PSV 1982 Ltd v Sean Anthony Edward Langdon
| Jurisdiction | England & Wales |
| Judge | Lady Justice Asplin,Lord Justice Arnold,Lord Justice Lewison |
| Judgment Date | 12 October 2022 |
| Neutral Citation | [2022] EWCA Civ 1319 |
| Docket Number | Case No: CA-2021-000124 |
| Court | Court of Appeal (Civil Division) |
| Year | 2022 |
[2022] EWCA Civ 1319
Lord Justice Lewison
Lady Justice Asplin
and
Lord Justice Arnold
Case No: CA-2021-000124
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
BUSINESS LIST (ChD)
Mr Robin Vos (sitting as a Deputy Judge of the High Court)
Royal Courts of Justice Strand, London, WC2A 2LL
Adam Chichester-Clark and Mark Baldock (instructed by Michelmores LLP) for the Appellant
Andrew Grantham KC (instructed by MFB Solicitors) for the Respondent
Hearing date: 27 July 2022
Approved Judgment
This judgment was handed down remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 11.00 a.m. on 12 July 2022 .
This appeal is concerned with the proper construction of section 217 Insolvency Act 1986 (“IA 1986”). The Respondent, PSV 1982 Limited (“PSV”) commenced proceedings against the Appellant, Mr Langdon, in March 2020 in respect of a judgment debt against Discovery Yachts Group Limited, (“DYGL”) in the sum of £1,125,824.67 which had been assigned to it. It was alleged that Mr Langdon was personally liable for the debt pursuant to sections 216 and 217 IA 1986. By an order of Deputy Master Bowles dated 30 March 2021, it was ordered that a number of matters be tried as preliminary issues on the basis of an agreed or assumed statement of facts.
The trial of the preliminary issues was heard by Mr Robin Vos, sitting as a deputy High Court judge in the Business and Property Courts. He held amongst other things, that: the effect of section 217 IA 1986 is that once a liability is established in proceedings against a company a defaulting director automatically becomes responsible for that liability [46] and [61]; Mr Langdon and DYGL were not privies [79]; it would not be an abuse of process for Mr Langdon to seek to defend the proceedings against him on the basis that DYGL was not, in fact, liable on the underlying claims made against it [88] and he was not estopped by his conduct from doing so [89]; and that the liabilities were incurred when DYGL breached the contract in question and not when the contract had been entered into [101]. The neutral citation for his judgment is [2021] EWHC 2475 (Ch).
The grounds of appeal are: (i) in respect of the first of the preliminary issues, the judge was wrong to construe section 217 as “automatically” establishing personal liability against a company director for a debt/liability which had been established against the company in previous proceedings to which the director was neither a party nor privy; and (ii) that he was wrong to find that a company incurred a “relevant” debt or liability for the purposes of section 217(3)(a) IA 1986 at the date of the alleged breach of contract (in this case, during contravention of section 216) rather than at the date the alleged contract was entered into (in this case being prior to any contravention of section 216) when the company assumed the underlying liabilities which gave rise to the subsequent breach.
The Preliminary Issues with which the Appeal is concerned
It is helpful to have in mind the preliminary issues to which the grounds of appeal relate. The preliminary issue with which the first ground of appeal is concerned was in the following terms:
“1.1 Does the judgment of Teare J of 19 December 2019 (“the Judgment”) following trial of proceedings in the Commercial Court in Claim No CL 2018 – 00288 (“the Commercial Court Proceedings”) between Andrew France and Discovery Yachts Group Limited (“DYGL”) (and the consequential orders of Teare J of the same date and Bryan J dated 26 th June 2020 (“the Consequential Orders”)) – notwithstanding that the Defendant was not a party to the Commercial Court Proceedings – and/or the acknowledgment of the debt in the Statement of Affairs signed by the Defendant on 10 th February 2020 (“the Statement of Affairs”) establish the alleged debt (“the Debt”) for the purposes of Sections 216 and 217 of the Insolvency Act 1986 (“IA 1986”) within these proceedings on any of the following grounds:”
1.1.1 That the Judgment and Consequential Orders are a matter of public record and therefore of themselves sufficient to establish the Debt;…”
The second ground of appeal relates to preliminary issue 1.3 which is as follows:
“1.3 Whether the Defendant is personally liable under s.217 IA1986 for the debt alleged to have been incurred to the claimants in the Commercial Court Proceedings by DYGL, if and on the footing that in September 2017 (ie prior to the date of the liquidation of the Liquidating Company and of any contravention of s.216 IA 1986) DYGL entered into an agreement in respect of repairs to the Yacht thereby incurring the liability (as the Defendant characterises it) or obligation (as the Claimant characterises it) which gave rise to the alleged debt.”
