Closegate Hotel Development (Durham) Ltd and another v McLean and others [2013] EWHC 3237 (Ch) Chancery Division, Companies Court 25Oct2013 Mr Richard Snowden QC (Sitting as a Deputy Judge of the High Court) APPROVED JUDGMENT I DIRECT THAT PURSUANT TO CPR PD 39A PARA 6.1 NO OFFICIAL SHORTHAND NOTE SHALL BE TAKEN OF THIS JUDGMENT AND THAT COPIES OF THIS VERSION AS HANDED DOWN MAY BE TREATED AS AUTHENTIC. RICHARD SNOWDEN QC: Introduction 1. There is before me an application dated 16 October 2013 ( 2. The Administrators were purportedly appointed on 11 October 2013 by the Bank as the holder of qualifying floating charges in respect of the property of the Companies pursuant to paragraph 14 of Schedule B1 to the Insolvency Act 1986. The Companies challenge the validity of those appointments on the basis that paragraph 16 of Schedule B1 to the 1986 Act prohibits the appointment of an administrator while a floating charge is not enforceable. The Companies contend that as at 11 October 2013 the floating charges were not enforceable because the Bank was estopped from making an immediate demand for repayment of the monies owing to it or from exercising any of the rights under its security. 3. The Application is supported by witness statements from the two directors of the Companies, Ms. Geraldine Hunt and Mr. Robert Bishop ( The standing of the Companies to make the Application 4. Before turning to the facts and the question of estoppel, I should deal with a preliminary objection raised by Mr. Trace as to the standing of the Companies to make the Application. Mr Trace submitted that the appointment of the Administrators deprived the directors of the authority to cause the Companies to challenge the appointment of the Administrators; or that it did so unless the directors were prepared to offer an indemnity to the Companies in respect of the costs of the Application. 5. The basis for Mr. Trace 6. I do not accept that submission. On the basic point of construction of Schedule B1, in common with Lord Glennie in the Scottish case of Stephen, Petitioner [2012] BCC 537, I think that the concept of a 7. I also note, as did Lord Glennie, that there is long-standing authority to the effect that even after the appointment of a provisional liquidators, the board of directors of a company retains a residuary power to instruct lawyers to challenge the appointment of the provisional liquidator, to oppose the petition and, if a winding up order is made, to appeal against the making of that order: see In re Union Accident Insurance Co Limited [1972] 1 WLR 640. There are also numerous reported cases in which the directors of a company have caused the company to take proceedings to challenge the validity of the appointment of a receiver: see e.g. RA Cripps & Son Ltd v. Wickenden [1973] 1 WLR 944 and Sheppard & Cooper Ltd v. TSB Bank plc (No.2) [1996] BCC 965. I see no reason in principle why the position should be any different as regards the appointment of an administrator by a qualifying charge-holder under paragraph 14 of Schedule B1. 8. It would, moreover, be to my mind an anomalous result if it were within the authority of the directors to cause the company to resist an application by a qualifying charge-holder to the court for the appointment of an administrator under paragraph 10 of Schedule B1, but that it was outside their authority to cause the company to challenge the validity of an appointment under paragraph 14 of Schedule B1. 9. Mr. TraceNewhart Developments Ltd v Co-operative Commercial Bank Ltd [1978] QB 814 at 819 and 821, and of Chadwick LJ in Sutton v GE Capital Commercial Finance Ltd [2004] 2 BCLC 662 at [45]. Those cases both dealt with the question of whether directors could cause a company to bring proceedings against a third party after the appointment of a receiver. 10. In Newhart, Shaw LJ said, at page 821, 11. In Sutton, Chadwick LJ referred to Newhart and added, at [51], 12. In my view, neither of these cases is authority for the proposition that the directors of a company lack authority to cause a company to commence proceedings against a third party after the appointment of a receiver, or that the existence of such authority is conditional upon an indemnity for costs being provided. Indeed, the reference to an indemnity may not be entirely apposite. As explained by Chadwick LJ, where all of the assets of a company are caught by a floating charge, the position is that as a practical matter the directors who cause a company to bring such proceedings are likely to have to find outside funds to provide assurance to the solicitors that they instruct to act on behalf of the company that their fees and disbursements will be paid from some source other than the charged assets (which will be in the hands of the receiver). Further, the defendant to such proceedings may be entitled to apply for security for his costs of the action on the footing that the charged assets in the hands of the receiver will not be available to meet any adverse costs order against the company. 13. It seems to me that similar considerations might apply in the case of an administration where the administrator is likely to be unwilling to agree to charged assets being used to fund an action in the name of the company of which he does not approve. I also cannot immediately see why payment of the solicitors instructed by the directors rather than by the administrators should qualify for payment as an administration expense under rule 2.67 of the Insolvency Rules 1986 or why a court could or should direct that any order for costs against the company in favour of the defendant must be paid as an administration expense. 14. As I have indicated, the observations of Shaw LJ and Chadwick LJ to which I have referred were made in the context of claims being brought in the name of a company against third parties. In such cases there may well be time for the third party to seek to protect its own position by seeking the provision of security for costs before substantial costs are incurred in defending the action. That may be impracticable where the proceedings in the name of the company are brought on urgently. That is the case with the present Application, where there was no application by any of the Respondents for security for costs. 