“1. Whethersection 127 of the Insolvency Act 1986 has rendered the entire settlement agreement dated23 December 2016 void; 2. If and to the extent it is held thatsection 127 Insolvency Act 1986 has rendered the settlement agreement void, whether the settlement agreement should be validated by the court; 3. Whether all or any of the claims brought by the applicants against the respondent are barred pursuant to the terms of the settlement agreement; 4. If some, but not all the claims brought by the applicants against the respondent are so barred, which ones are so barred.”
“7.1. You accept the waivers in your favour and the performance of the obligations set out in clause 7.7 below in full and final settlement of the Employment Claims and all and any claims or rights of action you may have now or may have in the future against the company and any other protected person in connection with or arising from your employment or its termination, the holding and/or loss of any office, or any other related or connected matter including without limitation any claims that you may have in any jurisdiction in the world under statute, common law or European law. The parties both acknowledge that it is their express intention, when entering into this agreement, that it covers all such claims, whether known or unknown to one or the other or neither or both of the parties and whether the factual or legal basis for the claim is known or could have been known to one or the other or neither or both of the parties. 7.2. This agreement shall not prevent you from issuing High Court or County Court proceedings against the company and any other protected person in respect of accrued pension rights or any personal injury of which you are not aware or could not reasonably have been aware at the date of this agreement (Excepted Claims). You warrant that as at the date of this agreement you are not aware of any circumstances that might give rise to any Excepted Claims. 7.3. This agreement is intended to address the matters set out at clause 7.1 and the Employment Claims. It is agreed that you have notified the following possible claims to the company: [a list of typical claims arising out of a termination of employment then follows, several of which relate to salary, which the respondent did not receive]. 7.4. It is agreed that this agreement satisfies the conditions governing settlement agreements and compromise agreements in [there follows a list of statutory provisions governing such agreements in relation to a termination of employment]. 7.5. The company is entering into this agreement on condition that (i) there are no material liabilities or commitments of the company or any group company entered into by you which either you have not disclosed to the directors of the company, or which the directors of the company or Andrew Trinder or Christoph Haschke are otherwise aware of; (ii) you do not initiate or continue any legal complaint, process or claim against the company or any other protected person in connection with your employment or the matters settled by this agreement. 7.6. You acknowledge that the company acted in reliance on your warranties and undertakings in entering into this agreement. 7.7. The company agrees that it enters into this agreement in full and final settlement of all and any claims or rights of action it may have now or may have in the future against you in connection with or arising from your employment. The parties both acknowledge that it is their express intention, when entering into this agreement, that it covers all such claims, whether known or unknown to one or the other or neither or both of the parties and whether the factual or legal basis for the claim is known or could have been known to one or the other or neither or both of the parties.”
“9. It is not appropriate in this case to reformulate the guidance given in the Rainy Sky and Arnold cases; the legal profession has sufficient judicial statements of this nature. But it may assist if I explain briefly why I do not accept the proposition that the Arnold case involved a recalibration of the approach summarised in the Rainy Sky case. 10. The court's task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. In Prenn v Simmonds[1971] 1 WLR 1381 , 1383H–1385D and in Reardon Smith Line Ltd v Yngvar Hansen-Tangen[1976] 1 WLR 989 , 997, Lord Wilberforce affirmed the potential relevance to the task of interpreting the parties' contract of the factual background known to the parties at or before the date of the contract, excluding evidence of the prior negotiations. When in his celebrated judgment in Investors Compensation Scheme Ltd v West Bromwich Building Society[1998] 1 WLR 896 , 912–913, Lord Hoffmann reformulated the principles of contractual interpretation, some saw his second principle, which allowed consideration of the whole relevant factual background available to the parties at the time of the contract, as signalling a break with the past. But Lord Bingham of Cornhill in an extra-judicial writing, “A New Thing Under the Sun? The Interpretation of Contracts and the ICS decision” (2008) 12 Edin LR 374, persuasively demonstrated that the idea of the court putting itself in the shoes of the contracting parties had a long pedigree. 11. Lord Clarke of Stone-cum-Ebony JSC elegantly summarised the approach to construction in the Rainy Sky case[2011] 1 WLR 2900 , para 21f. In the Arnold case[2015] AC 1619 all of the judgments confirmed the approach in the Rainy Sky case: Lord Neuberger of Abbotsbury PSC, paras 13–14; Lord Hodge JSC, para 76 and Lord Carnwath JSC, para 108. Interpretation is, as Lord Clarke JSC stated in the Rainy Sky case (para 21), a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But, in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause (the Rainy Sky case, para 26, citing Mance LJ in Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2) [2001] 2 All ER (Comm) 299, paras 13, 16); and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest: the Arnold case, paras 20, 77. Similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms. 12. This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated: the Arnold case, para 77, citing In re Sigma Finance Corpn[2010] 1 All ER 571 , para 12, per Lord Mance JSC. To my mind once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each. 13. Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type. The iterative process, of which Lord Mance JSC spoke in Sigma Finance Corpn[2010] 1 All ER 571 , para 12, assists the lawyer or judge to ascertain the objective meaning of disputed provisions. 14. On the approach to contractual interpretation, the Rainy Sky and Arnold case were saying the same thing.”
