BAT Industries Plc v Windward Prospects Ltd

The statutory power to appoint a receiver where it is just and convenient is broad but not unfettered. The court may develop its equitable jurisdiction incrementally where justice requires, including to protect claims that are not presently amenable to execution at law. Appointment is appropriate where there is a good arguable claim, the underlying claims have a real prospect of success, a substantial risk exists that they will become time-barred, and the defendant gives no adequate assurance that protective proceedings will be issued. The court must weigh the prejudice caused by intervention against the risk of losing valuable claims and should confine the receiver’s role to what is necessary.

BAT sought the appointment of a receiver over claims allegedly vested in Windward against its former shareholder and directors concerning substantial dividends. BAT contended that the claims might become time-barred under French law in mid-December 2013 and that Windward had not undertaken to issue protective proceedings or secure a tolling agreement. Windward disputed the urgency and argued that its directors should remain responsible for deciding whether the claims should be pursued. The central issue was whether, in the circumstances, justice and convenience required the appointment of a receiver under section 37(1) of the Senior Courts Act 1981.

1. Jurisdiction. Section 37(1) of the Senior Courts Act 1981 does not confer an unfettered power. The demands of justice remain the overriding consideration, and the jurisdiction may be developed incrementally to apply established principles to new situations.
2. Underlying claims. BAT had a good arguable claim for an indemnity. The Dividend Claims had a real prospect of success. The evidence concerning the accounts, provisions and potential liabilities justified that conclusion, although the figures were not necessarily as stark as BAT suggested.
3. Limitation risk. It was neither necessary nor appropriate to determine the applicable choice-of-law issue. The possibility that some claims were governed by French law, and therefore subject to a five-year limitation period expiring in mid-December 2013, could not be excluded.
4. Discretion. The claims exceeded $800 million, there was no assurance that Windward would issue protective proceedings or obtain a tolling agreement, and the risk of losing the claims was real. The receiver’s immediate role would be limited to commencing protective proceedings. The intervention and prejudice to Windward would consequently be limited, particularly because it was not a trading company.
5. Absent an appropriate undertaking by Windward to issue protective proceedings by the requisite date if no tolling agreement was reached, receivers were to be appointed to commence the Dividend Claims in Windward’s name and protect the limitation position. The court was not persuaded that a receiver was presently necessary to prosecute the claims after issue.

First-instance decision. No appellate history was stated in the judgment.