Walker v Walker and Another
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE CHADWICK,LORD JUSTICE LAWS,Lord Justice Chadwick,LORD JUSTICE JONATHAN PARKER |
| Judgment Date | 27 January 2005 |
| Neutral Citation | [2005] EWCA Civ 247 |
| Docket Number | A2/2004/1411 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 January 2005 |
[2005] EWCA Civ 247
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
(Mr Justice Lawrence Collins)
Royal Courts of Justice
Strand
London, WC2
Lord Justice Chadwick
Lord Justice Laws
Lord Justice Jonathan Parker
A2/2004/1411
The Appellant appeared in person
MR ASCROFT (instructed by Bevan Ashford of Exeter) appeared on behalf of the Respondent
This is an appeal from an order made on 17 June 2004 by Mr Justice Lawrence Collins in proceedings brought by the liquidator of Walker Windsail Systems Plc against Mr John Walker and his late wife, Mrs Jean Walker.
The company, Walker Windsail Systems Ltd, was incorporated in 1981. Its business was the development and marketing of fixed vanes or sails—described as windsails—designed to provide forward propulsion at sea by the use of wind forces. When used in conjunction with mechanical power in propeller driven commercial vessels the windsail was intended to produce an increase in speed or a saving in fuel, or both. The concept attracted considerable investment in the company, but it did not prove a commercial success. The company was placed in creditors' voluntary liquidation in 1998 with a substantial deficiency as regards contributories, and, an excess of liabilities over assets of some £1.7m.
Mr John Walker was appointed a director of the company on incorporation. Mrs Jean Walker was appointed a director in 1984. Mr Walker and, save for a period between 1997 and 1998, Mrs Walker remained directors of the company up to the date of liquidation.
These proceedings were commenced on 4 October 1999 by the issue of an originating application in the winding up of the company. That application sought declarations that Mr and Mrs Walker had been guilty of misfeasance in relation to the company in a number of respects which were listed under four main headings: remuneration, expenses, patents and preferences to creditors. The application sought orders for repayment to the company of sums said to have been misapplied or misappropriated. It sought, also, orders pursuant to Sections 213 and 214 of the Insolvency Act 1986 in respect of alleged fraudulent and wrongful trading.
The application was supported by an affidavit sworn by the liquidator on 1 October 1999.No copy of that affidavit is now before this court. But it was on the basis of that affidavit that application was made on 1 October 1999 to Mr Justice Ferris, without notice to Mr and Mrs Walker, for freezing injunctions restraining the disposition of their assets up to the value of £500,000. That is indicative of the value which the liquidator was then putting on these claims.
Those injunctions were granted on 1 October 1999. They were continued at a hearing on 8 October at which Mr and Mrs Walker were represented by counsel.
Following directions for service of evidence, the trial of these misfeasance proceedings was set for a date at the beginning of October 2000. But that date was overtaken by events. In August 2000—just before the end of the period of two years from the commencement of liquidation—the Secretary of State commenced proceedings against Mr and Mrs Walker under the Directors Disqualification Act 1986. On their application, the date for trial of the misfeasance proceedings was vacated and it was ordered that the misfeasance proceedings and the disqualification proceedings should be heard together—on the ground that they raised issues which were, in substance, the same. After some delay and extensions of time, a date for the trial of the conjoined proceedings was fixed for 12 November 2001. Sadly on 1 October 2001 Mrs Walker took her own life. The trial which had been due to start on 12 November 2001 was adjourned to a date to be fixed in the future.No further date has been fixed; although it seems that at some point a provisional date of 11 May 2002 was in mind.
The conjoined proceedings came before Mr Justice Lawrence Collins on 21 April 2004. There were before him on that day, first, an application by the Secretary of State to sever the disqualification proceedings from the misfeasance proceedings and, second, an application by Mr Walker to strike out the misfeasance proceedings on the grounds of delay. At that hearing an informal application was made by the liquidator for leave to discontinue the misfeasance proceedings. Leave to discontinue was required, on any view, because the freezing injunctions granted in October 1999 remained in force (see CPR 38.2 (2) (a)).
