Daniel McAteer v Hat & Mitre Plc (in creditors’ voluntary liquidation) & Ors

Technical standing under the Insolvency Act 1986 does not automatically justify relief. An unregistered transferee of shares may be a contributory through the statutory definitions, but the relief sought must relate to the applicant’s capacity and genuine interest in the liquidation.

A person relying on contractual rights to acquire shares in the future remains an outsider unless the application concerns rights directly affected by a power peculiar to the insolvency regime. A very small shareholding, combined with opposition from the other members and disproportionate potential costs, may also make proposed proceedings abusive.

The appellant challenged the dismissal by ICCJ Jones of his application concerning the liquidation of Hat & Mitre plc. He sought, among other relief, a stay of the liquidation, removal of the liquidators, directions for a qualifying decision procedure, and relief connected with a rescue proposal.

The application relied on an unregistered transfer of 10 shares, a memorandum of understanding giving pre-emption rights, and an option agreement concerning further shares. The property had already been sold and an interim distribution made. The central issues were procedural fairness, whether the appellant was a contributory or otherwise had standing, and whether his interests justified the relief sought.

1. Appeal dismissed. Permission to appeal was granted, but the decision below was upheld on substantially different reasoning.
2. Procedural complaints failed. The lower court was entitled to deal with the whole application because both sides had proceeded on the basis that standing could determine it. The admission of shareholder correspondence was a case-management decision and caused no injustice. Alleged testy exchanges, considered cumulatively and in context, did not render the hearing unfair. The applicable question was whether any irregularity had caused injustice: Hayes v Transco plc [2003] EWCA Civ 1261; Dunbar Assets plc v Dorcas Holding Ltd [2013] EWCA Civ 864.
3. An unregistered transferee is a member for the relevant statutory purposes under section 250 of the Insolvency Act 1986. Reading sections 74, 79 and 250 together, the appellant was a contributory in respect of the 10 transferred shares and therefore had technical standing under sections 112 and 147.
4. Technical standing did not determine the result. Relief had to be sought in the capacity which supplied standing. The appellant’s 0.02% interest, the unanimous opposition of the other shareholders, the completed sale and distribution, and the disproportion between likely benefit and litigation costs meant that the proposed relief was not justified. The proposed stay also sought to activate a separate option agreement, rather than to advance the appellant’s rights as contributory. That approach was capable of constituting a Jameel v Dow Jones [2005] QB 946 (CA) abuse.
5. The memorandum of understanding created contingent pre-emption rights, not presently exercisable options. The option agreement likewise gave no present right to the shares because its trigger had not occurred. Under Brake v The Chedington Court Estate Ltd [2023] 1 WLR 3035, the exceptional third category of applicant is confined to persons whose rights are directly affected by powers peculiar to the statutory insolvency regime. The appellant’s contractual interests did not fall within that category.
6. The same reasoning applied to the applications for removal of liquidators and directions under section 195. The appellant was seeking to become a contributory, or to obtain contractual advantages, rather than applying in respect of rights arising from the liquidation itself.

• Chancery Appeals, High Court: Appeal from the decision and order of ICCJ Jones dated 25 May and 31 May 2023. Permission to appeal granted, but the appeal dismissed.
• ICCJ Jones: Dismissed the appellant’s application concerning the liquidation, principally on the ground that he lacked standing.