“Further, having regard to the terms of Ord.16, r. 8 RSC, the words ‘in respect of’ used in the Tomlin Order must have been understood by Mr Garrard and Mr Fielding in a sense which was no more restrictive than the words ‘relating to’ or ‘connected with’. The words ‘in respect of’ are words of connection. They have been described as words which have the widest possible meaning of any expression intended to convey some connection between the two subject matters to which the word relates…”
“127. Avoidance of property dispositions, etc. (1) In a winding up by the court, any disposition of the company's property, and any transfer of shares, or alteration in the status of the company's members, made after the commencement of the winding up is, unless the court otherwise orders, void. (2) This section has no effect in respect of anything done by an administrator of a company while a winding-up petition is suspended under paragraph 40 of Schedule B1.”
“First, I think the contract of sale was not within the prohibition of section 153.… Then it is said no sanction of the court has been obtained; that is not necessary; section 153 does not avoid such a contract, but only makes a transfer in the interval between the petition and order void…”
“Section 127 does not affect contracts or transactions per se. It only affects the passing of title to property under a contract.”
“Section 127 does not impact on the company’s use, consumption or exhaustion of its assets. Thus, while an agreed overdraft limit is treated in the criminal law as property capable of being stolen by the presentation of forged cheques, the use, consumption or exhaustion of that overdraft limit by the company is not a disposition within the section. No rights in any identifiable property are transferred to or conferred on any other party. Conversely, where there is a credit balance on the company’s bank account, it is clear that the act of cashing a cheque drawn on the account extinguishes an asset in the form of the bank’s debt the amount of the check. However, the cashing of a cheque does not involve an assignment of the company’s claim on the bank and for as long as the company retains the cash proceeds, there is no disposition within the section because, again, the property rights have not passed from the company to any other party.”
“Any disposition of the property of the company including things in action and any transfer of shares, or alteration in the status of the members of the company made after the commencement of the winding up by the Court shall unless the court otherwise orders be void.”
“There is, in my view, great force in Mr McClellan’s argument that the paying by bank of the company’s cheque, presented by a stranger, does not involve the bank in a disposition of the property of the company so as to disentitle the bank to debit the amount of the cheque to the company’s account. The word ‘disposition’ connotes in my view both a disponor and a disponee. The section operates to render the disposition void so far as concerns the disponee. It does not operate to affect the agencies interposing between the company, as disponor, and the recipient of the property, as disponee. As was put in the course of argument, if a company, after presentation of the petition, delivered goods to a carrier consigned to a purchaser, the purchaser would face the avoidance of the transaction under section 227, but the carrier would not be placed in the position of a tortious handling of the goods. Again, if a company were to send its wages clerk up to the bank to cash the weekly wages cheque and bring back the proceeds for making out the pay packets, the payment of the cheque would involve no disposition of the company’s property: the company’s property belongs to it just as much when it was in the bank as when it was in the form of cash in the hands of the wages clerk. The element of disposition only enters into the situation when something passes out from the company to a disponee. It is the passing to the disponee which is the relevant disposition avoided by section 227. Taking further the example of a wages cheque, the giving by a company to the employee of his wages out of the cash brought back by the wages clerk would be disposition of property of the company to the employee. Alternatively, if the company gave to the employee directly a cheque for him to present to collector himself, the handing over of that cheque would be a conditional disposition within section 227. The intermediary functions fulfilled by the bank in respect of paying cheques drawn by a company in favour of and presented on behalf of a third party do not implicate the bank in the consequences of the statutory avoidance prescribed by section 227. The conclusion I have reached is that section 227 avoids in the hands of or as against a disponee any disposition of the property of the company made after the commencement of the winding up by the court. I do not regard this as a reading additional words into the section that the legislature has not itself put there. Rather, I consider that the legislative intention, as disclosed by the terms of section 227(1), is such as to require an investigation of what happened to the property, that is to say, what was the disposition, and then to enable the liquidator to recover it upon the basis that the disposition was void. It is recovering from the disponee that forms the basic legislative purpose of section 227.”
