[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> County Durham Environmental Trust Ltd v Twizell & Anor [2009] EWHC 2173 (Ch) (26 August 2009) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2009/2173.html Cite as: [2009] STI 2831, [2009] EWHC 2173 (Ch), [2009] EWHC B19 (Ch), [2009] BTC 8131

[New search] [Printable RTF version] [Help]

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LEEDS DISTRICT REGISTRY

		26 August 2009

1. Introduction

1. Groundwork Community Forests North East Developments Limited ("the Company") is the owner of 3 pieces of land purchased or substantially purchased with the benefit of funds provided from the Landfill Communities Fund ("LCF"). Those funds are provided by tax deductible donations from Landfill Operators.

2. Prior to the insolvency of the Company the pieces of land were used, in accordance with the Landfill Tax Regulations 1996 ("the Regulations") as a public amenity. The Company is insolvent and entered into administration in November 2008. It has virtually no assets other than its landholdings.

3. The creditors have approved the Administrators proposals including a proposal to sell the land and to utilise the proceeds of sale in discharge of their remuneration and in the payment of unsecured creditors.

4. The Administrators have marketed the land holdings and are in a position to exchange contracts. They wish to exchange contracts as soon as possible. They have ongoing responsibilities for maintenance and weed control which they are not in a position to fund. In addition they fear that any delay might jeopardise the proposed sale.

5. The Regulator, ENTRUST, has expressed the view that the sale of the land holdings in this way would infringe the Regulations. It has suggested that H M Revenue and Customs ("HMRC") would be able to claw back from the Landfill Operators the tax credits originally granted to them. This in turn would or might lead to actions by the Landfill Operators against the Environmental Body that distributed the funds and/or the Administrators.

6. These applications were initially instituted in June 2009 in order to obtain what is known as a Berkeley Applegate Order^[1]. Although on one view the application was somewhat wider the Administrators were concerned as to the payment of their fees in the event that any of the land was held on trust. Although the Regulator and all of the Environmental Bodies were joined they did not appear at the hearing. Judge Langan QC made the order but gave any interested party the right to apply to set it aside or vary it.

7. Some two minutes after the deadline set by Judge Langan QC County Durham Environmental Trust Limited ("CDENT") – the Environmental Body concerned with the distribution of funds for one of the three sites - Skerningham Woods, made an application for a variation of the order and for various orders which directly brought into question the Administrators right to sell the landfill sites for non approved purposes. No point is taken on the two minute delay and it is agreed that time should be extended so as to enable CDENT to make the application. In response to this application the Administrators have issued a further application for directions both as to whether they should enter into the contracts for sale and secondly as to their remuneration. It is those applications that fall for decision.

8. The case has so far proceeded in the County Court. However both parties agree that the issues raised make it suitable for transfer to the High Court and it is so transferred. Although the Administrators would no doubt prefer to be able to sell the land holdings so as to distribute the funds to the creditors they have made it clear that they have a neutral attitude and have no wish or intention to sell the land if is unlawful so to do.

2. Representation

9. The Administrators have been represented by Mr Hugh Jory instructed by Gordons LLP of Riverside West, Leeds LS1 4AW. CDENT has been represented by Colin Thomann instructed by Stone King Sewell of 13 Queen Square, Bath BA 1 2 HJ.

10. Both Counsel produced full and helpful skeleton arguments in what is, to me, an unfamiliar field. I am most grateful to them

3. The Facts

11. There is no dispute as to the facts relevant to the application. It is, however necessary to set them out in a little detail in order to understand the problems that have arisen.

4. 1. Background

12. Landfill operators can make tax deductible donations to the Landfill Communities Fund. The Regulations require such donations to be distributed by Approved Environmental Bodies

13. ENTRUST is the Environmental Trust Scheme Regulatory Body. It regulates the LCF on behalf of HM Revenue and Customs. Under the scheme the tax forgone element of the Landfill Tax Liability is passed on to registered environmental bodies including distributive environmental bodies who distribute the monies on one or more of the Approved Purposes in the Regulations.

