England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COMPANIES COURT
(Mr Justice Rimer)

		Royal Courts of Justice Strand London WC2 Thursday 22 March 2001

Thursday 22 March 2001

1. LORD JUSTICE CHADWICK: This is an application for permission to appeal against a winding-up order, made on 6 December 2000 by Rimer J, on a petition presented by the Millennium Commission on 26 June 2000. The presentation of the petition followed the service of a statutory demand, for payment of £17,742-odd, on the company, Multicultural Media for the Millennium Ltd, on 5 May 2000.
2. The basis of the statutory demand was that the Millennium Commission had provided funding to the company, under the terms of an agreement of 31 March 1999, in pursuance of the Commission's role as the body responsible for the distribution of public funds (in particular lottery funds) to bodies who had made application for financial assistance in connection with projects and schemes intended to mark the turn of the new millennium. The conditions under which that funding was provided, as appeared from the agreement, enabled the Commission to determine the agreement and demand repayment of sums paid if there were events of default, as defined by schedule 3 of the agreement.
3. The Commission took the view that the company was in default. It demanded, by a statutory demand, repayment of monies which it had provided to the company in the net amount of £17,742. The petition, which was presented on 26 June 2000, was opposed. It was adjourned to the judge. It was due for hearing on 28 November 2000. Very shortly before the hearing of the petition, a director and the accounting officer of the Millennium Commission, Mr Michael Cornelius O'Connor, swore a substantial affidavit, dated 21 November 2000, setting out the basis of the Commission's claim. That affidavit went into very much more detail than the normal statutory affidavit; which would have done no more than verify the allegations in the petition itself.
4. That affidavit appears to have been served on Mr Harte, the chief executive and the leading force in the company, only on 26 November 2000. A copy was handed to him, with the bundles of exhibits, on the morning of the trial itself. The judge asked him whether he wanted an adjournment to consider the contents of that affidavit. Mr Harte tells me that at that stage he had not had an opportunity to read the affidavit or to digest its contents. It is self-evident from the bulk of the affidavit and the exhibits that he would not have had an opportunity to do so on the morning of the hearing.
5. Mr Harte was representing the company himself. The company did not have the advantage of legal representation. If it had done, it seems to me most unlikely that the petition would have proceeded on 28 November 2000. Any competent legal adviser would have asked the judge for an adjournment to enable him to consider - and to answer - the detailed allegations in the affidavit.
6. Mr Harte did not take that course. Perhaps for understandable reasons, he felt that the best course was to let the petition proceed and see what the judge made of it. In those circumstances, the judge, in effect, accepted the whole of the material in Mr O'Connor's affidavit and held that there were or had been events of default which entitled the Commission to withdraw funding; and that, accordingly, grant monies were repayable.
7. The judge was pressed by Mr Harte to hold that, even if there had been an event of default - so that, prima facie, grant monies were repayable - nevertheless the company had counterclaims against the Commission which exceeded the amount of that debt. The counterclaims advanced were, first, a claim in relation to unpaid salaries and fees amounting to some £70,000; of which £64,000 was due from the company to the BBC under the terms of a training contract and in respect of persons nominated by the company for training in the course of the projects in which it was engaged. What is said, in effect, is that that fee had been incurred prior to the withdrawal of funding; and that, therefore, it was wrong to allow it to remain as a liability of the company, undischarged by any corresponding funding from the Commission.
8. The judge dealt with the petition shortly; and without reference to the BBC claim at all. It may be, as Mr Harte has suggested before me, that what has actually happened is that the Commission itself has paid the BBC; but that does not appear from the judgment.
9. But, if the Commission has paid the BBC, that seems to have been done in circumstances in which the Commission has renegotiated, for its own benefit, the arrangements which formerly existed between the company and the BBC. That gives rise to the second head of claim advanced by Mr Harte; namely a claim that the Commission has, in effect, taken over, without compensation, the company's intellectual property in the training schemes which it had devised.
10. It is quite impossible, on the material before me, to say whether or not there is anything in those counterclaims. What I can say, however, is that in a matter of this kind, it is, at least, arguably dangerous for the Companies Court to proceed on the basis of an affidavit to which the company itself has never had a proper opportunity to respond and in circumstances where the company was not legally represented. The judge accepted, quite correctly, that orders for winding up are not made on the basis of disputed debts. This debt was always disputed from an early stage. It is at least arguable that what has happened in this case is that the dispute has been resolved on the basis of material which came in at a very late stage and has not been the subject of a proper response. No explanation is offered, so far as I can see, in the affidavit itself for the reason why it was produced at such a late stage.
11. It might well be that, on investigation, it will be seen that there was indeed no answer to the points made in the affidavit. The danger in the course adopted by the judge is that there might have been an answer. In those circumstances, I do not feel able to say that this is an appeal which has no real prospect of success. In the circumstances that I have described, it seems to me a matter which ought to be considered by the Court of Appeal. Accordingly I give permission to appeal.
12. I give to the appeal a time estimate of four hours. I direct that notice of appeal is served in accordance with the rules. I should add this. If Mr Harte is to pursuant the appeal, it will assist the Court of Appeal if, in the course of his skeleton argument on the appeal, he identifies with some particularity what he says the answer would have been to the points made in the affidavit of 21 November 2000. The costs of this application are to be costs in the appeal.
ORDER: Application for permission to appeal allowed, with a time estimate of 4 hours. Costs of this application to be costs in the appeal. (Order not part of approved judgment)