Officeserve Technologies Ltd & Anor v Annabel's (Berkeley Square) Ltd & Ors [2018] EWHC 2168 (Ch)

“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. [ … ].”

“22. As Oliver J pointed out in Re J Leslie Engineers Co Ltd [1976] 1 WLR 292 at 298 the invalidating provisions (then to be found in section 227 of the Companies Act 1948) do not spell out the appropriate remedy of the Company when the disposition is avoided. The right of recovery of the Company's property which has been disposed of is determined by the general law. It is common ground in these proceedings that the right of recovery, whether invoked against the payees or against the Bank, is restitutionary. There is no claim against the Bank in these proceedings for damages either for breach of an alleged duty of care owed to the Company and to the general body of its creditors or for breach of an express or implied term of a contract between the Company and the Bank.”

“45. In my judgment, the effect of sections 278, 283, 284 and 306 of the Insolvency Act 1986 was that, in the present case, as from the transfer date, the first appellant held the legal title to the shares on the following trusts: i) contingently for the bankrupt, in the event that a bankruptcy order was indeed made against him; and ii) subject thereto (i.e. in the event that no such order was made), for himself as absolute owner of both the legal and beneficial title. As from the date when the bankruptcy order was made on 21 April 2009, the first appellant and/or the sisters (if they had had some of the shares transferred to them by this date, as to which see below) held the legal title on trust for the bankrupt and title to them was vested in Mr Hosking, on the latter’s appointment as trustee in bankruptcy on 22 July 2009. An alternative analysis would be that the first appellant and/or the sisters held a defeasible or voidable title from the transfer date until the bankruptcy order and thereafter no title to the shares at all, since the transfer was, retrospectively, void. However, the claim for equitable compensation was premised on the trust analysis and I see no reason to depart from it as it makes little difference to the ultimate outcome.”

“Whenever litigation exists, somebody must go on with it; the plaintiff is the first to begin; if he does nothing, he fails; if he makes a prima facie case, and nothing is done to answer it, the defendant fails. The test, therefore, as to the burden of proof … is simply this: to ask oneself which party will be successful if no evidence is given, or if no more evidence is given than has been given at a particular point of the case, for it is obvious that as the controversy involved in the litigation travels on, the parties from moment to moment may reach points at which the onus of proof shifts, and at which the tribunal will have to say that if the case stops there, it must be decided in a particular manner.”

“[H]ere the money had been paid to the respondents by a third party, Cass; and in such a case the appellant has to establish a basis on which he is entitled to the money. This (at least, as a general rule) he does by showing that the money is his legal property... If he can do so, he may be entitled to succeed in a claim against the third party for money had and received to his use, though not if the third party has received the money in good faith and for a valuable consideration.”

“41. Attractively as the argument was presented by Mr Prentis, I do not consider that change of position can be entirely ruled out as a possible way of resisting a claim for repayment by a liquidator. It seems to me that the question of validation of a disposition is distinct from the question of actual recovery if the disposition is not validated. I do not see why the defence should not be available where, for instance, a creditor did not know and could not have known (because it had not yet been advertised) of the existence of the petition. After all, in other cases where payments can be treated as void or ultra vires, it is commonplace that restitution is available subject to restitutionary defences. The purpose behind the discretion conferred on the court to validate a disposition is not the same as the purpose of the change of position defence, albeit that both are based on an overarching concept of fairness. The former is directed principally at achieving a pari passu distribution of assets whilst permitting transactions which are, or are likely to be, of benefit to the Company to take place; the latter is an inherent qualification to the right of restitution and which, in its very nature, will be detrimental to the Company and distort the pari passu distribution of assets. 42. I do not consider that the comparison with sections 238 and 239 improves the argument that section 127 excludes a change of position defence in all cases. Those sections provide express remedies to which the liquidator is entitled if certain conditions are satisfied; in the case of section 127, in contrast, no remedy at all is provided for recovery (where a validation order is not made) and the matter is left to the general law. The result is not incongruous because a liquidator must establish something more under sections 238 and 239 if he wishes to take advantage of the express statutory remedies. 43. However, whether the change of position defence succeeds will then depend on the individual facts. It is clear, for instance, that a payee cannot rely on a change of position defence if he knows, when he changes his position, that the payment to him was invalid. It might be said that this is because he is not acting in ‘good faith’ or not acting on ‘the faith of the receipt’.”

“55. … In my judgment, the change of position in releasing the charge was not made in reliance upon the initial validity of the credits to the overdrawn accounts, but was made in reliance on an assumption that no claim would be made to assert that initial invalidity. Without reliance on the initial validity, there is no change of position defence to the restitutionary claim.”

“It is submitted that the better view is that the decision in Lipkin Gorman effectively excludes the operation of estoppel in this context. Therefore estoppel no longer has any role to play here. There are a number of reasons for this. First, to allow estoppel completely to exclude a claim in restitution where the expenditure in reliance is less, even considerably less, than the total claim would operate an injustice at the expense of the transferor. The availability of the more proportionate defence means that the court must necessarily disregard the earlier primitive defence. Accordingly, Lipkin Gorman can be seen as having impliedly overruled the decision of the Court of Appeal in Avon County Council v Howlett [1983] 1 WLR 604. Secondly, support for this position can be garnered from the speech of Lord Goff, where his Lordship commented (at 579) ‘that, in many cases, estoppel is not an appropriate concept to deal with the problem’. In Newfoundland the courts have rejected estoppel completely in this context (RBC Dominion Securities Inc v Dawson (1994) 111 DLR (fourth) 230, at 237). The case law on estoppel is preserved, for the avoidance of doubt, by Goff and Jones, 828-33. Even if estoppel does survive, it is submitted that it will have only limited operation, in circumstances where there is an express representation by the transferor that the transferee is entitled to the money, and where it would be difficult for the transferee to quantify his expenditure in reliance.”