15. In such a situation, it seems to me that the respondents to an application such as the present may be thrown back upon the jurisdiction of the court to make third party costs orders against the directors of the applicant company under section 51 of the Senior Courts Act 1981 in an appropriate case. An analogy may be found in cases in which directors who improperly cause a company to resist the appointment of liquidators or provisional liquidators have been ordered to pay the costs of such resistance personally: see e.g. Gamlestaden plc v Brackland Magazines Limited [1993] BCC 194. I making those general comments I emphasise that I am not passing any judgment on the facts of the instant case. 16. In the result on this point, I conclude that the directors do have authority to cause the Companies to challenge the appointment of the Administrators, and that such authority is not dependent upon the provision by them of an indemnity for costs. The facts 17. I now turn to the facts and to the Companies 18. The Companies are the developers of leasehold land at Riverside, Durham upon which a Radisson SAS hotel has been constructed. That hotel is now operated pursuant to a management agreement by a company called Rezidor Hotels UK Limited. 19. The Bank was the provider of finance for the development, which funding was secured by floating charges granted by the two Companies. At the time of appointment of the Administrators the debt owed to the Bank was said to be in the region of 20. The relationship between the Companies and the Bank has not been an easy one. The original finance took a lengthy period to negotiate and there was a refinancing in 2007/2008. That led to complaints being made by the Companies against the Bank, and proceedings were issued in this Division by the Companies against the Bank and certain of its group companies on 2 November 2011 under claim number HC11/C03826 ( 21. In parallel to the pursuit of the High Court Claim, in early 2012 the Companies made overtures to the Bank with a view to settling the debt owed to the Bank and the High Court Claim. On 26 June 2012 the Bank responded favourably, indicating that it was 22. Thereafter discussions took place between representatives of the Bank and the Companies. In general terms, the Companies made a proposal to the Bank and to the landlord of the hotel for the acquisition of the freehold and leasehold interests in the hotel free of the Bank 23. Whilst the Companies were considering their next move, a further order was made on 16 October 2012 staying the High Court Action until 9 November 2012. That order was expressly subject to the parties having a right to terminate the stay on three business days 24. The Companies reverted to the Bank with an offer of settlement for a net amount in excess of 25. The Bank responded on 15 November 2012 commenting on the Companies 26. As events transpired, a deal was not concluded by the end of November 2012. Some confusion then ensued. On 3 December 2012 a further order staying the High Court Claim was made which purported to grant a stay until 9 November 2012 [sic], terminable on three business days 27. The Bank responded on 4 December 2012 that it remained open to finding a solution without recourse to taking further steps in the litigation and suggesting a further meeting between the parties. That drew a combative response from Mr. Bishop on 7 December 2012, but he agreed to what he described as 28. The supposed 29. On 25 January 2013 the Bank responded to the revised offer in some detail and concluded, (my emphasis) 30. A further meeting was held between the parties on 30 January 2013. That meeting was attended for the first time by solicitors for the parties who had not been responsible for the conduct of the High Court Claim and whose role would be to finalise and document any settlement. Mr. Bishop 31. The Bank followed the meeting up with an email of action points, which, among other things, indicated that the respective litigation solicitors would be contacting each other to discuss a proposed extension of the stay of the High Court Claim. 32. Correspondence between the parties then continued. For its part, each communication from the Bank repeated verbatim the paragraph containing a reservation of rights which had first been included in its letter of 25 January 2013 as set out in paragraph 29 above. A series of further consent orders were also made in the High Court Claim. Each stay was for a limited period, the last of which expired on 30 April 2013, and each order expressly provided that the stay could be determined by the parties on the giving of three business days 33. After 30 April 2013, no further stay was obtained. The absence of any stay was raised in correspondence between litigation solicitors acting for the parties in early August. In an email dated 6 August 2013, the solicitors for the Companies stated, The response of the Bank 34. Correspondence continued between the lawyers instructed by the parties over the summer in an endeavour to finalise the terms of settlement. However, reports emerged concerning financial difficulties that were being encountered by The Co-operative Bank, and that institution withdrew its offer of finance to the Companies in late August. On 4 September 2013 the solicitor instructed by the Companies emailed the Bank 35. By early October, the Companies had contacted a number of institutions regarding finance for the settlement, and they had received two indicative offers of finance from potential funders. They did not, however, communicate this to the Bank and there was no communication between the parties between the email of 4 September 2013 and 11 October 2013. 36. Shortly after 9 a.m. on 11 October 2013 the Bank emailed the Companies referring to the negotiations that had taken place since 2012 and the communication from the Companies The Bank 37. The Companies 38. As foreshadowed in its email, the Bank made formal demands for repayment of the debt, and in the absence of any payment, the Bank appointed the Administrators later on 11 October. Notices of appointment were filed at the Leeds District Registry at 2 p.m. 39. On 12 October 2013, the Companies On this basis the letter asserted that the Bank had no right to enforce its security on 11 October 2013 and that the appointment of the Administrators was invalid, 40. Apart from a narration of the correspondence and events to which I have referred above, Mr. Bishops 41. First, after referring to the letter from the Bank dated 15 November 2012 to which I have referred at paragraph 25 above, Mr. Bishop suggested that the Banks 42. Further, after giving his account of the meeting on 30 January 2013 to which I have referred in paragraph 30 above, Mr. Bishop commented, The Companies 43. In his skeleton argument, Mr. Phillips summarised the Companies 44. In oral argument, Mr. Phillips refined his submissions. He contended that there was a promissory estoppel arising because the Companies reasonably understood the communications from the Bank and the course of conduct between them to be a representation that neither side should take any action whilst negotiations between them were continuing. He further submitted that the representation was that this state of affairs would continue until either it was apparent that the negotiations had terminated, or the Bank gave reasonable notice to terminate the negotiations. Mr. Phillips accepted that the length of the period of reasonable notice would have been open to debate, but submitted that the Bank was obliged to give sufficient time for the Company to conclude its negotiations with potential funders. 