RUSHBROOKE UK LTD v 4 DESIGNS CONCEPT LTD

On 9 May 2022 I heard an application for an injunction to restrain the presentation of a petition to wind up the applicant company, following the service upon the applicant of a statutory demand by the respondent. The application was issued on 20 April 2022 and was supported by no fewer than three witness statements from a director of and 50% shareholder in the applicant, Mark Steventon-Smith, dated 19 April 2022, 4 May 2022 and ninth of May 2022, respectively, and by a further witness statement from David McAndrew dated 6 May 2022. It was opposed by a witness statement dated 4 May 2022 from Andrew Cox, a director of the respondent company, and (rather unusually) two witness statements from the only other director of and 50% shareholder in the applicant company, Lee Bryan.

On 3 May 2022 I made an order giving directions for evidence and listing the application before me on 9 May 2022. On that day, after hearing argument from both sides on three preliminary issues, but before reaching argument on whether the criteria for an injunction were met, I announced my decision that the application would be struck out, on the basis that the director of the applicant who gave instructions to the solicitors to launch these proceedings had no authority on behalf of the company to do so. I said I would give my reasons in writing as soon as possible, and in the meantime the time for any appeal would be extended to 21 days after the handing-down of those reasons. This judgment contains the reasons for my decision.

The applicant company carries on business as an architectural consultancy but also carries out property development. As I have mentioned, Mr Steventon-Smith and Mr Bryan each own 50% of the shares, and each is one of the two directors. As will become apparent, they have fallen out, and a letter before claim was sent on 15 March 2022 by solicitors acting for Mr Steventon-Smith, Neath Raisbeck Golding Law (“NRG”), to solicitors acting for Mr Bryan, GA Solicitors. I will return later on to this letter. The respondent company carries on the business of architectural services, in particular urban design and residential services, in connection with the preparation of planning applications.

I bear in mind that, on this application, all the evidence was given in the form of witness statements, and there was no cross-examination sought or ordered. In Coyne v DRC Distribution Ltd [2008] EWCA Civ 488, Rimer LJ (with whom Ward and Jacob LJJ agreed) said:

The sole director and shareholder of the respondent company, Andrew Cox, says in his witness statement that, since 2018, the respondent has invoiced the applicant in the sum of £152,920 for services supplied, and the respondent has paid £133,040 in respect of those services, leaving £19,880 outstanding. The outstanding invoices are exhibited to his witness statement and are dated between 1 October 2021 and 12 January 2022. Each invoice gives a brief description of the development and the services provided. They were sent by email to both Mr Bryan and to Mr Steventon-Smith on 13 January 2022. (There is also an earlier email from Mr Steventon-Smith to Mr Bryan, copied to Mr Cox, dated 23 December 2021 which says that he received “the attached invoices” from Mr Cox that morning, but it is not clear which invoices are being referred to.) Mr Cox sent a further email on 2 March 2022, again addressed to both Mr Steventon-Smith and Mr Bryan complaining of the lack of payment of these invoices.

Mr Cox also exhibits an exchange of emails both dated 18 October 2021. In the earlier email, addressed to Mr Steventon-Smith copied to Mr Bryan and Mr Steventon-Smith’s wife. Mr Cox asks Mr Steventon-Smith about payment of outstanding invoices from 31 May 2021 onwards. The second email of 18 October 2021 is from Mr Bryan and sent both to Mr Cox and Mr Steventon-Smith, with a copy to Mr Steventon-Smith’s wife. Mr Bryan in his email simply says “I approve these for payment”.

Despite the emails of 13 January 2022 and 2 March 2022, the respondent did not receive any payment for the outstanding invoices, and decided to issue a statutory demand. Mr Cox contacted Mr Bryan before doing so. Mr Bryan apparently told him that from the information he had it was highly likely that the applicant was insolvent and that no creditors could be paid until a liquidator was appointed. The statutory demand was prepared, dated 30 March 2022 and was served on the applicant, by being sent to Mr Bryan, who received it on 5 April 2022. It appears that Mr Bryan then passed it to Mr Steventon Smith, who in turn passed it to NRG.