“In our view, however, the two defences are different and estoppel has a role to play that is not performed by change of position. Change of position is about the fair allocation of loss where the value transferred from the claimant to the defendant has been dissipated through no fault of the defendants, while estoppel is about holding the claimant to his undertakings where these have been detrimentally relied upon by the defendant. Before brushing the estoppel defence to one side on the basis that it always produces the same outcome as the change of position defence, one would need to be certain that it would never be appropriate to fulfil the defendant’s expectations rather than merely reversing his detriment, or to achieve some combination of the two. There is an unspoken assumption in recent judicial discussions of the estoppel defence that this would never be appropriate, but no explanation has been offered of why this should be so. Furthermore, if a court were to take the view that the point of estoppel was to prevent the claimant from leading evidence to establish that the defendant’s enrichment was unjust, then that would suggest that the argument does not work as a ‘defence’ at all, but rather as a denial that the claimant has established all the necessary ingredients of his cause of action.”

“In any event, as I read the relevant authorities, the law has now developed to the point where a defence of estoppel by representation is no longer apt in restitutionary claims where the most flexible defence of change of position is in principle available…”

“44. I would be content to follow the judge in refraining from attempting any general statement of principle and treating this case as comfortably within the exception recognised by all three members of this court in the Avon County Council case. We cannot overrule that case but we can note that it was not seen, even by the court which decided it, as a wholly satisfactory authority, because of its fictional element.”

“The agreed sum is a liquidated amount which replaces the claim for an illiquid sum. The effect of the compromise is to fix the amount of his claim in just the same way as if the case had gone to trial and he had obtained judgment. Once the agreed sum has been paid, his claim against the defendant will have been satisfied. Satisfaction discharges the tort and is a bar to any further action in respect of it… I think that it follows that, if the claim was for the whole amount of the loss for which the defendant as one of the concurrent tortfeasors is liable to him in damages, satisfaction of the claim against him will have the effect of extinguishing the claim against the other concurrent tortfeasors. There may be cases where the terms of the settlement, or the extent of the claim made against the tortfeasor with whom the plaintiff has entered into the settlement, will show the parties have not treated the settlement as satisfaction for the full amount of the claim of damages. In the same way a judge, in awarding damages to the plaintiff in his action against one concurrent tortfeasor, may make it clear that he has restricted his award to a part only of the full value of the claim.”

“54. The importance of the decision of the House of Lords in Jameson v Central Electricity Generating Board [2000] 1 AC 455, as it seems to me, is that it shows that A's claim against one concurrent tortfeasor, say C, may be extinguished not only by the satisfaction of a judgment obtained against another concurrent tortfeasor, say B, but also by the payment by B to A of an amount which A and B have agreed shall be accepted in full satisfaction of A's claim. The unliquidated claim which A has against B and C may be converted into a liquidated claim either by a judgment obtained against B orby an agreement with B as to a sum to be accepted in full satisfaction of the claim. In any given case, the question whether or not that is the effect of the agreement between A and B will turn on the common intention to be attributed to A and B when making that agreement. That is a question of construction. But if, on interpreting the agreement between A and B, the court is satisfied that they intended the sum to be accepted in full satisfaction of A's claim, then (on payment of that sum by B) the claim is extinguished as against C also, because there is no longer any loss upon which A can found that claim.”

“Although in Jameson Lord Hope seems to have been careful to restrict his observations to the case of concurrent tortfeasors liable for the same damage, I would not exclude the possibility of the principle being extended to closely analogous situations (although where the two actual or potential defendants are not liable in respect of precisely the same damage, abuse of process may be a safer foundation for the court to restrict further proceedings, as Laddie J seems to have thought in Heaton).”

“48. It seems to me that the real question is whether the settlement with Mr Meerson falls within the Jameson v CEGB principle so as to bar the claim against Mrs Meerson. I do not think that it does. It is not a case which is ‘closely analogous’ to the position of the concurrent tortfeasors in Jameson. The claim against Mr Meerson, as put in the correspondence leading to the settlement, was different from the claim as it is now put against Mrs Meerson. The claim against Mr Meerson was put on the basis that he caused or allowed the payments to be made in breach of his duties to the Company. It was essentially a claim that he account to compensate the Company for the loss said to have been caused. That against Mrs Meerson is for recovery of the allegedly void payments themselves. In such cases the restitutionary remedies may be proprietary. Those are separate causes of action potentially leading to different forms of relief. Nor did the Liquidator’s offer of settlement to Mr Meerson purport to be in full satisfaction of his claims in relation to the Alleged Dividend Payments. It was expressed to be a settlement of the whole of the claim against Mr Meerson, not the separate claim against Mrs Meerson. 49. I do not see that the mere fact of a settlement of a claim against Mr Meerson as director for breach of duty in allowing allegedly void dispositions of company property to be made can have the effect of barring a claim to recover the property from its recipient.”