Thakbar v Johal and Freakley
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE PUMFREY |
| Judgment Date | 03 May 2002 |
| Neutral Citation | [2002] EWHC 897 (Ch) |
| Court | Chancery Division |
| Date | 03 May 2002 |
| Docket Number | NO: 5784 of 2001 |
[2002] EWHC 897 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2
Mr Justice Pumfrey
NO: 5784 of 2001
MR D RICHARDS QC 7 MR D LIGHTMAN (instructed by DLA) appeared on behalf of the Applicant
MR L ASHWORTH & MR D ROBERTS (instructed by Wragge & Co) appeared on behalf of the Respondents
rd May 2002
This is an application by Kirat Thakrar to set aside an order made by Mr Peter Leaver QC on 20th December 2001. The hearing before me took place over three days in March 2002 and involved a detailed examination of the course of the various proceedings arising out of the dispute between the three brothers, Kirat Thakrar, Rasik Lalji Thakrar, Vinod Thakrar and Vinod's son, Nilesh, who own Ciro Citterio Plc. I shall refer to them by the names used throughout this litigation as Kirat, Rasik, Vinod and Nilesh. The respondents to this application are the administrators to the company who were appointed by the order of Hart J on 12th March 2001 on a petition presented by Rasik on behalf of the directors of the company.
The statutory purposes of the administration order were the approval of the voluntary arrangement and more advantageous realisations of the company's assets than would have been effected on a winding-up.
Mr Leaver QC's order was made after a hearing of an application similar to a Beddoe application by the administrators. It was made in the absence of Kirat, who did not receive notice of it. It was supported by an affidavit of one of the joint administrators, Gurpal Singh Johal. The order as made was as follows. After the usual recitals:
"Upon the applicants [the joint administrators] by their counsel undertaking to supply a copy of this order to each member of the creditors' committee of the company as soon as practicable it is ordered and directed that:
1. The applicants should seek permission on behalf of the company to amend two notices of appeal served on its behalf in the proceedings of the High Court of Justice Chancery Division, Birmingham District Registry Action Number [and the action numbers are set out] and seek permission to appeal out of time and thereafter pursue appeals in the said proceedings so as to seek to reverse the following decisions of His Honour Judge Boggis QC sitting as a Judge of the High Court, dated [and the various orders of Judge Boggis QC are listed; I believe there are ten of them] In so far as the same concerned the company.
2. The costs and expenses of this application and of taking the steps set out in paragraph 1 above on behalf of the company should be paid out of the estate of the company in administration and should be treated as the costs of the administration in priority of the claims of creditors."
Then there is a provision for maintaining Mr Johal's witness statement and the exhibits to it "confidential upon the court file, not open to inspection without the permission of the court".
In effect the order approves the application of the administrators to appeal out of time from the specified orders of His Honour Judge Boggis and to charge the costs and expenses of these actions and the appeals, if permission is granted, as expenses of the administration to be paid in priority to the claimant's creditors. In summary, Kirat objects to this order on the ground that all the decisions of His Honour Judge Boggis against which it is sought to appeal out of time are decisions in his favour, in consequence of which he is a creditor of the company for some £7 million and interest. He further says that he is, as a result of certain charging orders made in the course of the proceedings by certain of the orders from which it is sought to appeal, a secured creditor of the company to the extent of £2.795 million. His contention in this regard depends upon the application of the principles of marshalling to his securities and those of the company's bankers, but it is not said to be unarguable. His complaint is that the effect of Mr Leaver's order is to permit the administrators to litigate against him at his expense and that this is unjust. If the administrators are unsuccessful he contends that he should not in effect pay for their proceedings.