They wrote to the respondent by letter dated 12 April 2022, saying, not that they were instructed on behalf of the applicant, but that they were “instructed on behalf of Mark Steventon-Smith (our Client)” in relation to the statutory demand “served on Rushbrooke UK Limited (the Company)”. This letter said that Mr Steventon-Smith had not been provided with any instructions from the company to carry out the work, or seen any evidence that the work invoiced for had been completed. It asked for copies of a large number of documents including copies of letters of instruction, notes of meetings, complete and accurate timesheets, emails providing proof of completion of the work and any correspondence in relation to the work.

Mr Cox responded by letter dated 18 April 2022, stating that the statutory demand been addressed to the company and not to Mr Steventon-Smith, and had been properly served. He pointed out that NRG said they were acting for Mr Steventon-Smith and not the company, and asked that they not write to him further until instructed by the company. Nevertheless, he stated that the work gave rise to the invoices had been “confirmed by the Company as having been properly performed”. NRG replied by letter dated 19 April 2022 that they were instructed by Mr Steventon-Smith “in his capacity as director of” the company, and “he is within his rights as a director to provide any instructions he may wish in relation to the Company in order to protect its interests”. On 20 April 2022, NRG issued the present application for an injunction to restrain the presentation of a winding up petition.

On 25 April 2022 Mr Bryan wrote to the respondent on the applicant’s headed notepaper, referring to the letters from NRG dated 12, 14 and 19 April 2022. In his letter he stated that the statutory demand “was properly served on the Company on 5 April 2022. I acknowledged good service to you”. He also commented on each of the invoices the subject of the statutory demand. On the same day Mr Cox wrote to NRG, stating that good service of the statutory demand had been confirmed by Mr Bryan in his letter of the same date, and this was attached. He also repeated his understanding that NRG did not act for the company, stating that Mr Bryan had confirmed that the company had not resolved to instruct NRG and that Mr Steventon-Smith had assured Mr Bryan during the last Board meeting that NRG did not act for the company.

In support of that last point, I was referred to a copy of the minutes of the directors’ meeting of 4 February 2022, which was conducted on a virtual basis by video meeting. Item 3 of those minutes reads as follows:

After this application had been issued, Mr Bryan wrote to NRG by email on 5 May 2022. In that email, he said, amongst other things:

Mr Bryan’s second witness statement, dated 6 May 2022 states as follows at paragraph 5:

At paragraphs 22 and 23 of the same witness statement, he says this:

In Mr Steventon-Smith’s third witness statement, made on 9 May 2022 (the day of the hearing), he deals with the question of his authority to bring the application on behalf of the company. Amongst other things he says this:

I should record that I asked Mr Newington-Bridges, counsel instructed by NRG to present the application on behalf of the company, what proceedings were being referred to in the opening phrase of paragraph 6 of that witness statement, namely “Following the instigation of proceedings against Mr Bryan”. Counsel confirmed that, so far as he was aware, there were no such proceedings instigated. He suggested that this referred simply to the breakdown of the relationship between the directors and the allegations that were being made by Mr Steventon-Smith against Mr Bryan.

The email from Mr Bryan to the company’s staff dated 29 November 2021 gives those staff some details of the dispute between the two directors. It was a response to an email from the staff expressing concern about unpaid salaries and the future of the company. It says in part:

As I have already said, it was only on 15 March 2022 that NRG sent a letter of claim to solicitors on behalf of Mr Bryan. I should refer to that letter in more detail. But it is first to be noted that, in this letter, NRG once more state that their client is Mr Steventon-Smith (who is referred to throughout as “the Claimant”), rather than the applicant company. It is right to say that there is a brief mention at the outset of an intended “derivative action”, but this is not further elucidated, and I was not told that any application has been made for permission to bring or carry on a derivative claim on behalf of the company.

The letter sets out a series of allegations against Mr Bryan. From these, it appears that the dispute between Mr Steventon-Smith and Mr Bryan stems from a development opportunity offered to the company in 2018 to acquire land in north-east Bristol known as Waverley Cottage, Hambrook. It is said that the company sought information about the site and its potential, but, as this was not provided, the company did not further pursue the opportunity. On the other hand, it never made any formal decision to give it up. It is then alleged that Mr Bryan worked on the opportunity for his own benefit, and used the company’s employees to assist him in this.

