Re Eurocruit Europe Ltd ((in Liquidation))

JurisdictionEngland & Wales
JudgeTHE HON MR JUSTICE BLACKBURNE,Mr Justice Blackburne
Judgment Date21 June 2007
Neutral Citation[2007] EWHC 1433 (Ch)
Docket NumberCase No: 6774 OF 2005
CourtChancery Division
Date21 June 2007

[2007] EWHC 1433 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before

The Hon Mr Justice Blackburne

Case No: 6774 OF 2005

In the Matter of Eurocruit Europe Ltd (in Liquidation)

And in the Matter of the Insolvency Act 1986

Between
Kevin Ashley Goldfarb (Liquidator of Eurocruit Europe Limited)
Applicant
and
Richard Poppleton
Respondent

Mr Richard Wilson (instructed by Moon Beever) for the Applicant

Mr Nicholas Briggs (instructed by Bevan Brittan) for the Respondent

Hearing dates: 7 June 2007

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

THE HON MR JUSTICE BLACKBURNE Mr Justice Blackburne

Mr Justice Blackburne:

1

This is the respondent's application to strike out the applicant's originating application for relief against the respondent under section 212 of the Insolvency Act 1986 (“the 1986 Act”). The respondent's application is made pursuant to CPR 3.4(2)(a) on the ground that the claims against him are statute-barred, alternatively pursuant to CPR Part 24 on the ground that, for the same reason, the claims against him have no real prospect of success and there is no other compelling reason why the matter should be disposed of at trial.

2

The proceedings relate to the affairs of Eurocruit Europe Ltd (“the Company”) which went into creditors' voluntary liquidation on 12 October 1999. The applicant, Kevin Goldfarb, a chartered accountant and licensed insolvency practitioner, was appointed liquidator on the same day.

3

The Company, which was incorporated on 17 July 1997, carried on business as a recruitment agency. The respondent, Richard Poppleton, was appointed a director of the Company on the day of its incorporation and remained a director until the Company went into liquidation just over two years later on 12 October 1999. Mr Poppleton was from 13 July 1998 the Company's sole director.

4

As at the date of liquidation the Company, according to its statement of affairs, had liabilities of £326,601 and assets of just £22,982. Its major creditors were and are Customs and Excise (as they then were) with an admitted debt of £107,629 and the Inland Revenue (as it then was) with an admitted debt of £117,438.45. Those two debts comprise roughly 70% of the Company's overall indebtedness and roughly 75% of the resulting deficiency. According to the statement of affairs Mr Poppleton is a debtor in the sum of £23,000 which represents just under 25% of the Company's creditors ignoring the two Crown debts.

5

By his originating application Mr Goldfarb seeks an order requiring Mr Poppleton to pay £303,719 to him by way of contribution to the Company's assets, or such other sum as the court considers just. That amount is exactly equal to the Company's deficiency. Interest and costs are also claimed. As is made clear by the particulars of claim, the relief is sought pursuant to section 212 of the 1986 Act on the ground that Mr Poppleton acted in breach of the duty of care and skill which he owed to the Company and also in breach of the fiduciary duty which he owed to act in good faith in the best interests of the Company and its creditors. Particulars are given of the alleged breaches. It is alleged that Mr Poppleton's breaches of duty resulted in the Company's deficiency of £303,719 and therefore that he is liable to account to the Company for that sum or to compensate the Company for such other sum as the court shall consider just pursuant to section 212. In answer to a Part 18 request, Mr Goldfarb states that the breaches of care and skill continued from January 1999 until the Company ceased to trade. The evidence indicates—and I did not understand this to be in controversy—that the Company ceased to trade in the second half of September 1999 when the decision was made, on professional advice, to convene meetings to place the Company in creditors' voluntary liquidation and appoint Mr Goldfarb as liquidator.

6

Mr Poppleton has served a defence in which he denies any breaches of duty. By paragraph 21 of his defence he pleads as follows:

“If, which is denied, the Respondent breached his duty of care and skill and/or fiduciary duty to act in the best interests of the Company as pleaded it is averred that any such breaches of duty that occurred prior to 7 October 1999 (being 6 years before the date of issue of these proceedings) are statute barred by reason of the Limitation Act 1980. For the sake of clarity it is averred that no breaches of duty occurred after 7 October 1999 and thus all claims made by the Applicant are time barred.”

