Roberts Petroleum Ltd v Bernard Kenny Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
Judgment Date11 December 1981
Judgment citation (vLex)[1981] EWCA Civ J1211-2
Date11 December 1981
Docket Number81/0503

[1981] EWCA Civ J1211-2






Royal Courts of Justice,


Lord Brandon of Oakbrook

Lord Justice Cumming-Bruce


Dame Elizabeth Lane

(Not Present on Delivery of Judgment)


1979 R. No. 34

Roberts Petroleum Limited
Plaintiffs (Appellants)
Bernard Kenny Limited (In Liquidation)
Defendants (Respondents)

MR. A. HIDDEN Q.C. and MR. PAUL MILLER (instructed by Messrs. Collyer-Bristow, Solicitors, London WC1R 4DF, agents for Messrs. Sergeant & Collins, Solicitors, Scunthorpe, DN15 7PS) appeared on behalf of the Plaintiffs (Appellants).

MR. ANDREW MORRITT Q.C. and MR. MICHAEL CRYSTAL (instructed by Messrs. R.C. Moorhouse & Co., Solicitors, Leeds, LS1 2BR) appeared on behalf of the Defendants (Respondents).


This appeal arises in an action in which Roberts Petroleum Ltd. ("Roberts") are plaintiffs and Bernard Kenny Ltd. ("Kenny"), now in liquidation, are defendants.


Roberts are and were at all material times wholesale suppliers of petroleum products. Kenny, at all material times before they went into liquidation, were retailers of such products, and as such were the owners of two filling stations in North Yorkshire. The first of these was known as the Malton Road Filling Station, Pickering ("Malton"). The second was known as the Marklands Garage, Langthorpe, Boroughbridge ("Marklands").


Kenny bought the petroleum products which they sold to the public from a number of different wholesalers. These included Roberts, Cawoods Fuel Oils Ltd. ("Cawoods"), National Benzole Company Ltd. ("National Benzole") and Nafta (G.B.) Ltd. ("Nafta").


By October or November 1978 Kenny had run into serious financial difficulties in that they owed large sums of money to their various wholesalers which they were unable to pay as and when payment became due. The creditors to whom Kenny owed the largest debt were Roberts.


In this situation negotiations were entered into between two firms of solicitors acting for Roberts and Kenny respectively. The aim of these negotiations was that, in consideration of Kenny being given extended credit by Roberts, Kenny would give Roberts a first legal charge on Marklands to secure their indebtedness to the latter. The negotiations proceeded a long way and nearly reached fruition. In the end, however, Kenny failed to execute the instrument of charge which had been prepared, and on or about 27th February 1979 the negotiations came to an abrupt end.


Meanwhile, on 24th January 1979, Cawoods had issued a specially endorsed writ against Kenny, in which they claimed £22,500 for petrol sold and delivered. That writ had been served on Kenny on 7th February 1979, but no appearance had been entered by Kenny to it.


On 8th February 1979, following the breakdown of the negotiations between Roberts and Kenny through their respective solicitors to which I referred above, Roberts issued a specially endorsed writ against Kenny in which they claimed £74,001.02 for petrol sold and delivered. That writ was served on Kenny by post forthwith. Again, as in the case of Cawoods' writ, no appearance was entered by Kenny.


Shortly afterwards, on 9th or 12th March 1979, Cawoods entered judgment in default of appearance against Kenny for the amount of their claim (less certain small sums which it was agreed that Kenny were entitled to set off) and costs.


Before and after Cawoods obtained that judgment, correspondence took place between Cawoods' solicitors and the solicitors acting for Kenny in relation to Cawoods' claim, in which Cawoods' solicitors pressed Kenny's solicitors to get the directors of Kenny to guarantee personally the indebtedness of Kenny to Cawoods. This correspondence began on 26th February 1979 and continued until 6th March 1979, when Kenny's solicitors rejected the proposal. Cawoods' solicitors then put forward an alternative proposal for ensuring payment for any petrol sold by them to Kenny, which Kenny's solicitors by letter dated 8th March 1979 also rejected. Cawoods' solicitors then threatened, on behalf of their clients, to enforce the judgment which they had earlier obtained against Kenny unless Kenny agreed to make certain specified instalment payments. Kenny did not so agree, but in fact Cawoods' solicitors took no steps to enforce the judgment concerned.


