England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF HHO LICENSING LIMITED (IN LIQUIDATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986

		Royal Courts of Justice Strand, London, WC2A 2LL
		10th October 2007

Mr Peter Leaver QC:

INTRODUCTION

1. This is an application by the Liquidator of a company, HHO Licensing Limited ("the Company"), for relief in respect of a number of transactions pursuant to which the Company purportedly paid monies to a connected company, Henry Hadaway Organisation Limited ("Organisation"). In order to make the claim comprehensible it is necessary at the outset to give an outline of the companies and individuals involved in the transactions.
2. Mr Henry Hadaway ("Mr Hadaway") has been involved in the music business for many years. Although he was not born in this country, he has lived and carried on business here for most of his life, and, as I understand it, is a British citizen.
3. Mr Hadaway has carried on his business through limited liability companies. Organisation was incorporated on the 29^th November 1971. It has 100 issued shares of which Mr Hadaway owns 50 shares and his wife, Toril Hadaway, owns the other 50 shares. Mr Hadaway is the sole director of Organisation, and his daughter, Sarah Hadaway, is the company secretary. Mr Hadaway controls Organisation, which owns, exploits and licenses the copyright in a number of audio and video recordings. Mr and Mrs Hadaway are "associates" of each other pursuant to the provisions of section 435(2) of the Insolvency Act 1986 ("the 1986 Act").
4. The Company was incorporated on the 25^th February 1999. On the 23^rd July 1999 the Company's name was changed to "HHO Music Limited". The Company's name was changed back to "HHO Licensing Limited" on the 28^th July 2000. The Company's business was the licensing of sound recordings. Mr Hadaway owned 100 shares in the Company, and his wife owned 1 share. Mr Hadaway was the Company's sole director, and he controlled the Company. The Company and Organisation are "connected" companies pursuant to the provisions of section 249 of the 1986 Act.
5. A company with the company registration number 3623764 and with the name of Withice Limited was incorporated on the 28^th August 1998. This company subsequently changed its name on two occasions. On the 26^th July 1999 its name was changed to "HHO Licensing Limited" and on the 2^nd June 2000 its name was changed again: this time it was changed to "The Music Rights Licensing Company Limited". It will be referred to in this judgment as "Old Licensing". Old Licensing went into Administrative Receivership on the 1^st June 2000. It was after Old Licensing went into Administrative Receivership that the Company's name was changed back to "HHO Licensing Limited".
6. The shareholders in Old Licensing were a limited liability company, Point Group Limited ("Point Group"), which owned 73% of the issued shares, and Mr Hadaway who owned 25% of the shares. [I was not informed who owned the remaining 2% of the issued shares in Old Licensing]. As Point Group owned a majority of the voting rights in Old Licensing, Old Licensing was a subsidiary of Point Group pursuant to the provisions of section 736 of the Companies Act 1985. Old Licensing was struck off the Companies Register on the 8^th June 2004 and dissolved on the 15^th June 2004.
7. Mr Wilhelm Mittrich ("Mr Mittrich") was the Chairman of Point Group, which had a German subsidiary, ODS Optical Disc GmbH ("ODS"). ODS specialised in the business of manufacturing compact discs and exploiting sound recordings. Mr Mittrich was a director and shareholder of ODS. On the 24^th March 2000 Grant Thornton were appointed Administrative Receivers of Point Group by Barclays Bank Plc. Point Group subsequently went into liquidation.
8. Organisation and the Company both had their registered office at Satril House, 3 Blackburn Road, London NW6 1RZ ("Blackburn Road"). Blackburn Road was owned by Organisation.
9. Prior to the 30^th July 1999 Organisation owned or controlled a number of recording masters embodying musical performances ("the HHO Masters"), which it was entitled to exploit commercially. Those musical performances were known collectively as "the HHO Catalogue". ODS also owned a number of recording masters embodying musical performances, which it was entitled to exploit commercially: those musical performances were known collectively as "the ODS Catalogue".
10. On the 30^th July 1999 ODS, Organisation and Mr Hadaway entered into an agreement ("the Asset Purchase Agreement") pursuant to which it was agreed that Organisation would sell the HHO Masters and the rights associated with them to ODS and Organisation jointly. The consideration for the sale was the sum of £1,200,000. Payment was to be by instalments. ODS was granted an exclusive, royalty-free, licence to exploit the HHO Catalogue, and the right to grant a sub-licence of all of the rights licensed to it, to Old Licensing. The income from the exploitation was to be shared between ODS and Organisation in the proportions 75%/25% respectively. Point Group guaranteed the performance by ODS of its obligations under the Asset Purchase Agreement.
11. At the same time as entering into the Asset Purchase Agreement, Organisation and ODS granted a sub-licence to Old Licensing. Old Licensing was then able to exploit both the HHO Catalogue and the ODS Catalogue.
12. Shortly after Point Group went into Administrative Receivership, ODS threatened to petition for the winding up of its subsidiary, Old Licensing, as Old Licensing had not accounted to it for its share of the royalties earned from the exploitation of the HHO Catalogue and the ODS Catalogue.
13. Point Group's Administrative Receivers had attempted to find a purchaser for Old Licensing, either by a sale of its shares or by a sale of its business. In order to protect the assets of Old Licensing and to enable a sale to proceed, Barclays Bank Plc, who were also Old Licensing's bankers, appointed Grant Thornton as its Administrative Receivers.
14. Both ODS and Organisation made offers to purchase Old Licensing's business, but in the event Old Licensing's Administrative Receivers decided to sell the business to ODS.
15. On the 18^th August 2000 ODS, Organisation and the Company entered into a licensing agreement, the effective date of which was the 1^st July 2000, by which the Company was appointed by Organisation and ODS as agent to exploit the HHO Catalogue and by ODS to exploit the ODS Catalogue. The Company was liable to account to ODS monthly for 80% of all monies received by way of royalties in respect of the exploitation of both the HHO Catalogue and the ODS Catalogue. ODS had the right to terminate the agreement if the Company failed to comply with its obligation to account, and the breach was not remedied within 20 days of receipt of a notice from ODS to that effect.
16. The Company duly granted rights to exploit the HHO Catalogue and the ODS Catalogue to third parties, and received royalty payments from those third parties. However, the Company did not make any payments to ODS from the monies that it received. The reason for the Company's failure to pay was that there was a dispute between Mr Hadaway and Mr Mittrich as a result of complaints that ODS did not have the rights to certain music that was included in the ODS Catalogue.
17. On the 19^th January 2001 ODS notified the Company that it had not provided its accounts for December 2000, which had been due on the 13^th January 2001, and indicated that the Company had 20 days to comply with its accounting obligations.
18. The Company failed to account to ODS within the 20 day period, and on the 18^th February 2001 ODS gave notice of the termination of the licensing agreement.
19. On the 29^th May 2002 ODS presented a winding up petition in respect of the Company to the Companies Court, and on the 4^th September 2002 the winding up order was made. At a creditors' meeting held on the 17^th December 2002 Mr David Coyne was appointed Liquidator. On the 21^st July 2004 the Applicant, Mr David Michael Clements, was appointed Liquidator in place of Mr Coyne.
20. During the course of his investigation into the affairs of the Company, the Liquidator discovered 3 documents which set him on the trail which subsequently led to the present applications. They were, first, a document entitled "Abbreviated Financial Statements for the year ended 28^th February 2001", which was filed at Companies House on the 21^st June 2001. That document, which was signed by Mr Hadaway "on behalf of the board", stated that the Company "was dormant (within the meaning of section 250 of the Companies Act 1985) throughout the financial year ended 28^th February 2001". Secondly, there was a document entitled "Statement of Accounts HHO Licensing Ltd with Henry Hadaway Organisation Ltd", which showed that in the year to the 31st December 2000 the Company had a revenue of £235,000, all of which had been paid into Organisation's bank account and declared in Organisation's sales; that the Company was being charged for 50% of Organisation's "total overhead operating costs" in the sum of £126,932; and that Organisation owed the Company the balance, which was in excess of £100,000. The document also stated that in the year to March 2002 the Company owed Organisation £396,000 for "Administration as per attached agreement" against which was set-off the balance owed to the Company by Organisation in respect of the year 2000 and a sum of £285,704.44 owed by Organisation to the Company over that period. A sum of £1,295.56 was shown to be owing by the Company to Organisation.
21. The third document was the "attached agreement", which set out "the terms under which [Organisation] shall provide office facilities, staff and management expertise" to the Company. The document appeared to have been signed by Mr Hadaway as Managing Director of Organisation on the 4^th January 2001, but was not signed on behalf of the Company.
22. The authenticity of the "attached agreement" was one of the most hotly debated issues during the hearing. However, as will become apparent, I feel that I am able to decide this application without expressing a concluded view on that issue, to which I shall refer as "the Document Issue".
23. Those are the background facts which give rise to this application. After discovering the three documents the Liquidator made further investigations to which I shall come after stating the legal principles which are relevant to the application.