45. Mr. Phillips submitted that this understanding on the part of the Companies was a reasonable conclusion to draw from what the Bank had said and done, and that this was sufficient to pass any requirement that a representation should be The Respondents 46. For the Respondents, Mr. Trace and Mr. Masefield submitted that it was settled law that a promissory estoppel can only arise where there is a clear and unequivocal representation upon which the representee relies to his detriment. They submitted that even taking the evidence of the Companies at its highest, none of the statements made by the Bank could conceivably have amounted to a representation or promise by the Bank of any sort concerning the future exercise of its right to demand repayment of its loan or the enforcement of its security; nor could such a promise relating to the Bank 47. Mr. Trace and Mr. Masefield also submitted that since the basis of a promissory estoppel is a statement made by one party to the other, any statement upon which the Companies could conceivably have relied must already have been known to them, and so there would be nothing to be gained by any process of disclosure of the Bank The law on promissory estoppel 48. The law as regards promissory estoppel can be traced back to cases such as Hughes v Metropolitan Railway (1877) 2 App. Cas. 439. In that case, a tenant to whom a notice to repair had been given wrote to the landlord proposing to sell its interest in the premises and stating that 49. The House of Lords held that the landlord was estopped from contending that the time should be counted. Lord Cairns LC observed at page 448, 50. I would observe that though couched in relatively general terms, Lord Cairns LC 51. The importance of precision in the communications between the parties said to give rise to a promissory estoppel has been apparent in subsequent cases. In Low v Bouverie [1891] 3 Ch 82, Bowen LJ said (at page 106) that: Kay LJ said (at page 113) that: 52. In Woodhouse AC Israel Cocoa v Nigerian Produce Marketing [1972] AC 741, Lord Hailsham LC gave the leading speech, which was concurred in by Viscount Dilhorne and Lord Pearson. Lord Hailsham LC reiterated the proposition derived from Low v Bouverie that in order to give rise to an estoppel, a representation should be clear and unequivocal, and he indicated that if a representation was not made in such a form, it would not matter that the representee had misconstrued it and relied upon it: see [1972] AC 741 at 755. Lord Hailsham LC also addressed the dictum of Bowen LJ in Low v Bouverie cited above, and said, 53. Mr. Phillips drew my attention to Lord CrossLow v Bouverie that was more favourable to a representee. Lord Cross referred (at page 768) to a decision of McNair J in Marquess of Bute v Barclays Bank [1955] 1 QB 202 in which McNair J had said that to found an estoppel a representation must be clear and unequivocal 54. Lord Salmon added to the debate. He said, at page 771, 55. These authorities were recently considered by the Court of Appeal in Sabrina Soon Duck Park Kim v Chasewood Park Residents Limited [2013] EWCA Civ 239. Patten LJ did not in terms deal with the difference between Lord Hailsham LC and Lord Cross, but acknowledged that there were conceptual issues. He said, at [23], 56. Patten LJ then observed that the courts have tended to a relatively strict application of the requirement that a representation should be unambiguous. He referred to Lord Hailsham LC 57. On the basis of these decisions, it seems to me that the weight of authority is to the effect that for a plea of promissory estoppel to succeed, there must have been a clear and unequivocal statement; and that if ambiguous words were used which could reasonably be interpreted in several ways (one of which would not support the alleged estoppel) then those words will not found an estoppel unless the representee seeks and obtains clarification of the statement. Analysis 58. As a preliminary matter, I agree with Mr. Trace and Mr. Masefleld that there is no reason why I should decline to adjudicate upon this matter summarily. The essence of a promissory estoppel is the identification of a clear statement made by one party to the other upon which the latter relies to his detriment. It is inherent in that formulation that the party asserting the estoppel must know of the terms of the statement made to him and how he understood it. To the extent that the argument is advanced on the basis of written communications, the documents will speak for themselves, and if the terms of any oral communication are not disputed, then such an argument cannot be assisted by an inquiry into the internal thoughts and deliberations of the representor. 59. It is also clear that the court should not decline to determine a matter summarily merely because of an unparticularised suggestion that something might turn up on disclosure: ICI Chemicals & Polymers v TTE Training [2007] EWCA Civ 725. In this regard, I invited Mr. Phillips at the start of the hearing to identify any particular issues upon which he contended that disclosure or cross-examination was necessary. In the event he identified only the question of what had been said at the meeting on 30 January 2013. But I consider that this point is met by Mr. Trace and Mr. Masefield inviting me to accept as accurate Mr. Bishop 60. At the start of my analysis, I would observe that this is not a case in which the alleged 61. Whilst I do not suggest that it is conceptually impossible for a promissory estoppel to arise by implication from a variety of sources as the Companies contend, I think that the requirement for precision apparent from the authorities to which I have referred means that the court must scrutinise such a claim with particular caution. 