14. CDENT is a registered distributive Environmental Body under the Landfill Tax Regulations 1996. It is a non profit making organisation which receives donations from County Durham Waste Management Company amongst others

5. 2. The Company

15. The Company was originally incorporated on 26^th February 1997. It is a company limited by guarantee. It has had various names. Its object is described as "the creation and management of environments within the North East for the benefit of the Community". It was originally incorporated to bring together the Great North Forests and the Tees Forests. These were community forests projects in the North East region covering some 250 km² across Tyne and Wear and North East Durham.

16. Funding arrangements for the Company were sourced through the public private and voluntary sectors. It is an Approved Body for the purpose of the receipt of LCF funds.

6. 3. The Contract

17. In 2003 the Company (under its previous name) submitted to CDENT a proposal for the development and purchase of approximately 50 acres of land at Skerningham, North Darlington. The area was to be planted to become community woodland.

18. On 4^th February 2004 the Company entered into a contract with CDENT for the provision of funding for the proposal.

19. The contract contained a number of clauses relevant to this application:

Under recital D it was recorded that ENTRUST had given approval to the purposes for which the funding was to be used.

Under clause 2 CDENT agreed to contribute up to £50,000 for the approved purposes to the Company upon the Conditions in Schedules 3 and 4.

Under paragraph 1 of Schedule 3

The Grantee will apply the Funding solely for the Approved Purposes and in any event in accordance with Regulation 30(2) of the Regulations

Under paragraph 2 of Schedule 3 the Company was required to fulfil the Approved purposes by 30^th December 2004

Paragraphs 7 to 11 of Schedule 3 deal with the question of funding. Paragraph 7 deals with funding invested for the purpose of generating income. Under those circumstances the Grantee is required to spend the income in accordance with the Approved Purposes. Under paragraph 11 the Company undertook that the Funding would only be used to support actual expenditure on items identified in the proposal.

Under paragraph 19 of Schedule 3 CDENT has the right to terminate the Agreement on a number of grounds including (a) a failure by the Company to comply with the provisions of the Landfill Tax Legislation, (b) the Company fails to apply the Funding for the Approved Purposes, (d) any part of the funding shall cease to be invested or spent in accordance with the Approved Purposes … or (i) the Company becomes subject to an administration order.

Under paragraph 20 upon termination CDENT have the right to recover any of the funding contributed which is recoverable under the Regulations and to apply it elsewhere.

Under paragraph 1 of Schedule 4 the Company undertook:

There will be no change of use of the site without the prior written consent of CDENT.

It was expressly provided that this obligation would survive termination of the Agreement.

7. 4. Acquisition of Skerningham Woods

20. On 7^th May 2004 the Company duly acquired title to Skerningham Woods. The purchase price was £77,719. £50,000 was provided by CDENT under the terms of the Agreement. £20,000 was provided by Thompson of Prudoe Environmental Trust ("Thompson") – another registered distributive approved body under the Regulations. The remainder of the purchase price was provided out of the Company's funds.

21. There is no evidence as to the terms of the contract between the Company and Thompsons. Thompsons is a party to the application but has declined to take any active part.

22. There is no evidence as to the source of the remainder of the purchase price.

23. It is common ground that the £50,000 provided by CDENT was properly applied at the time for the Approved Purposes. Skerningham Woods was duly developed as community woodland in accordance with the proposal

8. 5. Acquisition of other parcels of land

24. Two other parcels of land have been acquired with LCF funding

Ouston Community Woodland – This land was purchased for £86,493.50 and was funded by a contribution of £86,888.38 from The Veolia Environmental Trust ("Veolia").

West Stockton Community Woodland (Redhouse Farm) – This was purchased for £101,989.69 of which £50,000 was provided by ICI Chemicals & Polymers Limited ("ICI").

25. Veolia is another registered Distributive Approved Body under the Regulations. There is no evidence as to the terms of the contract between the Company and Veolia. Veolia is a party to the application but has declined to take any active part.

