England and Wales High Court (Technology and Construction Court) Decisions

In the High Court of Justice
Queen's Bench Division
Technology and Construction Court
HH Judge Thornton QC

		Technology and Construction Court St Dunstan's House 131 – 137 Fetter Lane London EC4A 1HD
		10 October 2007

JUDGMENT No. 6

See also: [2007] EWHC 2173 (TCC)

1. Overview

1. This judgment is the sixth judgment in what has become known as the Thakrar Litigation which has so far involved three trials with at least one further trial^[2] and an extended costs hearing still to come. This litigation is now, in 2007, in its eleventh year. It was started when Subhash Thakrar ("Subhash"), suing in the name of his then accountancy practice, S K Thakrar & Co ("SKT"), issued the writ on 4 December 1996 in the Colchester District Registry claiming allegedly due and unpaid professional accountant's fees and compound interest. Additional claims and Parties were added to or directed to be tried with this action as the lead action. This action led to trial no. 1 which culminated in judgment no. 1 that was handed down on 29 September 2004 and judgment no. 2 that was handed down on 20 December 2004. The subsequent litigation has been concerned with the procedural, enforcement and other related consequences of judgments nos. 1 and 2. This litigation has spawned a number of additional actions and applications which have been directed to be heard or tried together. In order to identify the scope of this subsequent litigation, a fresh claim form was issued which was directed to be the vehicle or umbrella encompassing all actions, disputes, claims and applications that had either led to judgment nos. 1 and 2 or which had subsequently arisen out of, or were connected with, the original action and the Family Actions. This composite and consolidating claim form, issued on 29 June 2006, describes all these various strands brought together into the current action of what is now referred to as "The Thakrar Litigation". The present judgment, being no. 6 in the series of the Thakrar Litigation judgments, has at the request of (some of) the Parties been extracted from my judgment no. 5. Judgment no. 5 was the judgment following the first, fact-finding trial of the current set of actions and applications and was handed down after trial no. 2.
2. The Thakrar Litigation now consists of twenty separate Parties. Five of the Parties consist of two or more separate individuals so that, in total, trial no. 2 has involved 29 separate individuals or companies. These Parties are grouped broadly into two camps, those claiming relief of some kind, who became known collectively as "the claiming Parties", and those resisting or defending any of these claims, who became known collectively as "the defending Parties". Only one Party, Glen International Limited ("Glen") has adopted an apparently neutral stance. That neutrality was changed into a stance wholly supporting the defending Parties for a period at a late stage in trial no. 2 but, on the purported appointment of administrators, Glen ceased to be an active participant.
3. The Thakrar Litigation is a hybrid action. The actions of, and the documents associated with, Subhash lie at the heart of all parts of the Thakrar Litigation. He was the principal Party at trial no. 1. He was addressed and referred to as Subhash throughout the Thakrar Litigation and trial no. 1. Many other Thakrar family members, and members and relatives of the Hughes-Narborough family are also Parties to the Thakrar Litigation and they are all similarly referred to by their first names to avoid undue repetition of the Thakrar and Hughes-Narborough family names. Another principal Party, Mr Harjivan, is not a Thakrar family member and he, as with other non-family members of either family, was referred to throughout the trial more conventionally by his title and surname. I will adopt the same convention for these various names in this judgment no. 6.
4. There are two reasons for this topsy-like growth in the range of, and number of Parties involved in the Thakrar Litigation, the complex factual subject-matter of all the disputes is linked and the need to decide the disputes of fact in a way that avoids the need for any of the disputed facts having to be re-litigated. Overriding these two objectives has been the need to provide a dispute resolution forum that enables all the related disputes to be decided in the most proportionate and cost-effective manner given that the resources of most of the Parties are extremely limited.
5. Trial no. 2 of the Thakrar Litigation evolved into one that lasted for thirty-two days that were spread over thirteen months from 3 July 2006 until 24 September 2007. This prolonged and disjointed trial was brought about by a series of developments which led to the introduction of new issues, Parties and procedural applications. In order to provide a structure and a workable framework to the many disputes that must be decided, I directed that trial no. 2 should be confined to a fact-finding exercise with the aim of my deciding the material disputed facts in a way that will bind all Parties. Following the handing down of this fact-finding judgment no. 5, a further trial, which will be trial no. 4 and which will be concerned with the consequences of those facts, will follow. This consequences trial will cover all claims, applications and disputes arising out of the Thakrar Litigation that the Parties have not been able to resolve following the handing down of this judgment no. 5^[3].
6. One of the causes of the prolongation of the trial was the need foran adjournment of trial no.2 while there was tried by another judge, Judge Coulson QC, the issue as to whether, at a late stage in the trial, all Parties had compromised the entirety of the Thakrar Litigation in an out of court, informal final and binding settlement agreement. It was necessary for this issue to be tried by Judge Coulson as trial no. 3 because all Parties were concerned to ensure that I, as the trial judge of the Thakrar Litigation, did not become aware of the details of the negotiations leading up to the alleged settlement if it turned out that no binding settlement took place and judgment had to be given in relation to the Thakrar Litigation. Strictly, it was not necessary for the compromise issue to be tried by a different judge, even if the negotiations leading up to the alleged settlement were conducted on a without prejudice basis. However, I exercised my case management powers to direct a trial by a different judge so as to avoid any subsequent suggestion of prejudice or bias if I had to determine the entirety of the disputes between the Parties having learnt of the details of what had turned out to be an abortive settlement negotiation.
7. This compromise issue was tried by Judge Coulson QC in January 2007 and he handed down judgment on 20 February 2007 and a subsequent costs judgment on 22 March 2007. These were judgments nos. 3 and 4 in the Thakrar Litigation. Judge Coulson decided that the Thakrar Litigation had not been compromised. At the request of the Parties, I have only read Judge Coulson's judgment no. 3 in a redacted form with the redactions having been agreed by the Parties.
8. Following Judge Coulson's judgment, trial no. 2 was resumed but was again subject to a prolonged interruption by Glen, a vital Party to the overall litigation. Initially, Glen instructed leading counsel to pursue a full-blown recusal application for which other defending Parties indicated support. The application was based, so I was informed, on allegations of my actual and presumed bias and judicial incompetence in conducting the trial, the alleged unfairness to the defending Parties caused by the disproportionate inequality of arms between the claiming and defending Parties and irredeemable prejudice to them resulting from the trial having become unmanageable. As a result, so it was alleged at that stage, the trial had become an abuse of process. At a late stage before these recusal applications were due to be heard, Glen and most of the other defending Parties withdrew their applications. However, three of the defending Parties, Subhash, Mr Harjivan, and Party 16, SK Thakrar and Co Limited, informed the court that they were persisting in their abuse of process applications but accepted that they could be determined as part of the overall judgment on the basis of the written materials already served by all Parties.
9. One reason for Glen dropping its recusal application was that its directors purportedly resolved on 13 April 2007 to place Glen in administration and they claimed to have made an out of court appointment of administrators. This resulted in a second cause of the trial's prolongation. This appointment initially had the temporary effect of the proceedings against Party 14 being stayed automatically. This in turn prompted two applications by the claiming Parties, albeit these were mounted by Parties 1 and 4. The first application was for an order lifting the stay at least in relation to the remaining stages of trial no. 2 including the handing down of judgment and the settling of the order consequent upon that judgment. This application was not opposed by Glen's administrators and I readily granted it. The second application was advanced by Parties 1 and 4 and was made under paragraph 81 of Schedule B1 to the Insolvency Act 1986. This application was to the effect that the administration was engineered by Subhash, who had no open role or involvement in the affairs of Glen, and was in any event voted on and initiated by the directors of Glen with an improper motive so that the administration should be set aside with effect from 13 April 2007. The hearing of these applications and a further application by Parties 1 and 4 challenging the validity of the purported appointment of joint administrators prolonged the trial by four further hearing days with further written submissions and extended the overall length of the trial by seven further months.
10. This judgment no. 6 concerns the applications arising out of Glen's "administration". Because they raise novel points of interest to insolvency practitioners, I have been requested by counsel for the represented claiming Parties to issue it as an additional, self-contained judgment to judgment no. 5 (which of course deals with the whole range of factual issues with which trial no. 2 was concerned), and I am happy to do so. This judgment no. 6 essentially repeats chapters 1.1 and 15 of my judgment no. 5.

2. Administration

2.1 Introduction

11. The complexities of the Thakrar Litigation were further compounded when the directors of Glen apparently resolved on 13 April 2007 to appoint Mr Stephen Cork and Ms Joanne Milner as administrators (for convenience referred to as "the administrators") under paragraph 22 of Schedule B1 to the Insolvency Act 1986. This was an out of court appointment under the relatively new procedure introduced by the Enterprise Act 2002.
12. The purpose of administration is defined in paragraph 3(1) of Schedule B1 to be to:

Rescue the company as a going concern; or

Achieve a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration); or

Realise property in order to make a distribution to one or more secured or preferential creditors.

13. The immediate consequence for Glen and the other parties to the Thakrar Litigation of this out of court appointment of administrators was four-fold, namely:

(1) The management of Glen was taken over by the administrators and the directors ceased to have any authority to act in relation to, or to manage, Glen's affairs whilst the administration remained in place.

(2) The administration placed a moratorium on the payment of Glen's debts whilst the administrators sought to achieve the statutory purposes of the administration.

(3) An immediate statutory stay was placed on all claiming parties' claims and applications against Glen, although not those against Mr Harjivan personally, since legal proceedings against a company at the time it was placed in administration and thereafter may not be continued or started without the leave of the administrators or the court.

(4) Unless the administration ceased, Glen's liabilities including any liability to pay or account to Party 2 and to pay any costs awarded against it in favour of other parties to the Thakrar Litigation would have to be dealt with through the process of administration rather than being under the direct control of the court. This could have serious and significantly prejudicial consequences for at least some of the claiming parties.

14. Although the administrators are appointed by the directors without court involvement, it is a statutory requirement that the appointment is lodged at court and is allocated a court case number and a file is opened. It was pursuant to this formal statutory engagement of the Companies' court that various procedural applications have been made. First and foremost, the parties consented to the relevant process being transferred to the TCC to be joined into the Thakrar Litigation. Secondly, the administrators have consented to the fact-finding trial no. 2 continuing up to the stage of the handing down of judgment. I have ruled that the effect of that consent is that the statutory stay has been lifted in relation to the handing down of judgment, to the formal process of the entry of the judgment as an order of the court, to the entry of the consequent declarations giving effect to my findings of fact in the judgment as an order of the court and to any consequential application relating to the terms of the order or orders giving effect to that judicial process. The statutory stay will then be re-imposed unless the administration has ceased or there has been a further lifting of the statutory stay in relation to further proceedings in the Thakrar Litigation.
15. A series of applications have been made by Parties 1 and 4 challenging the validity of the administrators' appointment and the motive of the directors in appointing administrators and by the directors by way of response. These and the responsive applications are based on paragraph 81 of Schedule B1. The applications were:

(1) For a declaration that the administration was invalid as not having been properly started since an essential prerequisite of appointment, being the service of a notice of the directors' intention to appoint administrators in advance of the decision to appoint on Teso as a qualifying floating chargeholder as required by paragraph 23 of Schedule BI, was not carried out;

(2) In the alternative, for a declaration that the administration was invalid because Glen was not insolvent at the time of the administrators' appointment;

(3) For an order under paragraph 81(1) that the appointment of the administrators should cease to have effect on the grounds that the directors who appointed them did so for an improper motive.

(4) For an order under paragraph 81(3)(d) affirming the administration or directing that the administration should only cease with effect from the day of the order. The purpose of such an order would be to:

(i) Ensure that there is no hiatus or void in the management of Glen and its liabilities following the cessation of the administration;

(ii) Ensure that there was no return to the status quo ante which everyone accepts is unworkable; and

(iii) Ensure that the administrators can claim their remuneration from Glen's assets despite any improper motive that had led to their appointment.

2.2 Procedural matters

16. By the end of trial no. 2, the hearing of the applications spanned 4 working days on 4 May, 5 and 6 June and 24 September 2007. Witness statements were submitted by Ms Milner, one of the two administrators; Mr Shelton, one of the directors; Mr Stubbs, the partner and file holder of the firm of solicitors, Beachcroft, who had been retained by the administrators to act for the administrators; Subhash; Mukesh and Kishan. Mr Stubbs' witness statement was not formally prepared but consisted of a note exhibited to one of Ms Milner's witness statements. Subhash's witness statement ran to many pages, most of which were not concerned with the administration applications which he had volunteered without being under any pressure or obligation to serve it. He served it on all parties. He was briefly cross-examined on the passages concerned with the administration. Mukesh and Kishan were also briefly cross-examined about the suggestion that Subhash and the Thakrar family provided the necessary funding to initiate the administration having provided some written information at the request of Parties 1 and 4.
17. The applications advanced by Parties 1 and 4 were advanced against the directors, Mr Harjivan, Mr Shelton and Ms Avni Bhatt. Mr Harjivan was, of course, already a party. The directors applied to me for an order allowing them funds from Glen in order to fund representation to enable them to oppose Parties 1 and 4's applications. Given the importance to them in both professional and financial terms of this application, I allowed limited funding to be paid by the Receiver of Glen's rents for this purpose. I also directed that the three directors should be made a new party to the Thakrar Litigation, Party 20. Thus, Mr Harjivan was a separate party for all matters arising from his role as a director of Glen to his role as an individual defending claims to shareholdings in Glen and Teso for which he had an interest or a claimed interest. Mr Arden QC instructed by Scott & Co represented the directors. As it turned out, the directors were not represented on the fourth day of the hearing because their funding had been exhausted and they appear to have elected not to apply for a further tranche of funding. That was a decision that they took and was therefore a conscious waiver of their right to legal representation on that final and significant hearing day.
18. The administrators elected not to appear at the hearing, quite properly taking a disinterested role. Ms Milner was prepared to provide detailed evidence and to be cross-examined on three separate occasions and Mr Stubbs also voluntarily tendered himself for cross-examination on his informal statement. However, when it became clear that the entire validity of the administration was to be challenged and the professional integrity of the administrators and their solicitors were also to be impugned, the administrators appeared by Mr Collings QC instructed by Beachcroft at the fourth and final hearing day and in post-hearing submissions relating to validity. This decision to be represented on the fourth hearing day was an entirely reasonable one, particularly as the directors had elected to be unrepresented on that day.
19. The reason for the protracted hearing was two-fold. Firstly, it was necessary to examine much background material which had emerged in the Thakrar Litigation in order to probe the directors' contention that they had independently decided to place Glen into administration essentially because it was unable to pay its debts. Much of this material had to be deployed to enable Parties 1 and 4's case to be put, namely that the administration was orchestrated by Subhash as the last of a long line of delaying tactics aimed at derailing the Thakrar Litigation so as to prevent the inevitable findings of fraud and dishonesty that would otherwise emerge. Given their recent and untutored arrival into the Thakrar Litigation, none of this material had been seen by or known to Ms Milner or the administrators' legal team and Mr Shelton had been less than forthcoming in revealing it to them or addressing it in evidence or cross-examination.
20. The second reason for the prolongation of the hearing was that Party 1, in her capacity as Subhash's Trustee, obtained from the Bankruptcy Registrar, after the close of the hearings, a second search and seizure order and, using that order, searched Subhash's premises and discovered, obtained and was granted permission by the Registrar to deploy, a wealth of highly material documentation which led to the re-opening of the hearing following a successful application to me. This material has enabled me to be entirely satisfied that the administration really was orchestrated by Subhash for the ulterior purpose of derailing the Thakrar Litigation just as the final whistle was about to be blown and once all else of his abusive behind the scenes manoeuvres had failed.

2.3 Issues requiring resolution

21. When the dust finally settled on the paragraph 81 application with the related applications and their rapid expansion into a full-blown trial in its own right, the following issues must be resolved:

(1) What is the relevant factual background that must be considered when determining who was responsible for appointing the administrators, for funding the administration and what their motives were in appointing the administrators and whether the necessary statutory prerequisites for such an appointment were present?

(2) What was Subhash's involvement in the appointment decision, if any and who funded the appointment of the administrators?

(3) Did the directors ever formally appoint the administrators?

(4) May Parties 1 and 4 now allege that there was a procedural irregularity in the appointment process?

(5) Were any necessary procedural requirements for a valid appointment of the administrators complied with and what is the effect of any non-compliance?

(6) Were the necessary prerequisites for appointment present in this case, particularly that relating to showing that Glen was unable to pay its debts at the time of appointment?

(7) Was Party 1 a "Receiver" as defined by paragraph 41(1) of Schedule B1?

(8) By applying the appropriate three-stage test, were the appointers of the administrators influenced by an improper motive?

(9) Were the administrators or their legal advisors at fault in any relevant respect in their advice or actions in relation to the administration?

(10) Should the appointment of the administrators cease to have effect or be treated as invalid and, if so, at what specified time?

(11) How should Glen be administered and/or managed in the future?

(12) In the light of the answers to these questions, what relief, if any, should the court grant under paragraphs 11, 81(1) or 81(3) of Schedule B1 or under Section 51 of the Supreme Court Act 1981 and/or the CPR or otherwise in relation to the control, administration and management of Glen?

(13) What costs, from which date and from whom, may the administrators claim their fees, costs and expenses incurred in connection with the administration?

