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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Ultraframe (UK) Ltd v Rigby & Ors [2005] EWCA Civ 276 (19 January 2005) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2005/276.html Cite as: [2005] EWCA Civ 276 |
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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION, MANCHESTER DISTRICT REGISTRY
(JUDGE MADDOCKS)
Strand London, WC2 |
||
B e f o r e :
(Vice President of the Court of Appeal, Civil Division)
LADY JUSTICE ARDEN
____________________
ULTRAFRAME (UK) LIMITED |
Applicant/Appellant | |
| -v- | ||
| (1) KENNETH BRIAN RIGBY | ||
| (2) GARY JOHN FIELDING | ||
| (3) THE BURNDEN GROUP PLC | Respondent |
____________________
Smith Bernal Wordwave Limited
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
(Official Shorthand Writers to the Court)
MR K B RIGBY appeared In Person
MR RICHARD SNOWDEN QC and MR N DOHERTY (instructed by Addleshaw Goddard) appeared on behalf of the Second and Third Respondents
____________________
Crown Copyright ©
Ultraframe
, be struck out. The application was dated 11th August 2004 and it was for an order that deeds of assignment between Quickfit Conservatories Limited and the second respondent, Gary John Fielding, dated 3rd January 2001, 30th April 2001 and 16th August 2003, be set aside, and, further, for an order that time for service of the application on Mr Rigby, the liquidator of Quickfit Conservatories Limited, Mr Fielding and the Burnden Group be abridged.
"If any person is aggrieved by an act or decision of the liquidator that person may apply to the court, and the court may confirm, reverse or modify the act or decision complained of and make such order in the case as it thinks fit."
Ultraframe
.
Ultraframe
took over the proceedings brought by Mr Davis's trustee in bankruptcy. On 20th October 2000 the Secretary of State appointed Mr Rigby liquidator of QC. On 19th December 2000, that is about two months after the appointment of Mr Rigby by the Secretary of State, Mr Rigby wrote to the creditors of QC stating that he proposed to sell the intellectual property rights belonging to QC to Mr Fielding and TBG.
Ultraframe
denied that they received this letter.
Ultraframe
has two subsidiaries called Northstar Limited and Seaquest Limited. These companies were originally owned by Mr Davies.
Ultraframe
commenced an action against TBG and Mr Fielding based on the assignment by Mr Davis's trustee in bankruptcy to it of his intellectual property rights. That action ultimately failed.
Ultraframe
.
Ultraframe
, on the one hand, and Mr Fielding and TBG on the other. On 20th July 2001 Mr Rigby responded to Eversheds.
Ultraframe
.
Ultraframe
learned of the third assignment, although there is some dispute about the dates.
Ultraframe
relying on the third assignment and claiming that Northstar and Seaquest stole their businesses from QC.
Ultraframe
issued its application to set aside the deeds of assignment. This is the application to which I have already referred. As I have said, it came before His Honour Judge Maddocks. He heard it on 16th August 2004 and on 17th August 2004 he gave judgment striking out the application.
"Ultraframe
, it seems, denies having received the first letter. Whether they did or not, the material points are (1) That Mr Rigby both advertised the offer and sent a circular to creditors; (2) That
Ultraframe
became aware of the assignment shortly afterwards because it was relied upon as the basis for the defence to the actions against Mr Fielding and his companies. That litigation has been continuing and in a serious way. It has been the subject of decisions by Laddie J, the first of which on a preliminary issue was on 3rd October 2002, and the Court of Appeal. The trial is now listed, I am told, in London for November 2004."
Ultraframe
had expressed a general interest in 1997, but not pursued it.
Ultraframe
had had ample opportunity to challenge the assignments, but instead allowed the litigation to proceed. The judge recognised that the lapse of time was less in relation to the third assignment, but he noted that no objection had been taken to it. He held that there was no evidence that Mr Rigby had acted improperly. On the contrary, he had kept creditors informed. In addition, no case had been made out against Mr Fielding or TBG that they had notice of any propriety on the part of Mr Rigby. Finally, the judge held that the application was inspired at a late stage not genuinely to increase the realisations for the creditors, but as a tactical step in the main litigation.
Ultraframe
had contended that its delay was due to the fact that it had only just become aware that the assignments were at an undervalue. The judge held that if that were true it would have been an apparent to
Ultraframe
all long, but it had only just become aware how the assignments might be deployed in litigation. That was not a proper reason for a delay. It was not a reason for allowing the application. For those reasons the judge struck out the application.