THE LAW

24. The relevant provisions of the Act are:

238 Transactions at an undervalue (England and Wales)

(1)     This section applies in the case of a company where—

[(a)     the company enters administration,] or

(b)     the company goes into liquidation;

and "the office-holder" means the administrator or the liquidator, as the case may be.

(2)     Where the company has at a relevant time (defined in section 240) entered into a transaction with any person at an undervalue, the office-holder may apply to the court for an order under this section.

(3)     Subject as follows, the court shall, on such an application, make such order as it thinks fit for restoring the position to what it would have been if the company had not entered into that transaction.

(4)     For the purposes of this section and section 241, a company enters into a transaction with a person at an undervalue if—

(a)     the company makes a gift to that person or otherwise enters into a transaction with that person on terms that provide for the company to receive no consideration, or

(b)     the company enters into a transaction with that person for a consideration the value of which, in money or money's worth, is significantly less than the value, in money or money's worth, of the consideration provided by the company.

(5)     The court shall not make an order under this section in respect of a transaction at an undervalue if it is satisfied—

(a)     that the company which entered into the transaction did so in good faith and for the purpose of carrying on its business, and

(b)     that at the time it did so there were reasonable grounds for believing that the transaction would benefit the company.

239 Preferences (England and Wales)

(1)     This section applies as does section 238.

(2)     Where the company has at a relevant time (defined in the next section) given a preference to any person, the office-holder may apply to the court for an order under this section.

(3)     Subject as follows, the court shall, on such an application, make such order as it thinks fit for restoring the position to what it would have been if the company had not given that preference.

(4)     For the purposes of this section and section 241, a company gives a preference to a person if—

(a)     that person is one of the company's creditors or a surety or guarantor for any of the company's debts or other liabilities, and

(b)     the company does anything or suffers anything to be done which (in either case) has the effect of putting that person into a position which, in the event of the company going into insolvent liquidation, will be better than the position he would have been in if that thing had not been done.

(5)     The court shall not make an order under this section in respect of a preference given to any person unless the company which gave the preference was influenced in deciding to give it by a desire to produce in relation to that person the effect mentioned in subsection (4)(b).

(6)     A company which has given a preference to a person connected with the company (otherwise than by reason only of being its employee) at the time the preference was given is presumed, unless the contrary is shown, to have been influenced in deciding to give it by such a desire as is mentioned in subsection (5).

(7)     The fact that something has been done in pursuance of the order of a court does not, without more, prevent the doing or suffering of that thing from constituting the giving of a preference.

240 "Relevant time" under ss 238, 239

(1)     Subject to the next subsection, the time at which a company enters into a transaction at an undervalue or gives a preference is a relevant time if the transaction is entered into, or the preference given—

(a)     in the case of a transaction at an undervalue or of a preference which is given to a person who is connected with the company (otherwise than by reason only of being its employee), at a time in the period of 2 years ending with the onset of insolvency (which expression is defined below),

(b)     in the case of a preference which is not such a transaction and is not so given, at a time in the period of 6 months ending with the onset of insolvency, . . .

[(c)     in either case, at a time between the making of an administration application in respect of the company and the making of an administration order on that application, and

(d)     in either case, at a time between the filing with the court of a copy of notice of intention to appoint an administrator under paragraph 14 or 22 of Schedule B1 and the making of an appointment under that paragraph].

(2)     Where a company enters into a transaction at an undervalue or gives a preference at a time mentioned in subsection (1)(a) or (b), that time is not a relevant time for the purposes of section 238 or 239 unless the company—

(a)     is at that time unable to pay its debts within the meaning of section 123 in Chapter VI of Part IV, or

(b)     becomes unable to pay its debts within the meaning of that section in consequence of the transaction or preference;

but the requirements of this subsection are presumed to be satisfied, unless the contrary is shown, in relation to any transaction at an undervalue which is entered into by a company with a person who is connected with the company.