62. The evidence demonstrates that from its first letter of 26 June 2012, the Bank indicated a willingness to engage in negotiations with the Companies with the aim, but no assurance whatsoever, that a settlement should be achieved of all issues between them. That would include the indebtedness of the Companies to the Bank as well as the Companies 63. Moreover, whilst those who were involved in such negotiations on the part of the Companies might have assumed that the Bank would not call in its loan or seek to enforce its security whilst the negotiations were on-going, the Bank 64. Further, when the Bank repeated its openness to progress settlement negotiations in its letter of 25 January 2013 and subsequent letters – which are plainly the most relevant when considering the position at 11 October 2013 – the Bank expressly reserved all its rights. In context, that reservation could only sensibly have been understood to be a reference to the Bank 65. For completeness I should add that I do not think that the statements made by the Bank in the letter of 27 September 2012 that it would treat an offer from the Companies 66. Nor is anything added by the Bank 67. In similar vein, I also do not accept the submission that the Bank made any representation about its rights to call in its loan and enforce its security when it proposed and was prepared to agree a series of stays of the High Court Action. The simple point is that the High Court Action did not concern the exercise of the Bankper Mr. Bishop). If that was so, then in the same way as the Companies now suggest that the Bank had represented that it would suspend any enforcement action in relation to the loan and security for an indefinite period until negotiations between the parties had ended, it must follow that the Companies were supposed to stay their High Court Action on the same basis. 68. But that is manifestly not what happened. Instead, each of the stays that were agreed and ordered were for a strictly limited and finite duration, usually of a few weeks, and they were expressly determinable by either side on the giving of three business days 69. I also observe that as set out in paragraphs 24, 26 and 27 above, Mr. Bishop unilaterally threatened to terminate or not extend the stay of the High Court Claim, and in particular did so on 7 December 2012 irrespective of the fact that a 70. As a final point on this matter, I note that the last agreed stay expired on 30 April 2013. What followed was an offer of a stay until 30 September 2013 (i.e. 11 days before the Administrators were appointed) which was not accepted, and a decision by the litigation solicitors simply to 71. During oral argument, the very brief comments attributed to Mr. Healy at the meeting on 30 January 2013 to the effect that it was 72. As reported, Mr. Healy 73. The position does not improve for the Companies when one turns to consider the precise terms of the estoppel for which they now contend. When considering whether an alleged representation is sufficiently clear and unequivocal to found an estoppel, I think that it must be relevant for the court to consider precisely how the alleged estoppel is supposed to work. 74. As indicated above, Mr. Phillips formulated the terms of the representation on the basis that the Bank would not call in its loan or take enforcement action until either it was apparent that the negotiations had terminated, or the Bank gave reasonable notice to terminate the negotiations. Mr. Phillips accepted that the length of the period of reasonable notice would have been open to debate, but asserted that it would have had to be sufficient for the Company to conclude its negotiations with potential funders. 75. Apart from the complexity of this formulation, which makes it inherently unlikely to have been capable of being read into anything said or done by the Bank, I cannot see how anyone could reasonably have thought that this was a commercially workable regime to which the Bank was committing itself. 76. Under the first limb, the instant case provides a good illustration of the uncertainties that might arise as to whether, and if so when, negotiations would be found to have terminated. The position after 4 September 2013 was that the Companies had told the Bank that their finance from The Co-operative Bank had fallen through, they had not kept the Bank informed of any progress with other potential lenders, and there had been no discussions between the parties. Although the Companies 77. As to the second limb, it seems to me that a provision requiring the Bank to give a Conclusion 78. For the reasons set out above, I conclude that the Companies stand no real prospect of establishing that the Bank 79. Accordingly, I shall dismiss the Companies Postscript 80. As a postscript to this judgment, I should record that after the conclusion of the oral argument I received an unsolicited e-mail directly from Mr. Bishop. I did not study its contents in any detail, but sought the assistance of counsel as to the course I should follow. The response of Mr. Phillips was that I should not take it into account and Mr. Trace agreed. Mr. Masefield indicated that he had no objections to my considering the e-mail provided that he could make some submissions on its contents. Having considered those views I determined not to take the contents of the e-mail into account in this judgment and have not done so.
Closegate Hotel Development (Durham) Ltd and another v McLean and others
Closegate Hotel Development (Durham) Ltd and another v McLean and others
[2013] EWHC 3237 (Ch)
Chancery Division, Companies Court
25Oct2013
Mr Richard Snowden QC (Sitting as a Deputy Judge of the High Court)
APPROVED JUDGMENT
I DIRECT THAT PURSUANT TO CPR PD 39A PARA 6.1 NO OFFICIAL SHORTHAND NOTE SHALL BE TAKEN OF THIS JUDGMENT AND THAT COPIES OF THIS VERSION AS HANDED DOWN MAY BE TREATED AS AUTHENTIC.
RICHARD SNOWDEN QC:
Introduction
1. There is before me an application dated 16 October 2013 (
2. The Administrators were purportedly appointed on 11 October 2013 by the Bank as the holder of qualifying floating charges in respect of the property of the Companies pursuant to paragraph 14 of Schedule B1 to the Insolvency Act 1986. The Companies challenge the validity of those appointments on the basis that paragraph 16 of Schedule B1 to the 1986 Act prohibits the appointment of an administrator while a floating charge is not enforceable. The Companies contend that as at 11 October 2013 the floating charges were not enforceable because the Bank was estopped from making an immediate demand for repayment of the monies owing to it or from exercising any of the rights under its security.
3. The Application is supported by witness statements from the two directors of the Companies, Ms. Geraldine Hunt and Mr. Robert Bishop (
The standing of the Companies to make the Application
4. Before turning to the facts and the question of estoppel, I should deal with a preliminary objection raised by Mr. Trace as to the standing of the Companies to make the Application. Mr Trace submitted that the appointment of the Administrators deprived the directors of the authority to cause the Companies to challenge the appointment of the Administrators; or that it did so unless the directors were prepared to offer an indemnity to the Companies in respect of the costs of the Application.