“In collecting payment upon a cheque the bank credits the customer's account with the amount of the cheque. If the account is already in credit, no disposition of the property of the customer takes place in favour of the bank. The amount standing to the credit of a customer's account is increased in return for the surrender of the cheque, which becomes a voucher for payment. It is the drawer of the cheque whose property is disposed of. All that happens between the customer and the banker is an adjustment of entries in the statement recording the accounts between them.”
“I prefer the reasoning in the three Commonwealth authorities as entirely in accord and supportive of the principles which I have stated.”
“8.28. We saw above that there is no disposition where the company simply uses, consumes or exhausts its assets. Goode asserts that the position is different in relation to transactions which have the effect of reducing or extinguishing the company’s rights in an asset, and which in so doing transfer value to another person. On this basis he argues the phrase “disposition of company property” is capable of embracing: (i) an agreement by which the company surrenders a lease or gives up contractual rights; (ii) the conferment and exercise of rights of contractual or equitable set off by a company debtor; and (iii) a post-petition payment to a judgment creditor made by a company debtor under a garnishee order. 8.29. At first sight, Goode’s argument is attractive. As all of these forms of transaction may subtract value from the insolvent estate, they arguably fall within the mischief of the section. However, the case for saying that an agreement for surrender of the lease would constitute a “disposition of the company’s property” is not entirely compelling. The surrender of the lease involves the extinction of the lessees property rights rather than their grant transfer. The lessor does not acquire any new proprietary rights in the process even though his property may well have a greater value freed from the lessees interest. 8.30. Equally, it is not immediately clear that the other transactions mentioned by Goode involve the company in granting or transferring an interest in its assets in favour of a third party. …”
“52. In these circumstances, I conclude that section 127 is neither aimed at, nor apt to cover, the present situation. Section 127 addresses cases where assets legally owned by a company in winding up are disposed of. The section is necessary to enable the company to recover them, by treating the disposition as void. The court's power to validate the disposition is a necessary safety valve, to cater for situations in which validation would be appropriate, bearing in mind the position of creditors as well as that of the other party to the transaction. Any such disposition will involve issues which arise directly between the company (embracing in that concept its creditors in liquidation) whose property is disposed of and the other party to the transaction, although the section embraces situations where the company's property is held by, for example, a director or agent and is disposed of by him to a third party: In re J Leslie Engineers Co Ltd[1976] 1 WLR 292 . 54. The holder of interests such as SICL's does not need protection on the lines of section 127, in order to protect its property or to protect or enforce its interests. Mr Al-Sanea disposed of his legal interest in the shares. That involved him in a breach of trust. But it did not involve any disposition of SICL's property. SICL's property, whether it consisted of an equitable proprietary interest or personal rights to have the shares held for its benefit, continued, despite the disposal of the legal title, unless and until that disposal overrode it. If the disposal overrode SICL's interest as regards a third party transferee of the legal title such as Samba, that was not because of any disposal of SICL's interest. It was because SICL's interest was always limited in this respect. 55. In some circumstances, the term "disposition" may, as Lord Neuberger demonstrates, embrace destruction or extinction of an interest. In the present context, one might also pray in aid academic descriptions of the wrongful alienation of trust property (even if it did not override any beneficial interest in such property) as a "misapplication of trust assets" (see Snell's Equity (33rd ed), paras 30-013, 30-050 and 30-067) and a "disposition ... in breach of trust" (see Swadling in Burrows, English Private Law (3rd ed), para 4.151). But the natural meaning of "disposition" in the context of section 127 is in my view that it refers to a transfer by a disponor to a disponee of the relevant property (here the beneficial interest), not least when the section goes on to render any disposition "void" unless the court otherwise orders. I agree with Lord Neuberger's and Lord Sumption's further reasoning on this point.”
