Absolute Living Developments Ltd v DS7 Ltd & Ors

Factual and Procedural Background

An application was brought by the Plaintiff, a litigant in person, against Company A in liquidation and its liquidator, Attorney B. The Plaintiff seeks interim injunctive relief to restrain Company A from selling certain properties, alleging that the sale is at an undervalue. The properties in question form part of a larger development comprising three elements: the property owned by Company A (edged yellow), and two adjoining plots owned by the local authority and Company B respectively (edged red and turquoise). The Plaintiff's case is that selling the property owned by Company A separately loses a significant premium that could be achieved if sold as part of the wider development.

The application is complicated by the Plaintiff's lack of formal pleadings, making it difficult to identify precisely the claims against Company A or its liquidator. The court has proceeded on a substance-over-form basis, treating claims as directed against Company A and/or its liquidator. The Plaintiff’s claim is primarily based on alleged dishonesty, or alternatively negligence, in the sale of the property at an undervalue by the liquidator. The liquidator relies on a settlement agreement which excludes personal liability for negligence but may not exclude claims based on dishonesty.

The application was considered under the American Cyanamid test for interim injunctions, focusing primarily on whether there is a good arguable case to be tried. The court was assisted by counsel representing Company A and the liquidator, who articulated why the Plaintiff’s case was weak, and the Plaintiff responded to these points, allowing the court to focus on the determinative issues despite the absence of formal pleadings.

Legal Issues Presented

1. Whether the Plaintiff has a good arguable case that Company A or its liquidator has sold the property at an undervalue, either negligently or dishonestly.
2. Whether damages would be an adequate remedy for the Plaintiff or any claimant with standing, as opposed to the granting of an interim injunction.
3. Whether the balance of convenience favors granting or refusing the interim injunction sought by the Plaintiff.
4. The applicability of the exclusion of personal liability in the settlement agreement to claims based on dishonesty versus negligence.
5. The proper interpretation and effect of the liquidator’s undertaking under clause 8.3 of the settlement agreement regarding the sale of the property as part of a package.
6. The question of the Plaintiff’s standing to bring the claim.

Arguments of the Parties

Appellant's Arguments

• The sale of the property by Company A is at an undervalue because it is not sold as part of the wider development, thereby losing a significant premium.
• The liquidator is acting dishonestly, or alternatively negligently, in selling the property separately rather than as a package with adjoining properties.
• The liquidator has breached an undertaking under clause 8.3 of the settlement agreement by failing to sell the property as part of the package with adjoining properties.
• The sales process has been flawed or collusive, undermining the validity of the sale price achieved.
• The creditors and other beneficiaries have not brought claims possibly due to lack of resources or dissatisfaction, leaving the Plaintiff to act.

Respondent's Arguments

• The Plaintiff has no standing to bring the claim, which affects all stages of the American Cyanamid test.
• The liquidator is presumed to be acting honestly and competently unless shown otherwise, and no sufficient evidence rebuts this presumption.
• The undertaking under clause 8.3 requires only that the liquidator seeks to sell the property as part of a package, not an absolute obligation to do so.
• The sales process was conducted properly with reputable agents, resulting in offers consistent with market value for the property sold separately.
• The failure to achieve a one-package sale is due to practical difficulties such as fragmented ownership and unresolved leasehold interests, not negligence or dishonesty.
• The absence of claims from other interested parties, including the liquidator of Company B and creditors, suggests no premium exists or that the sale price is appropriate.
• The Plaintiff’s evidence of a premium is speculative, slight, and not supported by expert reports or contemporaneous valuations.
• The balance of convenience and prejudice favors refusal of the injunction, as delay in sale would cause real and speculative losses to Company A and its creditors.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed analysis framed by the American Cyanamid test. At stage one, the court considered whether the Plaintiff had a good arguable case that the sale was at an undervalue due to negligence or dishonesty by the liquidator. The court noted the absence of clear pleadings and the difficulty in framing the claim precisely but proceeded on the substance of the allegations.

The court gave significant weight to the presumption that the liquidator acts honestly and competently, which the Plaintiff’s serious allegations of dishonesty did not overcome on the material before the court. The sales process was examined, including the offers received and the conduct of the auction. The court found no compelling evidence of collusion or undervalue, with the offers received consistent with market value for the property sold separately.

The court also considered the practical difficulties in achieving a one-package sale, such as fragmented ownership and unresolved leasehold interests, supported by after-the-event explanations from agents involved. These justified the liquidator’s decision not to pursue the one-package sale, which the court found was a rational and proper course open to a competent liquidator.

The court found the Plaintiff’s evidence of a premium to be speculative and slight, relying on after-the-event valuations and assertions without expert reports or contemporaneous evidence of sufficient weight.

Regarding the liquidator’s undertaking under clause 8.3, the court interpreted it as an obligation to seek to sell as part of a package, not an absolute obligation to do so, and found no arguable breach of this undertaking.

The court also weighed the absence of claims by other interested parties, such as creditors and the liquidator of Company B, as an indication that no premium was realistically achievable or that the sale price was appropriate.

On stages two and three of the American Cyanamid test, the court found that damages would likely be an adequate remedy and that the balance of convenience favored the respondents. Granting an injunction would cause real prejudice to Company A and its creditors by delaying the sale, with uncertain and potentially significant losses. The Plaintiff’s ability to provide an undertaking in damages was limited.

In sum, the court concluded that the Plaintiff’s case was unarguable on the evidence and that the requirements for an interim injunction were not met.

Holding and Implications

The court REFUSED the Plaintiff’s application for an interim injunction restraining the sale of the property by Company A.

The decision means that Company A may proceed with the sale of the property as currently proposed. The court did not find any good arguable case of negligence or dishonesty by the liquidator or Company A that would justify interim relief. No new precedent was set, and the ruling primarily addresses the specific facts and procedural posture of this application. The Plaintiff’s lack of formal pleadings and the speculative nature of the evidence were significant factors in the refusal. The case underscores the importance of clear pleadings and cogent evidence in interlocutory injunction applications, especially where serious allegations such as dishonesty are made against professionals like liquidators.