Summary
On an appeal against a chair’s decision admitting a creditor’s proof for voting purposes, the court determines the debt afresh on the balance of probabilities. A third party’s voluntary payment of a company’s debt does not discharge that debt unless made at the company’s request or with its authority. Once a voluntary liquidation has commenced and a liquidator is appointed, the directors cannot authorise or ratify such a payment.
A prospective members’ resolution does not itself constitute a request or management decision where the company’s articles vest management in the directors. For unjust enrichment, the claimant must establish enrichment, enrichment at its expense, an unjust factor and the absence of a defence. Where invalid votes determine a single, clear-cut creditors’ decision, the court may dispense with a further meeting and make the consequential appointment itself.
Factual background
Levy & Partners Limited appealed the liquidator’s decision to admit CCT International Limited’s proof of debt for £51,412.83 at a creditors’ meeting in the liquidation of C.C.T. Logistics Limited. The proof included payments said to comprise the company’s Barclays overdraft, a pre-appointment fee paid to Libertas, an alleged subcontract debt and two payments to other creditors.
The admitted vote enabled the existing liquidator to remain in office, whereas excluding the disputed amounts would have resulted in the applicant’s nominee being appointed. The central issues were whether the individual components of CCI’s proof were debts provable in the liquidation and whether the court should order a further decision procedure or appoint the replacement liquidator directly.
Held
- The appeal was allowed except in respect of £5,212. The court formed its own view of the debt, rather than reviewing the chair’s decision, applying Revenue and Customs Commissioners v Maxwell [2010] EWCA Civ 1379 and Karapetian v Duffy [2022] EWHC 1053 (Ch).
- The Barclays payment of £34,976.86 was voluntary. The members’ resolution of 22 June 2021 was prospective and did not itself request or authorise payment. It was not a valid special resolution under section 283 of the Companies Act 2006, and management powers lay with the board under the articles. The company entered liquidation on 15 July 2021 under section 86 of the Insolvency Act 1986; thereafter the directors lacked authority to request or ratify payment. The payment therefore did not discharge the Barclays debt, did not enrich the company and was not a provable debt under rule 14.1 of the Insolvency Rules 2016.
- Even if enrichment had been established, CCI failed to prove an unjust factor. The evidence did not establish free acceptance because CCI could not show that the company knew it expected repayment or had a meaningful opportunity to reject the benefit.
- The £5,212 paid to Libertas before liquidation was proved on the balance of probabilities to be a loan to the company. The absence of written terms, a repayment date or interest was not fatal; the contemporaneous documents and evidence supported the loan. Potential insolvency set-off was left open.
- CCI failed to prove that the £3,692.25 Nippon payment was properly payable under a subcontract arrangement. The AB Sped and Petrasco payments were conceded to be voluntary and were excluded.
- The invalid votes materially affected a single, clear-cut decision concerning the appointment of the liquidator. Applying the approach in Power v Petrus Estates Ltd [2009] BPIR 141, the court dispensed with a further meeting and ordered Mr Patel’s appointment in place of Mr Barnett.
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Appellate history
This was a first-instance appeal to the High Court under rule 15.35(3) of the Insolvency Rules 2016 against the liquidator’s decision to admit CCI’s proof for voting purposes. The court reversed that decision except as to £5,212 and appointed Mr Patel as liquidator.
Key cases cited
20 authorities cited.
- In the matter of the Nortel Companies [2013] UKSC 52
- Benedetti v Sawiris and others [2013] UKSC 50
- Deutsche Morgan Grenfell Group Plc (Respondents) v. Her Majesty's Commissioners of Inland Revenue and another (Appellants) Deutsche Morgan Grenfell Group plc (Appellants) v. Her Majesty's Commissioners of Inland Revenue and another (Respondents)(Consolidated Appeals) [2006] UKHL 49
- Revenue & Customs v Maxwell & Anor (As Joint Administrators of Mercury Tax Group Ltd) [2010] EWCA Civ 1379
- Gibb v Maidstone & Tunbridge Wells NHS Trust [2010] EWCA Civ 678
- ARSEN KARAPETIAN & ANOR. v RONAN ANTHONY DUFFY [2022] EWHC 1053 (Ch)
- National Westminster Bank Plc v Kapoor [2011] EWHC 255
- Power v Petrus Estates Ltd & Ors [2008] EWHC 2607 (Ch)
- Uren v First National Home Finance Ltd [2005] EWHC 2529
- EIC Services Ltd v Phipps [2004] 2 BCLC 589
- Re a Company (No 004539 of 1993) 1995 1 BCLC 459
- CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714
- Runciman v Walter Runciman Plc [1993] BCC 223
- Re a Debtor (No 222 of 1990) Ex p Bank of Ireland 1992 BCLC 137
- Electricity Supply Nominees Ltd v Thorn EMI Records (1991) 63 P & CR 143
- Charterhouse Investment Trust Ltd v Tempest Diesels Ltd (1985) 1 BCC 99,544
- In re Duomatic Ltd [1969] 2 Ch 365
- Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455
- Shaw (John) & Sons (Salford) Ltd v Shaw [1935] 2 KB 113
- Re Dummelow: Ex p Ruffle
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Cases citing this case
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