Officeserve Technologies Ltd (in compulsory liquidation) and Another v Cecil Anthony-Mike
| Jurisdiction | England & Wales |
| Judge | HHJ Paul Matthews |
| Judgment Date | 28 July 2017 |
| Neutral Citation | [2017] EWHC 1920 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: 286 of 2016 |
| Date | 28 July 2017 |
[2017] EWHC 1920 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BRISTOL DISTRICT REGISTRY
Bristol Civil Justice Centre
2 Redcliff Street, Bristol, BS1 6GR
HHJ Paul Matthews
(sitting as a Judge of the High Court)
Case No: 286 of 2016
Simon Passfield (instructed by Veale Wasbrough Vizards) for the Applicants
Dakis Hagen QC and Charlotte Beynon (instructed by Peters & Peters) for the Respondent
Hearing dates: 31 May 2017
Judgment Approved
Introduction
This is my judgment on certain preliminary issues arising in an application by notice dated 23 March 2017 in the liquidation of Officeserve Technologies Limited ("the company"). The application itself is one for various declarations that the respondent (the founder, former shareholder in and executive chairman of the company) has misapplied monies belonging to the company, and that certain payments made to him are void under section 127 of the Insolvency Act 1986, and for an order inter alia that the respondent repay the sum of £535,477.31. It is supported by a witness statement of Paul David Wood dated 31 March 2017.
Procedure
The application itself is made in the context of winding up proceedings against the company. The petition to wind up the company was first presented to the High Court, Chancery Division, Bristol District Registry, on 26 October 2016. It was based on a statutory demand that had been served on 3 October 2016. I interpose here to say that, before the petition could be dealt with, the respondent was ousted as a director and executive chairman of the company, on 20 December 2016. On 23 December 2016 an agreement (called a "settlement agreement") was entered into between the company and the respondent, governing certain claims or potential claims by each against the other. I shall return to these events in more detail.
Returning to the proceedings concerning the company, on 8 February 2017 HH Judge Purle QC, in the Birmingham District Registry of the Chancery Division, heard an application for an administration order in relation to this company. He dismissed that application, ordered that the petition to wind up the company be transferred to Birmingham District Registry and also appointed Mr Haskew and Mr Wood (now the liquidators) as the joint provisional liquidators of the company. On 22 February 2017 the judge made a winding up order.
There then followed proceedings within the winding up. First, a without notice freezing injunction was granted against the respondent, on 20 March 2017, by Mr Justice Newey. Then on 31 March 2017 an on-notice freezing injunction was granted, limited to assets to the value of £535,477.31. I varied that freezing injunction very slightly on 21 April 2017.
On 25 April 2017 I made an order by consent that certain preliminary issues should be determined in this application before the application itself was dealt with. The preliminary issues as set out in the order are as follows:
"1. Whether section 127 of the Insolvency Act 1986 has rendered the entire settlement agreement dated 23 December 2016 void;
2. If and to the extent it is held that section 127 Insolvency Act 1986 has rendered the settlement agreement void, whether the settlement agreement should be validated by the court;
3. Whether all or any of the claims brought by the applicants against the respondent are barred pursuant to the terms of the settlement agreement;
4. If some, but not all the claims brought by the applicants against the respondent are so barred, which ones are so barred."
These issues arose out of the "settlement agreement" dated 23 December 2016 between the company and the respondent, which might govern the claims made in the application. Put briefly, the respondent's case is that that agreement on its true construction bars all the claims. The company says that it does not, but that in any event section 127 of the Insolvency Act 1986 renders the agreement void. The respondent says that in that case the court should validate the agreement as being in the interests of the company's creditors. On 31 May 2017 I heard those preliminary issues, and this is my judgment on them. I am sorry for the delay in producing this judgment, partly as a result of pressure of other work (the appointment of the specialist mercantile judge having been delayed), and partly because of the flood in June at the Bristol Civil and Family Justice Centre which has disrupted civil and family proceedings in Bristol. At the hearing Mr Simon Passfield appeared for the applicants, and Mr Dakis Hagen QC and Miss Charlotte Beynon appeared for the respondent.
