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Insolvency Law

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Guildhall Chambers , 03 MAR 2015

Re Brown Bear Foods Ltd; Shaw v Webb [2014] EWHC 1132 (Ch)

Re Brown Bear Foods Ltd; Shaw v Webb [2014] EWHC 1132 (Ch)
(Chancery Division, HHJ Simon Barker QC (sitting as a judge of the High Court), 10 April 2014)

In an unusual case which emphasises the genuine nature of the court’s discretion, instead of making an administration order as sought and which was unopposed, the court brought on an extant winding-up petition for hearing and appointed a provisional liquidator.

After presentation of a winding-up petition, S, the sole director, applied for an administration order, with the consent of the petitioning creditor and holder of the sole floating charge. S claimed to have purchased the sole issued share from H, the former director, for £1m, but the share purchase agreement contained contradictory statements as to whether H owned the share beneficially or on behalf of others, the share to which it referred was a share in HHH Ltd, not the company and the buyer was stated to be Brown Foods Ltd not S, and the terms in which the consideration was to be paid was uncertain. There was a preferential payment of £104,000 to an unidentified connected company in respect of which a recovery of £50,000 was expected. Bank statements showed that since presentation of the winding-up petition £6,732 had been paid out to Q Ltd and £108,500 of a VAT refund to Nwn. S’s evidence did not deal with these payments but he informed the court through Counsel that he did not authorise them. Nwn was connected to Q Ltd and/or H.

The judge held that, despite the conditions for making an administration order being satisfied, it was not appropriate to do so. In particular under s 127 of the Insolvency Act dispositions since presentation of the winding up petition were void but the effect of the making an administration order would be to neutralise this. The post winding-up payments should remain void unless and until justified, and there might also be other such dispositions because not all the relevant bank statements had been produced. Similarly, it was not appropriate to treat the admin application as a winding-up petition. The share purchase cried out for explanation. The judge appointed one of the proposed administrators provisional liquidator to get in assets and investigate. He continued the moratorium and fixed a return date with directions for advertisement of the petition but allowing a window for the company’s assets to be realised in the meantime.
Guildhall Chambers
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