LCP Retail Ltd v Richard Andrew Segal
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE DAVID RICHARDS,Mr Justice David Richards |
| Judgment Date | 04 August 2006 |
| Neutral Citation | [2006] EWHC 2087 (Ch) |
| Court | Chancery Division |
| Date | 04 August 2006 |
| Docket Number | Case No: CH/2006/APP/0281 |
[2006] EWHC 2087 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice David Richards
Case No: CH/2006/APP/0281
William Hansen (instructed by Fraser Brown) for the Appellant
Raquel Agnello (instructed by Stephenson Harwood) for the Respondent
Hearing dates: 5 July 2006
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 Honourable
Introduction
This is an appeal by L.C.P. Retail Limited (the landlord) against an order of Registrar Derrett made on 30 March 2006, in which she ordered that the sale proceeds of goods belonging to Premier Karting World Limited (the company) be paid to Richard Andrew Segal, the company's liquidator.
Background
The company operated a go-karting race track at premises in Bridgwater, Somerset. The premises were let by the landlord under the terms of a lease dated 28 January 1998, the lease having been assigned to the company pursuant to a licence dated 22 July 2002.
The company failed to pay the rent due on 1 July 200On 2 July 2003 the landlord instructed Parkinson Bailiff Services Limited to execute a distress warrant and on the same day, again acting through Parkinson Bailiff Services Limited, took walking possession of go-karts and other goods belonging to the company. The walking possession agreement, in standard form, was signed on behalf of the company by Melvern Westwood, its director. The agreement stated "I will not remove or sell the goods or any part of them or allow any other person to do so without your permission." The agreement provided that the landlord could remove and sell the goods at any time after 2 October 2003 if the company had not by then paid the sum due and the bailiff's charges. The value of the distress was £25,077.44.
Various sums totalling just over £18,700 were paid by the company to the landlord in July, August and September 2003. It may be, although this does not arise for decision that the director believed that, taken together with a rent deposit of £14,000, these payments had the effect of discharging the distress. It is common ground that the landlord had not applied the rent deposit towards the outstanding rent and was not required to do so. Accordingly, whatever the belief of the director, the distress was not discharged in this way. On 18 September 2003, without the knowledge or permission of the landlord or the bailiff, the company instructed a firm of valuers and auctioneers to remove and sell goods from the premises, including some or all of those which were subject to the walking possession agreement. Between 7 October and 19 November 2003 the auctioneers realised a total of £5,816.90 from the sale of some of the goods, leaving a balance due to the company of £2,698.65 after deduction of the sale costs and expenses. It is this sum which is in dispute on this appeal.
The company ceased trading on 22 September 2003.The landlord inspected the premises on 9 October 2003, with a view to a sale of the lease. The Registrar found that the fact the goods had been removed "would have been clear to the Respondent when he inspected on 9 October 2003." The landlord subsequently wrote to the company on 14 October 2003. The landlord and the liquidator both place reliance on the letter, the key paragraphs of which are set out below:
"Following the landlord's inspection on 9 th October, I arranged to meet two local agents who are aware of the unit and are confident it could be re-let in short term. Subject to you agreeing to no waiving of landlord rights and privileges within the occupational lease dated 28 th January 1998 and subsequent documentation (Deed of Assignment, Deed of Variation and Rent Deposit Deed), we would be pleased to instruct Hatfield White and McKinlays Surveyors to market the unit on your behalf.
…
In the meantime, providing you have no intention of re-occupying the premises, please arrange for the units to be cleared including all old car tyres, tenant's fixtures associated with the Go-Kart use, engine parts and oil canisters etc from rear yard and any refuse/small items within the office areas. This will ensure the unit presents better for marketing purposes."
The letter was counter-signed on behalf of the company on 16 October 2003 and returned to the landlord.
On 17 October 2003 notices were sent out to creditors of the company, including the landlord, calling a meeting of creditors pursuant to section 98 of the Insolvency Act 198Creditors were also sent a proxy and proof of debt form. The landlord promptly returned the proof of debt form, which was dated 27 October 2003.
The proof of debt was in the form prescribed by the Insolvency Rules. The landlord stated its debts as £290,573.08. Box 10 of the form required the creditor to state:
"Particulars of any security held, the value of the security and the date it was given".
The landlord left this box blank.
The meeting of creditors was held on 5 November 2003, and Mr Segal was appointed as liquidator.
On or around 19 November 2003 the liquidator's assistant telephoned the landlord to discuss the property. He was informed that there was an outstanding warrant of distress, and that a walking possession agreement had been made on 2 July 2003. The liquidator had not previously been aware that there was any warrant for distress in existence, nor that walking possession had been taken.
In subsequent correspondence the landlord maintained that it was entitled to the net proceeds of sale of the goods which had been subject to its distress and which had been removed and sold in breach of the walking possession agreement.
By an application notice dated 21 July 2005, the liquidator sought directions as to whether the proceeds, which were in the meantime held by the auctioneers, should be paid to himself as liquidator or to the landlord.
The application came before Registrar Derrett on 30 March 2006. In his evidence in support of the application, the liquidator relied on the provisions of section 183 of the Insolvency Act 1986 on the grounds that the landlord's distraint was an execution against the goods of the company which had not been completed before the commencement of the winding-up. However, it was accepted before the Registrar that, in the light of Herbert Berry Associates Ltd v IRC [1977] 1 WLR 783 and In re Modern Jet Support Ltd [2005] BPIR 1382, distress was not a form of execution and section 183 was not therefore applicable. A second argument advanced by the liquidator was that the debt which was the subject of the distress warrant had been extinguished by the application of the rent deposit. This, too, was not pursued before the Registrar.
In his evidence, the liquidator also drew attention to the terms of the letter dated 14 October 2003, requesting removal of all goods from the premises without references to its distress, and to the absence of any reference to the distress in the proof of debt form.
As foreshadowed by the skeleton argument of counsel for the liquidator, it was submitted to the Registrar that by the letter dated 14 October 2003 and by the proof of debt form the landlord had abandoned its distress. It was further submitted that the landlord was estopped from relying on the distress and that in any event the court should exercise its discretion, discussed in Herbert Berry Associates Ltd v IRC and In re Memco Engineering Ltd [1986] Ch 86, to restrain the landlord from completing the distress by claiming payment of the net proceeds of sale.
The Registrar held in favour of the liquidator on the grounds that the landlord had abandoned its distress and that in any event it would be inequitable to allow the landlord to proceed with...
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