Neutral Citation Number: [2018] EWHC 12 (Ch)
Case No: 775 of 2014
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
INSOLVENCY AND COMPANIES LIST (ChD)
Leeds Combined Court Centre
1 Oxford Row Leeds LS1 3BY

Date: 09/01/2018
IN THE MATTER OF FLEXI CONTAINERS LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986 

Before :

HIS HONOUR JUDGE DAVIS-WHITE QC 
(SITTING AS A JUDGE OF THE HIGH COURT)
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Between :

	KATE ELIZABETH BREESE 
(Liquidator of Flexi Containers Limited) 	Applicant	
	- and -		
	(1)	 ALISON HELEN HILEY
 (by her litigation friend Herbert Hiley)
(2)	ABBY HILEY
(3)	ALEXANDER PHILIP HILEY	

Respondents	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Mr Ian Tucker (instructed by Squire Patton Boggs (UK) LLP) for the Claimant
Mr Omar Ensaff (instructed by Summers Nigh Law LLP) for the 1st Respondent

Hearing dates: 3 April (reading), 4-5 April, 4 August 2017
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Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

.............................

HIS HONOUR JUDGE DAVIS-WHITE QC (SITTING AS A JUDGE OF THE CHANCERY DIVISION)

His Honour Judge Davis-White QC : 
Introduction
1.	I have before me an application issued on 11 April 2016 by the Applicant, Ms Breese (the “Liquidator”), the liquidator of Flexi Containers Limited (the “Company”).  The main issues before me are whether a transaction amounted to a preference and/or a transaction at an undervalue such that relief ought to be granted under ss238, 239 and 241 Insolvency Act 1986 (“IA 1986”).  The transaction involved the transfer of (primarily) trading stock from the Company to the 1st Respondent, Alison Hiley (“Mrs Hiley”), with the purchase price, of just over £620,000, ostensibly being satisfied in full by being offset against an outstanding director’s loan owed to Mrs Hiley. 
2.	The transfer of trading stock took place in early 2014 in the context of Mrs Hiley transferring her interest in the Company to a Mr Bailey and ceasing to be a director.  The precise factual circumstances, as regards both timings and what in fact occurred, are hotly contested.  The position is complicated by the fact that at least some documents are admitted and asserted by Mrs Hiley and a witness on her behalf, Mr Mintz, to comprise forged signatures of Mrs Hiley, forged by Mr Mintz. 
3.	Mr Bailey became a director in October 2013, having previously worked for the Company.  He acquired the only issued share in the Company in 2014, though the precise date is unclear.  Mr Mintz apparently became a director of the Company in 2014, although, again, the precise date and circumstances are contested.  According to filings at Companies House, Mr Bailey resigned as a director of the Company on 21 August 2014.
4.	Such contemporaneous documents as are in evidence relating to the transfer and Mrs Hiley’s loan account with the Company are asserted by the Liquidator to be, at the very least, unreliable.  A further complication is that I have not heard oral evidence from the two persons whom, on the face of it, are best placed to explain what happened, namely Mrs Hiley and Mr Bailey.  That is because, in the case of Mrs Hiley she was too ill to give evidence.  
5.	So far as Mrs Hiley is concerned, Mr Hiley her husband, did give evidence.  As I shall explain later, he was closely involved at the time. The absence of oral evidence from Mrs Hiley was not therefore as much of a problem as it might have been,  
6.	As regards Mr Bailey, he was not called to give evidence.  Mr Mintz agreed, in oral evidence, that after 5 January 2017 it was Mr Bailey who was in fact running the company and had relevant dealings with the Hileys.  According to Mr Mintz, his own role was very limited, Mr Bailey being the person making the relevant decisions, agreeing figures and preparing documents that Mr Mintz then signed.  Both Mr Hiley and Mr Mintz said that Mr Bailey was the person with whom the Hileys had all, or nearly all, relevant dealings.  Indeed, at the time of the trial Mr Hiley said that he had only very recently met Mr Mintz for the first time and that prior to that they had only spoken a few times, as I understood it, fairly recently.  
7.	As regards the 2nd and 3rd Respondents the application against them is presently stayed pending determination of the position on the claims that I am considering against the 1st Respondent.  That is because the claims brought by the Liquidator against the 2nd and 3rd Respondents are based upon there being further transactions to defraud creditors, to which they are parties and which, says the Liquidator, are liable to be set aside under s423 IA 1986.  In broad terms, the Liquidator asserts that Mrs Hiley has sought to divest herself of assets, by the transfer of shareholdings to the 2nd and 3rd Respondents, after notification of the claims against her that I have to consider and in order to avoid such claims.  Undertakings have been given by the 2nd and 3rd Respondents. Their effect is, as an interim measure, effectively to preserve the assets said to have been transferred to them in circumstances giving rise to the s423 claim.  In the event that the claims that I am considering are not made out then it is anticipated that the connected s423 claims will not succeed on the grounds that the Liquidator will not be a “victim” of the transactions in question.
8.	The Company was wound up on a creditor’s petition presented to the High Court, Leeds District Registry on 23 July 2014.  The petition debt was some £6,820.28. The petition was heard on 14 October 2014, when a winding up order was made.  The Liquidator was subsequently appointed liquidator at a creditors’ meeting on 2 April 2015.  The petition debt was in respect of unpaid invoices dating between March and May 2013 in a sum of just over £6,000 (plus interest thereon) and in addition some £2,000 of costs ordered in its favour in May 2014 in proceedings commenced by the Company against it in the County Court at Peterborough.
9.	According to a report to creditors produced by the Official Receiver, Mr Draycott, and dated 12 March 2015 the estimated deficiency on winding up was some £299,975.32.  Again, this figure is far from certain.
Representation
10.	The Liquidator was represented before me by Mr Tucker.  The 1st Respondent was represented by Mr Ensaff. I am grateful to both of them for the efficient and economical way that they have conducted the case and for their respective written submissions and for the extra materials that they provided to me after oral closing submissions.  
Company History and relevant documents
11.	The Company was incorporated in 11 January 2010.  Its original name was Boston Furniture Limited.  Its name was changed to World of Furnishings Limited on 17 March 2010.  It changed its name from World of Furnishings Limited to Flexi Containers Limited on 18 June 2014.  This followed the sale of the Company in circumstances that I shall go on to consider.
12.	At all material times, up until at least January 2014, the Company carried on the business of the sale of furniture and furnishings.  
13.	Mr Hiley’s husband, Herbert Hiley (“Mr Hiley”), was a director of the Company from incorporation until 20 June 2010. He then resigned and, for a period, Mrs Hiley was the sole director.  In these proceedings, as I have said, Mr Hiley acts as Mrs Hiley’s litigation friend.  
14.	Mrs Hiley has produced an employment contract with the Company dated 14 January 2010 under which she was entitled to receive a salary of £70,000 per annum plus overtime.
15.	Mr Mark Bailey (“Mr Bailey”) worked for the Company from about January 2010.  I note that he was apparently the recipient of £100 a month received from the Company by way of standing order from at least April 2013.  He was appointed a director on 31 October 2013.  According to Mr and Mrs Hiley this was in circumstances where Mrs Hiley was not well enough to manage the company and needed support. She was then (and had been for some time) living abroad.  At various times, she lived in each of Bulgaria and France.  
16.	Mr David Mintz (“Mr Mintz”) was apparently appointed a director in 2014.  He claims to be a retired accountant who was brought in on the basis that he could bring financial and accounting experience to the Company.  The notice filed at Companies House says that Mr Mintz was appointed a director on 5 January 2014.  That notice was filed, electronically, on 27 March 2014.  The Liquidator disputes that Mr Mintz was appointed prior to 27 March 2014.  
17.	Mrs Hiley ceased to be a de jure director in 2014.  It is disputed whether she ceased to be a de jure director on 5 January 2014 (as she asserts) or (as asserted by the Liquidator) at some later date, probably about 8 April 2014, when a TMO1 form, noting her resignation as a director as at 5 January 2014, was filed electronically with Companies House.  The Liquidator’s case is that, in any event, Mrs Hiley remained a de facto or shadow director after her resignation as de jure director (assuming that she did so resign).  The significance of Mrs Hiley ceasing to be a director is that it is that position which made her a “connected” person for the purposes of the relevant sections of the IA 1986 dealing with transactions at an undervalue/preference, as I shall explain later.
18.	Mrs Hiley says that she owned the one issued share in the company until 5 January 2014 when it was transferred to Mr Bailey.  No share transfer has been produced to me nor has the Company’s share register.
19.	The Company traded from premises in Lincolnshire.  Under what is described as a “Commercial Lease” dated 1 August 2008, the Company was tenant of the property known as “Shop, Main Road Tickney Boston”.  The landlord was Stickney Developments Limited (“SDL”).  SDL was at all material times a connected company in that, until comparatively recently, the one issued share in its share capital was owned by Mrs Hiley.  Mr Hiley was sole director between 12 May 2010 and 1 December 2010. Mrs Hiley was then sole director between 1 December 2010 and 19 December 2015.  On the latter date her daughter, Abby, the 2nd Respondent was appointed (sole) director.  It is said by Mrs Hiley that she transferred the one share in SDL to her daughter, Abby, on 19 December 2015.   This transfer is one of the transactions alleged in these proceedings to have been made in breach of s423 IA 1986.
20.	The lease was for a term of 4 years from 4 August 2011.  The rent payable under the lease was £89,500 per annum.  It was payable by weekly amounts of £924 plus a “balloon payment” of £96,000 on 31 January 2014.
21.	Mrs Hiley has produced a series of unsigned (by the accountants or on behalf of the board) sets of accounts for the Company. I infer that these are the filed accounts.  
22.	The Company accounts for the period 1 February 2012 to 31 January 2013 show net assets of £21,929. There are in fact arithmetical errors and misdescriptions in the accounts.  The profit and loss account for the year is said to show a net loss of £21,928 but, on analysis of the actual figures, this is in fact a profit.  On the balance sheet, net current assets of £508,876 are wrongly described as net current liabilities.  As I have said, the balance sheet shows net assets of £21,929.  The amounts shown as “Creditors Amounts falling due after more than one year” represents a “Directors Loan” of £527,463 as Note 6 makes clear.
23.	Abbreviated accounts filed electronically with the Registrar of Companies at Companies House for the period ended 31 January 2014 were signed by Mr Mintz on behalf of the board on 21 August 2014.  They show a balance sheet with net liabilities of £188,102.  In particular, the accounts show current creditors of £108,073; net current liabilities of £92,102 and creditors falling due after more than one year of £96,000.   
24.	The Company has, or appears to have, entered into various charges in favour of Mrs Hiley.  The relevance of these charges is that at various times they have been relied upon as valid security such that the transfer to her of the stock of the Company in satisfaction of the debt owed to her by the Company was said not to amount to a preference.   There has been an admission and assertion of forgery in relation to at least one of these charges.  I turn to these charges now but put them in the context of other transactions.
25.	By a “Debenture Mortgage Agreement” dated 3 February 2013 (the “February 2013 Debenture”) between the Company and Mrs Hiley: “It is agreed this day by the Company and the Lender to grant a first fixed floating charge over all fixed and floating assets of the company in the sum of £527,463.00 for sums as per the accounts of the Company injected into the said company for trading and purchases to be sue upon demand by the lender within 7 days.  The amount shall be stated within the Companies [sic] Records”.  This was signed by Mrs Hiley as director and separately signed by her as “Lender”.   As I have said, £527,463 is the sum shown in the Company’s 31 January 2013 year end accounts as being owed by the Company by way of “Directors Loan”.
26.	The February 2013 Debenture was never registered at Companies House.  It is common ground that it is accordingly not valid as against the liquidator (see what is now Companies Act 2006, s859H, formerly Companies Act 1985, s395).   
27.	By a “Debenture Agreement” dated 18 December 2013, between the Company and Mrs Hiley (the “December 2013 Debenture”) “It is agreed this day by the Company to grand [sic] a first charged fixed and floating over its assets of any nature in the sum of £590,000 to satisfy upon demand the directors loan account due from the company to the Lender. This amount is stated within the Companies [sic] Records”.  The document is signed by Mr Bailey as director and by Mrs Hiley as Lender. This charge is alleged by the Liquidator to fall within the provisions of s245 IA 1986 and therefore not to provide security for repayment of Mrs Hiley’s director’s loan as it stood in at the start of January 2014.   It is common ground that after the date of the December 2013 Debenture Mrs Hiley made new advances to the Company but limited to £11,000.  Subject to the question of this £11,000, it was common ground before me, as I understand it, that the charge did not grant valid security for the remaining sums owed to Mrs Hiley.  In brief, the reasons for this are that (a) the charge could only be a floating charge; (b) the charge was granted within 2 years of the commencement of the liquidation to a connected person, Mrs Hiley, the then sole de jure director; (c) the sums secured by the charge were existing debts as at the date of the charge (see, generally, s245 IA 1986 discussed below).  In any event, for these reasons I so hold that the charge is ineffective to have given Mrs Hiley security once the Company went into liquidation, in the circumstances that it did.
28.	The transfer of stock in satisfaction, or partial satisfaction, of Mrs Hiley’s outstanding director’s loan account is evidenced by an invoice dated 10 January 2014.  The invoice is issued by the Company and is in respect of what are described as lists of, respectively, wholesale furniture (list 1) (£410,420.71); Wholesale Furniture (List 2), Vehicles (£109,200) and parts (£9,196.83).  The invoice shows “Total paid via Loan Offset” of £620,834.07.   The Liquidator does not accept the date of the invoice as being correct.
29.	Two payments were made to the Company from Mrs Hiley’s bank account after 5 January 2013.  The payments totalled £11,000.  A payment of £3,000 was made on 8 January 2013.  A further payment of £8,000 was made on 23 January 2013.   In the Schedule, defined and referred to below, being a document produced to justify Mrs Hiley’s proof of debt in the liquidation, these payments are shown as taking place on 1 and 8 January respectively. These payments are relevant when considering the state of the loan account of Mrs Hiley with the Company.  They are also relied upon by the Liquidator in the context of, and as pointers against, assertions by Mrs Hiley that she had ceased to own any shares or to be a director prior to the date of either payment.  
30.	A “Continuing loan agreement” dated 13 January 2014 and made between Mrs Hiley as lender and the company as borrower (the “Loan Agreement”) provides that “the indebtedness of £165,806.16 gbp to the lender Will continued to be loaned providing that the borrowed [sic] pays the lender 400.00 per week to her account..and the lender will not foreclose on such debt, providing that payments agreed are made…”  It is signed by Mrs Hiley as lender and by Mr Mintz on behalf of the Company.  There was no documentary evidence, in terms of, for example, bank statements, showing that the £400 per week sums were ever paid or received.  Again, the Liquidator challenges that this document is a valid document signed and effective on its purported date rather than a later construct. Mrs Hiley asserts that the sum calculated as due in that agreement was incorrect and that at the time she was in fact owed £192,466.16. 
31.	Also dated 13 January 2014 is a document described as a “Rent Holiday Gap Agreement” between Mrs Hiley of SDL and the company providing for “a 12 months holiday gap period for the repayment of the back rent due of 96,000 and the lender shall not call in the rent arrears if they are repaid by the year anniversary of the agreement”.  This is said by Mrs Hiley to relate to the balloon payment under the lease that I have already referred to.
32.	I have already referred to the abbreviated balance sheet for the Company, forming the accounts for the period ended 31 January 2014, which show a balance sheet deficiency of £188,102, representing a loss in the accounting year of £210,031.  
33.	By a Debenture Agreement on its face dated 11 March 2014 the Company purportedly granted Mrs Hiley a fixed and floating charge over the Company’s assets of any nature in the sum of £350,000 “to satisfy upon demand by the director/lender within 7 days of notice of repayment due this is for amounts due within the extended directors loan account and amounts stated within the companies [sic] accounts”.  The document is purportedly signed twice by Mrs Hiley, first as managing director and secondly by her as lender.  This document was apparently delivered to the Registrar of Companies on 11 March 2014 and registered by him. Mr Mintz asserts, as does Mrs Hiley, that he forged Mrs Hiley’s signatures on this document.  The Liquidator in any event relies upon the description of Mrs Hiley as managing director as evidence that Mrs Hiley had not as at March 2014 resigned as director or that, if she had, she remained de facto director.
34.	There is a further debenture, also dated 11 March 2014 and purportedly signed by Mrs Hiley as managing director of the Company and separately as managing director of SDL.  This apparently creates a second fixed and floating charge over the assets of the Company “in the sum of £96,000 to satisfy upon demand by the Director/Lender within 7 days of notice if repayment due for rent arrears and stock supplied on 60 days terms and amounts stated within the Companies [sic] accounts.”  This too is said by Mr Mintz and Mrs Hiley to contain signatures of Mrs Hiley forged by Mr Mintz.
35.	There then exist further versions of these two debentures, each also dated 11 March 2014 but this time purportedly signed in each case by Mr Mintz as managing director for the Company and Mrs Hiley (in her own right regarding the Debenture covering sums due to her and as director of SDL regarding the Debenture covering sums due to SDL).  I shall refer to that granting a charge to Ms Hiley of up to £350,000, and containing her actual signature and that of Mr Mintz, as the “March 2014 Debenture.”  
36.	The charges purportedly granted by the company dated 11 March 2014 (but containing forged signatures) were lodged electronically for registration with the Registrar of Companies on that date.  According to Mrs Hiley and Mr Mintz, these were later replaced by the versions actually signed by her and Mr Mintz.    
37.	A balance sheet “as at cessation” (the “Cessation Balance Sheet”) shows net liabilities of £240,936. An accompanying profit and loss account (for the period 1 February to cessation) shows a loss for the period of £52,833.73. On the balance sheet, this is coupled with a loss “brought forward” of £188,102 to show a total profit and loss account deficit of £240,935 (which to balance should probably be £240,937).  This document shows sums owing to Mrs Hiley under a debenture of £93,923 and to SDL of £86,000.  This document was apparently prepared by Mr Mintz.  His evidence was that the Company ceased trading in July 2014.  Mr Bailey, he says, resigned as secretary and director due to stress and health issues on 21 August 2014.
38.	As I have said, the Company was wound up on 14 October 2014.  The Official Receiver made a further report to creditors dated 12 March 2015.  In that he made various statements about the history of the Company.  Among these are the following:
“ A director of the company states that Alison Helen Hiley took action under her charge in 2013/2014 through a commercial sale of stocks.”
…….
“David Henry Mintz, a director of the company, states that
He took on the company in January 2014 at which time the company had limited stocks and a large premises he decided to streamline the business and left the rented unit in April 2014 on the basis they would sell furniture direct to councils and trade buyers.
They were unable to secure the contracts they expected or funding from private investors. This left them struggling to meet the liabilities of the company and they ceased to trade in mid-2014 as a result.”
39.	A list of creditors of the company printed on 9 March 2015 shows, under a list of “Scheduled Creditors”, Mrs Hiley owed some £328,378 by the Company.  This may have accompanied, or been used in connection with, a further report to creditors from the Official Receiver dated 12 March 2015.  That report refers to a meeting of creditors having been called for the purposes of appointing an insolvency practitioner as liquidator. 
40.	As at liquidation Mrs Hiley submitted a proof of debt in support of her voting proxy dated 16 March 2015 in the sum of £165,806.16.  For voting purposes, the Official Receiver reduced the claim to £93,923 (the figure shown the Cessation Balance Sheet) because of discrepancies in the paperwork.  That did not affect the ultimate voting result as with the claim of SDL, Mrs Hiley and SDL had the majority voting rights.  
41.	Mrs Hiley’s proof of debt was substantiated by a further document which showed various credits and debits to her loan account in the period after 31 January 2012 (the “Debt Schedule”).  As regards the period up to 31 January 2013 the position shown was as follows: (the below sets out the substance of the document but does not reproduce its precise content and format):
Loan account has at 31.1.12				£380,415.00
Plus salary not taken:			£  70,000.00
						£  45,000.00
						£115,000.00    	£115,000.00
Plus amounts paid to company
by or for A Hiley						£124,902.00
									£620,317.00
This compares with the figure in the accounts for that period of £527,463 and the same sum of £527,463 shown as owing by the February 2013 Debenture.
42.	The Debt Schedule then goes on to deal with the position between 1 February 2013 to 31 January 2014 as follows (again set out below is the substance rather than the precise format and detail of the Debt Schedule)
Loan Account as at 31.1.13					£620,317.00
Payments made by Mrs Hiley 				£  96,323.23
02.02.13 to 31.01.14
Salary not taken:						£  70,000.00
										£786,640.23
									
