MIR Steel UK Ltd v (1) Christopher Morris (2) Mark Fry and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rimer,Lord Justice Sullivan,Lord Justice Mummery |
| Judgment Date | 01 November 2012 |
| Neutral Citation | [2012] EWCA Civ 1397 |
| Docket Number | Case No: A3/2012/0071 |
| Court | Court of Appeal (Civil Division) |
| Date | 01 November 2012 |
[2012] EWCA Civ 1397
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Justice David Richards
[2011] EWHC 3310 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Mummery
Lord Justice Rimer
and
Lord Justice Sullivan
Case No: A3/2012/0071
Mr Paul Downes QC and Miss Emily Saunderson (instructed by Clyde & Co LLP) for the Appellant, Mir Steel UK Limited
Mr Lloyd Tamlyn (instructed by Lipman Karas LLP) for the Respondents
Hearing date: 24 July 2012
Introduction
This appeal, brought with the permission of Lewison LJ, is against an order dated 15 December 2011 made by David Richards J in the Chancery Division in proceedings in which Lictor Anstalt (a Liechtenstein anstalt, 'Lictor') is the claimant and Mir Steel UK Limited, the appellant ('Mir Steel'), is the first defendant. The judge had two applications before him, but the only one that is the subject of the appeal was Mir Steel's application to join as defendants to its proposed CPR Part 20 claim the four respondents to the appeal, namely, Christopher Morris, Mark Fry, David Hudson and Alphasteel Limited, a company in liquidation ('Alphasteeel'). Joint administrators of Alphasteel were appointed by a court order of 20 December 2007 and, following a replacement of one them on 6 May 2008, the first three respondents were the joint administrators. Alphasteel went into creditors' voluntary liquidation on 18 December 2008, and the three joint administrators became its joint liquidators. Of the three, Mr Morris and Mr Fry remain joint liquidators.
The judge dismissed Mir Steel's application. Mir Steel's appeal is against that order. Of the judge's 75-paragraph judgment dealing with the applications before him, only three paragraphs related to that part of the dismissed Part 20 application that is the subject of the appeal. To understand the basis of that application, and of Mir Steel's appeal, I must set out the background. In doing so, I have gratefully drawn from the judge's judgment, in part verbatim.
The facts
Alphasteel was a steel manufacturer operating from premises in Newport, South Wales. In about 1991, it engaged Lictor to purchase the parts required to assemble a hot strip mill, to be used for the production of hot rolled steel products. Lictor sourced the parts from various manufacturers and shipped them to Alphasteel's Newport site in about 1997. The equipment for the hot strip mill was assembled over the following two or three years and was installed at the site and joined to other plant, machinery and equipment. By April 2000, the equipment had been fully installed and commissioned and was ready to start production. It was a large item, some 300 metres long, bolted to concrete plinths and connected to gas, water and electricity supplies.
The arrangements between Alphasteel and Lictor relating to the equipment were set out in a letter of 3 April 2000 signed on their respective behalves. Whilst in the proceedings Mir Steel challenges the validity of the agreement contained in that letter, for the purposes of the applications before the judge, Mir Steel accepted that it constituted an enforceable contract between Alphasteel and Lictor. It recorded their agreement that the equipment was movable, that it was and would remain the property of Lictor and that Alphasteel had no property or other rights in it save for the right to use it to roll steel and produce the resulting products. It also provided that Lictor was entitled at any time, upon giving Alphasteel reasonable notice, to enter its premises and dismantle and remove the equipment at its expense; and that Alphasteel 'will not sell or purport to sell, mortgage, hypothecate or charge [Lictor's] interest as owners in the Equipment or create or knowingly suffer to exist any lien over all or any of the Equipment'.
Between April 2000 and the end of 2007, Alphasteel carried on business as a producer of rolled steel products using the equipment. Following its entry into administration in December 2007, the administrators instructed Edward Symmons LLP to prepare particulars of sale in relation to Alphasteel's business and assets and to carry out a marketing exercise. Particulars were circulated to possible buyers in January 2008. The covering letter invited offers for the freehold property, plant, equipment, motor vehicles, other assets and the goodwill of Alphasteel's business; and the particulars treated the equipment that was being offered for sale as including the hot strip mill. The judge said there was no evidence that, by that stage, the administrators had been alerted by Lictor or anyone else to the possibility of a claim by Lictor to ownership of the equipment. The conditions in the particulars made it clear that the information in them had been provided by Alphasteel's directors and staff, that no warranty was being given by Edward Symmons LLP or the administrators and that intending purchasers must satisfy themselves as to its correctness.