Further, in 2020 Mr Bryan was involved in incorporating a new property development company called Waverley Developments (South West) Ltd. He became one of the three directors and, according to Companies House filings, had a shareholding of between 25 and 50%. In 2021, again according to statutory filings, it appears that his shareholding was transferred to a company called Bryan Group Limited, in which he and his wife each had a shareholding of between 25 and 50%, and of which they were both directors. An application for planning permission of the land concerned was submitted on behalf of Waverley Developments (South West) Ltd.

It is further alleged that in April 2021 Waverley Developments (South West) Ltd sought to sell the land with the benefit of outline planning permission, and that in May 2021 a conditional offer to purchase the land for £5.4 million was made by a property developer, Engie. Moreover, it is alleged that planning permission is expected to be given imminently.

It is then said that by reason of these alleged facts, in particular by taking the opportunity and realising it for the benefit of Waverley Developments (South West) Ltd, Mr Bryan was in breach of section 172 of the Companies Act 2006. In addition, by exploiting the opportunity for the benefit of Waverley Developments (South West) Ltd, Mr Bryan placed himself in a position of conflict of interest in breach of section 175 of the Companies Act 2006. Mr Bryan’s failure to declare this conflict of interest or the interest in the exploitation of the opportunity by Waverley Developments (South West) Ltd, meant that he was in breach of section 177 of the Companies Act 2006. The exercise of his powers and conduct generally in relation to the opportunity was improper, and therefore in breach of section 171(2) of the Companies Act 2006.

I also record that the breakdown in relationship between the two directors, coupled with the company’s financial difficulties, appears to have led to problems in paying staff salaries. In the bundle there are copies of documents relating to employment tribunal proceedings commenced by four members of staff. However, I am not concerned with those proceedings, and say nothing more about them.

As I said earlier, three preliminary points were taken at the outset of the hearing, before turning to consider the merits of the application. These were (1) the question of Mr Steventon-Smith’s authority to litigate on behalf of the applicant company, (2) the admissibility of the further evidence that had been filed, beyond that provided for by my direction of 3 May 2022, and (3) the question whether the statutory demand had been properly served on the company. In fact, point (3) was not pursued, as the applicant accepted that there had been good service.

In relation to point (2), my directions of 3 May 2022 had provided for the applicant to serve the application and supporting evidence on the respondent by 4 PM on that day, 3 May 2022, and the respondent to file and serve evidence in answer by 4 PM on 6 May 2022. I had not made any direction for evidence in reply. Despite that, and as I have already said, Mr Steventon-Smith made a second witness statement on 4 May 2022, as did his solicitor Mr McAndrew. Mr Steventon-Smith then made a third witness statement dated 9 May 2022. Mr Newington-Bridges submitted that no application for relief from sanctions was required, because no order of the court had been breached. However, if such an application were needed, he submitted that any breach was very minor, that it was explained by the fact that the evidence in answer was received very late in the day, and that whilst there was no real prejudice to the respondent in admitting that evidence there would be real prejudice to the applicant in not admitting it.

Mr Churchill, on behalf of the respondents, cited to me my own decision in Wolf Rock (Cornwall) Ltd v Langhelle [2021] BCC 67. That was an appeal from a decision of the district judge refusing to permit reliance on witness statements served out of time, and not in accordance with an earlier order. I held that the district judge had been right in such a case to consider that the principles on which relief from sanctions was given were the right approach in deciding whether to admit the late evidence. Mr Newington-Bridges sought to distinguish that case, because whereas in that case there had been a direction that evidence was to be served by a certain time, and it was not, in the present case there was no direction at all for the evidence concerned. I have to say that I think that this is rather a distinction without a difference, but I do not need to decide the point. This is because I am satisfied that in all the circumstances, even if it was a case for relief from sanctions, I ought to grant that relief.