Less total repaid:						£(620,834.07)
Debt:								£165,806.16		
43.	Ms Breese was appointed liquidator at a meeting of creditors held on 2 April 2015.
The Law
44.	So far as material the relevant parts of ss238 to 241 are as follows (references hereinafter to section numbers are, unless the context otherwise requires, to the relevant section numbers of the Insolvency Act 1986):
238.— Transactions at an undervalue (England and Wales).

(1) This section applies in the case of a company where—
….1
(b) the company goes into liquidation;
and “the office-holder” means the ….liquidator, ….
(2) Where the company has at a relevant time (defined in section 240) entered into a transaction with any person at an undervalue, the office-holder may apply to the court for an order under this section.
(3) Subject as follows, the court shall, on such an application, make such order as it thinks fit for restoring the position to what it would have been if the company had not entered into that transaction.
(4) For the purposes of this section and section 241, a company enters into a transaction with a person at an undervalue if—
…
 (b) the company enters into a transaction with that person for a consideration the value of which, in money or money's worth, is significantly less than the value, in money or money's worth, of the consideration provided by the company.
(5) The court shall not make an order under this section in respect of a transaction at an undervalue if it is satisfied—
(a) that the company which entered into the transaction did so in good faith and for the purpose of carrying on its business, and
(b) that at the time it did so there were reasonable grounds for believing that the transaction would benefit the company.

239.— Preferences (England and Wales).
(1) This section applies as does section 238.
(2) Where the company has at a relevant time (defined in the next section) given a preference to any person, the office-holder may apply to the court for an order under this section.
(3) Subject as follows, the court shall, on such an application, make such order as it thinks fit for restoring the position to what it would have been if the company had not given that preference.
(4) For the purposes of this section and section 241, a company gives a preference to a person if—
(a) that person is one of the company's creditors or a surety or guarantor for any of the company's debts or other liabilities, and
(b) the company does anything or suffers anything to be done which (in either case) has the effect of putting that person into a position which, in the event of the company going into insolvent liquidation, will be better than the position he would have been in if that thing had not been done.
(5) The court shall not make an order under this section in respect of a preference given to any person unless the company which gave the preference was influenced in deciding to give it by a desire to produce in relation to that person the effect mentioned in subsection (4)(b).
(6) A company which has given a preference to a person connected with the company (otherwise than by reason only of being its employee) at the time the preference was given is presumed, unless the contrary is shown, to have been influenced in deciding to give it by such a desire as is mentioned in subsection (5).
(7) The fact that something has been done in pursuance of the order of a court does not, without more, prevent the doing or suffering of that thing from constituting the giving of a preference.

240.— “Relevant time” under ss. 238, 239.
(1) Subject to the next subsection, the time at which a company enters into a transaction at an undervalue or gives a preference is a relevant time if the transaction is entered into, or the preference
given—
(a) in the case of a transaction at an undervalue or of a preference which is given to a person who is connected with the company (otherwise than by reason only of being its employee), at a time in the period of 2 years  ending with the onset of insolvency (which expression is defined below),
(b) in the case of a preference which is not such a transaction and is not so given, at a time in the period of 6 months ending with the onset of insolvency, […]
 (2) Where a company enters into a transaction at an undervalue or gives a preference at a time mentioned in subsection (1)(a) or (b), that time is not a relevant time for the purposes of section 238 or 239 unless the company—
(a) is at that time unable to pay its debts within the meaning of section 123 in Chapter VI of Part IV, or
(b) becomes unable to pay its debts within the meaning of that section in consequence of the transaction or preference;
but the requirements of this subsection are presumed to be satisfied, unless the contrary is shown, in relation to any transaction at an undervalue which is entered into by a company with a person who is connected with the company.
(3) For the purposes of subsection (1), the onset of insolvency is—
….
 (e) in a case where section 238 or 239 applies by reason of a company going into liquidation…..the date of the commencement of the winding up. 

241.— Orders under ss. 238, 239.
(1) Without prejudice to the generality of sections 238(3) and 239(3), an order under either of those sections with respect to a transaction or preference entered into or given by a company may (subject to the next subsection)—
(a) require any property transferred as part of the transaction, or in connection with the giving of the preference, to be vested in the company,
(b) require any property to be so vested if it represents in any person's hands the application either of the proceeds of sale of property so transferred or of money so transferred,
(c) release or discharge (in whole or in part) any security given by the company,
(d) require any person to pay, in respect of benefits received by him from the company, such sums to the office-holder as the court may direct,
(e) provide for any surety or guarantor whose obligations to any person were released or discharged (in whole or in part) under the transaction, or by the giving of the preference, to be under such new or revived obligations to that person as the court thinks appropriate,
(f) provide for security to be provided for the discharge of any obligation imposed by or arising under the order, for such an obligation to be charged on any property and for the security or charge to have the same priority as a security or charge released or discharged (in whole or in part) under the transaction or by the giving of the preference, and
(g) provide for the extent to which any person whose property is vested by the order in the company, or on whom obligations are imposed by the order, is to be able to prove in the winding up of the company for debts or other liabilities which arose from, or were released or discharged (in whole or in part) under or by, the transaction or the giving of the preference.
(2) An order under section 238 or 239 may affect the property of, or impose any obligation on, any person whether or not he is the person with whom the company in question entered into the transaction or (as the case may be) the person to whom the preference was given; but such an order—
(a) shall not prejudice any interest in property which was acquired from a person other than the company and was acquired in good faith and for value, or prejudice any interest deriving from such an interest, and
(b) shall not require a person who received a benefit from the transaction or preference in good faith and for value to pay a sum to the office-holder, except where that person was a party to the transaction or the payment is to be in respect of a preference given to that person at a time when he was a creditor of the company.
 	(2A) Where a person has acquired an interest in property from a person other than the company in question, or has received a benefit from the transaction or preference, and at the time of that acquisition or receipt—
(a) he had notice of the relevant surrounding circumstances and of the relevant proceedings,
or
(b) he was connected with, or was an associate of, either the company in question or the person with whom that company entered into the transaction or to whom that company gave the preference,
then, unless the contrary is shown, it shall be presumed for the purposes of paragraph (a) or (as the case may be) paragraph (b) of subsection (2) that the interest was acquired or the benefit was received otherwise than in good faith.

(3) For the purposes of subsection (2A)(a), the relevant surrounding circumstances are (as the case may require)—
(a) the fact that the company in question entered into the transaction at an undervalue; or
(b) the circumstances which amounted to the giving of the preference by the company in question;
and subsections (3A) to (3C) have effect to determine whether, for those purposes, a person has notice of the relevant proceedings.

…..
.
(3C) In a case where section 238 or 239 applies by reason of the company in question going into liquidation …. a person has notice of the relevant proceedings if he has notice—
(a) where the company goes into liquidation on the making of a winding-up order, of the fact that the petition on which the winding-up order is made has been presented or of the fact that the company has gone into liquidation;
(b) in any other case, of the fact that the company has gone into liquidation.
(4) The provisions of sections 238 to 241 apply without prejudice to the availability of any other remedy, even in relation to a transaction or preference which the company had no power to enter into or give.”

45.	The definition of a person “connected” with a company is for these purposes set out in s249 which provides as follows:
“  “Connected” with a company.
249.  For the purposes of any provision in this Group of Parts, a person is connected with a company if— 
(a)	he is a director or shadow director of the company or an associate of such a director or shadow director, or
(b)	he is an associate of the company,
and “associate” has the meaning given by section 435 in Part XVIII of this Act.” 

