Rowntree Ventures Ltd and Another v Oak Property Partners Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Sir Geoffrey Vos,Lord Justice David Richards,Mrs Justice Asplin |
| Judgment Date | 29 June 2017 |
| Neutral Citation | [2017] EWCA Civ 1944 |
| Docket Number | Case No: A2/2016/2676 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 June 2017 |
[2017] EWCA Civ 1944
Sir Geoffrey Vos, THE CHANCELLOR OF THE HIGH COURT
Lord Justice David Richards
Mrs Justice Asplin
Case No: A2/2016/2676
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
HIS HONOUR JUDGE PURLE QC
The Royal Courts of Justice
Strand, London, WC2A 2LL
Mr M Collings QC (instructed by Howes Percival LLP) appeared on behalf of the Applicant
Mr C Buckley (instructed by Clarke Kiernan LLP) appeared on behalf of the Respondent
Sir Geoffrey Vos, THE CHANCELLOR OF THE HIGH COURT:
Introduction
This case raises questions as to the discretion that the court exercises when it considers whether it should make an administration order under Schedule B1 of the Insolvency Act 1986 (the " IA 1986"). On 10 June 2016 His Honour Judge Purle QC, sitting as a deputy judge of the High Court in Birmingham, held that the two statutory preconditions for making administration orders in respect of the two respondent companies were satisfied, but that he would not as a matter of discretion make the orders in these cases. He ordered the applicants for the administration orders in each case to pay the respondent company's costs.
The applicants issued their administration applications on 18 February 2016. Rowntree Ventures Limited ("Rowntree") applied for an administration order in relation to Oak Property Partners Limited ("Oak Property") and JM Print Services Limited ("JM") applied similarly in relation to Oak Forest Partnership Limited ("Oak Forest"). The applications were joined by His Honour Judge Simon Barker on 13 April 2016. Since the judge refused the administration orders and McCombe LJ granted permission to appeal on 17 August 2016, both companies having gone into creditors' voluntary winding up. Oak Forest went into creditors' voluntary winding up on 13 February 2017 and more recently Oak Property went into creditors' voluntary winding up on 21 June 2017. Messrs Paul Bailey and Tommaso Ahmed (the "liquidators") were appointed joint liquidators of Oak Property by a members' resolution of that date. A physical meeting of the creditors of Oak Property has been requisitioned by its creditors, including Rowntree, and will be held on 5 July 2017. Before Oak Property's winding up last week, Oak Forest's liquidators had confirmed that if the continuing appeal in respect of Oak Property were successful, they would not seek to enforce the costs order made by the judge in favour of Oak Forest. Accordingly, it was expected that only the appeal in respect of Oak Property would be effective but that the result in that case would have agreed ramifications in respect of Oak Forest.
Mr Matthew Collings QC, counsel for Rowntree, before us has confirmed that that remains the position. Indeed, he accepts that the Oak Forest appeal must be dismissed but that the agreed consequences will nevertheless follow, if, but only if, his appeal in Oak Property succeeds. The news of Oak Property's winding up led the court to ask the parties whether the case could really be effective at all since an administration order could no longer be made and the liquidators of Oak Property might anyway wish to apply under section 112 of IA 1986 to stay the litigation. The court also suggested that any question as to costs might also be agreed. Ultimately, however, no such agreement was reached and Rowntree indicated that it wished to proceed with its appeal on the basis that if it were successful in persuading the court to exercise its discretion afresh, it would seek no order on its administration application save that its costs should be paid as an expense of the voluntary winding up.
The liquidators for their part agreed not to pursue the respondents' notice challenging the judge's decision that Oak Property was likely to become unable to pay its debts within paragraph 11(a) of Schedule B1 to the IA 1986 ("Schedule B1") and have instructed counsel to attend the hearing. Mr Christopher Buckley has duly appeared for the liquidators and applied this morning for an adjournment of the appeal. That application was refused for the reasons I gave this morning, but Mr Buckley has indicated in the circumstances that the liquidators adopt a "neutral position". Notwithstanding that position, as I shall indicate in due course, Mr Buckley has made some submissions on the substantive issues.
In these circumstances the live issues on this appeal are now within a very limited compass. First, there is the question of whether the judge was right to exercise his discretion against making an administration order in respect of Oak Property, having found that the two preconditions for the making of an administration order were satisfied. The second question is what order this court should now make in respect of the original application, if it decides that the judge exercised his discretion wrongly and that he ought to have made an administration order on 10 June 2016.
The Relevant Statutory Provisions
Paragraph 11 of Schedule B1 provides that:
"The court may make an administration order in relation to a company only if satisfied — (a) that the company is or is likely to become unable to pay its debts, and (b) that the administration order is reasonably likely to achieve the purpose of administration."
