Louise Mary Brittain v Michael Chamberlain (Supervisor of a voluntary arrangement relating to North Point Global Ltd)

JurisdictionEngland & Wales
JudgeDavis-White
Judgment Date26 June 2020
Neutral Citation[2020] EWHC 1648 (Ch)
CourtChancery Division
Date26 June 2020
Docket NumberCase No: 759 of 2017

[2020] EWHC 1648 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS IN LEEDS

INSOLVENCY AND COMPANIES LIST (ChD)

Leeds Combined Court Centre

1, Oxford Row

Leeds LS1 3BY

Before:

HIS HONOUR JUDGE Davis-White QC

(SITTING AS A JUDGE OF THE HIGH COURT)

Case No: 759 of 2017

In the Matter of North Point Global Limited

And in the Matter of the Insolvency Act 1986

Between:
(1) Louise Mary Brittain
(2) Matthew John Waghorn (Joint Liquidators of Baltic House Developments Limited)
Applicants
and
Michael Chamberlain (Supervisor of a voluntary arrangement relating to North Point Global Limited)
Respondent

Ms Joseph Curl (instructed by Fieldfisher LLP) for the Applicants

Mr Steven Fennell (instructed by Clarion Solicitors Ltd) for the Respondent

Hearing dates: 2 June (reading) and 3 June 2020

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.

HIS HONOUR JUDGE Davis-White QC (SITTING AS A JUDGE OF THE HIGH COURT)

His Honour Judge Davis-White QC:

Introduction

1

On 7 September 2017, a company voluntary arrangement between North Point Global Limited (the “Company”) and its creditors (the “CVA”) came into effect pursuant to Part I of the Insolvency Act 1986 (“ IA 1986”). The Respondent, Mr Chamberlain, formerly the nominee, thereupon became the supervisor of the CVA pursuant to s7(2) IA 1986 (the “Supervisor”). The question before me is whether the applicants are bound by, and able to participate in, such CVA as contingent creditors of the Company.

2

On 17 May 2018, Baltic House Developments Limited (“BHD”), a subsidiary of the Company, was ordered to be wound up by the court on a petition presented to the Court on 6 February 2018. On the same date an application dated 6 March 2018, for the making of an administration order in relation to BHD, was dismissed. The applicants before me are the joint liquidators of BHD (the “Liquidators”). They were appointed by the Secretary of State on 24 May 2018. They are partners in the firm of Wilkins Kennedy LLP.

3

The Liquidators have submitted a proof in the CVA dated 18 February 2020 (the “Proof”). The proof is based upon a claim under s239 IA 1986, on the basis that certain payments by BHD to the Company, in a total sum of just over £841,000, amount to unlawful preferences of the Company. The Supervisor has rejected that Proof. Under the terms of the CVA, that rejection is now brought to the Court by the Liquidators, by way of appeal against the decision.

4

The main issues that I have to determine are as follows:

(1) Are the Liquidators bound by the CVA under s5(2) IA 1986?

(2) If they are so bound, are the Liquidators entitled to prove as creditors under the CVA? and

(3) If they are entitled to prove, should the Court determine the value to attribute to the Liquidators' proof or should the matter be remitted back to the Supervisor to decide, with the possibility that this might result in a further appeal if the Liquidators are not content with his decision?

5

The main issue is the first one. It turns upon the construction to be given to s5(2)(b)(ii) IA 1986 which provides that a CVA binds every person who in accordance with the rules would have been… entitled [to vote in the qualifying decision procedure by which the creditors' decision to approve the CVA was made] if he had had notice of it”.

6

The Supervisor submits that, at the time of the decision procedure, the individuals who are now the liquidators of BHD, were not liquidators. If notice had been given to them at that time, they would not have had any entitlement to vote, hence they are not bound by the CVA. The Liquidators submit that they are bound by the CVA and do fall within s5(2)(b)(ii). They say that the section is to be construed as looking at them not simply as individuals at the decision date, but as being individuals with the claims that they now have in their capacity as liquidators and asking on that hypothesis whether they would have been bound had notice been given to them in those circumstances.

7

The second issue turns upon the construction of the CVA (as varied). On the third issue the Liquidators rely, in part, upon the manner in which the Supervisor is said to have conducted himself in relation to the claim of BHD and, for that reason, I therefore need to examine the correspondence between the parties in more detail than would otherwise have been the case.

8

Both Counsel appeared before me remotely by video link. Mr Curl appeared for the Liquidators. Mr Fennell appeared for the Supervisor. I am grateful to both of them for their written and oral submissions and for the practical and commonsense manner in which they dealt with the application. As I shall explain, each took all the points that could properly be taken but Mr Fennell also made some concessions which, in my judgment, were entirely proper.

The Background facts

The Company and BHD

9

At the time of the CVA the directors of the Company were Craig Griffiths (appointed April 2015) and Anthony Marriott (appointed December 2016). Its holding company was LJS Corporate Projects Limited.

10

The report of the Supervisor to the court in his then capacity of nominee and dated 18 August 2017 (the “Nominee's Report”) describes the Company's business as follows:

The Company was incorporated as the parent company of a property development group. Over time the group became involved in four developments within Liverpool and one development in Manchester….The Company built up a worldwide network of property sales agents in order to sell long leasehold interests off plan to Investors…. Each development was owned by a specific corporate entity for the purpose of developing that specific project with the Company being the sole shareholder of each of these special purpose vehicles, creating the group structure.”

11

BHD was one of these subsidiary companies referred to in the Nominee's Report. It appears to have been the special purpose vehicle for the holding of, and making sales in relation to, Baltic House, Norfolk Street, Liverpool. At this stage of the liquidation of BHD, the creditors of BHD are predominantly individuals who paid up to 70% of the purchase price as deposits for 294 student apartments that were to be built at Baltic House. Although not all claims have yet been lodged, the Liquidators have received claims totalling just over £6 million from just over 100 investors and there are non-investor claims of over £700,000. It appears that the majority of BHD's funds were paid to connected companies prior to liquidation and that it is heavily insolvent.

12

In terms of the assets of BHD, the relevant real property has been sold by receivers and the proceeds will or have been used to pay secured creditors. In short, apart from the current proceedings and other ongoing litigation there are no significant assets in the estate.

The CVA: 7 September 2017

13

The Nominees Report reported (among other things):

The essence of the CVA is that the directors consider there is a viable business which they wish to continue and are offering to contribute the entire net proceeds received from the sale of a subsidiary expected to amount to £1.5m, a tax refund of approximately £93,000 and the sale of 2 motor vehicles for approximately £6,000 which in total will provide creditors with an estimated return of 34p in the £, which is a substantial improvement on that available, estimated at 21p in the £, if the Company were to be placed immediately into liquidation”.

14

Although it was said that the directors wished to continue the business, the Nominee also made clear that (as clause 8.1 of the CVA provides):

The company will continue to trade in the sense that its management team and consultants will endeavour to arrive at a satisfactory exit from each of its development subsidiaries. The aim being to realise as greater profit as possible from each of these assets with a view to returning a greater return to creditors where at all possible.”

15

Paragraph 7.9 of the CVA provides that no assets are to be excluded from the CVA, other than the benefit of tax losses which may be carried forward. The part of the Nominee's report referred to in paragraph 13 above has to be read in that context and therefore as including all the assets, not just proceeds of sale of one of the subsidiaries.

16

The CVA was approved by creditors by a decision process provided for under the IA 1986 and the Insolvency (England and Wales) Rules 2016 (the “IR 2016”). It took effect from...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT