Russell John Carman (Liquidator of Casa Estates (Uk) Ltd) v Joanne Marie Bucci
| Jurisdiction | England & Wales |
| Judge | Mr Justice Warren |
| Judgment Date | 31 July 2013 |
| Neutral Citation | [2013] EWHC 2371 (Ch) |
| Docket Number | Case No: HC13C0072 |
| Court | Chancery Division |
| Date | 31 July 2013 |
In the Matter of Casa Estates (UK) Limited (in Liquidation)
And in the Matter of the Insolvency Act 1986
[2013] EWHC 2371 (Ch)
Mr Justice Warren
Case No: HC13C0072
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
ON APPEAL FROM THE BIRMINGHAM COUNTY COURT
His Honour Judge Purle QC
Rolls Building
Fetter Lane
London EC4 1NL
Hermann Boeddinghaus (instructed by Geldards) for the Appellant
James Morgan (instructed by Shakespeares) for the Respondent
Hearing date: 19 June 2013
Introduction
This is an appeal from the judgment of HH Judge Purle QC dated 17 December 2012 (" the Judge" and " the Judgment"). The Applicant in the proceedings is the appellant in this appeal (" Mr Carman") in his capacity as liquidator of Casa Estates (UK) Limited (" the Company"). Mr Carman sought the recovery from the respondent in this appeal (" Mrs Bucci") of payments made to her or for her benefit under section 238, alternatively in relation to some of the payments under section 239, of the Insolvency Act 1986. References to section numbers in this judgment are to that Act unless otherwise indicated.
The payments in question fall into two categories:
i) The first category (totalling some £55,783) consists of remuneration and pension contributions made during the course of 2007 and 2008 in respect of services which Mrs Bucci claimed to have provided to the Company. Mr Carman sought to recover these payments, in whole or in part, as payments at undervalue pursuant to section 238. Of that amount £16,283.32 was paid in the years ending 5 April 2007 and 5 April 2008, £29,999.00 in the year ending 5 April 2009, with pension contributions totalling £9,500.00 paid over the same periods.
ii) The second category (totalling some £48,205) consists of three payments of £4,000 each between January and July 2008 (described in the Company's accounts as "dividends") and a payment to HMRC of £36,205 made in discharge of a tax liability of Mrs Bucci. She accepted that the three payments could not be justified as dividends but she claimed to have been a creditor of the Company and that the three payments and the payment to HMRC discharged the amount owing. Mr Carman disputed that Mrs Bucci was a creditor but advanced the alternative case (in case the Judge should have held that she was a creditor) that the payments were recoverable as preferences pursuant to section 239.
In relation to the second category, the Judge rejected Mrs Bucci's case that the payments were made as repayment of loans owing to her. There is no appeal against that decision. Section 239 ceases to be of relevance. In relation to both categories, the Judge decided that all of the payments sought to be recovered by Mr Carman constituted transactions at undervalue within section 238.
However, he also decided that the payments were not recoverable because the time of each payment was not a relevant time by virtue of section 240(2), on the basis that payment, the Company was not "unable to pay its debts within the meaning of section 123…" and did not become unable to do so as a result of the payment in question.
Mr Carman now appeals on the basis that the Company was, contrary to the Judge's conclusion, unable to pay its debts within the meaning of section 123. He says that the Judge erred in law in the approach which he adopted to the issue whether the Company was unable to pay its debts and gave inappropriate weight to various factors which he identified. He also submits that certain payments received by the Company never became its own assets but were held on Quistclose trusts, a factor which Mr Boeddinghaus (who appears for Mr Carman) submits has a serious impact on the answer to the question of solvency. There is a dispute about whether this point was properly raised before the Judge and, if not, whether or not I should allow it to be raised for the first time on this appeal.