In February 2008, however, the 3 April 2000 letter referred to in paragraph 4 above (and perhaps other documentation) was provided to the administrators. Their solicitors, Withers LLP, made enquiries and, on 10 April 2008, Alphasteel's former accountants informed them by email of their recollection that Lictor had retained ownership of the equipment, which had not been shown as an asset of Alphasteel in its accounts.
By a letter of 25 April 2008, agents for Libala Limited, a Cypriot company (and second defendant to Lictor's claim), made a 'subject to contract' offer to purchase the assets being marketed by Alphasteel's administrators. They noted their understanding that there might be some doubt about the ownership of the hot strip mill equipment and made two offers. The first, at £50.1m, was on the basis that Libala received a clean title to all assets, including that equipment. The second, at £40.1m, was on the basis that Libala received a clean title to all the assets 'with the exception of the hot strip mill for which the buyer will take the risk that there may be a dispute about ownership'. On 12 May 2008 Libala increased its two offers to £60m and £50m respectively but otherwise on the same terms.
Shortly afterwards, the administrators received formal notification on behalf of Lictor of its claim to ownership of the hot strip mill equipment. They were so notified by a letter of 19 May 2008 from Ernst & Young AG, of Basel, Switzerland, which explained that Ernst & Young were assisting in the administration of Satico Limited, which was said to own Lictor. The letter relayed Ernst & Young's opinion that the equipment was Lictor's property and included that 'Therefore and for the sake of good order, we would like to emphasise that you are not entitled to sell nor to dispose of assets belonging to Lictor' without its consent. They asked for the administrators' confirmation that they would comply with the letter, but received none. The administrators proceeded with the proposed sale to Libala.
Draft heads of terms, subject to contract, were agreed between the administrators and Libala and were contained in a letter of 2 June 2008 signed on behalf of Libala and the administrators. Paragraph 1.1 provided that either Libala or its nominee would acquire the entire business and assets of Alphasteel (save for immaterial exceptions) 'either directly or by way of the purchase of a wholly owned subsidiary of Alphasteel ("SPV") to which Alphasteel's entire business and assets [save as aforesaid] would be hived down…'. The price was to be £60m. In paragraph 1.3, Libala said it would not seek warranties etc in relation to Alphasteel's business, assets or title thereto. Paragraph 1.4 provided, so far as relevant:
'Subject to the release of Security Interests referred to above, we will acquire only such right and title to assets as Alphasteel actually has. We acknowledge the existence of:
(a) a title dispute relating to claim by Lictor Anstalt to ownership of Alphasteel's hot strip mill and that the Definitive Agreements between us will provide that we shall be responsible for settling any claims made against us, the SPV or the Assets following Completion in relation thereto;…' [Emphasis supplied]
On 11 July 2008 Mir Steel was incorporated as the company to which the business and assets to be sold to Libala were to be hived down. Its sole shareholder was Alphasteel. As the judge noted, it was to be inferred that Libala had exercised the second option referred to in paragraph 1.1 of the heads of terms. The hive down agreement, also made on 11 July 2008, was between (1) Alphasteel (the vendor), (2) the administrators and (3) Mir Steel (the purchaser, then known as Alpha (Realisations) Limited, but its name was later changed). The agreement proceeded on the basis that the hot strip mill equipment was a fixture and it was expressly included in the list of 'Fixed Assets and Moveable Plant and Equipment' listed in Schedule 2 to the agreement. Clause 2.1 of the agreement provided:
'Subject to the provisions of this Agreement, the Vendor shall sell and the Purchaser shall purchase, with effect from the Transfer Date, the Business by way of the purchase by the Purchaser of such right, title and interest as the Vendor may have in the following assets free of any claims by the Charge Holder under the Charge Holder's security.'
There followed a...
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