2.4 Paragraph 81 and other relevant provisions of Schedule B1 to the Insolvency Act 1986

2.4.1 Schedule B1 to the Insolvency Act 1986

22. Schedule B1 was introduced into the Insolvency Act 1986 by the Enterprise Act 2002 to replace the previous administration regime in sections 8 to 27 of the Insolvency Act 1986 Act. A novel feature of the then new regime, which has now been in operation for some five years, is the ability for specified persons, including the directors of a company, to make an out of court appointment of an administrator or a pair of administrators. Paragraph 81, which was an entirely new provision, provides the means for any creditor to challenge that appointment. Clearly Parties 1 and 4, with their current entitlement to costs and Party 2, with its claims for damages or restitutionary relief, are creditors for this purpose. This ability to challenge an out of court appointment is particularly important as a safeguard since any such appointment will not have been the subject of prior creditor or public judicial scrutiny
23. The cessation of an out of court appointment made by directors would not inhibit a later appointment by the court, even within 12 months. However, paragraph 23(2) of Schedule B1 provides prevents the directors of the company making a second or subsequent out of court appointment of administrators within 12 months of the cessation of the previous out of court appointment.
24. There is, evidently, as yet no authority which has interpreted paragraph 81 or explained the circumstances when paragraph 81 should be applicable.
25. 4.2 Paragraph 81 of Schedule B1
26. Paragraph 81 of Schedule B1 to the Insolvency Act 1986 provides, in so far as relevant, as follows :

"Court ending administration on application of creditor

(1) On the application of a creditor of a company the court may provide for the appointment of an administrator of the company to cease to have effect at a specified time.

(2) An application under this paragraph must allege an improper motive –

(a) …..

(b) ….., on the part of the person who appointed the administrator.

(3) On an application under this paragraph the court may –

(a ) adjourn the hearing conditionally or unconditionally;

(b ) dismiss the application;

(c ) make an interim order;

(d ) make any order it thinks appropriate (whether in addition to, in consequence of or instead of the order applied for)."

2.4.3 Other relevant provisions of Schedule B1

27. There are a number of other relevant provisions of Schedule BI which should be set out:

"Administration

2 A person may be appointed as administrator of a company—

(a) by administration order of the court under paragraph 10,

(b) by the holder of a floating charge under paragraph 14, or

(c) by the company or its directors under paragraph 22.

Purpose of administration

3 (1) The administrator of a company must perform his functions with the objective of—

(a) rescuing the company as a going concern, or

(b) achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration), or

(c) realising property in order to make a distribution to one or more secured or preferential creditors.

(2) Subject to sub-paragraph (4), the administrator of a company must perform his functions in the interests of the company's creditors as a whole.

(3) The administrator must perform his functions with the objective specified in sub-paragraph (1)(a) unless he thinks either—

(a) that it is not reasonably practicable to achieve that objective, or

(b) that the objective specified in sub-paragraph (1)(b) would achieve a better result for the company's creditors as a whole.

(4) The administrator may perform his functions with the objective specified in sub-paragraph (1)(c) only if—

(a) he thinks that it is not reasonably practicable to achieve either of the objectives specified in sub-paragraph (1)(a) and (b), and

(b) he does not unnecessarily harm the interests of the creditors of the company as a whole.

4 The administrator of a company must perform his functions as quickly and efficiently as is reasonably practicable.

Status of administrator

5 An administrator is an officer of the court (whether or not he is appointed by the court).

Administration order

10 An administration order is an order appointing a person as the administrator of a company.

Conditions for making order

11 The court may make an administration order in relation to a company only if satisfied—

(a) that the company is or is likely to become unable to pay its debts, and

(b) that the administration order is reasonably likely to achieve the purpose of administration.

Powers of court

13 (1) On hearing an administration application the court may—

(a) make the administration order sought;

(b) dismiss the application;

(c) adjourn the hearing conditionally or unconditionally;

(d) make an interim order;

(e) treat the application as a winding-up petition and make any order which the court could make under section 125;

(f) make any other order which the court thinks appropriate.

(2) An appointment of an administrator by administration order takes effect—

(a) at a time appointed by the order, or

(b) where no time is appointed by the order, when the order is made.

(3) An interim order under sub-paragraph (1)(d) may, in particular—

(a) restrict the exercise of a power of the directors or the company;

Power to appoint

22 (1) A company may appoint an administrator.

(2) The directors of a company may appoint an administrator.

Restrictions on power to appoint

23 (1) This paragraph applies where an administrator of a company is appointed—

(a) under paragraph 22, or

(b) on an administration application made by the company or its directors.

(2) An administrator of the company may not be appointed under paragraph 22 during the period of 12 months beginning with the date on which the appointment referred to in sub-paragraph (1) ceases to have effect.

Notice of intention to appoint

26 (1) A person who proposes to make an appointment under paragraph 22 shall give at least five business days' written notice to—

(a) any person who is or may be entitled to appoint an administrative Receiver of the company, and

(b) any person who is or may be entitled to appoint an administrator of the company under paragraph 14.

(2) A person who proposes to make an appointment under paragraph 22 shall also give such notice as may be prescribed to such other persons as may be prescribed.

(3) A notice under this paragraph must—

(a) identify the proposed administrator, and

(b) be in the prescribed form.

27 (1) A person who gives notice of intention to appoint under paragraph 26 shall file with the court as soon as is reasonably practicable a copy of—

(a) the notice, and

(b) any document accompanying it.

(2) The copy filed under sub-paragraph (1) must be accompanied by a statutory declaration made by or on behalf of the person who proposes to make the appointment—

(a) that the company is or is likely to become unable to pay its debts,

(b) that the company is not in liquidation, and

(c) that, so far as the person making the statement is able to ascertain, the appointment is not prevented by paragraphs 23 to 25, and

(d) to such additional effect, and giving such information, as may be prescribed.

(3) A statutory declaration under sub-paragraph (2) must—

(a) be in the prescribed form, and

(b) be made during the prescribed period.

(4) A person commits an offence if in a statutory declaration under sub-paragraph (2) he makes a statement—

(a) which is false, and

(b) which he does not reasonably believe to be true.

28 (1) An appointment may not be made under paragraph 22 unless the person who makes the appointment has complied with any requirement of paragraphs 26 and 27 and—

(a) the period of notice specified in paragraph 26(1) has expired, or

(b) each person to whom notice has been given under paragraph 26(1) has consented in writing to the making of the appointment.

(2) An appointment may not be made under paragraph 22 after the period of ten business days beginning with the date on which the notice of intention to appoint is filed under paragraph 27(1).

Notice of appointment

29 (1) A person who appoints an administrator of a company under paragraph 22 shall file with the court—

(a) a notice of appointment, and

(b) such other documents as may be prescribed.

(2) The notice of appointment must include a statutory declaration by or on behalf of the person who makes the appointment—

(a) that the person is entitled to make an appointment under paragraph 22,

(b) that the appointment is in accordance with this Schedule, and

(c) that, so far as the person making the statement is able to ascertain, the statements made and information given in the statutory declaration filed with the notice of intention to appoint remain accurate.

(3) The notice of appointment must identify the administrator and must be accompanied by a statement by the administrator—

(a) that he consents to the appointment,

(b) that in his opinion the purpose of administration is reasonably likely to be achieved, and

(c) giving such other information and opinions as may be prescribed.

(4) For the purpose of a statement under sub-paragraph (3) an administrator may rely on information supplied by directors of the company (unless he has reason to doubt its accuracy).

(5) The notice of appointment and any document accompanying it must be in the prescribed form.

(6) A statutory declaration under sub-paragraph (2) must be made during the prescribed period.

(7) A person commits an offence if in a statutory declaration under sub-paragraph (2) he makes a statement—

(a) which is false, and

(b) which he does not reasonably believe to be true.

30 In a case in which no person is entitled to notice of intention to appoint under paragraph 26(1) (and paragraph 28 therefore does not apply)—

(a) the statutory declaration accompanying the notice of appointment must include the statements and information required under paragraph 27(2), and

(b) paragraph 29(2)(c) shall not apply.

Commencement of appointment

31 The appointment of an administrator under paragraph 22 takes effect when the requirements of paragraph 29 are satisfied.

32 A person who appoints an administrator under paragraph 22—

(a) shall notify the administrator and such other persons as may be prescribed as soon as is reasonably practicable after the requirements of paragraph 29 are satisfied, and

(b) commits an offence if he fails without reasonable excuse to comply with paragraph (a).

Dismissal of administrative or other Receiver

41 (1) When an administration order takes effect in respect of a company any administrative receiver of the company shall vacate office.

(2) Where a company is in administration, any receiver of part of the company's property shall vacate office if the administrator requires him to.

Moratorium on other legal process

43 (1) This paragraph applies to a company in administration.

(2) No step may be taken to enforce security over the company's property except—

(a) with the consent of the administrator, or

(b) with the permission of the court.

…

(4) A landlord may not exercise a right of forfeiture by peaceable re-entry in relation to premises let to the company except—

(a) with the consent of the administrator, or

(b) with the permission of the court.

…

(6) No legal process (including legal proceedings, execution, distress and diligence) may be instituted or continued against the company or property of the company except—

(a) with the consent of the administrator, or

(b) with the permission of the court.

(7) Where the court gives permission for a transaction under this paragraph it may impose a condition on or a requirement in connection with the transaction.

(8) In this paragraph "landlord" includes a person to whom rent is payable."

2.5 Appointment by Glen's directors

28. On 13 April 2007, Mr Shelton, Mr Harjivan and Ms Avni Bhatt, acting as Party 14's directors apparently resolved to place Party 14 in administration and, acting on their behalf, Mr Shelton appointed the administrators as joint administrators. Both administrators are licensed Insolvency Practitioners at Smith & Williamson who are a large firm of United Kingdom-based Chartered Accountants and Mr Cork and Ms Milner are members of its department concerned with administration and similar matters. There was no known previous relationship or contact between Glen and Mr Shelton and any member of Smith & Williamson and the initial contact was as a result of Mr Shelton seeking a recommendation from the solicitor who had acted for Glen in the past, Mr Conway of Dechert LLP, for appropriate Insolvency Practitioners who might act as administrators and he had recommended Mr Cork as someone he might talk to. The first approach made by Mr Shelton to Mr Cork was a day or two before 21 February 2007 and the purported appointment occurred on 13 April 2007.
29. The appointment, made under the relatively new procedure without first obtaining the court's sanction, was formalised by the lodging at court of a statutory declaration made by Mr Shelton giving notice of the appointment of administrators together with (a) the minutes of a board meeting dated 13 April 2007 and attaching a purported creditors' schedule, and (b) the administrators' consents to act. These documents gave rise to the allocation of a court case number and to the opening of a file under the reference 2706/2007.

2.6 Factual matrix to the administrators' appointment

2.6.1 General background

30. By January 2007, when Mr Shelton contended he first considered the possibility of placing Glen into the hands of administrators, Glen's Walter Mitty-like existence had been in place for nearly 17 years. Glen had been conceived and has always operated as the means whereby Subhash sought to hide and protect from the world his ill-gotten property portfolio. Until his scheming unravelled during and following trial no. 1, Subhash was the beneficial owner of Glen and its assets who was in sole control of its administration and management and was in sole command of the professional accountants, lawyers and company administrators who acted for Glen or its reputed owners. He had succeeded in this web of deception by hoodwinking those professionals with a repeated series of lies, acts of dishonesty, forgery and deceit into accepting that the company was owned by wealthy overseas clients for whom Subhash had powers of attorney and in whom they had entrusted all management and investment decisions relating to their assets. His success had been built on the silent compliance of his siblings, particularly Mukesh, Vijay, Kishan and Sheela, particularly in the years since 2001 when he had had to appear to have distanced himself from their involvement in the Thakrar Litigation. Subhash is a very gifted, albeit a very flawed, individual and one of his gifts is an ability to manipulate and control those with less forceful personalities, particularly if they are closely related to him or are in close professional or personal relationship with him.
31. By January 2007, Subhash's grip over Glen had been weakened to virtually vanishing point and his dogged and remarkably persistent attempts to throw off the tightening noose around what he still sees as his assets, namely the property portfolio held by Glen. This noose was in the form of the Thakrar Litigation, particularly in the form of Party 1's claim to take over and assert her beneficial ownership of Glen's shares, Party 2's claim to recover in excess of £5 million under its judgment sum from Subhash and its claimed entitlement to its beneficial ownership of many of Glen's properties, Party 3's claim to recover its inheritance under William's will, Party 4's claim to huge costs and Party 5 and 6's wish to clear their name from its unlawful and unasked for use by Subhash in furtherance of his dishonest grand design.
32. Subhash was getting desperate by early 2007 because his last remaining attempts to disrupt or derail the Thakrar Litigation had failed. These last two pieces of the end-game were (1) the attempt made by the defending parties to persuade Judge Coulson in trial no. 3 that the claiming parties, by virtue of one letter written by Party 2's solicitors, had succeeded in achieving a binding compromise of the entire Thakrar Litigation and (2) the attempt by Glen and others to mount a successful recusal and abuse of process argument. Judge Coulson's judgment no. 3 ended the first of these stratagems and the wholly unsuccessful attempts of Parties 8 – 12, 14, 16 and 18 to mount a recusal and abuse of process argument ended the second stratagem. It is clear that Subhash first decided to instruct or forcefully persuade Mr Shelton to consider the appointment of administrators for Glen once he realised that both of these disruptive and deleting stratagems had failed.
33. The following findings made earlier in this judgment^[4] are relevant:

(1) Subhash had always been the beneficial owner of Glen and its shares and property holdings and other assets.

(2) Subhash retained an iron grip over the administration and management of Glen and only allowed Mr Shelton and the directors to undertake those tasks that he had expressly authorised or directed.

(3) Subhash was, and acted as, a shadow director of Glen and the nominated directors merely acted as his servants undertaking what he directed without question.

(4) Subhash resorted to a series of fraudulent, dishonest and unlawful acts and actions over the entire history of Glen in order to persuade everyone who came into contact with Glen that he was always acting for the overseas and wealthy beneficial owner (i.e. Ramila, Vijaya and Mr Harjivan) pursuant to a general power of attorney in his twin capacities of manager of their assets and their accountant.

(5) Once Subhash's control and ownership of Glen and its assets become under greater and greater threat from the Thakrar Litigation, he resorted to a series of more and more desperate stratagems, most of which were unlawful and/or dishonest, in an attempt to retain control of his ownership of Glen and is assets and to put those assets beyond the impending clutches of his creditors and opposing parties.

(6) Neither Mr Shelton or the directors or nominal shareholders of Glen exercised any control over Glen or its affairs.

34. Subhash's control, or attempted control, of Glen continued throughout the entirety of the Thakrar Litigation and was only slowly weakened by Subhash's voluntary bankruptcy and the appointment of his Trustee in 2005; the knowledge of Glen's affairs obtained from the documents downloaded from Subhash's hard drive pursuant to the search and seizure orders executed in 2005 and July 2007; the world-wide freezing orders imposed over Glen and its assets; the appointment of a Receiver under section 37 of the Supreme Court Act 1981 on 2 August 2006 of Glen's rents and profits and the knowledge of the extent of his dishonesty obtained from the evidence of Ramila and Vijaya.
35. Subhash's control of the defending parties' cases presented at trial no. 2 extended to:

(1) Drafting the entirety of Mr Harjivan's written evidence and either drafting or assisting in the drafting of the written evidence of the Thakrar siblings who gave evidence during trial no. 2.

(2) Coaching Mr Harjivan and the Thakrar siblings in the evidence they should give when each was cross-examined before each entered the witness box. In Mr Harjivan's case, this coaching extended to putting forward and maintaining an incredible and deeply dishonest series of lies which he persuaded Mr Harjivan to modify between the first and second parts of his cross-examination in an attempt to repair the particularly glaring inconsistencies that had developed during the first part of that cross-examination.

(3) Directing Kiran what she should say and do when in court, ostensibly representing Party 16 as its director and lay representative.

(4) Being in frequent contact with Mr Shelton and, to a lesser extent Mr Barby, and suggesting what line should be taken by Glen and by whom at different stages of the trial and as to the contents of his written and oral evidence.

(5) Arranging for funding by way of borrowing against the security of his own property, albeit that this was nominally held in the name of his two children, to allow the Thakrar siblings to pursue their appeal.

(6) Arranging for funding by way of his borrowing or being gifted sums which he made available to his siblings to help fund their legal representation in the earlier stages of the litigation and by using funds taken from Glen for the purpose of funding Mr Harjivan and his siblings' legal representation in all aspects of the Thakrar litigation.

(7) Following the trial in all its intricacies by reading the transcript on a daily basis and by receiving detailed and daily reports from his wife and brothers, namely from Kiran, Mukesh and Vijay.

(8) Directing what documents should be obtained from the large number of solicitors who had represented Glen over the years, which should be disclosed and, so it would appear, which should be destroyed. This stratagem was only thwarted, albeit only partially thwarted, by the search and seizure orders, by the claiming parties obtaining documents by way of disclosure from several of Glen's solicitors and from Glen itself and from the Trustee after she had first obtained the permission of the Bankruptcy court for her use of documents obtained by her from the search and seizure warrants and other legitimate means.

2.6.2 Events prior to the appointment of the administrators

36. According to Mr Shelton's evidence, the lead up to the appointment decision may be summarised as follows:

(1) Mr Shelton, so he asserted, on his own and without discussion or consultation with Subhash, first started considering the possibility of insolvency process for Glen in January 2007. This was for a number of reasons, principally the following:

(i) The failure of the compromise negotiations with the effect that, absent a finding that the compromise offer made by Nicholas Drukker, the litigation would continue.

(ii) The freezing orders and the Receivership had taken the management of Glen's income and properties out of the hands of its directors.

(iii) Glen's income was falling due to a wastage of tenants who were not being replaced as their tenancies came to an end.

(iv) Certain liabilities, particularly one owed to the Bank of Scotland in excess of £300,000, were not being paid by the Receiver.

(v) Glen's liability for costs was growing and would make serious inroads into its financial position.

(vi) Glen faced significant capital gains tax liabilities.

(vii) Mr Shelton's personal position as a director of Glen should Glen go into liquidation.

(2) Mr Shelton ruled out Jersey-based insolvency proceedings and a Jersey-based insolvency practitioner because this would be a controversial decision amongst the claiming parties and because the case would be unduly complex for a Jersey-based practitioner and would not be accepted as being correctly located in the local forum by the Jersey courts.

