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Poole v Horton [2016] EWHC 1315 (Ch)

Nick Goodfellow acted for Mr Poole who was a former director and shareholder in the company Tindale, Poole & Finn Limited (’the Company’) which was placed into members voluntary liquidation some time after Mr Poole had sold his shares and left the Company. 

Mr Poole claimed to be entitled to a payment calculated based on one third of the net assets of the Company, at the end of the 31 August 2012 accounting year, based on the terms of an agreement relating to his exit from the Company when he left to become an independent consultant (’the Agreement’).  In June 2014, Mr Poole submitted a letter before action to the Company claiming the net asset sum.  In July 2014, unbeknownst to Mr Poole at the time, the Company was placed into members voluntary liquidation by the two remaining shareholders.  After Mr Poole discovered that the Company was in liquidation, he submitted a proof of debt to the Liquidator.

The Liquidator rejected Mr Poole’s proof of debt, claiming that the no sum was due to Mr Poole in respect of the Company’s net assets. The Liquidator relied on the evidence of remaining shareholders in reaching its view as to how the Agreement was to be construed. 

Mr Poole appealed to the Companies Court, which heard live evidence over 2 days, and (contrary to the standard position under the Insolvency Rules) cross examination of all witnesses, including the Company’s accountant.   

The Court referred to well established case law that provides that an appeal against a proof of debt in a liquidation is a hearing de novo: Re Kentwood Construction Limited [1960] 1 WLR 646.  Applying those principles, the Court overturned the Liquidators finding and held that Mr Poole was entitled to one third of the net assets of the Company, having deducted the sum due under his loan account.  The remaining shareholders, who were added to the proceedings as third and fourth parties, were ordered to pay the costs of the action.   

The case is a useful illustration of circumstances in which a party that has a valid claim against a company placed into liquidation, can nonetheless achieve proper compensation for their loss. 

A link to the judgment can be found HERE.

Nick was instructed by Robin Blay at Magrath LLP
Posted: 28.06.2016 at 14:55
Tags:  Cases  Commercial Law  Insolvency  Dispute Resolution
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