Ultraframe (UK) Ltd v Rigby & Ors

Factual and Procedural Background

This appeal arises from an order made by His Honour Judge Maddocks in the High Court of Justice Chancery Division at Liverpool on 16th August 2004, which struck out an application by the Appellant, referred to as Ultraframe. The application sought to set aside certain deeds of assignment of intellectual property rights originally owned by Quickfit Conservatories Limited ("QC") and assigned to the second respondent, Mr Fielding, and subsequently to the third respondent, Company B (referred to as TBG). The assignments in question were dated 3rd January 2001, 30th April 2001, and 16th August 2003.

QC was wound up by court order in 1995, with Mr Davis as its principal director and shareholder. The intellectual property rights in the Quickfit System were owned by Mr Davis or his companies. After Mr Davis was made bankrupt, litigation commenced concerning ownership of these rights involving Mr Fielding, who controls Company B. The liquidator of QC, Mr Rigby, executed the assignments transferring rights to Mr Fielding and subsequently to Company B for nominal sums.

Ultraframe and its subsidiaries, Northstar Limited and Seaquest Limited, had interests in the intellectual property and commenced litigation challenging the assignments, which ultimately failed. Ultraframe later applied to set aside the assignments under sections 167(3) and 168(5) of the Insolvency Act 1986, but the application was struck out by the judge. Permission to appeal was granted by Chadwick LJ.

Legal Issues Presented

1. Whether the liquidator's decision to assign intellectual property rights to Mr Fielding and Company B was made in bad faith or was so unreasonable that no reasonable liquidator would have made it.
2. Whether the court should exercise its discretion under sections 167(3) and 168(5) of the Insolvency Act 1986 to set aside the deeds of assignment.
3. The impact of delay by Ultraframe in challenging the assignments on the court’s willingness to grant relief.
4. Whether Ultraframe, having a dual role as creditor and litigant, had standing and whether this dual role affected the court's discretion to grant relief.
5. Procedural fairness concerning the refusal to allow Ultraframe to adduce further evidence in support of its application.

Arguments of the Parties

Appellant's Arguments

• The judge erred in refusing Ultraframe the opportunity to present evidence, constituting a substantial procedural irregularity.
• The liquidator, Mr Rigby, acted improperly by assigning rights without proper investigation or considering better offers, and without consulting Ultraframe or its subsidiaries.
• The assignments were made for nominal consideration without clear benefit to creditors, contrary to principles established in prior case law.
• Ultraframe’s delay in challenging the assignments was justified by late awareness of their undervalue and potential misuse in litigation.
• Mr Fielding and Company B were not bona fide purchasers for value without notice, and thus the assignments were voidable.
• The liquidator failed to give proper notice to creditors, including Ultraframe, particularly regarding the short notice period over the Christmas holidays.
• The application was not solely to increase creditor distributions but also a tactical measure in ongoing litigation, which should not bar relief.

Respondents' Arguments

• The judge was correct to strike out the application as Ultraframe had known about the assignments since 2001 and made no timely objection or offer.
• The delay by Ultraframe disentitles it from relief, especially given the public interest in efficient winding-up of insolvent companies.
• Mr Rigby's conduct as liquidator was proper, including advertising the sale and notifying creditors.
• Ultraframe’s dual role as creditor and litigant seeking a litigation advantage undermines the application.
• No evidence was presented that Mr Fielding or Company B were aware of any impropriety, and the law requires such notice for setting aside assignments.
• The court’s discretion under the Insolvency Act 1986 is limited and should not be exercised to assist litigation tactics.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the liquidator’s conduct under the established test from Re Edennote Limited, considering whether the assignments were made in bad faith or were so unreasonable that no reasonable liquidator would have made them. The court found that the application raised a real prospect of success, particularly concerning the third assignment, due to lack of evidence that the liquidator investigated the value or negotiated adequately, and the short notice given to creditors.

The court rejected the argument that Ultraframe’s dual role as creditor and litigant barred its standing or justified dismissal. It emphasized that delay alone, without evidence explaining the reasons and timing of Ultraframe’s knowledge and actions, was insufficient to dispose of the claim at strike out.

Procedurally, the court held that the judge erred in refusing Ultraframe the opportunity to adduce evidence, especially concerning delay and notice issues. The judge should have granted an adjournment to allow evidence to be filed before ruling on strike out. The court found that the application should be restored for proper consideration with directions for evidence and further proceedings.

Holding and Implications

APPEAL ALLOWED.

The court overturned the order striking out Ultraframe’s application and restored the application for further conduct with directions to be made. The decision implies that applications under sections 167(3) and 168(5) of the Insolvency Act 1986 should not be dismissed at an early stage without allowing parties to present evidence, particularly on issues of delay and procedural fairness. The ruling clarifies that a dual role as creditor and litigant does not automatically bar standing or relief, and that courts must carefully assess the reasonableness of a liquidator’s decisions with appropriate procedural safeguards. No new precedent was set; rather, existing principles were applied to the facts to ensure fairness in insolvency proceedings.