46.	During the course of the hearing I ruled that it was too late for the Liquidator to assert (for the first time) that Mrs Hiley was “connected” with the company otherwise than through being a director within the extended meaning of s249(a).   In particular, I did not permit a case to be raised that Mrs Hiley was at any relevant time “connected” to the Company by virtue of being a person with relevant “control” over it and therefore an “associate”. 
47.	As regards preference, therefore, the conditions which need to be satisfied are, in summary as follows, a transaction:
47.1	entered into by a company which subsequently goes into liquidation (ss239(1), 238(1));
47.2	by which a creditor is preferred, that is put in a better position on liquidation that he or she would otherwise have been (ss239(2), (4));
47.3	which takes place in circumstances where the company was influenced in entering into the transaction by a desire to prefer the person (s239(4)), such influence being presumed in the case of a person connected with the company(s239(5)). The time for judging whether there was the requisite desire is the time that the relevant decision is made to make the preference, not the date of the transaction effecting the preference.  In the case where it is asserted that the decision was made prior to being given effect to a careful analysis of the facts is required:  (Re Stealth Construction Limited [2011] EWHC 1305 (Ch); [2012] 1 BCLC  297 at [56] to [65] applying re M C Bacon Limited [1990] BCLC 324 at 366 and considering subsequent cases).  As David Richards J (as he then was) said in Stealth at [63]:
“ [63] In my judgment, the question of when the decision is made is a question of fact to be determined in the particular circumstances of each case. An existing contractual obligation is neither necessary nor of itself sufficient….”
47.4	which takes place at a time within 6 months of the onset of insolvency of the company or, if the person is connected with the company, within 2 years of that date (s239(1), 240(1)).  The onset of insolvency is the commencement of liquidation (s240(3)).  That is, for these purposes, the date of the presentation of the winding up petition on which the winding up order was made (see s129(2));
47.5	at the time of the transaction the Company is or, as a result of the transaction, becomes insolvent, on either a cash flow basis or a net asset basis (ss240(2) , 123);
48.	In the case of transactions at an undervalue, the conditions which need to be satisfied are, in summary as follows, a transaction entered into by a company: 
48.1	which company subsequently goes into liquidation (s238(1));
48.2	at an undervalue, that is a transaction under which the value of the consideration, in money or money’s worth, received by the company is significantly less than the value, in money or money's worth, of the consideration provided by the company (s238(2), (4));
48.3	in relation to which the court is not satisfied both (a) that the transaction was entered into that by the company in good faith and for the purpose of carrying on its business, and (b) that at that time there were reasonable grounds for believing that the transaction would benefit the company (s238(5));
48.4	which takes place at a time within 2 years of the onset of insolvency (s238(1), 240(1)).  The onset of insolvency is the commencement of liquidation (s240(3)).  That is, for these purposes, the date of the presentation of the winding up petition on which the winding up order was made (see s129(2));
48.5	and at the time of the transaction the Company is or, as a result of the transaction, becomes insolvent, on either a cash flow basis or a net asset basis (ss240(2), 123), such state of affairs being treated as satisfied unless the contrary is proved where the person entering the transaction with the company was a connected person (s240(2)).
49.	“Insolvency” is defined by s123 as encompassing either net asset insolvency or cash flow insolvency.
50.	So far as material, s245 provides as follows:
“245.— Avoidance of certain floating charges.
(1) This section applies as does section 238…..
(2) Subject as follows, a floating charge on the company's undertaking or property created at a relevant time is invalid except to the extent of the aggregate of—
(a) the value of so much of the consideration for the creation of the charge as consists of money paid, or goods or services supplied, to the company at the same time as, or after, the creation of the charge,
(b) the value of so much of that consideration as consists of the discharge or reduction, at the same time as, or after, the creation of the charge, of any debt of the company, and
(c) the amount of such interest (if any) as is payable on the amount falling within paragraph (a) or (b) in pursuance of any agreement under which the money was so paid, the goods or services were so supplied or the debt was so discharged or reduced.
(3) Subject to the next subsection, the time at which a floating charge is created by a company is a relevant time for the purposes of this section if the charge is created—
(a) in the case of a charge which is created in favour of a person who is connected with the company, at a time in the period of 2 years ending with the onset of insolvency,
(b) in the case of a charge which is created in favour of any other person, at a time in the period of 12 months ending with the onset of insolvency,  
(4) Where a company creates a floating charge at a time mentioned in subsection (3)(b) and the person in favour of whom the charge is created is not connected with the company, that time is not a relevant time for the purposes of this section unless the company—
(a) is at that time unable to pay its debts within the meaning of section 123 in Chapter VI of Part IV, or
(b) becomes unable to pay its debts within the meaning of that section in consequence of the transaction under which the charge is created.
(5) For the purposes of subsection (3), the onset of insolvency is—
		……
(d) in a case where this section applies by reason of a company going into liquidation, the date of the commencement of the winding up.

(6) For the purposes of subsection (2)(a) the value of any goods or services supplied by way of consideration for a floating charge is the amount in money which at the time they were supplied could reasonably have been expected to be obtained for supplying the goods or services in the ordinary course of business and on the same terms (apart from the consideration) as those on which they were supplied to the company.”