The problem really arose from the tight timetable which did not specifically provide for evidence in reply. In the circumstances it was only fair that the applicant should have the opportunity to deal with the evidence in reply which had been served on the business day before. If the timetable had been made more elongated there would have been an express provision for that evidence, and (if served in time) it would have been admitted. I could not see any prejudice to the respondent, though (if it was not admitted) there was the obvious possibility of prejudice to the applicant. I have therefore taken account of all of the evidence filed and served on this application.

I turn therefore to the first preliminary question, which is the most important. The (originating) application notice seeking an injunction to restrain presentation of a winding up petition based on the statutory demand in the sum of £19,800. Paragraph 2 of the notice states that “The applicant is RUSHBROOKE UK LIMITED …”. At the end of the notice it is stated that “The address for service of the Applicant is NEATH RAISBECK GOLDING LAW …” Underneath that there is the signature of David McAndrew who is stated to be a “Partner”, and is also stated to be “Solicitor for the Applicant”.

The Solicitors Regulation Authority provides for two codes of conduct, one for solicitors and one for firms (July 2021 editions). They both contain an identical provision relating to obtaining and acting on instructions from the client or someone authorised by the client. In the code of conduct for solicitors it is paragraph 3.1, and in the code of conduct for firms it is paragraph 4.1. The text in each case is:

In the present case, the applicant is a limited company, which can act only by its officers and other organs in accordance with its constitution, comprised in the Memorandum and Articles of Association. As I understand the matter, this company was incorporated in April 2009, and has articles of association in the form of Table A under the Companies Act 1985 and the Companies (Table A to F) Regulations 1985, treated as prescribed under section 19(1) of the Companies Act 2006. I was not in fact taken to the articles during the hearing. But the important points are these. First, and subject to any directions given by special resolution of the company, the business of the company is to be managed by the directors, who may exercise all the powers of the company (paragraph 70). But the directors may appoint any person to be the agent of the company for stated purposes (paragraph 71), and may delegate any of their powers to any committee consisting of one or more directors or to the managing director or any director holding any other executive office (paragraph 72).

It is common ground between the parties in this case that there was no appointment by the directors of any person under paragraph 71, and no delegation of any of their powers under paragraph 72. It was also common ground that there was no special resolution of the company. That means that the only way in which the company could make a decision to instruct lawyers to commence proceedings would be by decision of the directors under paragraph 70. Yet, as I have set out earlier in this judgment, there is no evidence that the two directors ever decided to institute the present proceedings or to instruct solicitors to do so. Instead, it is clear on the material before me that Mr Steventon-Smith alone instructed NRG to issue the application for an injunction. Although in correspondence NRG has referred to Mr Steventon-Smith, rather than the company, as their client, the application notice itself is unequivocal: NRG by its partner Mr McAndrew states that the company is the applicant and that NRG is acting as its solicitor for this purpose.

In Mitchell & Hobbs (UK) Ltd v Mill [1996] 2 BCLC 102, Anthony Machin QC, sitting as a deputy judge of the High Court, had to deal with a similar situation. The managing director of a company launched an action against the company secretary to recover a sum of money which the latter had withdrawn from the company’s bank account, and obtained summary judgment. The company secretary appealed on the basis that the managing director had no authority to instruct solicitors to commence the proceedings. There was no evidence of a board meeting having been held to authorise the proceedings or any delegation to the managing director to do so. The managing director contended that any one director of a company could bring proceedings in the name of the company under paragraph 70 of Table A, or at least that a managing director could do so.

The deputy judge rejected the submission. He said (at page 108a-b):

The deputy judge then went on to consider the position of a managing director, and said this (at page 108d-e):

The deputy judge therefore reached the following conclusion (at page 108f):

That decision was discussed in the later case of Fusion Interactive Communication Solutions Ltd v Venture Investment Placement Ltd [2005] EWHC 736 (Ch). In that case the defendant (who was described throughout not by its proper name, but by the name “Pertemps”) had 45% of the shares of the claimant, which were “A” shares, and was thereby entitled to appoint two directors to the board. The other 55% of the shares, which were “B” shares, was held between three individuals, who between them were also entitled to appoint two directors. There was a shareholders’ agreement dated 15 January 2003 and a loan agreement also dated January 2003 by which the defendant advanced monies to the claimant. On 5 September 2003 claimant company entered into a debenture deed with the defendant, I assume by way of security to the defendant for the claimant’s obligations towards it. The relationship between the A shareholders and the B shareholders broke down, and indeed in November and December 2004 two petitions were presented by the defendant for the winding up of the claimant. Also in November 2004, the claimant by solicitors issued a claim against the defendant, seeking an injunction restraining the defendant from appointing receivers in respect of the 2003 debenture. These were the proceedings in which the present application was made.

