Limitless: Liquidators, Injunctions And Cross-Undertakings In Damages

• Published date: 07 July 2023
• Subject Matter: Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy
• Law Firm: Collas Crill
• Author: Mr Simon Hurry, Stephen Leontsinis and Michael Adkins

The English Court of Appeal (the Court of Appeal) has recently issued a judgment which will be of particular interest to liquidators and those that they pursue in the case of Hunt v Ravneet Ubhi [2023] EWCA Civ 417.

Background

The case concerns a creditors' (the Petitioners) petition to wind up Black Capital, alleged to be an insolvent partnership between Mr Sarju Patel (Mr Patel) and Mr Ravneet Ubhi (Mr Ubhi). The same day that the petition was presented, without notice applications were made for the appointment of a provisional liquidator, Mr Stephen Hunt (the Provisional Liquidator), and associated freezing orders. The applications were successful as follows:

• the Provisional Liquidator was appointed; and
• the Provisional Liquidator immediately applied for and was granted freezing orders against Mr Patel and Mr Ubhi for a maximum sum of '19m (the Injunctions).

The Provisional Liquidator gave an undertaking in damages in respect of the Injunctions but, crucially, a limited one. The cross-undertaking read:

"If the court later finds that this order has caused loss to the Respondent, and decides that the Respondent should be compensated for that loss, the Applicant will comply with any order the court may make, save that this undertaking shall be limited to the amount of monies and the net realizable value of the unpledged assets of Black Capital (in provisional liquidation) taken into the custody or under the control of the Applicant in the course of the liquidation less the costs, expenses or other disbursements of the liquidation" (the Limited Undertaking).

The Petitioners went on to present bankruptcy petitions against Mr Ubhi and Mr Patel. Both the winding-up and bankruptcy petitions became before a Deputy Insolvency and Companies Court Judge, who dismissed the winding-up petition and the bankruptcy petition against Mr Ubhi and also set aside the statutory demand served upon him.

The Petitioners sought and obtained leave to appeal and an order was made staying the order to dismiss the petition to wind up Black Capital and the appointment of the Provisional liquidator.

But what about the Injunctions? A decision had to be made as to whether they should be continued. By this time, the Provisional Liquidator had given evidence to the effect that he considered Black Capital to have operated as a "Ponzi scheme" and it was decided by a Deputy High Court Judge (the Judge) that the Injunctions should be continued.

Mr Ubhi appealed the continuance of the...