Re DCC Realisations Ltd ((in Liquidation)) (formarly the Devon Cider Company Ltd) : Bramston v Murphy and Others
| Jurisdiction | England & Wales |
| Judgment Date | 11 February 2009 |
| Neutral Citation | [2009] EWHC 316 (Comm) |
| Docket Number | No. 4444 of 2008 |
| Year | 2009 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 11 February 2009 |
[2009] EWHC 316 (Comm)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
In the Matter of DCC Realisations Ltd (in liquidation)
(formerly the Devon Cider Company Ltd)
And in the Matter of the Insolvency Act, 1986
Before:
David Donaldson Q.c. Sitting as a Deputy High Court Judge
No. 4444 of 2008
History and nature of the proceedings
This is an adjourned application for directions in an originating application made by the liquidator of DCC, formerly known as The Devon Cider Company Limited ((DCC(). Until 23 July 2007 DCC carried on the business of cider production and contract packing of liquids and beverages. It was a registered cider maker under the Cider and Perry Regulations, 1989 ((the CPR(), which deals with the control and taxation of the production of bottled and bulk cider.
In 2006 DCC encountered financial difficulties and its bank withdrew support by April 2007. DCC sought advice from Smith & Williamson ((SW(). No third party purchaser for the business having been found, SW advised a pre-packaged scheme under which DCC would go into administration and sell the business and assets to a new company owned by the directors of DCC with funding obtained by them.
In accordance with this plan DCC went into administration on 23 July 2007, with the First Respondents —two insolvency practitioners from Smith & Williamson —being appointed as joint administrators ((the administrators(). On the same day DCC, acting by the administrators, entered into an agreement for the sale of the business to a shelf company which then changed its name to The Devon Cider Company Limited ((Newco() and continued the business from the same premises. Newco(s application for registration under the CPR was signed on 18 July 2007, received by HMRC on 25 July 2007 and effected on 10 August 2007.
On 19 September 2007 DCC went into creditors(voluntary liquidation at the instance of HMRC, its only substantial creditor.
The originating application concerns excise duty payable in respect of a substantial quantity of bottled and bulk cider held by DCC at 23 July 2007. The share of the sale consideration attributed by the agreement to this stock was (375,000. The excise duty arising on the stock has been assessed by HMRC at (1,625,395.40, a figure with which the liquidator agrees. Though the precise figure may not be accepted by the administrators, it is not, as I understand, in dispute that it is very substantial and many times the (375,000 for which the cider was sold to Newco.
In essence, the originating application seeks to have determined what was the relevant excise duty point under the CPR and when it occurred.
At the time the application was issued on 29 May 2008, the battle lines were as follows. Relying on regulation 11(1)(ii) CPR, HMRC contended that the duty became payable when the stock was (sent out from the premises(, which it equated with the sale of stock to Newco. The liquidator concurred with this analysis. If correct, it would have made the liability for the duty an expense of the administration. The administrators disagreed, contending that the excise liability was triggered by DCC(s entry into administration, preceded the administration, and was therefore an unsecured claim. It is not suggested that this rival analysis had dictated the scheme advised by SW: indeed it appears that the question of duty had simply not been addressed. The contest between these two contentions was seen as affecting the proper conduct of the liquidation in a number of respects, including whether action should be brought against the administrators for negligence or breach of duty.
It was against this background that the liquidator issued his originating application. It sought the determination by the court as to whether the duty point was when (DCC entered into administration( or alternatively when (the Administrators sold the business (including the alcoholic stock)( and (therefore whether the duty is an expense of the administration and, if so, in what sum(.
Thereafter, however, the lines of battle changed. In a letter dated 12 August 2008, explaining the basis for its assessment of the same date against DCC in the sum of (1,625,395. 40, HMRC switched its reliance to regulation 13, which fixes as a duty point the time when (the business of making cider is discontinued at the cider premises having cider therein(, and confirmed this in its review decision by letter dated 6 November 2008. On this basis, though it is still contended that the duty became payable on 23 July 2007, this is now said to have occurred because DCC stopped making cider on that date.
The administrators effected an even more fundamental change of tack. Through their solicitors they argued in a letter of 22 October 2008 that (contrary to their previous position) the duty point was determined by regulation 11, but that the (sending out (did not occur until the stock was subsequently sold and dispatched to customers by Newco. On this basis DCC would never have incurred any liability, and the excise duty would be payable by Newco. The liquidator concurs with HMRC(s revised analysis. Though he has lodged an appeal against the assessment to the VAT and Duties Tribunal (now absorbed into the new tribunal structure), he has done so only to protect his position as against the administrators. That is reflected in the grounds of appeal dated 18 November 2008 which state that:
(It is disputed that the duty point arose during the period of Administration upon the transfer of the business of the Company. The former Administrators (Solicitors consider that it arose upon final sale by the successor company which purchased the business. This is the subject of an application for Directions by the Liquidator in the High Court.(
Strangely, until I pointed it out at the end of the argument, no-one had apparently noticed that the relief claimed by the originating application no longer reflected the revised contentions of the parties. I gave permission for the liquidator to amend to rectify the position. Since the hearing, the application has been amended on 23 December 2008 to claim an order that the excise duty point (occurred during the administration of DCC( and that (if properly assessed, excise duty of (2,111,018. 89 would be payable as an expense of the administration, alternatively that an excise duty point did not occur during the course of the administration of DCC(. (I observe that the...
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