(3) Having obtained the current monthly receipts and payments details from Mr Patel, the Receiver's solicitor, and having obtained the recommended name of a recommended insolvency practitioner, Mr Shelton approached Mr Cork who advised that if his firm was put in funds by the directors of Glen to the extent of £20,000 and if legal advice suggested that administration was appropriate, his firm would accept the role of administrators appointed under Schedule B1.

(4) Mr Shelton arranged for Mr Harjivan to obtain £20,000 and once this was provided by him, he arranged for a meeting at Beachcroft's offices on 29 March 2007 attended by Mr Harjivan and himself and the prospective administrators, their solicitors and leading and junior counsel who advised, having taken detailed instructions, that an out of court administration appointment was appropriate.

(5) The directors considered this advice and, on 13 April 2007, decided to appoint the administrators and, following the lodging at court of the appropriate documents, these administrators took office on that day.

(6) The meeting held on 29 March 2007 was attended by Subhash, ostensibly as the interpreter for Mr Harjivan who also attended. Subhash is fluent in Gujarati and he spoke throughout in this language ostensibly translating to Mr Harjivan the contents of the discussion. His presence had not been announced in advance and he was firmly told by Mr Stubbs of Beachcroft that his contribution should be limited to the provision of translation services. There was no-one present who was able to monitor what Subhash was telling Mr Harjivan.

2.6.3 Mr Shelton's instructions and understanding of the process of administration

37. It is important to be aware of the facts and considerations that Mr Shelton omitted to inform his advisers at or before the meeting on 29 March or about which he conveyed an inaccurate impression. This is because those advisers were giving their advice on a seriously false basis. The significant errors or omissions were as follows:

(1) The advisers were informed that Party 1 was appointed a Receiver to the rents and profits of Glen based on her claim that she was the true beneficial owner of the shares of Glen. This seriously understated the reasons why Party 1 was appointed by the court, without an application from Party 1, as an interim Receiver of rents and profits following the conclusion of Mr Shelton's cross-examination on 2 August 2006 when he had revealed that he had no knowledge or control of Glen's HSBC bank account into which all rents and profits were being paid. Although this account was subject to a world-wide freezing order, it had become clear from other evidence received on 2 August 2006 that Subhash and Mukesh had not only exclusive control of this account but had procured payments out of it in clear breach of the terms of the freezing order. Since Mr Shelton had not sought to take over management responsibility for this account following the freezing order, it was clear that there was no control being exercised and no or inadequate attempts being made to ensure that Subhash and Mukesh complied with the terms of the injunction. Party 1's appointment was intended to be a short-term emergency measure pending the anticipated handing down of the fact-finding judgment in September 2006 but the antics of Subhash and Glen ensured that the length of the trial was prolonged for a further twelve months.

(2) He suggested that Party 1 had refused to pay debts of Glen and that he had been unable to pay them as a result. In fact, Party 1 was only the Receiver of rents, the responsibility for making payments in the ordinary course of business remained with Mr Shelton who had never attempted to exercise that responsibility either before or after Party 1's appointment. Mr Shelton's misconception of his role was compounded by his admission in cross-examination that he thought that Party 1 had been appointed as a Receiver and manager whereas she had been appointed by the court for a limited and specific purpose to receive rents as an adjunct to, and as the means of ensuring compliance with, the interim freezing injunctions granted by Lawrence Collins J. 12 months earlier in 2005.

(3) He suggested that he hoped that Glen would remain balance sheet solvent once the litigation had been concluded but that Party 1 did not want to settle with the litigation. In other words, he appears to have suggested that Glen could and should survive the litigation whereas the litigation was seeking a claim to the entirety of Glen's assets and to the entirety of the issued shares and was based on the alleged fraudulent asset-stripping by Subhash of one of the claiming parties in circumstances in which Subhash had already been found liable in fraud and had an outstanding judgment for in excess of £5 million which had caused him to declare himself a voluntary bankrupt as a means of avoiding making any payment towards this liability. He also appears to have explained that he considered that Glen was at serious risk in relation to the fraud allegations being made against it, as was exemplified by his recorded but confidential views about Glen's potential liability expressed in a memo in 2003 to Glen's solicitors.

(4) Mr Shelton suggested that Party 1 did not have a real grip on the situation, that she was being heavily led by her professional advisers, that she was treating the matter as a litigation matter and was not strongly concerned with the financial and commercial affairs of Glen. In fact, Party 1 was only a section 37-appointed Receiver whose role was to ensure compliance with the interim injunction. She was seeking to recover Subhash's estate which appeared to include the entirety of Glen's assets so that it was neither part of her role, as an officer of the court, nor realistic, for her to seek to do other than attempt to recover the entirety of Glen's assets which, in any event, Subhash had obtained and retained in circumstances amounting to fraud. The only live issue was whether the company had been sold to a genuine bona fide purchaser for value without notice, namely Mr Harjivan and, as Mr Shelton knew or ought to have known, Mr Harjivan had no realistic prospect of demonstrating that he was such a purchaser.

(5) Mr Shelton stated that he found it difficult if not impossible to have a sensible commercial relationship with the Receiver and her advisers. In fact, Mr Shelton had never attempted to evolve such a relationship, was neither aware nor concerned that he was the manager whose role was to keep Glen going as a going concern. Furthermore, as he admitted in evidence, he was aware that if he was having any difficulties with the Receiver, his first recourse should have been to apply to the court for directions given that the court had appointed her as an interim Receiver to police an interim injunction and had given Glen liberty to apply if this gave it any difficulties in relation to the running of its business.

(6) He said that most of the properties were subject to a charge in favour Teso the validity of which Party 1 was challenging in the litigation and that, as he recalled, I had dismissed the charges. In fact, Mr Shelton knew, and had already given evidence to this effect, that the charges were bogus, that Party 1 had a cast-iron case to have them removed and that I had only directed the vacation of charges over properties owned by Subhash in his own right and not those over which Glen was or claimed to be owner and that that removal was directed following his evidence at which he accepted that these charges were bogus.

(7) He stated that he had already told Teso's directors of the intention to place Glen into administration. There is no independent evidence to corroborate that statement and nothing has been disclosed by Mr Shelton which records that notification. In the light of other evidence^[5], I find that no such notification had been given to the directors of Teso who, in this context, means only Mr Barby.

(8) Mr Shelton was informed that the administrators would need to be advised fully about the Thakrar Litigation fully and as a matter of urgency. It is clear that Mr Shelton never attempted to summarise accurately the nature and extent of the allegations being made against Glen and left all explanations to Subhash. The administrators were clearly wholly unaware of how deeply implicated Glen was in allegations of fraud, warehousing of assets and the deceitful attempts to avoid execution against its ill-gotten gains. Mr Shelton was, at the very least, aware of the full extent of the allegations and claims being made against Glen.

(9) Mr Shelton indicated that it ought to be possible to promote a resolution of the litigation and the costs associated with it. Given the grave nature of the allegations being raised against Glen and the three mediations and other attempts to settle that had already occurred, it was wholly unrealistic and misleading to suggest that a settlement might be possible that would leave Glen solvent and either income or balance sheet solvent.

(10) Mr Shelton informed the advisers that, strictly speaking, Glen was off-shore and that the only reason why it might be an on-shore company in March 2007 was because Party 1 may have brought it on-shore since her appointment as Receiver. Mr Shelton knew that Party 1 and her appointment did not alter anything. In reality, Glen was managed entirely by Subhash from his Woolwich offices and had always been managed in that way. Mr Shelton's role was solely to persuade the Inland Revenue to accept Glen as an off-shore company for tax purposes notwithstanding Glen's complete association with and management from within the jurisdiction and its trading activities and assets consisting solely and exclusively with on-shore properties.

(11) Mr Shelton never attempted to explain that his role in Glen was purely to receive letters written to him by Subhash requiring him to undertake purely secretarial tasks and that Glen was managed, administered and run exclusively by Subhash from his Woolwich offices without any involvement of/or brake applied by the ostensible Directors. Nor did he explain how doubtful and dubious were the claims of Mr Harjivan to be the beneficial owner of Glen's shares nor his belief that Subhash had, at the very least, a large personal beneficial interest in Glen. These were particularly significant omissions given the presence of both Mr Harjivan and Subhash at the meeting and there being no means of checking that Subhash was strictly and faithfully sticking to the role of interpreter into the Gujarati language. The administrators would undoubtedly have probed very extensively into Subhash's involvement in Glen had Mr Shelton given them a full and accurate briefing and their advice might have been very different had this been done.

38. 6.4 Mr Shelton's motive in supporting administration for Glen
39. It is helpful to set out some passages of the cross-examination of Mr Shelton.

2.6.4.1 Alleged difficulties with Receiver and misconception that the Receiver was also the Manager of the properties.

40. "Q. Paragraph 5.2 [of your witness statement]. In the last sentence you suggest that Mrs Jackson is appointed, not just as Receiver of rents and profits, but also manager of the properties. That is not right, is it?

A. I think that is right, yes.

Would you like to see the order [of 2 August 2006 appointing Party 1 as Receiver]. …

A. I would like to see that, yes.

[Mr Shelton was shown a copy of the order]

A. "… to commence, prosecute defend and compromise proceedings",

that is hardly just collecting rents:

"… to do such other things and take such other steps as may be proper or necessary in the fulfilment of their duties called upon to receive the rents and profits."

I would take that as meaning that Mrs Jackson had a duty to rent out properties when they became vacant etc. I am sure that she has done that.

Judge Thornton: If it is suggested to you that there is not any express requirement to manage, and that, certainly in England, the duties of a Receiver of rents do not extend to managing the properties, would that come as any surprise to you?

A. It would. I understand the appointment form for Mrs Jackson to become Receiver, that she was managing the properties in such a way that she would maximise the returns for Glen. I believed that she had renewed certain leases. I believe that she had repaired certain properties, made certain payments etc. All of those, I would have thought, were the duties of a manager rather than someone receiving the rents."^[6]

41. "Q. The order under which the Receiver was appointed as an interim Receiver of rents and profits provides expressly for permission to come back on notice to the court.

A. Exactly.

Q. Did you not consider – you are a director, you are the managing director – it being in the interests of the company to draw all of this to the immediate attention of the court in relation to the Receiver?

A. In retrospect you are probably right, I should have done that. But at the time, as you know, we were conducting compromise negotiations with the various parties. Unfortunately, they failed. I have always been hopeful that the parties would get their heads knocked together and agree things so that we would not have these arguments between myself and Mr Patel, etc. But yes, in retrospect, perhaps I should have troubled his Lordship about the payments."^[7]

42. "Q. … in the form of shares there are a large number of Lloyd's TSB shares, which

if realised would come very close to discharging the liability to the Bank of Scotland, If permission was available for that use of the money?

A. That is not true.

Q. Perhaps you would tell his Lordship why that is not true?

A. That is not true for very good reasons, my Lord. Yes there were 50,000 Lloyd's TSB shares registered in the name of Anchor Trust, but unfortunately the trustee has made a claim for that in Subhash Thakrar's bankruptcy, so those shares would not be available without Mrs Jackson's other hat on.

That is an example of the sort of conflict that I feel is there, as Receiver and trustee in bankruptcy, because, on the one hand, perhaps, as the Receiver, she would like to see the shares realised and the money expended on paying off the bank loan, and, on the other hand, wearing her hat as the trustee, it is something she would not allow. So in my opinion those shares are not available to pay off the Bank of Scotland loan.

Q. Have you had any dialogue with Mrs Jackson wearing her hats?

A. I have not had that dialogue with Mrs Jackson, but I have seen the claims she makes in this – in the bankruptcy."^[8]

43. "Q. [quoting from Mr Shelton's witness statement] "… first I asked Mr Patel [the Receiver's solicitor] to obtain a statement from the Receiver in regard to the cash position of Glen. I did this on 5^th February." … But you asked Mr Patel?

A. Exactly.

…

Q. You are contacting Mr Patel, not because you want to communicate with the court-appointed interim Receiver, who is a court officer and established insolvency practitioner and you do not mention your concerns about insolvency?

A. No.

Q. Would you like to offer an explanation to his Lordship about why you do not do that?

A. In my opinion, it had little to do with Mr Patel. As you have just said, I am the director of the company, I have the control of the company in my hands. That was one of the few things that I could do.

Q. Do you recall why Mrs Jackson was appointed as interim Receiver?

A. Yes, I do.

Q. Would you tell his Lordship what your recollection of that is?

A. My recollection of that was that his Lordship was unhappy that I did not know of the monies that Mukesh had recently taken out of the SK Thakrar account to give to Mr Harjivan.

Q. Would it be right to say – we can look at the judgment … if we need to – that the judge expressed concern to protect the income stream for the benefit of creditors from potential abuse. Is that a fair summary?

A. I am not going to argue with that.

Q. Bearing that in mind that that is why Mrs Jackson was appointed to receive the income, do you not think it would have been relevant to tell this interim Receiver, who is an experienced insolvency practitioner, that you, the managing director of Glen, are asking for this information because you are concerned about the solvency position of the company of which you are managing director?

A. No, I certainly do not, because, as I have already stated, I was concerned about the conflict that Mrs Jackson had in the wearing of the two hats as trustee and Receiver.

Q. But she was wearing three hats, according to your evidence, because the third hat is she is managing the company, through paragraph 5.2 [of Mr Shelton's witness statement where he states that Mrs Jackson was appointed not just as Receiver of rents and profits but also as manager of the properties]?

A. I did not think she was wearing two hats. I thought the appointment of Receiver and manager was just one hat."^[9]

2.6.4.2 Relationship with Subhash

44. "Q. What about between the directors, yourselves, was there any communication before this meeting [the meeting held on 29 March 2007] between yourself and any of ht either directors?

A. Yes, there was.

Q. What was the communication?

A. The communication generally was about what was – what the purpose of going to Beachcroft's' offices was.

Q. Who did you speak to about that?

A. I spoke to Marina Buckley and Mr Harjivan, although I did not speak personally to Avni Bhatt.

Q. Do you know whether anyone did speak to Avni Bhatt?

Q. I understood that Subhash Thakrar was going to speak to her on my behalf.

A. Who briefed Subhash Thakrar on speaking to Avni Bhatt on your behalf?

A. I did.

Q. Why was it relevant to Subhash Thakrar to do that, rather than you communicating directly with your fellow director?

A. Because Subhash Thakrar knows Ms Bhatt on a more personal basis than I do.

Q. She is a director, can you not –

A. I could have done, but I chose to do it the other way.

Q. Does Subhash Thakrar have any continuing role in the company, Glen?

A. As far as I know, no. That would be up to the administrator.

Q. I am sorry, you are quite right to correct me. At that time, did Subhash Thakrar have any continuing role in Glen?

A. No.

Q. Your evidence in relation to the use of Subhash is simply that he knew Ms Bhatt on a more personal basis than you did?

A. Exactly.

Q. So you would have briefed Mr Subhash Thakrar on what he was to brief Miss Bhatt on?

A. Yes.

Q. What did you say to Mr Subhash Thakrar?

A. I spoke to him generally about – I thought that the best thing the company could do would be to place itself in administration, one of the reasons being to sort of try to put a stop to the sort of proceedings we're "enjoying today", and the consequent cost of it all. I look around here now and I think I was quite right.

Q. Was that only occasion on which you have spoke to Mr Subhash Thakrar about administration proceedings?

A. I think I have spoken to him before and since.

Q. Did you speak to him when Mr Conway put you in touch with Mr Cork?

A. No.

Q. So when do you think your first communication about administration was?

A. It would have been after my meeting with Mr Cork, although I could not tell you exactly.

Q. Anytime after 12^th March?

A. Sometime around there.

Q. Sometime after 12^th March. Was that before you spoke to Mr Harjivan about it?

A. That I cannot remember?

Q. So it might have been?

A. It might have been."^[10]

2.6.4.3 Position of Mr Harjivan

45. "Q. Do you believe Mr Harjivan to be the beneficial owner of the shares?

A. Mr Harjivan is the registered owner of the shares. I have not heard all the evidence, so I do not know. That is for his Lordship to decide, not me.

Q. It is of course for his Lordship to decide, but I am asking you as the Managing Director of the company, what your evidence is as to whom you, as the managing director of the company, believe the beneficial owner of the shares to be?

A. I have no position on that and I have given it no real thought."^[11]

2.6.4.4 COMI

46. "Q. As far as you are concerned, the COMI is a bit of a flag of convenience; it drifts around according to what suits the purposes of the company at any particular time?

A. It can always do that, yes.

Q. That is your firm belief?

A. That is my firm belief, yes.

Q. Judge Thornton: Can I just summarise? In your view, the COMI moved to England on 29^th March because of the way you arranged for the meeting to have an English administration?

A. Yes, my Lord.

Q. You understand from advice you got that it may have occurred, this COMI movement, when the interim Receiver was appointed, but so far as you were concerned, the critical event was that 29^th March meeting, engineered or structured for the purpose of enabling an English administration?

A. I prefer the word "structured", my Lord.

Q. I am sorry, I withdraw the word "engineered" and replace it with the word "structured".^[12]

47. "Q. The advice I had, my Lord, was that the COMI was probably already in the United Kingdom, given the factors that I have already explained, but that, to make it absolutely one hundred per cent, we should hold the meeting – and any future directors' meetings – of Glen in the United Kingdom."

Q. When did you get that advice?

(12) On 29^th March.

Q. But that was after you had moved to London.

A. No, my Lord, we did not actually move to London until 13^th April. That was when we had our first directors' meeting.

Q. I see. So the COMI did not shift to London until 13^th April?

A. Yes."^[13]

2.6.4.5 Mr Shelton's stated motive

48. "Q. … Tell his Lordship, will you please, what it was exactly that you bore in mind in relation to Glen being suitable for administration?

