Montgold Capital LLP v Agnieszka Ilska & Others

JurisdictionEngland & Wales
CourtChancery Division
JudgeSimon Barker
Judgment Date16 Oct 2018
Neutral Citation[2018] EWHC 2982 (Ch)
Docket NumberCase No: BL-2017-000654

[2018] EWHC 2982 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

INSOLVENCY & COMPANIES LIST (ChD)

The Rolls Building

7 Rolls Buildings

Fetter Lane

London EC4A 1NL

Before:

HIS HONOUR JUDGE Simon Barker QC

(Sitting as a Judge of the High Court)

Case No: BL-2017-000654

Between:
Montgold Capital LLP
Claimant
and
Agnieszka Ilska & Others
Defendants

Mr A Pay (instructed by Everatt's LLP) appeared on behalf of the Claimant

Mr A Deacock appeared on behalf of the First and Second Defendants

Representation for the Third to Seventh Defendants not provided

Mr B Shaw (instructed by Howard Kennedy LLP) appeared on behalf of the Eighth and Ninth Defendants

JUDGMENT ( approved)

JUDGE Simon Barker QC:

1

The application before the court is for permission under section 261 of the Companies Act 2006 to continue a derivative claim. The applicant, Montgold Capital LLP (‘the Claimant’), holds 50 per cent of the share capital issued by Agushia Limited (the relevant company), which was placed in administration by its director, Agnieszka Ilska (‘the first defendant’) on 28 November 2016. By the application notice, the Claimant also sought an order that its costs of the derivative action be indemnified out of Agushia's (“the Company's”) assets.

2

During the hearing the Claimant's position in relation to the indemnity changed, with the result that this aspect of the application is not pressed if, as I indicated towards the end of the hearing I was provisionally minded to do, I make an order aimed at preserving Agushia's assets in the administration, which are in the order of £190,000 in cash, subject only to (1) payment of the minimum costs reasonably and necessarily incurred by the administrators to fulfil their duties as such pending conclusion of the litigation, and (2) prohibition of the use of any part of those monies to fund the administrators' own costs of the Claimant's ongoing claims against them, including, if permission is given, defending the derivative claim.

3

Section 261(2) provides, in effect, that unless the application and supporting evidence filed in support disclose a primafacie case for giving permission, the court must dismiss the application. That aspect of the application has been considered by Norris J on the papers. His order was made on 11 January 2018. There has also been a consent order varying the directions given. The prima facie case threshold was passed and Norris J's order recited that he considered that the evidence appeared to him to make out a sustainable case. By that order, the administrators (who are Mr Asher Miller, the eighth defendant, and Mr Henry Lan, the ninth defendant, both of David Rubin and Partners) were given permission to file evidence on behalf of Agushia in answer to the application, including, if so advised, witness statements from any other intended defendant to the derivative claim. The Claimant was given permission to file evidence in reply.

4

The eighth and ninth defendants and the Claimant evidently agreed that expert evidence as to the financial position of Agushia (1) at the time of its entry into administration on 28 November 2016, and (2) in March 2018 should be filed. They submitted a consent order for sequential exchange of reports and a joint report. I note here that Norris J added reasons to his approval of the consent order, which included that it would not be necessary to make findings as to the expert evidence, not least because so to do would be to take a wrong approach to a section 263 application and, potentially at least, usurp the function of a trial judge.

5

My task on this application is under section 263 and is to decide whether or not to give permission to continue the derivative claim.

6

Section 263(2) provides, in so far as relevant and in effect, that permission to continue must be refused if no person acting in accordance with section 171 of the Companies Act 2006, that is the duty to maintain the success of a company imposed upon directors, would seek to continue the claim. That leaves open scope for continuation in cases where the section 172 duty could properly be exercised by either continuing or not continuing a claim. It suffices, for passing through this gateway, that the court can envisage one or more such persons properly deciding to continue the claim. If the court is not bound to refuse permission to continue a claim it must then exercise a discretion one way or the other as to continuation.