The background. The company traded in retail clothing through a number of shops. Kirat owns 21.78% of the company, Rasik 42.6%, Vinod 26.79% and Nilesh 8.62%. Immediately before the events leading to Kirat's exclusion from the management of the company Rasik was the managing director. Kirat was responsible for buying, manufacture and design. Kirat and Rasik fell out, it is not necessary to discuss why, and on 8th February 1999 Kirat was excluded from the management of the company by the others. On 10th June 1999 Kirat presented a petition under section 459 of the Companies Act 1985. As is usual, the relief sought included an order requiring the others to buy him out. The respondents to the petition were Rasik, Vinod and Nilesh. The company was also required to be a respondent to the petition, but as is well known, as a purely nominal party.
On 20th January 2000 an agreement was reached in relation to Kirat's petition. This agreement is scheduled to an order of His Honour Judge Boggis of 20th January 2000, which is the first of the orders against which it is sought to appeal. This is a consent order and by the order the further consideration of Kirat's petition under section 459 was adjourned upon the parties having reached terms as set out in the schedule to the order. The schedule to the order provided a mechanism for the valuation of Kirat's shareholding and set out certain aspects of the basis of the valuation. The company was obliged under the terms of the agreement to provide access to its records and accounts such as might be reasonably required by each party's expert to determine the value of the shares, and there was an obligation upon the respondents to cooperate with Kirat with a view to mitigating his liability to tax.
The agreement contained a full-back position in the event that the parties had not agreed a evaluation by 30th April 2000. The basis for the default valuation, which was to be carried out by a Fellow of the Institute of Chartered Accountants appointed by the President from the time being of the institute acting as expert, is set out. Clause 7 of the agreement provided for the purchase by the respondents of the petitioner's shares at the value so agreed or determined, together with interest on such sum for such period and at such rate as is agreed or determined by the court to be reasonable. Then by clause 8:
"The petitioner shall cooperate with all the respondents and shall make no objection if the purchase of the sale shares is effected by the company purchasing its own shares, or by a third party purchasing the shares, subject to the respondents' indemnifying the petitioner in respect of all and any liability whatsoever, whether directly or indirectly arising out of such method or purchase, whether under the Companies Act 1985 or relevant taxation legislation in force or howsoever arising."
It is essentially out of the provisions of clause 8 that all the ensuing problems of this litigation have proceeded.
I think that it is clear that clauses 7 and 8 of the agreement plainly contemplated that one possible result would be the purchase by the company of Kirat's shareholding. It may well be that the better view of the correct construction of clause 8 is that its language is purely permissive and that it does not place any obligation upon the company to purchase the shares. However, I do not, deliberately, wish to come to any concluded view as to the meaning of that provision.
Were the company to undertake the purchase of the shares then it would, of course, have to satisfy the statutory requirements and the payment for the purchase would have to be made out of distributable profits. The agreement was signed by counsel on behalf of Kirat and on behalf of the original respondents. There is no signature on behalf of the company.
The machinery established by the agreement annexed to the order of 20th January 2000 broke down.
On 27th July 2000 an order for specific performance of the agreement scheduled to the order of 20th January 2000 was made. This order reserved the question of interim payment of part of the purchase price to be considered at a subsequent hearing. It also contained detailed provisions for proceedings relating to the valuation of Kirat's shareholding.
On 5th September 2000 the question of an interim payment of part of the purchase price was considered. An order for the payment of £500,000 was made against all the respondents. At the hearing on 5th September 2000 leading counsel for the respondents (there was no separate representation of the company) sought to argue the question whether the company was bound by the order to make the payment. He contended that on a true construction of the agreement scheduled to the order of 20th January 2000 the company was plainly obliged to make the payment in question. This much appears from the skeleton argument advanced on behalf of the respondents and particularly paragraphs 5, 8, 9, 11 and 12 thereof. Paragraph 5 criticises the inclusion of the words "first to third respondents only" in the draft order. But paragraph 8 says this:
"In no part of the petitioner's written or oral argument advanced to the judge during the trial or on 17th October was it suggested that the purchase obligation fell only upon the individual respondents. In this respect the court is reminded of the terms of paragraphs 1 to 13 of the written...
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