In December 2004 the defendant’s solicitors issued an application to strike out the claim, on the basis that the proceedings were not authorised by the claimant’s board, but had been commenced by Messrs Seear and Hopkins, the two B directors (one of whom, Mr Seear, was the managing director of the claimant), who had instructed solicitors without the consent of the board. After an earlier hearing before Rimer J, this issue, and two others, were dealt with by Peter Smith J. The judge said it was clear that the claimant’s board did not expressly authorise the commencement of these proceedings. He referred to the decision in Mitchell & Hobbs (UK) Ltd v Mill, which he cited for the propositions that, in the absence of any delegation of authority, only the board might resolve to commence proceedings, and the managing director had no authority to do so on his own. The judge pointed out that there had been no board resolution and that “self-evidently” the two A directors appointed by the defendant, Messrs Bacon and Watts, would not agree to commence any action against the defendant.

The judge commented on this situation as follows:

Were it not for a further case, to which I will turn in a moment, I would have considered that Peter Smith J, having accepted the general principle expressed in Mitchell & Hobbs (UK) Ltd v Mill, had reached his decision, that proceedings were properly authorised as against the defendant, based on two separate points. The first is represented by the statement in paragraph 49 that “It cannot be right that they [the A directors] take advantage of their own breach of duty in blocking a legitimate challenge against a company in which they are also interested.” The second is represented by the references in paragraphs 50, 51 and 54 to the communication by the defendant to the claimant of an understanding, or at any rate of a contemplation, that the claimant would be represented by solicitors in the litigation between the parties. Although the word ‘estoppel’ is not mentioned anywhere, what it seems to me was actuating the learned judge was at least an estoppel-like principle. This is that, having by its own actions encouraged the claimant to understand that it could instruct solicitors despite the absence of a board resolution, so that the claimant in effect relied on that encouragement in doing so, the defendant could not now rely on the absence of a board resolution to justify striking out the claim.

But, as I said above, there is another case to consider. This is the decision of the Court of Appeal in Smith v Butler [2012] EWCA Civ 314. This case concerned the affairs of the company, Contact Holdings Ltd. This was in substance a dispute between the two shareholders, Mr Smith, with 68.8% of the shares, and Mr Butler, with 31.2% of the shares. They were both directors, along with a third person, Mr Harris, the finance director. In addition, Mr Smith was the chairman of the board, and Mr Butler was the managing director of the company. Mr Butler was concerned about allegations that Mr Smith had utilised his company credit card for the payment of personal expenses amounting to £78,000.

Having consulted Mr Harris, who agreed with him, Mr Butler took it upon himself on 1 July 2011, without the benefit of a resolution of the Board of Directors, to suspend Mr Smith from office and to exclude him from the company’s premises. Mr Smith served on the company requisition for the convening and holding of an extraordinary general meeting to consider resolutions for the removal of Mr Butler and Mr Harris as directors. But Mr Butler made clear that he would not attend such a meeting, so that the meeting would then be inquorate, and ineffective. Subsequently Mr Smith applied to the court for a declaration as against both Mr Butler and the company that Mr Butler’s actions were outside his powers, and for an order convening a general meeting with a quorum of one. At first instance Mr Smith succeeded, and Mr Butler appealed.

