The company was in liquidation. Terence Venables, who had owned the shares, had taken an assignment of a cause of action against the football club. The court had set aside that assignment, and removed the liquidator. Venables now appealed saying that the court had been wrong to intervene.
Held: The appeal succeeded in part. The assignment was not re-instated, but the liquidator was. An unsecured creditor did have the right to ask a court to impugn a liquidator’s transactions. Although the words ‘on cause shown’ in section 108(2) do not appear in section 172(2), the difference in the language of the two provisions was immaterial for the purposes of the case. In the case of a compulsory liquidation, the court will not lightly remove its own officer; and the court will, among other considerations, pay a due regard to the impact of removal on the liquidator’s professional standing and reputation. Sir John Vinelott’s statement was correct with the addition that any belief of the creditors must be reasonable. In this case, although the liquidator had made a serious mistake, it was honest, and his integrity and good faith were accepted, and, in all the circumstances, this liquidator ought not to have been removed. No adequate or reasonable grounds had been shown for his removal. When liquidators are exercising their administrative powers to realise assets, the court will be very slow to substitute its judgment for that of the liquidators’ on what is essentially a businessman’s decision.
Nourse LJ said about counsel’s propostion that the correct test for intervening was: ‘namely (fraud and bad faith apart) that the court will only interfere with the act of a liquidator if he has done something so utterly unreasonable and absurd that no reasonable man would have done it’ that ‘it is certainly possible for a liquidator to do something so utterly unreasonable and absurd that no reasonable man would have done it, simply by selling an asset of the company without taking into account the possibility that a third party might well have made a better offer than he to whom it was sold. That was what Sir John Vinelott found Mr Ryman had done in this case and that, no doubt, was why he expressed himself as he did. It does not mean that he applied the wrong test. I am that satisfied that he did not.’ The applicant was a disappointed purchaser and ‘In the latter capacity alone, like any other outsider to the liquidation, they would not have had the locus standi to apply under section 168(5).’
Judges:
Nourse LJ, Millett LJ
Citations:
Times 03-Jun-1996, Gazette 03-Jul-1996, [1996] 2 BCLC 389
Statutes:
Insolvency Act 1986 108(2) 168(5) 172
Jurisdiction:
England and Wales
Citing:
Approved – In re Keypak Homecare Ltd ChD 1987
The court considered an application under section 108 to remove the liquidator, and reviewed the case law on the topic: ‘The section authorises the court to remove the liquidator ‘on cause shown’. That is not the same as saying ‘if the court shall . .
Appeal from – In Re Edennote Ltd; Tottenham Hotspur plc v Ryman ChD 1-Nov-1994
The company Edennote had been wound up on insolvency. It had a possible claim for fees against Tottenham, owned by Mr Sugare. The shareholder, Terry Venables, took an assignment of that action. An application was made to set aside the assignment and . .
Cited by:
Cited – Quickson (South and West) Limited v Stephen Mark Katz, John Stephen Kelmanson (As Joint Liquidators of Buildlead Limited) ChD 25-Aug-2004
Various applications were made in the insolvency, including for removal of the liquidators and declarations that certain payments were a fraudulent preference on the creditors.
Held: No prejudice had been shown by any procedural irregularity. . .
See Also – In re Edennote Ltd (No 2) ChD 1997
Sanction was sought against a liquidator. Lightman J said: ‘The question is the commercial best interests of the company, reflected prima facie, by the commercial judgment of the liquidator, a judgment in my view which, in the circumstances and in . .
Cited – In re Buckingham International Plc and In the Matter of Insolvency Act 1986; Mitchell v Buckingham International Plc CA 16-Feb-1998
. .
Cited – Mahomed and Another v Morris and Others CA 17-Feb-2000
. .
Cited – Ultraframe (UK) Ltd v Rigby and others CA 19-Jan-2005
Appeal against strike out of application to have set aside deeds of assignment. . .
Cited – Cintec International Ltd, Re Sequestration ScSf 12-May-2006
. .
Cited – Sisu Capital Fund Ltd and others v Tucker and others ChD 9-Sep-2005
. .
Lists of cited by and citing cases may be incomplete.
Insolvency, Company
Updated: 31 October 2022; Ref: scu.81864