Payroller Ltd ((in Liquidation)) v Little Panda Consultants Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Butcher |
| Judgment Date | 20 November 2018 |
| Neutral Citation | [2018] EWHC 3161 (QB) |
| Date | 20 November 2018 |
| Court | Queen's Bench Division |
| Docket Number | Case No: HQ17XO3377 |
[2018] EWHC 3161 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Butcher
Case No: HQ17XO3377
Matthew Cook (instructed by Pinsent Masons LLP) for the Claimants
William Buck (instructed by Hallmark Solicitors) for the First and Second Defendants
Hearing date: 6 November 2018
Judgment Approved
This is an application by the Claimants for summary judgment against the First and Second Defendants, to whom I will refer as “Little Panda” and “Mr Burton” respectively. The First Claimant, to which I will refer as “Payroller”, is a Scottish company in liquidation. The Second and Third Claimants were appointed as joint liquidators of Payroller on 1 March 2017.
Little Panda is a company of which Mr Burton is the sole director and shareholder. This is subject to the fact that currently Little Panda has been removed from the register for a failure to file accounts. An application to restore it has been made and I was told is likely to be a formality. A waiver letter has been provided by the Treasury Solicitor. Neither side suggested that the status of Little Panda at present was a reason to delay hearing the Claimants' application.
That application is made on the basis that the Claimants contend that Little Panda and Mr Burton have no defence which stands a realistic prospect of success to their claim under section 423 Insolvency Act 1986 (“ s. 423 IA”) to recover certain payments made to each of them by Payroller.
The background to this claim is that Payroller was a company controlled by two individuals, Mr Martin Lang and Mr Graeme Cullen. Its liquidators have established, and this is not disputed by Little Panda or Mr Burton on this application, that Messrs Lang and Cullen used Payroller as a vehicle for the commission of a large-scale VAT fraud. While Payroller traded for less than a year, namely between February 2016 and December 2016, it charged its clients over £7.7 million as VAT, using a VAT number belonging to another company. It then retained this money, thus defrauding HMRC of this sum. HMRC discovered this fraud in early December 2016, and Payroller's bank accounts were frozen in that month.
What emerged from an investigation of Payroller was that, apart from the proceeds of the VAT fraud Payroller had had no significant net income. Further, a consideration of its bank accounts showed that the majority of the proceeds of the VAT fraud had already been paid out of Payroller by December 2016. The particular transfers which are relevant to the present application are a series of payments made between March and November 2016 from Payroller's bank account to Little Panda and to Mr Burton personally. As I understood it, the sum of £1,786,389.88 was paid to Little Panda, involving 45 separate transfers, while a sum of £450,000, involving 6 separate transfers from Payroller, was paid to Mr Burton via an agent.
Part of the sums received by Mr Burton was paid onwards to the Third Defendant, to which I will refer as “Bluday”. In its Defence, Bluday did not dispute that it had no entitlement to the sums which it had received, indirectly, from Payroller, which it put at £322,239.88, and has returned that sum.
In the Particulars of Claim the Claimants have advanced a number of different types of claim against Little Panda and Mr Burton, including knowing receipt and knowing assistance, as well as a claim under s. 423 IA for the recovery of the amounts paid by Payroller to Little Panda and Mr Burton.
In their Defence, Little Panda and Mr Burton have contended that the payments which were made to them were “as a result of bona fide and legitimate commercial transactions conducted at arm's length and for valuable consideration”, of which they identify the following:
(1) Payments relating to the “Black Sea Plaza”. Little Panda and Mr Burton say that Mr Burton intended to buy and redevelop a hotel in Bulgaria and then sell rights in it on a timeshare basis. This project has been referred to as the “Black Sea Plaza” project. What is alleged in the Defence is that Mr Cullen and Mr Lang each agreed to purchase a number of weeks of fractional ownership in various apartments of the Black Sea Plaza, and paid £1,625,150 to Little Panda in respect thereof. In addition, Mr Burton states in his witness statement in response to the present application that £99,000 was paid by Payroller to Little Panda on 30 August 2016 in relation to Mr Cullen's purchase of 99,000 Non-Voting Redeemable Preference shares in Black Sea Plaza Limited.
(2) Payments relating to the Guardian Companies. Payments totalling £450,000 were made to Mr Burton in August 2016. Mr Burton contends that these were made in relation to the sale of shares in two companies to Mr Cullen. Both those companies were called Guardian Corporate Consultants Limited and they were incorporated in UAE and Belize respectively.
(3) Payments relating to Maltese companies. Some £62,000 was paid to Little Panda, which Mr Burton states related to a 12-week retainer agreement with Mr Cullen pursuant to which Little Panda set up several companies in Malta.
For the purposes of the present application, the Claimants do not dispute the existence or bona fides of these transactions. They make it clear, however, that, if the present application is not successful, their case in the action will be that these were not bona fide transactions.
As I have already indicated, the Claimants make this application solely on the basis of their claim under s. 423 IA. It is convenient to refer to the terms of that section, and related sections, at this point. S. 423 IA provides in relevant part:
‘423. (1) This section relates to transactions entered into at an undervalue; and a person enters into such a transaction with another person if –
(a) he makes a gift to the other person or he otherwise enters into a transaction with the other on terms that provide for him to receive no consideration;
(b) …; or
(c) he enters into a transaction with the other for a consideration the value of which, in money or money's worth, is significantly less than the value, in money or money's worth, of the consideration provided by himself.
(2) Where a person has entered into such a transaction, the court may, if satisfied under the next subsection, make such order as it thinks fit for –
(a) restoring the position to what it would have been, if the transaction had not been entered into, and
(b) protecting the interests of persons who are victims of the transaction.
(3) In the case of a person entering into such a transaction, an order shall only be made if the court is satisfied that it was entered into by him for the purpose–
(a) of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or
(b) of otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make.
(4) In this section “the court” means the High Court …
(5) In relation to a transaction at an undervalue, references here and below to a victim of the transaction are to a person who is, or is capable of being, prejudiced by it; and in the following two sections the person entering into the transaction is referred to as “the debtor”.’
Section 425 IA provides:
“425 (1) Without prejudice to the generality of section 423, an order made under that section with respect to a transaction may (subject as follows) –
(a) require any property transferred as part of the transaction to be vested in any person, either absolutely or for the benefit of all the persons on whose behalf the application for the order is treated as made;
(b) require any property to be so vested if it represents, in any person's hands, the application either of the proceeds of sale of property so transferred or of money so transferred;
(c) release or discharge (in whole or in part) any security given by the debtor;
(d) require any person to pay to any other person in respect of benefits received from the debtor such sums as the court may direct;
(e) provide for any surety or guarantor whose obligations to any person were released or discharged (in whole or in part) under the transaction to be under such new or revived obligations as the court thinks appropriate;
(f) provide for security to be provided for the discharge of any obligation imposed by or arising under the order, for such an obligation to be charged on any property and for such security or charge to have the same priority as a security or charge released or discharged (in whole or in part) under the transaction.
(2) An order under section 423 may affect the property of, or impose any obligation on, any person whether or not he is the person with whom the debtor entered into the transaction; but such an order –
(a) shall not prejudice any interest in property which was acquired from a person other than the debtor and was acquired in good faith, for value and without notice of the relevant circumstances, or prejudice any interest deriving from such an interest, and
(b) shall not require a person who received a benefit from the transaction in good faith, for value and without notice of the relevant circumstances to pay any sum unless he was a party to the transaction.
(3) For the purposes of this section the relevant circumstances in relation to a transaction are the circumstances by virtue of which an order under section 423 may be made in respect of the transaction.
…”
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