John McCarthy v David William Tann and Others
| Jurisdiction | England & Wales |
| Judge | Mr. Registrar Briggs |
| Judgment Date | 22 February 2016 |
| Neutral Citation | [2016] EWHC 542 (Ch) |
| Docket Number | Case No: 7489 OF 2012 |
| Court | Chancery Division |
| Date | 22 February 2016 |
[2016] EWHC 542 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice, Rolls Building,
Fetter Lane, London, EC4A 1NL
Mr. Registrar Briggs
Case No: 7489 OF 2012
Stuart Adair (instructed by BRABNERS) for the Applicant
John Briggs (instructed by BOYES TURNER) for the First and Second Respondent
Joseph England (instructed by FLADGATE) for the Third Respondent
Hearing dates: 16 February 2016
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.
The court is asked to decide whether it should extend time for the filing of an appeal against a decision made by liquidators of a company to admit a proof of debt. The appeal notice was served three business days out of time. If the court were to permit an extension of time it is asked to order inspection of company records pursuant to section 155 of the Insolvency Act 1986. The application to extend time is vigorously resisted by the third Respondent and opposed by the first and second Respondents but to a lesser degree.
The issues mentioned above have spawned skeleton arguments that combined run to 70 pages, the citation of 23 authorities, 8 witness statements with exhibits, and an expert report with exhibits. The parties estimated the hearing to take 2 1/2 hours. The time estimate was optimistic. Due to a lack of time not all the arguments regarding the second issue were aired. I have taken into account of the lack of time to air the arguments later in this judgment.
This is the third application to come before the court concerning the liquidation of Emerald Meats (London) Limited (the "Company"). The applicant, Mr. John McCarthy, is a contributory and creditor of the Company. This application arises out of a letter sent by the first and second Respondents (the "Joint Liquidators") on 1 July 2015 informing Mr. McCarthy that they had admitted a proof of debt submitted by Mr. Marshall (the third Respondent) in the amount of £53,900.68.
Background
The Company was incorporated on 31 May 1983 under the Companies Act 1948 and is limited by shares. Its share capital is £50,000 divided into 50,000 ordinary shares of £1–00 each. The Company's business was concerned in imports and distribution of meats. Mr Marshall holds 25,000 shares. Mr. McCarthy and his wife equally hold the other 25,000 shares.
The Company held 100 per cent of the shares in a company known as Emerald Properties (London) Limited ("Properties"). The subsidiary owned a property portfolio which included a block of flats at 30 Lancaster Gate, London that is considered valuable. The day to day running of the Company was undertaken by Mr. Marshall. Mr and Mrs McCarthy lived, and continued to live, in Dublin. Mr. McCarthy explains in his evidence that he and Mr Marshall had a good relationship for many years. However this changed when Mr Marshall replaced the companies' accountant. He says that there was a lack of information flowing from the Company. The lack of information led to a suspicion (of which I make no judgment) that "Mr Marshall was acting fraudulently, that the errors and omissions identified in the accounts were deliberate, and that they were intended to extract value and assets from the Company". Mr. McCarthy refused to sign the filed accounts for year ending 30 September 2009 and the management of the Company slowly ground to a halt. Mr. McCarthy explains:
"Having also proposed that we liquidate the companies in a Members Voluntary Liquidation in mid-2012 on grounds that we would not have to file any accounts if they were liquidated, on 25 September 2012, Mr Marshall petitioned the High Court for a just and equitable winding up on grounds management was deadlocked in these regards. I defended the winding up petition and I issued section 994 unfair prejudice proceedings contending there were more reasonable remedies available to the court rather than liquidating the companies. On 19 July 2013 the High Court made an order for the winding up of the Company and stayed the unfair prejudice proceedings."
I have made orders for interim distributions as the Joint Liquidators have reported that there will be a surplus in the liquidation in excess of £5m.
The proof of debt and the late application
Mr Tann has given evidence on behalf of the Joint Liquidators. Mr. Marshall and Mr. Tann are both agreed as to the sequence of events leading to the submission of the impugned proof of debt. Mr. Marshall says:
"I originally filed a proof of debt dated 18 September 2014 which quantified the credit balance of my director's loan account at £201,482. This figure was included as, at the time, it was the most up to date figure available and was taken from the last filed Company audited accounts, dated 30 September 2008.
Following submission of my original proof of debt dated 18 September 2014, I had a meeting with Toby Mason of Wilkins Kennedy in mid-January 2015 regarding my proof of debt. In early February 2015 I was then told that the liquidators' investigations and review were complete and I was asked to submit an amended proof of debt quantifying that claim at £53,900.68.