(3)     For the purposes of subsection (1), the onset of insolvency is—

[(a)     in a case where section 238 or 239 applies by reason of an administrator of a company being appointed by administration order, the date on which the administration application is made,

(b)     in a case where section 238 or 239 applies by reason of an administrator of a company being appointed under paragraph 14 or 22 of Schedule B1 following filing with the court of a copy of a notice of intention to appoint under that paragraph, the date on which the copy of the notice is filed,

(c)     in a case where section 238 or 239 applies by reason of an administrator of a company being appointed otherwise than as mentioned in paragraph (a) or (b), the date on which the appointment takes effect,

(d)     in a case where section 238 or 239 applies by reason of a company going into liquidation either following conversion of administration into winding up by virtue of Article 37 of the EC Regulation or at the time when the appointment of an administrator ceases to have effect, the date on which the company entered administration (or, if relevant, the date on which the application for the administration order was made or a copy of the notice of intention to appoint was filed), and

(e)     in a case where section 238 or 239 applies by reason of a company going into liquidation at any other time, the date of the commencement of the winding up].

25. There is no dispute between the parties as to the legal principles involved in deciding whether there has been a transaction at an undervalue or a preference: nor is there any dispute as to the issues which arise in relation to those principles in the present case. Those principles and the issues can be shortly summarised.

(a) Transactions at an undervalue

26. So far as is relevant to the present applications, sections 238 and 240 of the 1986 Act provide that where a company has gone into liquidation, and during the 2 years prior to the commencement of the winding up it has entered into a transaction at an undervalue with a connected person, the liquidator can apply to the court for an order restoring the position to what it would have been if the company had not entered into the transaction. However, the court will not make an order if it is satisfied that the company which entered into the transaction did so in good faith and that at the time that there were reasonable grounds for believing that the transaction would benefit the company.
27. As it is common ground that Organisation was a connected person at the relevant time, the issues to be decided in respect of the application under section 238 are (i) was the transaction at an undervalue and (ii) did the Company enter into the transaction in good faith and with reasonable grounds for believing that it would benefit the Company. The transaction will be at an undervalue if the Company was paying more for the services which Organisation was providing to it than those services were worth ("inequality of value").
28. In respect of each of the Liquidator's claims there are two periods to be considered: the first period is from the 1^st July 2000 to the 31^st December 2000, and the second period is from the 1^st January 2001 to the 31^st March 2002. The difference in the length of the two periods is explained by reference to the documents discovered by the Liquidator to which I have referred above.
29. It will be noted that in order to trigger the provisions of section 238 the Company has to have entered into "a transaction". The Liquidator's case in relation to the first period is put in alternative ways: either there was no contractual basis for the Company to make any payment to Organisation in respect of the charges for that period or any agreement to make payment was made in December 2000 after the services had been provided so that the consideration for any agreement was past consideration. In relation to the second period, the Liquidator's case is that the document relied upon by the Company does not evidence a genuine agreement and is a sham document so that there was no consideration for the payment by the Company of £336,000; alternatively, if there was an agreement for the provision of services by Organisation to the Company, that the value of the services received by the Company was worth far less than that sum.
30. It was submitted on behalf of Organisation that for the purposes of section 238 there does not have to be a contract between the parties, and that the arrangement that was made in December 2000, in circumstances which I shall describe later in this judgment, to deduct an agreed amount from the monies which Organisation was holding on behalf of the Company was a "transaction" for the purposes of section 238. Organisation's case is that the Company received proper value for the monies which, as a result of the agreed deduction, it must be deemed to have paid to Organisation. Organisation also contends that the agreement purportedly recorded in the document which the Liquidator alleges is a sham document in respect of the second period was a genuine agreement, and that the Company received proper value for the payments that, again, it must be deemed to have made. Organisation's case is that in respect of neither period was there an "imbalance" or "inequality" of value between what the Company paid and what the Company is deemed to have received for that payment.
31. I have no doubt that the use of the word "transaction" in section 238 was intended to cover as wide a range of mutual dealing as possible. Although one would normally expect to find a contract when one commercial entity agrees to provide goods or services to another such entity, the existence of a contract is not required by the 1986 Act. In Re Taylor Sinclair (Capital) Ltd. (in liquidation) [2001] 2 BCLC 176 Mr Robert Englehart QC (sitting as a Deputy Judge of the High Court) said:

"[20] It is right to say that the word 'transaction' as a matter of ordinary language embraces a potentially wide range of possibilities. Furthermore, the inclusive definition of s 436 of the 1986 Act is of broad ambit. It reads:

""transaction" includes a gift, agreement or arrangement, and references to entering into a transaction shall be construed accordingly."

Doubtless, one should be wary of circumscribing the width of the statutory language of s 238 lest the evident policy of the section be undermined. Nevertheless, as I read the section it does envisage that, apart perhaps from the case of a mere gift which is expressly included within ss 238 and 436, a transaction will be something which involves at least some element of dealing between the parties to the transaction. Not only is this implicit in the word 'transaction' itself, but it is reinforced by the references in s 238 to (a) the 'entry into' a transaction (b) 'with a person' and (c) 'on terms that provide'. Whilst plainly an actual contract is not required in order for there to be a transaction, the language of the section is redolent of contract and mutual dealing."

32. The 1986 Act provides a similar regime for relief from transactions at an undervalue in the case of individual bankruptcy: see section 339.
33. The task of the court is to assess whether, from the debtor's point of view, the value in money or money's worth of the consideration provided to him under the transaction ("the incoming value") is "significantly less" than the value in money or money's worth, again from the debtor's point of view, of the "consideration provided" by the debtor, that is to say, the value in money or money's worth of the totality of whatever it is that the debtor is parting with under the transaction ("the outgoing value"). The transaction will be at an undervalue whenever the court is satisfied that the incoming value, is, on any view, "significantly less" than the outgoing value.
34. In deciding whether the incoming value is significantly less than the outgoing value, it is not necessary for a precise figure to be attributed to either value. For the transaction to be at an undervalue, the court must be satisfied that the incoming value is on any view "significantly less" than the outgoing value.

(b) Preference

35. So far as is relevant to the present application, sections 239 and 240 of the 1986 Act provide that where a company has gone into liquidation, and during the 2 years prior to the commencement of the winding up it has done anything which has the effect of putting one of its creditors into a position which, in the event of the company going into insolvent liquidation, would be better than the position it would have been in if that thing had not been done, the court can make such order as it thinks fit for restoring the position to what it would have been if the preference had not been given. No order will be made unless the company which gave the preference was influenced in deciding to give it by a desire to put the creditor into a better position than it would otherwise have been in. However, in the case of connected companies, such as Organisation and the Company, such influence is presumed, unless the contrary is shown.
36. It is common ground that (i) Organisation was one of the Company's creditors; (ii) the relevant transaction took place within 2 years of the commencement of the Company's winding up; and (iii) the effect of the transaction between Organisation and the Company was to put Organisation into a better position on the Company's insolvency than it would otherwise have been in. The sole issue which has to be decided in respect of this application is whether the Company can rebut the presumption of a desire to prefer Organisation.

