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OUTER HOUSE, COURT OF SESSION
[2008] CSOH 133
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P1168/08
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OPINION OF SIR DAVID EDWARD
(Sitting as a Temporary Judge)
in the Petition
of
KEITH VEITCH ANDERSON
Petitioner;
for
Sanction to raise
unfair preference proceedings in terms of Section 165 of the Insolvency
Act 1986
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Petitioner: Delebegovic-Broome, Advocate; MacRoberts
Respondent: Macpherson, Solicitor Advocate; Brodies
10 September 2008
[1] The
Petitioner is the liquidator of New Alba (Redwood House) Limited (hereinafter
respectively "the liquidator" and "the company"). The company is subject to creditors'
voluntary winding up with effect from 18 December
2006.
[2] The
Petitioner seeks the sanction of the Court to raise proceedings under Section 243
of the Insolvency Act 1986 against Mr Paul Anthony Dickens, who was
the sole shareholder and director of the company and has lodged a claim as a
creditor of the company. Another company
under his control, Ablawen Limited (formerly New Alba Limited, hereafter "Ablawen")
has also lodged a claim as a creditor of the company.
[3] An
action under Section 243 has in fact already been raised by the
liquidator, the summons having been signetted on 19 December and intimated
to Mr Dickens on 20 December
2007. So the Petitioner asks
that, if sanction is granted, it be given effect retrospective to 19 December 2007.
[4] The
circumstances of the case are fully set out in my Opinion of today's date in
the action Anderson v
Dickens.
[5] The
power of the liquidator in a creditors' voluntary winding up to bring
proceedings under Section 243 of the 1986 Act is subject to the
sanction of the court or of the liquidation committee or, if there is no such
committee, a meeting of the company's creditors - see Section 165(2)(b)
and paragraph 3A of Part I of Schedule 4 of the 1986 Act.
[6] There
is no liquidation committee in this winding up and the liquidator did not seek
or obtain the sanction either of the court or of a meeting of creditors before
raising the action. Accordingly, unless
sanction is given, the liquidator is exposed to personal liability for the
expenses of the action. The liquidator
avers that the failure to seek sanction before raising the action was due to an
oversight.
[7] Mr Dickens,
with his company Ablawen, is the only person to have lodged Answers seeking to
have the Petition refused. He avers, and
the liquidator does not deny, that Hunter & Clark, the creditor with the
largest claim in the liquidation, are funding the action.
[8] Various
arguments were put forward in the Answers and Outline Submissions for Mr Dickens
and Ablawen. At the hearing, their
solicitor-advocate conceded that it is not incompetent for the liquidator in a
creditors' voluntary liquidation to raise an action such as this, and that it
is competent for the Court to grant retrospective sanction as sought by the
liquidator.
[9] At
the hearing, the solicitor-advocate for Mr Dickens and Ablawen limited his
case to arguing that the Court should not, as a matter of discretion, grant sanction,
or at any rate should not grant retrospective sanction. He did so on the ground that Hunter &
Clark are in a position "akin to that of a dominus
litis". In that connection he
referred to Cairns v M'Gregor 1931 SC 84, at page 89,
where Lord Justice-Clerk Alness cites as the locus classicus what had been said by Lord Rutherford in Mathieson v Thomson, 16 D. 19 at page 23. Without the support of Hunter & Clark,
the action would not have been raised and could not proceed. If sanction were granted and the action were
to fail, the cost of the unsuccessful action would fall on the general body of
creditors, including Mr Dickens and Ablawen. This would be inequitable. Hunter & Clark could, as creditors, have
raised such an action themselves (Section 243(4)(a)(i) of the 1986 Act)
and should not be enabled to evade the financial consequences of doing so by
funding the liquidator to pursue an action.
[10] In my opinion, this argument is without foundation. In the words of Lord Rutherford (supra) a proper dominus litis is
"a party with a
direct interest in the subject-matter of the litigation, and, through that
interest, master of the litigation itself, having the control and direction of
the suit, with power to retard it, or push it on, or put an end to it altogether".
That is not the position of Hunter
& Clark here. It is, moreover, as
the liquidator avers, "normal practice for liquidators to put in place
appropriate funding arrangements before commencing litigation". Indeed, in a case such as this where the
liabilities of the company in liquidation greatly exceed its assets, it is
difficult to imagine that a liquidator would be prepared to set about
recovering funds lost to the company through the grant of unfair preferences
unless he had the financial support of one or more of the creditors.
[11] It is regrettable that the liquidator did not seek the sanction
of the Court before raising the action.
It was, however, understandable that he did not seek sanction from a
general meeting of creditors since Mr Dickens and Ablawen claim to be
creditors and would be likely to have opposed the grant of sanction. The situation that the liquidator had to
unravel was not straightforward and, as appears from my Opinion in the action Anderson v
Dickens, Mr Dickens has been anything but candid in his dealings with
the liquidator. As also appears from my
Opinion, the liquidator was well justified in raising the action.
[12] In all the circumstances, I am of opinion that it is reasonable
to grant sanction with effect retrospective to 19 December 2007, and I shall pronounce an
interlocutor accordingly.