7

Section 263(3) provides a non-exhaustive list of factors to be taken into account. In so far as relevant, the particular factors are: (a) whether the member seeking to continue the claim is acting in good faith; (b) the importance that a person acting in accordance with the section 172 duty, that is the duty to promote the success of the company, would attach to continuing it; (c) where the cause of action results from an act or omission that is yet to occur, whether the act or omission could and would be likely to be authorised or ratified, which is not relevant; (d) and (e) are also not relevant because the company is in deadlock; and, (f) which is relevant, whether the act or omission in respect of which the claim is brought gives rise to a cause of action, the member could pursue in his or its own right rather than on behalf of the company.

8

Further, section 263(4) requires the court to have particular regard to any evidence before it as to the views of the members who have no direct interest in the matter.

9

There are no such members in this case. There is no statutory reference to regard being had to the interests or views of creditors. Mr Shaw, counsel for the eighth and ninth defendants, submitted that where, as in his submission is the case here, the company is insolvent regard should be had to the views of creditors. I shall obviously return to this.

10

Agushia carried on the business of a restaurant known as “Yalla Yalla” at Winsley Street in London with popup restaurants elsewhere. No dividends have ever been paid by Agushia. The Claimant owns 50 per cent of Aguisha's issued capital. Neither the Claimant nor its controller, Mr Karim Mawji, nor anyone nominated by him is or at any material time was a director or employee of the company. Ms Ilska, the first defendant, owns 5 per cent of Agushia's issued shares and was at all material times and remains a director. Formally, she is the sole director. Jad Youssef, who is the second defendant, owns the remaining 45 per cent of Aguisha's issued shares. He was a director until 14 August 2015 and he then became a consultant. The Claimant's case includes that at all material times Mr Youssef was and remained a de facto or shadow director. The first defendant managed the restaurant business and was front of house; the second defendant was chef or head chef; and, the first and second defendants are said to be in a personal relationship.

11

Mr Philip Poyner, the third defendant, was or held himself out as finance director of the company. He may still be finance director. Ascent FD Philip Poyner Limited, the fourth defendant, was a company through which the third defendant Mr Poyner's services are provided.

12

Put very shortly, the Claimant's case is that at a time when (1) Mr Mawji and another restaurateur were negotiating to purchase A Limited for £1.05 million (from which the first and second defendants would receive £260,000) and a sale and purchase agreement was in circulation and supposedly under consideration by the first and second defendant and their lawyers, (2) a meeting had been convened by the first defendant for 2 December 2016, at which Mr Mawji, the first and second defendants and no doubt the third defendant were to consider Agushia's affairs, including its financial position, (3) unknown to the Claimant and/or Mr Mawji, the second defendant had been seeking employment as an executive chef at Comptoir Group PLC, which is the sixth defendant, (‘Comptoir’) and on 25 November had secured employment at a salary of £60,000 per annum, and (4) in order to thwart the sale to Mr Mawji and better their own position, the first and second defendants arranged for Agushia to enter administration and for what in substance was a pre-packaged sale to Comptoir (pre-packaged in the sense that it was to follow hard on the heels of the appointment of administrators), the sale was intended or likely to be at a price markedly lower than the £1.05 million and therefore at a price which was an undervalue.

13

The Claimant further contends that the pre-pack was achieved through an unlawful means conspiracy between the first, second, third, fourth, sixth, eighth and ninth defendants and two other persons. The first of these other persons is Mr Jonathan Sinclair, who is named as the fifth defendant. He is an accountant and an insolvency practitioner and is alleged to have had a finger in every slice of the conspiracy pie having (1) given initial advice to the first defendant, (2) effected the introduction of the first defendant to the eighth and ninth defendants, (3) been under consideration as a joint administrator with the eighth defendant, and (4) acted as an advisor and agent for Comptoir in its purchase of Agushia's business through the pre-pack.

14

The first defendant has said that she happened upon Mr Sinclair through an internet search. The Claimant challenges this explanation by reference to Mr Sinclair's track record. Comptoir is now listed on the AIM and has been since 2016. However, in the five or six years before that, so says Mr Mawji, at least four of its restaurant businesses went through insolvency processes at significant loss...

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