THE EVIDENCE

i) The Document Issue

37. Before setting out further facts which are relevant to the decision that the Court has to make in relation to the Liquidator's claims, however, I should refer again briefly to the Document Issue. That issue involved the Court being taken on an intensive course on the internal workings of computers. The course was conducted with the assistance of statements from computer experts, who had produced an agreed report so that it was not necessary to call any of them to give evidence.
38. The Liquidator's case is that the document which is relied upon by Organisation in respect of the second period is a sham document. Mr Riley submitted that the document had been created long after the date recorded on it (the 4^th January 2001), and that it had been created in an attempt by Organisation to prove that there was an agreement between the Company and Organisation that Organisation would provide, and the Company would pay for, management services. Mr Hardwick submitted that to call a document a sham is tantamount to an allegation of fraud, and that the Liquidator comes nowhere near proving fraud. He submitted that, to the contrary, the agreement which is recorded in the document is genuine.
39. As I pointed out to Mr Riley and Mr Hardwick during the course of the hearing, it will not be necessary for me to decide whether or not the document is a sham if I conclude that there was an imbalance in value between what the Company paid for the services and the value of those services. The remaining issues of whether the payment was made in good faith and with reasonable grounds for believing that it would benefit the Company and whether the presumption of a desire to prefer had been rebutted, could also be decided without the Court having to reach a conclusion on the Document Issue. In my judgment, therefore, despite the heat generated by, and the time taken on, the Document Issue, it is of peripheral importance in this case. I shall, therefore, state my views on the Document Issue briefly after I have set out the other facts as I find them, and expressed my conclusions on those facts.

(ii) The Witnesses

40. It is convenient at this stage to express my views on the most important witnesses who gave evidence during the hearing. They were Ms Beverley King, Mr Hadaway, Mr George Vassiliou and Ms Sarah Hadaway.
41. Ms King, who used to be employed by Old Licensing and was called by the Liquidator, impressed me as a careful, precise and thoughtful witness. The manner in which she gave her evidence was in sharp contrast to the manner in which Mr Hadaway gave his evidence. Even making allowance for his health problems and the difficulty that he sometimes had in expressing himself, I was unimpressed by Mr Hadaway's evidence, although I do not believe that he was giving consciously dishonest evidence.
42. However, it became apparent that although he had been a company director for many years, Mr Hadaway had little understanding or concept of what was involved in being a director of a limited liability company. It also appeared that he had no understanding of the potential conflicts of interest that might arise when companies controlled by the same person had commercial relations with each other. That was a particularly acute problem in the companies of which Mr Hadaway was the controlling shareholder, in which the minority shareholder was his wife, and in which his daughter was the company secretary. Mr Hadaway seemed to be completely unaware of the need to keep company books or records. No Minute Book was apparently kept either for Organisation or for the Company: certainly, no Minute Book was ever produced, and, as I understand it, no Minute Book was to be found amongst the Company's documents which were delivered to the Liquidator.
43. Furthermore, Mr Hadaway disavowed any knowledge of the financial aspects of the various companies which he controlled, or of the requirements to file documents at Companies House. All financial aspects were left to a part-time bookkeeper, Mr Ghandi, who was apparently about 80 years old, or to other members of the staff, who were responsible for ensuring that Mr Hadaway signed documents relating to the companies which they presented to him for signature. Mr Hadaway was apparently happy simply to sign the documents without attempting to understand them. His evidence was a text-book example of how a company director should not behave.
44. A particularly stark example of the manner in which Mr Hadaway allowed his companies to be run arose during the evidence of Mr Pravin Haria, a bookkeeper employed by Organisation. He was asked why the Company had filed dormant company accounts. His evidence was that another employee told him that the company was dormant. Although he was a bookkeeper for Organisation, he did not apparently know that the Company was trading and that its receipts were being paid into Organisation's bank account. Mr Haria told the other employee that dormant company accounts had to be filed. So such accounts were prepared and put in front of Mr Hadaway, who duly signed them without demur.
45. The other witnesses to whom I should specifically refer are Mr George Vassiliou and Ms Sarah Hadaway. Neither of them was a satisfactory witness, albeit for different reasons. In my judgment, Mr Vassiliou was not attempting to be honest and truthful. At times he wished to appear extremely knowledgeable and careful, in particular about the workings of computers. At other times, when faced with comparatively simple questions, for example, how to change a clock on a computer, he attempted to persuade me that he did not really understand the workings of computers to be able to make that change.
46. Ms Hadaway was in a difficult position. She had a natural wish to support her father, but, like him, she appeared to have little knowledge or understanding of what was involved in being an officer of a limited liability company, in her case as company secretary. She explained that she was an actress, and had no knowledge of or training in the workings of limited liability companies, although she insisted that she was careful about signing documents. She was not responsible for maintaining the files, and had no clear idea of how the files were maintained or by whom. She also had difficulty in understanding conflicts of interest; indeed, she asked for an explanation of the meaning of that phrase.

