Technocrats International Inc. and Fredic Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr. Justice Jack |
| Judgment Date | 23 November 2004 |
| Neutral Citation | [2004] EWHC 2674 (QB) |
| Docket Number | Case No: HQ04X02021 |
| Court | Queen's Bench Division |
| Date | 23 November 2004 |
[2004] EWHC 2674 (QB)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
The Honourable Mr. Justice Jack
Case No: HQ04X02021
Mr. Romie Tager QC and Mr. Neil Mendoza (instructed by Haynes Phillips) for the Claimant
Mr. John Brisby QC and Mr. Nicholas Lavender (instructed by GSC Solicitors) for the Defendants
Miss Clare Hoffmann (instructed by GSC Solicitors) for Alexander Houstoun-Boswall, Lady Eliana Houstoun-Boswall and Hampton Court House Limited
Hearing dates: 12 November 2004
Approved Judgment
Mr Justice Jack :
Introduction
This judgment is concerned with the status of £700,000 held by the defendants' solicitors on the terms of an order made by consent on 26 August 2004, whereby on the solicitors' receipt of the money a freezing order made on 11 August 2004 was discharged. This turns on the meaning of 'security' in paragraph 16 of the latter order, which was in the standard form. The claimant asserts that it has a charge over the monies, which takes priority over the rights of the administrator of the first defendant, Mr Stephen Cork, who was appointed on 3 November 2004.
The history
On 4 February 1998 the first defendant, Fredic Limited, completed the purchase of Hampton Court House for £3,075,000. Fredic is controlled by the second and third defendants, Alexander Houstoun-Boswall and Lady Eliana Houstoun-Boswall. Lady Eliana is the mother of Alexander. Following the purchase disputes arose between the Houstoun-Boswalls and others involved with the purchase as to what those others should receive in recompense for their trouble. Those others included Mr George James and Mr Asad Meerza. Mr Meerza controls the claimant company, Technocrats Limited. As part of the resolution of those disputes an agreement dated 20 April 1998 was made between Fredic and Mr James which provided for the payment of commission to Mr James on a resale of the property. Subsequently Mr James assigned his rights under the commission agreement to Technocrats, and Mr Meerza made payments totalling £350,000 as the consideration. The Houstoun-Boswalls established a school at Hampton Court House, which is run by Hampton Court House Limited. In 2002 Technocrats commenced proceedings against Fredic, claiming that commission had become payable under the commission agreement. Following a trial Field J. delivered a judgment on 1 April 2004, in which he dismissed the claim for commission and made a declaration as to the effect of clause 4 of the commission agreement. It was, in short, that Fredic was obliged to accept the first genuine offer to buy Hampton Court House for over £7 million, which offer was made before 30 June 2004, and that Technocrats would then be entitled to commission as defined by the agreement. On 1 April 2004 Technocrats made an offer to purchase the property for £7,000,100. This led to Field J having to rule whether an offer made by Technocrats could fall within clause 4. In his judgment delivered on 25 May he held that it could. By letter of 22 June Technocrats gave notice to Fredic that, unless its offer was accepted by close of business on 29 June, it would treat Fredic as being in breach of contract. Fredic did not accept the offer and on 1 July the present action was commenced. Fredic was the sole defendant. In it Technocrats claim damages for breach of clause 4 by failing to accept its offer of 1 April, the damages being the commission which would have been payable on completion of the sale if the offer had been accepted. That commission is calculated as £660,000.
The events since 29 June 2004 can best be set out in the form of a chronology.
June A freezing order was made against Fredic by Morland J. in the sum of £700,000. The return date was 7 July. Paragraph 8 provided:
This Order will cease to have effect if the Respondent –
(a) provides security by paying the sum of £7000,000 into Court, to be held to the order of the Court; or
(b) makes provision for security in that sum by another method agreed with the Applicant's legal representatives.
July Issue of claim form by Technocrats.
July A freezing order was made in like terms by Astill J. A further hearing was ordered for 21 July.
July Particulars of claim served by Technocrats
July A similar freezing order was made by Wakerly J.