A. I think, as I state in my witness statement, we were not paying bills as they were falling due. I was worried that I had very little control over the company because of the Receiver/manager position and also the injunction upon the company's assets. I was concerned that may have been brought on shore by having – onshore for tax reasons by having the Receiver effectively in charge of the company's properties. I was worried that the - about the ferocity of the litigation and the costs. I was worried that in the event that decisions were made by his Lordship which went against Mr Harjivan and against the company in relation to Group 2 proceedings, that the litigation would continue on ad infinitum, and I suppose that one of the reasons that I thought that placing the company in administration – one of the – the good that it would do would be that we would have somebody who could not be challenged by either side in this sort of point-scoring exercise that we always seemed to be undertaking between Glen and the other parties, and in particular between myself and Mr Patel, would cease. They would advise the company.

In fact, they would not advise the company, they would do what they thought was best in the interest of all creditors, including Group 2, whom I feel do deserve to be paid. They would take all the decisions about the future of the legal proceedings, and in fact they did not consult me when they dropped the recusal proceedings at all, and I was actually quite relieved that all of this would be over. But apparently it seems that it is not.

…

Judge Thornton: A moment ago I think you said that you felt that Group 2 deserved to be paid.

A. That is my personal opinion, my Lord. I do not mean in respect of the tracing claim, I mean in respect of the original judgment that your Lordship made.

Q. Paid by whom?

A. Paid – well, I do not really want to go into the compromise proceedings at this stage. Just suffice it to say that I thought that the independent administrators would be able to knock all of the litigants' heads together and come to some practical solution to avoid further litigation, my Lord.

Q. Was this an additional reason for your believing that the administration was in the best interests of the company?

A. It was, my Lord. I did not think that was improper.

Q. It is not something that you refer to here, is it?

A. It is not something I refer to there, but it was always in my mind that that would be the way forward."^[14]

"Q. I would like to ask you some questions about the witness statement that you served or filed on 20^th March 2007 in support of the application then being made by Glen for recusal of his Lordship. … one of the two prongs [of SPC's case] was the return of the properties … the position of Party 2 is to say that that compromise may be disregarded because it is either void or voidable … how can you say, as you say repeatedly in your witness statement, that you are unaware that Party 2 was making an adverse claim against Glen's properties?

A. I do not think that we were aware generally that you were making a claim, but I did not think that at that time that was going to be decided upon. So in other words, I did not realise that if – that – I did not think that his Lordship was making a decision as to the – whether the consent order was right or wrong, in other words, I did not think that was part of the fact-finding exercise as such. I thought it was merely relating or basically relating to finding out facts. In other words, not deciding upon – I mean the existence of a consent order is known, yes, that is a fact.

Judge Thornton: Do you recall a discussion in court when you applied to represent Glen and exercise rights of audience, that it would be inappropriate for you to do that because of your evidence that had been put in a witness statement that related to the compromise agreement which would form a contentious part of the proceedings in which you were seeking rights of audience?

A. I do not specifically remember, my Lord, no.

…

Q. [Following counsel showing Mr Shelton a number of orders and other documents relating to the Thakrar Litigation] So how does that square with the evidence that you gave to his Lordship a moment ago, that your view was that somehow certain of the issues raised on Party 2's claim were going to be extracted from the hearing?

A. You are quite right when you look at this, but at the time – and you can see from this file there is a huge amount of correspondence being generated by this litigation over the years. I have not examined every single piece of paper myself, I have obviously relied upon the legal advice that I was given at the time was that there was nothing which affected Glen and that we need not be represented in the proceedings.

Now, that was the advice I got off Decherts and I certainly did not have time to read all this myself. That is why I pay solicitors for. It may well be that I was wrong. If I was, I put my hands up to it."^[15]

2.6.5 Prelude to the administrators' appointment

49. It is important to set out the facts relating to the steps taken that led up to the administrators' appointment. Many of these facts were only unearthed by means of the second search and seizure warrant obtained by Party 1 from the Bankruptcy Registrar in June 2007. It is clear from the documents that were obtained from Subhash using this warrant that it was a wholly justifiable step for Party 1 to have taken to have obtained these documents by applying for this warrant.
50. The relevant history starts on 1 March 2007 when I held a further procedural hearing in order to deal with an application by Glen for an adjournment of what was intended to be the final day's hearing of the trial in order to enable it to see whether it wished to mount a wholesale attack on the integrity of the trial. Prior to that hearing, Glen had, in the main, adopted a neutral stance and had only briefed counsel to argue a recusal application which I had heard in September 2006 and had ruled that I would determine that application as part of my fact-finding judgment. The trial was then, in effect, put into limbo whilst the compromise issue was prepared and then tried and determined by Judge Coulson. I then held what were intended to be the final oral submissions during which Glen's leading counsel intimated that Glen did not intend to maintain its recusal application. However, Glen then changed leading counsel and it was their new leading counsel who appeared on 1 March 2007 and informed the court that he was instructed to apply for my recusal due, amongst other factors, to the bias that it was perceived that I had shown in dealing with Glen's interests. Leading counsel also applied for a direction that funds should be released from Glen in order to enable him to examine the entire record and advise on the precise grounds that Glen wished to advance in support of this application.
51. Glen did not inform the court that it was already considering appointing administrators or that it had concerns as to its ability to pay its current debts as they fell due. These were highly material matters that should have been disclosed to the court during its application since it was applying for funding in circumstances in which it believed it could not pay its debts and for a further adjournment in order, ostensibly, to prepare a recusal application whereas, as it is now known, the period of repose granted by my acceding to the adjournment and funding applications, were used to prepare for an administration appointment by the same directors who, certainly in the case of Mr Shelton, were behind the adjournment application. Mr Shelton was in court for at least part of the application on Thursday 1 March 2007 and it was intimated that the application was made with his authority and on his instructions.
52. Mr Shelton then arranged to see Mr Cork for the first time on Friday 2, Monday 5, Tuesday 6 or Wednesday 7 March 2007. At that meeting, Mr Cork informed Mr Shelton that Smith & Williamson would need to be put in funds to the extent of £20,000 before the firm would agree to act. Furthermore, it would be necessary first to instruct solicitors and specialist counsel to advise whether an administration appointment should be made by the directors. Until the funds were received by the firm, no further step could be taken towards the administration appointment.
53. Mr Shelton then obtained Smith & Williamson's bank details from Mr Cork on 8 March 2007 and also informed Mr Cork by e-mail that "The BO is still deciding what he wants". The "BO" is clearly the beneficial owner and Mr Shelton would have been referring to Subhash in that context, since Mr Harjivan had never undertaken any decision on his own, he had always left all decision-making to Subhash and Mr Shelton stated in evidence that he did not know whether Mr Harjivan was the beneficial owner, he had always relied on Subhash for his belief that Mr Harjivan was the beneficial owner. Moreover, earlier in the trial, he accepted that Subhash certainly had a beneficial interest in Glen.
54. Subhash then started to take the necessary steps needed to put the prospective administrators in funds and to prepare the ground for their appointment. Mr Shelton stated in evidence that he had asked Mukesh to prepare the list of Glen's creditors because all the necessary information was in SKTL's offices and that firm was Glen's accountants. In truth, as Mr Shelton showed in his evidence, he had very little knowledge of what debts were owed by Glen. This was understandable in relation to debts that had pre-dated 2 August 2006 when Party 1 was appointed Receiver since he had left all management and administration to SKTL and Mukesh had undertaken the work, albeit under Subhash's ever-present and watchful eye. However, once the Receiver of rents and profits was appointed, there was no-one who was responsible for these administrative and managerial matters since SKTL were directed to cease involvement in Glen's affairs by the court and the Receiver was not a manager, merely a collector and protector of rents subject to making available to Glen all reasonable disbursements to enable Glen to carry out its day to day business activities.
55. Subhash then surfaced. On 16 March 2007, he telephoned Smith & Williamson's offices and, by chance, the telephone in the relevant department, which operates an open plan system, was picked up by Ms Milner who had been deputed to be the principal administrator if Smith & Williamson were in fact appointed as administrators. Subhash explained that he was introducing himself, as always, as acting for Mr Harjivan, albeit without referring to his status as the holder of his power of attorney. He wanted to know what he should send to Smith & Williamson and to whom he should send it. Ms Milner gave him clear instructions on these matters.
56. Almost by return, Subhash sent Ms Milner the following letter, dated 16 March 2007:

"Further to our discussion, I enclose bundles of various documents regarding Glen, Mr Harjivan and what the Solicitors have dealt with, with the Counsel's Submissions and copy emails, documents.

I hope this will help you with sufficient background and if you require anything further please let us know. I will email you Glen's 2005 accounts, property Schedule and unpaid bills and Court actions due to Shirley Jackson's non-payment.

This should be kept totally confidential on Mr M Harjivan the legal and beneficial owner's instructions to us.

I enclose Balsara & Co's email re sale of Subhash's two properties and exorbitant expenses deducted – unchallenged by Shirley Jackson again.

Mr Barry Shelton will no doubt also, confirm former written instructions on behalf of Glen International limited to proceed in this regard in due course.

Finally, arrangements will be made to put funds into your clients' account of £15,000 or £20,000 depending on what total sum is available on Monday from M. Harjivan resources he is able to send us, as loan/repayable expense.

An application need to be made urgently and Court Order to appoint your firm as Administrator is VITAL to save Glen and destruction of assets, value and claims by the Claiming parties 1 to 6 with their Solicitors, who all do not want to explain their claims – untaxed and disproportionate totally.

I will email to you separately Ashok Patel's email, where he says Glen assets of over £42m will not realise £20m or less. Please highlight that wrong.

Kindly acknowledge safe receipt. More to follow by Emails to you. Happy reading.

Kind regards to you and Stephen Cork. Thank you both.

Kind regards,

Kiran

Encls"

57. Although the letter was signed by Kiran, it was written by Subhash. Kiran has always signed e-mails sent to the court which were written by Subhash and the style is unmistakably Subhash's style. It is to be noted that this letter is somewhat desperate in tone and brings in the wholly irrelevant complaint that Party 1 sold two of his properties at an under-value and had deducted exorbitant expenses from the gross sale proceeds. The letter is tantamount to a letter of instruction and the suggested confirmatory letter from Mr Shelton was never sent. The court documents enclosed were not disclosed by Smith & Williamson but it would appear from the letter that they would have been a highly selective selection of documents from the Thakrar Litigation including the brief submission made by Mr Harjivan's counsel in support of his recusal application. No mention is made in the letter of Subhash's liability to pay SPC in excess of £5m or SPC's claims for the return of over 100 of the properties in Glen's property portfolio. Finally, it is noticeable that Subhash puts Glen's assets as being worth £42m, which is a clear indication that he regarded the Teso charges as being worthless. Subhash also sees the role of the administration as being to save Glen from the claims being made against it, there is no mention of the indebtedness which has led to Glen's current suggested cash-flow insolvency.
58. Much evidence was adduced at the hearing as to the source of the sum of £20,000, paid in two tranches of £17,000 and £3,000, that was ostensibly provided by Mr Harjivan to Smith & Williamson as the required funding needed as a prelude to that firm accepting appointment. After much evasion and prevarication, Subhash and Mukesh's evidence, supported by documentation relating to bank transfer details, was to this effect:

(1) Mr Shelton was not prepared to find any funds to place Smith & Williamson in funds. He left the task of finding this sum to Subhash and Mr Harjivan. Since Subhash is bankrupt, he could not get involved in obtaining funding directly and could not allow funds to pass through his hands.

(2) According to Mukesh's evidence, Mr Harjivan arranged for the total sum of £20,000 to be found by calling in a loan from Mukesh and his siblings of that sum. This loan had been advanced to the Thakrar family for unspecified wedding expenses for an unspecified member or members of the family. No other details of this loan were forthcoming.

(3) £3,000 of this sum was paid by Mukesh. His evidence was that he arranged for SKTL to draw a cheque payable to Smith & Williamson for this sum which Kishan paid into SKTL's branch of Barclays and it was transferred into Smith & Williamson's account. The sum in question represented a loan or advance to Mukesh of consultancy fees due to him for consultancy work he had done for clients of SKTL of an accountancy nature. Many different fees or clients were involved. No documents were produced to show who these clients were or that the sum in question was due to Mukesh from SKTL.

(4) Later in his evidence, Mukesh changed the evidence he had given about the loan that he was repaying. On his second version, the loan from Mr Harjivan had been provided in early 2006 to enable Mukesh to put his solicitors Seddons in funds. The money had arrived from people known to Mr Harjivan who either owed him money or were prepared to lend Mukesh money at Mr Harjivan's request. Mukesh did not know who the three individuals were who lent the money and, remarkably, all three, who were providing about one third each of the sum Mr Harjivan was lending, arranged for the money to be transferred by arranging a personal delivery of cash to SKTL's offices by an unknown person. Mukesh didn't meet any of the three messengers, did not give a receipt and could give no other details of the sources of these funds.

(5) £17,000 was provided by Kishan. It finally emerged that Kishan had drawn this sum from a special personal loan account he had opened for £25,000. He had opened this account at the Sidcup branch of NatWest in June 2006 without security or enquiries about his finances, which were in a parlous condition and was able to draw this sum out in March 2007. This sum was still available because he had also paid into this account £5,000 redundancy money he had obtained when SKT, who had employed him for many years, ceased to trade following Subhash's bankruptcy and he had been made redundant. Kishan was providing this money, according to his evidence, because he was jointly liable to repay Mr Harjivan his loan of £20,000.

59. Subhash did not give evidence about this provision of funds to Smith & Williamson. He did, however, send the court one of his many vituperative e-mails following the hearing of the evidence I have summarised. It is necessary to quote a passage of that e-mail so as to show the nature and content of material Subhash sought to place before the court, after any opportunity had passed to question him about it, as a means of seeking to persuade the court that Mr Harjivan was the source of this payment to Smith & Williamson of £20,000. He stated in the e-mail sent at 17.12 on 27 September 2007 to the court and all parties:

"14. Regarding the £20,000 paid to Smith & Williams (sic) has been fully and properly explained. There is no need to create a mess for the sake of trying to score points as I have said. They are acting like children and spoilt people, because they themselves see others in the light they wish to see and make false inferences, deductions and assumptions which are totally wrong and without facts. To try and confuse you by giving you the selective documentation with their interpretation put is nothing but fraudulent, false and with extremely bad motives to remove the Administrators under guise of Party 1's Application 81. I/we have categorically stated that under section 235/236 I am able to assist anybody asking for my assistance and that is what happened. The fact that we have had telephone calls, exchange of emails, providing copy documentation was on the instructions of Glen Directors Mr Barry Shelton and Mr Harjivan and Ms Avni Bhatt also as they had made their decisions and appointed the Administrators. That is what has been dealt with by Mr Barry Shelton on Parole evidence and having fully cross-examined. There were no other challenges made beforehand and it was the Glen Directors only who could make such an Appointment in the UK High Court NOT me – simple fact and the UK Laws which they do know but lie to blame in on me! Why."

Subhash also stated in an earlier passage in the lengthy e-mail:

"2. … The £20,000 paid by Mr Harjivan from his family and friends on which he has already written to you on several occasions and therefore, there is confirmation that does exist from him directly much before the event of 26 June 2007 when RHF, Solicitors for P1 came again with bad intentions and stole the documentation not for their client but for the benefit of P4. Therefore, this was an illegal activity. Arrangements are in hand to produce an Application before the Bankruptcy Court to stop this malice and to report the matters to the Police, Law Society and/or others to make sure that these abuses can never take place again in future. … ."

60. Mr Harjivan did not give evidence and did not submit a witness statement. Mr Shelton could not give any other evidence save that he said that Mr Harjivan had told him that he had borrowed the money from unspecified lenders, a significant variation from the evidence of Mukesh and Kishan.
61. I have no hesitation in rejecting Mukesh and Kishan's evidence that the money that was paid to Smith & Williamson was paid by them in repayment of a loan that Mr Harjivan had previously made to them. No such loan was established in evidence. The source of the £20,000 was Mukesh and Kishan through his loan account and both payments were made on Subhash's instructions. The money was, on analysis, advanced by the two brothers as a gift or loan to Subhash and, ultimately, the source of the funds was in consequence Subhash. This was provided by him as he is, and always has been, the beneficial owner of Glen and it was needed to enable him to launch what he clearly regarded as his last, and ultimate, poisoned pill or Exocet in order to derail the Thakrar Litigation once and for all.

2.6.6 The directors' "meetings"

62. The decision to appoint the administrators was taken, if the documents available to the court are to be believed, over three separate board meetings and the meeting on 29^th March 2007 which was not a board meeting but a meeting between two members of the board and their professional advisers. The three separate board meetings, I find never took place. I will deal with each in turn.
63. The first two "meetings" are documented in what appears to be board meeting minutes which only surfaced when Subhash's papers were searched pursuant to the June 2007 warrant. These "minutes" were found in a file of Glen papers held by Subhash in SKT's offices.
64. The first of these "minutes" reads as follows:

"MINUTES OF THE MEETING OF DIRECTORS OF THE COMPANY

HELD AT PO BOX 525

2686.601 POTELA LRS

LISBOA

PORTUGAL

ON THE 26 MARCH 2007

PRESENT MR Mahindra Harjivan (Chairman)

By Telephone

Mr B Shelton (Director)

Miss Bhatt

Mrs Marina Buckley

Notice of Notice convening the Meeting was dispensed with and the Directors confirmed that further Meeting meetings will be held in London, England.

Resignation Mrs Marina Buckley has tendered her resignation with immediate effect. Mr Barry Shelton thanked her for her work and assistance given to the Company in Jersey Office.

Mr Harjivan gave instructions for Company records to record this and deal with necessary formalities. He or Mr Barry Shelton would deal with the necessary formalities.

Administration It was discussed as an option to the Directors, who will attend London Accountants, Smith and Williamson, Insolvency Practitioners and Beachcroft, Solicitors to obtain Legal advice and act accordingly to protect the Company's assets and the maladministration of the Interim Receiver, whose lack of co-operation and not re-letting company properties, unpaid bills and Bank Loans are all causing serious concerns to the Directors and Shareholder.

