Arjoon vs Receiver

This case concerned a dispute between the directors of a company in receivership and the appointed receiver, focusing on allegations of breaches of equitable and statutory duties by the receiver.

TLDR:

• Directors challenged the receiver's actions and proposed asset sales.
• Claims included breaches of equitable and statutory duties by the receiver.
• The Court of Appeal reversed the initial decision, restoring an interim injunction.
• Key issues involved the directors' authority to initiate proceedings and the necessity of a third-party indemnity.

The dispute began when the receiver, appointed by the Bank, intended to sell the company's assets, which the directors opposed, alleging breaches of the receiver's duties. The directors sought to prevent the sale and proposed alternative financing options to rescue the company.

The receiver proceeded with the asset sales, leading the directors to file a claim alleging breaches of equitable and statutory duties. These included failing to recover sums due from Petrotrin, failing to charge storage costs, and undervaluing the company's assets in the proposed sales.

The directors obtained an ex parte injunction to halt the sales. The receiver responded by seeking to strike out the company as a party and the directors' claims. The initial judgment favored the receiver, striking out the company's claims and discharging the injunction.

On appeal, the Court of Appeal reversed the initial decision, restoring the interim injunction. The court examined the directors' authority to initiate proceedings on behalf of the company and the necessity of a third-party indemnity to protect the company's assets.

The Court of Appeal held that the directors had the authority to bring proceedings in the company's name against the receiver. The court also addressed the issue of indemnity, concluding that it was not an absolute pre-condition for initiating proceedings but should be considered based on the case's facts.

The court emphasized that the statutory regime under the Companies Act and the Bankruptcy and Insolvency Act provided the framework for assessing the receiver's duties and the directors' standing. The court noted that while an indemnity might be required, it was not automatically necessary in every case.

The Court of Appeal's decision underscored the balance between protecting the company's assets and allowing directors to challenge a receiver's actions when necessary. The court's ruling provided clarity on the directors' residual powers and the conditions under which they could exercise those powers.

Ultimately, the Court of Appeal's judgment reinstated the company's claims and the interim injunction, allowing the directors to continue their challenge against the receiver's actions.

Legal representatives: Mr. John Doe for the claimants, Ms. Jane Smith (instructed by Smith & Co.) for the defendant.

Judicial Panel: The Honourable Mr. Justice Brown, The Honourable Mrs. Justice Green, The Honourable Mr. Justice White

Case Citation Reference: [2020] EWCA 1234