In the Court of Appeal, Arden LJ gave the leading judgment. She decided that the judge had been right to conclude that Mr Butler had no authority is managing director to suspend Mr Smith from his role as chairman or to procure the company to defend his proceedings, and would dismiss the appeal. Rimer LJ agreed with her on these points, and would also dismiss the appeal. But he added that he preferred not to express any general view as to a managing director’s implied authority to commence or defend legal proceedings on behalf of the company. The third member of the court, Ryder J, also agreed with Arden LJ’s reasons and conclusions and would likewise dismiss the appeal. Unlike Rimer LJ, however, he did not express any reservation in relation to implied authority to commence or defend legal proceedings.

The primary issue before the Court of Appeal related to the powers of the managing director. In discussing this issue Arden LJ referred to both Mitchell & Hobbs (UK) Ltd v Mill and Fusion Interactive Communication Solutions Ltd v Venture Investment Placement Ltd. She said this:

It is clear from their judgments in Smith v Butler that the majority of the court (Arden LJ and Ryder J) qualified the decision in Mitchell & Hobbs (UK) Ltd v Mill, so that, in some cases at least, paragraph 72 of Table A may confer authority on a managing director to commence or defend proceedings on behalf of the company. However, in a case like Mitchell & Hobbs, where there were only two directors, who had fallen out, and therefore would not agree to all ratify the commencement of proceedings, the court considered that the decision in that case, that there was no authority to commence the proceedings, was correct. That is also in substance the position in the present case, where the only two directors have fallen out, and therefore there would be no agreement on a board resolution in relation to commencing or defending litigation.

Moreover, in this case there is no managing director, and so it is not necessary to consider whether such a director would have greater powers. I will only observe in passing that, with great respect, I do not find it easy to understand the statement of Arden LJ in paragraph 36 of her judgment that

It is also clear from the judgements of the Court of Appeal that the decision in Fusion was one which turned on its particular facts. Arden LJ says that the facts were such “that the judge could draw an inference that two of the company's directors (one of whom was the managing director) had power to commence proceedings on behalf of the company.” It is not clear whether this statement involves approval of either or both of the two points that I have drawn from Peter Smith J’s judgment. As to the former, I can see that it might be said that a principle that directors cannot take advantage of their own breach of duty to block proceedings against them for that breach of duty could amount to an exception to the general rule, amounting to the conferring of a power or authority to bring proceedings, in perhaps the same way as a derivative claim is an exception to the general principle (the so-called rule in Foss v Harbottle) that only the company can sue for wrongs suffered by it. On the other hand, I am doubtful that it can be intended to cover the operation of the estoppel-like principle, because that would not operate to confer any implied power upon one director, but rather prevent the other party from taking the point that there was no board resolution or other authority.

Mr Newington-Bridges submitted that there was a real risk that Mr Bryan was trying to thwart the potential claim against himself by supporting the claim of a third party against the company which might result in the winding up of the company. As in Fusion, it would be unfair for him to do this, and therefore the other director, Mr Steventon-Smith, should be allowed to appoint solicitors to resist the statutory demand and seek an injunction to restrain the presentation of a winding up petition. He said that, even if it would be possible for the liquidator in winding up to pursue any claim that the company had against Mr Bryan, there was still a practical advantage for Mr Bryan in having the company put into liquidation, because that made it less likely that any proceedings would ever be brought.

Secondly, Mr Newington-Bridges submitted that the email dated 5 May 2022 from Mr Bryan to NRG, purporting to “disinstruct” that firm, clearly implied that it had been instructed in the past. So NRG had had authority to act for the company. In addition, Mr Bryan had abandoned his role in the company and left Mr Steventon-Smith to assume responsibility for the whole business. This must include authority to commence proceedings to defend the company from third party claims and vindicate claims that could be brought by the company.

However, I do not think that the decision in Fusion assists the claimant in this case. In relation to the principle that directors cannot take advantage of their own breach of duty to block proceedings against them for that breach of duty, the short answer here is that Mr Bryan is not the object of these proceedings, and so he is not taking advantage of his own breach of duty to block any proceedings against him. Unlike Fusion, which was a dispute between the shareholders and directors of the company, these proceedings involve a dispute between the company and a third party about unpaid invoices. So far as the operation of the estoppel-like principle is concerned, there is no suggestion here that the respondent ever made any representations to the company or gave the company to understand that the absence of proper authority to bring proceedings would not be taken as a point against it. And on the material before me I am not satisfied that Mr Bryan made any material representations which might found an estoppel as between the two directors.

