John McCarthy v Louise Mary Brittain
| Jurisdiction | England & Wales |
| Judge | Sir Anthony Mann |
| Judgment Date | 20 May 2022 |
| Neutral Citation | [2022] EWHC 1200 (Ch) |
| Docket Number | Case Nos: CR-2012-008789 |
| Court | Chancery Division |
In the Matter of Emerald Meats (London) Limited
And in the Matter of Emerald Properties (London) Limited
And in the Matter of the Insolvency Act 1986
[2022] EWHC 1200 (Ch)
Sir Anthony Mann
Case Nos: CR-2012-008789
CR-2016-001271
IN THE HIGH COURT OF JUSTICE
INSOLVENCY AND COMPANIES LIST (ChD)
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
Stuart Adair (instructed by SBP Law) for the Applicant
John Briggs (instructed by Boyes Turner) for the 1 st and 2 nd Respondents
Elizabeth Weaver (instructed by Fladgate LLP) for the 3 rd Respondent
Hearing dates: 23 rd & 24 th March 2022
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.
This is an application by Mr John McCarthy for a direction that the liquidators of Emerald Meats (London) Ltd (“Meats”) and Emerald Properties (London) Ltd (“Properties”) assign to him various causes of action for what I can call misfeasance against Mr Marshall, the third respondent to this application. The first and second respondents are the current liquidators who have declined to assign those causes of action without a direction from the court. Properties is a wholly owned subsidiary of Meats, which has been in liquidation since 2013 and Properties since 2014. Both liquidations are solvent and at the moment there is a substantial undistributed surplus held by the liquidators.
Mr McCarthy presses for the assignment; Mr Marshall opposes it. The liquidators are neutral. There are three principal issues on this application:
(i) Has the question of the assignment already been determined against Mr McCarthy as a result of previous orders and decisions in litigation concerning these companies.
(ii) If the answer to that is Yes, should those decisions be revisited under Insolvency Rules 12.59(1).
(iii) If the answers to the two previous questions would permit an assignment, should the liquidators nonetheless be directed not to assign on the basis that to do so would be to permit hopeless and/or vexatious litigation.
Issues (ii) and (iii) overlap in that some of the facts are relevant to both.
Background
The background to this matter appears from a previous judgment of mine ( [2019] EWHC 433 (Ch)) to which reference should be made for general background and any detail that does not appear here.
Ignoring for these purposes one share held in the name of Mrs McCarthy (which I shall do hereafter), Mr McCarthy and Mr Marshall were the equal owners of Meats whose trade was, as its name suggests, trading in meat. Properties held (again as its name suggests) properties. Those properties have been sold, and indeed were sold before the winding up of Properties (brought about by the then liquidators of Meats after their appointment). Mr McCarthy resided in Dublin. Mr Marshall resided in England and was left in day-to-day charge of the business. In 2010 Mr McCarthy and Mr Marshall fell out and Meats essentially ceased trading. There is a dispute as to whether there was some residual trade for a while, but in any event at about the same time Mr Marshall started his own meat trade via his own company, Mulberry International Ltd (“Mulberry”), which he has traded since then. Mr McCarthy did not start his own meat trade. In 2013 Meats was wound up on Mr Marshall's petition on the just and equitable ground. Mr McCarthy had commenced his own unfair prejudice proceedings, and complained of various misfeasances on the part of Mr McCarthy, but Registrar Barber decided that winding up was preferable when it came to investigating those matters, because liquidators would be better placed to investigate (see paragraph 24 of her judgment of 19th July 2013). In due course the liquidators of Meats wound up Properties, and the liquidations have at all material times had the same liquidators.