iii) The Facts

47. I have already set out the history of the incorporation of the Company. The Company began trading on the 1^st July 2000. In effect, the Company's business was almost identical with the business that had been carried on by Old Licensing before its demise, and of Organisation before it entered into the Asset Purchase Agreement with ODS. The difference between the business originally carried on by Organisation and that carried on by both Old Licensing and the Company was that both Old Licensing and the Company had the ODS Catalogue to exploit in addition to the HHO Catalogue. The Company granted licences for the exploitation of both the HHO Catalogue and the ODS Catalogue and received royalties from licensees.
48. For some reason which the evidence did not satisfactorily resolve, the Company did not have a bank account for many months. Mr Hadaway told me that the reason was that the bank manager had left the particular branch at which his companies had their bank accounts, and the bank was unable to open a new account for the Company until March 2001. Mr Hadaway told me that he became extremely angry with the bank, but to no avail. I do not think that it is necessary for me to come to any conclusion about the reason for the delay in the opening of the Company's bank account. The documents show that there was no account until March 2001. Suffice it to say, that I find it difficult to accept that a major bank was unable to open a new account for a company which was associated with other of its company customers for about 9 months.
49. In the circumstances, all of the royalties that the Company should have received were paid into Organisation's account. As the Company was operating from Blackburn Road, and was, as has been described, effectively carrying on the business formerly carried on, first, by Organisation and subsequently by Old Licensing, Mr Hadaway decided that the employees who worked at Blackburn Road should be responsible for the running of the Company's business.
50. It was never made clear to me how the various people who were engaged in running Mr Hadaway's group of companies were organised. It appeared from the evidence that everyone performed duties for all of the trading companies. Those companies included Javelin Promotions Limited, Javelin Distribution Limited, Half Full Music Limited, Jackson Multimedia Limited and HHO plc. Mr Hadaway said that all of the employees were Organisation's employees, notwithstanding the fact that Organisation had little business of its own apart from a residual music publishing business. He also told me that, as he did not want to alter the employment status of his existing staff, before the Company began trading he had decided to use Organisation's existing administration and staff to run it.
51. There was considerable disagreement during the hearing about the number of people needed to run the Company's business. On this issue there was a difference of opinion between Ms King, who used to be employed by Old Licensing and who has been in the music licensing business for some 20 years, and Mr Hadaway, who has been involved in the business for more than 37 years. Ms King said that the business could be carried out by a small staff. She said, by way of example, that as licensing contracts are in a relatively standard form the basic number of staff required to run a company which carried on the licensing business which the Company carried on was one person to answer the telephone and conclude the deals and one person to prepare the tapes and arrange delivery to the licensees, although more staff would sometimes be used. She said that she and a Ms Muna Khan carried out those tasks at Old Licensing.
52. Mr Hadaway said that far more staff were required. In support of his contention Mr Hadaway exhibited the telephone list for the Point Group at its three locations, Ivor Place and Linhope Street in London (effectively one location), Elstree and Aldermaston. The telephone list included 85 people of whom 3 were identified as working for Old Licensing. Those three were Mr Hadaway, who was described as the Chairman, Ms King and Ms Beky Charles, who was described as the Personal Assistant to Mr Hadaway and Ms King. It was Mr Hadaway's evidence that many of the other people listed "were engaged in the business of Old Licensing".
53. Ms King's response to Mr Hadaway was contained in her 2^nd Witness Statement, upon which she was cross-examined at length. By reference to the telephone list Ms King identified 10 people who were, from time to time, involved in the business of Old Licensing. The majority of those people were not involved on a day-to-day basis, but worked for all of the companies in the group.
54. Ms King was subjected to a sustained attack from Mr Hadaway both in his 5^th Witness Statement, in which he accused her of a lack of candour, naivety and of a wish to cause harm to him, and in her cross-examination. I found Ms King's response to the attack to be impressive. She gave her evidence in a dignified, thoughtful and measured manner, and resisted responding to the attack in kind. On this issue, I came to the conclusion that Mr Hadaway's evidence was not credible, and I preferred that of Ms King. I had no doubt that Mr Hadaway was attempting to make the business sound more labour intensive and complex than it was in order to persuade me that the staff cost element of the management charge was justified.
55. It must be remembered that the business of both Old Licensing and the Company was that of licensing established music catalogues. I accept Ms King's evidence that the licensing agreements would be largely in standard form. The licensor, whether Old Licensing or the Company, would have to produce the standard form agreements and agree any variations to them, and then to compile, produce and deliver to the licensee a disc containing the licensed music. The compilation would be taken from a master disc. That description of the business of Old Licensing and the Company, which was common ground between Mr Hadaway and Ms King, did not appear to me to be labour intensive. I, therefore, accept Ms King's evidence that 2 people could be employed as the basic staff. No doubt other people would be engaged from time to time in assisting in various activities involved in running the business, albeit not many on a full-time basis, but I am quite satisfied that when Ms King described 10 people as being engaged in the business of Old Licensing she was accurately stating the figure. Of those 10 people only 2 were full-time employees. As will be seen, my conclusion on this issue is of great significance when I come to consider the level of the charges purportedly agreed between the Company and Organisation.
56. During the last 6 months of 2000 all of the royalties that should have been received by the Company were received by Organisation. It must be remembered that the Company was only entitled to retain 20% of those royalties. Organisation should have accounted to ODS for 80%: it did not do so because of the developing dispute between Mr Hadaway and Mr Mittrich about the ODS Catalogue.
57. It was apparently not until December 2000 that it occurred to Mr Hadaway that the Company should pay to Organisation what has been variously described as a "service charge" or a "management charge". During those 6 months other companies in the group of companies controlled by Mr Hadaway carried on business from Blackburn Road. Those companies also made use of Organisation's employees. Throughout that period Organisation only had the small music publishing business to which I have referred.
58. Having decided that a management charge should be made, Mr Hadaway, the only director of both Organisation and the Company, then decided that, as the "vast majority of the operating costs of Organisation had been incurred in dealing with the business of the Company", the Company should pay Organisation for the services provided. Mr Hadaway "decided that a fair allocation of the operating costs would be 50% of the total for the year as the Company had started trading and licensing at the beginning of July 2000".
59. In making this decision Mr Hadaway met on two occasions with a Mr Holloway, who described himself as "a consultant in business affairs in the music industry" and who had for many years been a consultant to Organisation, and Mr Ghandi, the part-time bookkeeper. The meetings took place on the 20^th and 22^nd December 2000. Mr Hadaway was the only witness who gave evidence about what was discussed at both of those meetings. Mr Ghandi was not called to give evidence, and Mr Holloway had died before the hearing. However, before his death Mr Holloway had made a brief written statement, which was in the bundle used at trial. Mr Vassiliou attended the first meeting briefly, and was at the second meeting.
60. At the first meeting, on the 20^th December 2000, Mr Hadaway asked Mr Ghandi to calculate the expenses incurred by Organisation for the calendar year 2000. He also asked Mr Ghandi to prepare a calculation of the costs incurred by Organisation in the years between 1995 and 1999, and an estimate of the expenses likely to be incurred by the Company in 2001.