26. ICI is not a registered Distributive Body. I was told at the hearing that the contribution from ICI will have qualified for tax relief. Like Veolia and Thompsons ICI has been made a party to the proceedings but has declined to take any active part.

9. 6. Financial Problems of the Company and Administration

27. The financial difficulties of the Company are set out in detail in the witness statement of Mr Twizell and in Mr Jory's skeleton argument. It is not necessary for me to rehearse them in any detail.

28. In July 2008, the Company took sole control of a group of companies incorporated as North East Community Forests, and ran into financial difficulties following the discovery of undisclosed liabilities. On 27 November 2008 Mr John Twizell and Mr Geoffrey Martin of Geoffrey Martin & Co were appointed Joint Administrators of the Company.

29. As at the date of the appointment the assets of the Company were said to comprise an inter-company debt of £75,759 and cash of £2,176. This analysis excludes the value of the land holdings. In fact the inter-company debt is irrecoverable and the overall cash assets are minimal – certainly not sufficient to make any contribution to the costs of realisation and clarifying the correct recipients of the realisations.

30. On 3 February 2009, creditors of the Company unanimously accepted the Administrators' proposals without modification. Those proposals included at 2(i):

"continue to investigate and market for sale the Company's interest in its various land holdings and complete the sales thereof on the basis of recommendations from GVA Grimleys"

31. As a result the Administrators have sought to market the various landholdings owned by the Company and another Group Company. After a marketing campaign by GVA Grimleys best and final offers were received by 29^th May 2009. A subject to contract offer from the highest bidder was accepted on 2^nd June 2009 but, pending the decision of the Court contracts have not in fact been exchanged. The Administrators are concerned that if there is continuing delay the purchaser will withdraw and the landholdings will have to be remarketed.

32. Each of the Administrators in their separate witness statements have drawn attention to the on-going management problems that they face. In paragraph 39 of his witness statement Mr Twizell points out that much time has been spent on protecting and preserving the forests. He has applied for grant aid and been advised that it would be forthcoming but it had not materialised at the date of the witness statement. He pointed out that maintenance was a time consuming and expensive exercise involving external contractors.

33. The position was updated in paragraphs 12 to 14 of Mr Martin's witness statement. In summary the position had been exacerbated by correspondence from Natural England and possible liability under the Weeds Act 1959. Some moneys have been received from the Rural Payments Agency and the Forestry Commission but there is a risk that there will be a claim in respect of a possible overpayment. [It is, however, right to point out that the weed problem does not affect Skerningham Woods]

10. 7. Concerns of ENTRUST

Concerns expressed to the Administrators

34. ENTRUST wrote to the Administrators on 30^th January 2009. The letter drew attention to Regulation 33A(1) of the Regulations and of the right of HM R & C under regulation 36(1)(a) to seek repayment of credits claimed from the landfill operator.

35. The letter made the point that the three pieces of land including Skerningham Woods had been purchased with LCF monies. As a result any income derived from the sales of the land would be "derived income" and by virtue of regulation 33(1)(b) can only be used in accordance with the approved objects of the LCF.

36. The letter went on to say that if the Administrator acting on behalf of the business, decides to distribute funds raised from the sale of these assets to creditors, he would be acting in breach of Regulation 33A(1)(b) and any contractual restrictions set by the contributors.

37. This could result in a claim being made by HM R & C against the Landfill Operator for a claw back for the amount of non compliant expenditure. This in turn could result in a claim being made by the Landfill Operator against the Administrators of the Environmental Body (such as CDENT) for misapplication of land fill monies

38. ENTRUST also proposed the possible remedies open to the Administrators:

If the Administrators choose to sell the land purchased with LCF monies then the proceeds from the sale should be transferred to another Environmental Body to use on approved objects;

An alternative option to selling the parcels of land as no monies can be realised to pay creditors, is that the Administrator approaches another Environmental Body to take over the woodlands.

39. ENTRUST is a party to the Administrators' applications for directions. However it was not represented at the hearing before me and thus made no submissions in support of its views and its construction of the Regulations.

Concerns expressed to the Environmental Bodies including CDENT

40. As will appear below on 11^th June 2009 the Administrators made an application to the Court for a Berkeley Applegate Order. It was served on ENTRUST.

41. As a result on 19^th June 2009 ENTRUST wrote to each of the Environmental Bodies (including CDENT) who had provided LCF funds for the purchase of each of the 3 pieces of land.

42. In summary, it advised:

It is for the Landfill Operator and the Environmental Body concerned to ensure that the funds and income derived therefore are spent compliantly. It is the role of the Environmental Body to ensure that landfill tax credit monies are spent in accordance with the Regulations. It is the role of ENTRUST to audit and verify the compliance with the activity

That income derived from the sale of land purchased with LCF donations would be considered "derived income" and could only be used in accordance with the approved purposes of the Landfill Communities Fund.

That the taking of proceeds of the sale of land for purposes of paying costs to the administrators, too, was considered non compliant/ capable of leading to a claw back against the Landfill Operator in respect of non compliant expenditure.

That should such non compliant distribution occur HMR&C might apply to claw back the non compliant expenditure from the Landfill Operator, which could lead to a claim made by the Landfill Operator against the Administrators and the Environmental Body for mis-application of LCF moneys.

43. CDENT is the only one of the Environmental Bodies to have acted on the letter from ENTRUST and to have put forward submissions to the Court. I immediately acknowledge that the submissions have been of considerable assistance in what is unfamiliar territory.

11. 8. The proceedings.

44. Faced with the funding problems identified above and with the views of ENTRUST as summarised in its letter of 30^th January 2009 the Administrators made an application for what was described as a Berkeley Applegate Order in respect of their remuneration. There may in fact have been some confusion as to the extent of the order applied for and it may be that the wording of the order made did not reflect the limited nature of the order sought. In the course of his submissions before me Mr Jory indicated that the Administrators were not seeking the authority of the Court for remuneration out of the proceeds of sale in so far as that was not possible under the Regulations. In so far as the order purported to give that authority he conceded that it was too widely worded. The purpose of the order was simply to ensure that the Administrators would be entitled to remuneration out of the proceeds for sale in so far as the land was held on trust. In fact it now appears to be common ground that none of the 3 pieces of land are held on trust and thus the orders that were made are of limited effect.

45. Be that as it may the matter came before Judge Langan QC on 26^th June 2009. The Administrators were represented by Mr Jory. There was no other appearance save that the solicitors for CDENT sent a letter to the Court which was read by Judge Langan QC.

46. Judge Langan QC made the order as sought but gave each of the Respondents liberty to vary or discharge the order by 4 p.m on 4^th July 2009. Some 2 minutes after the deadline CDENT made an application to vary Judge Langan Q C's order. In summary the application asked for some 5 orders (apart from costs):

the Administrators be compelled to comply with their obligations under the Agreement in particular in relation to the Regulations

the Administrators only be permitted to remuneration only so far as permitted by the Regulations, in particular so far as they identify an approved object

the Administrators be required to indemnify CDENT against any liability consequent on the remuneration falling outside the meaning of "qualifying contribution" within the Regulations

the Administrators not be entitled to remuneration from funds presently manifested as Skerningham Woods.

the Administrators be prevented from selling Skerningham Woods otherwise than by consent of CDENT.

47. The Application was supported by a witness statement from Mr Taylor the Company Secretary. After summarising the facts he suggests that he has been advised by Counsel that the application of the proceeds of sale of Skerningham Woods to satisfy either their fees or creditor claims would give rise to an entitlement to HMRC to claw back from the Landfill Operator the "non compliant expenditure" and result in a breach of the Regulations. CDENT is accordingly concerned that the interests of its funder will be adversely affected by any order which could result in a claim against CDENT. He also makes the point that CDENT could suffer reputational loss as a result of the order.

