Re Edennote Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 21 May 1996 |
| Date | 21 May 1996 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal
Before Lord Justice Nourse and Lord Justice Millett
Insolvency - liquidator - power of unsecured creditors to impugn transactions
The unsecured creditor of a company who was aggrieved by an act or decision of the liquidator had a right to seek directions from the court under section 168(5) of the Insolvency Act 1986 so as to impugn transactions entered into between the liquidator and third parties.
If the liquidator was found to have done something so unreasonable and absurd such that no reasonable man would have done, the court would set the transaction aside. However, in such circumstances the court should only order the removal from office of the liquidator, being its own officer, if adequate grounds existed for showing loss of confidence in him by the creditors and that that loss of confidence was reasonable.
The Court of Appeal so held in a reserved judgment allowing in part an appeal by the second respondent, Mr Terence F Venables, from orders made by Sir John Vinelott, sitting as a judge of the Chancery Division in November 1994 ([1995] 2 BCLC 248) on an application brought by the applicants, Tottenham Hotspur plc, Amshold Ltd and Mr Alan M Sugar.
The court upheld the judge's order setting aside the liquidator's assignment to Mr Venables of Edennote Ltd's right of action in the High Court against Tottenham Hotspur plc and Tottenham Hotspur Football Athletic Co Ltd. However the court, holding in Mr Venable's favour, set aside the judge's order removing from office the liquidator, Mr Stephen B Ryman, and appointing joint liquidators in his place.
The liquidator, the first respondent, was not a party to the appeal.
The application arose out of the dispute between Mr Sugar and Mr Venables over the management of Tottenham Hotspur plc, a company controlled by Amshold Ltd and Mr Sugar. In 1993 Mr Venables and Edennote, a company whose shares were held by Mr Venables, commenced proceedings in the High Court against Tottenham for damages for breach of management/service agreements.
In May 1994, at the instigation of Tottenham, Edennote was ordered by the court to be wound up and the liquidator was appointed. Edennote's only asset was a £35,000 refund due from the Inland Revenue.
In July 1994 the liquidator, so as to obtain funds to carry out his duties as liquidator and despite objections from the applicants, who were all unsecured creditors of Edennote and who claimed that more could...
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...very slow to interfere and defers to the commercial judgment of the office-holders providing that they are behaving rationally: see e.g. Re EdennoteLtd [1996] 2 BCLC 389 and Unidareplc v. Cohen [2006] BCC 463. Mr. McCulloch submitted that a court ought not to make a costs order against offi......
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...by which the court would interfere with the actions of a liquidator was considered by the Court of Appeal in the UK in Re. Edennote Ltd 1996 2 BCLC 389 where LJ Nourse stated as follows at page 394: 'Mr. Rayner James accepts and asserts that those authorities propound the correct test, nam......
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...the Court must satisfy itself on the evidence that the retention of the liquidator would be against the interest of the liquidation. In Re Edennote Ltd [1966] 2 BCLC 389 at page 398 Nourse L.J. restated the principles as follows: " Sir John Vinelott said that the decision in Re Keypak Homec......