Re D.P.R Futures Ltd
| Jurisdiction | England & Wales |
| Date | 1989 |
| Court | Chancery Division |
Company - Winding up - Liquidator - Cross-undertakings in damages - Proceedings by liquidators against former directors of company - Mareva injunctions obtained ex parte - Extent of liquidators' cross-undertaking in damages - Orders requiring discovery in support of tracing claim - Whether justified - Criminal proceedings pending against former directors - Proceedings by liquidators prejudicial to fair trial - Whether to be stayed - Company - Winding up - Contributories - Proceedings by liquidators against former directors and shareholders - Criminal proceedings also pending - Former directors applying as contributories to inspect company's records - Whether entitled to order -
The company was incorporated in 1986, with a nominal capital of £100,000, divided into 100,000 shares of £1 each, which were issued with only 17p per share paid up. The respondents D., P. and R., were the directors and shareholders. The company traded as brokers, dealing in commodities and futures on behalf of its clients, receiving commission on the transactions entered into. In February 1988 D. resigned and his shares, which had cost him less than £6,000 were purchased by the company for £598,587 and cancelled. In July 1988 the Securities and Investment Board (“the S.I.B.”) issued a notice of prohibition, bringing about a cessation of the company's business, and on the same day authorised an investigation into its affairs. The S.I.B. also presented a winding up petition, on the grounds that the company's trading practices were contrary to the public interest and detrimental to its clients, and that it was unable to pay its debts. A compulsory winding up order was made on 12 October 1988, and on 23 November 1988 the applicants were appointed joint liquidators. On 20 January 1989 the respondents were arrested and subsequently charged with conspiracy to defraud and with breaches of section 330 of the
On the applications: —
Held, (1) continuing the Mareva injunctions and orders for discovery, that the joint liquidators should not be required to provide an unlimited cross-undertaking in damages; but that it would be right to require them to give a cross-undertaking limited to an amount commensurate with the size of the company's assets; that, in the circumstances, the court would accept their offer of a cross-undertaking limited to £2m which should be more than sufficient to cover any realistic estimate of the loss likely to be suffered by the respondents from the continuance of the injunctions; and that the orders for the discovery were required to ensure full disclosure and that any information provided by the respondents was up-to-date, and to allow verification thereof (post, pp. 786D, 787A, C, 788A–C).
(2) That, while there was a real risk of prejudice to the respondents' right to a fair trial if the present proceedings were heard before the criminal proceedings, there was no sufficient reason to stay the proceedings, since the respondents' interests could be safeguarded in other ways, and a large number of clients who had invested through the company would suffer serious injustice if discovery and inspection were delayed until the conclusion of the criminal proceedings; and that the respondents could be sufficiently protected by undertakings by the joint liquidators not to disclose the contents of any affidavit or document disclosed, save with the prior written consent of the respondents' solicitors or leave of the court, and by directing that all further interlocutory proceedings be held in camera, that directions be sought as to pleadings, that the case should not be set down for hearing without the leave of the court and that steps be taken in due course to ensure that trial of the civil proceedings should not take place before the conclusion of the criminal proceedings (post, pp. 790D–G, 791B–D, 792B–C).
(3) Dismissing the application to inspect the company's records, that section 155 of the Insolvency Act 1986 applied only to documents in the company's possession, whereas, in the present case, the records in question were not in the company's possession but in that of the police; further, that section 155 could be invoked only for the purpose of the winding up, and that inspection of the company's records was sought by P. and R., not for that purpose, but in order to prepare their defence to criminal charges arising out of their conduct of the company's affairs (post, pp. 788H–789C, H–790B).
The following cases are referred to in the judgment:
Guinness v. Saunders (unreported) 19 January 1988, Sir Nicolas Browne-Wilkinson V.-C.
North Brazilian Sugar Factories, In re (
The following additional cases were cited in argument:
A. v. C. (No. 2) (Note) [
Allen v. Jambo Holdings Ltd. [
Bankers Trust Co. v. Shapira [
Highfield Commodities Ltd., In re, [
Hoffmann-La Roche (F) & Co. A.G. v. Secretary of State for Trade and Industry [
Jefferson Ltd. v. Bhetcha [
Precision Dippings Ltd. v. Precision Dippings Marketing Ltd. [
Rank Xerox Ltd. v. Lane [
APPLICATIONS
On 2 February 1989, John Andrew Talbot and Raymond Hocking, the joint liquidators of D.P.R. Futures Ltd., issued an originating application against the respondents, Marcus Brett Deller, Andrew Michael Page and David Marc Rycott, seeking, inter alia (1) a declaration that all loans made to the respondents by the company were made in breach of section 330 of the
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