Tracs (Engineering) Ltd v Sampson & Ors

Where an application for permission to appeal cannot be properly considered immediately, execution of an order may be stayed temporarily if its immediate effect risks disproportionate expense, destruction of the relevant asset or other serious practical prejudice. The court should consider whether effective protective arrangements can preserve the asset and safeguard the claimant’s position until the application is heard. A receivership should not be imposed merely because a claimant threatens to withhold assistance and thereby jeopardise the underlying contract. The court may instead require financial monitoring and advance notification of substantial payments. The interim balance must account for the likely effect of receivership on the company’s credit, banking and ability to complete its business.

TRACS (Engineering) Ltd claimed that Roderick Sampson and Linda Wilson had diverted a Channel Tunnel rail link depot contract to PWME Limited, a company of which they were directors. The High Court, on the application of TRACS, appointed an accountant as receiver of PWME’s property and authorised her to preserve assets, raise finance and carry on the company’s business.

TRACS sought permission to appeal and an immediate stay of execution. The Court of Appeal had insufficient time to review the substantial papers or obtain a proper transcript of the High Court judge’s reasons. The central issue was whether the receivership should take effect during the short period before the permission application could be properly heard.

Execution of the receivership order was stayed. The application for permission to appeal was adjourned for an urgent one-hour hearing the following week. There was no order as to costs.

1. The court considered that immediate appointment of a receiver could generate expense out of proportion to the profit likely to be earned during the remaining four or five weeks of the contract.
2. TRACS did not know its own assets and liabilities and therefore could not provide a cross-undertaking in damages of meaningful value if the receivership later proved unjustified.
3. The essential operation of the contract was the monitoring of money received from AMEC Spie and payments made for labour and machinery. That monitoring could be achieved without appointing a receiver.
4. The timing of the next expected payment meant that the dispute could be reviewed before further contract funds reached PWME. Immediate receivership also risked destroying PWME’s credit with its bankers and clients, potentially ending the contract before the permission application was considered.
5. The court would not appoint a receiver merely because TRACS threatened to withhold labour and thereby risk termination of the contract. Whether TRACS supplied labour was a matter for TRACS, and the court should not be induced to make the appointment on that basis.
6. As an interim safeguard, PWME was directed to provide TRACS, or its nominated solicitor or accountant, with daily records of transactions on its Royal Bank of Scotland trading account. Payments exceeding £5,000 required at least 24 hours’ prior notification. TRACS was given liberty to apply at short notice if the condition was breached.

1. Court of Appeal (Civil Division): The application for permission to appeal was adjourned, and execution of the High Court order was stayed in the interim.
2. High Court of Justice (Queen’s Bench Division): Mr Leighton Williams QC, sitting as a Deputy Judge, appointed a receiver over PWME Limited’s property and authorised her to preserve assets, raise finance and carry on the business.