Worwood & Anor v Leisure Merchandising Services Ltd & Ors

Permission is required for a second-tier appeal. The Court of Appeal will grant permission only where the proposed appeal raises an important point of principle or practice, or where another compelling reason justifies hearing it. The test is strict. A charge over shares does not, without more, impose on the chargee a duty to intervene in the company’s underlying business or to procure its winding-up. The court distinguished the position where the security is over the company’s undertaking rather than its shares.

The claimants owned and controlled Concessions Contracts Ltd and charged their shares in that company to Nice Man Merchandising Inc as security for loans. After the company’s business was run down and it entered liquidation, the claimants brought personal and assigned claims against the chargee and associated parties.

Master Bowman struck out the claims. Park J refused permission to appeal in relation to the company’s claims, but heard and dismissed the appeal concerning the claimants’ personal claims. The claimants then sought permission from the Court of Appeal for a second-tier appeal under rule 52.13 of the Civil Procedure Rules. The central issues were whether the proposed appeal raised an important point of principle or practice, or whether there was another compelling reason for the Court of Appeal to hear it.

1. Application dismissed. The application was governed by rule 52.13 of the Civil Procedure Rules. Permission for a second-tier appeal requires an important point of principle or practice, or some other compelling reason. The test is strict.
2. The proposed appeal challenged Park J’s conclusion that the chargee’s duty was limited to acting in good faith for the purpose of obtaining repayment of the indebtedness. The claimants sought to recast the alleged duty as an obligation to use shareholder powers to prevent the company trading insolvently or otherwise than to preserve its business.
3. Lord Justice Parker held that this reformulation amounted in substance to the same proposed duty to intervene in the company’s business. The charge was over the shares, not over the company’s undertaking. The court therefore saw no substantial basis for challenging the judge’s reasoning or conclusions.
4. The proposed appeal raised neither an important point of principle or practice nor another compelling reason for the Court of Appeal to hear it. The application was dismissed, with no order for costs.

• Master Bowman: struck out the claimants’ claims, including claims assigned by the liquidator of Concessions Contracts Ltd.
• High Court, Park J: refused permission to appeal concerning the company’s claims. He heard and dismissed the appeal concerning the claimants’ personal claims.
• Court of Appeal (Civil Division): dismissed the application for permission to bring a second-tier appeal.