Company's It was, subject to legal and other advices, considered to open an Office, branch operational

Branch to safeguard the Company's assets and property Portfolio mainly based in England & and London Wales. The address and Offices at 113 Woolwich High Street will be rented and used as Offices its address in England & Wales. The necessary formalities to be attended, when in London

Closure IT WAS RESOLVED that the future meetings will be Held at any offices and the meeting was closed.

Chairman_(M. H Harjivan)_______"

The document was signed by Mr Harjivan in what appears to be, given that his signature has been found on a number of other documents adduced in evidence, to be that of Mr Harjivan's.

65. The second minute was in similar form.

"MINUTES OF THE MEETING OF DIRECTORS OF THE COMPANY

HELD AT 100 FETTER LANE

LONDON WC1

ON THE 28 MARCH 2007

PRESENT MR Mahindra Harjivan (Chairman)

Mr B Shelton

IN Mr Mike Stubbs (Beachcroft, Solicitors)

ATTENDANCE Mrs Joanne Miller (Smith and Williamson)

APOLOGY Miss Bhatt (By Telephone)

Notice of Notice convening the Meting was dispensed with and the Directors confirmed that Meeting further meetings will be held in London, England.

Articles of A copy of the Articles and Association was produced and copy of the previous Association Directors meeting held in Lisbon – These were discussed and approved. Mr M Harjivan

as Chairman signed the Minutes.

Administration It was discussed as an option to the Directors, who will attend London Accountants, Smith and Williamson, Insolvency Practitioners and Beachcroft, Solicitors to obtain Legal advice and act accordingly to protect the Company's assets and the maladministration of the Interim Receiver, whose lack of co-operation and not re-letting company properties, unpaid bills and Bank Loans are all causing serious concerns to the Directors and Shareholder.

Directors Mrs Marina Buckley's resignation was discussed again and accepted on legal advice. Resignation She was to be thanked by Mr Barry Shelton for the Company

Roles

SK Thakrar & Co Ltd, London address to be used for Glen's Offices in England & Wales and Fordacre Associates Ltd its 100% UK Subsidiary, registered Office address also to be moved to these new Accountants Offices All 100% Shares are now owned by Glen as beneficial owners of Fordacre Associates Ltd. Mr MK and VK Thakrar are nominee Directors and Shareholders of Fordacre on behalf of Glen International limited.

Administration It was then resolved on professional and legal Advice that the Directors based in Lisbon, Order Portugal, Jerset and Kenya had no other option left butto deal with Glen opening a new

Office in London, appoint new additional directors needed to manage its London portfolio and apply to English High Court for and administration Order forthwith to appoint Smith & Williamson, a reputable and independent Insolvency Practitioners as Glen (a Liberian Company) Administrators in England & Wales to take immediate legal controls and protect all its UK assets. The Legal actions in Court of Appeal and recusal applications made for HH Judge Thornton QC, to continue with the consent Smith & Williamson on legal advice to obtain.

Mr M Harjivan and/or Mr Barry Shelton are further authorised by the Board of Directors to instruct as needed to sign all or any legal or other documents as needed. All and sundry costs incurred to be reimbursed by the Company.

Closure Future meetings to be held overseas and/or at care of SK Thakrar & Co Ltd. 113 Woolwich High Street, London, SE18 6DN, where Glen has agreed to Establish its Offices, in addition.

Chairman____(M. Harjivan)________"

66. Subhash was asked about these minutes, found as they were in his possession. As for the first, dated 26 March 2007, he stated that he had helped Mr Harjivan to draft it when he asked him to help him. Mr Harjivan signed it. He drafted it the day after the meeting because Mr Harjivan asked him to do something to record the fact that the meeting had taken place. However, Mr Shelton said that it was not acceptable and it would not be regarded as a proper minute. Mr Shelton said this early the following week when told about the minute. It was drafted because Mr Harjivan wanted to emphasise two points. Firstly, that Marina did not want to be involved with the company any more and secondly that he was, as a director, having made the phone calls from Lisbon, because he had to make various arrangements with Barry Shelton, that's what he wanted. However, Mr Shelton said, "No, I will deal with the minutes myself because I am the person taking all the decisions and I don't want anybody else to interfere."
67. Subhash was caught out by the fact that this minute records that on legal advice Glen had to open a London office. However, Subhash also confirmed in evidence that the first time that this question was raised, of an office being opened in London, was at the meeting on the 29 March 2007 in Beechcroft's offices. Subhash could not provide a coherent answer as to why the minute records this question in fact first being raised on 26 March 2007.
68. Subhash contended that the second minute was prepared the day after the Beechcroft meeting on 29 March 2007. He contended that the wrong date had been placed on the document (28 March 2007) and that he had prepared, at Mr Harjivan's request, a minute of the 29 March 2007 meeting but that Mr Shelton had overruled the use of this minute. When asked to explain how a document which clearly cannot be a record, however inadequate, of the meeting, Subhash resorted to bluster. For example, when asked how it could be a minute of the meeting, which was not a board meeting, even though it is written as if it was recording a board meeting, Subhash merely asserted:

"No, but decisions were taken by the directors of the company and therefore they, you know, regarded that as a board meeting."^[16]

69. As has been stated, Subhash attended the meeting on 29 March 2007, ostensibly as an interpreter for Mr Harjivan. Ms Milner and Mr Stubbs, in their evidence, stated that he did not speak at the meeting except in either Portuguese or Gujarati, they did not know which. It is noteworthy that Mr Harjivan needed an interpreter, as he did when giving evidence, yet he appears to have been able to attend or conduct a board meeting on 26 March 2007 in English and without interpretation. Mr Stubbs was understandably outraged at being shown the minutes of what appeared to have been a separate meeting held on 28 March 2007 at his offices with him in attendance which never took place. When asked what he thought, with hindsight, was the reason for Subhash's attendance at the meeting held on 29 March 2007, he replied:

"… With the benefit of hindsight, my own view is that Subhash was there because he is a nosy individual and wanted to know what was going on."^[17]

Mr Stubbs also accepted that it was possible that the two, when conversing in the language they were using, were having discussions rather than merely Subhash providing translations. He also stated that Subhash had always tried, as Mr Stubbs saw it, to protect himself or his family. As he put it:

"… If the judgment does find that he is the beneficial owner of shares, then its fairly understandable that he will have some interest in the residual beneficial ownership, should there be one."^[18]

70. Mr Shelton was not asked about the minutes of these two meetings but it is clear from his evidence that he knew nothing about the first meeting and nothing about being shown or told about the minutes and rejecting them.
71. In considering these minutes, I bear in mind the significant role that forged and invented minutes of SPC played in the fraud perpetrated by Subhash on SPC and on the dishonest acquisition of SPC's property portfolio. The details are set out in full in judgment no. 1. These minutes, in style and layout and in their muddled phraseology are strikingly similar to those forged SPC minutes dealing with meetings in and after 1988. I am satisfied, beyond reasonable doubt, that these two minutes are forgeries concocted by Subhash which he got Mr Harjivan to sign, probably without Mr Harjivan even reading them. It is not clear what purpose Subhash intended to put these minutes to, but they provide an insight into his thinking as to the purpose of Glen's administration. That was, in summary:

(1) Glen's assets, or rather what Subhash regarded as Glen's assets, where under great threat from the Thakrar Litigation which was drawing to a close.

(2) There seemed no way of defeating the claims of Parties 1 and 4 and Glen's assets were under great threat as a result.

(3) If Glen appointed administrators, the Thakrar Litigation would be stopped save for the recusal application which had just been started by Glen, some three weeks earlier at the directions hearing held on 1 March 2007.

(4) Glen must invent a move of offices to London as the only way of getting an administration started.

(5) The misbehaviour of Party 1 provided a good excuse for starting the administration, or as the "minute" put it:

"whose lack of co-operation and not re-letting company properties, unpaid bills and Bank Loans are all causing serious concerns to the Directors and Shareholder."

72. I now turn to the third board meeting disclosed by the evidence. This was a board meeting that it was contended had been conducted by telephone on 13 April 2007 and was the meeting at which the directors resolved to place Glen into administration. What was clearly established was that Mr Stubbs caused to be prepared a draft board meeting minute which recorded the decision to appoint the administrators. Mr Shelton's evidence was that he telephoned Mr Harjivan and Ms Bhatt in turn and carefully read out the draft prepared by Mr Stubbs and each assented to its contents. The draft is a carefully prepared three-page document which was signed by Mr Shelton. There is no written substantiation that these telephone calls took place and there was a material discrepancy between Mr Shelton's evidence just summarised and Ms Bhatt who sent an e-mail which was adduced in evidence which stated that the telephone board meeting was conducted as a three-way meeting.
73. I find that the purported telephone calls to, in succession, Mr Harjivan and then Ms Bhatt, did not take place. Had the call been made to Mr Harjivan, he would not have understood what was being read to him. Ms Bhatt was not in the habit of telephoning about Glen's affairs to anybody and these two facts reinforce my finding. What appears to have happened is that Subhash orchestrated the finalisation of the documents sent by Beachcroft and he must have merely obtained Mr Shelton's signature. Both would have proceeded on the basis that the decision had already been taken at the meeting on 29 March 2007, indeed Subhash's evidence was to that effect when he was asked about the "minute" of that meeting.
74. There is a further matter of controversy. This concerns Mr Shelton's evidence that he mentioned to Mr Barby in his capacity as a director of Teso on the telephone at some stage of the impending administration. The only record of this telephone call was in part of the minutes of 29 March 2007 which reads:

"BS was advised that if Teso or any party had a floating charge then they would need to be notified of the administration and be asked to consent to it. BS said that he would let Teso know: he had, in fact already told Teso's directors of the intention to place Glen into administration if professional advice confirmed and Teso were content with this agreeing that administration was right in the circumstances."

75. There is no written record of this conversation with "Teso's directors" and, on 25 April 2007, some 12 days after the administrators had been appointed, Mr Shelton sent the following e-mail to Mr Barby:

"Roger,

Glen by its directors has placed itself in administration.

This has horrified our opponents in litigation as it places a moratorium on the proceedings.

They are therefore trying to make the point that the administration is invalid because we did not have the consent of Teso who had a charge over Glen assets. They claim that the charge is still valid. This is extraordinary given the fact that they were instrumental in having the charges cancelled by Judge Thornton!

However, just to be on the safe side (and knowing what Thornton is like), I wonder if Teso, could confirm to Jo Milner, the Joint Administrator that they have no problem with Glen being placed in administration and formally give its consent.

Thanks

Best regards

Barry"

76. This e-mail is inaccurate in stating that Teso's charge over Glen's assets were removed. What I directed be removed was the Teso charges over properties owned by Subhash, the Teso charges over Glen's assets remained and remain in place. This considerable error made by Mr Shelton adds insight into his thinking about and remarkably partial knowledge of Glen's affairs. There was no response to this e-mail adduced in evidence. Mr Shelton stated in his witness statement that Teso consented informally to the advice that it was his intention to place Glen in administration.
77. The wording of Mr Shelton's e-mail to Mr Barby is wholly inconsistent with Mr Shelton having already notified him of Glen's directors' intention to appoint administrators. Had there been such a notification, the e-mail would have referred to that earlier conversation and indicated that it was merely confirmatory of the earlier notification. Moreover, the note of what Mr Shelton said at the meeting on 29 March 2007 suggests that Mr Shelton did not himself assert that he had notified the directors, it states that Glen had the intention of appointing administrators if they received professional advice that this course should be adopted. Until Glen's directors had actually received that advice and had decided to follow it, all that Teso had been notified of was the possibility that it might in the near future receive a formal notification.
78. In assessing the accuracy of Mr Shelton's evidence and statement to the effect that a oral notification or oral notifications were given to Teso prior to the appointment of the administrators, I take account of the fact that Mr Shelton's evidence generally about the circumstances in which the administrators were appointed and about his motivation for adopting or acquiescing in that appointment was lacking in candour and, at times, evasive. I am not therefore prepared to accept his uncorroborated evidence about this important matter, based as it is on an assertion that a conversation had previously taken place. Furthermore, the wording of the e-mail, couched in terms which suggests that it is the first intimation that Mr Shelton had given Mr Barby of the appointment, amounts to an admission by Mr Shelton that no previous notification had been given.
79. I find that no notification of the intention to appoint administrators was given to Teso or its directors. Indeed, the first that Mr Barby and the directors of Teso came to hear of the administration was by Mr Shelton's e-mail, sent eleven days after the purported appointment of the administrators. Furthermore, even if Mr Shelton had done as he stated at the meeting held on 29 March 2007 that he had done, that did not amount to a notification, in the language of Paragraph 26(1)(a) of Schedule B1, " a written notice of an intention to appoint an administrator" both because the notice was oral and not written and because it was not a notification of an intention to appoint but merely a notification that an intention to appoint might arise in the near future. Thus, there was no notification, no written notification and nothing that was said capable of amounting to notification.
80. Ms Milner, in the first Report of the Joint Administrators, stated that "I have been in touch with Mr Roger Barby, apparently a director of Teso, and Teso have waived the requirement of formal notice and consented to the administration." However, no statement in writing was produced that recorded this decision of Teso, just as there had been no response to Mr Shelton's e-mail to Mr Barby. There was no document produced in which Mr Barby's notification of Teso's waiver was recorded by him because, as I find, no such document exists. The Report does not condescend to detail of how and in what terms Ms Milner's contact with Mr Barby was effected and, in any event, this contact must have been made some days after the appointment of the joint administrators.
81. I find that whatever was said to and by Mr Barby in the course of what I find was an informal contact was insufficient to have any legal effect so as to constitute either notice of an intention to appoint or an unequivocal and informed waiver by Teso of the need to give it a notice under paragraph 26(1) of Schedule B1 or a retrospective assent to appointment by Teso so as to validate the appointment and to dispense with the need for such a notice to have been given originally.

2.7 What was Subhash's involvement in the appointment decision, if any and who funded the appointment of the administrators?

82. Subhash was heavily involved in the appointment decision both in what he did and in the influence he must have had on Mr Harjivan and Mr Shelton. Indeed, his influence on the two active directors in this matter was so pervasive that whatever motive Subhash had in promoting the appointment of administrators can and should be taken to have been the motivation of that appointment.
83. Subhash's influence and involvement may be seen from the following steps that he initiated, followed or participated in:

(1) Subhash had been the driving force behind Glen, Mr Harjivan, Thakrar Family members' and SKTL's respective participation in the Thakrar Litigation throughout and down to the decision by Glen in March 2007 to seek to pursue its recusal application. Subhash's involvement in that particular decision can be seen from the minute of the purported directors' meeting allegedly held on 28 March 2007. In that minute, which was entirely concocted by Subhash without any input from anyone else, it is recorded that:

"The Legal actions in Court of Appeal and recusal applications made for HH Judge Thornton QC, to continue with the consent Smith & Williamson on legal advice to obtain."

(2) Only Subhash knew about, or was actively involved in the Thakrar Family members' appeal, which does not involve Glen in any event, and only he felt strongly about the necessity and desirability of maintaining the recusal application. Indeed, Mr Shelton stated that he was very relieved when the administrators decided to abandon Glen's recusal application, thereby indicating that he regarded the application as hopeless or misconceived. Only, Subhash, would have been concerned that the administrators' appointment should not jeopardise the pursuit of the recusal application.

(3) Subhash prepared the documentation which was submitted to Smith & Williamson prior to their appointment and he also drafted or helped to draft Glen's answers to Smith & Williamson's COMI checklist which Ms Milner sent to Subhash and which was answered in the names of Mukesh and Mr Harjivan on 30 March.

(4) Subhash concocted without any other assistance the "minutes" of the two directors' "board meetings" that purportedly took place on 26 and 28 March 2007.

(5) Subhash attended the meeting on 29 March 2007 so as to ensure that he knew what was discussed and managed to inveigle his way into the meeting masquerading as Mr Harjivan's interpreter. Mr Stubbs finally twigged to the fact that Subhash's purpose in attending was to find out what was said because he is such a busy body.

(6) Subhash put together the documentation lodged at court to confirm the appointment of the administrators and the failure to hold any kind of board meeting to confirm the directors' decision to appoint Smith & Williamson's representatives as co-administrators on 13 April 2007 was entirely due to Subhash's oversight in failing to ensure that this took place.

(7) Subhash with Mukesh's assistance drafted the list of creditors used to found the appointment of the administrators.

(8) In two e-mails to Mr Stubbs on 10 April 2007, Subhash was seeking to use the administration for various extraneous and improper purposes:

(i) He asserted that I had removed all securities that Glen had given to Teso and that he did not understand why or how I had removed them. In fact, only the securities over his own properties had been removed and that only after Mr Shelton had stated on oath that these securities were, in effect, bogus and a sham and did not support any indebtedness owed by Glen to Teso. Subhash has, on other occasions in his e-mails to the court, spoken highly critically of Mr Shelton in giving this evidence but no evidence has ever surfaced that these charges support any loans made by Teso or are anything other than a subterfuge to deter Glen's creditors from enforcing against Glen's assets.

(ii) He asserted that the charges supported various inter-company loans. There were no inter-company loans, indeed Teso only opened a bank account very recently. These so-called loans are no more than fictitious entries in the accounts of Glen and Teso which Subhash himself drew up.

(iii) He asserted that Glen's shareholders had lent money and invested in Glen and that this indebtedness was protected by debentures in favour of Teso. There was no such indebtedness and no supporting debentures provided as security.

(iv) He asserted that Mr Harjivan was the beneficial owner of Glen.

(v) The assistance of the administrators was urged to support and take steps to obtain the reinstatement of the Teso charges and to defeat the claims made for Mr Harjivan's beneficial ownership of Glen.

