Opus Art Ltd v Mr Nedim Aiylan (as Liquidator of Rochay Productions Ltd)
| Jurisdiction | England & Wales |
| Judge | Barber |
| Judgment Date | 07 July 2020 |
| Neutral Citation | [2020] EWHC 1737 (Ch) |
| Docket Number | CR-2019-006422 |
| Court | Chancery Division |
| Date | 07 July 2020 |
[2020] EWHC 1737 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTERS OF ROCHAY PRODUCTIONS LIMITED (IN LIQUIDATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
7 The Rolls Building
Fetter Lane
London
EC4A 1NL
ICC JUDGE Barber
CR-2019-006422
Christopher Lloyd (instructed by Howard Kennedy LLP) for the Applicant
Jonathan Coad (of Coad Law LLP) for the Second and Third Respondents
The First Respondent appeared in person for part of the hearing
Hearing date: 7 May 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.
ICC Judge Barber
This is an application brought by Opus Art Limited under r.15.35 of the Insolvency Rules 2016 (IR 2016) to challenge the admission of the Third Respondent's proof of debt for voting purposes at a meeting of creditors of Rochay Productions Limited (‘Rochay Productions’) held on 4 September 2019. The application is now unopposed and the only issue between the parties is who should pay the Applicant's costs of the application. The Applicant contends that the Second Respondent, Ms Medina Williamson (as chair of the meeting) and/or the Third Respondent should be ordered to pay the Applicant's costs. The costs application is opposed.
Costs: Applicable Law
In ordinary proceedings, the general rule is that the unsuccessful party should pay the successful party's costs, although the court may make a different order: CPR 44.2, r.12.41(3) IR 2016.
In the context of appeals against the admission or rejection of a proof, however, the ordinary rule under CPR 44.2 is tempered to an extent. The person who made the decision on the proof giving rise to the appeal is afforded a degree of protection. Rule 15.35(6) IR 2016 provides that ‘the person who made the decision is not personally liable for costs incurred by any person in relation to an appeal under this rule unless the court makes an order to that effect’.
There is a similarly worded rule in respect of the liability of office holders for the costs of appeals from their decisions to admit/reject proofs for dividend purposes: r.14.9(2) IR 2016. In that context, case law has established that an order for costs against an office holder should only be made in special circumstances, such as where the office holder's decision was self-interested, irrational or unreasonable; or there is otherwise good reason to do so: see Nimat Halal Food v Patel [2020] EWHC 734 (Ch) at [13]–[14], [45]; Fielding v Hunt [2017] EWHC 406 (Ch) at [11]–[19].
In my judgment the approach adopted in relation to the liability of office holders for the costs of appeals from their decisions to admit or reject proofs for dividend purposes is equally applicable to cases falling within r.15.35 where the chair or convenor of the meeting is not an office holder. An order for costs against the chair or convenor should only be made in special circumstances, where the decision to admit or reject a proof was self-interested, irrational or unreasonable, or where there is otherwise good reason to do so.
With these principles in mind, I turn to consider the present application.
Background
Rochay Productions was incorporated in 2011. Until 29 July 2019, its sole director was a Mr Nicholas Baker. The Second Respondent became sole director of the company on 30 July 2019, the day after Mr Baker resigned.
The Third Respondent is the sole shareholder of Rochay Productions.
From 2012 to 2019, the directors of the Third Respondent were Mr Kevin Rochay and Mr Baker. Mr Baker resigned on 18 April 2019.
The sole shareholder of the Third Respondent is Rochay Group Limited (‘Rochay Group’). The sole shareholder and director of Rochay Group is Mr Kevin Rochay.
The Rochay website describes Rochay Productions as a company ‘specialising in the design and creation of unique brand-enforcement mechanism and produces the most luxurious tactile publications, celubrious [sic] events, shows, film productions and apps in the world today’. Mr Kevin Rochay is described as an ‘adviser to leaders around the world’. The Rochay companies are described as running an exclusive club called ‘Rochay Elite’; the website boasting that ‘our membership base consists of 85% of the UK Rich List, 52% of the Global Rich List and C-level executives of the FTSE 100/250 and Fortune 500.’ Membership of the club referred to as Rochay Elite is said to cost £50,000 per year.
