Mr Ben Channer (directly instructed) for the Third Respondent
Caroline Shea KC:
This is my judgment on an application made pursuant to a notice dated 8 November 2023 (“the Application”) for an adjournment of a trial listed for a 7 day hearing commencing 9 November 2023 (with one day’s prior judicial reading). The Application is brought by the first, second and third respondents (“R1”, “R2” and “R3” respectively, together “the Applicants”) to a petition under section 994 of the Companies Act 2006 (“the Petition”). The Application is opposed by the Petitioner. The Applicants requested the Application be heard remotely the day before the trial was due to commence. I directed that it be heard at the outset of the trial on 9 November 2023, and that a skeleton argument be produced of no more than four pages addressing the legal principles relied upon in support of the Application. A skeleton argument was served on the afternoon of 8 November 2023 on behalf of the First and Second Respondents. Also served that afternoon was a skeleton argument on behalf of the Petitioner, opposing the Application.
I shall briefly set the scene in terms of the central dispute between the parties. It is the Petitioner’s case that the Seventh Respondent (“TCGL”) was sold at undervalue out of a holding company, the Sixth Respondent (“AJHL”), into a new holding company, the Eight Respondent (“THL”), in which the Petitioner had no shareholding, but in which R1 and R2 had in combination a majority shareholding. The sale was effected by R1 as sole director of TCGL, in the face of the Petitioner’s objections. He claims this caused him to suffer unfair prejudice. R1 was a shareholder of AJHL, owning 47.5% of the shares, the same shareholding as that of the Petitioner. R2, the Company Secretary, owned a 5% shareholding in AJHL. R3 was an investor who was allocated a 15% share of THL upon the transfer to it of TCGL. The Fourth and Fifth Respondents were also investors in THL; the claim against them was settled last week by means of a Tomlin Order and they play no further part in these proceedings.
The Application is brought on three grounds: (1) the alleged financial deterioration of TCGL, the company at the centre of the dispute and in respect of the value of which the Petitioner and the Respondents have each adduced the evidence of an expert accountant. It was said that TCGL had been put into administration the week of the trial (“ground 1”); (2) the consequential need for further disclosure, witness statements and expert reports in order to do justice to the central issues in the case (“ground 2”); and (3) the fact that R1 and R2 are no longer legally represented at trial which creates an unfair inequality of arms (“ground 3”).
The evidence in support of the Application is set out in section 10 of the Application Notice. The Application Notice was signed by a representative of Wordley Partnership, solicitors instructed by R1, R2, and R3, who checked the box indicating that the Applicants believe that the facts stated in section 10 are true. Notwithstanding that statement of truth, late yesterday afternoon, an email was sent informing me that TCGL was not in fact in administration; rather a Notice of Intention to Appoint Administrators was filed by the directors of TCGL on 3 November 2023.
Although R1 and R2 are unrepresented for the purposes of the trial, they were represented on the Application by Mr Loxton of Counsel. Mr Loxton had been instructed to appear at the trial on a direct access basis, but had notified the court on 7 November 2023 that he had had to return his instructions the previous day. R3 was represented by Mr Channer of Counsel.
Ground (1) – TCGL financial problems
Under ground (1), it is said that TCGL has been struggling financially since May 2023, a position which worsened significantly in September 2023. This was said to have led to the administration of the company on 3 November 2023 (that evidence was later amended to say that a Notice of Intention to Appoint Administrators was filed on 3 November 2023). It is said that the experts, who exchanged expert reports at the beginning of June 2023 addressing the specific question of the value of TCGL, and who produced a joint statement dated 26 June 2023, have not had an opportunity to report or opine on the value of TCGL since these highly material matters arose. Neither prior to issuing the joint statement, nor until last week when documents were sent to the Respondents’ expert, had either expert been supplied with any materials documenting the alleged decline, nor had they been otherwise alerted to the alleged change in financial outlook of TCGL.
Ground (2) – further directions required
Under this ground it is said that directions are required for (1) a further disclosure bundle to be produced containing all documents relevant to the administration that post date the expert reports; (2) further witness statements from R1, R2 and R3 to provide evidence of fact as to reasons for the financial difficulties and the timing of the administration; (3) a witness statement from the administrator; and (4) supplemental reports from the experts, followed by a joint report on the value of TGCL over the period following the date of the joint report.
During oral submissions and in response to my questions, Mr Loxton suggested that there were some sixty-six relevant documents. These had in the last week been sent to his client’s expert, Mr Isaacs, who was on holiday and who then intimated that he would not have time to produce anything more than a cursory supplemental report addressing the late disclosure prior to attending next week to give his evidence. Mr Loxton frankly accepted that his clients were in breach of the continuing duty to give disclosure in not having disclosed the documents to the Petitioner, and offered no reasons for the breach. He also offered no explanation as to why matters which have allegedly been unfolding since May 2023 were neither notified to the experts nor made the subject of supplementary witness evidence. He offered no explanation as to why the application to adjourn was brought merely one day before the hearing. Mr Channer adopted Mr Loxton’s submissions and accepted that his client also was in breach of the duty to give disclosure.
Ground (3) – inequality of arms
It was stated in the Application Notice that due to financial difficulties R1 and R2 have been unable to retain counsel for the trial. An adjournment of the trial would allow funding to be obtained and counsel instructed, thus ensuring equality of arms and procedural fairness. It would not be in the interests of justice for R1 and R2 to represent themselves in a 7 day trial given the legal complexities of the case, the requirements of cross examination of lay witnesses and expert witnesses, the requirement to present legal arguments, and the potential value of the relief being sought against the Respondents (into millions of pounds).
Principles
The Application is made under CPR 3.1(2)(b) which provides the Court with the power to “adjourn or bring forward a hearing”. The decision whether to order an adjournment must be made in the light of the overriding objective, which provides that the court must
deal with cases justly and at proportionate cost’, meaning, ‘so far as practicable –
(a) ensuring that the parties are on an equal footing and can participate fully in proceedings, and that parties and witnesses can give their best evidence;
(b) saving expense;
(c) dealing with the case in ways which are proportionate –
(i) to the amount of money involved;
(ii) to the importance of the case;
(iii) to the complexity of the issues; and
(iv) to the financial position of each party;
(d) ensuring that it is dealt with expeditiously and fairly;
(e) allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases; and
(f) enforcing compliance with rules, practice directions and orders.
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