Robert Valentine v Bangla TV Ltd and Others
| Jurisdiction | England & Wales |
| Judgment Date | 14 July 2006 |
| Neutral Citation | [2006] EWHC 2292 (Ch) |
| Docket Number | No. 5937 of 2004 |
| Court | Chancery Division |
| Date | 14 July 2006 |
[2006] EWHC 2292 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
David Donaldson QC
No. 5937 of 2004
This is the official judgment of the court and I direct that no further note or transcript be made.
Background and nature of the application
Until the autunm of 2003 Bangla Television Limited ("the Company") carried on business broadcasting on satellite television in the United Kingdom in the Bangla language. On 9 September 2003 the Company entered into a Business Sale Agreement dated 9 September 2003 ("the BSA") under which the entirety of the company's business and assets was transferred to the First Respondent ("Bangla TV"), and since then that business has been carried on by Bangla TV. The Second Respondent ("Mr Khan") and the Third Respondent ("Mr Haque") were the directors of the Company at that date and responsible for committing the Company to that transaction. Clause 3 of the BSA, entitled "Consideration", provided that:
"3.1 The total consideration for the said sale and purchase shall be the sum of Two hundred and fifty thousand pounds (1~25O,OOO)…("the Consideration")
3.2 It is acknowledged and agreed by the parties that the Consideration payable by the Purchaser to the Vendor under this agreement has already been satisfied by the Purchaser to the Vendor in lieu (sic) of the signing of this agreement."
In accordance with Clause 3.2 no payment was received by the Company on the transfer of the business and assets.
At the time of the BSA the Company was hopelessly insolvent. The effect of the BSA was to extract the business and assets from the Company to be carried on, shorn of its liabilities, in a new "phoenix" company, the similarly named Bangla TV. On 23 December 2003 the Company went into creditors' voluntary winding-up, with the Applicant being appointed as liquidator. The Statement of Affairs showed that it had no assets (inevitably) and liabilities in excess of £1 million.
In this action the Applicant seeks a number of orders from the court in relation to the BSA. In particular, the Applicant seeks a declaration that the sale was a transaction at an undervalue within section 238 (4) (a) or (b) of the Insolvency Act, 1986 (alternatively a preference within section 239) and consequential orders against all the Respondents.
At the outset of the proceedings before me, the relief sought by the Applicant was resisted in its entirety by all the Respondents. That position changed very rapidly and indeed before I began to hear evidence. Bangla TV now formally accepted that the sale constituted a transaction at an undervalue, as did Mr Khan, and Mr Khan also accepted that an order against him under section 214 was appropriate. However, both Bangla TV and Mr Khan maintained that against the value of the assets (agreed to have been £250,000 on the basis of an independent valuation in September 2003) they should be given credit in any order for a number of payments to which I shall refer in more detail below, and the hearing before me was in consequence focussed on this argument.
At that stage, Mr Haque, whose solicitors had come off the record a few months earlier, was neither represented before me nor present in person. However, before the proceedings were —after an adjournment of some weeks —concluded, Mr Haque did attend court and informed me that he not only accepted that the transaction was at an undervalue but did not contend that credit should be given for these payments. He therefore neither gave evidence nor made any submissions. For convenience, my reference to the Respondents hereafter is therefore (except where the context indicates otherwise) to the First and Second Respondents.
The essential facts
The original shareholders of the Company in 1998 were Mr Haque and two others. In September 1999 Mr Khan bought the shares of the other two, and became a director and chairman of the company as well as the substantial majority shareholder, holding 960,000 of the 1,200,000 issued shares. The Company grew rapidly and enjoyed initial success. As time went on, however, it began to face increasing competition from other Bangla-language channels which offered lower advertising rates and free viewing as against subscription, and lost market share. Significant cash injections became necessary. Mr Khan told me that in 2002 he put some £400,000 into the Company but by 2003 it had become apparent that monies would be required from outside investors.
To this end there were discussions with Mr Jahangir and Mr Rashid, who in April 2003 agreed to invest £375,000. This sum was to be paid to Mr Khan by the end of May 2003; on receipt Mr Khan was to transfer 300,000 shares to Mr Jahangir and 75,000 shares to Mr Rashid; and Mr Khan was to invest £300,000 of these monies in the Company in return for a further 300,000 shares to be issued by the Company.
It is clear that Mr Jahangir and Mr Rashid made payments of at least £73,000, which were routed on by Mr Khan to the Company. Indeed they claim to have paid the full £375,000, though I am not sure that this is said to have occurred by 31 May 2003. At all events, they never received the shares. They have filed a proof of debt for £375,000 in the liquidation and, as I understand, are the major creditors, though on the face of it their claim, if good, would appear to have lain against Mr Khan. They have also brought a claim against Mr Khan for £375,000 damages for breach of contract: that claim has recently been struck out as inconsistent with the proof of debt, but the order is subject to appeal.
On 15 May 2003 the Company, acting by Mr Khan, and Mr Mustafa Pasha (sometimes written Pasher) signed a document entitled Heads of Agreement ("the May Agreement") under which the Company agreed to sell its business and assets to Mr Pasha for £150,000 with completion on 31 July 2003. The background to this, according to Mr Khan's evidence, was that in the meantime, pending the arrival of the £375,000 from Mr Jahangir and Mr Rashid interim funding was required, and Mr Pasha agreed to lend the funds for this purpose. This appears inconsistent with the May Agreement, under which the payments were to be made for the purchase of the assets, but Mr Khan went on to say that the May Agreement was executed as a form of security to Mr Pasha, who agreed that he would not enforce the Heads of Agreement if he was repaid his advances, which it was contemplated would be done from the monies to come from Mr Jahangir and Mr Rashid.
A witness statement by Mr Pasha to similar effect was served by Bangla TV. However, Mr Pasha did not attend to support it by oral testimony. Initially, I was informed by Bangla TV that Mr Pasha, who lives in Manchester, was in Bangladesh where he had fallen ill, and was asked to adjourn the proceedings to permit his attendance, Within hours, that application was withdrawn in circumstances which suggested that he was in Manchester and perfectly well. In the event, the proceedings were adjourned after two days for a period of some weeks. Though I expressly pointed out that Mr Pasha might wish to testify on the resumption of the proceedings, this never occurred.
It was suggested by Counsel for the Applicant, with a degree of enthusiasm which varied from time to time, that the May Agreement, which was produced late, was probably or might be a late fabrication. But it became clear from other documents (also produced late) that the document was in existence at latest in July 2003, and I have no reason to believe that it was not signed on the date it bears. On the other hand, as will appear below, there is no evidence that Mr Pasha...
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