The Agreed Facts
An agreed or assumed statement of facts was prepared for the purposes of the hearing of the preliminary issues and both that hearing and the appeal before us proceeded on the basis of those facts. It was expressly stated that the statement of facts was agreed solely for the determination of the preliminary issues and that neither party should dispute them for those purposes but that they were free to do so in connection with any other issues which might arise in the proceedings.
In summary and where relevant, the agreed facts were as follows. In October 2015, Mr Andrew France entered into a contract with Discovery Yachts Sales Limited (‘DYSL’) for the purchase of a yacht named “Elusive”. At that stage, DYSL was owned by a Mr John Charnley. DYSL warranted that “Elusive” was free from defects in materials and workmanship under normal use and maintenance for a period of 12 months. Discovery Yachts Limited (‘DYL’), which was also owned by Mr Charnley, built yachts and supplied them to DYSL for onward sale to DYSL's customers. In August 2016, Mr Langdon became a director of DYL and DYSL.
“Elusive” was delivered to Mr France in January 2017. He subsequently complained of a number of alleged defects.
In early April 2017, DYGL, known at that time as Tradewinds Marine Limited, purchased, amongst other things, the shares in DYSL and the business and assets of DYL. At that stage, Mr Langdon was DYGL's majority shareholder and by September 2017, he was also one of three directors, describing himself as managing director. He resigned as a director of DYL on 18 April 2017.
In September 2017, DYGL entered into the alleged “September Agreement” referred to in preliminary issue 1.3 and at [12] below.
DYL was placed into insolvent liquidation on 12 October 2017. “Discovery Yachts” became a prohibited name for the purposes of section 216(2) IA 1986 and Mr Langdon was in breach of section 216 IA 1986. That section prohibits a person who has been a director of a company which has gone into insolvent liquidation from being involved in the management of a company with a similar name. Mr Langdon was unaware that he could or might be made liable for the debts of the Discovery Yachts group companies if they continued to trade under the Discovery Yachts name after the liquidation of DYL. He did not make an application or obtain leave from the court or comply with the requirements of Rule 22.4 and 22.6 of the Insolvency Rules 2016 (“IR 2016”) to continue to use the Discovery Yachts name.
In the meantime, in April 2018, Mr France and his company Elusive Yachting Ltd brought proceedings in the Commercial Court against DYGL and DYSL for damages for breach of contract, interest and costs (the “Commercial Court Proceedings”). In addition to a claim for breach of warranty, it was alleged against DYGL that in September 2017, one of its employees had given a contractually enforceable undertaking to procure that various repairs to “Elusive”, set out in a “September Schedule”, would be completed and that it had failed to do so in breach of that undertaking (the “September Agreement”). Mr Langdon was not joined as a party to those proceedings but he did sign a Defence on behalf of DYSL in his stated capacity as CEO and provide a witness statement.
On 5 December 2019, DYGL's board, chaired by Mr Langdon, resolved to place DYGL into administration and an administrator was appointed on 19 December 2019. It is now in insolvent liquidation.
DYGL and DYSL were not represented at the trial in the Commercial Court Proceedings nor did they defend the claim. Teare J lifted the stay of the claim imposed by the statutory moratorium triggered by the notice of intention to appoint the administrator and struck out the defence. However, he did not enter judgment in default but proceeded with the trial hearing witness evidence on behalf of the claimants and reviewing the documentary evidence.
Teare J handed down judgment on 19 December 2019: [2019] EWHC 3552 (Comm)). He found that DYGL had in September 2017 agreed to assume liability for ensuring that various repairs to “Elusive” would be completed and that DYGL had acted in breach of that agreement in January 2018.
By an order also dated 19 December 2019, it was ordered, adjudged declared and directed, amongst other things, that judgment be entered against DYGL in the sum of £262,957 together with interest up to 2 January 2020 of £22,867.67 and interest thereafter at 8%; DYGL was required to indemnify Mr France in respect of the reasonable costs of certain further repairs to Elusive; and DYGL and DYSL were ordered to pay the claimants' costs, to be assessed on the indemnity basis if not agreed, with a payment on account of £283,000. By a consent order made by Bryan J and dated 26 June...
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