Digest
Case-law Digest
COMPANY & INSOLVENCY
Crown disclaimer
Re Fivestar Properties Ltd
[2015] EWHC 2782 (Ch)
At issue was the effect of a company’s restoration to the register on an earlier disclaimer of freehold property by the Crown. The trial judge held that the Crown’s disclaimer of the freehold was not a disposition, and the effect of the company’s restoration to the register was that, retrospectively, the freehold estate was recreated and revested in the company in all respects as if it had never been dissolved and the freehold had never been disclaimed.
Comment: There is uncertainty in this area. Earlier this year, in Scotland and at appellate level, it was held that the Crown’s disclaimer of a lease remained intact when a company was restored to the register subsequently (see ELB Securities Ltd v (First) Love (Second) Prestwick Hotels Ltd [2015] CSIH 67).
Companies and non-party cost orders
Trident Australasia Pty Ltd v Versabuild LLC and others
[2015] EWHC 2890 (Comm)
Trident brought an unsuccessful action against Versabuild. Versabuild was awarded costs (of the claim and its counterclaim) on the indemnity basis, but Trident failed to pay. Versabuild applied for a non-party costs order under Senior Courts Act 1981 s51 against Mr Cox (the sole shareholder of Trident and also its chairperson and managing director); Mr Ross (an alternate director); and Ms Robinson (the company’s accountant and financial controller). The judge granted the order against Mr Cox only. He was ordered to pay the costs that Trident had been ordered - but had failed - to pay.
Comment: The judge made clear that an order for costs against a non-party was exceptional, and only appropriate in cases described as being ‘outside of the ordinary run’ . The decision provides a good example of such a case, and of circumstances where a shareholder or director can be made liable for company obligations.
This said, as the judge stressed, the mere fact that an individual is a significant shareholder, or a dominant director, of a company is not, by itself, sufficient . Some additional element is required where, for example, the non-party has funded the proceedings, controlled the same, would stand to benefit from the proceedings, or had acted with impropriety in their conduct.
Unfair prejudice and share valuation
Birdi v (1) Specsavers Optical Group Ltd (2) Singh (3) Dartford Visionplus Ltd (4) Dartford Specsavers Ltd [2015] EWHC 2870 (Ch)
A former director and shareholder made wide-ranging allegations of unfair prejudice under Companies Act 2006 s994 in respect of her removal from a business. The only allegations to be upheld were those relating to certain breaches of directors’ duties. The judge held that this unfair prejudice should be taken into account in the sale price of her shares.
Comment: The case provides a good example of the conduct that can found a successful petition under section 994, which remains one of the key remedies for shareholders in closely held companies. The decision is important also because of the illustration it offers of the court’s ability to provide relief in a flexible way, which is appropriate for the circumstances.
Insolvency and post-petition payments
Sahaviriya Steel Industries UK Ltd v Hewden Stuart Ltd
[2015] EWHC 2726 (Ch)
The court approved various payments by Sahaviriya, after a petition for its winding up had been presented. The payments were approved under Insolvency Act 1986 s127, which provides that dispositions of a company’s property after the presentation of a winding-up petition are void unless approved.
Comment: The decision is noteworthy and unusual because the early hearings took place in private. The trial judge held that this was necessary in order for the company to be able to set out in detail, and with complete candour, information that was commercially confidential.
In the judge’s view, disclosure at a public hearing might have impacted negatively on the delivery of certain company plans. This would not have been in the interests of the company’s unsecured creditors, the protection of which was the principal purpose of section 127.
CRIME
Proportionality of powers to detain at ports or borders
Beghal v Director of Public Prosecutions
[2015] UKSC 49
A woman was stopped under Terrorism Act 2000 Sch 7 when passing through East Midlands Airport on her return from Paris, where she had visited her husband, who was a French national detained in custody in relation to terrorist offences. Most of the questions she had been asked (the majority of which she had not answered) included her reasons for travel, where she had stayed, whether she had been arrested in the past, her relationship with her husband given his imprisonment for terrorism, her nationality status and whether she was carrying a mobile phone.
The Supreme Court was asked to consider whether the powers set out in the legislation were proportionate and in line with rights under the European Convention on Human Rights (‘ the convention’ ). It was held that anti-terrorism provisions, without any requirement for prior reasonable suspicion, allowed police officers to stop, question and detain a person at a port or border for up to nine hours for the purpose of determining whether s/he appeared to be as person concerned in the commission, preparation or instigation of acts of terrorism, were not incompatible with the convention. Because port questioning and search under Schedule 7 was not part of a criminal investigation, no question of a breach of the applicant’s right to a fair trial arose.
EMPLOYMENT
Allegation of bad faith
Secretary of State for Justice v Lown
UKEAT/0082/15
An employment tribunal’s reasoning suggested that it considered that an employer had acted in bad faith, and was determined to dismiss the claimant regardless of any evidence in his favour. However, the allegation of bad faith was not put to the employer’s witnesses, and the Employment Appeal Tribunal ruled that this was a procedural error rendering the tribunal’s decision unsafe. The case was remitted to a different tribunal for a rehearing.
EUROPE
VAT and cryptocurrencies
Skatteverket v Hedqvist
[2015] EUECJ C-264 /14
In a preliminary ruling from Sweden, questions were asked about the VAT consequences for a business that proposed exchanging traditional currencies for bitcoin (and vice versa). The court held, referring to the VAT Directive 2006/112/EC, that VAT was not payable on the exchange of a traditional currency for bitcoin.
Comment: Cryptocurrencies such as bitcoin pose many interesting questions for policymakers and the courts. Providing a regulatory framework supporting such usage is seen by some jurisdictions as a potential source of competitive advantage. From a UK perspective, the court’s decision is important and confirms the view taken by HM Revenue and Customs in Revenue and Customs Brief 9 (2014): Bitcoin and other cryptocurrencies, a guidance note published in 2014.*