Kieran Michael Bourne (as Liquidator of M.M. Apartment Letting Ltd) v Manuk Manukyan
| Jurisdiction | England & Wales |
| Judge | Greenwood |
| Judgment Date | 16 April 2024 |
| Neutral Citation | [2024] EWHC 832 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2018-002980 |
In the Matter of M.M. Apartment Letting Limited (In Liquidation)
And in the Matter of the Insolvency Act 1986
[2024] EWHC 832 (Ch)
INSOLVENCY AND COMPANIES COURT JUDGE Greenwood
Case No: CR-2018-002980
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Rolls Building
Royal Courts of Justice
7 Rolls Buildings
London EC4A 1NL
Amit Gupta (instructed by Morgan Phelps Solicitors) for the Applicant
The First Respondent appeared in person
The Second Respondent was neither present nor represented
Hearing dates: 30, 31 October and 1 November 2023
This judgment was handed down remotely at 10.30am on 16 April 2024 by circulation to the parties or their representatives by e-mail.
ICC JUDGE
Introduction
This is the trial of an application made by Mr Kieran Bourne in his capacity as the liquidator of M.M. Apartment Letting Ltd (“ the Company”) and by the Company itself, by Insolvency Act Application Notice dated 6 January 2022, against the Company's former sole director, Mr Manuk Manukyan, and his wife, Mrs Yolanda Manukyan, formerly its company secretary. The Company is in compulsory liquidation, a winding-up order having been made against it on 28 June 2018 in the Birmingham District Registry on the first hearing of a petition presented on 13 April 2018 by a creditor, Nell Gwynn House Apartment 2 Ltd (“ NGH”). The petition was founded on the Company's failure to pay a debt in the sum of £243,898.87, said to have been due as at 29 March 2018, and admitted as to about £184,000.
The Applicant sought relief:
2.1. first, against Mr Manukyan alone, under ss. 212 and/or 238 and/or 239 of the Insolvency Act 1986 (“ the IA 86”) and the Companies Act 2006 (“ the CA 2006”), in respect of a £10,000 dividend, admitted to have been declared and paid to Mr Manukyan in June 2018 (“ the June Dividend”) and therefore after the deemed commencement of the winding up, without the benefit of a validation order under s.127 of the IA 86, at a time when the Company was admittedly insolvent; and,
2.2. second, in respect of various payments (including cash withdrawals) admitted to have made by the Company, acting by Mr Manukyan, from its sole bank account (at Lloyds Bank, Upper St., Islington Branch, account number 00284404 — “ the Bank Account”) between 14 August 2017 and 13 April 2018, in the aggregate sum of £93,003.73 (“ the Payments”):
2.2.1. against Mr Manukyan, under ss.212 and/or 238 and/or 239 of the IA 86, in respect of the whole sum (albeit that in closing, it was said the Applicant's case was principally advanced under ss.212 and 238);
2.2.2. against Mrs Manukyan, under s.239 of the IA 86, in respect of an amount no more than £76,670.57, if and to the extent that by virtue of the Payments, she was repaid in respect of certain loans and/or financial assistance admitted to have been given by her to the Company between March 2017 and 15 January 2018 in that aggregate sum. Plainly, if and to the extent that Mrs Manukyan was repaid a debt by means of the Payments or any of them, the claim against Mr Manukyan under s.238 could not succeed: repayment of a debt is not a transaction at an undervalue.
Mr Manukyan was present at the trial, albeit without representation; he gave evidence and was cross-examined by Mr Amit Gupta of Counsel who appeared for the Applicant; Mrs Manukyan was not present, and although Points of Defence (drafted by their counsel) had been served on behalf of both Respondents together, Mrs Manukyan did not herself make or serve a witness statement or serve any other evidence. Otherwise, the evidence at trial comprised the first witness statement of Mr Bourne made on 11 October 2022, and his second statement made on 18 January 2023. His evidence was admitted without attendance or cross-examination, by virtue of an Order made by Deputy ICCJ Agnello QC (as she then was) on 2 September 2022. As a preliminary point, I was satisfied that Mrs Manukyan was aware of the trial (which was fixed by order made on 26 September 2022, about two months after the Defence was served, at a time when both Respondents were represented) and chose not to attend; indeed, notwithstanding that Mr Manukyan appeared in person, the Respondents' solicitors (Morgan Has) remain on the record.