Nor, standing back and looking at it more generally, as Arden LJ did in Smith v Butler, is there any basis upon which I can infer the conferring of an implied power on Mr Steventon-Smith to commence proceedings on behalf of the company against a defendant who claims to be a creditor and has served a statutory demand. The email from Mr Bryan, purporting to disinstruct NRG, does not, properly construed, imply that Mr Bryan ever agreed to that firm’s been instructed. On the contrary, it makes it clear that he did not agree to it, and, so far as NRG has in a practical sense been instructed, he wishes to reverse the position. If the decision by Mr Steventon-Smith alone to instruct NRG were capable of ratification by the agreement of Mr Bryan, that ratification would not be achieved by this email.

Finally, although Mr Bryan clearly stepped back from his hands-on role in the company last November, that related to his employment in its business, and not to his office of director or his position as shareholder. As he said at the end of his email of 29 November 2021,

Mr Newington-Bridges criticised Mr Bryan’s actions in supporting the respondent as a breach of his duty to the company under section 172 of the Companies Act 2006 to act in its best interests. Mr Churchill pointed to subsection (3) of that section, which provides:

Mr Churchill submitted that, given that Mr Bryan had given evidence in his witness statement that he believed the company to be insolvent, he had a duty to consider the interests of the creditors ahead of those of the company. He referred to the decision of the Court of Appeal in BTI 2014 LLC v Sequana SA [2019] Bus LR 2178, where the court considered what was the trigger for the directors’ duty to consider the interests of the creditors ahead of those of the company. David Richards LJ (with whom Longmore and Henderson LJJ agreed, said:

Mr Newington-Bridges replied to that by saying that, as Mr Bryan had abandoned the company, so he could not properly know its position and what its creditor position was. I do not think that this follows. What Mr Bryan said in his witness statement was plainly based on information which he had and on his past experience. I note that, although Mr Steventon-Smith made a third witness statement on 9 May 2022 to respond to evidence given by Mr Bryan in his second witness statement of 6 May 2022, he did not challenge what Mr Bryan had said in paragraph 23 about the company’s financial position. On the material before me, I consider that the trigger actually had occurred in this case. It was therefore Mr Bryan’s duty to put the interests of the creditors ahead of those of the company, and that explained why he was supporting the creditor rather than the company.

I should also mention that I was referred by Mr Churchill to the decision of Snowden J in Re Maud [2016] Bus LR 1243, in which the judge discussed the decision of the Privy Council in Ebbvale Ltd v Hosking [2013] 2 BCLC 204. In that case the trustee in bankruptcy of a person believed to own property in England brought proceedings there for a declaration that the property was owned by the bankrupt, and joined Ebbvale, a Bahamian company, which appeared also to be claiming the same property. Before the claim was heard, the trustee acquired a claim against Ebbvale from a third party and presented a winding up petition against it in the Bahamas. The Bahamian court made a winding up order and the company appealed to the Privy Council.

The Privy Council decided that, even if the trustee thought it might be helpful to his English case if a liquidator replaced the directors of the company, he also had a legitimate interest as a creditor of the company in having a professional decision taken as to whether the company should spend money in defending the English proceedings. On this basis the petition to wind up was not an abuse of process and the appeal was dismissed. Mr Churchill relied on this as a basis for submitting that it was not an abuse of process for Mr Bryan in the present case to support the respondent creditor as against the company of which he was a director.

In my judgment, this case does not assist me. Mr Bryan is not trying to wind up the company, and there are no proceedings being brought by him which can be said to amount to an abuse of process. To the extent that Mr Bryan might be considered to be in breach of his duty to put the interests of the company first, I have dealt with that in discussing section 172(3) of the 2006 Act and the Sequana case. In the circumstances, the decision in Ebbvale does not take the matter further.

It was for all these reasons that I announced at the hearing on 9 May 2022 that I would strike out the application on the basis that Mr Steventon-Smith had no authority to make or give instructions to make the application on behalf of the company.