51.	S245 will therefore bite in the following manner, provided:
35.1	a company goes into liquidation and;
35.2	before doing so it grants a floating charge;
35.3	either within 12 months of the onset of insolvency or, in the case of a charge granted to a connected person, within 2 years of the onset of insolvency (for these purposes the onset of insolvency being the date of presentation of the winding up petition); and
35.3	if the charge is granted to a non-connected person, the Company is then or becomes insolvent as a result.
52.	In those circumstances, the floating charge will be invalid save to the extent of the aggregate of the value of the consideration received by the company for the creation of the charge, which is then or thereafter received by the company.  
53.	I have also been referred to the well-known authorities regarding the circumstances in which, and in what manner, the Court may take into account a failure of a party to adduce evidence that he, she or it might be expected to produce (Wisniewski v Central Manchester Health Authority [1998] P.I.Q.R. 324 especially at 340; R (on the application of Stapleton) v Revenue and Customs Prosecution Office [2008] EWHC 1968 (QB) at [36] to [39] and the valuable analysis of Arden LJ in Wetton (as Liquidator of Mumtaz Properties Limited v Ahmed [2011] EWCA Civ 610 at [10] to [18].  I do not set out the relevant passages in this judgment but have them well in mind.  The liquidator relies on these authorities as regards what is submitted to be a failure to call Mr Bailey. In that connection, only during the trial, did it become clear that Mr Mintz’s role in events was far less central to that which his and Mrs Hiley’s written evidence gave cause to believe.   
The parties’ cases in summary
54.	The Liquidator says that the use of stock in settlement of debt was an unlawful preference.  The debt was not at the time secured by any charge (The 2014 charge, submits the Liquidator, falls foul of s245 IA 1986).  The stock transaction was decided upon or entered into at a time when Mrs Hiley was connected with the company as a director.  Accordingly, it was entered into within the 2 year period of the start of the liquidation.  The Company is presumed to be influenced by the relevant desire, given Mrs Hiley was “connected”.  At that time the company was, or as a result became, insolvent.
55.	So far as the transaction at an undervalue is concerned, the Liquidator says that the debt owed by the Company to Mrs Hiley as at 10 January was less than the value of (or the consideration payable for) the stock transferred to Mrs Hiley.   To that extent the Liquidator says that a settlement of the debt owed being effected by a transfer of the stock amounted to an undervalue, viewed from the company’s position.
56.	The Liquidator says that if the transaction in question was a preference or a transaction at an undervalue for which Mrs Hiley is responsible as director then she is also liable for breach of duty as a director.  However, it is accepted that, in practice, subject possibly to the question of remedy, this adds nothing in practice to the claims of unlawful preference and unlawful transaction at an undervalue.  It stands or falls with the allegations of preference and transaction at an undervalue. 
57.	I deal with Mrs Hiley’s defence below, when dealing with the constituent elements of ss238 and s239 IA 1986. In summary, however it is said that Mrs Hiley resigned as director prior to the stock transfer transaction being entered into. Accordingly, she was not then “connected” and the transaction is not vulnerable under s239 as it took place outside the 6 month applicable period.    If this is wrong, then there was no preference, the transaction was not influenced by a desire to place Mrs Hiley in a better position than on insolvent liquidation and the company was not then insolvent. 
The evidence
58.	The written evidence in the case comprised a number of witness statements from the Liquidator(3), Mrs Hiley(2), Mr Hiley(1) and Mr Mintz(2).  In addition, Mr Hiley made a further witness statement in support of an application to adjourn the proceedings which was refused by His Honour Judge Klein (sitting as a High Court Judge) on 17 March 2017. On the latter occasion, the learned Judge also (among other things) appointed Mr Hiley as Mrs Hiley’s litigation friend.  He also ordered that Mrs Hiley was not required to attend the trial due to her incapacity and that her witness statements would be admitted at trial, but the weight to be accorded to them was a matter for the trial Judge. 
59.	The Liquidator gave oral evidence.  I found her to be a truthful and credible witness.  However, the value of her evidence was necessarily limited because she had not been involved in any of the relevant events at the time that they took place.  
60.	Mr Hiley also gave oral evidence.  
61.	Mr Hiley, in his written and oral evidence, said that he had no involvement with the company after his resignation as director but accepted that he assisted his wife, for example, in preparing documents to go to the accountants for the preparation of annual accounts and in dealing with the HMRC investigation that I have referred to.  I am satisfied that Mr Hiley was very fully involved in and informed about his wife’s arrangements with regard to the Company, its management and her shareholding and dealings between her and the Company in terms of the financial position between her and the Company including the state of account between them. This was particularly so in the latter part of 2013 when Mrs Hiley was in significant ill health.  Such ill-heath was sadly, however, not a new thing.  As a report from Docteur Nicolas Roux of Saint-Jean-De-Luz dated 28 July 2013 makes clear, she was then suffering from long lasting depression, chronic problems following on from bowel surgery in 2012 and she needed continuing support with help from her husband as her problems/pain “could affect her instantly” at any given time.  This is not the only medical evidence in the case.  
62.	Although I did not hear from Mrs Hiley herself I am satisfied that her husband was able to give evidence as to what had happened at the relevant time.  Indeed, as his 1st witness statement confirmed, he was the source of many of the documents put forward by Mrs Hiley in her 1st witness statement, he having been given the documents by her “for safekeeping”.   Further, it was at his suggestion that the February 2013 Debenture was entered into; it was he who found out that it had not been registered and arranged with Mr Bailey for the December 2013 Debenture to be put in place and he who registered it; it was he who spoke with Mr Bailey about Mr Bailey taking over the Company; he was “present” at discussions leading to the transfer of the Company’s stock to his wife; it was he who arranged for the subsequent onward sale of the majority of such stock on or about 14 February 2014; it was he who “assisted” in the negotiations leading to the Loan Agreement and the Rent Holiday Agreement; it was he who found out that his wife’s signature had been forged on the two charges dated 11 March 2014 and who arranged with Mr Mintz for the position to be corrected and it was he who filed the replacement charges at Companies House.  
63.	I therefore accept and rely upon his statement in his 2nd witness statement, made in support of the application to adjourn, that he “was fully aware of the circumstances and events” surrounding the matters in the proceedings before me.  I am also satisfied that, given the medical evidence and Mr Hiley’s evidence, even if Mrs Hiley were now to recover sufficiently to give evidence, her state of health at the relevant time in October 2013 to March 2014 was such that she would be unable to give more detailed or different evidence to that provided by Mr Hiley. 
64.	I find that Mr Hiley’s evidence was, at least in parts, not reliable. I deal with those aspects below.  I also take account in evaluating his evidence that, as referred to me by the Liquidator, Mr Hiley has pleaded guilty to a charge of fraudulent trading involving over £100,000.  In relation to that offence he was sentenced in August 2013 at Lincoln Crown Court to a 12-month suspended sentence.  In addition, a disqualification order of 3 years was imposed upon him.  The offence in question apparently dated back to 2009.   
65.	As a general matter, the Court is usually able to place significant reliance upon contemporaneous documents.  In this case, that is not possible.  Key contemporaneous documents (such as emails) are missing.  Some are admitted to have been forged.  Accordingly, I have had to rely very much on the overall probabilities and my assessment of the witnesses who gave oral evidence.
The transfer of the Company to Mr Bailey
66.	Mrs Hiley’s written evidence was to the effect that as at October 2013 her health was significantly bad and she was abroad.  She therefore agreed with Mr Bailey in October 2013 that she would resign as director, Mr Bailey would be appointed in her place and she would transfer her share in the Company to him.   
67.	Mr Bailey, says Mrs Hiley, was appointed a director in November but she did not cease her involvement nor formally resign as director nor transfer the one issued share in the company “because I was not well enough to deal with the matter at the time.”  As she was preparing to hand over the company she says the non-registration of the February 2013 Debenture came to light. As I have mentioned, Mr Hiley says that he discovered this.  This discovery, says Mrs Hiley, resulted in entry into the December 2013 Charge. Mr Hiley says that it was he who arranged for the new charge and who registered it at Companies House.   The delay between October and December was, says both Mr and Mrs Hiley, because of her ill-health.  The Charge was signed by Mr Bailey for the Company and by Mrs Hiley as lender.
68.	Mrs Hiley says that she resigned as director and transferred her share on 5 January.  (In an early letter to the Liquidator the assertion was that she resigned on 6 January 2014).  At that stage Mr Mintz was, she says, appointed director, though whether by her and Mr Bailey or by Mr Bailey alone is unclear.  According to Mr Mintz’s first witness statement, Mrs Hiley signed a form TMO1 and gave it to him to file at Companies House.  He there says that he did not file it until his return to the office after his heart surgery because that intervened before he had a chance to file the resignation form.  His 2nd witness statement revealed that the heart surgery took place on 25 January 2014 and that he was then absent from the office “for a few weeks”.  On his return, he says in his witness statement, he first dealt with filing notice of his own appointment as a director, believing that the resignation of Mrs Hiley had been dealt with but upon checking the position and finding that it had not been dealt with, he then made the appropriate filing.  He says in his witness statement that he was resident at an address in London W9 during the period January to early December 2014.
69.	Mr Hiley’s oral evidence was that the share transfer and the form of resignation were executed by Mrs Hiley on 5 January when he and Mrs Hiley were in France.  He says that it was e-mailed to Mr Bailey (not given to Mr Mintz).  His explanation as to why there are no available email records of the same (or indeed in relation to the other documents put forward by Mrs Hiley as having been created in 2014) was confusing and unconvincing.  
70.	Mr Hiley also sought to suggest that the version of the Debt Schedule in fact exhibited by Mrs Hiley had been tampered with in some way but I found his evidence confusing on this issue and in any event the main point made little sense. 
71.	After, Mrs Hiley says, her resignation on 5 January she wished her debt to be repaid. She was also aware the balloon payment of £96,000 was due to SDL at the end of January 2014.  Accordingly, she says, it was agreed that goods would be transferred by the Company to her in partial satisfaction of her debt, the balance being repaid over time, and that there would be a 12 month “holiday gap” for payment of the balloon payment.  The result was the transfer of goods in exchange for her loan account being reduced by £620,834.07.  She says that Messrs Mintz and Bailey agreed to the transfer of stock as they no longer needed it, having decided that the Company would now sell on-line. The business would, apparently, not need any vehicles as the manufacturers would deliver direct to the end customer and no showrooms or stock would be needed.  Although, according to Mrs Hiley, the premises would not be needed and she owned SDL, the landlord, the Company continued in occupation of the premises, deferred the Balloon payment, but remained liable for ongoing rent. 