Ultraframe
, makes an important procedural point that the judge refused to give
Ultraframe
the opportunity to adduce evidence on its application. The appointment on 16th August 2004 had been fixed for directions only. The estimated length of the hearing was stated in the application to be 30 minutes. Mr Rigby produced certain documents at the hearing which were relied upon by Mr Fielding and TBG.
Ultraframe
wanted to adduce evidence in answer to these documents if that evidence was admitted. The judge did not accede to
Ultraframe
's argument that the evidence should be excluded and refused
Ultraframe
's request that it should be able to file evidence. Mr Hochhauser contends that the procedure was a substantial irregularity.
"Mr Rigby simply agreed to assign the rights requested [by Mr Fielding] without any investigation as to or consideration of the possible value of the rights being assigned."
and that Mr Rigby never enquired of
Ultraframe
, Northsea or Seaquest as to what they might be willing to pay for the rights being assigned. Mr Hochhauser submits that the only reasonable inference from the evidence is that the rights were not offered to anyone other than Mr Fielding. As stated above,
Ultraframe
had already written to the Official Receiver expressing an interest in the intellectual property rights of QC. The consideration for the assignments had been relatively nominal sums. If TBG succeeds in its new proceedings, it will have saved itself liability to Northstar and Seaquest against their claim which is said to be worth millions of pounds.
Ultraframe
to adduce evidence that Mr Fielding was aware of the impropriety of the part of Mr Rigby. In this connection Mr Hochhauser relies on the statement of Nourse LJ in Re Edennote Limited at page 391. However, I would interpose that in that case it was not suggested that Mr Venables had acted improperly. Nourse LJ noted that no formal defence had been raised that in taking the assignment the assignee had been a bona fide purchaser for value and without notice.
Ultraframe
learned of the first and second assignments in the first half of 2001, when the second and third respondents relied on them in their defence in the action brought against them by
Ultraframe
.
Ultraframe
did not take steps to launch that application until August 2004. Mr Hochhauser submits that, without more, delay should not be an absolute bar to the application in this case. In any event, in order to adjudicate on delay evidence needs to be adduced as to when
Ultraframe
learnt of the assignments and what
Ultraframe
did or did not do between learning of the assignments and the application.
Ultraframe
learnt of the first and second assignments when the defences were lodged in the adverse actions. However, it does not follow that
Ultraframe
knew about the inadequacy of the consideration or of the investigations.
Ultraframe
should have been accorded the opportunity to explain the delay so that the significance of the delay could have been assessed in the light of all the circumstances. Mr Hochhauser further submits that it is no bar to the application that it was not made to increase the distribution to creditors, but as a tactical step on the part of
Ultraframe
in its litigation with Mr Fielding and TBG.
Ultraframe
's position as regards this letter is that, if the letter was sent, it never received it. Mr Hochhauser submits that Mr Rigby did not explain why he felt it necessary to act on the purchaser's indication that the transaction had to be completed within 14 days.
Ultraframe
were denied the opportunity of putting in evidence to show that they received none of the letters to creditors that Mr Rigby sent.
Ultraframe
would have been willing to pay far more than that sum, if only because the costs of having to deal with the consequences of the assignment would be far in excess of that amount.
Ultraframe
learning of the assignment. Although
Ultraframe
attaches most significance to the third assignment, it considers that it was appropriate for it to challenge the first two assignments at the same time. Mr Hochhauser does not submit on this application that the third assignment was bad in law. Mr Hochhauser submits it is voidable and can be set aside.
Ultraframe
had known about the first and second assignments since 2001 and had raised no objection and made no offer of its own. As to the third assignment, it had clearly known about this for a number of months, although the exact date when it became aware of it was unknown. The effect of
Ultraframe
's application was to create a difficult situation for the liquidator because he had convened the final meeting of creditors which was due to be held on 19th August 2004. I should add, with respect to that submission, that there was nothing to prevent an adjournment of that meeting.
Ultraframe
had no standing under section 167 or section 168. He submits that it is a person aggrieved for the purposes of section 168 and a creditor for the purposes of 167. However, he submits that the court can take into account its delay and the fact that its application was inspired by a desire to assist its position in litigation rather than the position of its subsidiaries. He submits that those factors would inevitably lead the court to dismiss the application. Accordingly, it should be struck out at this stage.
Ultraframe
did not think that they had a right to set aside the assignment at the time of that letter, or rather they did not expressly state any matter which would lead Mr Rigby to believe that they had or had not such a right. Mr Snowden stresses that the conduct of Mr Rigby is not to be assessed with hindsight, which is correct. His conduct must be considered on the basis of the facts known to him at the time. He had no background to the litigation. Indeed, on Mr Snowden's submission, he had no knowledge of
Ultraframe
's interest.
