Re Charit-Email Technology Partnership LLP v Vermillion International Investments Ltd
| Jurisdiction | England & Wales |
| Judge | THE CHANCELLOR |
| Judgment Date | 13 February 2009 |
| Neutral Citation | [2009] EWHC 388 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH/2008/APP/0775 |
| Date | 13 February 2009 |
[2009] EWHC 388 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BEFORE: The Chancellor of the High Court (The Rt Hon Sir Andrew Morritt)
Case No: CH/2008/APP/0775
MR A DE MESTRE (instructed by Addleshaw Goddard) appeared on behalf of the Claimant
MR J JARVIS QC AND MS A START (instructed by Howes Percival) appeared on behalf of the Defendant
Approved Judgment
This is the appeal of 94 individuals, who deny being contributories of a limited liability partnership (LLP) called Charit-Email Technology Partnership LLP, brought with the leave of the judge from the order of Chief Registrar Baister made on 22 October 2008, to the effect that they are not entitled to appear on the hearing of the petition to wind up the LLP presented by the respondent, Vermillion International Investments Limited on 4 March 2008 and to oppose the order sought.
The LLP was incorporated on 30 September 2003 in the name of Charit E-mail (with a hyphen between the “E” and the “Mail” as opposed to between “Charit” and “Email) Technology Partnership LLP. The partnership deed of the same date provided that the term of the partnership was to be ten years and no party might seek to wind it up earlier; the partnership would borrow money on terms that the members guaranteed its repayment in proportion to their investments and both the loan and those investments would be used to buy certain computer software. It provided that the agency of a member was restricted to transactions to a value of £1,000 and that losses were to be shared pro rata to each member's investment. It provided also that the members might be called on to make loans to the LLP in proportion to their investment and that on dissolution the member would remain liable to contribute to the assets of the partnership up to, but not more than, five times the original investment.
The partnership agreement envisaged a sale and purchase agreement, which was made on 13 October 2003, between the LLP and Vermillion under which the web mail system (operated under that name by Vermillion) was sold to LLP for £35 million. That was followed, in May 2004, by a loan facility to LLP granted by MFC Merchant Bank SA (MFC) in the sum of £28 million. That loan was guaranteed and/or secured by Vermillion by means of a pledge of its credit balance for £28 million with MFC Merchant Bank SA. The LLP changed its name on 2 July 2004 by moving the hyphen from after to in front of the “E” in “Email”. In August 2004, MFC assigned its rights under the loan facility to MFC Financial Services GmbH.
The evidence before me includes the accounts for the LLP for the years ended 5 April 2004, 2005 and 2006. Those for 2006 show a deficiency regarding members of £27,999,999. On 27 April 2007, MFC demanded repayment from LLP, on or before 27 May 2007. Failing that repayment it demanded payment of the like sum from Vermillion on 31 May 2007. It was paid by Vermillion and, on 5 February 2008, Vermillion served a statutory demand on the LLP requiring it to pay the £28 million which it claimed to be due by way of subrogation to the rights of MFC Financial Services GmbH. The petition with which I am now concerned was presented by Vermillion on 4 March 2008. The ground for winding up, it is alleged, is that of insolvency and failure to comply with the statutory demand.
On 2 June 2008, Mr Michael Green (the solicitor acting on behalf of the appellants) made a witness statement. In that statement he asserted that the appellants are not, and never have been, members of LLP. He indicated that they are concerned that Vermillion might seek to recover its debts from each of them, up to the limit of their respective liability, and, he added, civil proceedings on behalf of some 550 investors are expected shortly to challenge the operation and legitimacy of the schemes under which the investments were made. He pointed out that the liability of the members of LLP is some five times his or her initial investment. He submitted that the petition had been presented by the wrong person, as a claim by way of subrogation should be made in the name of the original creditor, and he asserted that in any event there was confusion as to which company is the debtor, due to the change of name, both of Vermillion and of LLP. Finally, he contended that LLP is a collective investment scheme, the consequence of the provisions upon which Vermillion relies have no application.The first hearing of the petition was on 4 June 2008. The Registrar gave directions for evidence and adjourned the petition to 7 October 2008.
Mr Green made a second witness statement on 18 July (adding little to the first) and on 22 September a witness statement was made by a Mr Robert Spears, on behalf of Vermillion, in which he contended that the appellants were investors in the LLP and, therefore, contributories. The petition returned to Chief Registrar Baister on 7 October 2008. Counsel for Vermillion objected to the appearance of counsel for the appellants on the ground that they had not been identified by name; no notice of their opposition had been given as required by Insolvency Rule 4.16; and that they had failed to demonstrate a contingent surplus of assets in the winding up available to them for distribution if an order was made on the petition to wind up LLP.
The following day, 8 October 2008, the list required by Insolvency Rule 4.16 was put in. It is in an unusual form. It states:
“Take notice that the individuals listed in Schedule 1 attached hereto, each listed as a member of the above named LLP at Companies House and alleged to be a contributory thereof, intend to appear on the hearing of the abovementioned petition to oppose it.”
On the same day, the Chief Registrar heard argument in respect of the locus standi of the appellants to appear as opposing contributories on the hearing of the petition in due course. He reserved his judgment and handed it down on 22 October. So far as relevant for present purposes, he concluded that the evidence showed that the LLP had been formed as the vehicle for a complex tax avoidance scheme which had failed; that the scheme had been sold to a number of individuals, including the appellants, and that the appellants intended to bring proceedings alleging fraud against a number of persons in relation to their investment in the LLP. He noted that it was now contended that the appellants were contributories within the meaning of section 79 of the Insolvency Act 1986, but he found that there was an established practice from which the court should not depart (save in exceptional...
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