• In Re a Company [2024] EWHC 1070 (Ch)

    Did enforcing foreign judgments by winding up just get easier? In this case, the court held that insolvency proceedings were not an "action on a judgment" for the purposes of section 24 of the Limitation Act 1980. This meant that they did not fall within the scope of the Limitation Act, and nor was there any common law limitation period. Play The importance of this judgment is that it brought the principles in Re Drelle v Servis-Terminal LLC (which also appears in this blog) into the wider corporate sphere. The issue of whether any limitation period would apply to prevent the presentation of a winding up petition based upon a foreign judgment was considered here. The present case was essentially an application to restrain presentation of a winding up petition on five grounds. These were: That the judgment debt was time-barred. That it was unclear if there had been an acknowledgment of the debt within the limitation period. That there was a substantial dispute as to whether the judgment debt had been satisfied. That the company was solvent. That it may be appropriate to grant an injunction. The High Court considered whether any limitation period applied to prevent the presentation of a winding up petition based upon a foreign judgment debt that was not subject to the judgment registration schemes under the Administration of Justice Act 1920 or the Foreign Judgments (Reciprocal Enforcement) Act 1933, and was not the subject of a Part 7 claim under the CPR. That would have converted the foreign debt into an English judgment debt. It confirmed the fact that a judgment can be the subject of a petition without such registration or recognition under the Administration of Justice Act 1920 or the Foreign Judgments (Reciprocal Enforcement) Act 1933. In the similar case of Drelle, which is referred to in this blog, whether it was necessary to first seek recognition of a foreign judgment under Part 7 CPR before issuing a bankruptcy petition which was founded upon it was also considered - but in that case the court looked at the similar position arising in the arena of personal insolvency. Crucially, in this case, the court held that the foreign judgment debt could serve as the basis for the presentation of the winding up petition as a matter of English common law. It also held that insolvency proceedings were not an "action on a judgment", so they were not within the scope of the Limitation Act 1980; and that there was no common law limitation period in any case. This meant that the avoidance of 'normal' limitation restrictions in relation to a winding-up petition was an important aspect of this case. The court also found that even if the Limitation Act had applied, the company had acknowledged the judgment debt through its agents within the six year period from the date of the final judgment. It also acknowledged that there was no substantial dispute of a nature which required evidence or hearing. However the court rejected a claim that a payment had been made in satisfaction of the judgment debt. The failure to pay the debt was seen as being of itself an act of insolvency, so the court noted that the underlying solvency of the Applicant was not relevant in this matter. As regards whether it was appropriate to grant an injunction, the court stated that it was likely that a stay in a foreign court, being procedural, would not, in and of itself, stop time running in the English and Welsh jurisdiction.

  •

    Re UKCloud Ltd (in liquidation) [2024] EWHC 1259 (Ch)

    Internet Protocol Addresses - fixed for floating charge? The question which arose in this case, and on which the liquidator required the court's direction, was whether the security granted by UKCloud Limited was a fixed charge or a floating charge. Play The reason that the liquidator felt he needed assistance on this question was probably because the label used in a debenture to describe the nature of the charge created over an asset, or class of assets, is a guide to the security the parties intended to create, but it is not conclusive. To attempt to answer this question, the court was fundamentally concerned with the nature of the rights and obligations the parties had intended to create. To come to a conclusion, it considered the essential difference between a fixed charge and a floating charge. The case law indicates that under a fixed charge the assets charged as security are permanently appropriated to the payment of the sum charged, in such a way as to give the chargee a proprietary interest in the assets. For as long as the fixed charge remains unredeemed, the assets can be realised from the charge, though only with the agreement of the chargee. The chargee might have good commercial reasons for agreeing to a partial release. Under a fixed charge, that will be a matter for the chargee to decide for itself. A floating charge contrasts with a fixed charge, however, because in the case of a floating charge the chargee does not have the same power to control the security for its own benefit. In this case, the chargee does have a proprietary interest, but its interest is in a fund of circulating capital. Unless and until the chargee intervenes (by crystallisation of the charge), it is for the trader, not the bank, to decide how to run its business.

  •

    Mitchell & Ors v Al Jaber; Al Jaber & Ors v JJW Ltd [2024]

    A director's breach of his fiduciary duty occurred by his ignoring the fact of liquidation of the company of which he was a director, and of the resulting termination of his powers, and instead causing the company to transfer away its shares to a knowing recipient. Play In the present case, a Saudi Arabian sheikh, who was also a director of a BVI company, 'impersonated' a pre-liquidation director of the company - someone with authority to execute some Share Transfer Forms on behalf of the company He did not have the power to execute the Share Transfer Forms as his powers had ceased when the company entered liquidation. In circumstances where those Share Transfer Forms were actually executed later than the director claimed (meaning that, because of the liquidation, his powers had in actual fact ceased before the date of their execution), he was unable to argue that he was not still subject to the fiduciary duties that accompanied such powers. So, in accordance with equitable principles, the court considered him as subject to the fiduciary duties that he would have had if his powers as a director of the company had not ceased.

  •

    Hurstwood Properties (A) Ltd and Ors v Rossendale BC and Anor [2021] UKSC 16

    This case has implications in matters where the parties attempt to avoid liability for business rates by using corporate vehicles Play The main question posed in this case was whether certain development companies bore any liability to pay non-domestic rates to the council on empty properties that had been leased by those development companies to special purpose vehicle companies (SPV) solely for the purpose of the development companies avoiding the rates liability for which they would otherwise have been liable.    The SPVs argued that there was no such liability, and that they were entitled to the unpaid business rates. They stated that this was because, alternatively:   The lease to an SPV which did not occupy the property did not meet the requirements to make the council the 'owner' of the empty property for rating purposes (the "Statutory Ground"); or   The SPV should be ignored because its purpose was to avoid business rates, which the defendants would otherwise have had to pay. This was claimed to amount to an abuse of the SPVs' separate personality that warranted the piercing of the corporate veil (the "Piercing the Corporate Veil Ground").    In respect of the Piercing the Corporate Veil ground, as is widely understood, to pierce the corporate veil is to disregard the separate legal personality of a company. This means to disregard the doctrine that a company is treated in law as a person in its own right, which is capable of owning property and having its own rights and liabilities distinct from the rights and liabilities of its shareholders. This ground did not find favour with the Supreme Court and was dismissed.   In response to the Statutory Ground, it was important to know who the "owner" of the relevant property was, as only the owner could qualify for rating relief, and only if it could show that it fell within the relevant exemption to liability for the business rates claimed. The relevant exemption was found within some Regulations to the Local Government and Finance Act 1988. These Regulations listed the classes of non-domestic hereditaments (or properties) which, exceptionally, don't give rise to a liability to pay rates when unoccupied. The relevant Regulation stated that these classes include a hereditament "whose owner is a company which is subject to a winding-up order made under the Insolvency Act 1986 or which is being wound up voluntarily under that Act."   In this case, the Supreme Court allowed the appeal by the Local Authorities against the striking-out of their claims to unpaid business rates from the defendant landlords on the basis that the legislation dealing with the payment of business rates for unoccupied properties should be interpreted in the context of the intention behind it, which, it held, was in line with the intention going as far back as the Poor Relief Act 1601, which aimed to deter owners from leaving properties unoccupied for personal financial advantage. It also ultimately held that a court will consider the liability of defendant landlords for business rates at a later stage at trial.