(9) He was provided with a draft of Ms Milner's witness statement prepared in opposition to the paragraph 81 application and provided extensive comments on the draft and with Mukesh prepared a list of documents and dates which purportedly showed up Ms Jackson's defaults as Receiver and Trustee which were provided to Ms Milner.

(10) He took it upon himself to e-mail the court and all parties what Glen's position was in response to my e-mail to the parties seeking from them a statement of their positions. In that e-mail, he informed the court that the proceedings against Glen were stayed and would remain stayed until the Companies' Court, rather than the TCC, had given directions. Glen was stated to be leading the recusal application and the TCC was urged to suspend the Thakrar Litigation in its entirety until the Companies Court had expressed an opinion as to what should happen. This e-mail led to Mr Stubbs e-mailing Subhash and stating:

"This is really unhelpful! Please let the administrators speak for themselves. This is very sensitive stuff and we are concerned that such interventions could be very unhelpful."

To which I would add: "Quite".

(11) He provided detailed comments to Ms Milner on the response document prepared by Parties 1 and 4. These included this misstatement of the effect of the appointment of administrators:

"The appointment of administrators certainly stops all the Court proceedings against Glen as party 14. However, there are valuable contribution proceedings, there are costs claims (by Subhash) and the compromise agreement of 2002 on which a defences needs to be put in and the point should be addressed by the Directors and Administrators with their lawyers."

The stay had already been lifted in relation to the fact-finding trial by the time this e-mail was written and sent off by Subhash, the contribution proceedings had been abandoned by the Trustee some years ago and cannot now be revived and the defence to the attack on the compromise agreement had already been put in but can be seen to be as being incapable of staving off Party 2's claim to set it aside.

(12) He constantly badgered Mr Stubbs on his mobile telephone seeking information, giving advice and generally being a nuisance. Mr Stubbs, being an experienced litigator and insolvency specialist, avoided being influenced by this unwarranted interference.

(13) Subhash, with Mukesh's assistance, drafted Glen's statement of affairs.

84. Overall, Subhash appears to have first raised the possibility of administration and then asked Mr Shelton to undertake the necessary enquiries and then continued to act throughout the following period until 13 April 2007 when the administrators were appointed as he had for the past seventeen years. In other words, he continued to as the beneficial owner of Glen who was both unable and unwilling to allow anyone else to take any decisions about Glen or to manage or direct its affairs. He also displayed in that period and since, as he has consistently since trial no. 1, a remarkable state of denial as to his dishonest conduct with regard to SPC's properties, the dishonesty he has shown in the establishment of Glen and the subsequent conduct of its' affairs and in the repeated and systematic dishonesty he has displayed in seeking to thwart the legitimate enforcement and tracing actions of the many parties who have been wronged by his actions. These parties include, but are certainly not limited to, the many family members ensnared in his deceitful net and the many professionals who have acted for him and his interests and for the interests of each claiming party.
85. I am bound to view Subhash's conduct and motives relating to the appointment of administrators of the company he dishonestly set up and subsequently managed in the light of his dishonest conduct throughout the 24 years since his first act of dishonesty in procuring the first of the properties that he and Neil plundered from William's Estate. In particular, I must consider his actions in the light of his conduct summarised in paragraph 81 above.
86. In the light of all the evidence I have summarised, which is dealt with extensively throughout this judgment, I am satisfied that he first put Mr Shelton up to seeing whether it would be possible to put Glen into administration, he pushed the decision forward and he took all the steps that I have outlined so as to both procure their appointment and so as to attempt to ensure that their actions led to the fatal interruption of the claiming parties' cases against Glen and his Estate. Mr Shelton appears to have taken no step himself save for helping to prepare his witness statement and attending court for cross-examination. Mr Shelton was prepared to agree to the administrators' appointment and it was clear that he adopted Subhash's motives for this appointment. Moreover, it was Subhash with Mukesh's assistance who put together the information needed to enable the case to be run that Glen was insolvent, a case put forward, as I find, to mask the fact that there were no good reasons for seeking administration and that administration was being sought first and foremost as an attempted and last ditch means of stopping the Thakrar Litigation and forcing an unwanted and unwarranted settlement on the claiming parties.

2.8 Did the directors ever formally appoint the administrators?

87. The directors contended that the administrators were appointed pursuant to the decision taken at a board meeting held on 13 April 2007 at which each of the three directors agreed to the contents of a detailed draft minute of the board meeting prepared for them by Mr Stubbs of Beachcroft. This minute contains a resolution that Glen be placed in administration and was signed by Mr Shelton. The minute records the meeting as having been concluded at 1.28 pm on that day.
88. As I have already found, no meeting of that kind took place. What happened appears to have been that Mr Shelton received the draft minutes and, probably in the presence of Subhash at SKTL's offices, signed the minute. Subhash clearly considered that the decision to appoint administrators had been taken by the two directors present at that meeting, being Mr Harjivan and Mr Shelton. Mr Shelton was still somewhat confused about precisely what had been agreed and by whom and on what occasion when giving evidence on two separate days of the hearing. This confusion was undoubtedly the result of his trying to steer a very fine line between giving accurate answers to the questions he was asked but seeing the need to hide the fact that Subhash had driven the exercise of placing Glen into administration from the outset. Mr Harjivan, who clearly cannot speak anything other than pigeon English, could not have understood anything of the minute had it been read out to him over the telephone and would not have learnt much from the meeting held on 29 March 2007. Subhash could not have spent much time explaining what was happening, it is likely that he was devoting much of his time to coaching Mr Harjivan and to following what was being said for his own purposes. Ms Bhatt, had she been spoken to, would not have followed much of the contents of the minute but, in truth, she was not even spoken to on that day.
89. Thus, no board meeting took place. However, at the very least, Mr Shelton in the presence of the beneficial owner of Glen, approved and signed a document which appointed Mr Cork and Ms Milner administrators. It is a matter of law as to whether the decision taken solely by Mr Shelton in the presence of the beneficial owner of the company to appoint administrators, a decision taken against the background leading up to that decision that I have found to have occurred, complies with the statutory provision contained in paragraph 22 of Schedule B1 that "a company may appoint an administrator" or "the directors of a company may appoint an administrator". It seems unlikely that the signature of Mr Shelton on a document describing itself as the minutes of a meeting and which records the factors that led to the directors named in the document to reach the decisions taken constitutes the decision of the directors if the meeting described never took place.
90. However, since the conclusion as to whether or not the directors took an appointment decision raises issues of law in the light of my findings, I will decide this question in a further hearing concerned with the legal consequences that must flow from the facts found in this judgment, but only if it turns out to be necessary to decide this question.

2.9 May Parties 1 and 4 now allege that there was a procedural irregularity in the appointment process?

91. At a very late stage, namely after the closing of the final day of the trial and only two working days before judgment was due to be handed down, Parties 1 and 4 gave notice of their wish to raise or revive the question of whether Glen's directors failed to achieve a valid appointment of the administrators due to a failure to give a paragraph 26 written notice of their intentions to Teso as a holder of a qualifying floating charge.
92. The administrators objected to this point being raised at such a late stage because it was a fact sensitive point and involved Parties 1 and 4 approbating and reprobating since the point, it was contended, had been raised by those parties when first launching their paragraph 81 application and then abandoned at the outset of the hearing.
93. I find that the response to these points by Parties 1 and 4 to be compelling. In summary, they contended:

(1) Until the new evidence was obtained, it was not apparent a paragraph 81 notice had not been given. This was because the evidence previously adduced, which asserted that this notice had been given or waived, could only clearly be seen to be false once the new evidence was available.

(2) The issue did not take the administrators by surprise and all possible evidence relating to this issue was now before the court.

(3) The issue goes to the jurisdiction of the inherent powers of the directors to appoint administrators. It also goes to the jurisdiction of the court to engage, validate and supervise the process of administration by out of court appointed administrators, an engagement required by the statutory framework that Schedule B1 gives rise to.

94. I therefore allow this issue to be raised.
95. 10.1 Were any necessary procedural requirements for a valid appointment of administrators complied with and what is the effect of any non-compliance?
96. This issue raises the question as to whether:

(1) It was necessary in this case for the directors to comply with the notice requirements of paragraph 26 of schedule B1;

(2) If so, were the requirements complied with:

(3) If not, were the requirements mandatory or directory;

(4) If directory, were the requirement capable of being waived by Teso or by the court;

(5) If so, was there a waiver or should the requirements be waived by the court.

97. It is first necessary to consider who must be given a paragraph 26 notice. That notice must be given to a qualifying chargeholder, being the holder of a floating charge. Teso is such a chargeholder by virtue of the floating charge imposed over Glen's assets dated 8 November 1996. This charge has never been lifted although I have found in this judgment that it is invalid. No declaration to that effect has yet been made and the charge is, in consequence, in place and it remains binding on Glen and enforceable by Teso until it is removed or ordered to be removed by an order or declaration of the court. This is particularly so since Glen is a Liberian company whose COMI and place of business have only recently clearly been established to be within the jurisdiction of the English courts.
98. There are two limbs to the statutory requirement of notice. Firstly, a notice in writing must be given of the directors' intention to appoint administrators, paragraph 26(1)(a), and secondly, the notice must be in the prescribed form, paragraph 26(3)(b). That form is Form 2.9B. It is important to consider both the reason for this notice and the procedure that follows its service. It is clear that the intention is to give a holder of a floating charge an opportunity, before out of court administrators are appointed, of exercising its right to appoint an administrative Receiver under its floating charge. Since directors can only appoint administrators if the company is unable to pay its debts, the company is likely to be in a condition in which the entitlement to appoint administrative Receivers has crystallised. If the holder of the floating charge is unable to appoint its own administrative Receivers prior to the appointment of administrators, its rights under its charge will be, or could be, significantly compromised. In consequence, paragraph 26 is aimed at giving those holders of the floating charge a prior but limited opportunity to exercise their rights before the directors can appoint out of court administrators. If an administrative Receiver is appointed in that limited window of time by the holder of the floating charge, the directors may no longer exercise their own power of appointment. If no such appointment is made, the directors may act and, thereafter, the holder of the floating charge and the indebtedness charged will be subject to the regime imposed by Schedule B1.
99. The notice requirements are, therefore, of some consequence and it is to be expected that the statutory regime which gives rise to them is likely to be both strict and incapable of being waived. Such is common in such situations, for example the notice regime imposed by the Landlord and Tenant Acts relating to the statutory entitlement to renew commercial leases or to prevent that entitlement from being exercised. It is well-known that these notice requirements must be strictly observed and cannot be waived and, if not complied with, the court cannot extend time or grant relief from non-compliance.
100. In this case, no notice was given. The administrators appear to contend that the question for consideration is whether the wrong form was served since the directors are required to use Form 2.10 when lodging the requisite documents at court where there is no qualifying chargeholder and that was done. However, in my judgment the correct question is whether the failure to give notice to Teso, as I have found occurred, precludes the directors from appointing administrators at all.
101. It is clear to me that the requirements of paragraph 26 are mandatory. The purpose of these requirements and the lack of any statutory mechanism to grant relief against non-compliance point inexorably to the conclusion that directors cannot appoint administrators using the out of court procedure unless and until they have complied with paragraph 26 where there is in existence a qualifying chargeholder. These requirements are not mere formalities, they are in place to ensure that the overriding and pre-existing rights of floating chargeholders are not overridden. A floating charge is an essential and much-used method of commercial financing and unless the rights created by these charges are protected from the use by directors of the power to make out of court appointments of administrators, the commercial confidence that allows for the provision of credit to commercial undertakings would be weakened.
102. I therefore reach the same conclusion as did Hart J in Re G-Tech Construction Ltd^[19] who concluded that the related provision requiring the correct form to be filed at court was not complied with and cannot be waived. If the requirement to lodge the correct form at the court cannot be waived, it must follow with even more force that the requirement to serve a notice in writing in the first place also cannot be waived.
103. The administrators did not seriously challenge the conclusions I have reached. They sought to contend that Teso is not, or should not be treated, as a qualifying chargeholder. They point to paragraphs 14 – 21 of Schedule B1 which sets out the statutory scheme for the appointment by qualifying chargeholders of administrators which only allows for such an appointment by chargeholders where the floating charge is enforceable. They contend that Teso's charge is not enforceable in reliance on the evidence of Mr Shelton and, no doubt had this issue been argued out following the handing down of this judgment, on my findings. They also contend that these provisions require the reading into paragraph 26 a limitation or qualification that has the effect of interpreting the phrase "any person who is or may be entitled to appoint an administrative Receiver of the company" as meaning "a qualifying chargeholder" and then qualifying that meaning as "a qualifying chargeholder except one whose floating charge is not enforceable". It also requires a decision as to whether, despite all its limitations and shortcomings, this charge was, on 13 April 2007, one that falls within the description in paragraph 16 of being "not enforceable".
104. The more natural interpretation of paragraph 16 would be only to exclude as being "not enforceable" those charges which have been declared to be unenforceable in legal proceedings or where there is a clearly established receipt which shows that the entire indebtedness charged has been discharged. Otherwise, the decision as to whether a charge is or is not enforceable is to be left to the subjective judgment of the directors and not on documentation which can be readily verified and obtained.

2.11 Were the necessary prerequisites for appointment present, particularly was Glen unable to pay its debts at the time of appointment?

2.11.1 Introduction

105. Essential prerequisites for this appointment were:

(1) Glen was unable or was likely to become unable to pay its debts;

(2) Glen was in need of financial rescue;

(3) The purpose of the administration, namely the financial rescue of Glen, was likely to be achieved;

(4) Glen's centre of main interests ("COMI") was within the jurisdiction. The notice of appointment stated that Glen's COMI was at 113 Woolwich High Street, namely the offices of SKTL.

106. In this case, the prerequisite for appointment that is relied on is the alleged indebtedness of Glen at the time of appointment, being a total sum of £1,079,523.03 set out in the schedule lodged with the notice of appointment which had been prepared by Mukesh. This indebtedness was said to be incapable of being met by Glen out of its income and it was not possible for Glen to raise any of its capital to meet this debt since it was charged, subject to injunctions and the iron hand of the interim Receiver and to the inability of Glen's management to take any action which would enable the indebtedness to be discharged, largely due to the intransigence of the Receiver and of the claiming parties in the Thakrar Litigation. That litigation was proving to be unsettle able and had been, and would continue to be such a drain on Glen's resources that it was unable to manage its business in such a way as to be able to trade profitably and meet its debts.
107. It is clear that Glen's COMI at the time of its appointment was, and had been for many years, England and Wales. This had nothing to do with the appointment of a Receiver or the decision by Subhash and Mr Shelton to move Glen's offices to London or to hold meetings on either 29 March 2007 or 13 April 2007 in Woolwich but to the fact that the company had been managed and had run the totality of its business in the Woolwich offices of SKT whilst leaving an outpost in Jersey devoted, in effect, to the filing of documents provided by Subhash from Woolwich and answering his repeated overbearing letters demanding secretarial action by Mr Shelton. This was coupled with the fact that the entirety of Glen's business involved managing and investing in properties located in England.

2.11.2 Glen's indebtedness

108. As the facts of Glen's situation were presented to them, it is understandable, and indeed obviously correct for the directors' advisers to advise the directors in the meeting held on 29 March 2007 and thereafter that administration was an appropriate course of action to take. On the basis of the information given to them, it appeared that Glen was unable to meet its debts. However there are four features of this alleged indebtedness which throw this advice into doubt.

2.11.2.1 The alleged malign influence of the Receiver

109. I have already highlighted the actual or feigned misunderstanding that Mr Shelton had about the role of the interim Receiver following her appointment on 2 August 2006. Mrs Jackson's sole function was to collect in the rents and account for them to the court. She had no role in managing the properties or of the business as a whole. Her appointment did, in fact, throw out the de facto, and probably unlawful, management structure that had existed previously. Since all the properties and the income and investments of Glen were managed by Subhash and Mukesh in Woolwich, Mr Shelton had no involvement in the day to day affairs of Glen. When the freezing injunctions were imposed, they did not appear to be given effect to by Subhash and Mukesh in relation to the HSBC account that SKT held in Woolwich into which all rents and other income was paid and out of which the day to day running expenses were met. This arrangement continued until the Receiver was appointed, indeed the discovery of this arrangement when Mr Shelton was giving evidence and the discovery of clear breaches of the injunction that were occurring through Mukesh's methods of operation, led to the appointment of Mrs Jackson as interim Receiver in the first place.
110. Mrs Jackson, of necessity, did pay out of her receipts essential day to day expenses, such as Council Tax, insurance and other such outgoings. Some of these were, indeed, paid out by the managing agents before accounting to her for the net rents recovered and she then paid out further expenses. However, Mrs Jackson could not pay out anything which was not drawn to her attention and Mukesh and Mr Shelton were either inefficient or deliberately obstructive in drawing to her attention some of the indebtedness now relied on.
111. A further complaint raised by Mr Shelton was that the income stream of Glen was significantly depleted after Mrs Jackson's appointment. In fact, as the evidence demonstrated, the income stream increased following her appointment due to the fact that Mukesh had not managed the properties very well and had not been ensuring that properties were promptly relet as they fell vacant.
112. All in all, Mr Shelton painted a wholly inaccurate picture to Glen's advisers in relation to the role of Mrs Jackson. As is clear from his evidence already set out, he never made any attempt to contact her, he never notified her of his concerns, if he actually had any, that Glen was unable to meet its debts and he wrongly painted her position as being one in which she had a conflict of interests in relation to her duties to Subhash's estate and to Glen. She was only a Receiver, not a manager; she was only intended to remain in post for a few weeks pending the outcome of the Thakrar Litigation and had been appointed in an emergency to stem the significant and unlawful braches of the freezing injunctions imposed on Glen's assets that were occurring due to Subhash and Mukesh's misuse of the HSBC account; she never interfered with the running of Glen's business and only paid out those sums which she was asked to pay which she considered were genuine and bona fide day to day commercial expenses of Glen and she appears to have faithfully complied with the terms of her appointment and of the freezing injunctions she was appointed to enforce.
113. Mr Shelton not only misstated Mrs Jackson's role but he appears to have deliberately failed to draw to the court's attention, under the terms of both the freezing orders and the order appointing the interim Receiver, the perceived difficulties that these court orders were providing. That suggests, given that he was able to obtain legal advice, that his difficulties were either exaggerated or non-existent. However, his omission is more serious still. During the course of trial no. 3, the court directed that a total of £200,000 should be paid to Glen and Mr Harjivan from its own resources to enable it to obtain legal advice and representation. The most significant order was that £100,000 should be made available to pay for such legal assistance to prepare for and present Glen's recusal application, an order made on 1 March 2007 only days before Glen's apparent cash flow difficulties led to the appointment of the Receivers. Mr Shelton failed to draw to the attention of the court the cash flow difficulties he now complains of even though, if they existed, they required the expenditure of the funds that, following his application to the court, were redirected to Glen's legal advisers. His lack of candour, obviously induced by Subhash, is both breathtaking and very revealing as to the alleged problems of Glen in meeting its outgoings as they fell due.