48. The Administrators responded by issuing their own application for directions. It is couched in neutral terms and specifically asks if the Administrators should exchange contracts in respect of Skerningham Woods and other pieces of land. It also asks for an order that the Administrators be entitled to their fees and remuneration out of the net proceeds of sale of the land sales.

12. The Regulations

49. The Finance Act 1996 makes provision for the taxable activity of landfill. By section 51(1) of the Act there is power to provide regulations in relation to credits and to prescribe conditions required to be fulfilled. Section 53 provides

(1) Regulations may be made under section 51 above with a view to securing that a person is entitled to a credit if

(a) He pays a sum to a body whose objects are or include the protection of the environment and

(b) Such other conditions as may be prescribed are fulfilled.

50. Part VII of the regulations is concerned with credit for bodies concerned with the Environment.

51. Regulation 30 contains a number of definitions including a definition of "income" as "including interest".

52. Regulation 30(2) deals with the spending of qualifying contributions:

(2) A body shall only be taken to spend a qualifying contribution in the course or furtherance of its approved objects--

(a) in a case where the contribution is made subject to a condition that it may only be invested for the purpose of generating income, where the body so spends all of that income;

(b) in a case not falling within sub-paragraph (a) above, where the body becomes entitled to income, where it so spends both the whole of the qualifying contribution and all of that income;

(c) in a case not falling within either of sub-paragraphs (a) and (b) above, where the body so spends the whole of the qualifying contribution; or

(d) where--

(i) it transfers any qualifying contribution or income derived therefrom to another approved body, and

(ii) that transfer is subject to a condition that the sum transferred shall be spent only in the course or furtherance of that other body's approved objects.

53. Regulation 31 deals with entitlement to credit. Under this regulation a registered Landfill Operator is entitled to credit in respect of 90% of the amount of a qualifying contribution made by him in any accounting period up to a limit of 90% of the amount of 6% of his relevant tax liability.

54. Regulation 32 deals with qualifying contributions:

(1) A payment is a qualifying contribution if--

(a) it is made by a registered person to an approved body;

(b) it is made subject to a condition that the body shall spend the sum paid or any income derived from it or both only in the course or furtherance of its approved objects;…

55. Regulation 33 deals with bodies eligible for approval. Amongst the conditions necessary are:

(1) [A body is eligible to be approved if--]

(a) it is--

(i) a body corporate, or

(ii) a trust, partnership or other unincorporated body;

(b) its objects are or include any of the objects within paragraph (2) below (approved objects);

(c) it is precluded from distributing and does not distribute any profit it makes or other income it receives;

(d) it applies any profit or other income to the furtherance of its objects (whether or not approved objects); …

56. There is a long list of approved objects in paragraph (2). These include

(d) where it is for the protection of the environment, the provision, maintenance or improvement of--

(i) a public park; or

(ii) another public amenity,

57. It is common ground that both the Company and CDENT are approved bodies within the meaning of the Regulations. A community woodland is a public amenity within regulation 33(2)(d)(ii).

58. Regulation 33A deals with obligations imposed on approved bodies including:

(1) An approved body shall--

(a) continue to meet all the requirements of regulation 33 above;

[(aa) comply with such conditions as the regulatory body may impose from time to time under regulation 34(1)(aa) (including any conditions varied under regulation 34(1)(ab));]

(b) apply qualifying contributions and any income derived therefrom only to approved objects;

(c) not apply any of its funds for the benefit of any of the persons who have made qualifying contributions to it or who were contributing third parties in relation to such contributions (except to the extent that they benefit by virtue of belonging to a class of persons that benefits generally);

59. As has already been noted from the correspondence Regulation 33A(1)(b) is central to ENTRUST's argument and CDENT's concerns. It is their view that that the proceeds of sale of Skerningham Woods, to the extent that it derives from the £50,000 contributed by CDENT is "income derived therefrom" within the meaning of the Regulations and must therefore be applied to approved objects.