Ultraframe
is only a creditor for £12,000 in the liquidation. I interpose that, while the total amount owed to creditors is approximately £110,000, the admitted claims (excluding amounts owed to preferential creditors) are only about £20,000 in total, including
Ultraframe
. So
Ultraframe
has a significant voice among the creditors of QC. The figures I have given are, of course, exclusive of interest. In support of his submissions on the law Mr Snowden relies particularly on the authorities of Re Edennote Limited and Mahomed v Morris [2000] 2 BCLC 536.
Ultraframe
's delay following the 2001 assignment in particular. He submits that the assignments could not be set aside unless Mr Fielding was aware of the impropriety. However, I should make the point that that question of law has not been argued on this application, and, indeed, it would not assist if it had been argued, in the light of Mr Hochhauser's submission that Mr Fielding must have had the requisite notice for the reasons he gives.
"40. The relief that is available under sections 167 and 168 of the 1984 Act is discretionary. Persons who seek the exercise of a court's discretion to avoid or set aside agreements must act with due expedition. It is manifest that, absent a very good reason, no court would now set aside assignments which had been, at the time of the application, entered into over three years earlier (in the case of the 2001 assignments) and almost one year ago earlier (in the case of the 2003 assignment). No sensible explanation whatsoever has been offered byUltraframe
for its delay. The fact that
Ultraframe
had not realised the purpose to which the assignments might be put in substantive litigation provides no excuse.
41.Ultraframe
's long delay in seeking to raise a challenge to the propriety and the reasonableness of Mr Rigby's conduct, over three years after the 2001 assignments, after Mr Rigby had distributed the proceeds to creditors and already gone out of office once, must also be measured against the clear public interest in facilitating the efficient and expeditious winding-up of insolvent companies. This interest would not be promoted if persons claiming to be 'aggrieved' are permitted to stand idly by for many years and only to seek to raise objection to the liquidator's conduct at the very last minute."
Quintessentially the issues which are raised by those paragraphs appear to me to be issues which could not be decided on a strike out.
Ultraframe
's letter to the Official Receiver in 1997. He accepts that he was reappointed as liquidator at the instigation of Mr Fielding's agents.
Ultraframe
is a creditor it has standing: see Re Edennote Limited at 393E to F per Nourse LJ, with whom Millett LJ agreed. However, Mr Snowden submits that the Court would not grant relief, first, because of the dual role of
Ultraframe
and, second, because of its delay.
"... namely (fraud and bad faith apart) that the court will only interfere with the act of a liquidator if he has done something so utterly unreasonable and absurd that no reasonable man would have done it." (page 394).
"... it is certainly possible for a liquidator to do something so utterly unreasonable and absurd that no reasonable man would have done it, simply by selling an asset of the company without taking into account the possibility that a third party might well have made a better offer than he to whom it was sold. That was what Sir John Vinelott found Mr Ryman had done in this case and that, no doubt, was why he expressed himself as he did. It does not mean that he applied the wrong test. I am that satisfied that he did not." (page 394 to 395).
"Mr Smith had written to the creditors on 15th November 1999 that he required advice from counsel about 'the status and merits' of the case. However, it became clear that none of the creditors was prepared to fund the action, even to the extent of enabling Mr Smith to take the preliminary step of obtaining counsel's advice. Since he could not afford to take advice at the expense of the estate, he moved (as it apparent from the statement which Mr Smith sent to Neuberger J) to the position that there was no need for him to take advice and that it was a matter for his discretion. He seems to have exercised his discretion on the basis that Mr Faryab appeared to be a loser rather than a winner. That is how Mr Smith himself put it, although I do not doubt that he did his best to form a view as to the prospects of success in the action. Nevertheless, I consider that for an insolvency practitioner who is an experienced chartered accountant but not a lawyer, that is a most unsatisfactory basis on which to form decisions as to the disposal of a claim for less than 1 per cent of its minimum potential value (or on Mr Faryab's more optimistic view for about one third of 1 per cent). The more difficult claim to evaluate (and I do not in any way diminish the problems of evaluation or the size of the difficulty facing Mr Smith), the stronger the argument must be for the sort of procedure described by Lord Hoffmann in Stein v Blake which enables the claim to go forward and see whether it is worth anything or not. Mr Faryab is, as he has shown today and has shown on many previous occasions, an experienced and skilled litigant in person who could be expected to prosecute the cause of action if it is re-assigned to him with skill as well as vigour and determination."
Ultraframe
, as both a creditor of QC and a party interested in litigation with a third party, and delay are "knock-out" points.
"In the latter capacity alone, like any other outsider to the liquidation, they would not have had the locus standi to apply under section 168(5)."
