Russell Crumpler and Another v Candey Ltd
| Jurisdiction | England & Wales |
| Judge | HH Judge Davis-White |
| Judgment Date | 23 June 2017 |
| Neutral Citation | [2017] EWHC 1511 (Ch) |
| Docket Number | Case No: CR-2016-001012 |
| Court | Chancery Division |
| Date | 23 June 2017 |
In the Matter of Peak Hotels and Resorts Limited (In Liquidation)
and
In the matter of the Cross-Border Insolvency Regulations 2006
[2017] EWHC 1511 (Ch)
His Honour Judge Davis-White QC
(sitting as a Judge of the Chancery Division)
Case No: CR-2016-001012
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
7 Rolls Buildings
Fetter Lane
London
EC4A 1NL
Mr Stephen Robins (instructed by Stephenson Harwood LLP) for the Applicants, the joint liquidators
Mr Andrew de Mestre (instructed by Candey Law LLP) for the Respondent
Hearing dates: 6–8 March 2017
Approved Judgment
HH Judge Davis-White QC:
Introduction
This is an application by the joint liquidators (the " Liquidators") of a BVI incorporated company, Peak Hotels and Resorts Limited (" Peak"). The application is one to which the company's former solicitor, CANDEY Limited (" Candey"), is the respondent. The application is directed at establishing the efficacy of a charge granted by Peak to Candey.
Peak had a comparatively short life. Prior to liquidation its function was one of acting as an holding company. In effect, it held a 32% stake or so, through shares, in a joint venture vehicle. That joint venture vehicle owned the luxury Aman Resorts hotel group, a boutique luxury hotel group operating about 26 hotels internationally (the " Aman Group"). The Aman Group was purchased by the joint venture vehicle for approximately US $358 million in about January 2014. Shortly thereafter, Peak became involved in a plethora of international litigation. The litigation primarily concerned a breakdown of relations between the joint venture partners and control over the Aman Group. There were also disputes in relation to various contractual funding arrangements in relation to the same.
Peak was set up to acquire a stake in the Aman Group. Peak's majority shareholder was Peak Investment Limited (" PIL"). PIL is understood by the Liquidators to be beneficially owned by the family trust of a Mr Omar Amanat (" Mr Amanat"). Mr Amanat was a director of Peak until about September 2014. He is said then to have resigned, although there is evidence suggesting that he maintained some connection with Peak's affairs and management after this date.
Peak held shares in the joint venture vehicle, Peak Hotels and Resorts Group Limited (the " JVC"). The JVC indirectly owned the Aman Group. Peak's holding in the JVC was about 32.5%. The other joint venture partner was Tarek Investments Limited (" Tarek"). That company is also a BVI company. It is apparently controlled by a Mr Vladislav Doronin (" Mr Doronin"). Tarek held approximately 64.8% of the shares in the JVC.
The JVC held 100% of the shares in Aman Resorts Group Limited (" ARGL"). ARGL in turn held 100% of the shares in Silverlink Resorts Limited (" Silverlink"). Silverlink held the hotel assets of the Aman Resorts group.
Candey acted for Peak in connection with the litigation that I have referred to. The litigation extended to proceedings in the High Court in England, an arbitration under the Hong Kong International Arbitration rules but whose seat was in London and proceedings in the BVI courts.
To assist with Peak's cash flow, in October 2015, Peak and Candey reached an agreement regarding arrears owed to Candey and that, going ahead, Candey would be entitled to a fixed fee of approximately £3.8 million for legal services to be provided (the " Fixed Fee Agreement"). That fee was purportedly secured by a charge. The charge was registered in the BVI. By the time Peak entered liquidation, Candey had carried out substantial work for it. Based on Candey's usual hourly rates, that work would have been charged out at about £1.2 million on a time basis. In the liquidation, Candey claims to be a secured creditor for the full £3.8 million. By these proceedings, the Liquidators do not challenge the fixed fee as such. They do challenge the asserted security.
In effect, the applicant Liquidators seek determination of whether, and if so to what extent, certain sums of money are subject to valid charges in favour of Candey, securing its fixed fee. The submissions before me have focussed on three main issues: first, whether certain property is capable of falling, and does fall, within the relevant charge(s) under the charging document. Secondly, to the extent that property does fall within the relevant charge, whether the charge is fixed or floating. Thirdly, to the extent any charge is floating, whether s245 Insolvency Act 1986 applies so as to limit the sums secured. The Liquidators have reserved the right to challenge the charge on other grounds in case they need to do so at a later date.