By his order, made on 21 April 2004, the judge dismissed the application to strike out the misfeasance proceedings and reserved the costs of that application. He adjourned the liquidator's application to discontinue to a date to be fixed. He ordered severance of the disqualification proceedings so that those proceedings could continue independently. We were told that they are still on foot.
The liquidator's formal application to discontinue with no order as to costs was made on notice dated 10 June 2004. The basis for the application, as appears in the notice, is —
"because there is now no useful purpose to be served by the continued prosecution of the claim having regard to (i) the costs of the proceedings; (ii) the apparent assets of the 1st respondent and the estate of the 2nd respondent; and (iii) the likely recoveries by the applicant."
That application was made under CPR 38.2. It was supported by a witness statement made by the liquidator on 14 May 2004. At paragraphs 7 and 8 of that statement the liquidator set out, in general terms, the position as he then saw it:
"7 In short, I consider that the continued prosecution of these proceedings would now serve no useful purpose. More particularly, there is, having regard to the costs incurred by me and Mr Walker's apparent means with which to satisfy any judgment, no prospect of any return for the company's creditors even if I were ultimately wholly successful. To pursue the claim to trial would now be wholly about recovery in part but not all of my legal costs.
8 The decision to seek to abandon the claim against Mr Walker and his late wife's estate has not been made lightly. Apart from the significant energies and resources devoted to the investigation and conduct of the claim by me and professionals instructed on my behalf, I remain of the view that Mr Walker's conduct as director of the company manifested itself in several serious breaches of duty causing loss to the company. In no way therefore should the application for permission to discontinue the proceedings be seen as any sort of acknowledgment or recognition by me that the claims against Mr Walker and his late wife's estate are unlikely to succeed. I consider, notwithstanding voluminous evidence adduced by Mr Walker and his late wife in opposition to the allegations against him, my claim has good prospects of success."
In the following ten paragraphs—paragraphs 9 to 18 of his witness statement—the liquidator explained why he continued to take the view that the claims against Mr Walker and the estate of the late Mrs Walker remain well founded. That is, of course, wholly and hotly disputed by Mr Walker. But it is no part of the function of a court on an application to discontinue to attempt to reach a decision whether or not the claim would succeed. I am content, as the judge was, to assume that the liquidator has a serious claim deserving of argument at the trial. This is not a claim which could be dealt with on a summary basis; and it is not a claim that could be struck out as having no real prospect of success.
At paragraphs 19 and 20 of the witness statement, the liquidator refers to the disqualification proceedings commenced in August 2000. At paragraph 21 he says:
"It has been the impact of the proceedings being run in tandem and the orders made by Mr Justice Hart on 26 September 2001 and by Mr Justice Evans-Lombe on 30 July 2002 which has rendered the claim against Mr Walker and his late wife's estate progressively worthless."
The two orders to which the liquidator referred in that paragraph were orders which had the effect of releasing assets from the freezing injunctions for the purpose of enabling Mr Walker to fund the costs of his defence in these and in the disqualification proceedings.
In the following paragraphs of his witness statement the liquidator analysed the movement of Mr and Mrs Walker's assets which, it must be remembered, had been the subject of freezing injunctions at all material times. The position may be summarised as follows. The amount of the assets as they appear from the affidavit of means sworn on 26 October 1999—that is to say at the outset of these proceedings—was £292,000 or thereabouts. Following the death of Mrs Walker there was an accretion of those assets of £150,000 representing the proceeds of a life policy which matured on Mrs Walker's death. Against that, there were to be set the amounts allowed by way of payment of legal costs (some £55,000). There must also be set—although they may not yet have been paid—the costs both of defending these proceedings (something in the order of £200,000) and the cost of defending the disqualification proceedings (some £55,000). Mr Walker has told us that his understanding is that his former solicitors will not be pursuing him for the £55,000 billed in respect of the disqualification proceedings. And we have been told by counsel for the liquidator that it would be wrong to assume that the whole of the profit costs billed in respect of these proceedings...
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