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England and Wales Court of Appeal (Civil Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Official Receiver v Heath & Anor [2002] EWCA Civ 286 (17 January 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/286.html Cite as: [2002] EWCA Civ 286 |
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CIVIL DIVISION
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
(His Honour Judge Boggis)
The Strand London Thursday 17 January 2002 |
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B e f o r e :
LADY JUSTICE ARDEN
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THE OFFICIAL RECEIVER | Claimant/Respondent | |
and: | ||
(1) JOHN HEATH | ||
(2) KENNETH JACK PALMER | Defendants/Applicants |
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The Respondent did not appear and was not represented
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Crown Copyright ©
Thursday 17 January 2002
"The correct way, in my view, is this: is there entitlement in favour of ESH or a liability upon Telford for [management] charges to be paid by Telford to ESH and if so does the amount exceed that entitlement and liability? In my judgment the district judge fell into error in answering that question affirmatively. The real position is that in August 1997 there was no clear debt due from TI to [ESH]. There was no contract between the two companies. There was no established basis for calculating the management charge. Apparently the charge was loosely based on turnover. It was apparently paid by monthly instalments with an annual balancing charge some time in August or September. In my judgment the payment of £176,000 odd cannot be reviewed long after the event by reference to what might be justified. At the time of payment there was simply no basis for the payment at all and this is confirmed by two pieces of evidence. First, Mr Heath wrote to say that there were no calculations and, secondly, Mr Palmer said that the management charge was more than adequate at £15,000 a month and this was only a method of transferring the cash over."
"The essential issue was whether the conduct complained of in paragraphs 55 and 56 of the report of the Official Receivers constituted unfitness for the purposes of [the 1986 Act]. The alleged misconduct was the participation of the directors in raising and paying a management charge of £176,250 to an associated company at the time when the paying company was insolvent. The judge held there was no basis for this payment because it was not supported by calculations and because one of the directors stated that the management charge was more than adequate at £15,000 per month and was only a method of transferring cash over. The director was mistaken about the rate of management charge actually being paid. However, the crucial point was the fact that it was being paid at a time when the company was insolvent. The district judge, whose decision the judge reversed, did not ask whether the conduct amounted to unfitness, i.e. was not properly considered to be justified. Rather he asked whether the determination of the management charge was potentially capable of being justified. Nor did the district judge ask whether it was appropriate for the sum so determined to be paid at all. In those circumstances the judge was entitled to draw a different conclusion on appeal on the basis of the primary facts as found by the judge."
"The fact is that the directors did not properly consider whether the amount was justified and in so far as they considered the matter made the payment to further interests other than the best interests of the company."