrators took steps to sell the LLP's principal asset, the Hotel in Sittingbourne, Kent. In due course, the Hotel was sold. It was sold to West Register Limited, which is an associated company of the Bank.
The Procedural History
These proceedings have had a long, it might be said too long, procedural history. I am going to draw on the judgment of Norris J given in this case on 1st February 2013 for some, at least, of the procedural history, certainly the procedural history up to the date of that judgment.
At paragraph 27, Norris J explained that, on 1st August 2011, the Members, acting in person, commenced insolvency proceedings against the Joint Administrators seeking an order that they should forthwith cease to act as Joint Administrators of the LLP, that the administration be "discharged" and that the costs of the administration should be borne by the Joint Administrators personally. Norris J commented that the evidence in support of that application accused Mr Tait, in particular, of helping the Bank to achieve a hidden policy of acquiring the Hotel, of deliberately misconstruing figures, of making fraudulent misrepresentations, and of participating in wrongdoing by facilitating the Bank in disposing of the Hotel.
Norris J went on, at paragraph 28 of his judgment, to recount that the Administrators caused the LLP to petition the court to wind up the LLP on various grounds. One of the grounds was that the objectives of the administration —that is achieving a better result for the creditors as a whole than would have been likely if there had been an immediate winding up; and realising property in order to make a distribution to secured creditors —had been achieved; and, secondly, that the LLP was insolvent and unable to pay its debts as and when they fell due.
Vos J made a winding-up order in respect of the LLP on 12th December 2011. Vos J was then asked to deal with the position under the present proceedings, which had, of course, been commenced prior to the winding-up order. Vos J discharged the Joint Administrators from certain heads of the liability, but he carved out of the discharge a provision that the discharge did not operate in respect of this present application.
At paragraph 56 of his judgment, Norris J recorded that, on 4th July 2012, the Administrators applied to have the proceedings summarily dismissed, either by striking out the application and the supporting pleadings or by entering summary judgment in favour of the Joint Administrators, on the grounds that, on the evidence, the Members had no real prospect of succeeding on the claim.
Before Norris J went on to deal with the matters argued before him, he said the following at paragraphs 57 and 58, which remarks are of some significance in view of the later course taken in these proceedings. I quote from his judgment.
"It is necessary to clear away one fundamental issue relating to the character of the proceedings, and then to address the specific issues that arise on the application.
The letter before action settled by Mr Miah" -
I interpose, he is counsel instructed on direct access by the Members—
"contained veiled accusations of fraud. The evidence filed by Mr Berntsen and Mr Richardson when these proceedings commenced contained specific allegations of fraud, deceit and dishonesty. The Points of Claim advanced no such case. The evidence filed in opposition to this application contained further allegations of fraud and dishonesty. Mr Miah's skeleton argument asserted 'likely fraudulent conduct', 'material concealment', 'deliberate concealment', orchestration of a highly-dubious valuation', '[complicity] in the deliberate and unlawful cessation of funding' and deliberately lowering a valuation in concert with KF".
I interpose, that is a reference to a firm of surveyors and valuers, Knight Frank.
"I asked Mr Miah whether he was pleading fraud. After a passage of argument … it is clear that there is no allegation of fraud or dishonesty and the case is being run (so far as duties are concerned) as one of negligence and breach of fiduciary duty".
Norris J then addressed the case as it appeared at that stage on the pleadings, which had been served up to that point. The learned Judge went a very long way with the Administrators' application, both as regards the interpretation of paragraphs 74 and 75 of Schedule B1 to the 1986 Act and as regards the requirements for a properly pleaded case under those paragraphs. At paragraph 61 of his judgment, he accepted the submission that the Members' pleadings up to that point were not adequate, but he held that it would be disproportionate or unjust to strike out or dismiss the entire claim "if by pruning and definition the Members' case can be put in a form that the Joint Administrators can address".
At paragraph 65 of his judgment, Norris J distinguished, giving detailed reasons for this distinction, between allegations of wrongdoing by Mr Tait and Ms Rayment, as insolvency practitioners and advisors, prior to the commencement of the administration, and a claim that Mr Tait and Ms Rayment, as Administrators, on and following appointment, had been guilty of misfeasance or wrongdoing of some relevant kind. So far as the period prior to the commencement of administration is concerned, Norris J pointed out in detail, which I will not at present repeat, in paragraph 65 of his judgment, why it was that it was not appropriate, either in the present proceedings, or, possibly, at all, for the Members to bring a claim based upon alleged wrongdoing or negligence prior to the commencement of the administration.
In paragraph 65(a), on the other hand, the learned Judge identified the kind of complaint relating to the period on and after the commencement of administration, which could be brought within the relevant paragraphs of Schedule B1 to the 1986 Act. The Judge did what he could to summarise the case, which he was able to find here and there in the pleadings and in the witness statements, which could come within those paragraphs of Schedule B1. Having made those distinctions, at paragraph 66 of his judgment, he held that the present proceedings should be confined to the Members' claims as creditors or Members under paragraphs 74 and 75 of Schedule B1; that is to say, as he had explained, in relation to matters on and after the commencement of the administration.
Norris J made a detailed order on 1st February 2013. By his order he struck out complaints made by the Members in relation to alleged wrongful acts or omissions prior to the date of their appointment as...
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Adrian Charles Hyde v Antony David Nygate (in his Capacity as Representative of the Estate of James Joseph Bannon, Former Joint Administrator of One Blackfriars Ltd Appointed Under Cpr R 19.8(1))
...a more direct and definitive way to ascertain its actual value. This submission derives support from In Re Coniston Hotel (Kent) LLP [2014] EWHC 1100 (Ch), in which at [44] Morgan J noted: “a valuation is a prediction of what will happen in a particular market. Comparing a prediction of wh......