72.	In his first witness statement Mr Mintz essentially sets out the same version of events as Mrs Hiley.  Among other things he says that Mrs Hiley “claimed due” £786,640.23. He says that the stock values were taken from stock control sheets. The valuation of vehicles was taken from taking their actual market value.  
73.	In her 2nd witness statement Mrs Hiley says that the transfer of goods and the resignation were not part of one “linked transaction”.  It was only after her having ceased to be involved with the Company, that the issue of repayment of her loan account arose. She also says that the further injection of £11,000 (£3,000 on 8 January and £8,000 on 23 January) made after her resignation was made at the request of Mr Mintz and Mr Bailey to help them put in place their new business model for the Company.
74.	The Loan Agreement of 13 January 2014, says Mrs Hiley, incorrectly recorded the remaining loan at £165,806.16 when it should have been £192,466.16.  She says she miscalculated the amount of the debt.  By deduction, on her account, some undrawn salary of about £25,000 is said to have been wrongly left out of account.  Mrs Hiley says that the Loan Agreement was made between her and Mr Mintz.  On the same date, she says, the Rent Holiday Agreement was entered into.    In hi witness statement, Mr Mintz says much the same though as regards the debt owing to Mrs Hiley limits himself to saying he knew that she “claimed” £786,640.23 as at January 2014. He says the Loan Agreement was entered into.   
75.	Mrs Hiley says that payments were made to her under the Loan Agreement of £400 per week from January until April 2014.  Mr Mintz asserts the same in his witness statement.  As I have said, no paper evidence of such payments has been produced.
76.	In “January 2014” Mrs Hiley says that she asked Mr Mintz to sort out a further charge to secure the sums that she says were still owed to her by the Company.  She says that she mistakenly believed that a new charge was required because the figures on her loan account had changed so much. She said that Mr Mintz only prepared the further charges on his return from having heart surgery in March 2014.  
77.	According to Mr Mintz’s 1st witness statement it was “a condition” of Mrs Hiley agreeing to the Loan Agreement that a further charge be granted to her.  I assume the same to be true of the Balloon payment, the charge in that case being one granted to SDL.
78.	As regards the charges with her forged signatures upon them, Mrs Hiley says that Mr Mintz had used the template of the December 2013 Charge.  As he “felt under pressure” to get them to Companies House he forged her signatures and filed them but that “as soon as he realised his mistake” he drew up the charges which were eventually signed by Mrs Hiley (in her own right) and by Mr Mintz (for the Company).    These charges were then filed at Companies House, replacing the ones with the forged signatures.
79.	According to Mr Mintz’s 1st witness statement, the reason for him forging the signatures was because he was “embarrassed that the matter had been delayed so long” but when he “realised” the charges were not valid he arranged for the charges to be re-drawn up and signed by Mrs Hiley, returned to him and he then signed them and filed them at Companies House.
80.	Contrary to Mrs Hiley’s written evidence suggesting that the repayment of her loan and in fact her increasing it by £11,000 were not connected with her resignation and transfer of shareholding, but only arose subsequently, Mr Hiley confirmed both that the further £11,000 injection and the reduction of loan account by a transfer of stock, were agreed in about October/November 2013 and that they formed part of the terms of leaving that were negotiated at that time.   He later suggested that the payments totalling £11,000 were agreed in January, although whether that was simply the precise amounts and payment dates was unclear to me.  
81.	All negotiations were, said Mr Hiley, through Mr Bailey not Mr Mintz.  Direct contact between the Hileys and Mr Mintz had only occurred after the Company collapsed.  This was later confirmed by Mr Mintz’s in oral evidence. 
82.	As regards the accounts for the year ending 31 January 2014, approved in August 2014, Mrs Hiley says that she did not see them at the time but that the current creditors of £108,073 relates to trade creditors but “principally relates” to the amount due to her on her on her director’s loan account.  However, she says in fact £192,466.16 was owing to her.  However, on her version of events that cannot be correct because there would have been a reduction by reason of the weekly payments of £400 from January to April 2014.  It is telling that the sum said to be due is also far short of the £162,000 set out in the Loan Agreement.  Mr Mintz in his witness statement said that the £108,000 relates to trade creditors but principally to the amount due to Mrs Hiley under the DLA.  He says that this was calculated on the basis of figures in my possession”.  This, as so much else in his witness statement, contrasts with the position he took in oral evidence (see below). 
83.	According to Mrs Hiley the cessation accounts, showing a debt owed to her of just over £93,000 understates the debt owed to her by a sum of just under £100,000.  
84.	So far as the Debt Schedule is concerned Mrs Hiley’s evidence was that her proof of debt, enclosing this schedule, was prepared with the help of a Mr Carter who was involved in advising about the liquidation process.  However, she says that this was in September 2015, but the proof of debt was submitted much earlier than that.  If 2015 is a typo for 2014, that also would make no sense because Mrs Hiley says she didn’t know about the liquidation until January 2015.  Mr Hiley gave confused evidence about the position and about the date when it might have been prepared.  The suggestion seems to be that the work in the Schedule had been carried out prior to the Loan Agreement being signed but neither Mrs Hiley or Mr Hiley gave any clear evidence on this point. 
85.	I have had to deal with Mr Mintz’s evidence separately from that of Mr Hiley,  The reason for that is that his evidence was given over the course of an afternoon of one day and the morning of the next.  It was thus interrupted by an overnight adjournment.  Having given evidence in the afternoon of one day he commenced the next day by spontaneously making a statement resiling from much of what he had said the day before on the grounds, among others, that he had been confused the day before, in part because he suffers from sleep aponea and had therefore been very tired.     I did not detect this at any time during his evidence given the day before.  Counsel had not detected any confusion or apparent weariness either or I am sure they would have intervened and suggested, at the least, a break.  Further, the time over which Mr Mintz had given evidence had not been very prolonged.
86.	Mr Mintz’s oral evidence, at least initially, was that he had no responsibility for and had never filed Company documents at Companies House.  Mr Bailey, he said, asked him to sign things but it was Mr Bailey who did all the filing.  He said if he had been asked he would have printed off the document and posted it to Companies House rather than carrying out any electronic filing.  This of course was flatly contradictory to his witness statement, not just with regard to filing the appointment of himself as director and the resignation of Mrs Hiley but also the March 2014 Debenture and the other debentures signed (with forged signatures or regularly) at the same time.  
87.	So far as the arrangements for Mr Bailey taking over the Company were concerned he confirmed that he was aware of the negotiations between the Hileys and Mr Bailey, but not involved in them on a day to day basis. He was asked if he wanted to have a shareholding but declined.  He was not sure when the handover took place or when he became a director.  However, it was a key part of Mr Bailey taking over the Company, and his being involved, that the stock was to be transferred to Mrs Hiley to be set off against her director’s loan and that this should happen before any hand over.  The stock was not needed for the proposed new form the business was to take (no direct selling, but a form of agency selling) and the debt was something that he did not want the Company to be saddled with if he was to be involved.  The hope was that a deal could be done regarding the rent.  He was taken to the Official Receiver’s further report to Creditors and confirmed that he was the director referred to, Mr Bailey having resigned in August.  He agreed that what was there attributed to him, he had told the Official Receiver and he agreed that it was accurate.  In particular, the Company was only taken over from the Hileys when the stock had already been substantially reduced in quantity and the debt been cleared, or at least substantially reduced.  He confirmed that he would not have agreed to be involved with the Company if the stock transfer and reduction of debt had not already taken place.  
88.	As regards the debentures prepared in March 2014, he said that he found out the necessary documents to carry out the transaction had not been filed and that he asked Mark Bailey to prepare the relevant documents.  He said he wrongly signed the first versions of the Debentures, forging Mrs Hiley’s signature, and then asked for new ones to be prepared for her to sign.  He initially said he had not seen any documents relating to the transaction (including without limitation the Loan Agreement) prior to his heart operation.  He then thought perhaps he had.  So far as the £165,000 odd figure set out in the Loan Agreement is concerned he claimed that he thought this was perhaps carried forward in some way but then later suggested that he had seen a calculation in accordance with the Debt Schedule. He was unsure when he signed the Loan Agreement.  He was unable to explain why he was happy to be involved with a company owing a debt of £165,000 to Mrs Hiley. He was unable to explain why the 2014 year end accounts showed current creditors of £108,000 if Mrs Hiley alone was owed over £165,000.  He was also unable to explain why he signed the March 2014 Debenture envisaging a debt owed to Mrs Hiley of £350,000 but said that he had just been asked to sign it by Mr Bailey.   He was also unable to explain why a large debt of approximately £165,000 owed to Mrs Hiley going ahead would have been acceptable to him given his earlier statements about the need for the debt to be removed and that this was to happen by transfer of stock prior to the Company being acquired by Mr Bailey and prior to him (Mr Mintz) becoming a director. 
89.	So far as he was asked to sign documents it would be Mr Bailey who would ask him to do so.  The company was very much Mr Bailey’s “baby” and it was Mr Bailey who was managing director.  He was unable to explain why Mr Bailey, who had signed the December 2013 Debenture, would have wanted Mr Mintz to sign documents in 2014 and then return them to Mr Bailey for Mr Bailey to file them.  
90.	So far as the accounts for the year ending 31 January 2014 (approved in August 2014) were concerned he said that Mr Bailey had assisted in their preparation and then resigned.  He, Mr Mintz, had not carried out any form of internal audit but the figures there, in particular but not limited to the figure of £108,000 for current creditors, “made sense” to him.
91.	So far as his illness was concerned he said that he had felt unwell, went in for a check-up and was admitted the next day, 24 January, for heart surgery and was then in hospital for about three weeks.  He later asserted that well before 23 January things had been confused in his mind and so on.