2.11.2.2 Teso charges

114. It is clear, and Mr Shelton has acknowledged on various occasions when giving evidence, that the Teso charges are shams and do not support any indebtedness to Teso owed by Glen and these charges have not been assigned to, or appropriated to, any indebtedness owed to Mr Harjivan or other third parties. They have not been removed however, because of Subhash's continuing insistence that they are valid and his strident but ill-founded complaints that the Teso charges over his properties were vacated after the court had received evidence which proved that these charges were ill-founded. These matters were not drawn to the attention of Glen's advisers and, indeed, they were left with the impression that I had directed the removal of the charges that were lifted improperly and without a proper trial or consideration of the evidence.
115. Ms Milner accepted in evidence that Glen had managed to arrange a loan facility of £20 million in early 2007 so that if the Thakrar Litigation was compromised, it would have available immediately the means of paying out all those who were to receive payment as a result. None of this facility had been drawn down and, indeed, the facility was only available in principle but Mr Shelton appears to have been able to arrange it without difficulty. This was possible because he was able to represent Glen as a company with uncharged assets worth at least £34 million. Ms Milner also accepted that the principal indebtedness to the Bank of Scotland, in a sum of about £300,000, was charged and fully protected against a limited number of Glen's properties. Her contention was that Glen remained in need of administration because its debts were not being serviced. She painted a picture of a company whose loan had not been drawn down who was in the iron grip of both injunctions and freezing orders and had bailiffs knocking at the door. As she put it: "it has a future income, but it is not there".
116. However, the future income had not materialised into current cash flow sufficient to meet Glen's genuine indebtedness because of the failure by Mr Shelton to take the necessary management steps in time so as to realise the necessary income to meet current indebtedness. The gloomy picture painted by Ms Milner was one she had been provided with by Mr Shelton and by the interfering protestations of Subhash and the inaccurate portrayal of indebtedness of Mukesh.

2.11.2.3 Glen's debts

117. The actual indebtedness displayed by Mukesh's schedule prepared at the end of March 2007 was less than £100,000. It has to be remembered that Mukesh's instructions from Subhash were to put everything into the schedule. Mr Shelton stated in evidence of this schedule that:

"We put everything in that there could possibly be said to be against."^[20]

118. In fact, much of the schedule was not to be regarded as being in that category at all. The principal items that should properly be omitted from the schedule were as follows.
119. Bank of Scotland - £305,000. The Bank of Scotland had inherited a loan account in favour of Glen from the Bank of Wales. This had been created a few years earlier at Subhash's request when he had enquired about a facility from that Bank and was offered huge facilities on the basis of his being the beneficial owner of Glen which was worth many millions of pounds and was unencumbered with debt. The debt was being regularly serviced by Glen on a monthly basis out of income and was charged against a limited number of properties. The loan was called in at the end of October 2006 because these monthly payments were late in being paid. It is clear from the evidence that these difficulties in late payment were occasioned by a failure by Mr Shelton, or through him of Mukesh and Subhash, to inform the Receiver and her solicitor timeously, in the period leading up to the demand calling in the loan, of the need to make these payments. However, the evidence showed that the Bank of Scotland would have been, and may still be, prepared to return to the previous arrangement if its instalment arrears and interest were paid off and the monthly payments were resumed. In any event, the evidence also showed that it was and remains prepared to be repaid by allowing the sale of its secured properties and to await payment of the capital sum, outstanding interest and costs until this security has been realised.
120. Brokers Fees at 1% of prospective loan of £20 million - £200,000. It became clear from Mr Shelton's evidence that Glen had no contractual obligation to pay this commission and that, in any case, had the commission become payable, it would not have been Glen but the Thakrar Litigation parties participating in the compromise discussions who would have been collectively liable since the loan was discussed by Mr Shelton on their behalf generally.
121. Fees associated with the compromise negotiations £346,000. The schedule contains reference to alleged outstanding fees and costs associated with the defending parties' expenses in relation to the compromise negotiations and possible compromise agreement which never materialised and which led to Judge Coulson's finding that compromise had never been agreed. It is clear that all, or the great majority of these sums are ones for which Glen has no contractual liability to pay or are not yet payable or are grossly inflated. At all events, they do not properly rank as indebtedness currently needing to be paid out of income as at 13 April 2007.
122. SKTL's outstanding fees - £120,000. There was and remains no evidence of Glen's contractual indebtedness to pay this sum, of the invoiced services to which it applies backed by timesheets or of outstanding unmet demands for payment. SKTL is Mukesh and other family members by another name and was set up to acquire SKT's business on Subhash's bankruptcy. This was certainly not an immediate indebtedness.
123. Outstanding directors fees - £28,000. This represents a claim by Mr Harjivan for outstanding directors' fees. This claim has not been documented and appeared to represent what Subhash considered Mr Harjivan should be paid. In any case, in view of his dishonest claim to the ownership of Glen's shares and the lack of any services provided by him to Glen, this claim would appear to be wholly irrecoverable.
124. Claims by two companies owned by Thakrar Family members - £18,000. These claims had been scrutinised by the Receiver who considered them to be unjustified or, at best, grossly inflated. The companies were small building companies controlled by Mukesh and other Thakrar siblings and they appeared to be a vehicle for these members to siphon money out of Glen as opposed to undertaking maintenance at reasonable rates for Glen on its property portfolio.
125. Halifax mortgage - £18,000. This sum had already been discharged and the mortgage cleared.

2.11.2.4 Alleged inability to pay

126. It was very evident from the evidence that the only example of a debt that Glen appeared unable to pay that Mr Shelton was aware of was the Bank of Scotland loan and that was only incapable of being paid because the Bank had called in the loan. This was called in because the monthly direct debit arranged on Glen's RBS bank account in Jersey which had been frozen by the injunction. It was Mr Shelton's responsibility to either make arrangements for this account to be permitted to make payments towards this direct debit or to arrange for the payments to be made by the Receiver by instructing her to make these payments. In fact, the Receiver through her solicitor was notified but only in October and the payments for three months between August and October were paid by the Receiver but, a short time before the payment was made, the loan was called in.
127. Mr Shelton made no attempt to discuss the suggested cash flow difficulties or suggested unpaid bills with the Receiver and did not even mention to her that he had these concerns at the time he was arranging to see Mr Cork in early March 2007 to discuss the possible need for Glen to appoint directors. He also made no attempt to arrange for Scott & Co to apply to the court for directions in relation to the injunctions or the Receiver so as to enable Glen to obtain funds held up by these processes, if they were held up in this way, to meet its day to day business expenditure and he does not appear to have sat down with Mukesh and ascertain what liabilities Glen had or to ensure that all bills should be sent to him so that he could arrange for their payment by the Receiver. He was, after all, the manager of Glen's business as well as its director. In truth, these steps were not taken because Subhash had not, and would not have, authorised them and Mr Shelton and Mukesh remained under Subhash's guiding hand.

2.11.3 Inability to pay debts

128. The directors relied on this provision of the Insolvency Act 1986 which defined the phrase "inability to pay debts" as showing that Glen was unable to pay its debts on 13 April 2007:

"123. (a) if a creditor (by assignment or otherwise) to whom the company is indebted in a sum exceeding £750 then due has served on the company … a written demand (in the prescribed form) requiring the company to pay the sum so due and the company has for 3 weeks thereafter neglected to pay the sum or to secure or to compound for it to the reasonable satisfaction of the creditor; or

…

(e) if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due."

129. I must, as I see it, consider the position of Glen as at the 13 April 2007, the date the directors contend they considered whether the statutory test was satisfied. On that day, the Bank of Scotland had served a demand for £282,434.56, it had been served on 30 October 2006 on Glen at SKTL's Woolwich offices and Mukesh and Subhash had not brought it to the attention of the Receiver, or even possibly Mr Shelton until March 2007. It was therefore unpaid but it seemed clear from Mr Shelton's evidence that it would have been possible to compound this debt by arranging for a sale of sufficient of the charged properties, numbering 9 in all, charged with the loan account and allowing the interests accruing whilst the sales were arranged to be added to the sum to be paid out of the proceeds of sale. Thus, Glen could have proceeded on the basis that it had compounded, or was readily able to, compound to the reasonable satisfaction of the Bank of Scotland its overall indebtedness to that Bank. The debts that could be said to have fallen due on or before 13 April 2007 that had not been paid did not total more than £50,000 - £60,000 at most and were probably much smaller is size. These could have been met out of income.
130. It is noteworthy that Ms Milner in her evidence, and Mr Arden QC in his written submissions, rely almost exclusively on indebtedness which was not referred to in Mukesh's schedule or considered at the meeting on 29 March 2007. This indebtedness includes HM Revenue & Customs' assessments in the sum of £346,000 which were first raised in a letter dated 24 April 2007; a judgment debt of £92,403.52 which was of long standing and was ignored by Mukesh's schedule and, so it would appear, is adequately charged and the creditor is not currently pressing for payment; interim costs orders in the Thakrar Litigation totalling £77,000 which, again Mukesh and Subhash's schedule ignores and which could not found an administration order since the relevant claiming parties are not pressing for immediate payment.
131. I conclude that the statutory threshold was not met on 13 April 2007 in that:

(1) Apart from the Bank of Scotland indebtedness, Glen's overall indebtedness as at 13 April 2007 did not exceed about £60,000 in the sense of debts which had fallen due for payment;

(2) Glen could have compounded with the Bank of Scotland for its indebtedness and the court would have sanctioned the sale of charged properties sufficient to meet this compounded sum;

(3) Glen's income was sufficient to meet its current indebtedness;

(4) There was no difficulty in arranging for genuine day to day expenditure to be met by the Receiver if she was kept fully and speedily informed of bills as they fell due and if Mr Shelton had worked directly with her instead of ignoring her; and

(5) Mr Shelton was sufficiently unconcerned at Glen's ability to meet its day to day indebtedness that he did not know what it was until he saw Mukesh's schedule at or soon before the meeting on 29 March 2007 and the indebtedness only appeared unmanageable because Subhash had instructed Mukesh to put into the schedule everything that could possibly be said to be against.

132. It is interesting to note that, due to the Thakrar Family state of denial about their liability to claiming parties in the Thakrar Litigation and also about their established liability in other litigation where tenants have succeeded in enfranchising their interest, the "throw everything in" schedule prepared by Mukesh with Subhash's assistance and pursuant to his instructions, omits reference to existing costs orders in favour of claiming parties totalling £77,000. For similar reasons, it omits reference to Glen's longstanding liability to meet a judgment debt in favour of Mr Lynch for £92,403.52 arising out of the enfranchisement proceedings in which Subhash and Mr Harjivan acted so dishonestly. Again due to Subhash's state of denial about Glen's substantial tax liability to HM Revenue & Customs, there is no reference to impending assessments totalling £346,000 or more. This blind spot stems from Subhash's pride and vanity at having arranged Glen's tax affairs, as he believes, so that it has no or very little tax liability. However, Subhash has consistently ignored the fact that his dealings with HMRC have always been based on Subhash's deceit that has led HMRS to believe erroneously that Glen is, and always has, been an off-shore company with a Jersey COMI which is wholly owned by overseas residents.

2.12 Was Party 1 a "Receiver" as defined by paragraph 41(1) of Schedule B1?

133. This issue arises because both the administrators and Mr Shelton considered that the administrators could require Party 1 to vacate her office by virtue of Paragraph 41(2) of schedule B1 which provides that:

"(2) Where a company is in administration, any receiver of part of the company's property shall vacate office if the administrator requires him to."

Mrs Jackson was appointed by the court pursuant to section 37 of the Supreme Court Act 1981 to preserve property claimed by other parties and as a preservative measure to support those parties' claims in legal proceedings. Thus, the interim Receiver is not a receiver of "part of the company's property" but is a receiver of monies against which there are valid and bona fide claims to hold to the court's order to abide the conclusion of, and decision in the proceedings. Pending the resolution of those disputes, Glen is not entitled to treat that property as its own albeit that it may use the monies for legitimate running expenditure. Otherwise, it must apply to the court for permission to use monies held by the receiver who is a court officer and who must account to the court for the monies held.

134. In my view an interim receiver appointed by the court as an adjunct to legal proceedings is not a receiver to which paragraph 41(2) applies at all. Of course, the legal proceedings out of which the receiver and any injunctions or freezing orders flow are subject to a moratorium which covers the institution or continuance of any legal process including legal proceedings, execution, distress and diligence except with the consent of the administrator or the permission of the court. Thus, the interim receiver who is already in post who has been appointed by the court may not act without obtaining the permission of the court or of the administrators but the administrators cannot require that receiver to vacate office, they must apply to the court for an order to that effect if that is what is sought and the court would then need to exercise its discretion as to what should be done with the order appointing the interim receiver in the first place.

2.13 By applying the appropriate three-stage test, were the appointers of the administrators influenced by an improper motive?

2.13.1 The Principles

135. It is a precondition of the discretionary jurisdiction that the Court should be satisfied that there was an "improper motive" on the part of the Directors in making the appointment. The time at which motive must be judged is at the time of the appointment. The onus of establishing improper motive is with the persons making the application under paragraph 81, namely Parties 1 and 4.
136. Schedule B1 gives no guidance as to what is meant by improper motive or the conditions under which it might be established. Nor is any guidance to be found in the material published by the relevant government departments and agencies which sponsored the amendments to the 1986 Act made by the Enterprise Act 2002.
137. In determining what approach the court should adopt to the question of improper motive, it can and should adopt the approach applicable to any challenge to the exercise by directors of the powers conferred on them generally. This is because no power vested in directors, including the power to appoint administrators, may be validly exercised for an improper motive. The approach to this general question was authoritatively set out in the opinion of the Board delivered by Lord Wilberforce in Howard Smith Ltd v Ampol Petroleum Ltd^[21].
138. The approach that a court should adopt may be set as follows:

(1) The court must first consider the nature of the power whose exercise is in question. In this case, the relevant power is the statutory power to appoint administrators. The court must determine the limits within which it may be exercised.

(2) Next, the Court must determine the substantial purpose for which the power was actually exercised. In determining this issue, the state of mind of the persons exercising the power is all-important. That state of mind is a question of fact, to be determined in the ordinary way, directly from evidence from the persons whose decision-making is challenged and indirectly by inference from the established facts.

(3) Finally, having identified the substantial purpose which motivated the exercise of the power, the court must determine whether that exercise was proper or not. In doing so, it will give credit to the bona fide opinion of the directors, assuming that the exercise of the power was bona fide. The court must, in undertaking this exercise, also recognise that the line between a proper and an improper exercise of a power is a "broad line".

139. It is important to note that Lord Wilberforce identified the task of the Court at stage two to be the identification of the "substantial purpose" or the "primary purpose" for which the power was actually exercised.^[22] The use of the terms "substantial" and "primary" is important, because it caters for mixed motive cases. It is not sufficient to establish any improper purpose or motive; that purpose or motive must have been the substantial or primary purpose or motivation behind the exercise of the power in question.
140. The Howard Smith case does not deal with the significance of professional advice. What is the position if directors act on advice to the effect that administration is appropriate? There is a useful discussion of this point, in the context of paragraph 81 challenges, in Kerr and Hunter on Receivers and Administrators,^[23] in which the authors suggest in a passage which I gratefully adopt that, even if the court concludes that the advice was wrong, that would not be sufficient to establish improper motive on the part of the directors who relied on that advice.
141. Moreover, as the authors also point out, the intended administrator is required to state, in the forms accompanying the notice of appointment, that he believes that:

"in his opinion the purpose of administration is reasonably likely to be achieved."^[24]

142. This is an essential part of the process, and an important safeguard, which requires the intended administrator to have formed a professional judgment as to the likelihood of the administration achieving the statutory purposes at which the administration process is directed. As with other professional advice, the fact that the intended administrator has formed and expressed that view is of critical importance when assessing the motives of the directors making the appointment.
143. The purpose of administration is defined in paragraph 3(1), as follows:

(1) Rescuing the company as a going concern; or

(2) Achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration), or

(3) Realising property in order to make a distribution to one or more secured or preferential creditors.

144. Provided that the substantial or primary motive of the directors, in making the appointment, was to seek to achieve one or more of those purposes in relation to the company, it is clear that the motive would be proper. In this regard, and in all cases, the directors will have the benefit of and be able to rely upon the fact that the intended administrator has stated that he considers that the administration purpose is reasonably likely to be achieved in relation to the company.
145. However, it is possible to imagine cases where the substantial or primary motive is improper, notwithstanding the existence of the statement. In such a case, the administration might continue, but only in circumstances where the Court considered that it was in the best interests of the company and its creditors, and made an order achieving this result in the exercise of its discretion.^[25]
146. I conclude therefore that, in applying Lord Wilberforce's three-stage approach, I must decide whether the primary or substantial motive was improper notwithstanding that the decision to appoint was taken on professional advice and the appointees made a statutory declaration that the intended purpose of rescuing Glen as a going concern, which was the purpose for appointing administrators for Glen, was likely to be achieved.