“62. As Lord Mance says, where a legal estate is sold to a bona fide purchaser for value without notice, any equitable interest is not transferred to the purchaser: it is overridden, or to put it more colloquially, it is lost or disappears. Lloyd LJ accurately summarised the position in Independent Trustee Services Ltd v GP Noble Trustees Ltd[2013] Ch 91 , para 106, when he said that a "trustee acting in breach of trust ... cannot vest the beneficial interest in the property in a bona fide purchaser for value without notice, since he does not own that title and is not acting in a way which enables him, under the trust, to overreach the beneficiaries' equitable interest"; but, nonetheless, "the availability of the bona fide purchaser defence means that a transaction in favour of a bona fide purchaser for value without notice is as effective as it would be if he could vest the beneficial title in the purchaser". 63. As Lord Mance also points out, where the legal owner transfers the legal estate to a bona fide purchaser for value with no notice of the beneficial interest in breach of trust, the person who owned the beneficial interest does not by any means lose all its other rights. In particular, it retains all its personal rights against the trustee, ie the party who sold the legal estate. In other words, following the transfer of the shares in this case, SICL retained its personal rights against Mr Al-Sanea, but (assuming Samba was a bona fide purchaser for value without notice and subject to section 127), SICL lost any proprietary rights or interest it had in the shares. 64. The fact that SICL retains its personal rights against Mr Al-Sanea notwithstanding the loss of its beneficial interest in the shares appears to me to be irrelevant to the issue whether section 127 applies. If a transaction would otherwise be a disposition within the section, there is no reason for disapplying the section merely because the company in question would not be deprived of its personal rights by the disposition. Similarly, the fact that an equitable interest is more precarious than a legal interest appears to me to be nothing to the point. The very purpose of section 127 is to impeach transactions which would otherwise be effective, and it seems to me to be inconsistent with that purpose to exclude from its ambit a transaction which would otherwise be lawful, and to which a particular right or interest is otherwise susceptible of being defeated. 65. There is undoubtedly a powerful argument for saying that a transfer by the legal owner of the legal estate for value in an asset to a bona fide purchaser who has no notice of the existence of an equitable interest in that asset cannot amount to a disposition of that equitable interest. As already mentioned, and as Lord Mance demonstrates, there is no question of Mr Al-Sanea having transferred SICL's equitable interest in the shares to Samba: he simply transferred his legal ownership of the shares to Samba, and, on the assumption that Samba was a bona fide purchaser for value without notice, the equitable interest effectively disappeared. In those circumstances, at least on the basis of the meaning which it naturally conveys, section 127 simply does not apply: a "disposition" normally involves a disponor and a disponee, and so there has simply been no disposition. Indeed, in an Australian first instance decision, In re Mal Bower's Macquarie Electrical Centre Pty Ltd (in liquidation) [1974] 1 NSWLR 254, 258, Street CJ in Eq expressly so stated, albeit in a very different context from the present. 66. However, it is fair to say that the word "disposition" is linguistically capable of applying to a transaction which involves the destruction or termination of an interest. Etymological analyses can fairly be said to be suspect in this sort of context, but it seems to me to involve a perfectly natural use of language to describe SICL's interest in the shares as having been "disposed of" by the transfer of those shares to a bona fide purchaser. 67. And it is possible to claim support for such a view in relation to section 127 from respected authors. Thus, Professor Sir Roy Goode in Principles of Corporate Insolvency Law, 4th ed (2011) at para 13-127 states that "[s]ection 127 bites on beneficial ownership, not necessarily on the legal title". And at para 13-128, he says that "[t]he word 'disposition' ... must be given a wide meaning if the purpose of the section is to be achieved, particularly in view of the fact that there is no exception in favour of transfers for full value"; particularly relevantly for present purposes, this passage continues: "'[d]isposition' should therefore be considered to include not only any dealing in the company's ... assets by sale, exchange, lease, charge, gift or loan but also ... any other act which in reducing or extinguishing the company's rights in an asset, transfers value to another person". Sir Roy then explains that on this basis "'disposition' includes an agreement whereby the company surrenders a lease or gives up contractual rights". And McPherson's Law of Company Liquidation, 3rd ed (2013), para 7-015, states that section 127 "only [applies to] property which belongs in equity to the company" and "is confined to the company's beneficial interest in property". 