Rbs Invoice Finance v Dymond & Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lloyd Jones |
| Judgment Date | 07 February 2012 |
| Neutral Citation | [2012] EWHC 3613 (QB) |
| Docket Number | Claim No: QB/2011/0311 |
| Court | Queen's Bench Division |
| Date | 07 February 2012 |
[2012] EWHC 3613 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand,
London WC2A 2LL
Mr Justice Lloyd Jones
Claim No: QB/2011/0311
MR S MILLS (Instructed by Mishcon de Reya) appeared on behalf of the Claimant
MR G BUTTIMORE (Instructed by Healys) appeared on behalf of the Defendants/Appellants
Approved Judgment
Tuesday, 7 February 2012
This is an appeal against the orders of Master Eastman made on 13 April and 26 May 2011 respectively. On 13 April he decided that a conditional order should be made against the defendants and he gave directions as to the filing of evidence for the determination of the extent of that financial condition. On 26 May 2011, following a further hearing, he determined that the first defendant should pay £150,000 into court and that the second and third defendants should each pay £100,000 into court. Spencer J gave permission to appeal against these orders on two grounds. First, that a conditional order should not have been made and, secondly, that the conditions imposed were excessive. There is no cross appeal on and, therefore, the claimant does not maintain that the master should have entered judgment for the claimant.
The background to the matter is that the claimant, a subsidiary of the Royal Bank of Scotland plc, has engaged in the business of financing trade debts. The first defendant, Mr Roger Dymond ("Mr Dymond"), is a director of RD Industries Limited, a company in administration ("the Company"). Mr Dymond is also a director and shareholder of the second and third defendants, RDI Group Limited and RD Investments Limited, respectively. I am told that the third defendant is a wholly-owned subsidiary of the second defendant.
In May 2009 the Company entered into a series of agreements: a written invoice discounting agreement executed by Mr Dymond on behalf of the Company which incorporated invoice discounting terms; and also a debenture executed by Mr Dymond on behalf of the Company. The nature of the transaction was that the claimant would purchase the Company's debts, and upon receiving notification of the debts of the Company the claimant would immediately make funds available to the Company at the rate of 85 percent of the notified value and then, in due course, the claimant would seek to recover the full amount from the debtors.
It was a condition precedent of this invoice discounting agreement that the Company would deliver a limited personal guarantee executed by Mr Dymond limited to £160,000, and an unlimited corporate multi-party guarantee executed by the second and third defendants, and in due course that happened. There were express terms of the agreement that the claimant would be entitled to terminate the agreement on the occurrence of a termination event, and "termination event" was defined as including a material deterioration in the financial condition of the Company and the Company becoming insolvent.
On 22 July 2010 the Company went into administration and Mr Mark Roach and Mr Graham Randall, BDO LLP, were appointed as joint administrators of the Company. That was, of course, a termination event under the terms of the invoice discounting agreement. At that point all sums outstanding under the agreement prima facie became immediately payable by the Company. Further, under the terms of the personal indemnity and the corporate indemnity, the defendants were liable to pay on demand up to the limit of the financial limit contained in the personal indemnity, in the case of the first defendant, the sums which were the subject of those indemnities.
On 13 September 2010 a claim form was issued against the defendants. Other matters were canvassed in correspondence, but the claimant sought to rely on the Company's insolvency as the termination event, and the sums claimed from these defendants related to their primary obligations as indemnifiers.
The claimant made an application for summary judgment. Shortly before that was due to be heard, the defendants lodged evidence in support of a new defence that the assets had been sold by the administrators at an undervalue and that this had been done by the administrators acting as agents for the claimant. The new defence (as it appears in the amended defence) is that the defendants are discharged from liability under the indemnities because the administrators sold the assets of the Company for £310,000 whereas they were in fact worth not less than £750,000. For the purposes of this application, this is the sole defence with which we have been concerned.
For such a defence to succeed, it would have to be established not only that the assets were sold at an undervalue, in breach of duty to the defendants, a matter which prima facie would be the responsibility of the administrators, but also that the claimant bears responsibility for that. Here it is now maintained that the administrators acted on the instructions of the claimant in selling at an undervalue and, therefore, in doing so, they acted as the agents of the claimant.
Mr Mills, on behalf of the claimant, is very critical of this late defence and the circumstances in which it came to be relied upon. Mr Dymond in his witness statements provides an explanation of how the significance of what was said by the administrator, Mr Roach, only became apparent to him at a late stage shortly before the hearing before the master. Master Eastman concluded that, so far as the new defence was concerned, he could not say that there was no realistic prospect of success. However, it seemed to him that this was a thin defence and, therefore, he came to the conclusion that it was appropriate to grant conditional leave to defend, conditional upon substantial sums of money being paid into court by all three defendants. At the later hearing he then proceeded to assess those sums, there having been an opportunity in the meantime for the parties to lodge further evidence in relation to means and the appropriate sums to be paid into court.
Ground 1: A conditional order should not have been made.
CPR 24 PD para 4 provides that:
"Where it appears to the court possible that a claim or defence may succeed but improbable that it will do so, the court may make a conditional order."
The question on this ground of the appeal, the appeal being by way of review, is whether the master was wrong to decide that it appeared possible that the defence may succeed, but improbable that it would do so. It is accepted before me that the master directed himself correctly in law. This ground of appeal therefore relates to two issues, which will be considered in turn: whether the administrators sold the assets of the Company as agents of the claimant; and, secondly, if so, whether they sold the assets at an undervalue.
Turning to the agency point, Mr Buttimore, on behalf of the defendants, puts forward this defence on the basis of an analogy with the position of mortgages and receivers. He has drawn my attention to a number of authorities, including Standard Chartered Bank v Walker [1982] 1 WLR 1410, American Express International Banking Corporation v Hurley [1986] 2 BCC 98993, and Barclays Bank plc v Kingston [2006] EWHC 533 QB. Mr Mills, for the claimant, reserves his position in relation to this aspect of the case.
The defendants maintain that the administrators became agents of the claimant because the claimant gave directions to the administrators as to the conduct of the administration and the conduct of the sale of the assets, and/or interfered in the sale of the assets of the Company such that they became agents of the claimant. The defendants say that Mr Roach, one of the joint administrators, informed the first defendant incorrectly that the administrators had accepted an offer of £425,000 for the assets, whereas in fact the sale price was £310,000, and, secondly, that Mr Roach informed the first defendant, Mr Dymond, that the administrators could not wait until Monday 2 August 2010 to consider other bids as the claimant had "instructed them to accept the offer".
Mr Dymond's evidence on the point is as follows:
"The Administrators had stated that they would not accept another offer without first consulting me or before the Monday deadline. However on Friday 30 July 2010 Mr Roach (Administrator) telephoned me to tell me that they had agreed the sale of the Company and the formalities (signatures) were all that were required. He then came to the Company's offices. I asked him who had made the offer, to which he replied, 'I am not at liberty to tell you.' I then asked him what offer he had accepted and he told me that the Administrators had accepted an offer of £425,000. I commented that he had not compared my offer properly as my offer was in fact better, there were other interested parties coming in on Monday and it was outrageous that he had not waited until Monday as he had stated. To which he replied, 'It is too late, Roger. The bank instructed me to accept this offer and the Company has been sold.'"
Mr Buttimore, for the defendants, points to the alleged incorrect statement of the price as supporting the view that the Company had been sold at an undervalue. It was, he says, to cover the embarrassment of the administrator Mr Roach at the low price which had been accepted. I note that Mr Armstrong, solicitor with the conduct of this matter for the claimant, in his second witness statement, states that Mr Roach denies that he told the...
To continue reading
Request your trial