92.	Mr Mintz then continued to give oral evidence the following morning.  As I have explained he spontaneously asked to make a statement.  He said that he had spoken to his partner overnight, without telling her anything and asked her to look at his diary.  As a result of this he was able to say that he spoke to Mr Bailey on Saturday 4 January.  It was agreed that Mrs Hiley wanted to come off the board.  He agreed to be a director there and then.  Mrs Hiley agreed that they would get down to the “nitty gritty” of the fundamentals of the deal in the following week.  His safeguard, he said, was that he could always resign if his requirements for joining the Company were not put in place.   
93.	The Official Receiver’s further report was again put to him. This time he said that it should have referred to it being the “intention” to reduce stock and reduce debt owed rather than stock having been reduced when he joined the Company.  
94.	Mr Mintz’s evidence was now that he had been sent forms regarding resignation and his appointment on or about the 5 January but he could not explain why he would have been sent a form for Mrs Hiley’s resignation.  He could not explain how a diary entry of a telephone call with Mr Bailey suddenly reminded him of all the detail he was now giving. He could not explain why he had not referred to nor produced the diary at some earlier state.  So far as his witness statements were concerned, he apologised that they were wrong but said he hadn’t done as much diligence as he should have done on various matters. The inference I draw both from his evidence and from the terms of the witness statements is that they were largely drafted by solicitors following Mrs Hiley’s witness statements.  
95.	I do not need to set out the entirety of the cross-examination of Mr Mintz.  It suffices to say that his volte face on the morning of the second day he gave evidence was wholly unconvincing. Even after that he was still unable to explain in a convincing manner how the documents produced over time stacked up with his version of events.  He was still unable to confirm whether the Loan Agreement may not have been signed much later on than its actual date.  
Conclusions   
96.	I am satisfied, as a matter of common sense, that the question of repayment of the directors’ loan account, any further injection of capital, any postponement of the balloon payment and any further charges were all agreed and implemented prior to any actual resignation as director by Mrs Hiley and prior to any transfer of the one issued share.  From Mrs Hiley’s perspective it made no sense to leave the matter uncertain, especially in light of evidence from the Hileys that the Company could have ceased trading and she and SDL received payment in full after payment of any creditors.  Why would Mrs Hiley give up ownership and control of the company without first taking steps to secure her financial interests, direct as a creditor of the company and indirect through SDL?  From Mr Bailey’s and Mr Mintz’s perspective (as the latter’s evidence initially confirmed) it also made no sense for the transfer of the share and the resignation to go through so that he took over the Company unless the directors’ loan position was first resolved.  Mr Hiley’s oral evidence was that Mr Bailey did not want to take on the company with a substantial debt owed to Mrs Hiley and that he wanted the debt to be wiped out so far as possible.  Mr Hiley said that this was agreed by about Christmas 2013 and prior to any resignation. Mr Mintz too initially said much the same.
97.	I am also satisfied that even though Mrs Hiley did not in practical terms have day to day involvement in the Company’s affairs in any managerial sense from the beginning of January onwards, the same was largely true for the period from October 2013.  
98.	I am satisfied therefore that Mrs Hiley did not effectively resign as a director until after the putting into place of the relevant charges which were clearly backdated to 11 March 2014.  It is unclear when the ones with genuine signatures were in fact signed and dated: Mr Hiley suggested that the matter came to light in March or April.  I consider that the charges were only re-drawn after March 27 when Companies House was notified of Mr Mintz’s appointment as director: otherwise his signature as director would have been inconsistent with the other records at Companies House. I am also satisfied that Mrs Hiley was described as director in the version on which Mr Mintz forged her signature because at that point she had not in fact resigned, not because the document has simply “copied” the earlier December 2013 charge. I am satisfied that though things were agreed in “principle” by 5 January and from then on it was agreed that Mrs Hiley would not in practice be involved in the Company from then, she only formally resigned once the formalities protecting her position were on place, and most particularly the transfer of stock and the charges entered into in March 2014.  The resignation however was treated as being with retrospective effect.  However, that would not have the effect of “retrospectively” causing her to cease to have been a “connected” person during the period that she was a director up to the date of her resignation.
99.	I am also satisfied that the stock was transferred to Mrs Hiley on or about 10 January 2014 as evidenced by the invoice of that date.
100.	So far as the figure of £350,000 is concerned set out in the March 2014 Debenture, that strongly suggests, and I so find, that the Loan Agreement had not been entered into at that date. (to a lesser extent the same is true of to the provisions in that and the other debentures signed at about the time regarding repayment).  I find that the Loan Agreement was a document created later and backdated, though the principle that any outstanding loan would be repaid might have been agreed at about that time (or even in October/November 2013).  The main reasons that I say this, in addition to the figure of £350,000 in the March 2014 Debenture, are as follows:  first, there is no written evidence of any repayment by the Company of the £400 a week referred to and said by Mr and Mrs Hiley to have been made (and such sums were not given credit for in the Debt Schedule).  Secondly, the only independent evidence of when and why this document was created is in connection with proofs of debt after January 2015 (and where the calculation gave no credit for payment off of any of the alleged loan by way of £400 instalments).  Thirdly, the explanation put forward by Mr Hiley for the sum adopted in the March 2014 Debenture, namely that further sums might have been (but never in fact were) agreed to be lent was totally unconvincing.  Fourthly, the accounts at the 2014 year end do not contain a figure which could include such a sum.  Fifthly, the cessation accounts do not include such a figure regarding director’s loan or anything approaching it.  Sixthly, the initial evidence from Mr Mintz that he was not prepared to become a director of the Company while it had the large stock holding that was no longer required and which carried a large debt owed to Mrs Hiley.  Finally, as at 14 January a further sum of £8,000 comprising part of the “debt” had not then been paid.    
The Company’s Financial position in 2014
101.	It is necessary to ascertain the Company’s financial position in 2014 for two main reasons.  First, the actual debt owed to Mrs Hiley in January 2014 has to be determined with a view to a consideration of whether the transfer of company stock to her was at an undervalue.  Secondly, the solvency of the Company at the relevant time is part of the test for determining whether the conditions of ss238-40, and 245 are met.  
The Loan Account as at 5 January 2014
102.	The director’s loan account of Mrs Hiley, representing sums owed to her, stood at the sum of £527,463 as at 31 January 2013.  This is the sum referred to in the Company’s balance sheet as at that date, forming part of the accounts for the year ending 31 January 2013, as the amount of the “Directors Loan”.  This is also the sum secured by the February 2013 Debenture.   Mrs Hiley says that the sum shown in the accounts for the year ending 31 January 2014 as creditors due within one year (£108,073) covers trade creditors but it “principally relates to the sum due to me under the DLA”.  However, she says that the sum shown as due is significantly understated.  She says the total owing to her was then over £192,000.  As is clear from the Debt Schedule, Mrs Hiley asserts that further sums were due to her at 31 December 2013 which were not taken account of in the Company’s accounts for the year ending 31 January 2013.
103.	In determining what sums were due to Mrs Hiley on her director’s loan account as at 5 or 10 January 2014, the starting point is therefore the 31 January 2013 figure as shown in the Company’s balance sheet at that date.    
104.	Mrs Hiley says that the sum owing to her as at 10 January 2014 falls to be increased by reference to unpaid salary.  She says that there was £70,000 arrears of salary in each of the years ending 31 January 2012 and 2013 and £65,014 arrears in respect of the period 1 February 2013 to 5 January 2014 (339 days).  As regards the £140,000 claimed in respect of the years ending 31 January 2012 and 31 January 2013 I am satisfied that entitlement to the relevant claims were waived and Mrs Hiley was not owed these sums in January 2014.   The Company’s own accounts, approved by Mrs Hiley, and the February 2013 Debenture, are consistent only with such waiver.  Further, as regards the 2012 year end and the £70,000 said to be unaccounted for in the year end accounts, there is the fact that there had been an Inland Revenue investigation in 2013/14.  That investigation involved a reconciliation and review by HMRC of the sums owed to Mrs Hiley by the Company as at the accounting year ends of 31 January 2011 and 2012.  In each case the verified outstanding balances did not include any sums in respect of arrears of salary for those years.  In evidence before me there is correspondence from a Mr Hadley of HMRC confirming the relevant position and the amount of the loans outstanding at the two year ends for 2011 and 2012.  Mr Hiley in oral evidence agreed that there was no dispute regarding what HMRC said and found and that the relevant figures (including those for the sums owed to Mrs Hiley at the January 2012 year end) were agreed.  (For completeness, I should add that in the 2012 year end accounts some of the relevant sums owing to Mrs Hiley were accounted for by way of directors’ loan: some was accounted for as trade creditor.)  
105.	In these circumstances, it is inconsistent for Mr Hiley to assert that, although the loan amount as at 31 January 2012 was reviewed and agreed with HMRC, and was as shown in the 2012 accounts, nevertheless the accounts wrongly omitted £70,000 of further debt owing to Mrs Hiley.  
106.	His explanation that this omission (and that in the 2013 year end accounts) was only picked up much later and that this was because the accounts were opaque makes little sense. He was involved in dealing with the HMRC investigation and detailed schedules were provided and considered in which no sums due for undrawn salary were taken into account.  Further, the 2012 and 2013 accounts showed directors’ remuneration and other benefits of £6,480 and £7,950 respectively.  This is hard to square with Mrs Hiley having taken no part of her salary for those two years.  Furthermore, the fact that these figures were in the accounts makes Mr Hiley’s evidence to the effect that the position on receipt of the accounts was unclear and that the accountants had made a mistake (of not including the two £70,000 of undrawn salary) and this was not “picked up” because the accounts were not detailed enough, unsatisfactory.  Further, his evidence was, as I have said, that he was providing the relevant figures to the accountants.   Accordingly, as I have said, I am satisfied that Mrs Hiley was not owed £140,000 for arrears of salary in respect of the 2012 and 2013 accounting periods ending on 31 January in each case.  
