Newhart Developments Ltd v Co-operative Commercial Bank Ltd
| Jurisdiction | England & Wales |
| Judge | JUSTICE STEPHENSON,Lord Justice SHAW,Lord Justice STEPHENSON |
| Judgment Date | 16 November 1977 |
| Judgment citation (vLex) | [1977] EWCA Civ J1116-1 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 1976 No. N11769 |
| Date | 16 November 1977 |
[1977] EWCA Civ J1116-1
In the Court of Appeal
On Appeal from the High Court of Justice
Queen's Bench Division
Birmingham District Registry
Lord Justice Stephenson
and
Lord Justice Shaw
MR. D. H. STEMBRIDGE (instructed by Messrs. Price Atkins of Birmingham) appeared on behalf of the Plaintiffs/Appellants.
MR. O.N. WILLIAMS (instructed by Messrs. Hancock & Willis) appeared on behalf of the Defendants/Respondents.
I will ask Lord Justice Shaw to give the first judgment.
This is an appeal by the plaintiffs in the action, from an order of Mr. Justice Chapman made on the 5th October last, whereby he directed that the writ in the action be set aside, thereby reversing the order of the learned Registrar.
The history is an 'unusual one. It has provided scope for argument on areas of the law relating to receivers which are somewhat obscure. The plaintiff company are property developers. As long ago as October 1973, they entered into an agreement with the defendant bankers setting up an arrangement whereby the plaintiffs would find properties for development -in particular in North Wales. They were to deal with all the matters relating to the actual development of the site, and the entire finance was to be provided by the defendant bank, or an associated bank.
For this purpose, a company called Newhart Development (North Wales) Ltd. was set up, the shares in that company were held in equal numbers by the plaintiffs and the defendants, and the project which the arrangement envisaged was set in train. But by April of 1974 matters had not progressed as favourably as the bank had hoped and they refused any further finance At that time there was a very substantial sum owed by the plaintiffs to the bank and there also was a substantial sum, though a much lesser one, owed by Mr. Hartley, who was in the forefront of the management of the plaintiff company, on his personal overdraft.
In that unfortunate state of affairs, in the Spring of 1974 the bank delivered an ultimatum. They said that all the shares in the development company must be held by the bank and that accordingly Mr. Hartley, and his associates, must transfer the holding of their company in that regard to the bank. Mr. Hartley had little option but to comply. This was done and, for the time being, the development of the site was halted, although it appears that later the bank turned to other development organisationsin order to pursue the project in relation to the land in North Wales.
On the 23rd September, 1974, a receiver was appointed by "the plaintiff under the terms of a debenture which had been made on the 25th January, 1973, the bank prudently contemplating at that date the possibility that things might not go as wall as they hoped, and wishing to provide for some means of satisfying their claims against the company if the necessity should arise. The debenture was in common form. It provided by clause 2 that: "The Company as Beneficial Owner hereby charges as a continuing security for the payment of such sums its undertaking and its property whatsoever and wheresoever both present and future" - and it went on to say - "such charge shall" - and then it deals with the fixed assets of the company, and in clause (c) provides: "As regards the Company's other assets be a floating security but so that the Company shall not create any mortgage or charge In priority to or pari passu with the charge hereby created nor sell the undertaking of the Company or (except In the ordinary, course of business) any portion thereof nor deal with its book or other debts or securities for money otherwise than by getting in and realising the same in the ordinary course of business". The only other provision which needs to be looked at is contained in Clause 5, which provides that: "At any time after the principal monies hereby secured become payable the registered holder" -I leave out the immaterial words - "of this Debenture may appoint … any person or persons to be a Receiver or Receivers of the property hereby charged. A Receiver or Receivers so appointed shall be deemed to be the agent or agents of the Company and the Company shall be solely responsible for his acts or defaults and for his remuneration and such Receiver so appointed shall have power (a) To take possession of collect and get In a property charged by this Debenture and for that purpose to take any proceedings in the name of the Company or otherwise. (b) To carry on or concur in carrying on the business of the Company" - and then I go down to(d) - "To make any arrangement or compromise which such Receiver or Receivers shall think expedient in the interests of the registered holder", of this Debenture.
By the 2nd December 1976, it had appeared to the plaintiffs that the bank, in taking the course it did of withdrawing financial support and requiring the holding of the plaintiffs in the development company to be transferred to the bank, had been in breach of its contract, and that as a result of that breach of contract the plaintiffs had lost the opportunity of getting their half share of the contemplated profit which they hoped would derive from the development of the site in North Wales. That sum has been quantified at something approaching £½ million. On the 2nd December, 1976, they wrote a letter to the defendant bank. The letter was not answered, and accordingly the plaintiffs issued a writ on the 7th December, 1976, by which they claim "damages for breach of contract in writing dated the 16th October, 1973 and made between the Plaintiffs and the Defendants", they set out their Particulars as to the nature of the agreement and then they claim the estimated profit of the development as something which was expected to amount to £920,000, and their share, representing their loss, is said to be £460,000.
The writ was issued without seeking the consent, or the concurrence, of the Receiver who was still in possession on behalf of the debenture holders. The riposte was that in March 1977, the bank issued proceedings against Mr. Hartley, both in respect of his personal liability under his own overdraft, and also in respect of his liability as guarantor of what the plaintiffs owed to the bank. That claim amounted to something approaching £400,000, though we were told that it had been much reduced as a result of the activities of the Receiver in bringing in the assets of the company and realising them for the benefit of the debenture holders.
The writ having been issued on the 7th December, an appearance was originally entered. Then there was an application to set aside theappearance and to enter a conditional appearance and set aside the writ. On the 11th March, a summons to set aside the writ on the ground that the Receiver had not consented, was taken up and It is in these terms: it is an application on the part of the defendants that "the Writ of Summons in this action be set aside on the ground of irregularity in that it was issued without the knowledge or consent of the Receiver of the Plaintiff company's assets who is alone entitled to the proceeds of this action and to give a valid discharge for any claim by the Plaintiff Company".
It may be observed that the logic of the summons, as drafted, appears to be a little uncertain because the complaint is that the writ was issued "without the knowledge or consent of the Receiver" and It defines him as being a person "who Is alone entitled to the proceeds of this action", and it is a little difficult to see why that second assertion arising out of the status of the Receiver is in any way impinged upon by the fact that the action has been instituted. It seems to me that, on the contrary, it is setting up the situation which will provide an opportunity for the Receiver in due course, if the...
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