68. There is also some judicial support for the notion that "disposition" can extend to extinguishment. Thus, Wynn-Parry J said in In re Earl Leven, Inland Revenue Comrs v Williams Deacon's Bank Ltd[1954] 1 WLR 1228 , 1233, that "[t]he word 'disposition', taken by itself, and used in its most extended meaning, is no doubt wide enough to include the act of extinguishment". However, he rejected such a wide interpretation of that word in theFinance Act 1940 , partly because it produced "a quite unexpected result" and partly because in other sections of that Act "it is clear that where the legislature intended that ... 'disposition' should include 'extinguishment', it was at pains to make express provision". Accordingly, the extinguishment of a liability to pay insurance premiums did not amount to a "disposition" for the purposes ofsection 44(1) of the 1940 Act . 69. In another revenue case, Inland Revenue Comrs v Buchanan[1958] Ch 289 , the Court of Appeal held that the surrender of a life interest under a will trust in favour of those people entitled in remainder operated as a "disposition" of that life interest for the purposes of sections 20 and 21 of theFinance Act 1943 . At p 298, Jenkins LJ specifically rejected the argument that there was no disposition because "a surrender of a life interest destroys the interest and there is nothing left". This again provides support for the notion that the fact that property ceases to exist as a result of a transaction does not prevent the transaction involving a "disposition" of that property. But, of course, all depends on the statutory context and how they apply to the facts of the particular case. 70. There is also a policy argument for concluding that in a case such as the present, the equitable interest is the subject of a "disposition" for the purposes of section 127, particularly bearing in mind the fact that the court has a dispensing power. The purpose of section 127 is to ensure that, at least once the winding up procedure has been started, a company's property is retained, in particular for the purpose of being available in order to be distributed pro rata, ie fairly, among its creditors. On the face of it, at any rate, that should apply as much to property which is held for it by a third party as to property which it holds in its own name. 71. It would appear that Mr Al-Sanea was a bare trustee of the shares - ie the whole of the beneficial interest in the shares was vested in SICL. A transfer of the bare legal estate by the trustee to a purchaser with notice of the trust would not be caught, because he would only acquire the bare legal interest, which would normally be worth nothing, and no disposition of the company's property would have occurred. And a transfer by the company of its equitable interest would undoubtedly be caught by section 127 as it would involve a disposition by the company of that interest. It can therefore be said to be surprising if a transfer by the trustee which involved the transferee effectively obtaining the whole of the equitable interest previously owned by the company was not caught by the section. 72. Nonetheless, I have reached the conclusion, in agreement with Lord Mance, that there is no "disposition" of an equitable interest within section 127, when there is a transfer by the legal owner of the legal estate, which is subject to that equitable interest, to a bona fide purchaser for value without notice of that equitable interest. 73. As already mentioned, the natural meaning of section 127 appears to me to carry with it the notion of a disponor transferring property to a disponee, and on that basis there was no disposition of SICL's equitable interest in the shares in this case. Although, as explained above, there are arguments for departing from the natural meaning of section 127, I consider that they are outweighed by the arguments the other way. 74. In my view, Sir Roy Goode is right when he says that the surrender of a lease or the giving up of contractual rights by a company would be a "disposition" within section 127, as would a surrender of a life interest (and a company can no doubt have such an interest, at least if it is contingent on an individual's life) as discussed in Buchanan. However, there are differences between a surrender (whether of a lease, contractual rights, or a life interest) and the loss of a beneficial interest on a transfer of the legal estate to a bona fide purchaser for value without notice of that interest. In the former case, the person who is the disponor is the same as the person who loses the property; whereas in the latter