Re Overnight Ltd ((in Liquidation))
| Jurisdiction | England & Wales |
| Neutral Citation | [2009] EWHC 601 (Ch) |
| Date | 2009 |
| Year | 2009 |
| Court | Chancery Division |
Limitation of action - Fraudulent trading - Accrual of cause of action - Statute conferring cause of action on liquidator where “in the course of the winding up” company’s business was carried on with intent to defraud creditors - Whether company in course of being wound up on presentation of winding up petition - Whether “liquidator” encompassing provisional liquidator - Whether limitation period running only from making of winding up order and appointment of liquidator - Whether claim time-barred -
On 30 October 2001 a petition was presented to wind up the company and on 26 November the applicant was appointed as its provisional liquidator. On 5 December 2001 the company was compulsorily wound up. The liquidator considered that during the course of the winding up the business of the company had been carried on with the intent to defraud creditors. Accordingly on 30 November 2007 he applied for leave to commence proceedings against one of the directors of the company under section 213 of the Insolvency Act 1986F1 for a declaration that he was liable to make a contribution to the company’s assets. Relying on sections 129 and 135 of the 1986 Act, the director contended that the six-year limitation period for bringing the claim ran from the date of the presentation of the winding up petition or the appointment of the provisional liquidator and therefore the application issued on 30 November 2007 was out of time. The registrar ordered to be tried as a preliminary issue whether the application was time-barred.
On the hearing of the preliminary issue—
Held, that section 213 of the 1986 Act imported two essential conditions quite apart from the need to prove that the business of the company had been carried on with intent to defraud creditors, namely, that the company was in the course of being wound up and that the application was made by the liquidator; that for the purposes of section 213 the commencement of the winding up was the making of the winding up order rather than the presentation of the petition; that, further, “liquidator” in section 213(2) did not encompass a provisional liquidator; that, therefore, the date on which all the elements necessary to plead the claim arose was 5 December 2001; and that, accordingly, the application was not time-barred (post, paras 22, 23, 24, 25, 36, 37).
The following cases are referred to in the judgment:
Farmizer (Products) Ltd, In re [
Hill v Spread Trustee Co Ltd
Priory Garage (Walthamstow) Ltd, In re [
R v Schildkamp [
Stocznia Gdanska SA v Latreefers Inc [
Yates (A bankrupt), In re
No additional cases were cited in argument or referred to in the skeleton arguments.
By an application dated 30 November 2007 Kevin Ashley Goldfarb, the liquidator of Overnight Ltd, applied for an order under section 167(1)(a) of the Insolvency Act 1986 giving him leave to commence proceedings under section 213 of the Act against the second respondent, Andreaus Charalambous, a director of the company. On the same day Mrs Registrar Derrett made the order sought. By his defence dated 12 March 2008, the second respondent alleged that the liquidator’s application was time-barred. By an order dated 16 May 2008 Mr Registrar Jaques ordered to be tried as a preliminary issue whether the liquidator’s claim was barred by section 9(1) of the Limitation Act 1980.
The facts are stated in the judgment.
Richard Morgan (instructed by
Edward Ash (instructed by
SIR ANDREW MORRITT C
1 This is the trial of a preliminary issue directed by order of Mr Registrar Jaques made on 16 May 2008. The issue is whether the application by the applicant, Mr Goldfarb, as liquidator of Overnight Ltd, which he made on 30 November 2007 seeking a declaration under section 213 of the Insolvency Act 1986 is barred by section 9(1) of the Limitation Act 1980.
2 The facts of the matter can be shortly stated. Her Majesty’s Revenue and Customs (“HMRC”) presented a petition for the winding up of Overnight Ltd on 30 October 2001. The petition was based on a judgment for £337,000-odd in relation to unpaid VAT. On 26 November 2001 Mr Goldfarb was appointed the provisional liquidator of Overnight Ltd. The order appointing him contained the conventional provisions providing that “The functions and powers of the provisional liquidator extend to the following acts, that is to say” and then para 1 dealt with collecting and protecting the assets; para 2 was securing the books and records; para 3 was investigating the affairs of the company; likewise para 4; paras 5 and 6 dealt with defending actions and maintaining bank accounts and so forth. It was then provided that the provisional liquidator was to have further powers relating to the dismissal of employees; completion or otherwise of contracts; engaging solicitors or other agents; and retaining and operating the existing bank accounts.
3 On 5 December 2001 Overnight Ltd was compulsorily wound up on the petition of HMRC. On 30 November 2007, that is to say just under six years after the winding up order was made, a number of events occurred. First, Mr Goldfarb, as the liquidator, applied for an order under section 167(1)(a) of the Insolvency Act 1986 giving him leave to commence proceedings under sections 206, 208 and 213 of that Act against three respondents, Mr Higgins, the second respondent variously called Mr Charalambous and Mr Andreous (and I will call him the latter) and Mr Chareb.
4 The application was supported by a statement of Mr Goldfarb in which he alleged that the company had been engaged in what is known as a missing trader or carousel fraud by the purchase from a trader in another member state of a large number of computer software processing units and re-selling them at cut prices to customers in the United Kingdom.
5 On the same day, that is 30 November 2007, Mrs Registrar Derrett made the order sought by that application and (this is the third act) on the same day applications for orders under section 213 of the 1986 Act against Mr Higgins, Mr Andreous and Mr Chareb were duly issued by Mr Goldfarb pursuant to the leave he had been given by Mrs Registrar Derrett. And on the same day, Mr Andreous was personally served.
6 The statement of Mr Goldfarb in support of the application and order under section 213 exhibited particulars of claim setting out his case. The case against Mr Andreous is that he was appointed a director of Overnight Ltd on 12 July 2001. The trading of Overnight Ltd alleged to have been carried on with intent to defraud creditors is set out in paras 8–10 of the particulars of claim in the following terms:
“8. The company started selling computer chips in around June 2001. The company purchased those computer chips from suppliers within the European Community but outside England and Wales and accordingly paid no VAT on their acquisition. It sold those chips to purchasers within England and Wales on which sales it charged VAT. It ceased trading on or around 19 September 2001 when Her Majesty’s Customs and Excise sought and obtained a freezing injunction.
“9. In the period during which the company traded, the respondents caused it to sell computer chips for a price which, if VAT was properly accounted for to Her Majesty’s Customs and Excise, would result in the computer chips being sold at a price (excluding VAT) that was approximately 10% lower than their cost to the company. However the respondents caused the company not to account to Her Majesty’s Customs and Excise for VAT charged by the company and sums representing the VAT were misappropriated or applied otherwise than in respect of that liability in the knowledge, or without any reasonable belief, by the respondents that the company would be able to service its VAT liability.
“10. In the period during which it traded, the company raised invoices for a gross value of £3,037·845 and charged but failed to bring to account the sum of £452,445 in respect of VAT in the circumstances set out below.”
7 Mr Andreous put in a defence on 12 March 2008. He denied the material facts set out in the particulars of claim (to which I have referred) claiming to have been concerned only in an administrative capacity, effectively as a book keeper, to do the bidding of the third respondent, Mr Chareb. But in para 19 of his defence he alleged:
“Furthermore, it is contended that the present application is time-barred, being an action to recover a sum of money under an enactment, namely section 213 of the Insolvency Act 1986. The applicant’s cause of action accrued on the presentation of the petition for the winding up of the company, that is, in...
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