2.13.2 The Motive of the Directors of Glen in appointing

147. I must first decide who, for the purpose of this application and of the appointment in question, are the directors. I have already concluded that there was no directors' meeting held on 13 April 2007. I must assume, for the purposes of this application, that the appointment was valid since, otherwise, paragraph 81 cannot be engaged. Thus, strictly speaking, the appointment must be taken to have been that of Mr Shelton. However, it is clear that Mr Harjivan can be taken to have adopted the views of Mr Shelton since he can speak no English and was obviously fully in agreement as to anything that was motivating Mr Shelton. Ms Bhatt does not appear to have had, at the time of the appointment or previously, sufficient involvement in the affairs of Glen to have been capable of deciding in any other way than merely to adopt whatever Mr Shelton advised and whatever was motivating his decision.
148. However, as I have already found, the driving force behind the appointment was Subhash. He was the beneficial owner of Glen and its assets, he had always been the controlling mind and sole shadow director of Glen and it was he who had been masterminding Glen, Mr Harjivan and his siblings' involvement in the Thakrar Litigation. Moreover, Mr Shelton had always, as I have also found, unhesitatingly and without question allowed Subhash to take all decisions. There is no evidence to suggest that this particular appointment decision was taken by Mr Shelton with any greater role in its formulation or motivation or with any less influence from Subhash in any other way than all other decisions involving Glen that he had been involved in since his appointment as a director.
149. It follows that I must determine what motivated Subhash in urging Glen's directors, led by Mr Shelton, to appoint administrators on 13 April 2007 and in taking such an active part in securing that appointment.
150. It is clear from my findings that the motivation of Subhash was as follows:

(1) Glen was in desperate need of being saved because its future and its ownership of its assets and his beneficial ownership of Glen through Mr Harjivan's nominee ownership of Glen's issued shares were about to be destroyed by the Thakrar Litigation in general and by the actions of the conspiring lawyers acting for Parties 1, 2 and 4; the Receiver; Ramila and Vijaya through their lies and perjured evidence and the judge through his bias and his procedural improprieties arising from his conduct of trial no. 3.

(2) Glen and its assets had to be saved for its beneficial owner through Subhash's nominee, Mr Harjivan because the claiming parties had, and have, no or no substantial entitlement or enforceable claims. This is because:

(i) Subhash was not liable to Party 2 in the first place and judgment no. 1 was wrong and obtained by the claiming parties' dishonesty and the trial judge's errors of fact, law and procedure;

(ii) Party 2 has no claim against Glen because it compromised all causes of action against Glen during trial no. 1 and any suggestion that that compromise was procured by fraud is unsustainable;

(iii) All parties' claims for costs against Glen are misconceived, inflated and the result of the conspiracy of those parties and their professional advisers to incur exorbitant costs and then recover these unjustifiably from Glen.

(3) Unfortunately, despite every effort by Subhash, a state of the trial has been reached when it looks increasingly likely that judgment will be entered against Glen for all or for most of its assets. This despite the attempt to argue that there was a compromise which, regrettably, Judge Coulson could not be persuaded of.

(4) The only remaining way of derailing the Thakrar Litigation and saving Glen and its assets for its beneficial owner, is to bring that litigation to a premature end. This can be, or at least, might be achieved by the appointment of administrators since this is "the last game left in town".

(5) The appointment of administrators might work in achieving Subhash's objective because:

(i) It would cause the Thakrar Trial to halt since no further proceedings will be possible save for the then-outstanding recusal application that Subhash, as a result of the procedural hearing on 1 March 2007, had arranged for Mr Jones QC to set to work on in an attempt to mount the application in the near future;

(ii) It would lead to the immediate removal of the Receiver from office;

(iii) it would lead to the reinstatement of the Teso charges. Some charges had been removed but Subhash mistakenly believed, or decided to mistakenly assert, that I had removed all these charges;

(iv) It would lead to dismissal of all claiming parties' claims for costs; and

(v) It would stop Ramila and Vijaya's perjured evidence leading to Mr Harjivan being stripped of Subhash's beneficial ownership of Glen.

151. Subhash was not concerned in any way about the inability of Glen to pay its debts as they fell due but was frenziedly anxious about the looming loss of all or most of Glen and its assets. This can be seen from the following matters:

(1) He had made no attempt to ascertain what these debts were until the prospective administrators advised on or just before 29 March 2007 that these needed to be ascertained precisely and in detail.

(2) He and Mr Shelton decided to take no step to appoint an administrator until it became clear that the compromise trial had gone against them, many months after the alleged indebtedness and inability to work with the Receiver had started to show itself.

(3) Glen was in fact able to pay its debts and the principal debt to the Bank of Scotland had only occurred because Mukesh had, deliberately or by omission, failed to arrange for the Receiver to pay the interest instalments for August, September and October 2006 until it was too late to pay them.

(4) Mr Shelton and Mukesh had made no attempt to contact the Receiver at any stage, relying on the assumed and feigned conflict of interest that she found herself in which, even if it existed, she had never demonstrated in a way prejudicial to their interests.

(5) He knew that the Teso charges were a sham and he was therefore prepared to urge their reinstatement. Thus, Glen was more than able, as he saw it, to meet any conceivable debt, other than those owed to claiming parties that his dishonesty and sense of denial declined to acknowledge.

(6) The meeting with the directors' professional advisers at the meeting on 29 March 2007, and Subhash in his frequent briefings of the administrators thereafter, misinformed them in many significant respects both positively and in what they omitted to inform these advisers. In particular, the advisers were not informed fully about Glen's Subhash-dominated management structure, its debts, its beneficial ownership by Subhash, its purpose as a dishonest warehouse of Subhash's ill-gotten gains and its considerable charge-free asset value.

(7) He was prepared to, and did, forge minutes of two non-existent directors meetings in what seems to have been a misguided attempt to assist and hasten the appointment of administrators.

(8) He orchestrated a delaying tactic in early March 2007 whereby the Thakrar Litigation was again held up, this time by Subhash arranging for new leading counsel to be instructed and for Glen to sack without explanation its previous leading counsel. New counsel then, on instructions, applied for an adjournment to enable a full-frontal attack on the integrity of the trial process to be mounted by Glen by means of both abuse of process and recusal applications. This new recusal application was rapidly abandoned by the administrators on first being appointed.

152. Mr Shelton had enormous concerns and worries about this agenda. This was demonstrated, albeit almost by accident, during his evidence and in what was revealed about his attitude in evidence adduced at the trial. In particular:

(1.) He knew, and acknowledged in evidence when cross-examined at an earlier stage of the trial, that Subhash, at the very least, had a beneficial interest in Glen and might well be its sole owner;

(2.) He clearly had grave doubts about Mr Harjivan's story that he had become the beneficial owner of Glen. He was not prepared to assert that Mr Harjivan was not the owner but, more significantly, he was not prepared to state affirmatively that he thought that Mr Harjivan was the owner and his support of Mr Harjivan was so lukewarm as to betray a clear disbelief in it;

(3.) He was enormously relieved when the administrators unilaterally dropped Glen's recusal application, as he revealed in cross-examination during the paragraph 81 application. This may well have been the result of his knowing that he would have been cross-examined on a witness statement put in on 20 March 2007 which contained many errors. One glaring error was put to him during his paragraph 81 application cross-examination and he was very uncomfortable indeed in accepting his errors.

(4.) He had written a private memo following Glen's original settlement with SPC in 2002 which indicated that he had thought that Glen was in real danger of losing everything to SPC in its fraud action against Glen.

(5.) He had persuaded himself that the part of SPC's claim in the present trial that sought to have the compromise set aside was not being tried. He was again very uncomfortable when it was shown to him during the paragraph 81 application that this view was erroneous and that the setting aside application was currently being tried.

(6.) He was also very surprised and uncomfortable when it was shown to him that Party 1 was only a receiver of rents and had no role as a manager and was also uncomfortable when it was pointed out to him that he had never made any attempt to contact the Receiver at any time about Glen's debts and that he could easily have applied to the court for a variation of the injunctions and the terms of Party 1's receivership had he been experiencing any difficulties in ensuring that Glen's debts were being paid.

153. It was the case, of course, that the professional advisers provided detailed and full advice as to the desirability of appointing out of court administrators and the necessary draft board meeting minutes for the meeting that would be needed to approve and adopt that advice and the administrators were able to give the necessary statutory declaration. This occurred on the basis of their correctly and understandably accepting at face value what they had been told at the meeting on 29 March 2007 and also accepting at face value the list of creditors as being a fair and accurate statement of Glen's then current indebtedness.

2.13.3 Directors Improper Motive - Conclusion

154. I conclude that the substantial and primary, if not only, purpose of Glen's directors in appointing or in arranging for the appointment of administrators was an improper motive and that that purpose was not saved by the advice of Glen's professional advisers nor by the statutory declaration signed by the administrators prior to their appointment since these interventions were based on grossly inaccurate and misleading instructions provided by the directors with Subhash's active and interfering assistance.
155. 14 Were the administrators or their legal advisors at fault in any relevant respect in their advice or actions in relation to the administration?
156. At a late stage in the hearing, Parties 1 and 4 widened their attack on the administration and on the motive of the directors in appointing the administrators to include an attack on the administrators and their solicitors. The complaints were that both were culpable in not providing full discovery or information, particularly about the source of the funds that were paid to them, in their failure to approach or co-operate with the Receiver and her solicitors and in their provision of information generally. No attack was made as to their integrity, professional competence or in their roles as officers of the court.
157. It is easy with hindsight to fault professionals who have been so significantly misled by Glen's directors. However, the process of appointing administrators is one fraught with potential difficulty. These professionals had to work at very great speed in relation to a company and its tortuous, complex and chaotic affairs, given that it was considering administration at all, of which they have no prior knowledge. They had had no access to documents and had to take what was said to them at face value. There were no obvious indications of how significant was the difference between what they were told and what was the reality behind those instructions. Given that it had been possible to hoodwink so many over the previous seventeen years, it is difficult to start to be critical, indeed it would be grossly unfair to start to be critical, about the possible shortcomings that had occurred over a few days. I find that there are no grounds for criticising the administrators or their solicitors in connection with the appointment of the administrators.

2.15 Outstanding Issues

158. Four outstanding, indeed crucial, issues remain for decision. These do not arise as part of the fact-finding trial but they must be resolved in the near future, indeed those numbered (2) and (3) need to be resolved at an early stage and, unless agreement can be reached, need to be resolved in advance of the consequences trial.
159. These questions are:

(1) Should the appointment of the administrators cease to have effect or be treated as invalid and, if so, at what specified time?

(2) How should Glen be administered and/or managed in the future?

(3) In the light of the answers to these questions, what relief, if any, should the court grant under paragraphs 11, 81(1) or 81(3) of Schedule B1 or under Section 37 of the Supreme Court Act 1981 and/or the CPR or otherwise in relation to the control, administration and management of Glen?

(4) What costs, from which date and from whom, may the administrators claim their fees, costs and expenses incurred in connection with the administration?

160. The most important and pressing question that must be answered is what is to happen to Glen in the immediate future following the handing down of this judgment. Glen clearly cannot be returned to its previous directors and yet there will be the need for some urgent and some longer term decisions to be taken and for the business to be managed. This will involve:

(1) discovering the full extent of the value of the company's assets;

(2) ascertaining whether there is any realistic point in contesting SPC's claims to set aside the compromise agreement and Tomlin Order and defending that claim if so;

(3) finding the means of providing large interim payments to each group of claiming parties and their legal teams;

(4) negotiating with the HMRC and other creditors;

(5) dealing with the claims of all claiming parties and other creditors;

(6) ascertaining whether all claims can be met in full and, if not, working out a strategy and priority for dealing with the claims; contesting where appropriate the consequences trial if it takes place;

(7) negotiating with all claiming parties and creditors and disposing of what, if anything remains of Glen once all liabilities have been met in full to whoever is entitled to that residue.

161. Meanwhile, it must be decided how the claims will be met whether by selling the business and its assets wholesale or piecemeal or by raising money against the security of the existing portfolio or in some other way. This requires it to be decided whether this future series of decisions should be undertaken within the framework of a court-appointed administration, a liquidation, a court-appointed receivership under Section 37 of the Supreme Court Act 1981, a board of court-appointed or shareholder appointed directors or in some other way. Finally, the identity of the relevant personnel, whether they be liquidators, administrators, receivers, managers or directors must be determined and the day to day management of Glen's properties must be undertaken.

2.16 Conclusion

162. I find that:

(1) The relevant floating charge had not been discharged and it seemed unlikely that it could be argued that that charge should be considered, for the purposes of appointing administrators, as being unenforceable. That question had, however, to be determined following further argument of law.

(2) No Board meeting took place on 13 April 2007. However, Mr Shelton signed the draft minute prepared for Glen by Beachcroft in the presence of, or with the direct knowledge and approval of, Subhash. The question of whether that constituted "appointment by the directors of Glen" as required by paragraph 22(2) had, however, to be determined following further argument of law.

(3) The appointment of the administrators by the directors of Glen, if such took place, was for an improper motive and the conditions for the court to provide for the appointment of the administrators to cease, provided for in paragraph 81(1) were engaged.

(4) The appropriate order to be made in the light of these findings could not be determined without further argument.

163. By e-mail dated 19^th December 2007 I made the following further findings^[26], which are hereby incorporated into this judgment:

(1) For the purposes of any application or decision by the directors to appoint an administrator, the floating charge was valid and was to be treated as valid by the directors unless and until it had formally been discharged or declared void, invalid or no longer operative by an English court;

(2) I find as a fact that no Board meeting took place on 13 April 2007 and only one director signed the decision of the directors, namely Mr Shelton. Neither Mr Harjivan nor Ms Bhatt were consulted nor approved the document signed by Mr Shelton at Subhash's request the document dated 13 April 2007;

(3) I find as a fact that, on 13 April 2007, Glen was not likely to become insolvent and the directors had no bona fide belief that Glen was likely to become insolvent;

(4) Teso did not receive written notice of the proposed appointment of administrators prior to their appointment and did not give its consent, in writing, prior to that appointment;

(5) The decision to appoint the administrators was taken by Subhash, the directors, or more accurately, Mr Shelton on 13 April 2007, merely adopted his decision and implemented it and, in any event, the decision was taken in bad faith.

(6) The directors, and in particular Mr Shelton, did not fairly, fully, accurately or honestly, brief the legal advisors in the meeting at which advice was given as to the appropriateness of appointing administrators and any reliance on that advice by Mr Shelton and the other directors cannot either validate the administrators' appointment or allow it to be confirmed by the Paragraph 81 application.

(7) Evidence of that bad faith was the forgery of minutes of two meetings of the directors which did not take place which was undertaken by Subhash and approved of or acquiesced in by Mr Shelton. These minutes were not used but were retained by Subhash in case they were needed and were discovered pursuant to the search and seizure order issued by the Bankruptcy court to the Trustee.

(8) The administrators had the opportunity to submit any evidence they wished and they participated in the hearing and had the opportunity to make submissions on all these issues.

(9) The decision to appoint administrators was unlawful, a nullity and invalid. Had the appointment been valid, it would have to be set aside under Paragraph 81.

Note 1    Order 8.6.06 para 8 [C/39A]    [Back]

Note 2    Since this judgment was originally handed down as part of judgment no. 5 (see textinfra) various of the Parties have entered into various compromise agreements which have obviated the need for a further trial.    [Back]

Note 3    See footnote 2supra.    [Back]

Note 4    This refers to the findings I made in judgment no. 5 prior to chapter 15 of that judgment.    [Back]

Note 5    See paragraphs 73 to 75 below.    [Back]

Note 6    D4.5.07/151/1 - /153/4.     [Back]

Note 7    D4.5.07/147/19 - /148/11.    [Back]

Note 8    D4.5.07/154/17 - /155/20.    [Back]

Note 9    D4.5.07/159/24 - /163/4.    [Back]

Note 10    D5.5.07/168/5 - /170/18.     [Back]

Note 11    D5.5.07/158/18 - /159/159/4.     [Back]

Note 12    D5.5.07/179/5 - /179/25.     [Back]

Note 13    5.6.07/57 – 8 - /58/8.    [Back]

Note 14    D4.5.07/170/21 - /174/1.    [Back]

Note 15    D4.5.07/186/17 - /191/25.    [Back]

Note 16    D24.9.07/214/7 – 9.     [Back]

Note 17    D24.9.07/116/20 – 23.     [Back]

Note 18    D24.9.121.15 – 19.    [Back]

Note 19    Unreported, No 5670/04, 29 September 2005, Chancery Division. For a much deserved tribute to Hart J. see: Scottish & Newcastle plc v Delco Stephen Rages [2007] EWCA Civ 150 per Lloyd LJ: “1. This appeal is brought from an order of Mr Justice Hart made on 11 April 2006 after a nine day trial. The clarity and perceptiveness of the analysis and discussion in the judgment, and its presentation of the factual and legal subject-matter in a very readable manner, are characteristic of the judge, and a vivid reminder of how much the law has lost by his recent premature death.”     [Back]

Note 20    D5.6.07/65.    [Back]

Note 21    [1974] AC 821 (PC).    [Back]

Note 22    Ibid. at pages 822C and 838B respectively.    [Back]

Note 23    18th edition, paragraphs 17-19 to 17-20.    [Back]

Note 24    paragraph 29(3) of Schedule B1.     [Back]

Note 25    See two cases under the old regime for appointment of administrators: Re Dianor Jewels Limited [2001] 1 BCLC 450 and Re MTI Trading Systems Limited [1998] BCC 400.    [Back]

Note 26    Having been given to understand that the Joint Administrators did not intend to serve reply submissions.    [Back]