60. Regulation 34 concerns the functions of the regulatory body ENTRUST. Regulation 35 deals with the functions of HMRC. These include, under regulation 35(1)(h) a discretion to revoke the approval of an approved body if that body fails to comply with any requirement of regulation 33A(1).

61. Regulation 36 deals with the right of HMRC to claw back credits granted from the Landfill Operators:

(1) Where a person has benefited from an amount of credit to which he was entitled under this Part and the Commissioners serve upon him a notice in relation to a qualifying contribution paid to an approved body--

(a) specifying that--

(i) they are not satisfied that the contribution has been spent by the body only in the course or furtherance of its approved objects; or

(ii) they are not satisfied that any income derived from the contribution has been so spent by the body;

…

he shall repay to the Commissioners the credit claimed in respect of the qualifying contribution.

62. It will be seen therefore that the right to claw back credits under regulation 36(1)(a)(ii) is dependent on the proceeds of sale being classified as "income derived from the contribution".

13. Income

63. At the hearing the question arose as to whether the proceeds of sale of Skerningham Woods was "income derived from the qualifying contributions" so as to be within the obligation in regulation 33(A)(1)(b). It was pointed out that the purchase price comprised of a mixed fund - £50,000 from CDENT, £20,000 from Thompson and £7,700 from the Company's funds. Thus two questions arose. First there was the question of whether the proceeds of sale amounted to income at all. Second there was the question of whether it was derived from the contribution.

64. At the hearing I was attracted by the distinction, familiar to trust lawyers, of the difference between capital and income in a trust context. On that basis there could be little doubt that the proceeds of sale would be classified as capital rather than income. It would not be treated for tax purposes as income.

65. There are a number of references to "income" in Part VII of the Regulations. First there is the definition in Regulation 30(1) that "income" includes "interest". The use of the word "includes" shows that the definition is not exhaustive but it is at least indicative that the word "income" is not being used in any unusual sense. The same point can be made about Regulation 30(2). As already noted Regulation 30(2)(a) is dealing with a situation where the contribution is made subject to a condition that it may only be invested for the purpose of generating income; Regulation 30(2)(b)refers to the body becoming "entitled to income" and to spending "both the whole of the qualifying condition and all of that income". In both of these cases "income" is being used in what may be considered its ordinary meaning, that is to say, as something deriving from the qualifying contribution. To my mind that does not include the proceeds of sale of the property acquired with the qualifying contribution.

66. I reserved judgment in this case because this construction caused me some concern. First it was contrary to the view of ENTRUST, CDENT and guidance given by HMR&C. Second it is to be remembered that the contributions are tax credits. The whole scheme of the regulations is to ensure that the tax credits are used for approved community purposes and continue to be used for such purposes. It is arguable that it would, as it seems to me, drive a big wedge in the scheme if it was possible to use the tax credits for the approved purpose and then be able to sell the capital asset acquired and use the capital acquired free from the regime set up by the Regulations.

67. In the end, though, if the meaning of the Regulations is plain effect must be given to them. It also has to be remembered that the Regulations made under the Finance Act 1996 are concerned with the raising of tax. In particular, as both ENTRUST and CDENT are at pains to point out there is a right of claw back against the original Landfill Operator under Regulation 36. To my mind there is no reason to stretch the meaning of income so as to enlarge that right to a situation such as this thus giving rise to a potential liability to the Landfill Operator many years after the qualifying contribution was made.

68. Thus I have come to the conclusion that the proceeds of sale of Skerningham Woods are not "income derived therefrom" within the meaning of Regulation 33A(1)(b).

69. If I had thought that the proceeds of sale were income within the meaning of the regulations I would have been less troubled by the fact that there was a mixed fund. It is common ground that the £50,000 provided by CDENT was provided for the specific purpose of acquiring Skerningham Woods. It plainly formed a substantial part of the purchase price of Skerningham Woods. In those circumstances I would have had little difficulty in finding that part of the proceeds of sale were income derived from CDENT's qualifying contribution. It is not necessary for me to consider whether that part should be £50,000 or a pro rata proportion of the net proceeds of sale.

