England and Wales High Court (Chancery Division) Decisions

HIGH COURT OF JUSTICE
BIRMINGHAM CIVIL AND FAMILY JUSTICE CENTRE
CHANCERY DIVISION

		Birmingham Civil & Family Justice Centre Priory Courts 33 Bull Street Birmingham B4 6DS
		2 November 2015

MR JUSTICE NEWEY:

1. I have before me an application brought by the liquidators of Powertrain Limited.
2. Powertrain sits within the wider group of companies in the business of vehicle manufacture that includes the well known company MG Rover Group Limited, which was the main trading company in the group. Powertrain itself undertook the design, manufacture and sale of engines and gear boxes. Many of its products were sold to MG Rover Group, but it also supplied other manufacturers.
3. Both MG Rover Group and Powertrain, the company with which I am concerned, went into administration in April 2005. On 22 July of that year, the administrators entered into a contract for the sale of the majority of Powertrain's assets to Nanjing Automobile (Group) Corporation. At that point Powertrain's activities were curtailed to a substantial extent, but it continued to effect sales until February 2006. It went into creditors' voluntary liquidation on 20 March 2006.
4. The present position is that the liquidators hold a balance of £10.5m. No further realisations of significance are expected to be made other than by way of dividends on the company's claim in the liquidation of MG Rover Group. Some such receipts are anticipated, but perhaps not for some time yet.
5. The question with which I am concerned today is whether the liquidators should be authorised to effect further distributions in favour of Powertrain's known creditors without regard to claims that, at least in theory, could yet emerge against the company. A particular concern in that regard is that claims could in principle arise in relation to the period between Powertrain entering into administration and its ceasing to trade in February of the following year. Were a claim to be made in respect of that period, it would represent an administration expense and so rank in priority to claims in the liquidation.
6. As, however, is apparent from the evidence before me and has been bought out by the submissions to me of Mr Daniel Bayfield, who appears with Miss Charlotte Cooke for the liquidators, the chances of further claims emerging against Powertrain are remote. Powertrain ceased to trade more than nine years ago. To date, no proofs have been lodged in the company's liquidation or otherwise notified to its office holders in respect of product liability claims. No notifications made against the wider group relate to post-appointment supplies which could potentially give rise to expense liabilities. None of the 120 product liability claims notified under the group's insurance policy since 2000 has been made against Powertrain itself. Of the 93 claims that have not been settled, only 36 could, on their face at least, relate to Powertrain products, and all of these both relate to events before administration and appear to have been abandoned or be dormant. None of the 27 claims that have been settled by a member of the group or its insurers has been attributed to Powertrain.
7. Taking those matters together with the lapse of time, which of course stands to give rise to limitation issues, it is indeed the case, it seems to me, that there is little chance of a claim against Powertrain emerging now. That being so, I agree with Mr Bayfield that there is a strong case for the liquidators proceeding to make distributions without regard to claims that might emerge in the future. As is apparent from the authorities to which I have been referred, a balance has to be struck between the desirability of distributing assets to known creditors sooner rather than later and the potential injustice of leaving someone who has a valid claim with no effective remedy. Here, however, the creditors have already been kept out of the money in the liquidators' hands for a considerable period and, as I say, the chances of other creditors coming to light are remote.
8. It is relevant, too, to note that, were a creditor to appear before the liquidators had distributed the proceeds of the outstanding claim against MG Rover Group, they would have to have regard to that claim in deciding what to do with that money. They would not be entitled at that stage to distribute the funds that had come into their hands without regard to the liability of which they would by then be aware.
9. So far as authority is concerned, on that part of the application I was taken in particular to the decision of Sir Robert Megarry, Vice Chancellor, in R-R Realisations Ltd [1980] 1 WLR 805; the decision of Mr Bernard Livesey QC, sitting as a Deputy High Court Judge, in Tombs v. Moulinex SA [2004] EWHC 454 (Ch), [2004] 2 BCLC 397; and the decision of David Richards J in Re WW Realisation 1 Ltd [2010] EWHC 3604 (Ch), [2011] BCC 382. Those cases bear out the propositions for which Mr Bayfield cited them. In particular, WW Realisation shows the principles established in earlier authorities being applied in the context of expense claims as well as provable debts. It is also relevant to have in mind the decision of Roxburgh J in Re House Property and Investment Co Ltd [1954] Ch 576, which brings out the need for liabilities to be dealt with within a reasonable time and the fact that Parliament cannot have intended liquidations to last for ever.
10. At any rate, I accept Mr Bayfield's submission that a balance needs to be struck and, on the facts of the present case, the balance seems to me to come down firmly in favour of granting the liquidators permission to declare and pay dividends without making provision for the possibility of unknown future product liability claims, subject to the provisos for which the draft order provides.
11. A second aspect of the liquidators' application, without which it might in fact be pointless or inappropriate to accede to the grant of the relief I have already mentioned, concerns s.1157 of the Companies Act 2006. That empowers the court to grant relief to, among others, officers of companies. By virtue of sub-section 2 of that section, the court can prospectively relieve an officer from a claim that might in future be made against him in respect of negligence, breach of duty or breach of trust.
12. In the circumstances of this case, it seems to me, for essentially the same reasons as I have given in relation to the other relief sought, that it is appropriate to grant relief under s.1157, subject only to being satisfied that the liquidators are "officers" for the purposes of s.1157.
13. In Rawnsley v. Weatherall Green & Smith North Ltd [2009] EWHC 2482 (Ch), [2010] BCC 406, His Honour Judge Behrens, sitting as a judge of the High Court, said in paragraph 66 of his judgment that to his mind it was "seriously arguable that a liquidator is not within the ambit of s.1157." So far as can be seen from Judge Behrens' judgment, however, he was not referred to the authorities to which I have been taken and which indicate that a liquidator is within the scope of s.1157. In that connection, I was referred to the decision of Parker J in Re X Co Ltd [1907] 2 Ch 92; to the decision of Harman J in Re Home Treat Ltd [1991] BCC 165; and to passages in McPherson's Law of Company Liquidation, at page 444, and the Law of Administrators and Receivers of Companies by Lightman and Moss, at paragraph 12-065. Those various sources provide substantial support for the proposition that a liquidator is an "officer" for the purposes of s.1157 of the Act. The most helpful authority is perhaps Home Treat, where Harman J was concerned with the position of an administrator and expressed the view that it was quite clear that the word "officer" "which merely means somebody who holds an office, and an office in relation to the company, can apply to an administrator." Harman J's reasoning in Home Treat appears to me to be equally applicable to the position of a liquidator, and I shall accordingly follow that case and hold that a liquidator can be granted relief under s.1157.
14. There being power to grant such relief, it seems to me that it must be appropriate for me to grant it in the present case. I shall therefore, as asked, grant the liquidators relief pursuant to s.1157(2) of the Act from any liability for negligence, default, breach of duty or breach of trust which might arise as a result of the liquidators declaring and/or paying further dividends on the basis I have outlined earlier in this judgment.
15. In all the circumstances I am satisfied, as I have indicated, that it is appropriate for me to grant relief along the lines sought by Mr Bayfield and I shall accordingly make an order in the terms of the draft with which I have been supplied.