5. The basis for Mr. Trace
6. I do not accept that submission. On the basic point of construction of Schedule B1, in common with Lord Glennie in the Scottish case of Stephen, Petitioner [2012] BCC 537, I think that the concept of a
7. I also note, as did Lord Glennie, that there is long-standing authority to the effect that even after the appointment of a provisional liquidators, the board of directors of a company retains a residuary power to instruct lawyers to challenge the appointment of the provisional liquidator, to oppose the petition and, if a winding up order is made, to appeal against the making of that order: see In re Union Accident Insurance Co Limited [1972] 1 WLR 640. There are also numerous reported cases in which the directors of a company have caused the company to take proceedings to challenge the validity of the appointment of a receiver: see e.g. RA Cripps & Son Ltd v. Wickenden [1973] 1 WLR 944 and Sheppard & Cooper Ltd v. TSB Bank plc (No.2) [1996] BCC 965. I see no reason in principle why the position should be any different as regards the appointment of an administrator by a qualifying charge-holder under paragraph 14 of Schedule B1.
8. It would, moreover, be to my mind an anomalous result if it were within the authority of the directors to cause the company to resist an application by a qualifying charge-holder to the court for the appointment of an administrator under paragraph 10 of Schedule B1, but that it was outside their authority to cause the company to challenge the validity of an appointment under paragraph 14 of Schedule B1.
9. Mr. TraceNewhart Developments Ltd v Co-operative Commercial Bank Ltd [1978] QB 814 at 819 and 821, and of Chadwick LJ in Sutton v GE Capital Commercial Finance Ltd [2004] 2 BCLC 662 at [45]. Those cases both dealt with the question of whether directors could cause a company to bring proceedings against a third party after the appointment of a receiver.
10. In Newhart, Shaw LJ said, at page 821,
board (though not the receiver) would wish to pursue, it does not seem to me that the rights or function of the receiver are affected if the company is indemnified against any liability for costs (as here). I see no principle of law or expediency which precludes the directors of a company, as a duly constituted board (and it is not suggested here that they were not a duly constituted board when they took the step of instituting this action) from seeking to enforce the claim, however ill-founded it may be, provided only, of course, that nothing in the course of the proceedings which they institute is going in any way to threaten the interests of the debenture holders.
11. In Sutton, Chadwick LJ referred to Newhart and added, at [51],
arged to the debenture holder, who does not consent to the action being brought t the claimant company provide, from outside funds, security for its (the defendant
12. In my view, neither of these cases is authority for the proposition that the directors of a company lack authority to cause a company to commence proceedings against a third party after the appointment of a receiver, or that the existence of such authority is conditional upon an indemnity for costs being provided. Indeed, the reference to an indemnity may not be entirely apposite. As explained by Chadwick LJ, where all of the assets of a company are caught by a floating charge, the position is that as a practical matter the directors who cause a company to bring such proceedings are likely to have to find outside funds to provide assurance to the solicitors that they instruct to act on behalf of the company that their fees and disbursements will be paid from some source other than the charged assets (which will be in the hands of the receiver). Further, the defendant to such proceedings may be entitled to apply for security for his costs of the action on the footing that the charged assets in the hands of the receiver will not be available to meet any adverse costs order against the company.
13. It seems to me that similar considerations might apply in the case of an administration where the administrator is likely to be unwilling to agree to charged assets being used to fund an action in the name of the company of which he does not approve. I also cannot immediately see why payment of the solicitors instructed by the directors rather than by the administrators should qualify for payment as an administration expense under rule 2.67 of the Insolvency Rules 1986 or why a court could or should direct that any order for costs against the company in favour of the defendant must be paid as an administration expense.
14. As I have indicated, the observations of Shaw LJ and Chadwick LJ to which I have referred were made in the context of claims being brought in the name of a company against third parties. In such cases there may well be time for the third party to seek to protect its own position by seeking the provision of security for costs before substantial costs are incurred in defending the action. That may be impracticable where the proceedings in the name of the company are brought on urgently. That is the case with the present Application, where there was no application by any of the Respondents for security for costs.
15. In such a situation, it seems to me that the respondents to an application such as the present may be thrown back upon the jurisdiction of the court to make third party costs orders against the directors of the applicant company under section 51 of the Senior Courts Act 1981 in an appropriate case. An analogy may be found in cases in which directors who improperly cause a company to resist the appointment of liquidators or provisional liquidators have been ordered to pay the costs of such resistance personally: see e.g. Gamlestaden plc v Brackland Magazines Limited [1993] BCC 194. I making those general comments I emphasise that I am not passing any judgment on the facts of the instant case.
16. In the result on this point, I conclude that the directors do have authority to cause the Companies to challenge the appointment of the Administrators, and that such authority is not dependent upon the provision by them of an indemnity for costs.
The facts
17. I now turn to the facts and to the Companies
18. The Companies are the developers of leasehold land at Riverside, Durham upon which a Radisson SAS hotel has been constructed. That hotel is now operated pursuant to a management agreement by a company called Rezidor Hotels UK Limited.