61. Mr Ghandi prepared the requested calculations and estimate in manuscript. He gave them to Mr Vassiliou. Mr Vassiliou typed up the list of expenses for the calendar year 2000, and the estimate of expenses likely to be incurred in 2001. Strangely, Mr Vassiliou did not type out the lists of the costs incurred by Organisation during the 5 years from 1995 to 1999. Instead he wrote out the figures, which were taken from Organisation's accounts, and, with Mr Ghandi's assistance, calculated, first, the average cost for one year, which was a simple averaging of the total costs incurred over the 5 year period, and, secondly, the monthly average cost, which was obtained simply by dividing the annual average by 12. Mr Vassiliou then made deductions for "expenses less likely to occur" and additions for "expenses likely to increase", and so produced a monthly average cost of running Organisation's business of £33,133. In making his lists, Mr Vassiliou did not check the figures produced by Mr Ghandi. He assumed that they were correct. His task was the mechanical one of typing out Mr Ghandi's manuscript lists and then making a calculation from the figures prepared by Mr Ghandi.
62. The figures were discussed at the second meeting, which was held on the 22^nd December 2000. That meeting was attended by Mr Hadaway, Mr Holloway, Mr Ghandi and Mr Vassiliou. It was then decided that a management charge of £33,000 was an appropriate charge to make on Licensing for 2001. Mr Vassiliou's evidence was that that decision was reached by Mr Hadaway in discussion with Mr Holloway. Mr Vassiliou also gave evidence that, at Mr Ghandi's suggestion, Mr Hadaway decided to split the expenses for 2000 equally between Organisation and the Company.
63. Organisation was a small company as defined by the Companies Act 1985. It, did not have to have its accounts audited, and did not do so. Nor did the Liquidator or the Court have the advantage of having Organisation's books of account available for examination. The accuracy of the figures for the expenses of Organisation for the calendar year 2000 could not, therefore, be tested. However, some crucial evidence emerged during the hearing in the form of Organisation's VAT returns for the last 6 months of 2000 (the first period), the whole of 2001 (the second period) and the first 6 months of 2002.
64. Organisation's VAT registration included the 5 other companies controlled by Mr Hadaway and identified above, and the Company. Each of those companies was registered in trade class "22140" apart from Javelin Promotions Limited ("Javelin"), which was registered in trade class "22310". Trade class "22140" covers "sound recordings; publishing of", while trade class "22310" covers "sound recordings", which are defined to include reproduction from master copies of gramophone records, CDs, DVDs and tapes with music or other sound recordings.
65. The list of Organisation's expenses for 2000 prepared by Mr Ghandi showed total expenses during the year of £253,846. The VAT returns for the last 6 months of 2000 showed that the 2 companies in the group which were trading were Organisation and Javelin. Organisation's net inputs (that is, business expenses) for those 6 months were £79,177.46, nearly £50,000 less than the figure of £126,923 with which the Company was charged as being 50% of the total expenditure of Organisation in 2000. A simple calculation shows that, if the expenses list prepared by Mr Ghandi is correct, the expenses incurred by Organisation in the first 6 months of 2000 must have been nearly £175,000, that is, almost £100,000 more than in the second half of the year.
66. The business carried on by the Company in the last 6 months of 2000 was effectively the same business as Organisation had been carrying on in the first 6 months of that year. One would, therefore, have expected some explanation as to why the expenses in the first half of the year had been so much greater than in the second half of the year, or why so many claimed expenses had not been subject to VAT. Although it might have been possible for Organisation to demonstrate why the figures for the last 6 months of 2000 did not seem to support the figure calculated and relied upon for the full year, no such explanation was forthcoming.
67. In addition, there were a number of questionable items on the expenses list. For example, there was an item "Rent" in respect of which the expenditure was said to be £24,000. But Organisation owned Blackburn Road, from which premises its business and that of the Company and the other companies in the group was run. It was explained to me that "Rent" was a misnomer and that the entry referred to the interest that Organisation paid in respect of a loan of £140,000 made by its bankers to enable it to purchase 3 Blackburn Road. That loan had been taken in December 1995 and was for a term of 10 years. The loan repayments were £1,870.57 per month, that is, £22,446.84 per annum.
68. That explanation is difficult to reconcile with the figures which appear in Organisation's unaudited accounts in respect of expenditure on "Rent and rates" in the years from 1995 to 1999: those figures are expenses of £20,228 (1995), a credit amount of £19,702 (1996) and expenses of £9,253 (1997), £8,406 (1998) and £7,921 (1999). The manuscript list of expenses for those years prepared by Mr Vassiliou, and said to be taken from Organisation's accounts show figures for rent and rates of £20,228 (1995), £23,702 (1996), £26,523 (1997), £29,406 (1998) and £32,528 (1999). It can readily be seen that apart from 1995 the figures in Mr Vassiliou's list are much higher trhan those in the unaudited accounts. Mr Vassiliou's list separates rent and rates in each year, but it is not clear what is the source of his figures for rent, which increases annually by precisely £3,000 from £12,000 in 1995 to £24,000 in 1999. It apparently remained at £24,000 in 2000.
69. There are a number of other issues which arise in relation to the figures produced by Mr Ghandi, and typed or written out by Mr Vassiliou. It is not necessary to identify each and every item that was discussed during the hearing: for example, freight charges appear on the list, but it is not clear why a licensing company, such as the Company, should incur such charges. It is sufficient to say that Mr Hadaway was unable to explain with any clarity why the Company should be expected to contribute 50% of the amount supposedly spent on a number of those items.
70. Mr Hadaway was the only director of both Organisation and the Company. He was the person who made the decision that the Company should pay a management charge to Organisation, and who decided what that charge should be. He was the person who requested Mr Ghandi to calculate the figures. Mr Hadaway was also an officer of the other companies in the group that carried on business from Blackburn Road. It is apparent from that brief statement of Mr Hadaway's involvement in the affairs of the companies in the group that he wore a number of hats during the meetings on the 20^th and 22^nd December 2000. Although he told me that he had been a company director for many years and was aware of the fiduciary duties owed by a director to the company, I formed the clear view that Mr Hadaway's appreciation of those duties was, at best, superficial.
71. In a small group of companies a degree of informality may be expected, and the Courts will often take a tolerant view of such informality. It is when companies encounter difficulties, and their internal workings are exposed to scrutiny, that the informality can give rise to problems. In my judgment, the present case is a paradigm of the problems that can arise. At no stage did Mr Hadaway give any real thought to the fact that Blackburn Road was the place from which all of the companies in the group carried on their business. It was the centre of operations. The staff who worked there worked for all of the companies. The cost of running Blackburn Road was a cost of all of the companies. No doubt Mr Hadaway had high hopes that the Company would become the greatest generator of cash amongst all of the companies, but when he sat down in December 2000, that was not the position. Indeed, the VAT returns would seem to show that the Company was not really generating significant sums. It also appears that Mr Hadaway forgot that of the sums that the Company received, it was only entitled to retain 20%, and was bound to account to ODS for the balance.
72. It did not seem to occur to Mr Hadaway that it would be sensible for the Company to be independently advised about whether any charges could properly be made, and, if it could, the amount of those charges, or that it should be independently represented in the negotiations about the charges. Doubtless the reason for that is that Mr Hadaway was not used to operating in that way. The failure to obtain independent advice or to arrange independent representation for the Company would not, of itself, mean that any decision about the making or amount of the management charge was impeachable. But if a decision is then taken on the basis of calculations that are demonstrably suspect and which would undoubtedly have been queried if such advice had been taken or there had been independent representation, it is almost inevitable that a Court will view sceptically the value of such services as were provided and will be disposed to the view that the value was significantly less than the amount of the payment made. In the absence of cogent evidence supporting the amount of the charge made, such a disposition is likely to become a firm conclusion.