The statutory provisions
I have found it helpful to set out parts of section 123, 238 and 240 very early in this judgment. Section 123 provides so far as material
"(1) A company is deemed unable to pay its debts—
(a) if a creditor (by assignment or otherwise) to whom the company is indebted in a sum exceeding £750 then due has served on the company, by leaving it at the company's registered office, a written demand (in the prescribed form) requiring the company to pay the sum so due and the company has for 3 weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor, or
(b) if, in England and Wales, execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part, or
…
(e) if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due.
(2) A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities."
Section 238 provides so far as material:
"(1) This section applies in the case of a company where—
…
(b) the company goes into liquidation;
and "the office-holder" means … the liquidator…
(2) Where the company has at a relevant time (defined in section 240) entered into a transaction with any person at an undervalue, the office-holder may apply to the court for an order under this section.
(3) Subject as follows, the court shall, on such an application, make such order as it thinks fit for restoring the position to what it would have been if the company had not entered into that transaction.
(4) For the purposes of this section and section 241, a company enters into a transaction with a person at an undervalue if—
(a) the company makes a gift to that person or otherwise enters into a transaction with that person on terms that provide for the company to receive no consideration, or
(b) the company enters into a transaction with that person for a consideration the value of which, in money or money's worth, is significantly less than the value, in money or money's worth, of the consideration provided by the company.
……."
Section 240 provides so far as material:
"(1) Subject to the next subsection, the time at which a company enters into a transaction at an undervalue or gives a preference is a relevant time if the transaction is entered into, or the preference given—
(a) in the case of a transaction at an undervalue or of a preference which is given to a person who is connected with the company (otherwise than by reason only of being its employee), at a time in the period of 2 years ending with the onset of insolvency (which expression is defined below),
(b) in the case of a preference which is not such a transaction and is not so given, at a time in the period of 6 months ending with the onset of insolvency
…
(2) Where a company enters into a transaction at an undervalue or gives a preference at a time mentioned in subsection (1)(a) or (b), that time is not a relevant time for the purposes of section 238 or 239 unless the company—
(a) is at that time unable to pay its debts within the meaning of section 123 in Chapter VI of Part IV, or
(b) becomes unable to pay its debts within the meaning of that section in consequence of the transaction or preference;
but the requirements of this subsection are presumed to be satisfied, unless the contrary is shown, in relation to any transaction at an undervalue which is entered into by a company with a person who is connected with the company.
(3) For the purposes of subsection (1), the onset of insolvency is—
…
(e) in a case where section 238 or 239 applies by reason of a company going into liquidation at any other time, the date of the commencement of the winding up."
It was common ground before the Judge (and this remains the position before me) that Mrs Bucci was a person connected with the Company, so that the relevant period within which a transaction is open to attack is 2 years before the onset of insolvency and the statutory (rebuttable) presumption of insolvency applies to transactions at an undervalue.
The facts
Paragraphs 4 to 11 of the Judgment contain a summary of certain agreed facts and certain findings by the Judge. I do not need to repeat them in full. The following can be taken from those paragraphs and other parts of the Judgment:
i) The Company was incorporated on the 23 rd February 2005 and carried on business as an introducer of investors to Dubai property. It received payments from investors by way of deposits for properties and payment of instalments towards the purchase price. It appears also to have operated as a dealer in its own right. It was under the day-to-day management of its sole director, Franco Bucci (" Mr Bucci") who is Mrs Bucci's husband. Mrs Bucci was company secretary. They were the owners of the company, as equal shareholders. There were no other shareholders. Since it did not broker sales of any UK properties, it was not required to, and did not in fact, keep a separate client account.
ii) Casa Dubai Real Estate Brokers LLC (" Casa Dubai") was the Company's agent and intermediary in Dubai. It was incorporated in the UAE and was owned (as required under the local law) by two UAE nationals. Mr Bucci acted as general manager of Casa Dubai.
iii) The Company ceased trading in December 2008 following the collapse of the Dubai property market. One of the developers with which the company dealt, Al Barakah, which promised investors a 50% return in 6 months, was unable to meet its obligations. Mr Bucci quickly reached the conclusion that the company could not survive in the...
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