19. The Bank was the provider of finance for the development, which funding was secured by floating charges granted by the two Companies. At the time of appointment of the Administrators the debt owed to the Bank was said to be in the region of
20. The relationship between the Companies and the Bank has not been an easy one. The original finance took a lengthy period to negotiate and there was a refinancing in 2007/2008. That led to complaints being made by the Companies against the Bank, and proceedings were issued in this Division by the Companies against the Bank and certain of its group companies on 2 November 2011 under claim number HC11/C03826 (
21. In parallel to the pursuit of the High Court Claim, in early 2012 the Companies made overtures to the Bank with a view to settling the debt owed to the Bank and the High Court Claim. On 26 June 2012 the Bank responded favourably, indicating that it was
22. Thereafter discussions took place between representatives of the Bank and the Companies. In general terms, the Companies made a proposal to the Bank and to the landlord of the hotel for the acquisition of the freehold and leasehold interests in the hotel free of the Bank
23. Whilst the Companies were considering their next move, a further order was made on 16 October 2012 staying the High Court Action until 9 November 2012. That order was expressly subject to the parties having a right to terminate the stay on three business days
24. The Companies reverted to the Bank with an offer of settlement for a net amount in excess of
25. The Bank responded on 15 November 2012 commenting on the Companies
26. As events transpired, a deal was not concluded by the end of November 2012. Some confusion then ensued. On 3 December 2012 a further order staying the High Court Claim was made which purported to grant a stay until 9 November 2012 [sic], terminable on three business days
27. The Bank responded on 4 December 2012 that it remained open to finding a solution without recourse to taking further steps in the litigation and suggesting a further meeting between the parties. That drew a combative response from Mr. Bishop on 7 December 2012, but he agreed to what he described as
28. The supposed
29. On 25 January 2013 the Bank responded to the revised offer in some detail and concluded,
he completion of [a] settlement will be [in] full and final settlement of all claims (existing and future) against [the Bank] and [the landlord]. In the meantime, all rights are reserved.
(my emphasis)
30. A further meeting was held between the parties on 30 January 2013. That meeting was attended for the first time by solicitors for the parties who had not been responsible for the conduct of the High Court Claim and whose role would be to finalise and document any settlement. Mr. Bishop
commercial, not litigationn that good faith commercial negotiations would continue based upon the principle terms [sic] that had now been agreed, and on the basis that any litigation, i.e. actions that had been threatened previously by either side (enforcement by the Bank and the Companies prosecuting their claims) would not be pursued whilst those negotiations were ongoing.
My notes of the meeting confirm that the Bank confirmed its good intentions and [the Companiestransparencykey
31. The Bank followed the meeting up with an email of action points, which, among other things, indicated that the respective litigation solicitors would be contacting each other to discuss a proposed extension of the stay of the High Court Claim.
32. Correspondence between the parties then continued. For its part, each communication from the Bank repeated verbatim the paragraph containing a reservation of rights which had first been included in its letter of 25 January 2013 as set out in paragraph 29 above. A series of further consent orders were also made in the High Court Claim. Each stay was for a limited period, the last of which expired on 30 April 2013, and each order expressly provided that the stay could be determined by the parties on the giving of three business days
33. After 30 April 2013, no further stay was obtained. The absence of any stay was raised in correspondence between litigation solicitors acting for the parties in early August. In an email dated 6 August 2013, the solicitors for the Companies stated,
The response of the Bank
34. Correspondence continued between the lawyers instructed by the parties over the summer in an endeavour to finalise the terms of settlement. However, reports emerged concerning financial difficulties that were being encountered by The Co-operative Bank, and that institution withdrew its offer of finance to the Companies in late August. On 4 September 2013 the solicitor instructed by the Companies emailed the Bank
As advised previously, my client has been pursuing other funders in case this situation arose and their financial adviser is currently in negotiations with several alternative funders and we met at the hotel last week to discuss the various funding options and in particular, their likely cost.
As soon as we have a firm offer my clients are comfortable with, I will be in touch with you both to hopefully progress matters.
35. By early October, the Companies had contacted a number of institutions regarding finance for the settlement, and they had received two indicative offers of finance from potential funders. They did not, however, communicate this to the Bank and there was no communication between the parties between the email of 4 September 2013 and 11 October 2013.
36. Shortly after 9 a.m. on 11 October 2013 the Bank emailed the Companies referring to the negotiations that had taken place since 2012 and the communication from the Companies
The Bank
37. The Companies
38. As foreshadowed in its email, the Bank made formal demands for repayment of the debt, and in the absence of any payment, the Bank appointed the Administrators later on 11 October. Notices of appointment were filed at the Leeds District Registry at 2 p.m.
39. On 12 October 2013, the Companies
(2) The Companies had told the Bank that negotiations were continuing and that any firm offer would be communicated.
(3) The Bank had not responded.
(4) In reliance, the Companies had continued to negotiate in good faith in the reasonable expectation that the Bank would not enforce without reasonable notice to the Companies, which, in the circumstances required reasonable time to conclude negotiations then underway.
On this basis the letter asserted that the Bank had no right to enforce its security on 11 October 2013 and that the appointment of the Administrators was invalid,
40. Apart from a narration of the correspondence and events to which I have referred above, Mr. Bishops
41. First, after referring to the letter from the Bank dated 15 November 2012 to which I have referred at paragraph 25 above, Mr. Bishop suggested that the Banks
42. Further, after giving his account of the meeting on 30 January 2013 to which I have referred in paragraph 30 above, Mr. Bishop commented,
e Co-op) and its comments at the meeting, all led me to conclude that the negotiations were being conducted on a good faith basis and that, should the situation change, the Bank would give the Companies reasonable notice in order to conclude any negotiations then in hand.
At the very latest from the date of this meeting, the Companies also understood (and further committed ourselves) to the negotiations and, and both I and Mrs. Hunt have spent considerable time (I would estimate most days most weeks) and the Companies have spent considerable funds (I would estimate in excess of
The Companies
43. In his skeleton argument, Mr. Phillips summarised the Companies
otice. The understanding merely suspended the rights of the Bank for such time as would have allowed any negotiations in hand with a potential funder to be concluded either to a firm offer or a refusal.