73. Of course, in the present case, no actual payment was made because Organisation held the monies in its account for the Company. Organisation, therefore, simply appropriated from the monies which it held in its account, those amounts which Mr Hadaway had decided to charge the Company in respect of management charges. That appropriation was made without any attention being paid to the fact that the Company was only entitled to 20% of the monies in the account. Arguably, all of the monies held by Organisation from licensees of the HHO Catalogue and the ODS Catalogue was held on trust for the Company and ODS.
74. An examination of Organisation's bank statements shows that when the Company started trading Organisation's overdraft was in excess of £200,000. By the 22^nd December 2000 Organisation's overdraft had been reduced to about £120,000. As the majority of the receipts into Organisation's account were royalties due to the Company and ODS (to neither of whom were any payments made) it would seem that Mr Hadaway was allowing Organisation's bank account to be used as the central bank for the companies in the group. And after the Company had its own bank account (from March 2001) it would appear that Mr Hadaway used that account to replenish Organisation's account so as to reduce its overdraft.
75. At the meeting on the 22^nd December 2000 the decision was also made that the Company should pay a monthly management charge of £33,000 for 2001. That decision suffered from the same defects as the decision in respect of 2000. Again, the figures were suspect, and again the Company was not independently advised or represented. In addition, at that date Mr Hadaway knew or must be taken to have known that (i) the Company's first 6 months trading had not generated the sort of cash flow that would have enabled it to pay £33,000 in the foreseeable future; (ii) his dispute with Mr Mittrich was escalating; and (iii) there were growing problems with the licensing of the ODS catalogue.
76. In order to make monthly payments of £33,000 (£396,000 annually) it would have been necessary for the Company to have been in receipt of royalties of at least £1,980,000. Receipt of that sum and payment of management charges at that level would have meant that the Company would have made no profit as £1,584,000 would have had to be paid to ODS and the balance would have been paid over to Organisation. If it were to be assumed that the whole of Organisation's trading for the last 6 months of 2000, as shown on the VAT returns, had been attributable to the Company's licensing business and had produced a turnover, net of VAT of £507,092.36, of which £405,673.88 was owed to ODS, it is clear that it would not have been possible for the Company to make monthly payments at the level of £33,000, unless its business had taken a remarkable turn for the better. And it was, of course, known that those same VAT returns had shown that Organisation's business expenses for the last 6 months of 2000 had been far less than Mr Ghandi's figures showed.
77. Mr Hadaway explained that he was optimistic that the Company would generate over £2million turnover per annum. In my judgment, there was no reasonable basis for that optimism. Although Organisation had generated sales of over £2 million in the past, the sales for the preceding few years had been nowhere near as successful. Mr Hadaway's optimism was apparently based upon the belief that the exploitation of both the HHO Catalogue and the ODS Catalogue would generate substantial business. How he could have held that belief when he knew of the difficulties that were arising with the licensing of the ODS Catalogue, which was his recurring explanation for the failure of the Company, is unclear.
78. The Company's bank statements show that during 2001 its income was modest. Whenever it had a reasonable credit balance, a transfer was made to Organisation. But no transfer was ever made for £33,000 or anything like that amount: nor could it have been, as there was never as much as £33,000 in the Company's account. Inevitably, 80% of such payments as were made from Organisation's account, and which Organisation was holding for the Company, were made with monies that the Company owed to ODS. Clearly, the Company was unable to make those payments and if ODS had instituted proceedings the Company would have had no defence. The point can be illustrated simply. On the 18^th May 2001 the Company's account was in credit in the sum of £17,868.75. On that date the Company paid £15,000 to Organisation. Of the sum in the account the Company was liable to pay ODS £14,295, that is, 80% of £17,868.75. Thus, the Company was making payment to Organisation with monies to which it was not entitled.
79. I conclude that Mr Hadaway knew full well that the Company would not be able to make monthly payments to Organisation of £33,000 when he made the decision that such payments should be made in December 2000. He naturally hoped that the Company's business would flourish, but the first 6 months of trading gave him no encouragement and no reasonable basis for believing that it would be able to meet such a commitment. I further conclude that at the various dates in 2001 when the Company made payments to Organisation Mr Hadaway knew full well that it could not afford to make those payments. Regardless of that knowledge, he decided to use the Company as a source of funds to reduce, albeit temporarily, Organisation's overdraft.
80. In my judgment, although it is not disputed that it would have been proper for Organisation to make some charge for the services which it provided to the Company, Mr Hadaway utterly failed to justify charges at the level decided by him in December 2000. No proper calculation was made of what those charges might properly be.
81. Earlier in this judgment, I concluded that the Company's business could have been run with a small full-time staff, supplemented, where necessary, by the services of others who were employed on the business of Mr Hadaway's other companies. It follows that I have concluded that the value of the services to the Company was "significantly less" than the amount which it was required to pay for those services. I do not believe that the transaction was made in good faith, nor do I believe that Organisation or Mr Hadaway had reasonable grounds for believing that the the transaction would benefit the Company.
82. In order to make a proper calculation of the charge to be made for the services provided by Organisation to the Company, it would have been necessary to make a proper assessment of the cost of the full-time staff who were engaged on the Company's business, and of the cost of the services of others who supplemented the work of the full-time staff. An assessment would also have to be made for the proper charge to be made for the provision of the central services that were used by all of the companies in Mr Hadaway's group of companies.
83. In all such calculations, there is bound to be some element of imprecision, and a Court will not expect a wholly accurate calculation to have been made. But the Court will expect the calculation to be explained on a rational and logical basis, and will be astute to scrutinise what has been explained to the paying company, and whether that explanation was justifiable.
84. I am satisfied that Mr Hadaway's thought process was simply to enable Organisation, which was running a substantial overdraft, and which had little business of its own, to be able to fund its operations using the money that flowed into the Company. He paid no thought to the fact that most of that money was owed to ODS. Indeed, so consumed was he by his developing feud with Mr Mittrich, that he viewed the money as his own, or at least as money to which Organisation was entitled.
85. I have also concluded that neither Organisation nor Mr Hadaway has rebutted the presumption that the preference was given with a desire to put Organisation in a better position in the event, as happened, of the Company going into liquidation.
86. Organisation was not providing services to the Company that were of a value of 50% of Organisation's expenses in 2000 or worth £33,000 per month or anything like that sum in 2001. It cannot seriously have been believed by Mr Hadaway that the Company could make such payments. Nothing in the record of the Company's receipts during the last 6 months of 2000 could possibly justify charges at the level decided upon by Mr Hadaway. Indeed, Mr Hadaway seemed to acknowledge that fact when he told me that he hoped that the Company's business and, crucially, receipts, would increase to the sort of levels that Organisation had enjoyed some years previously. I do not accept that there was any reasonable basis for such hope.
87. I have, therefore, concluded that the decisions taken in December 2000, both in relation to 2000 and to 2001, and the subsequent appropriations, were both transfers at an undervalue and were preferences so that the Liquidator is entitled to succeed in his claims.