Facts
I proceed on the basis of the following facts, gathered from the written evidence filed in this case. For the purposes of the preliminary issues in the application, I should record that there was no application for any of the witnesses to be cross-examined on their affidavits or witness statements. That limits the extent to which it is legitimate for the court to disbelieve any of those written statements: cfLong v Farrer & Co [2004] EWHC 1774 (Ch).
The company was incorporated in 2011. The respondent became sole shareholder and director in 2013. It aspired "to disrupt and enter the £15.9 billion lunch at work market, using technology and a national delivery network". It grew rapidly, from a handful of employees at the outset to 200 employees and a market value estimated at £40 million before it crashed. The respondent was originally the 100% shareholder. But between 2015 and 2016 outside investors were brought in, so that by the time of the crash the respondent held only 80% of the equity. Two companies called Westhill Corporate Finance Ltd and Westhill Capital LLP (together "Westhill") were engaged to assist on the raising of capital from outside investors. The prices which such outside investors were willing to pay gave the estimated market value. An experienced management team was put in place, freeing the respondent to concentrate on fundraising, the strategic direction of the business, stock-market listing and strategic relationships.
The respondent was appointed a director of the company on 4 November 2013. He later became executive chairman. As already foreshadowed, he resigned on 23 December 2016. In that time, he did not draw a salary from the company. In 2016 the company made two acquisitions. The first was a company called Chiltern Foods Ltd, acquired from a Mr Phillips, on 8 April 2016, at the price of £500,000, but deferred as to part, so that £250,000 would be payable on 31 December 2016. The second was a company called Fruitdrop Ltd, acquired from a Mr Ben Thompson, on 6 May 2016, at the price of £6,050,000, also deferred as to part. Mr Thompson became an employee of Fruitdrop Ltd.
However the company was unable to pay instalments of the purchase prices as they fell due. The respondent blames Westhill for failing to secure sufficient private investor funding. On 1 July 2016 Mr Thompson made a loan to the company of £500,000 for working capital. In practice, that simply meant that he was not paid the instalments which he was owed for the purchase of Fruitdrop Ltd. He was still owed the sum of £3,722,671.22 at 3 October 2016, when he served a statutory demand on the company. On 26 October 2016, he presented the petition to wind up the company. It was initially listed for hearing on 22 December 2016, although this date was subsequently adjourned to enable Mr Thompson and the company to continue negotiations.
On 2 December 2016 Ben Thompson had resigned from Fruitdrop Ltd and (it is argued) caused significant members of staff also to resign, to join a new company called Officedrop Ltd, which he had set up, and which appeared to occupy the same ground in the lunch at work market as the former Fruitdrop Ltd. (Mr Thompson is not a party to these proceedings, and I make no finding on this, beyond his resignation.) The directors of the company met on 20 December 2016, and noted a number of matters, including that the failure to make deferred consideration payments and Mr Thompson's consequent statutory demand and later winding up petition had not been circulated to the board, and that the respondent had failed to keep the board informed of developments relating to the acquisition of Fruitdrop and the subsequent dispute with Mr Thompson. Members of the board had carried out a review of the company's finances because of the impending hearing of the winding up petition, and reported that the respondent had committed the company to significant levels of expenditure relating either to the respondent's personal affairs or to matters unrelated to the business of the company, which had not been authorised by the board.
As set out in the minutes of the board meeting, the expenditure included:
(i) costs relating to the respondent's flat in Bruton Street in the West End of London;
(ii) costs relating to a private corporate vehicle of the respondent called Valentina Capital, and his private staff;
(iii) funding for business ventures unrelated to the business of the company;
(iv) property costs relating to additional premises which were in excess of the company's property needs;
(v) other personal expenditure related to the respondent, including the Bentley motor car, and driver, dry-cleaning and flowers for his flat; the employment of the respondent's sister and housekeeper by the company.
According to those minutes,
"the conclusions reached by the directors earlier in the day had been that [the respondent] had:
(a) committed the company to significant levels of unauthorised expenditure, a significant proportion of which was of a personal nature and that this had had a direct...
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...also places weight on dicta of HHJ Paul Matthews, sitting as a High Court Judge, in Officeserve Technologies Ltd v Anthony-Mike [2017] EWHC 1920 (Ch), at [90] (the italics are original): “In considering what is and what is not a disposition for the purposes of section 127, it is necessary ......
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