Richard James Philpott & Mark Jeremy Orton (as Joint Liquidators of WGL Realisations 2010 Ltd) v Lycee Francais Charles de Gaulle School
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Purle |
| Judgment Date | 06 March 2015 |
| Neutral Citation | [2015] EWHC 1065 (Ch) |
| Docket Number | No. 8568 of 2009 |
| Court | Chancery Division |
| Date | 06 March 2015 |
[2015] EWHC 1065 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
33 Bull Street
Birmingham, B4 6DS
His Honour Judge Purle QC
(Sitting as a Judge of the High Court)
No. 8568 of 2009
Mr. J. Morgan (instructed by Squire Paton Boggs (UK) LLP) appeared on behalf of the Applicants.
Ms. L. Briggs (instructed by Browne Jacobson LLP) appeared on behalf of the Respondent.
This is an application by the liquidators of a company now called WGL Realisations 2010 Limited ('the company'), which is in creditor's voluntary liquidation, for directions. The respondent is Lycee Francais Charles De Gaulle School ('the school'), with whom the company in liquidation was during its active life contractually involved in a construction project. As a result of insolvency the company went into administration, then voluntary liquidation, and there is now a dispute as to whether monies are due on one side or the other under the contract in question, which is a JCT Intermediate Building Contract (with contractors design) 2005 Revision 1: 2007, which was made on 1 st July 2008. I shall call it 'the contract'. The name of the company was formerly Welconstruct Limited. I shall continue to refer to it as 'the company'.
I have before me evidence from Mr. Philpott, who is one of the joint liquidators of the company, setting out the range of the dispute. In Appendix A to his first witness statement he sets out a summary of each party's position on the final account under the contract. That indicates that, according to the liquidators, somewhere around £615,000 is due to the company, and according to the school a sum of just in excess of £270,000 is due to the school. That is a range of £885,000, in round figures.
The liquidators have considered various ways of resolving the dispute. The school some time ago formally put in a proof of debt for its £270,000-odd, which the liquidators have yet to accept or reject. There is a final certificate which, if valid, is very much in the school's favour. The liquidators challenge its validity on grounds which I need not consider on this application.
There is an arbitration clause in the contract which plainly applies as a matter of construction to the current dispute. There is also provision for adjudication.
The school's position is that the arbitration clause is binding and continues to apply after an administration and liquidation. As this is a voluntary liquidation arbitration proceedings could be commenced, though they would be vulnerable to an application for a stay. It is clear that arbitration proceedings are legal proceedings or process for this purpose (see by way of comparison in the context of an administration Re: Frankice (Golders Green) Limited [2010] BLR 1608, paragraph 38, page 1617B).
McPherson's Law of Company Liquidation, Third Edition, makes the point that a stay is commonly granted when proceedings are brought against a company in voluntary liquidation. In the case of a company in compulsory liquidation the prior permission of the court is required. Mr. Morgan, for the liquidators, took me to the citation set out in McPherson at paragraph 7–072 from Toronto Wood & Shingle Company [1894] 30 Canadian Law Times, 353 and 356 as follows:
"It must be kept in view that the intention of the Winding Up Act and of all legislation respecting insolvency is to get within the control of the court all of the estate of the insolvent company, to settle there all the claims of debt, privilege, mortgage, lien, or right of property upon, in or to any effects or property of such company in the simplest and least expensive way, and to distribute its assets among its creditors in the most expeditious manner possible and not to have the proceedings of the winding up court or the distribution of the assets delayed or impeded by or dependent upon outside or expensive litigation in other courts."
Likewise, the citation from McPherson J, as he then was, in Ogilvie Grant v. East [1893] ACLR 669 is relied upon, as set out in paragraph 7–071:
"As a matter of history a winding up by the court was, and remains today, an administration conducted by the court."
[I observe that we are concerned in this case with a voluntary liquidation but similar principles apply subject to the provision that the onus is, when dealing with proceedings brought against a company, upon the liquidator to seek a stay rather than upon the person bringing proceedings to seek permission]:
"Both because of this, and because it was before the Judicature Act an administration conducted in Chancery, it was inevitable that there should be restrictions on the bringing of proceedings, whether at common law or otherwise, during the course of that administration. What is substituted for litigation in the ordinary form is a procedure by which a claimant lodges a verified proof of debt with the liquidator, who admits or rejects it wholly or in part, and from whom an appeal lies to a Judge, who determines that appeal de novo primarily on affidavit material: Re: Kenwood Constructions Limited [1960] 1 WLR 646. There can be no doubt that ordinarily such a procedure is, and is designed to be, much more expeditious and less expensive than ordinary proceedings by way of action."
That quotation remains potentially applicable in the context of the current insolvency legislation in this country, though I confess that my own experience leaves me doubtful whether the procedure for appealing a proof of debt offers significant savings in time and expense.
Proof of debts in a liquidation are dealt with in the Insolvency Rules 1986, Part 4, Chapter 9. Section A sets out the procedure for proving. Rule 4.73(2-CVL) provides:
"In a voluntary winding up … the liquidator may require a person claiming to be a creditor of the company and wishing to recover his debt in whole or in part, to submit the claim in writing to him."
That obviously is not a procedure which the liquidator could apply to the court to stay, because it is something which the liquidator himself initiates, and the existence of this procedure is the reason for staying other forms of proceedings against a company in liquidation. By contrast, in a winding up by the court, the obligation of the creditor under Rule 4.73(1), is ordinarily to submit his claim in writing, whether or not required to do so by the liquidator.
Under Rule 4.82(2):
"If the liquidator rejects a proof in whole or in part, he shall prepare a written statement of his reasons for doing so, and send it as soon as reasonably practicable to the creditor."
In the present case the liquidators have not yet decided whether to accept or reject the proof. Because of the claims on both sides they say they cannot do so until the account referred to in Rule 4.90 has taken place. Put another way, the account referred to in Rule 4.90 cannot take place until the underlying dispute has been resolved. The issue before me is how that dispute should be resolved.
Rule 4.90(1) provides:
"This Rule applies where, before the company goes into liquidation there have been mutual credits, mutual debts or other mutual dealings between the company and any creditor of the company proving or claiming to prove for a debt in the liquidation."
It is common ground that Rule 4.90(1) applies here and that the competing contentions of the parties, summarised in Appendix A to the witness statement to which I have referred, reflect such mutual dealings.
Rule 4.90(3) provides:
"An account shall be taken of what is due from each party to the other in respect of the mutual dealings and the sums due from one...
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