August Technocrats obtained an order without notice from Fulford J. joining Alexander Houstoun-Boswall, Lady Eliana Houstoun-Boswall and Hampton Court House Limited as defendants to the action, and a freezing order was made against them in addition to Fredic. Clause 16 of the freezing order was in the same terms as paragraph 8 of the order of 30 June save that it referred to 'all or any of the Respondents' in place of 'the Respondent'. The application was made on the basis that part of the Hampton Court House land known as 'the cottage' had been transferred to Alexander Houstoun-Boswall for a nil consideration, and that £966,000 had been advanced by a bank to him on its security. I should say that it is now accepted and asserted by the defendants that Alexander holds the land and the money as a bare trustee for Fredic. That, however, was not recorded in the documents relating to the transactions. Paragraphs 8 and 14 of the order specifically included in the prohibition on disposing of or dealing with assets, the monies which had been borrowed – in respect of them, even in the ordinary course of Fredic's business. The order provided that the return date should be 8 September.
August Fredic served its defence.
August Following negotiations between the solicitors for the parties a consent order was made by Treacy J. on 26 August. It provided:
Upon application being made by counsel for the above-named Respondents pursuant to paragraph 18 of the Order of the Hon. Mr Justice Fulford dated 11 August 2004 ("the Order")
And upon …
And upon counsel for the Respondents acting for this purpose as counsel for the firm of solicitors who practice as 'GSC Solicitors' [who acted for the defendants/respondents] undertaking on their behalf that upon receipt of the sum of £700,000 from the Respondents they will place that sum in a specially designated client account which will be held by them until further order of the Court as security for the Applicant's claims in these proceedings against the Respondents (in the same sense as the meaning of "security" in paragraph 16 of the Order) and that they will not deal with such monies other than pursuant to a further order of the Court, or as agreed in writing with the Applicant's solicitors
And upon …..
It is ordered by consent:
1. Upon GSC Solicitors informing the Applicant's solicitors in writing that they have received the sum of £700,000 from the Respondents to be held as security for the Applicant's claims pursuant to the aforementioned undertaking (with the word "security" being used in the same sense as in the above-mentioned undertaking), the Order shall be discharged without prejudice to any claim that the Respondents may have in relation to or arising out of the making of the Order.
2. The return date of 8 September shall be vacated and a full day be fixed ….. for the hearing of the Applicant's application for the continuance of its freezing injunction and any application of the Respondents relating to the making of the Order or the discharge of the above-mentioned undertaking ("the applications").
3, 4 and 5 [related to the service of evidence in relation to the applications, and to costs].
At the hearing on 25 August Technocrats was informed between counsel that GSC was holding £500,000 on the terms of the undertaking. On 27 August GCS wrote to say that the further £200,000 had been received, and that in consequence the freezing order was discharged.
September GSC wrote informing Haynes Phillip, solicitors for Technocrats, that Fredic was prepared to proceed towards the sale of Hampton Court House on the basis of Technocrats' offer at the price of £7,00,100. Since then the matter has proceeded, though with difficulty. The administrator has stated that he will continue the process, and the first draft of a contract has now been provided.
October Technocrats issued a notice of application for summary judgment against Fredic under Part 24, with a return date of 5 November. At some point 5 November was also fixed as the return date pursuant to paragraph 2 of the consent order of 26 August.
November Mr Cork, of Smith & Williamson Limited, was appointed administrator of Fredic. The notice of appointment made in the specified form included a declaration by Dr Lambert Grasern of Vaduz, Liechtenstein, a director of Fredic, that the company 'is or is likely to become unable to pay its debts'.
November The applications for summary judgment and to continue the freezing order came before me.
At the hearing on 5 November Mr Romie Tager QC submitted on behalf of Technocrats that I should grant permission pursuant to paragraph 43(6) of Schedule B1 to the Insolvency Act 1986 for the action to proceed and that I should hear the application for summary judgment. That was resisted on behalf of the administrator. I adjourned all applications to 12 November so that the administrator could inform himself and give instructions. At the hearing on 5 November Mr Tager stated that Technocrats contended that it had an enforceable security interest in the £700,000 held by GSCS under the terms of the consent order of 26 August.
On 12 November the administrator was represented by Mr John Brisby Q.C. and Mr Nicholas Lavender, instructed by...
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