The relevant purposes of administration are set out in paragraph 3 of Schedule B1 as:
"(a) rescuing the company as a going concern, or (b) achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration) or (c) realising property in order to make a distribution to one or more secured or preferential creditors."
The powers of the court on an administration application are set out in paragraph 13 of Schedule B1. It is provided there that the court may:
"(a) make the administration order sought; (b) dismiss the application; (c) adjourn the hearing conditionally or unconditionally; (d) make an interim order; (e) treat the application as a winding-up petition and make any order which the court could make under section 125; (f) make any other order which the court thinks appropriate."
Factual Background
Oak Forest (originally called Oak Property Partnership Limited) was incorporated on 5 July 2010. Oak Property was incorporated on 13 July 2012. Both companies were incorporated for the purpose of carrying on business as a hotel property developer and were owned by Mercantile Investment Holdings SA ("Mercantile") a company registered in Nevis where no details of its directors or shareholders are available.
In early 2013 Oak Property purchased Needham House Hotel in Hertfordshire which was not then operational and needed refurbishment. Oak Property issued a prospectus and investment proposal at about the same time offering to sell investors 999 year leases of individual rooms within that hotel at prices starting at £180,000 per room. Investors were also offered (a) a guaranteed return of 10 per cent of the investment or 50 per cent of the actual income that the room generated and (b) mortgage finance for one half of the purchase price to be provided by Mercantile. The leases of the rooms included a buy back clause whereby Oak Property agreed to repurchase the lease at cost on twelve months' notice from the fifth anniversary of the lease. Oak Property sold a total of about 80 rooms in Needham House between 2013 and 2014 so that the earliest date for the completion of any buy back, a number of which were exercised from 13 February 2016 onwards, was March 2018.
Oak Property engaged White Linen Hotels and Resorts Limited ("White Linen") to manage the hotel. White Linen was also originally owned by Mercantile. Leaseholders also entered into rental management agreements with White Linen which contained the guaranteed income provisions. White Linen in due course engaged Chateauform SA ("Chateauform") apparently an unconnected company to operate the hotel. White Linen was replaced by Stevenage Conference Centre Limited ("SCC") from early 2015. SCC offered investors 60 per cent of the actual income that the room generated but not an annual return of 10 per cent of their original investment as White Linen had guaranteed them. White Linen proposed a company voluntary arrangement in December 2015 and eventually went into creditors' voluntary winding up on 6 January 2017. Its statement of affairs discloses an estimated deficiency of some £3.4 million.
Five days after the first buy back notices were served, on 18 February 2016 Rowntree issued its application for an administration order. The judge heard argument on 3 June 2016 and delivered his judgment on 10 June 2016. The officers and de facto directors of the various companies involved in these two hotel ventures, apart of course from the investors, appear to have been related or connected in various different ways. I do not, however, for the purposes of this judgment, need to set out those interconnections.
The Judge's Decision
The judge began by explaining the business model under which the hotels were operated and said at paragraph 5 of his judgment that when the investors purchased their leasehold interests they were "given what now appear to them to be extravagant promises of a guaranteed return which appeared to have been more than optimistic and possibly reckless or wantonly misleading." The judge then acknowledged that although this flavour underlay the applications, no...
To continue reading
Request your trial
-
Hanover Investors Management LLP (on Behalf of Hanover Catalyst Fund) v Hawkwing Plc
...the court has a discretion as to whether or not to make an administration order: Rowntree Ventures Ltd v Oak Property Partners Ltd [2017] EWCA Civ 1944 at 73 In exercising that discretion, however, the court will have regard to a number of settled principles. These include the following: (......
-
Strategic Advantage SPC (for and on behalf of HSG Rooftops SP) v High Street Rooftop Holdings Ltd
...Imperial Motors UK Ltd (1989) 5 BCC 214 at 217–8 (cited by Sir Geoffrey Vos C in Rowntree Ventures Ltd v Oak Properties Partners Ltd [2017] EWCA 1944 (Civ); [2018] BCC 135 at [21]) where the court held that it had jurisdiction to make an administration order but declined to do so on the ba......
-
Baltic House Developments Ltd v Wing Keung Cheung & Po Shing Patrick
...to discretion. 33 I have also been referred to the recent decision of the Court of Appeal in the case of Rowntree Ventures Ltd & Anor v Oak Property Partners Ltd & Anor [2017] EWCA Civ 1944, where the Chancellor addressed the discretion that is open to the court in these circumstances and s......
-
Interactive Digital Systems Ltd v VST Enterprises Ltd
...order. As Sir Geoffrey Vos C (David Richards LJ and Asplin J agreeing) said in Rowntree Ventures Ltd v. Oak Property Partners Ltd [2017] EWCA 1944 (Civ) at [24]: “It is necessary first in my judgment to understand that the discretion provided to the court in para.13 of Sch.B1 is of a wide ......