case the disponor is, ex hypothesi, not the person who loses the property. And, in the former case the disponee is well aware of the property which is ceasing to exist: as far as he is concerned, its extinction is the purpose of the transaction; in the latter case, the disponee is, by definition, unaware of the property which is being disposed of. 75. Section 127 can operate harshly so far as people dealing in good faith with a company are concerned. In many cases, a person dealing with a company will be unaware that a petition has been presented (particularly if the presentation occurred very recently), and the section contains no exception for transactions in the ordinary course of business or for transactions for which the company receives full value. The fact that the court will often sanction transactions in the ordinary course of business under its statutory dispensing power is by no means a wholly satisfactory answer to this. As Fox LJ explained in In re SA & D Wright Ltd[1992] BCC 503 , 505, when deciding whether to validate a disposition under section 127, the court "must always do its best to ensure that the interests of the unsecured creditors will not be prejudiced", and, where there is said to have been a benefit in validating, "the court must carry out a balancing exercise". And, as Sales LJ put it more recently in Express Electrical Distributors Ltd v Beavis[2016] 1 WLR 4783 , para 56, validation will ordinarily only be granted "if there is some special circumstance which shows that the disposition in question ... has been ... for the benefit of the general body of unsecured creditors". 76. But it would not merely be harsh, but positively unfair for a bona fide purchaser of a legal estate from a third party to find that, because of section 127, the transaction in question was liable to be held void owing to the existence of an equitable interest held by a company of which he had no notice. As explained in para 74 above, the position is very different from the surrender of a lease or of contractual rights. A person taking a surrender of a lease or contractual rights from a company knows both that he is dealing with the company and that he is dealing in the lease or the rights. A bona fide purchaser for value of an asset without notice of a company's equitable interest in the asset would be unaware both of the company (or at least that it had an equitable interest) and of the equitable interest (as if he knew about it he would be bound by it, as he would not be a bona fide purchaser).”
“89. It is arguable, as Lord Neuberger observes, that the transfer of the legal interest in movables may constitute a "disposition" of an equitable interest if its effect is that the equitable interest is extinguished. But the difficulty about the argument, and the reason why I would reject it, is that equitable interests arise from equity's recognition that in some circumstances the conscience of the holder of the legal interest may be affected. When the asset is transferred to a third party, the question becomes whether the conscience of the transferee is affected. On the facts pleaded in the present case, the equitable interest of SICL was defeated not by the act of the transferor (Mr Al-Sanea) but by absence of anything affecting the conscience of the transferee (Samba). The rules of equity which protect transferees acquiring in good faith and without notice are among the fundamental conditions on which equitable interests can exist without injustice. 90. The reality is that the transaction of16 September 2009 was simply a transfer of the shares in breach of trust, and any rights of SICL against Samba depend on the law relating to constructive trusts and not on section 127 of the Insolvency Act. The law relating to constructive trusts has achieved a high level of development, reflecting a careful balance between the competing interests engaged in such cases. Wide as the term "disposition" is, the coherence of the law in this area would not be assisted by giving it a meaning inconsistent with the basic principles governing the creation and recognition of equitable interests and founded on a very different balance of the relevant interests. There is no claim in this case to make Samba accountable as a constructive trustee, and no allegation of notice. For that reason, the proceedings as presently framed must fail.”
“When an action is compromised by an agreement to pay a sum in satisfaction, it gives rise to a new cause of action.”
“An unimpeached compromise represents the end of the dispute or disputes from which it arose. Any issues of fact or law that may have formed the subject matter of the original dispute are buried beneath the surface of the compromise. The court will not permit them to be raised afresh in the context of a new action. If the parties have agreed that their original dispute may be resurrected in certain circumstances then, of course, the position may be different.”
