IRC v Richmond and Jones (Re Loquitur Ltd)
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice ETHERTON,Mr Justice Etherton |
| Judgment Date | 09 May 2003 |
| Neutral Citation | [2003] EWHC 999 (Ch) |
| Docket Number | Case No: 5157 of 2001 |
| Court | Chancery Division |
| Date | 09 May 2003 |
[2003] EWHC 999 (Ch)
The Honourable Mr Justice Etherton
Case No: 5157 of 2001
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF LOQUITUR LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Philip Jones (instructed by Solicitor of Inland Revenue) for the Claimant Ms Hilary Stonefrost and Miss Aparna Nathan (instructed by Walker Morris) for the Respondents
Hearing dates : 13 – 19 and 25 – 27 March 2003
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.
Introduction
Loquitur Ltd, formerly known as Modus Vivendi Limited ("MV"), went into creditors voluntary liquidation on 5 September 1997. The Commissioners of Inland Revenue ("the CIR") are creditors of MV. This is an application by the CIR, under the Insolvency Act 1986 (" IA") s.212, against the Respondents Geoffrey Richmond ("Mr Richmond") and Martin Lewis Jones ("Mr Jones"), as former directors of MV. By the application, the CIR seek an order that the Respondents pay MV £5,900,000 together with interest, for misfeasance or breach of duty, as directors of MV, in declaring and paying a dividend of £5,900,000 in favour of Copperbeck Limited ("Copperbeck") on about 1 September 1995.
The factual background
MV was incorporated on 10 November 1981 as Bruton Products Limited. It changed its name to Ronson (Exports) Limited, and traded as the exporting arm of Ronson International Limited. In 1982 Ronson International Limited went into administrative receivership. In 1983 MV acquired, from the administrative receivers, the sole export rights for Ronson cigarette lighters, accessories and writing instruments to a number of substantial markets. In 1985 it bought the sole UK rights for Ronson lighters.
In 1988 MV sold to, and leased back from, Holtstar Limited ("Holtstar") premises at West Chirton, North Shields, Tyne and Wear ("the Estate"). The Estate comprised two areas: Enterprise Park, which included a factory occupied and used by MV for its Ronson business, and Julius House. The latter was occupied in part by MV for storage purposes in connection with the Ronson business, and was otherwise occupied or available for occupation by numerous different licencees or sub-tenants. The lease-back to MV ("the Headlease") was for thirty-five years, at an initial rent of £175,000, with rent reviews on 31 March 1998 and at five yearly intervals thereafter. Under the rent review provisions, the rent was to be increased in line with the Retail Prices Index.
In January 1994 MV sold the Ronson product range, including the Ronson trading name ("the Ronson Business"), to Hoskyns Brewery plc for some £10 million. This gave rise to a chargeable gain of about £7 million, in respect of which, at the rates then applicable, a corporation tax charge of approximately £2.3 million was payable.
The assets retained in MV included the Headlease, shares in Scarborough Football Club, and shares in a wholly owned subsidiary, Ronson Properties Limited.
MV changed its name to Modus Vivendi plc.
MV installed the new owner of the Ronson Business, Powerdraught Limited ("Powerdraught"), as sub-tenant of those parts of the Estate formally occupied by MV.
At the end of January 1994 MV sold its shares in Scarborough Football Club and acquired 60% of the shares in Bradford City AFC (1983) Limited.
The Respondents were at that time, and at all relevant times afterwards, directors of MV. MV was then owned or controlled by the First Respondent, Mr Richmond, his wife and children.
On 27 June 1994 there was a meeting attended by the Respondents, Michael Percival of John Lansbury Associates, Mr Reuben Kay, who was a partner of Kay Johnson Gee, MV's accountants, Leslie Morris and Simon Concannon of Walker Morris, MV's solicitors, and Mr Neils Sundel of European Business to Business Company Finance Limited ("EBB"), at which there were discussed proposals to offset the capital gain arising from the sale of the Ronson Business with capital allowances. Those proposals involved the hire purchase, and subsequent leasing to third parties, of some £28 million worth of ship containers. EBB was to be responsible for arranging the transactions that were involved in the tax mitigation proposals.
On 1 September 1994 the Respondents attended a consultation with Mr Andrew Thornhill, a leading tax counsel, on the proposed tax mitigation proposals. As a result of his advice, the capital allowances proposal was abandoned because there was concern that the capital gain might not, by virtue of falling within a different accounting period, be eligible for set-off against the capital allowances.
On 7 October 1994 there was a further consultation with Mr Thornhill QC. It was attended by the Respondents, Mr Kay, Mr Percival, Mr Sundel, Mr Morris, Mr Concannon, and Mr Siddiqui of Haines Watts, EBB's accountants. The consultation was arranged to discuss a different proposal to defer and mitigate the capital gain by the use of rollover relief under the Taxation of Chargeable Gains Act 1992 (" TCGA 1992") s.152. The proposal was to acquire qualifying assets, in particular an aircraft, into which the capital gain would be rolled, so that the corporation tax charge on the gain would be deferred until the qualifying assets were sold.
Pursuant to the rollover scheme, on 19 October 1994 Microplaza Ltd ("Microplaza") was incorporated. It became a wholly owned subsidiary of MV on 15 November 1994 when the shares in the name of the formation agents were transferred to MV. The Respondents became directors of Microplaza on that day.
On 17 November 1994 Microplaza entered into a hire purchase agreement with Lupa Marine (UK) Ltd ("Lupa Marine") for the acquisition of dry cargo containers for ships, and entered into an administration contract with Cordes Investments Ltd ("Cordes") for leasing the containers to third parties. Those transactions were entered into, pursuant to the rollover scheme, in order to establish a trade of leasing by Microplaza.