On 12th March 1979 there was a meeting of Kenny's directors attended by Mr. Ward, a partner in the firm of solicitors acting for Kenny in relation to Cawoods' claim. Mr. Ward had originally supposed that Cawoods were Kenny's only creditors, but had later learnt from Kenny's auditors that there were other creditors also, and that these auditors had recommended to Kenny that they should sell their two filling stations, Malton and Marklands, as going concerns, in order to meet the claims of their creditors.


At the meeting on 12th March 1979 Mr. Ward advised Kenny's directors that the company ought not to delay any further in putting its affairs before all its creditors. He further asked for, and obtained, instructions from the directors to engage an independent firm of insolvency accountants, Messrs. Poppleton & Appleby of Sheffield ("Poppletons"), to prepare a Statement of Affairs as a matter of urgency.


On 16th March 1979 Poppletons sent out letters, all in the same terms, to each of Kenny's creditors, including Roberts. In those letters Poppletons gave notice of a meeting (since described as an "informal meeting") of all Kenny's creditors to be held at the offices of Kenny's solicitors in Leeds on 26th March 1979. They invited all creditors to attend the meeting and asked them meanwhile not to begin or continue any legal proceedings against Kenny. They further requested the creditors to inform them of the amounts owing to them and of any securities in respect of such indebtedness held by them.


On 23rd March 1979 Roberts entered judgment against Kenny in default of appearance for £74,001.02 and £54.55 costs. They then on the same day sought and obtained from the Scunthorpe District Registrar a charging order nisi under which Kenny's two filling stations, Malton and Marklands, were charged with payment of the judgment debt. The order further provided that Mr. Panter, an accountant employed by Roberts, should be appointed as receiver for the purposes of the charging order, and fixed 4th April 1979 as the date on which cause could be shown why the charging order nisi should not be made absolute.


The informal meeting of creditors arranged by Poppletons took place as planned on 26th March 1979. Roberts were represented by Mr. Armitage, an accountant, and twelve other creditors of Kenny, having claims amounting to about £95,000 in all, were either present or represented. It was estimated that the claims of Roberts and the other twelve creditors present or represented constituted about 95% of the total trade claims against Kenny. Mr. Ward informed the meeting of the charging order nisi obtained by Roberts, and made available to the creditors the Statement of Affairs prepared by Poppletons. The latters' report of the meeting showed that the principal creditors were National Benzole for £37,922, Cawoods for £22,141, Nafta for £24,520 and Roberts for £74,055. The Statement of Affairs showed that Kenny were insolvent, with an overall deficit of the order of £106,000.


The conclusion reached by the meeting was expressed by Poppletons in the penultimate paragraph of their report as follows:

"In conclusion, therefore, the creditors present unanimously agreed to the aforesaid recommendation of a 56 day Moratorium subject to the withdrawal of proceedings by Roberts and subject to the company being able to trade for cash, which it has done for practical purposes for the whole of March, without suffering any substantial loss in trading. It was also therefore agreed that Messrs. Poppleton & Appleby set up a weekly cash account system so that the largest creditors could have a weekly Receipts and Payments Account and in the meantime the company to incur no further credit and pay no further payments to creditors".


According to Mr. Ward, when the meeting closed, it was left that Roberts would inform him of their decision within 48 hours.


In fact, again according to Mr. Ward, it proved impossible to obtain from Roberts, who did not agree with the plan, any decision either way on the matter. As a result an Extraordinary Meeting of Kenny was held at Mr. Ward's offices at 12.00 noon on 2nd April 1979, at which Extraordinary Resolutions were passed that Kenny be wound up and that Mr. Priestley of Poppletons should be appointed liquidator.


Two days later, on 4th April 1979, there took place before the District Registrar the hearing of the question whether or not good cause had been shown why the charging order nisi obtained by Roberts on 23rd March 1979 should not be made absolute. The District Registrar, being aware from the affidavits put in on either side of the history of the matter as I have described it, came to the conclusion that the charging order nisi should be made absolute, and made an order to that effect.


Kenny desired to appeal from that decision and the view of the solicitors on both sides was that an appeal from a District Registrar against an order making absolute a charging order nisi lay directly to this court. Later, after a great deal of unnecessary effort and money had been expended for the purpose of an appeal to this court, it became apparent that, under the Rules of the Supreme Court then...

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