The accounts of Rochay Productions, the Third Respondent and Rochay Group, however, paint a rather different picture. From 2011 to 2017, Rochay Productions filed dormant accounts at Companies House. A company is only permitted to file dormant accounts if it has ‘no significant accounting transactions’ in the relevant period: s.1169 Companies Act 2006 (‘CA 2006’). Rochay Productions filed ‘micro entity’ accounts for the year ending 31 October 2017. The Third Respondent and Rochay Group have only ever filed dormant accounts at Companies House.
The Opus Art Proceedings
During the course of 2016, the Applicant entered into a series of contracts with Rochay Productions. The Applicant agreed to sponsor events which Rochay Productions said it would be organising during 2016/17. The Applicant paid approximately £130,000 to Rochay Productions to sponsor these events. The events did not take place, however, and the money was not returned.
On 21 December 2017, the Applicant issued proceedings against Rochay Productions and Mr Baker claiming damages for breach of contract and fraudulent misrepresentation. The trial of the claim took place on 24–27 June 2019 and judgment was given on 15 July 2019. HHJ Backhouse found Rochay Productions and Mr Baker liable in deceit for a series of fraudulent misrepresentations made to the Applicant. She ordered Rochay Productions to pay damages and costs of £247,547.48 (of which sum Mr Baker was jointly liable for all except £31,036). In her judgment, HHJ Backhouse was highly critical of Rochay Productions and Mr Baker.
The judgment debt was due to be paid on 29 July 2019. That day, Mr Baker resigned as a director of Rochay Productions. He filed for bankruptcy the following day. On 30 July 2019, the Second Respondent was appointed as sole director of Rochay Productions by the Third Respondent.
Voluntary Liquidation
On 15 August 2019, Rochay Productions gave notice to the Applicant that its director had resolved to place the company into creditors' voluntary liquidation and proposed the First Respondent for appointment as liquidator. Enclosed with the notice was a statement of affairs signed by the Second Respondent, who at that stage had been a director of Rochay Productions for just over two weeks. The statement of affairs stated that Rochay Productions had no assets but had unsecured creditors including:
(1) £39,362.10: described as ‘trade and expense creditors’ (predominantly the company's former solicitors, Healy's LLP);
(2) £247,047.48: described as ‘other creditor’ (the Applicant's judgment debt); and
(3) £477,843.55: described as ‘parent company loan account’.
On 20 August 2019, the Applicant lodged its proof of debt (in the sum of £248,547.48) and Notice of Objection to Deemed Consent, in accordance with rule 6.14(4) IR 2016.
On or about 28 August 2019, the Third Respondent lodged a proof of debt signed by Kevin Rochay, stating that Rochay Productions was indebted to the Third Respondent for ‘funds advanced’ in the sum of £477,843.55.
The Creditors' Meeting on 4 September 2019
A physical meeting of creditors was convened on 4 September 2019. The Second Respondent was the convenor/chair of the meeting for the purposes of IR 2016.
Prior to the meeting, Howard Kennedy, the Applicant's solicitors, wrote to the First Respondent's firm, Abbott Fielding, querying the proof of debt submitted by the Third Respondent. By email dated 2 September 2019, the First Respondent replied stating as follows:
‘I enclose for your attention a copy of the Proof of Debt submitted by Rochay Elite Limited. In anticipation of this exact question, I also requested copies of the bank statements and I have satisfied myself that the amounts claimed have been deposited within the bank account.
I note that you will be objecting to the admission of Rochay Elite Limited's alleged debt, and I would comment as follows:
Firstly, it is not my duty to adjudicate on this but rather the duty of the Chairman of the Meeting, although we will be advising him.
Secondly, I would be grateful if you could please advise on what grounds you are disputing the claim. As have stated, I have been supplied with bank statements (which will be available at the meeting) which show the amounts deposited and there is no evidence that these have been repaid. Therefore the amount claimed does appear to be technically valid.
In addition I have discussed the matter with my Solicitors. The advice given to me was that I should enquire as to the grounds on which you are objecting to this as it does appear that this is a valid claim, unless you are aware of any information which is not in my possession.’
At the meeting on 4 September 2019:
(1) The Applicant proposed that Andrew Cordon and James Everist of Corporate Financial Solutions be appointed as liquidators. As an alternative, Mr Everist proposed a joint appointment of the First Respondent and himself. The Third Respondent objected to the appointment of Messrs Cordon and Everist and supported the appointment of the First Respondent.
(2) The Applicant...
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