107.	As regards the £65,000 or so undrawn salary to which Mrs Hiley says she is entitled in respect of the accounting year ending 31 January 2014, the position is that the Debt Schedule set forward a sum of £45,000 in this respect.   The sum has been increased in Mrs Hiley’s evidence in part to cover £40,000 of repayments to Mrs Hiley set out in her witness statement but not included in the Debt Schedule. The result is that Mrs Hiley’s witness statement and the Debt Schedule tally in suggesting that she was owed £165,000 or so after she had received stock in (what she says is partial) satisfaction of her outstanding loan account.  Mr Hiley’s oral evidence was that £45,000 was thought to be a reasonable sum given that Mrs Hiley had not been working fully due to her ill-health.  However, that does not explain why the figure was subsequently increased in Mrs Hiley’s evidence to £65,000.  
108.	I am satisfied that whatever the employment contract said, the practice was that Mrs Hiley did not in fact draw her salary entitlement each year and that to the extent that she did not do so any salary was waived.  That is consistent with the position in 2011, 2012 and 2013 for which I have relevant figures.  There is nothing to suggest that this waiver was a conscious decision each year (such that in 2014 there was no waiver) rather than being the established position.     
109.	For present purposes it should also be noted that the arrears of salary as relied upon by Mrs Hiley in her witness evidence differ from those set out in the Debt Schedule put forward to the Official Receiver to substantiate the proof of debt lodged.  The differences are, first that in the Debt Schedule £70,000 was claimed as being properly credited to the loan account in the 2013-14 financial year whereas in the Schedule £70,000 is credited in the 2011-12 financial year.  The second difference is that in her evidence she seeks to credit arrears of salary of £65,014 rather than £45,000.  In my opinion, these inconsistencies confirm the fact that the sums were never due and that they are ex post rationalisations of the position to justify (a) the proof of debt (in the case of the Schedule) and (b) the position put forward in these proceedings (as regards the witness statement evidence).
110.	In addition, Mrs Hiley says that her loan account as at 10 January 2014 falls to be increased over its 2013 level by virtue of payments made by her from her bank account totalling some £112,823.23.  I accept these figures.  She also asserts that during the financial year she made payments totalling £6,000 from her credit paypal account, which I also accept.  It should be noted however that her witness statement relies upon 3 payments totalling £24,500 which do not appear in the Debt Schedule and that the Debt Schedule shows payments of £3,000 and £8,000 as taking place on 1 and 4 January rather than 8 and 23 January.     
111.	I also accept her evidence that the Company had repaid her sums of £40,000 by four payments of £10,000 each in late October 2013. These sums totalling £40,000 are not mentioned in the Debt Schedule.
112.	The consequence is that my finding is that as at the date of the invoice to Mrs Hiley in respect of the sale of the Stock (10 January 2014) she was owed £600,286.23 calculated as below.  As at 23 January 2014 this debt would have increased to £608,286.23 but subject to the timing of any offset arising from the transferred Company stock.
Sum outstanding to Mrs Hiley as at 10 January 2014 
Carried forward from 2013:					£527,463.00
Plus further expenditure/loans				£112,823.23	
	Less repayments						£ (40,000.00)
										£ 600,286.23
113.	It follows that the setting-off of the purchase price of £620,834.07 against the Loan Account was a transaction at an undervalue if and to the extent its purported effect as at 10 January was to extinguish the debt of £600,286.23.  The undervalue would be £20,547.84.  If the transaction took place later than 10 January and after the last payment by Mrs Hiley of £8,000, and the invoice was backdated then the undervalue would be £12,547.84.  I find extinction of the debt to be the intention in light of the wording on the invoice and the manner in which the evidence developed.  The alternative possibility, if I am wrong, is that there was no undervalue because the intention was to set off whatever could be set off.  If the matter was calculated incorrectly, then the alternative effect would be that Mrs Hiley still owed the Company £20,547.84.  However, after 10 January Mrs Hiley paid the Company a further £8,000.  The effect would be to reduce any outstanding sum owing by Mrs Hiley to some £12,547.94. I shall consider further below how, if at all, this payment affects the analysis of undervalue/preference.
Solvency of the Company
114.	 According to the filed accounts the Company was insolvent on a net asset basis as at 31 January 2014.  If the debt owed by Mrs Hiley was in fact owing to her the insolvency was of course all the greater.  However, assuming in her favour my finding that she was owed nothing as at that date and the whole £108,000 trade creditors reflects her debt then the Company was still insolvent.   This remains the position even if she owed the approximated sum of £12,000 as a result of the stock transferred to her being at a value exceeding the then debt owed to her.   There is no evidence suggesting that the financial position of the Company was any different between 10 January and 31 January.   
115.	Mrs Hiley makes much of the fact that if her debt and SDL’s debt is left out of account then the Company was solvent.  There is however no proper reason for leaving out of account the SDL debt. 
116.	After 31 January 2014, the financial position of the Company deteriorated rapidly: that much is apparent from the figures thereafter produced however unreliable they may be as to detail.  I do not believe them to understate the insolvency position. 
117.	I reject the submission of Mr Ensaff that, in the light of both the postponement of liability to Mrs Hiley (though I find below there was no liability) and the agreement to postpone the balloon payment and given the Eurosail case (BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL plc [2013] UKSC 28),  I cannot be satisfied that the Company was insolvent within the meaning of s123 IA 1986.  The Company was net asset insolvent.  The debts were clear.  The future trading prospects, given a complete change of business and an apparent need, as adverted by Mr Mintz, to acquire a further capital investment which eventually did not materialise all show that the case is quite different to that in the Eurosail case.
Preference?
118.	I summarised the necessary conditions for establishing a preference, vulnerable to attack under s239, at paragraph 47 above.  By way of further summary they are that the transaction in question was one:
117.1	entered into by a company which subsequently goes into liquidation (“the Liquidation Condition”)
117.2	by which a creditor is preferred, that is put in a better position on liquidation that he or she would otherwise have been (the “Preference Condition”);
117.3	which takes place in circumstances where the company was influenced in entering into the transaction by a desire to prefer the person (s239(4)), such influence being presumed in the case of a person connected with the company (the “Mental State Condition”);
117.4	which takes place at a time within 6 months of the onset of insolvency of the company or, if the person is connected with the company, within 2 years of that date (the “Time Condition”);
117.5	at the time of the transaction the Company is or, as a result of the transaction, becomes insolvent, on either a cash flow basis or a net asset basis (ss240(2), 123) (the “Solvency Condition”).
119.	As I have said, I am satisfied that Mrs Hiley was a director at the time that the agreement was made that the Company would transfer stock to her to satisfy sums owed to her by the Company.  It follows that for the purposes of s239  she is a connected person.
120.	The Liquidation Condition is met and that is common ground.
121.	As regards the Preference Condition, Mr Ensaff takes two points.  First he says that there was no preference because at the time of the Stock Transfer Mrs Hiley was a secured creditor, under each of the December 2013 Debenture and the March 2014 Debenture.  Secondly, he says that Mrs Hiley was not put in a better position by the transfer of stock than on an insolvent winding up because she was the only creditor at the time of the transaction and the trade creditors of the Company which remain unpaid as at liquidation are all trade creditors who became such after the transfer of stock.
122.	As regards the December 2013 Debenture, Mr Ensaff accepts that Mrs Hiley was a connected person at the time of its creation.  The charge could only have taken effect as a floating charge. Mr Ensaff accepts that it is therefore vulnerable under s245 and that, as regards the indebtedness already in existence at the date of creation of the charge, Mrs Hiley cannot rely on that charge as a basis for saying that she was secured in January 2014.  However, he submitted that the s245 would not invalidate the charge as regards the sums totalling £11,000 as paid to the Company by Mrs Hiley in January 2014.   However, in my judgment the charge did not purport to cover future sums that might be advanced.  It was a charge to secure the then stated indebtedness as at December 2013.  Accordingly, the January payments of £11,000 were not secured by the charge because it did not extend to such sums.
123.	As regards the March 2014 Debenture, Mr Ensaff submits that the charge is not vulnerable under s245 IA 1986 on the basis that (a) Mrs Hiley was not at that time connected and (b) if she was not connected, then given the company was not then insolvent, s245 does not bite.  However, I have found that Mrs Hiley was connected as at the date of creation of the March 2014 Charge.  I have also found that the Company was insolvent at that time.  In any event, the point does not seem to me to assist: if the transaction went through prior to the charge being put in place then at the time of the transaction there was a preference: a later charge cannot make the debt secured at an earlier date when it is discharged.
124.	Accordingly, the March 2014 Debenture affords no basis for saying that Mrs Hiley was not preferred when she took stock in satisfaction of her debt because she was then a secured creditor: the answer is that she was not.
125.	As regards the question of creditors, the position is that Mrs Hiley was not the only creditor.  SDL, a separate corporate entity, was also a creditor.  The same is true of the petitioning creditor whose debts dated back to March 2013.  Looking at the list of those creditors who have proved, and there may be others, there is at last one other creditor whose debts appear to date back prior to January 2014.  Accordingly, it cannot be said that on an insolvent liquidation taking place at the time when the transfer of stock took place Mrs Hiley would have received value for the entirety of her debt.  Accordingly she was preferred.  I should add that I am unsatisfied on the evidence as to whether it is possible to say that she was only preferred to a certain extent. This point was not argued: the point being taken on an all or nothing basis.  If otherwise satisfied that the preference claim is good (which I am) I am not prepared to find that there was only preference up to a certain sum.     
126.	As regards the Mental State Condition, the question is whether the Company was influenced by the desire to put Mrs Hiley in a better position than she would have been on an insolvent liquidation.  There is of course a presumption to that effect but few cases are decided on the burden of proof.  Here it is obvious to me that the object of the transaction, apart from clearing the debt and clearing the stock, was, in part, to improve the position of Mrs Hiley and put her in a better position than she would otherwise have been on an insolvent liquidation.    That was Mrs Hiley’s main preoccupation regarding the putting in place of security in 2013 and 2014 and in getting her debt repaid.  I am accordingly satisfied that the Mental State Condition is met.
127.	As regards the Time Condition, this is obviously met in light of my finding that Mrs Hiley was connected at the time the transaction was entered into.
128.	 I have already held that the Insolvency Condition is met.
129.	It follows that I consider that the Liquidator has made out her case that the transfer of stock was a preference to the extent that it reduced or extinguished Mrs Hiley’s debt.   