“20. … Thus, the policy of the law in favour of distribution of the assets of an insolvent company in the course of the liquidation process on a pari passu basis between its unsecured creditors is a strong one, and it needs to be shown that special circumstances exist which makes it a particular transaction one in the interests of the creditors as a whole before a validation order will be made to override the usual application of the pari passu principle. 21. Sometimes the court may be justified in making a validation order where the making of a payment or the supply of assets by the company is a way of, say, fulfilling its obligations under a particularly profitable contract where the eventual profits will exceed the consumption of the company’s assets and will inure to the overall advantage of the general body of creditors. There is no suggestion of that in this case. Sometimes the court may be justified in making a validation order simply to allow the company to carry on its business in the usual way; but, as Buckley LJ pointed out, it will be more speculative whether this is really desirable in the interests of the general body of creditors and this ‘will be likely to depend on whether a sale of the business as a going concern will probably be more beneficial than a breakup realisation of the company’s assets’[1980] 1 WLR 711 , 717H. [ … ] 24. As Buckley LJ pointed out, there may be circumstances in which a validation order is not sought in advance of a transaction, but only retrospectively. That will be so where, in a case like the present one, the parties are “unaware at the time when the transaction is entered into that a petition has been presented”
“52. Whilst the grant of summary judgment against Mr Rastogi and Mr Jain was a circumstance which placed beyond question the fact that the pursuit of the claim against Mr Patel was neither commercial nor viable, this was foreseeable and foreseen beforehand and, once the application for summary judgment was made, the liquidators were confident of its outcome. The Claimant was in law entitled to take the course which it did of keeping Mr Patel a defendant in the action unless and until he agreed terms of settlement which were acceptable to the Claimant and until judgment was obtained against Mr Rastogi and Mr Jain, but the exercise of this choice carries with it in a case such as the present the price (in particular since the outcome was reasonably foreseeable if not actually foreseen), that the ordinary rule should prima facie apply on the subsequent discontinuance and the Claimant should pay Mr Patel's costs. Subject to one matter as it seems to me there is no good reason to depart from the normal rule. It is of course no answer to Mr Patel's claim for costs that the Claimant has at all times had a good arguable case and continues to do so. It is of course no reason to depart from the normal rule that any costs order to be paid by the Claimant will have to be funded out of monies already paid or set aside for payment of the liquidators' remuneration. The liquidators should have appreciated the risk of commencing and continuing the proceedings against Mr Patel. Liquidators should think very carefully before making decisions to bring or continue expensive proceedings for damages against impecunious defendants, most particularly when they involve serious allegations such as fraud. They should realise that they may not be able to extract themselves from those proceedings save on terms requiring payment of the defendant's costs of those proceedings. If to the mind of the liquidators the defendant acts unreasonably in refusing to agree terms of settlement, in the ordinary case the prudent course for the liquidator is to apply to the court for permission to discontinue and leave it to the court to decide what (if any) terms should be imposed. 53. The question however arises whether the conduct of Mr Patel and the attitude which he adopted in negotiations for settlement affords a good reason to depart (in whole or in part) from the normal rule.CPR 44.3 requires the court in exercising its discretion as to costs to have regard to the conduct of the parties and admissible offers to settle made by the parties. There can be no doubt that the Claimant did wish to negotiate terms with Mr Patel in particular for discontinuance and made a series of offers. I do not think that the offers were generous, but they afforded the basis for negotiations and (most particularly with the Royal as insurers liable to pick up the tab for any shortfall in recovery from the Claimant of Mr Patel's costs incurred from the14th June 2002 ) a settlement should have been achievable. There was substance in Magwells' letter to Lovells dated the4th October 2002 that the Royal might be expected to adopt a more conciliatory approach to a settlement than Mr Patel. But success in the negotiations was totally stymied by the insistence by Mr Patel that he receive (as well as costs on an indemnity basis) a public statement of exoneration and an apology. This was something which he (or at least his solicitors) must have known the liquidators could not properly furnish. In view of their belief in his guilt, the liquidators could never have honestly or reasonably met his request. The attitude taken by Mr Patel in this regard is all one with the serious and (so far as I can see) unfounded allegations made throughout this litigation (including in the evidence on this application) against the liquidators. His unnecessarily aggressive approach in the litigation has been calculated to increase costs, make any compromise at any stage the more difficult and occasioned the cost of rebuttal of his allegations against the liquidators. It seems to me that the totally unreasonable and unjustified stance adopted by Mr Patel is a good reason to order that Mr Patel should be deprived of a proportion of his costs. A fair proportion in my judgment is forty per cent reflecting the real prospect that a settlement might and should have been reached at an early date, and the saving of costs, if Mr Patel had not adopted the attitude and stance which he did. I can take into account the fact that Mr Patel was insured for the purpose of evaluating the prospects of settlement if Mr Patel had acted reasonably and indeed rationally.”