This was done and the amended proof of debt was sent to the liquidators on 3 February 2015 quantifying the claim in relation to my director's loan account at £53,900.68…….On 1 July 2015 I received a letter from David Tann dated 30 June 2015 confirming that the liquidators had admitted my claim relating to my director's loan account in the amount of £53,900.68.
Mr. Marshall resists the application to appeal out of time on the basis that Mr. McCarthy has, in his eyes, tried to delay the winding up which has resulted in increased costs and time. He explains his position in his first witness statement:
"The application [to appeal out of time] was made the day before he received his distribution of £20,000 (on 30 July 2015), at a time when he was in exactly the same financial position as he had been for the entire period during which he was aware the liquidators had admitted my claim. Accordingly, Mr McCarthy's justification for the delay based on lack of legal representation and money does not ring true. I have suffered prejudice in the form of extra cost in having been forced to apply to be joined to these proceedings when I ought to have been a Respondent from the outset. In addition, his various applications have caused me, the liquidators and the liquidators' solicitors (and therefore the Company) to incur unnecessary costs in dealing with them. The more time and money spent responding to Mr McCarthy's applications means the more the assets of the Company are being rapidly depleted. Finally, I do not see why I should not be able to benefit from the protection of deadlines and be safe in the knowledge that if Mr McCarthy misses a deadline then that is the end of the matter. As it is, I am constantly on the hook."
Those are powerful reasons why the time limits set out in the Insolvency Rules 1986 should not be extended by the court. However the statutory mechanism provides the court with a discretion to extend.
To make good his submission that time should not be extended, Mr. England on behalf of Mr. Marshall says that in terms of delay, it is 5 years since trading ceased, and over 2 years since liquidation and the appointment of the Joint Liquidators. As regards the costs to date the Company has incurred £250,000 in Joint Liquidators' fees and over £145,000 in their solicitor's fees. Mr. McCarthy's actions only increases the delay and costs reducing the final dividend to members.
Mr. Marshall says that he accepts the Joint Liquidators' decision to significantly reduce his proof of debt claim. Mr. McCarthy should also accept their decision. The evidence of the Joint Liquidators is that they have thoroughly investigated the proof and that any disclosure order would be in vain as all documents have been considered properly. Mr. McCarthy on the other hand says that he cannot file full evidence in support of his application to appeal the decision until he has inspected the Company's books and records. Mr. Marshall responds:
"He has always had access to everything and his investigations have not uncovered anything. I believe his request to access is nothing more than a fishing exercise designed to further delay the liquidation….Mr McCarthy has not raised any new and substantive points in his evidence; it is simply a repeat of matters that were raised in his evidence regarding the winding up petition. All of these points have been previously dealt with by the liquidators or this court. The appeal is clearly not proportionate. The Company is solvent and it is anticipated that there will be a surplus in the liquidation of in excess of £5.5 million. The amount being challenged is just over £50,000, a very small fraction of the total assets of the Company and the parties are being forced to expend thousands of pounds entertaining another of Mr McCarthy's unfounded applications".
As a result of the evident break-down of trust between Mr. McCarthy and Mr. Marshall, it is not surprising that they are unable to agree on how the liquidation should be conducted. On one hand Mr. Marshall wants the Company wound up and a distribution as soon as possible. On the other hand there is at least a danger that Mr. McCarthy views the liquidation as a forum in which he can conduct dispute resolution. The Joint Liquidators, as Mr. John Briggs says, are caught in the middle of the dispute. In such circumstances the court is, in my...
To continue reading
Request your trial
-
Darryl Preston and Another v Mr Elliot Green (Liquidator of Cre8atsea Ltd) and Others
...application to extend time for the filing of an appeal against a decision made by liquidators of a company to admit a proof of debt in McCarthy v Tann [2016] EWHC 542 (Ch). The reasoning was that an appeal against a rejection of proof is a challenge to a decision made by an office holder a......
-
Mohammed Arshad Alam v Pervez Alam
... ... It appears to have been arranged with Mr John Kay (“ Mr Kay ”) of Molesworths Bright Clegg ... Some witnesses chose to swear an oath, others to affirm. During their closing submissions, ... account of its financial affairs, McCarthy v Tann [2015] EWHC 2049 (Ch) at [40] per Mr ... emails, in March and April 2015, between Mr David Stelfox, of the Bank, and Arshad, in connection ... ...
- Ecology Support Services Ltd v Kevin Hellard and Another