Bourne & 101 Ors v The Charit-Email Technology Partnership LLP

Permission to commence proceedings against a company in liquidation under section 130(2) of the Insolvency Act 1986 involves a broad discretion to do what is just and fair in all the circumstances. The court should ordinarily seek an orderly resolution of the winding up for creditors as a whole, and should refuse permission where the issues can conveniently be decided in the liquidation. Relevant considerations include genuine arguability, proportionality, cost and delay, overlap with existing proceedings, the risk of inconsistent findings, the liquidator’s resources, and the interests of persons affected by the liquidation. Permission may nevertheless be granted where wider interlocking issues are already before another court and coordinated case management can avoid duplication and inconsistency. The order need not determine the eventual procedural course: the judge managing both matters may later stay, combine or separate issues.

The applicants, investors in a limited liability partnership, sought permission under section 130(2) of the Insolvency Act 1986 to join the partnership to substantial Commercial Court proceedings. The partnership had been wound up and was without funds. The proposed proceedings concerned whether the applicants had become members and whether the underlying sale, purchase and loan arrangements were binding or genuine.

The Commercial Court proceedings concerned 19 broadly similar investment schemes and involved numerous parties, including alleged promoters and professional advisers. The central question was whether the Charit Scheme issues could conveniently be determined in the liquidation without creating duplicated litigation or inconsistent findings.

1. The application was granted. The court’s discretion under section 130(2) of the Insolvency Act 1986 is broad and unfettered. It must do what is just and fair in all the circumstances, while starting from the premise that proceedings may not ordinarily be brought against a company in liquidation.

2. The court should ordinarily pursue an orderly resolution of matters arising in the winding up for the benefit of creditors as a whole. Permission should generally be refused where the issues can conveniently be decided in the liquidation, because that will usually be quicker and less expensive. The court must also be cautious before exposing a liquidator, particularly one without funds, to difficult and time-consuming litigation.

3. The relevant question was whether wider interlocking issues made it difficult to adjudicate the members issue and loan issue in isolation. Although the Charit Scheme had scheme-specific features, the evidence showed substantial overlap with the other schemes, including common documentation, authority, valuation methods, money flows, technology and allegations concerning the genuineness of the transactions. The issues were therefore not conveniently severable.

4. Costs, delay and the early stage of the Commercial Court proceedings weighed against permission. However, there were no substantial independent creditors requiring particular protection from delay, and the risk of inconsistent judgments could be reduced by having the same judge conduct both matters. The applicants’ lack of standing as creditors or contributories was relevant but did not restrict the court’s statutory discretion to the protection of those categories alone.

5. Permission was granted, with a proposal that Gloster J be nominated to hear the Companies Court matter concurrently with the Commercial Court proceedings. The managing judge remained free, after considering the pleadings and developing evidence, to stay the claim, determine issues in the liquidation first, or adopt another proportionate case-management solution.