44. In oral argument, Mr. Phillips refined his submissions. He contended that there was a promissory estoppel arising because the Companies reasonably understood the communications from the Bank and the course of conduct between them to be a representation that neither side should take any action whilst negotiations between them were continuing. He further submitted that the representation was that this state of affairs would continue until either it was apparent that the negotiations had terminated, or the Bank gave reasonable notice to terminate the negotiations. Mr. Phillips accepted that the length of the period of reasonable notice would have been open to debate, but submitted that the Bank was obliged to give sufficient time for the Company to conclude its negotiations with potential funders.
45. Mr. Phillips submitted that this understanding on the part of the Companies was a reasonable conclusion to draw from what the Bank had said and done, and that this was sufficient to pass any requirement that a representation should be
The Respondents
46. For the Respondents, Mr. Trace and Mr. Masefield submitted that it was settled law that a promissory estoppel can only arise where there is a clear and unequivocal representation upon which the representee relies to his detriment. They submitted that even taking the evidence of the Companies at its highest, none of the statements made by the Bank could conceivably have amounted to a representation or promise by the Bank of any sort concerning the future exercise of its right to demand repayment of its loan or the enforcement of its security; nor could such a promise relating to the Bank
47. Mr. Trace and Mr. Masefield also submitted that since the basis of a promissory estoppel is a statement made by one party to the other, any statement upon which the Companies could conceivably have relied must already have been known to them, and so there would be nothing to be gained by any process of disclosure of the Bank
The law on promissory estoppel
48. The law as regards promissory estoppel can be traced back to cases such as Hughes v Metropolitan Railway (1877) 2 App. Cas. 439. In that case, a tenant to whom a notice to repair had been given wrote to the landlord proposing to sell its interest in the premises and stating that
49. The House of Lords held that the landlord was estopped from contending that the time should be counted. Lord Cairns LC observed at page 448,
nce, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.
50. I would observe that though couched in relatively general terms, Lord Cairns LC
51. The importance of precision in the communications between the parties said to give rise to a promissory estoppel has been apparent in subsequent cases. In Low v Bouverie [1891] 3 Ch 82, Bowen LJ said (at page 106) that:
understood in a particular sense by the person to whom it is addressed.
Kay LJ said (at page 113) that:
52. In Woodhouse AC Israel Cocoa v Nigerian Produce Marketing [1972] AC 741, Lord Hailsham LC gave the leading speech, which was concurred in by Viscount Dilhorne and Lord Pearson. Lord Hailsham LC reiterated the proposition derived from Low v Bouverie that in order to give rise to an estoppel, a representation should be clear and unequivocal, and he indicated that if a representation was not made in such a form, it would not matter that the representee had misconstrued it and relied upon it: see [1972] AC 741 at 755. Lord Hailsham LC also addressed the dictum of Bowen LJ in Low v Bouverie cited above, and said,
esentation will (not may) be reasonably understood in the particular sense required. I do not regard this second sentence as any authority for general qualification of the first. On the contrary, the first sentence governs the second and contains the very proposition for which Low v. Bouverie is rightly cited as an authority.
53. Mr. Phillips drew my attention to Lord CrossLow v Bouverie that was more favourable to a representee. Lord Cross referred (at page 768) to a decision of McNair J in Marquess of Bute v Barclays Bank [1955] 1 QB 202 in which McNair J had said that to found an estoppel a representation must be clear and unequivocal
mind, very obscure. Although words used have only one tatement may be obvious to anyone but sometimes it may arise from facts not known to the representee. What, I conceive, Bowen L.J. and McNair J. were saying – rightly or wrongly – was that the question to ask was whether the representee was justified in having no doubt that the words meant what he took them to mean. But one cannot decide questions of this sort without regard to the relationship of the parties for that may be such that the representor ought to be saddled with the risk of the representee putting the best interpretation which he can on language which is undoubtedly equivocal.
54. Lord Salmon added to the debate. He said, at page 771,
r than its true meaning. I would classify such a letter, if it exists, as hat it need not come up to
55. These authorities were recently considered by the Court of Appeal in Sabrina Soon Duck Park Kim v Chasewood Park Residents Limited [2013] EWCA Civ 239. Patten LJ did not in terms deal with the difference between Lord Hailsham LC and Lord Cross, but acknowledged that there were conceptual issues. He said, at [23],
ble (but perhaps less probable) meanings not fatal to the creation of an estoppel where the Court can say that it was reasonable for the representee to have interpreted the words used in the way he did? There is also an issue about the test to be adopted by the Court. Few, if any, statements are not capable of being interpreted in more than one way. The Courtd the Courto more than one reasonable interpretation (one of which is fatal to the estoppel defence) then the representee was not entitled to rely on what was said without further clarification and there is no basis for an estoppel.
56. Patten LJ then observed that the courts have tended to a relatively strict application of the requirement that a representation should be unambiguous. He referred to Lord Hailsham LC
57. On the basis of these decisions, it seems to me that the weight of authority is to the effect that for a plea of promissory estoppel to succeed, there must have been a clear and unequivocal statement; and that if ambiguous words were used which could reasonably be interpreted in several ways (one of which would not support the alleged estoppel) then those words will not found an estoppel unless the representee seeks and obtains clarification of the statement.