In fact, as I understand it, these proceedings, although dated 7 October 2005, were only issued on Monday 10 October 2005. This means that they were issued only one clear working day before the sixth anniversary of the commencement of the Company's liquidation and Mr Goldfarb's appointment as liquidator.

7

For the purposes of Mr Poppleton's strike-out application, I proceed on the basis that the allegations of fact set out in the particulars of claim are true so far as relevant to the basis of that application. It has not been suggested that I should proceed on this application on any other basis. The only issue has been when the applicable limitation period began to run.

8

For Mr Poppleton, Mr Nicholas Briggs submits that the relevant limitation period is six years, under section 2 of the Limitation Act 1980 (“the 1980 Act”) (concerned with actions founded on tort) in the case of the alleged breaches of the duty of care and skill and, given the nature of the sole breach that is alleged, under sections 2 and 36 of the 1980 Act (applying the time limits under section 2 by analogy) in the case of the alleged breach of fiduciary duty. He submits that the six year periods run in each case from the date damage was suffered by the Company in respect of the breach relied upon. He submits that since the Company ceased trading on 21 September 1999 (see paragraph 17.1.2 of his defence) the latest date on which any cause of action could have accrued was more than six years before these proceedings were brought. If that is correct then, prima facie, the claims were statute-barred when these proceedings were issued on 10 October 2005.

9

For Mr Goldfarb, Mr Richard Wilson accepts that the relevant limitation period is six years but submits that the material provision is section 9 of the 1980 Act, namely the time applicable to “an action to recover any sum recoverable by virtue of any enactment”. The enactment in question is, he says, section 212 of the 1986 Act. He submits that, in any event, whichever is the relevant section of the 1980 Act, the causes of action only accrued to Mr Goldfarb on 12 October 1999 when the Company was wound up and he was appointed its liquidator. If that is correct then, on any view, the proceedings were brought in time, if only just. But Mr Wilson also goes on to submit that if, contrary to those submissions, the relevant limitation period began at the date of breach, so that the claims were prima facie statute-barred when these proceedings were issued, nevertheless time began to run afresh, under section 32(1)(b) of the 1980 Act, by reason of Mr Poppleton's conduct in deliberately concealing from Mr Goldfarb facts relevant to his rights of action against him.

The primary limitation period

10

Section 212 of the 1986 Act provides, so far as material, as follows:

“(1) This section applies if in the course of the winding up of a company it appears that a person who —

(a) is or has been an officer of the company…

has misapplied or retained, or become accountable for, any money or other property of the company, or been guilty of any misfeasance or breach of any fiduciary or other duty in relation to the company.

(3) The court may, on the application of the official receiver or the liquidator, or of any creditor or contributory, examine into the conduct of the person falling within subsection (1) and compel him —

(a) to repay, restore or account for the money or property or any part of it, with interest at such rate as the court thinks just, or

(b) to contribute such sum to the company's assets by way of compensation in respect of the misfeasance or breach of fiduciary or other duty as the court thinks just.”

11

Mr Briggs reminded me that section 212, like its statutory predecessors stretching back very many years, has been regarded, at least since 1880 (see Re Canadian Land Reclaiming and Colonizing Company (1880) 14 ChD 660 at 670), as procedural in nature, enabling the liquidator of a company to bring proceedings in his own name in respect of breaches of duty or the like suffered by the company which, but for that provision, the company would have to pursue in its own name. He drew my attention to various passages in the authorities which are to this effect including, most recently, the following from the judgment of Chadwick LJ in Cohen v Selby [2001] 1 BCLC 176 at 183 (paragraph [20]):

“Section 212 is the successor to s333 of the Companies Act 1948. It, and its statutory predecessors, have been in the Companies Acts since 1862. It provides a summary procedure in a liquidation for obtaining a remedy against delinquent directors without the need for an action in the name of the company. It does not, of itself, create new rights and obligations: see Re City Equitable Fire Insurance Co Ltd [1925] Ch 407 at 507. The scope of the section was enlarged by the 1986 Act (or, more accurately, by the Insolvency Act 1985, in which s212 was enacted as s19) to include 'breach of other duty'; thereby removing the limitation imposed by he concept of misfeasance which had been identified by Evershed MR in Re B Johnson & Co (Builders) Ltd [1955] 2 All ER 775 at 781, [1955] Ch 634 at...

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