Undervalue?
130.	 So far as concerns undervalue, I am satisfied that there was an undervalue.  The transfer of stock was purportedly in satisfaction of the debt then owed but the relevant value of the stock was some £20,547.84 more than the amount of the debt owing to Mrs Hiley. Of course, Mrs Hiley subsequently paid a further £8,000 to the Company.  As I understood it, whatever the technical position, the Liquidator is prepared to give credit for this sum against any undervalue so that the undervalue should be treated as being £12,547.84.  
131.	I am not satisfied that the transfer at an undervalue, so far as it was an undervalue, was effected in the best interests of the Company or that there were reasonable grounds to think it would be.  
132.	All other conditions of ss238 & 240 IA 1986 are met.  
133.	Accordingly, I find that the stock transfer was one at an undervalue within s238 IA 1986.    
134.	I invite the parties to agree a form of order in the light of my judgment.
This judgment
135.	As I understand it the undertakings given by the Second and Third Respondents expire upon my handing down judgment.  In those circumstances, I gave permission for a draft of this judgment to be released to those parties and their lawyers in the expectation that the Claimant would be seeking an agreed extension of such undertakings or, failing agreement as to that, injunctive relief in effect continuing the protection of the undertakings over until after judgment on the remaining claims in the proceedings against the Second and Third Respondents.  Release of the draft was permitted upon the basis that prior to it taking place the Second and Third Respondents and their lawyers had drawn to their attention the fact that the draft  judgment was confidential and the terms of the warning on the front page of that draft judgement regarding contempt of court which applied.
136.	I had originally indicated that this judgment would be handed down without need for attendance, though if necessary I would hear a short application to enjoin the Second and Third Respondents as indicated above.  If a draft Order could not be agreed for me to consider on the hand down then I indicated that I would then so consider it.  If agreement could not be reached I indicated that I would adjourn all consequential matters (including, but not limited to, any application for permission to appeal) to a further hearing to be fixed, which I would be happy to deal with by telephone, if the parties agree.  I also indicated that I would extend time for filing a notice of appeal so that the 21 day period commenced on judgment on any such further application or on the sealing of an agreed court order, whichever is sooner.  I said that I would also direct that a composite order showing (where they differ) each side’s relevant versions of the order that they asked the court to make and skeleton arguments were to be  lodged and filed not less than 3 clear days before any such resumed hearing.   
137.	Since sending the parties a draft judgment under the procedure provided for by CPR Part 40, there have been a number of developments.  These include the following (which is not exhaustive nor in the order in which the events occurred).  First, I was asked by the Applicant to delay handing down judgment because it had not been possible in the time available to make arrangements about extending the undertakings given by the 2nd and 3rd Respondents (or if not to have ready an application for injunctive relief) and, in addition, Counsel for Mrs Hiley was away.  I accordingly delayed the hand down of the judgment to Tuesday 9 January 2018.  Secondly, Mr Hiley indicated that he no longer wished to act as litigation friend to his wife, Mrs Hiley. Mr Hiley has been informed that if he wishes to crease to be litigation friend then a properly constituted application supported by evidence will have to be launched.  Thirdly, Mr Hiley’s solicitors indicated that they were without instructions and would be coming off the record.  Fourthly, the Applicant’s solicitors sent a draft order that they invited me to make without any attendance at the hearing (and without the agreement of the Respondents).  That draft included a stay of the proceedings against the 2nd and 3rd Respondents and an order for an on-account payment of costs.  I have indicated that I would not make such an order without an attendance.  Given the spate of emails that have arrived I have therefore left it open for anyone to attend the hand down of this judgment and make any application that they seek fit to make.  In the event that there is no attendance by anyone I will make an order along the lines of that earlier indicated.