Analysis
58. As a preliminary matter, I agree with Mr. Trace and Mr. Masefleld that there is no reason why I should decline to adjudicate upon this matter summarily. The essence of a promissory estoppel is the identification of a clear statement made by one party to the other upon which the latter relies to his detriment. It is inherent in that formulation that the party asserting the estoppel must know of the terms of the statement made to him and how he understood it. To the extent that the argument is advanced on the basis of written communications, the documents will speak for themselves, and if the terms of any oral communication are not disputed, then such an argument cannot be assisted by an inquiry into the internal thoughts and deliberations of the representor.
59. It is also clear that the court should not decline to determine a matter summarily merely because of an unparticularised suggestion that something might turn up on disclosure: ICI Chemicals & Polymers v TTE Training [2007] EWCA Civ 725. In this regard, I invited Mr. Phillips at the start of the hearing to identify any particular issues upon which he contended that disclosure or cross-examination was necessary. In the event he identified only the question of what had been said at the meeting on 30 January 2013. But I consider that this point is met by Mr. Trace and Mr. Masefield inviting me to accept as accurate Mr. Bishop
60. At the start of my analysis, I would observe that this is not a case in which the alleged
61. Whilst I do not suggest that it is conceptually impossible for a promissory estoppel to arise by implication from a variety of sources as the Companies contend, I think that the requirement for precision apparent from the authorities to which I have referred means that the court must scrutinise such a claim with particular caution.
62. The evidence demonstrates that from its first letter of 26 June 2012, the Bank indicated a willingness to engage in negotiations with the Companies with the aim, but no assurance whatsoever, that a settlement should be achieved of all issues between them. That would include the indebtedness of the Companies to the Bank as well as the Companies
63. Moreover, whilst those who were involved in such negotiations on the part of the Companies might have assumed that the Bank would not call in its loan or seek to enforce its security whilst the negotiations were on-going, the Bank
64. Further, when the Bank repeated its openness to progress settlement negotiations in its letter of 25 January 2013 and subsequent letters – which are plainly the most relevant when considering the position at 11 October 2013 – the Bank expressly reserved all its rights. In context, that reservation could only sensibly have been understood to be a reference to the Bank
65. For completeness I should add that I do not think that the statements made by the Bank in the letter of 27 September 2012 that it would treat an offer from the Companies
66. Nor is anything added by the Bank
67. In similar vein, I also do not accept the submission that the Bank made any representation about its rights to call in its loan and enforce its security when it proposed and was prepared to agree a series of stays of the High Court Action. The simple point is that the High Court Action did not concern the exercise of the Bankper Mr. Bishop). If that was so, then in the same way as the Companies now suggest that the Bank had represented that it would suspend any enforcement action in relation to the loan and security for an indefinite period until negotiations between the parties had ended, it must follow that the Companies were supposed to stay their High Court Action on the same basis.
68. But that is manifestly not what happened. Instead, each of the stays that were agreed and ordered were for a strictly limited and finite duration, usually of a few weeks, and they were expressly determinable by either side on the giving of three business days
69. I also observe that as set out in paragraphs 24, 26 and 27 above, Mr. Bishop unilaterally threatened to terminate or not extend the stay of the High Court Claim, and in particular did so on 7 December 2012 irrespective of the fact that a
70. As a final point on this matter, I note that the last agreed stay expired on 30 April 2013. What followed was an offer of a stay until 30 September 2013 (i.e. 11 days before the Administrators were appointed) which was not accepted, and a decision by the litigation solicitors simply to
71. During oral argument, the very brief comments attributed to Mr. Healy at the meeting on 30 January 2013 to the effect that it was
72. As reported, Mr. Healy
73. The position does not improve for the Companies when one turns to consider the precise terms of the estoppel for which they now contend. When considering whether an alleged representation is sufficiently clear and unequivocal to found an estoppel, I think that it must be relevant for the court to consider precisely how the alleged estoppel is supposed to work.
74. As indicated above, Mr. Phillips formulated the terms of the representation on the basis that the Bank would not call in its loan or take enforcement action until either it was apparent that the negotiations had terminated, or the Bank gave reasonable notice to terminate the negotiations. Mr. Phillips accepted that the length of the period of reasonable notice would have been open to debate, but asserted that it would have had to be sufficient for the Company to conclude its negotiations with potential funders.
75. Apart from the complexity of this formulation, which makes it inherently unlikely to have been capable of being read into anything said or done by the Bank, I cannot see how anyone could reasonably have thought that this was a commercially workable regime to which the Bank was committing itself.
76. Under the first limb, the instant case provides a good illustration of the uncertainties that might arise as to whether, and if so when, negotiations would be found to have terminated. The position after 4 September 2013 was that the Companies had told the Bank that their finance from The Co-operative Bank had fallen through, they had not kept the Bank informed of any progress with other potential lenders, and there had been no discussions between the parties. Although the Companies
77. As to the second limb, it seems to me that a provision requiring the Bank to give a
Conclusion
78. For the reasons set out above, I conclude that the Companies stand no real prospect of establishing that the Bank
79. Accordingly, I shall dismiss the Companies
Postscript
80. As a postscript to this judgment, I should record that after the conclusion of the oral argument I received an unsolicited e-mail directly from Mr. Bishop. I did not study its contents in any detail, but sought the assistance of counsel as to the course I should follow. The response of Mr. Phillips was that I should not take it into account and Mr. Trace agreed. Mr. Masefield indicated that he had no objections to my considering the e-mail provided that he could make some submissions on its contents. Having considered those views I determined not to take the contents of the e-mail into account in this judgment and have not done so.