THE DOCUMENT ISSUE

88. In the light of my findings, it is not necessary for me to express any conclusion on the Document Issue. Whether the allegation that the document is a sham is strictly one of fraud or not is, therefore, not a matter that I have to decide. However, as the matter was fiercely argued on both sides, I will express my views shortly.
89. I start by saying that I am quite satisfied that it was proper for the Liquidator, as an officer of the Court, to make and persist in the allegation. There are a number of extremely curious aspects of the document that the evidence of Mr Hadaway, Ms Hadaway and Mr Vassiliou did little to clarify. But I incline to the view that the manner in which the document containing the "agreement" was produced was typical of the shambolic and disorganised manner in which Mr Hadaway permitted his companies to be operated.
90. The Liquidator was quite properly interested to know whether the document that he found in the papers and which was signed by Mr Hadaway on behalf of Organisation, but was not signed on behalf of the Company, had, in fact, ever been accepted by the Company. The answers that he subsequently received from, first, Mr Hadaway and, subsequently, Organisation's solicitors were confused and confusing. I wish to make it clear that in making that comment, I do not intend any criticism of Organisation's solicitors. They were, no doubt, acting on instructions from Mr Hadaway.
91. Ultimately, but not until after the hearing had started, Organisation's case became clear: the document had come into existence on the 4^th January 2001, and was then signed by Mr Hadaway on behalf of Organisation. On the following day, the 5^th January 2001 a photocopy of the document which Mr Hadaway had signed was given to Ms Hadaway to sign in her capacity as company secretary of the Company. Ms Hadaway signed it, not as Sarah Hadaway, but in her married name of Sarah Black. Why Ms Hadaway was asked to sign a photocopy and what happened to the document after Ms Hadaway had signed it is a mystery. It was Mr Hadaway's case that the documenthad been amongst the papers sent to the Liquidator or to Organisation's solicitors, but, in the light of answers that Organisation's solicitors subsequently gave to queries by the Liquidator's solicitors as to the whereabouts and provenance of the document, it would seem that either it was not sent to them, or, if it was sent, they misplaced it.
92. A document was eventually produced by Organisation's solicitors which purported to be the document signed by Ms Hadaway. However, a textual analysis of that document justifiably caused the Liquidator to have more doubts about the provenance of the document and whether it was a genuine document. Those doubts were not resolved before the hearing began, and led to the engagement by both sides of witnesses who were expert in the inner workings of computers. The experts produced an agreed report. Unfortunately, that report did not resolve all of the issues. In particular, an issue remained about the identity of the computer that produced the document signed by Ms Hadaway.
93. During her evidence Ms Hadaway explained that the document that had been produced bearing her signature was a document that she had printed and signed in March or April 2005 and which she then sent to Organisation's solicitors. She did that because she could not find the document that she had previously signed. She did not tell Organisation's solicitors what she had done. Ms Hadaway remembered that she had not been in the office on the 4^th January 2001, as a very good friend had given birth that day, but that she signed the document on the 5^th January 2001. She was then married and her married name was "Sarah Black". When she came to sign the document in March or April 2005 she had been divorced, and had reverted to her maiden name. However, she remembered that she had signed as "Sarah Black", and so signed the replacement document in that name.
94. Unfortunately, there were two versions of that document. The one signed by Ms Hadaway did not tally with the one signed by Mr Hadaway. But Ms Hadaway explained that she remembered signing the document on the 5^th January 2001, although she had no recollection of what happened to the document after she signed it. That was a remarkable admission from the company secretary, whose duties were not onerous, but, presumably, involved making sure that there was a system in place for the safekeeping of important documents .
95. There was some evidence about the number "4" that appeared on the document. In fact, there were obviously two documents on which that number had been written as the format in which it appeared was different in the two documents. Mr Hadaway was unable to explain the significance of that number. He thought that it might have been the number of the file into which the document had been placed, but no other documents were numbered in that way, and Mr Hadaway's explanation was unlikely. Ms Hadaway was also unable to explain the significance of the number.
96. I have concluded that in December 2000 Mr Hadaway decided that a management charge should be made for both periods, and also decided on the level of the charge. Equally, I think that a document was produced to record the decision and dated the 1^st January 2001. The document was not produced on that day.
97. I incline to the view that at some stage between the 4^th January 2001 and March or April 2005 Ms Hadaway did sign a copy of the document. That copy was then lost, and so Ms Hadaway had to have printed a copy of the document, which she then signed. Unfortunately, she signed a document that did not tally with that signed by her father. Hence the Liquidator's justified doubts about the provenance of the document.
98. I do not propose to say any more about the document. It is unnecessary for me to do so. In particular, it is unnecessary for me to express any conclusion on the expert evidence. I would, in any event, be unwilling to do so in the light of the evidence that there was another computer, which had been thrown away and which the experts had not seen, onto which the agreement may have been copied.

CONCLUSION

99. For the reasons set out in this judgment, I will make the declarations and other orders sought by the Liquidator. I would be grateful if Counsel could agree a Minute of Order.
100. Finally, I would like to record my thanks to Mr Riley, Mr Hardwick and their respective Instructing Solicitors for their assistance throughout this difficult hearing.