The Procedural Background and Application of English law
Peak was incorporated in the British Virgin Islands (" BVI") on 14 January 2014. Eventually it was placed into liquidation in the BVI on 8 February 2016. The relevant winding up order is that of Bannister J (Ag) sitting as a High Court Judge of the Eastern Caribbean Supreme Court in the Commercial Division in the BVI. The applicants before me, a member of KPMG China in Hong Kong (Ms Bower) and the managing director of KPMG (BVI) Limited (Mr Crump), were appointed joint liquidators.
On 24 February 2016, by Order of Registrar Derrett, this court recognised the BVI liquidation proceedings in relation to Peak as a foreign main proceeding under Schedule 1 to the Cross-Border Insolvency Regulations 2006 (the " CBIR"). The CBIR give effect to the UNCITRAL Model Law on cross-border insolvency within Great Britain. The effect is that, subject to certain exceptions which are not relevant in this case, the joint liquidators are entitled to apply under the CBIR to obtain the same relief as if the liquidation were an English liquidation (see CBIR Schedule 1, Article 21 and e.g. In re Atlas Bulk Shipping A/S; Larsen v Navios International Inc [2012] Bus LR 1124 and contrast Fibria Celulose S/A v Pan Ocean Co Limited [2014] Bus LR 1041). It is on this basis that s245 Insolvency Act 1986 potentially comes into play (see Article 23 of Schedule 1 to the CBIR).
The parties have agreed that the matter is conveniently dealt with by the English court. This is against the background of an exclusive English jurisdiction clause in the Fixed Fee Agreement, the close co-incidence between the English s245 Insolvency Act 1986 and s247 of the Virgin Islands Insolvency Act 2003, the recognition of the BVI liquidation in this jurisdiction and that the assets considered by Candey to be caught by the relevant charge are held by the Liquidators within this jurisdiction.
The current application notice is dated 27 September 2016. There has been a number of procedural orders, varying the timetable for evidence initially laid down.
The evidence in the form of written witness statements has been extensive. The hearing bundle before me extends to 15 bundles with further bundles of authorities.
At the hearing the Liquidators were represented by Mr Robins of Counsel. Candey Limited was represented by Mr de Mestre of Counsel. I am grateful to both of them for their helpful submissions. I also express my thanks to the solicitors for the manner in which the bundles have been organised.
After the hearing of this matter I received further written submissions from each of Mr de Mestre and Mr Robins. These came in two tranches. Both tranches related to the issue of the status of payments into court and the ability to charge the same. The first tranche expanded on oral submissions and dealt primarily with Flightline Limited v Edwards [2003] 1 WLR 1200, Cantor Index v Lister [2002] C.P. Rep 25 and JKB Holdings Pty Ltd v de la Vega [2013] NSWSC 501. The second tranche dealt with the Court of Appeal decision in Emmott v Michael Wilson & Partners Limited [2017] EWCA Civ 367.
The Fee Agreement and the charging document
The Fixed Fee Agreement is a written agreement described as "Confidential Fee Agreement between CANDEY Limited and Peak Hotels & Resorts Ltd dated 9 October 2015", but signed on behalf of Peak on 10 October 2015 and by Candey on 21 October 2015. By the agreement Candey agreed to continue to act in various pieces of existing litigation and " other matters expressly agreed from time to time (including ongoing general advice). The Fixed Fee Agreement superseded and replaced any previous agreements between the parties in respect of fees (Clause 1). It was subject to an English choice of law clause and an exclusive English jurisdiction clause (clause 9). So far as not inconsistent, Candey's standard terms of business applied.
Clause 3 of the Fixed Fee Agreement records that, as a consequence of a number of developments, mainly connected with existing proceedings, Candey's previous estimate of costs:
" has been revised to £5 to £6 million. The actual figure could be significantly higher or it could be substantially lower if an early settlement is achieved."
Clause 4 of the Fixed Fee Agreement provides:
"4. [Peak] does not wish to pay [Candey's] invoiced and unbilled costs incurred to date or provide further funds in advance, on account on a weekly basis and wishes instead to agree a fixed liability fee payable at a future date. It is therefore agreed that [Peak] will pay [Candey] a fixed fee of £3,860,637.48 (the "Fixed Fee"). It is agreed that to assist [Peak's] cash flow [Peak] is not obliged to pay the Fixed Fee before judgment on liability is handed down or a settlement is agreed in the Tarek proceedings unless [Peak] obtains cash from elsewhere as set out in this agreement. Interest at 8% per annum will accrue from judgment or settlement".
Clause 5 of the...
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