"26. In general I respectfully agree with the sentence which I have cited from Re Edennote Limited [1996] 2 BCLC 389. It could not have been the intention of Parliament that any outsider to the liquidation, dissatisfied with some act or decision of the liquidator, could attack that act or decision by the special procedure of section 168(5). However, I would accept that someone, like the landlord in Re Hans Place Limited [1993] BCLC 768, who is directly affected by the exercise of a power given specifically to liquidators, and who would not otherwise have any right to challenge the exercise of that power, can utilise section 168(5). It may be that other persons can properly bring themselves within the subsection. But the mere fact that the act or decision is that of a liquidator in respect of an asset of the company the proceeds of which would be available for unsecured creditors is not enough, as can be seen from the example of the persons denied an opportunity to buy an asset of the company from the liquidators in Re Edennote Limited [1996] 2 BCLC 389. Nor in my view is it enough that the person claiming to be aggrieved by the act or decision of the liquidator in respect of assets of the company is a surety when his subrogation rights do not in any way depend on the company being in liquidation."
"It may be that other persons can properly bring themselves within the subsection. But the mere fact that the act or decision is that of a liquidator in respect of an asset of the company the proceeds of which would be available for unsecured creditors is not enough ..."
Ultraframe
was not only a creditor of QC, but also wished to use the assignment for its own purposes in other litigation -- indeed, that is probably its primary purpose -- would not preclude it from bringing a claim. Nor, as I see it, is there authority which compels the Court to dismiss the claim because it has those two capacities and that primary motivation.
Ultraframe
, without more, from having their claim adjudicated upon out. In my judgment, the claim and witness statement did not satisfy that test. The judge would have to have evidence, for instance, as to when
Ultraframe
learned of the assignments and their reasons for not taking action at that stage.
Ultraframe
issued its application on short notice. As I have explained, it sought leave from the judge to serve short on the respondents. Indeed, the purpose of the application on 16th August was to obtain that permission and further directions as to evidence. Shortly before the hearing there was an exchange of letters between solicitors. On 12th August 2004 Addleshaw Goddard for the second and third respondents wrote to Eversheds:
"While we are authorised to accept service of the application, we wish to make it clear that our clients regard the application as misconceived, not least because of the failure to offer any explanation as to why the alleged 'criticism' of Mr Rigby (as liquidator of Quickfit Conservatories Limited) could lead to the assignment being set aside as against Mr Fielding or the Burnden Group plc. The application has no (or no reasonable) prospects of success against our clients and is an abuse of process. Our clients therefore intend to appear before the court on Monday through counsel to seek an order that the application be dismissed with costs. We understand from enquiries made of the court office that His Honour Judge Maddocks has no other matters presently listed before him on Monday afternoon ...
As set out above our clients will invite the court to dismiss the application as being an abuse of process on the basis it has no reasonable prospects of success. For this purpose alone we do not consider any further evidence is required. However, if this matter were to proceed further, then our clients would wish to put in evidence in answer to the application as a whole. In default of outright dismissal of the application, directions will be sought accordingly."
"The applications which will ultimately be before the court, namely your application to strike out and our substantive application, will in our view require an estimated length of hearing of two days. Ignoring the limited time available on Monday, it is inappropriate for your application to proceed without exchanging evidence. The appropriate course for you is to seek directions for the exchange of evidence in respect of your application. The more constructive course would be for evidence to be exchanged in respect of both parties' application and that a date be fixed with an estimated length of hearing of two days.
Our client is being represented by Rebecca Stubbs. She has not been involved at all in the wider dispute between our respective clients, nor was she involved in the preparation of our application and witness statement in support. Mr Christopher Parker is not available to attend the hearing on Monday, nor is Mr Adrian Speck, both of whom possess a detailed knowledge of the complex factual background to this dispute. In dealing with your allegations of delay we anticipate advancing detailed evidence covering much of the history to this dispute.
We suggest therefore that we attempt to agree directions before the hearing commences at 2.15 on Monday."
That is all I need read from that letter.
Ultraframe
had no standing, it would be pointless to give directions for evidence. But that is not the basis on which the judge dealt with the matter. He should not, therefore, in my judgment have proceeded to deal with the application, even the strike-out application, without evidence.
Ultraframe
would want to put in. The fact is, however, that he could not determine the question of whether delay disentitled
Ultraframe
from making the application without giving
Ultraframe
an opportunity to put in evidence. Nor could the judge properly proceed to hear the substantive application without any evidence from
Ultraframe. The judge should therefore, in my judgment, have acceded to the application for an adjournment.
ORDER: Appeal allowed.