On 9 December 1994 Microplaza entered into a further hire purchase agreement with Lupa Marine for the acquisition of more shipping containers, and an administration contract with Cordes leasing those containers to third parties.
On 23 December 1994 Microplaza entered into a credit purchase agreement ("the Purchase Agreement") with Safe Harbour Leasing Limited ("Safe Harbour") for the purchase of a water purification plant ("the WPP") for £8,700,000, and an agreement to lease the WPP back to Safe Harbour ("the WPP Lease Agreement"). The WPP was acquired, instead of the aircraft originally proposed, as the asset into which the gain from the sale of the Ronson Business was to be rolled. The WPP Lease Agreement contained an option for Safe Harbour to repurchase the WPP by not less than 10 days' notice in writing to expire on the first day of a month. The option price was £8,613,000.
On 21 March 1995 Safe Harbour served notice exercising its option to repurchase the WPP on 1 April 1995.
At a meeting on 31 March 1995 attended by, among others, the Respondents and Mr Sundel, Mr Sundel agreed that EBB would purchase Microplaza for £1, on terms that a £1 million "fee" would be paid to EBB if the rollover scheme was successful so that MV had no liability to corporation tax in respect of the gain on the sale of the Ronson Business.
On about 25 April 1995 Mr Richmond signed, on behalf of MV, and on about 28 April 1995 Mr Sundel countersigned, on behalf of EBB, a letter from MV to EBB ("the April Agreement Letter") referring to EBB's agreement to purchase Microplaza. The Letter also referred to EBB's agreement to procure that Microplaza would enter into transactions the result of which would be that Microplaza would not have any tax liability in relation to its current financial year and that MV would not have any actual or contingent liability resulting from the sale of the Ronson Business and/or MV's ownership of the shares in Microplaza at any time. MV agreed in the Letter that MV would pay Microplaza £1.16 million conditional upon it being established that Microplaza did not have a tax liability in relation its current financial year, and that MV did not have any actual or contingent liability resulting from the sale of the Ronson Business and/or its ownership of the shares in Microplaza at any time.
On about 15 May 1995 there were sent to EBB stock transfer forms transferring to EBB the issued shares in Microplaza, and also Microplaza's seal and company books. The Respondents resigned as directors of Microplaza, and Mr Sundel of EBB was appointed in their place.
On 18 May 1995 there was a telephone discussion between Mr Sundel and Mr Concannon about an inter-company loan of £220,000 which had been made by MV to Microplaza. In a letter from Mr Concannon to Mr Sundel the following day, Mr Concannon said that, rather than writing-off that loan between Microplaza and MV, MV would propose "to capitalise the loan as part of the arrangements set out in [the April Agreement Letter] relating to the payment of the further £1.16 million".
On about 23 May 1995 Mr Richmond signed, on behalf of MV, and on about 31 May 1995 Mr Sundel countersigned, on behalf of EBB, a letter from MV to EBB dated 23 May 1995 ("the May Agreement Letter") which was expressed to replace, and not be in addition to, any previous letter "relating to the same subject matter." The second and third paragraphs of this letter were in identical terms to the first and second paragraphs of the April...
To continue reading
Request your trial
-
Madoff Securities International Ltd ((in Liquidation)) v Stephen Raven and Others
... ... Ms Jones, an assistant to Bernard Madoff, communicated to Mrs Kohn, on a quarterly basis, figures which Ms ... Bairstow v Queens Moat Houses Plc [2002] BCC 91 per Robert Walker LJ at [49]-[54]; Re Loquitur [2003] STC 1394 per Etherton J at [135]-[137]; In Re Paycheck Services 3 (sup) per Rimer LJ ... ...
-
HM Revenue and Customs v Holland; Re Paycheck Services 3 Ltd
... ... Mr Watson's] letter (advised by Jones [or James—the writing is unclear]) saying that ESC C9 did apply”. On one reading, this suggests ... Walker LJ, applying Re Exchange Banking, Flitcroft's Case [1882] 21 Ch D 519 , and Re Loquitur, IRC v. Richmond [2003] 2 BCLC 442 at 471 —472 per Etherton J, applying Re Lands Allotment ... ...
-
BTI 2014 LLC v Sequana S.A.
...2748 (Ch); [2003] 2 BCLC 153, para 74 (“insolvent or of doubtful solvency or on the verge of insolvency”), and in re Loquitur Ltd [2003] EWHC 999 (Ch); [2003] 2 BCLC 442, para 240 (“insolvent or potentially insolvent”). These phrases are broadly synonymous, and all convey a sense of immi......
-
HM Revenue and Customs v Holland; Re Paycheck Services 3 Ltd
...(No 3) [1968] 1 WLR 1555 at 1575; Belmont Finance Corpn v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 at 404; Re Loquitur Ltd [2003] EWHC 999 (Ch); [2003] 2 BCLC 442 at 471-472. On the other there is a line of authority to the effect that a director is only liable if he makes a mis......
-
‘Knowledge’ as a mechanism to hold directors personally liable for adverse distributive decisions under the Companies Act 71 of 2008
...to repay the moneys to the tune of 78 million pounds. See also Re Loquitar Ltd Inland Revenue Commissioners v Richmond and Another [2003] EWHC 999 (Ch); [2003] All ER (D) 123. 78 It’s a Wrap (UK) Ltd (in liquidation) v Gula [2006] EWCA Civ 544 para 1. 79 White (A�P�) v� White and the Motor ......