In summary — I shall deal with its detail at appropriate points below — Mr Manukyan's case, which certainly he purported to advance on behalf of Mrs Manukyan also, was that he alone was responsible for the operation, management and financial affairs of the Company; that the sums in issue were all paid or used by him for the proper purposes of the Company's business (and in return for valuable consideration); and that to the extent Mrs Manukyan was repaid, those repayments were not made under the influence of a desire to improve her position in the event of an insolvent liquidation.
The Background
The Company was incorporated on 24 July 2002, and its 100 issued shares were held, as to 60, by Mr Manukyan, and as to the remainder, by his daughters, Dora and Natalie, each of whom held 20, but neither of whom was otherwise involved in its affairs. From the beginning, Mr Manukyan was the Company's sole director, and owed duties accordingly; Mrs Manukyan was the company secretary, but according to Mr Manukyan, had “ no idea” about its affairs, and was not involved in its management. He said they had been separated for some 20 years. As mentioned above, the Company had only one bank account, in respect of which Mr Manukyan was the sole signatory, and only he held a debit card; he accepted that he alone was responsible for all payments and transfers out of the Bank Account.
Essentially, the Company provided agency services, referring customers (mostly in Turkey, but also Spain) who were seeking short-stay holiday accommodation in London, for two to three days, to various accommodation providers. NGH was one such provider, and had been since 2005; from 2015, according to Mr Manukyan, it provided a “ large share”, indeed, almost all of the required accommodation.
Mr Manukyan described the business as “ low-margin” (5–10% “ maximum”), only able to charge customers sums “ slightly above” those payable to the accommodation providers. Because it was often required to pay providers before itself receiving payment, the Company, according to Mr Manukyan, “ regularly suffered from cashflow difficulties”. It had no office in England, but traded from Mr Manukyan's home; it paid for the services of a contract manager, one Mr William Bailey, who was paid, according to Mr Manukyan, £2,500/month. In addition, Mr Manukyan described the existence of various other general costs and expenses, such as “ business lunches”, telephone bills and travel expenses.
According to its abbreviated accounts to 31 July 2016 (“ the 2016 Accounts”) produced by its accountants, Champ Consultants Limited (“ Champ”) and dated 12 December 2016, the Company had £7,123 cash at bank and in hand, and net liabilities of £3,576 (compared with £5,903 in the previous year); it had shareholders' funds in the negative sum of £3,576. Mr Manukyan understood that it was important to maintain the Company's financial books, records and other documents, and said that he gave Champ “ whatever they needed”; he did not criticise or seek in any way to undermine or cast doubt on their work or its product; on the contrary, he accepted that he could not dispute it.
According to its “ Report and Accounts” in respect of the year to 31 July 2017 (“ the 2017 Accounts”), dated 25 January 2018, and also produced by Champ, the Company's turnover increased significantly, to £558,381 from £286,148 in the previous year, producing a profit of £26,441, and net assets in the sum of £1,365. The Notes to those Accounts recorded the fact of debtors owing £7,483 to the Company; in response to an enquiry from the Official Receiver, by letter dated 24 July 2018, it was explained by Champ that the whole of that sum was owed by Mr Manukyan.
Mr Manukyan's evidence was that the increased turnover after July 2016 “ put further strain” on the Company's cashflow, because it meant that it was obliged to find ever larger sums to pay for accommodation in advance of payment by its own customers. In those circumstances, in about March 2017, whilst in Turkey, he was (according to his witness statement) telephoned by a Mr Jamal Watfa from NGH, or (according to his oral evidence) by Mr Watfa's manager, one Ms Belinda Nolan, but in any event, was told that NGH was owed £40,000 (according to his witness statement) or £50,000 (according to his oral evidence) and would not allow customers to use booked rooms without immediate payment. The Company did not have that sum. Accordingly, Mr Manukyan asked his wife, who agreed, to lend £40,000 to the Company, which she sent directly to NGH; there was no written loan agreement and Mr Manukyan agreed that there was no immediate prospect of repayment. Moreover, he agreed in cross-examination that notwithstanding that payment, in about March 2017, the Company still had an outstanding debt due to NGH.
In addition to the sums owed to Mrs Manukyan and NGH, as at 31 March 2017, according to a Schedule produced by Champ and sent to the Applicant's Solicitors by letter of 18 November 2018, the Company owed Mr Manukyan (on his directors loan account) £38,059.23. By contrast, by 31 July 2017, Mr Manukyan owed the Company £7,483, and as at the date of its liquidation, owed it £27,3393.89 (a sum which he has been ordered to repay, by paragraph 1 of the Order of Deputy ICCJ Agnello QC on 2 September 2022).
On his return to England, Mr...
To continue reading
Request your trial