14. The contract with CDENT

70. I have set out the relevant terms of the contract. CDENT makes the point that the use of the proceeds of sale to pay creditors and/or to pay the remuneration of the Administrators is not approved under the Regulations. For reasons I have given I do not agree with this submission.

71. CDENT also refer me to paragraph 1 of Schedule 4 which prevents a change of use of the site without its prior written consent. There has, of course, been no breach of this clause. Any such breach will occur (if at all) after the sale of Skerningham Woods. Furthermore CDENT also readily acknowledged that the clause was unenforceable against the purchasers. Apart from the fact that it has not been registered it does not touch and concern any land held by CDENT.

72. Both parties referred me to the decision of Scott J in Re P & C and R & T (Stockport) Ltd^[2]. That case concerned a joint venture agreement where one party had become insolvent and administrators were appointed. The solvent joint venturer sought to object to the administrator's proposals. The objection failed. At p 375 of the judgment Scott J said

In a case such as this, where the joint venture has become insolvent, the insistence by the joint venturers on their contractual rights under the joint venture agreement in order to control the attempts by the administrators of the insolvent joint venture company to salvage the development is, in my judgment, objectionable. The administrators of the company were appointed in order, inter alia, to recommence the development of the site so that at least phase 1 might be completed and realised for the benefit of creditors. Neither PCP nor, for that matter, RTG (although RTG has not put forward any obstacles) has, in my judgment, any equity to stand in the administrators' way.

The manner in which the administrators carry out their task is subject to control by the court. PCP has locus standi to make an application to the court under s 27 of the 1986 Act. It can make representations to the administrators or to creditors' meetings. In these ways PCP can ventilate pragmatic objections to the administrators' proposals. But PCP cannot, in my judgment, object to the administrators' proposals simply on the grounds that those proposals are inconsistent with contractual rights enjoyed by PCP under the joint venture agreement.

My reasons for this conclusion are in summary: (1) that in view of the insolvency of the joint venture, PCP, as at least a quasi-partner, has no equity to obtain specific performance, whether by injunction or otherwise, of its contractual quasi-partnership rights against the company; (2) that to permit the management provisions and the project co-ordinator provisions of the joint venture agreement to be specifically enforced against the administrators would be inconsistent with the spirit and purpose of s 14(4) of the 1986 Act; (3) that the insolvency of the joint venture and of the company has frustrated the purpose of the joint venture agreement.

73. In his skeleton argument Mr Thomann makes the point that CDENT is not in the position of a joint venturer. It is obliged by reason of its statutory duties not to release the Company from its obligations in relation to Landfill Community Funds proceeds. As a not for profit company, it derives no pecuniary advantage thereby. Put simply, the LCF proceeds are money to which CDENT has no claim. He also makes the point that its regulatory function requires it not to consent to the proposals.

74. I understand these submissions. However, it seems to me, as Mr Thomann acknowledged, that they lose much of their force if, as I have held, the proceeds of sale are not "income derived therefrom" and there is no breach of Regulation 33(A)(1)(b).

15. Conclusion

75. Once I have reached the conclusion that there is no breach of Regulation 33(A)(1)(b) I can see no reason why the statutory regime set up by the Insolvency Act 1986 should not take its course.

76. In those circumstances I propose to authorise the Administrators to enter into the contracts for the sale of Skerningham Woods.

77. It was agreed between the parties that each would pay their respective costs.

78. I would hope that the parties can agree the terms of the necessary order. My provisional view is that this is an appropriate case to grant CDENT permission to appeal.

JOHN BEHRENS

Thursday 18 February 2010

Note 1   After the decision of Edward Nugee QC in Re Berkeley Applegate (Investment Consultants) Ltd (No 2) (1988) BCC 279    [Back]

Note 2   [1991] BCLC 366    [Back]