By now the distrust of Mr Marshall by Mr McCarthy was profound. When Mr Marshall lodged a proof of debt Mr McCarthy's accountants produced evidence which forced him to reduce his claim substantially, and eventually he withdrew it completely. Mr McCarthy had other misgivings about the way that Mr Marshall had conducted the affairs of the company, and he also disputed the manner in which the liquidators had conducted their liquidations. On 25th July 2016 certain applications made by Mr McCarthy were heard by Chief Registrar Baister. Mr McCarthy appeared in person on this occasion. There was a challenge to the liquidators' remuneration by Mr McCarthy, an application for inspection of documents by Mr McCarthy and an application for an interim distribution in favour of the shareholders. In the course of the debate about distribution the Registrar indicated that it seemed to him that once HMRC clearance was obtained there could be a distribution:
“Provided that you [viz Mr McCarthy] haven't got anything else up your sleeve because they don't want to distribute and then find you start suing them over something and they've got no assets to indemnify. So, if you're happy with that you could give me an undertaking that you're not going to bring any further action.”
Mr McCarthy indicated that he could not do that because he was without representation. He did not know what claims he might have. Chief Registrar Baister indicated that he was looking for a mechanism to flush out claims to see whether it would be possible to close down the liquidation:
“[Mr McCarthy] can challenge a decision of the liquidator, but that is why I want to see whether I can find a mechanism to say that unless challenge is to the liquidator amounting as to anything else [sic] that is outstanding by a certain date, the liquidator is free to close down.”
He then attempted a formulation as follows:
“So, the first order will be Mr McCarthy notifies the liquidators by 4.30 on 25 August of any claims, applications or other objections relating to the conduct of the liquidators. There may be a better way of putting that. I will let everyone go outside and think if they want to as well. Secondly, if none are so notified, the liquidators proceed to close the liquidation as soon as practicable, and then, thirdly, the remuneration application and all applications connected therewith be adjourned until the final fees of the liquidators have been determined by the court and/or by agreement, for which purpose the applications stand adjourned generally, to be listed for further directions.”
The Registrar then invited the parties to step outside court and produce an agreed wording to deal with what he had decided should happen. The result was an order with the following relevant terms:
“2. That Mr McCarthy shall notify the Liquidators and Mr Marshall's solicitors by 4:30 pm on 8 September 2016 of all and any claims, applications or objections which he has in relation to the conduct of the liquidation of Meats and/or Properties by the Liquidators (save for the remuneration of the Liquidators and their legal expenses in relation to the liquidations) or claims against Mr Marshall relating to the affairs, dealings or property of Meats or Properties (hereinafter called “the claims”).
3. That Mr McCarthy shall be debarred from making any claims not so notified.
4. That if no claims are so notified the Liquidators shall proceed to close the liquidation of Meats and liquidation of Properties as soon as practicable.
…
6. In the event that Mr McCarthy gives notification of any claims the Liquidators shall as soon as practicable apply to the court for further directions.”
This is the first of the orders in this case which Miss Weaver for Mr Marshall submits to be an answer to Mr McCarthy's current application because she says that the claims which he now wishes to bring were not notified under this order within the specified time (which as a matter of fact is correct).
Mr McCarthy's solicitors served a letter on 17th August 2016 giving notice of the claims that he considered he had against the liquidator and against Mr Marshall. They did not include the claims which he now wishes to have assigned. For their part, and pursuant to the liberty to apply, the liquidators issued an application for directions on 19th September 2016. They sought an order that Mr McCarthy issue any applications he intended to issue within 28 days and in default should be debarred from issuing them at all. This application came before Chief Registrar Baister on 8th November 2016. Mr Adair appeared for Mr McCarthy at that hearing and expressed misgivings as to how the debarring order came about at the previous hearing. When he raised them the Chief Registrar made the following remarks, relied on by Mr Adair now:
“The Registrar: I think that is probably a fair point. I can remember feeling a certain amount of despair as to how we are going to get out of this and move on. I am open to the idea I may have been wrong and shot from the hip, but what is the way forward if it is not the one?
Mr Adair: Exactly. My concern was, firstly, that there was no notice and he was a litigant in person. The second concern was that there was actually no evidence before the court of any breach of any order, rule or practice direction or any of these approaches.
The Registrar: Start from the premise that I am prepared to assume I may have shot from the hip and gone too far. That brings us back to what we do and, if it is not what I have suggested, what do we do?”
The Chief Registrar did not actually recall any part of his previous order. His order on this later occasion actually provided (so far as...
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