Neutral Citation Number: [2005] EWHC 2743 (Ch)
Case No: 4169 of 2002
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 02/12/2005

Before:

THE HON. MR. JUSTICE EVANS-LOMBE
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Between:

	JULIE SWAN	Applicant
	
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(1)	SURINDER KAUR SANDHU
(2)	SALVINDER SINGH SANDHU	

Respondent	

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Jane Giret QC / Birgitta Meyer (instructed by Oughton Graeme) for the Applicant
David Marks (instructed by Brooke North) for the Respondent

Hearing dates: 1-3 & 7-8 Nov 2005
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Judgment
The Hon. Mr. Justice Evans-Lombe : 
1.	In this case the Applicant, Julie Swan (“the Liquidator”),  as Liquidator of K&K Knitwear Ltd (“K&K”) claims against the Respondents, Surinder Kaur Sandhu (“Surinder”) and her younger son Balvinder Singh Sandhu (“Balvinder”) relief under section 212 of the Insolvency Act 1986 in respect of their misfeasance in procuring K&K to enter into certain transactions  of subordination, postponement and capitalisation of loans entered into by K&K with a related company P&P Designs Ltd (“P&P”), at all material times controlled by Balvinder’s elder brother  Kalvinder Singh Sandhu (“Kalvinder”) and also the transfer of the business of K&K to Kay Textiles Ltd (“KT”), a company controlled by Balvinder.  The material events occurred during the years 1999 and 2000.  At all material times during those years Surinder and Balvinder were controlling shareholders and directors initially of K&K and later of KT on its incorporation.  In 1999, Kewal Singh Sandhu (“Kewal”) the husband of Surinder and father of Balvinder and Kalvinder was director of K&K but resigned as such in the course of the year 2000.  The Liquidator contends that the transactions associated with loans by K&K to P&P and the transfer of the business by K&K to KT were transactions at an undervalue contrary to section 238 of the 1986 Act and intended to put assets out of the reach of creditors of K&K contrary to section 423 of that Act.
2.	The background facts of this litigation are as follows:  K&K was incorporated in 1975 to take over the wholesale clothing business, until that time being conducted in partnership by Kewal and Surinder who were, initially, the only shareholders and directors of K&K.  The nature of the business of K&K was the purchase of ready made clothes and their onward sale at a mark up to retailers from leasehold premises in the Whitechapel Road.  In the early 1980’s Kalvinder joined a Mr Kanwaljit Sidhu (“Mr Sidhu”), a friend and business associate of Kewal in a business of importing clothes from the Far East.  On the 15th January 1986, Palmier Plc (“Palmier”) was incorporated to take over that business.  At all material times until its liquidation the issued shares of Palmier were held equally by Kewal and Mr Sidhu and Kewal and Kalvinder were its directors.
3.	According to the unchallenged evidence of Kewal, the clothing imported by Palmier was of high quality and reasonably priced and thus Palmier became one of the main suppliers to K&K.  As at the 31st October 1998, Palmier’s accounts showed net assets of £1,011,097.  On the 3rd December 1998 administrative receivers were appointed over Palmier by the Midland Bank.  A petition to wind it up was presented by a creditor on the 19th February 1999 which petition was opposed, inter alia, by a witness statement served by Kalvinder.  Notwithstanding a resolution to put Palmier into creditors voluntary liquidation, on the 14th December 1999 a winding up order was made against Palmier.  It has a deficiency of approximately £8.8m.  The collapse of Palmier is blamed by Kalvinder on the operations of Mr Sidhu.
4.	On the 25th and 27th November 1998, immediately before the appointment of the Bank’s administrative receiver, Palmier made two payments to K&K totalling £880,647 in reduction of loans made by K&K to Palmier.  P&P was incorporated on the 4th December 1998 by Kalvinder as a vehicle to acquire the unrealised assets and business of Palmier from its receiver.  In due course on the 22nd January 1999, P&P acquired those assets and business from the receiver for £87,500.  On incorporation, Kalvinder held all P&P’s issued shares save one and was one of its three directors.  Shortly after its incorporation Surinder became a director, with two others, and the holder of 40,000 of its 50,000 issued shares.  On the 17th,18th, and 21st December 1998, K&K made three payments totalling £750,000 by way of loan to P&P (“the long term loans”).  It is Balvinder’s unchallenged evidence that these loans were made at the instance of his father Kewal without consulting  either himself or his mother and that, if he had been consulted he would have opposed making them. 
5.	On the 5th , 14th , 18th , and 21st of January 1999, further payments were made by way of loan by K&K to P&P at the instance of Kewal.  It was Balvinder’s evidence that he only discovered that loans were being made by K&K to P&P towards the end of January 1999.  It was his unchallenged evidence that until this time both he and his mother were unaware that the loans had been made, would have been against the making of the loans and, when they were discovered were angry at not being consulted.  It seems that by this time both Balvinder and his mother were on bad terms with Kalvinder.  Nonetheless it does not appear that any steps were taken by the board of K&K, controlled by Balvinder and his mother, either to recover the amounts advanced from P&P or to obtain any security for repayment.  Balvinder’s explanation for this inaction was that by the time that they discovered that since the loans had been made, P&P had spent their proceeds on the purchase of stock for P&P’s business.  To attempt to recover the loans would have been very damaging to P&P and P&P was an important supplier of K&K from whose supplies of clothes K&K was generating substantial profit for itself.
6.	Kewal gave two witness statements in the proceedings on behalf of the Respondents upon which he was not cross-examined.  Between paragraphs 9 and 17 of his second witness statement dated 3rd October 2005 Kewal describes the circumstances of, and reasons for, his procuring K&K to make the loans to P&P.  In particular he describes what he saw as the advantages to K&K in its relationship with P&P.  In particular he describes how he was able to obtain preferential prices for goods bought from P&P and to delay payment for goods supplied by P&P thus obtaining advantages over K&K’s competitors in the acquisition of high quality stock from P&P exploiting Kalvinder’s sources in the Far East acquired when working for Palmier.
7.	Notwithstanding the advances made by K&K, it appears that in early 1999 P&P was looking for further finance and obtained it through a factoring agreement with Euro Sales Finance Plc (“ESF”).  By the end of January 1999, ESF’s advances to P&P amounted to £1.3m.  On the 4th of February 1999, P&P granted a debenture to ESF securing all sums due from P&P to ESF the security being a fixed charge on the book debts due to P&P and a floating charge over P&P’s assets generally.  There were terms of the arrangements between P&P and ESF that K&K would subordinate the long term loans to P&P’s indebtedness to ESF and that P&P would require ESF’s permission to grant any charges over its assets ranking after its debenture.  Accordingly on the 8th February 1999, Balvinder and Surinder entered into a deed of subordination on behalf of K&K to enable P&P to conform to these terms.  It is the Liquidator’s case that the Respondents were misfeasant in procuring the company to enter into this deed of subordination.
8.	On the 15th February 1999, K&K and P&P entered into a written agreement entitled “unsecured loan agreement” setting out the terms upon which K&K was prepared to continue to advance monies to P&P then standing at £1,110,000.  The material provisions of this agreement (“the Loan Agreement”) were that K&K would make a further advance of £150,000 to P&P (clause 2.2), that P&P would pay interest at the rate of LIBOR plus 1% on the outstanding balance of the advances on a prescribed date, provided that the amount outstanding at that date was less than £1m, if not, then at a rate equivalent to 8% on that balance, and that, in default of the occurrence of certain specified events, consequent on the future insolvency of P&P, the loans would not be repayable until the 15th February 2009.  This loan agreement was executed as a deed by Surinder and Balvinder on behalf of K&K.  
9.	In the course of cross-examination Balvinder was asked what advantage there was to K&K in postponing the date for repayment of its advances to P&P in this way.  He was unable to specify any material advantage save that this was the first occasion in which an advance was made to entities controlled by Kalvinder where he had agreed to the advance being recorded in writing.  He did not mention that this document provided, for the first time, for the payment of interest on the amounts advanced by K&K.  The accounts of K&K and P&P for the material periods do not show that any significant payments of interest were ever paid pursuant to the Loan Agreement or otherwise.  It is the Liquidator’s case that the Respondents were misfeasant in procuring K&K to enter into the Loan Agreement.
10.	In accordance with the terms of the Loan Agreement K&K, on the 29th March 1999, lent to P&P the further sum of £150,000.  This was followed by a further advance of £270,000 from K&K’s pension fund to P&P on the 29th of July 1999.
11.	In March and April 1999 Messrs Price Waterhouse Coopers (“PWC”) were engaged to conduct a review of the business of P&P for the three months ended the 31st March 1999.   In the introduction to PWC’s report it is noted that “the initial investment for the company came from [K&K] … a company owned and controlled by [Kewal].  …the company has little difficulty in selling its products with the majority of stock being pre-sold.  At present, however, the company is showing signs of overtrading and is obliged to fund its working capital requirements externally.”   The report shows that the company’s trading performance for the first three months produced a net profit of £580,000 before tax, better than its budget figure of £549,000.  That profit was after deduction of extraordinary costs associated with its start up of £250,000.  The report shows a balance sheet of P&P as at the 31st March 1999 showing current assets of £5,457,321 (cash and debtors), current creditors of £3,753,275 (suppliers and financiers including ESF), and net current assets, therefore, of £1,704,046 with long term creditors (K&K) of £1,200,000.  P&P as at this stage, therefore, had a net assets balance of £628,426.
12.	The following are some of the comments of PWC on P&P’s performance during this three month period:-
“The net profit margin for the adjusted profit figure is as stated above is 16% and this is more in line with the actual gross mark up achieved of 37%.  The margin is high because the market conditions are favouring sellers.  This is especially true of continental customers who are absorbing the higher prices.  The sales strategy is high margin and low volume.
The high price for goods that has been obtained is the main factor behind the healthy gross profit.  Gross profit of 37% is, we understand, above the industry average.
To date debtor receipts have totalled £1.47m and this represents a recovery of 32% of the trade debtor’s balance.  This would appear to be an adequate recovery given that the overseas customers often take at least 90 days credit.
The trade creditors balance is not high when compared against the turnover.  This does not indicate understatement but is because the credit facilities given by suppliers are not yet favourable and to encourage better terms the company aims to pay its creditors promptly. 
P&P have an invoice discounting arrangement with Eurosales.  As part of this arrangement, it has been agreed that [K&K] will not request repayment of £750,000 of this advance, without the written consent of Eurosales or until such time as there is no longer an arrangement or no further monies are due to Eurosales.”
13.	Thereafter P&P’s audited accounts for the period to the 31st December 1999 showed a profit of £215,170 and a net assets balance of £265,170.  There was a sharp decline in P&P’s performance during the year to the 31st December 2000 during which the company’s accounts showed a loss of £1,180,138 and net liabilities of £164,968.  There was a recovery during the year to the 31st December 2001 when P&P’s accounts showed a profit of £262,414 and net assets of £917,446.  P&P’s accounts for the succeeding years were not in evidence but I was told that its trading declined again in 2002.  It ceased trading in 2003 and was wound up in 2005.
14.	It was Balvinder’s evidence that in August 1999 he decided to separate his business affairs from those of his father and to set up a company which he controlled to acquire from K&K the assets of its business and, as consideration for that acquisition, to discharge its outstanding business debts.  KT was incorporated as the vehicle for acquisition on the 31st August 1999.  It was Balvinder’s evidence that he informed Mr Verma, K&K’s accountant and auditor, of this intention in August 1999, and asked him to work out a list of the trade creditors of K&K whose debts would have to be discharged by KT.  The transfer of the business of K&K to KT took effect on the 1st October 1999.
15.	There is no written evidence recording the terms of any contract between K&K and KT whereby KT was to acquire the business assets of K&K.  The Respondents were directors and shareholders of both companies.  Kewal was still a director but not a shareholder of K&K.  Kalvinder and his sister held small shareholdings.  There is no evidence from Kewal or from any other source that he, Kalvinder or his sister were consulted and agreed.  However it seems to me that in default of any objection shown in the evidence, I must proceed on the basis that all those interested in K&K and KT at the end of September 1999 were content that the business of K&K should be transferred to KT on such terms.
16.	Mr Verma has not been called as a witness by either the Liquidator or the Respondents and I was told that he has proved un-contactable.  He prepared from K&K’s records provided to him by Mr Wong, the company’s bookkeeper, K&K’s accounts to the 30th September 1999.  The auditor’s certificate on those accounts is given by Mr Verma’s firm.  The balance sheet on those accounts shows £1,457,866 due to creditors falling due within one year.  Note 8 to the accounts shows that, of those creditors, £833,694 was due to trade creditors.  Included in the evidence before the court is a schedule of bought ledger balances in respect of trade creditors as at the 30th September 1999.  This document (“the Verma schedule”) comes from Mr Verma’s firm’s audit working papers.  Materially for the purposes of this judgment the Verma schedule includes a balance £188,836 due to Palmier Plc and £434,839 due to P&P.  Also included in the evidence was a document from the records of KT being a handwritten schedule  (“the Wong schedule”) made by Mr Wong, KT’s bookkeeper, headed with the words “schedule of bought ledge balances as at 1/10/99”.  This schedule repeats precisely the Verma schedule save for three matters: the miscellaneous figure is shown as £1446.26 as against £9854.26:  there is no entry of a debt due to Palmier and the debt due to P&P is shown as £295857.37.  In consequence the total, net of two small credits (which also appear on the K&K schedule) is £497466.96.
17.	It was Balvinder’s evidence that Mr Wong’s schedule shows the amounts of the outstanding indebtedness which KT was required to discharge, and did discharge, in taking over the business of K&K.  The debt due to Palmier was omitted because that debt was challenged on the ground that K&K had cross claims in respect of defective and returned goods which had been previously purchased by K&K.  The figure for the amount payable to P&P was the figure produced by Mr Verma as being the correct indebtedness as at the 1st October 1999.
18.	That the amounts shown on the Wong schedule (with some minor and immaterial alterations), were actually paid by KT, appears to be confirmed by entries in the KT bought ledger and KT’s banking records.  These payments had been made by KT by the end of December 1999.  KT’s bought ledger also records the purchase by KT for P&P of fresh stock from the 1st October 1999.  The burden on KT of discharging K&K’s trade creditors meant that it was not until the end of June 2001 that its account with P&P as shown on KT’s bought ledger came into balance. 
19.	No sum was actually paid by KT to K&K for the transfer of K&K’s business to KT but, in the result, it is the Respondents’ case that KT has paid £170,000 for the acquisition of that business, being the sum of approximately £497,000 less KT’s sales ledger balances taken over of £144,670.19p and stock values at £182,713.70p.  Both these latter figures are agreed.  It is the Liquidator’s case that, in fact, KT took over assets of the business worth only £32,000 less than the amount of the trade debts of K&K that KT discharged.  In any event K&K’s business had a value materially greater than £170,000.
20.	On the 30th November 1999 P&P repaid the loan to K&K of £270,000 financed from K&K’s pension fund.  On the 20th December 1999 P&P repaid the further loan of £150,000 from K&K pursuant to the provisions of the Loan Agreement.  On the 3rd January 2000 £354,000 being the balance of the indebtedness from K&K to P&P was set off against P&P’s indebtedness to K&K in respect of loans by K&K reducing that loan indebtedness to £750,000, the amount of the long term loans subordinated to P&P’s indebtedness to ESF.
21.	On the 3rd August 2000 the Liquidator of Palmier wrote to K&K demanding repayment of £880,647 (being the amounts paid by Palmier to K&K in November 1998) with interest, as preferences pursuant to section 239 of the 1986 Act.  On the 7th August apparently at the suggestion of Mr Verma, K&K granted to Surinder a debenture securing all monies due to her by K&K.  It is Surinder’s case that the amount due was £177,000.
22.	On the 7th December 2000 consequent on K&K’s agreement through Balvinder to capitalise the long term loans from K&K to P&P of £750,000, P&P’s shareholders passed the necessary resolutions to issue paid up class C non voting shares in P&P to K&K.  It was Balvinder’s evidence that this step was designed to have the effect of strengthening P&P’s balance sheet so avoiding the triggering of provisions of the financing agreement between P&P and ESF which might have required P&P to cease trading.  This became necessary because of the marked decline in P&P’s trading performance in the year to 31st December 2000 which would have to be reflected in its accounts to that date.  It was Balvinder’s evidence that the best interests of K&K were served by capitalising the long term loans and thus giving P&P an opportunity to trade out of its difficulties.  In the result as already noted P&P’s trading performance improved in 2001 but thereafter again declined until P&P ceased trading, having sold its business, and was wound up.  It is the Liquidator’s case that the Respondents were misfeasant in procuring K&K to permit the long term loans to be converted into non voting shares in P&P.
23.	On the 8th March 2001 the liquidator of Palmier commenced proceedings in the winding up of that company to recover from K&K the amounts paid by Palmier to K&K in November 1998 as preferences.  On 25th September 2001 the board of K&K approved a loan by K&K of £350,000 to Premier Designs Ltd.  That loan was made on the 1st November 2001 to be repaid after 10 years with interest at 1% over LIBOR.  Included in the relief sought in these proceedings by the Liquidator is a claim to recover from the Respondents the amount of the advance to Premier Designs Ltd under section 212 of the 1986 Act.  On the 28th July 2005 the Respondents consented to summary judgment in favour of the Liquidator for the sum of £350,000 plus interest and costs.  
24.	On the 30th May 2002, Patten J made a freezing order against K&K in the preference action being pursued by the liquidator of Palmier against K&K.  On the 23rd June 2002 K&K abandoned its defence of those proceedings and on the following day an order was made by Deputy Judge Martin QC for payment by K&K to Palmier of £1.132m plus interest and costs.  On the 26th June 2002 a petition to wind up K&K was presented by the liquidator of Palmier based on that judgment upon which, in due course, a winding up order was made.  On the 19th March 2004 Rimer J made a freezing order in these proceedings against K&K which were commenced by ordinary application dated the 22nd March 2004.                            
25.	It is common ground that notwithstanding paragraphs 1 and 2 of the ordinary application by which these proceedings were commenced, the Liquidator’s claim must proceed under paragraphs 3 and 4, namely, pursuant to section 212 of the Insolvency Act 1986.  So far as material to these proceedings that section provides:-
“212. Summary remedy against delinquent directors, liquidators, etc. 
(1) 	This section applies if in the course of the winding up of a company it appears that a person who - 
(a) 	is or has been an officer of the company, 
(b)	 …
(c)	…
has misapplied or retained, or become accountable for, any money or other property of the company, or been guilty of any misfeasance or breach of any fiduciary or other duty in relation to the company. 
(2) …
(3) The court may, on the application of … the liquidator… examine into the conduct of the person falling within subsection (1) and compel him - 
(a)	 to repay, restore or account for the money or property or any part of it, with interest at such rate as the court thinks just, or 
(b)	 to contribute such sum to the company's assets by way of compensation in respect of the misfeasance or breach of fiduciary or other duty as the court thinks just.”
26.	Section 212 differs from its predecessor sections and, in particular, from section 333 of the Companies Act 1948 by the addition of the words “or other” after the words “Fiduciary” in sub-section (1) and (3)(b).  These additions cannot alter the line of authority which decides that section 212 and its predecessor sections in earlier Companies Acts did not create any new rights but is a procedural section, providing “a summary mode of enforcing existing rights” see per Pollock MR in Re City Equitable Fire Insurance Co 1925 Ch 407 at 507.  
27.	Paragraph 3 of the present application seeks “further or alternatively, a declaration that the Respondents and each of them by causing or allowing the company to enter into the said transactions [whereby it is alleged that K&K’s assets were disposed of at an undervalue contrary to section 238 or put beyond the reach of creditors contrary to section 423 of the 1986 Act] were guilty of misfeasance and/or acted in breach of their fiduciary duty or other duty in relation to the company.”  Paragraph 4 seeks consequential relief under section 212(3).
28.	The present case concerns 4 transactions for which it is sought to make the Respondents answerable under section 212:  the first two in February 1999, when K&K was procured to subordinate the long term loans to the advances made by ESF and whereby it was procured to enter into the Loan Agreement postponing repayment of the long term loans until the 15th February 2009; the third, the transfer of K&K’s business to KT on the 1st October 1999 and the fourth the capitalisation of the long term loan into C non-voting shares in P&P on or about the 7th December 2000.  The Liquidator alleges that these four transactions had the effect of diminishing the assets of K&K available for its creditors and that, by procuring K&K to enter into them, the Respondents were guilty of breach of their fiduciary duties to K&K, alternatively, their common law duty of care to K&K, with the result that they must compensate K&K for the diminution of K&K’s assets caused by those alleged breaches of duty.
29.	The differences between the two forms of relief sought by the Liquidator against the Respondents are summed up in the judgment of Mr Jonathon Crow, sitting as a Deputy Judge of this court in the case of Extrasure Travel Insurance Ltd & anr v Scattergood & anr [2003] 1BCLC 598 at paragraphs 87 – 89 as follows:-
“87 	It is trite law that a director owes to his company a fiduciary duty to exercise his powers (i) in what he (not the court) honestly believes to be the company’s best interests, and (ii) for the proper purposes for which those powers have been conferred on him. Mere incompetence is not a breach of fiduciary duty: it might give rise to a claim for breach of a tortious or contractual duty of care, but the claim in this case was based entirely on alleged breaches of fiduciary duty. 
   88	 The claimants sought to argue that a director is also in breach of his fiduciary duty if he honestly, but unreasonably and mistakenly, believes that he is pursuing the company’s best interests. This argument was founded on a single remark of Richard Field QC (sitting as a deputy High Court judge) in Re Pantone 485 Ltd [2002] 1 BCLC 266 at para [46]. In that passage, the judge observed that it was not a breach of fiduciary duty for a director of company A to advance monies for the benefit of a related company B, if the director ‘honestly and reasonably’ believed that company B would repay the monies so advanced. On the basis of this formulation, Mr Nicholls submitted that it would be a breach of fiduciary duty if the director’s belief, albeit honestly held, had no reasonable basis in fact. He submitted that, if the law were otherwise, a director would be immune to suit for crass incompetence: in other words, his fiduciary duties would be less demanding that any common law duty of care. 
89		I reject that proposition. Fiduciary duties are not less onerous than the common law duty of care: they are of a different quality. Fiduciary duties are concerned with concepts of honesty and loyalty, not with competence. In my view, the law draws a clear distinction between fiduciary duties and other duties that may be owed by a person in a fiduciary position. A fiduciary may also owe tortious and contractual duties to the cestui que trust: but that does not mean that those duties are fiduciary duties. Bearing all that in mind, I find nothing surprising in the proposition that crass incompetence might give rise to a claim for breach of a duty of care, or for breach of contract, but not for a breach of fiduciary duty.”
30.	Having cited authority Mr Crow continues at paragraph 90:-
“90	Those cases make it perfectly clear that a director’s duty is to do what he honestly believes to be in the company’s best interests. The fact that his alleged belief was unreasonable may provide evidence that it was not in fact honestly held at the time: but if, having considered all the evidence, it appears that the director did honestly believe that he was acting in the best interests of the company, then he is not in breach of his fiduciary duty merely because that belief appears to the trial judge to be unreasonable, …”
I gratefully adopt these passages in Mr Crow’s judgment.
31.	I will deal first with the first two transactions in February 1999.  It must first be noted that these transactions took place at a time when K&K was still trading before it transferred its business to KT on the 30th September 1999.  The second point that must be noted is that, notwithstanding the relatively rosy picture painted by K&K’s audited accounts to the 30th September 1999, those accounts made no provision for the preference claim of the liquidator of Palmier against K&K which resulted in the order of Mr Martin QC on the 24th June 2002 that K&K pay the sum of £1,132m plus interest and costs to Palmier.  The existence of this claim, resulting from the payments by Palmier to K&K in November 1998, probably by itself renders K&K insolvent thereafter on a balance sheet basis.  But, even if there existed a margin of solvency from an excess of the net assets of K&K shown by those accounts over the total claim including interest and costs, bearing in mind that it is the Respondents’ case that the long term loan could not be recovered from P&P in February 1999 without causing both capital and income loss to K&K, it seems to me that I must proceed on the basis that at the time of the first two transactions in question K&K was insolvent.
32.	Balvinder’s case as to the February 1999 transactions is as follows:  had Kewal consulted him before the initial loans were made by K&K to P&P he would not have agreed to the making of those loans.  In his view the loans involved K&K committing too much money to the support of P&P.  He would have preferred to have supported P&P simply by trading with it.  Nonetheless, when he became aware of the loans that his father had authorised, he accepts that he took no action either to obtain repayment of the loans or to obtain security for their repayment to K&K.  By the time he came to know of the loans their proceeds had been spent by P&P in the purchase of stock.  To attempt to obtain repayment of the loans forthwith would have severely undermined P&P’s trading operations and possibly tipped it into some form of insolvent administration.  It is here relevant to note PWC’s view in their report on the first three months trading of P&P, that P&P was overtrading and in consequence requiring the provision of working capital from outsiders.  It is also relevant to note that the debenture to ESF by P&P contained a provision requiring ESF’s consent before any second charge could have been granted by P&P to K&K.
33.	It was Balvinder’s evidence that he regarded it as in the interests of K&K that P&P continued to trade and expand its trading.  The relationship between K&K and P&P gave K&K privileged access to high quality stock upon the resale of which K&K was able to make a significant part of its profits.  It was not practicable to propose that K&K might have obtained direct access to the stock that it was acquiring through P&P.  Such access required Kalvinder’s contacts in the Far East which no one at K&K had.  By contrast with K&K, P&P was conducting an international business with representatives in countries apart from the UK.
34.	Balvinder said that he understood that it was a condition of ESF continuing and extending its advances to P&P that the long term loans should be subordinated to ESF’s advances to P&P.  Because he understood that P&P required the further working capital available from ESF to continue and expand its trading and because it was, in his view, important to K&K that that trading continue and expand, Balvinder felt compelled to enter into the deed of subordination of the 8th February 1999.
35.	Balvinder does not, in his witness statements, deal expressly with the reasons for procuring K&K to enter into the Loan Agreement.  In cross-examination he said that the agreement was produced for him and Surinder to sign on behalf of K&K, out of the blue, by Kalvinder.  His evidence was that it had been prepared by lawyers advising Kalvinder.  He said that he did not thoroughly understand its terms and, in particular, he did not understand that its effect was to make it impossible, in normal circumstances, for K&K to insist on repayment of the loan by P&P before the 15th February 2009.  He accepted that he could have, but did not take legal advice on its effect.  The only reason that he gave for entering into the Loan Agreement was that it provided a record of the long term loan being made by K&K to P&P.  It was, it appears, unprecedented for Kalvinder to acknowledge in writing loans made to him or his companies.  Nonetheless, Balvinder said that he regarded it as in the interests of K&K to enter into the Loan Agreement with P&P.  It should be noted that until the Loan Agreement was entered into it was repayable upon demand and so would have constituted a current debt of P&P.  As I have already pointed out the Loan Agreement, for the first time, contained provisions for the payment of interest by P&P to K&K.
36.	In her written closing submissions Miss Giret invites me to disbelieve Balvinder when he says that he entered into the February 1999 transactions in the bona fide belief that to do so was in the interests of K&K.  Looking objectively at the facts established by the evidence existing at the time of the February transactions, and which are largely common ground, it seems to me that they are capable of supporting a genuine belief by Balvinder in February 1999 that it was in the best interest of K&K to advance £750,000 to P&P on a long term basis to provide P&P with working capital and to assist it in obtaining working capital from third parties, to expand and develop its business.  It seems to me reasonable to approach the two February 1999 transactions as, in fact, one transaction.  They were almost simultaneous.  Miss Giret’s strongest argument against this conclusion was that in order to provide P&P with working capital it was not necessary to postpone the date of repayment of the long term loans until February 2009, particularly as they were unsecured.  To do so was an unreasonable exposure of K&K to the future financial strength of P&P which leads to the conclusion that Balvinder was considering only the interests of his brother’s company and not those of K&K.
37.	I can see no reason to reject Balvinder’s evidence that he genuinely believed that the February 1999 transactions were in the interests of K&K.  There does not seem to have been any particular family interest in Balvinder supporting P&P for its own sake.  It is common ground, indeed it was emphasised by Miss Giret in her submissions, that Balvinder was a reluctant lender to P&P.  It is not in issue that he was on bad terms with Kalvinder at the time.  His father’s evidence was that he had to try and persuade Balvinder of the commercial necessity of supporting P&P.  Although it was not expressly put forward in argument upon the Respondents’ behalf, there was a perfectly reasonable reason for entering into an agreement to postpone repayment of the long term loans.  As they stood prior to the Loan Agreement they were repayable on demand and would thus have to appear as a current debt in P&P’s balance sheet.  Postponing the date for repayment meant a strengthening of P&P’s balance sheet making the obtaining of outside finance that much easier.  Finally, and it seems to me, importantly, Balvinder knew that P&P’s trading had got off to a very strong start and there was no reason to assume that it would have any great difficulty in paying off EFS and its debenture and then the long term loans.  I did not find Balvinder to be an unreliable witness.
38.	I do not find that Balvinder was materially motivated in the decisions which he took by the interests of P&P or Kalvinder save and insofar as those interests were coincident with those of K&K.  See Hogg v Gramphorn [1967] 1 Ch 254. 
39.	I turn to consider the fourth transaction namely the capitalisation of the long term loans as C non-voting shares of P&P.  It was Balvinder’s evidence that this capitalisation was an unavoidable consequence of the unexpected decline in P&P’s trading during the year to the 31st December 2000 in which it made a substantial loss and became balance sheet insolvent.  At paragraph 14 of his witness statement of the 17th August 2005 Balvinder says this:-
“14	On the 7th December 2000 the loan of £750,000 was capitalized in the form of 750,000 C class shares being ordinary shares of £1 each.  Again, although I have not and have never had sight of the Eurosales Finance lending arrangements my recollection is that P&P had covenanted with Eurosales Finance that once the net asset value fell below a certain sum then P&P had no option but to convert debt into equity, repay some of its debts to Eurosales Finance or inject new working capital or risk formal insolvency proceedings.”
It must be borne in mind that as at the 7th December 2000 K&K had sold its business to KT and so had ceased to have an interest in the continued trading of P&P as a customer and KT had not replaced K&K as a provider of working capital to P&P.  It was Balvinder’s evidence that capitalisation of the long term loans was designed to have the effect of strengthening P&P’s balance sheet thus preventing the triggering of ESF’s rights under the provisions of its loan agreement with P&P as outlined in paragraph 14 of Balvinder’s witness statement set out above.  It was further his evidence that had those provisions been triggered P&P would have been forced into insolvent administrative administration.  The state of its affairs, as at the 7th December 2000 was such that K&K would not have expected to obtain any significant repayment of the long term loans since all the assets of P&P would have been caught by ESF’s debenture and consumed in paying off ESF’s debt.  Balvinder was prepared to accept non-voting shares because otherwise he would have taken control of P&P from Kalvinder.  This was unacceptable to Kalvinder and Kalvinder’s presence was, for reasons I have already outlined, important to P&P’s successful trading.  As it turned out ESF did not call in its loans and P&P traded successfully in the following year although no part of the long term loans was as a result repaid.  Balvinder gave inconsistent answers as to whether he fully understood the effect on K&K’s ability to recover the amount of the long term loans of their being converted into equity.  I will proceed on the basis that he did understand that, as a result, K&K would cease to have claims against P&P as a creditor.
40.	Again, it seems to me, that on the basis of the surrounding facts of this transaction, which are not substantially in dispute, it is not possible to say that Balvinder can have had no genuine belief that the capitalisation of the long term loans was not, as at December 2000, in the best interests of K&K.
41.	For these reasons I conclude that the Liquidator has not made out her case that, in respect of the first, second and fourth transactions Balvinder acted in breach of the fiduciary duty he owed to K&K as its director at the material times.  Surinder’s witness statement of the 21st May 2004 simply supports Balvinder’s evidence and case.  She was briefly cross-examined, but nothing arose from that cross-examination to place her in any better or worse position than that of Balvinder.  My conclusion is that the Liquidator’s claim for breach of fiduciary duty against Surinder in respect of the first, second and fourth transactions also fails.
42.	I turn to consider the Liquidator’s claim against the Respondents in respect of alleged breaches of the common law duty of care to K&K as a result of the first, second and fourth transactions.  It is at this point important to note that I have found that K&K must be treated as insolvent at least from the time that the long term loans were made.  It follows that there is no room for the argument advanced by Mr Marks for the Respondents that the situation was governed by the decision of the Court of Appeal in the Multinational Gas case 1983 1 Ch 258.  This was not the disposition, albeit ill judged, of the assets of a solvent company with the consent of a majority of shareholders.
43.	In Re D’Jan of London Ltd [1994] 1 BCLC 561 at page 563 Lord Justice Hoffmann, sitting as an additional judge of the Chancery Division said this:-
“In my view the duty of care owed by a director at common law is accurately stated in section 214(4) of the Insolvency Act 1986.  It is the conduct of –
“a reasonably diligently person having both – (a) the general knowledge skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company, and (b) the general knowledge, skill and experience that that director has.”
Both on the objective test and having seen Mr D’Jan on the subjective test, I think that he did not show reasonable diligence…. He was therefore in breach of his duty to the company.”
44.	I read this passage in the judgment of Lord Justice Hoffmann as meaning that there are two separate tests; the first objective, the second subjective and a failure to meet either of those tests will found a claim in negligence by a company against its director.
45.	In my judgment, both Balvinder and Surinder fail the objective test in that they ought to have procured K&K to take a second floating charge on the assets of P&P at the time of the February transactions to secure the long term loans.  In my view the breach of duty did not extend to failing to obtain from Kalvinder a guarantee of P&P’s indebtedness to K&K from the long term loans.  Taking such a charge would not have deprived P&P of the working capital it obtained through those loans but might have afforded K&K some protection in the event of P&P’s collapse.  I can see no reason why ESF should have refused to permit P&P to give such a second charge.   ESF’s security was effective to take in all the available assets of P&P in the event of any part of ESF’s debt being unpaid.
46.	It seems to me that the Respondents also failed the objective test in agreeing to postpone repayment of the long term loans until February 2009.  As a condition for the subordination of the long term loans to ESF’s advances the Respondents should have required a variation of the terms of the Loan Agreement so as to make the long term loans repayable in the event that ESF required or obtained repayment of its advances.  
47.	However it seems to me that the difficulty which the Liquidator is in is that it has not been possible to identify any moment at which it can plausibly be suggested that ESF might have required repayment of its advances when the assets of P&P would have been sufficient to discharge ESF’s outstanding indebtedness and leave a surplus available to K&K’s second charge.  No attempt has been made by the Liquidator to do so and the burden of proof rests on her to establish damage.  It does not follow that because the Respondent directors were in breach of their duty by taking no step to obtain security for P&P’s debt to K&K that it is not incumbent on the liquidator of K&K to show circumstances in which the court can be satisfied that, in the light of my finding that the subordination of the long term loans was justified, such a security would have been of some value to K&K, let alone as securing the whole £750,000 of the long term loans together with any accrued interest.  
48.	At the commencement of the hearing application was made to admit a further expert report of Mr Mathew-Jones dated 12th August 2005.  I declined to admit the report as such because, in my view, it did not meet the requirements of expert evidence and was in any event too late.  However I said that I would read it and treat its contents as part of Mr Marks’ opening submissions.  Between paragraphs 3.19 and 3.44 an argument is advanced, based primarily on the evidence of P&P’s accounts, that any attempt to recover the long term loans from P&P as an alternative to subordination of these loans to P&P’s indebtedness to ESF, would have been futile.  I find this analysis persuasive.  No attempt was made on behalf of the Liquidator to undermine it or to suggest that the financial position of P&P would later improve sufficiently to enable this to happen.  The analysis is conducted on the basis that the ESF advances had never been made; the fact that they have been made, secured by a charge on book debts and a floating charge, which would have priority to any second charge taken by K&K, and that K&K’s debt has been subordinated to that secured debt, seems to me, to indicate that it is most unlikely that a surplus of assets available for a second charge ever subsequently emerged or if it did that that surplus was not exceeded by K&K’s trading losses caused by the drying up of the supplies of stock previously obtainable from P&P. 
49.	I conclude therefore that the claim by the Liquidator for breach of the Respondents’ duty of care to K&K as its directors also fails.  I would add that even had I found that the Respondents were in breach of fiduciary duty, I would similarly have found that the claim failed because the Liquidator has failed to demonstrate that any damage to K&K has resulted from such breach.  The Liquidator has not shown that the long term loans could have been recovered from P&P at any time after February 1999 without its claim against P&P being reduced in value or disappearing as a result of the insolvency of P&P and loss of profit resulting from the failure of supplies of stock from P&P.
50.	In the light of these conclusions it is not necessary for me to consider the position of the Respondents under section 727 of the Companies Act 1985.  Nonetheless I should add, should the matter go further, that had my conclusions been different I would not have exercised the courts power under section 727 to relieve the Respondents. 
51.	I finally turn to consider the third transaction namely the transfer of K&K’s business to KT on the 1st October 1999 for a consideration, the assumption of liability for trade creditors of K&K, which the Liquidator alleges represents a substantial undervalue.
52.	I have already described the facts surrounding the transfer of K&K’s business on the 1st October 1999 and, in particular, the apparent informality of that process, namely, the complete absence of any documentary record of the terms upon which the business was transferred and the absence of any recorded attempt to place a value on the business so transferred.  It is the Respondents’ case that KT discharged, with certain minor alterations, the trade creditors of K&K listed on the Wong Schedule as at the 9th October 1999 and that since the agreed value of K&K’s stock and debtors as at the 1st October is less than that figure by approximately £170,000, that was the price which KT paid as consideration for the transfer.
53.	The Liquidators case on this issue is summarised between paragraphs 21 and 24 of the Liquidator’s counsel opening written submissions and between paragraphs 29 and 48 of their written closing submissions.  It is the Liquidator’s case that an earnings based valuation of the business of K&K at the time of transfer would put a value of between £380,000 and £427,500 on that business.  Accordingly, it is submitted, a purchase price of £170,000 even if paid, represents a substantial undervalue.  However, secondly, the Liquidator does not accept that KT actually is to be treated as having paid £170,000 for the business.
54.	On the issue of valuation, both sides called expert evidence. There was a meeting between experts, Mr Mathew-Jones for the Respondents and Mr Callaghan for the Liquidator.  Paragraph 2 of the note of matters which were agreed or which were not agreed by the experts reads as follows:-
“The Expert accountants agreed the following matters:
•	The appropriate methodology of valuation of K&K was the earnings basis;
•	The maintainable earnings of K&K to be applied in the valuation were £95,000 per annum; and
•	The multiple applicable to the maintainable earnings was between 4 and 4.5 times the maintainable earnings.
Matters not agreed
2.2	The Expert accountants could not agree the discount that was applicable to the valuation as they concluded that the level of discount was dependant upon the view of risk to the business of K&K which would arise from the assumed level of co-operation of Mr Balvinder Sandhu on the assumed sale of the business at 1 October 1999.
2.3	The Expert accountants did not consider that it was within their expertise to judge what this level of co-operation would have been but that this was a matter of factual evidence for the Court.
Further assistance for the Court
2.4	However, the Expert accountants did agree that it would potentially provide further assistance to the Court to attempt to narrow the difference between them as to the discount that was applicable to the valuation.
2.5	They were able to narrow the difference between them on this matter such that they agreed three scenarios for the discount to be applied to reflect the appropriate level of risk. These scenarios are based on three different assumptions as to Mr Balvinder Sandhu’s level of cooperation with a potential purchaser of K&K. These are:
•	Scenario 1 - Where Mr Balvinder Sandhu does not co-operate with the potential purchaser in the acquisition of the business but "walks away" without assisting in the disposal.
•	Scenario 2 - Where Mr Balvinder Sandhu co-operates with the potential purchaser in the acquisition of the business and is prepared to act reasonably in assisting in the transfer of the business.
•	Scenario 3 - Where the services of Mr Balvinder Sandhu are secured by the business and he continues to perform his previous trading and management functions.
Scenario 1
2.6	In the case of scenario 1 the Expert accountants agreed that the appropriate level of discount to be applied to the valuation was in the range of 45% to 50%.
2.7	Applying this to the maintainable earnings and appropriate multiple of K&K results in the following valuation range:
Maintainable earnings	Multiple	Discount	Discount	
		45%	50%	
£		£	£	
95,000	4	209,000	190,000	
95,000	4.5	235,120	213,750	

2.8	Thus, under scenario 1 the Expert accountants agreed that the valuation of K&K would lie in the range £190,000 to £235,000.”
55.	I will first deal with the issue of the amount which KT is to be treated as having paid in respect of the transfer.  As paragraph 23 of the Liquidator’s opening submissions makes clear, the Liquidators case depends on K&K’s audited accounts to 30 September 1999, prepared and audited by Mr Verma’s firm and signed off on behalf of the board by Balvinder.  Those accounts show a figure of £1,457,866 due to creditors falling due within one year.  Note 8 to the accounts gives the breakdown of that figure and, in particular, shows a figure for trade creditors of £833,694.  The Verma schedule provides a breakdown of that figure and, in particular, shows a sum of £434,839.06 due to P&P.  That sum contrasts with the sum of £295,857.37 shown as being due to P&P on the Wong schedule, and, which, it is the Respondents’ case, they actually paid to P&P.  It follows that, on the assumption that the audited figure for K&K’s creditors shown on the September 1999 accounts of K&K is correct and its makeup is as set out on the Verma Schedule, KT has underpaid K&K in respect of the P&P indebtedness to K&K by the difference between the £434,000 odd figure shown on the Verma schedule and the £295,000 odd figure shown on the Wong schedule.  Thus KT are only to be treated as having paid approximately £32,000 in respect of the transfer.  
56.	The parties have adduced fairly complicated submissions based on the accounts and records of K&K and P&P in support of their arguments on this point.  It seems to me, however, that there is a simpler approach to the question which is to determine, from the evidence, the extent of the trade creditors of K&K which the Respondents can demonstrate that they have paid and to compare that amount with the agreed value of the stock and debtors taken over.
57.	I have come to the conclusion that the Respondents can demonstrate that they have in fact discharged an amount of approximately £497,000 worth of K&K’s trade creditors over the period between the transfer of the business of K&K to KT until the end of December 1999.
58.	In evidence was KT’s purchase ledger.  That ledger records all payments made by KT from the 1st October 1999 onwards by reference to amounts shown on invoices recorded in the ledger.  It is possible to demonstrate that each of the amounts shown due to K&K’s trade creditors recorded in the Wong schedule including the sum of £295,000 odd due to P&P, with some small alterations, were paid during that period.  That those payments were actually made can be confirmed by reference to KT’s bank statements for that period.  I invited the Liquidator’s counsel to check the KT purchase ledger and the supporting bank statements to confirm that this was so.  I have had no indication that they disagree.
59.	Also in evidence was K&K’s purchase ledger recording transactions with P&P up to the date of transfer.  The concluding page of that part of that ledger which deals with transactions with P&P summarises the effect of the transfer of the business on the account as between K&K and P&P.  It shows as “taken over by K Textiles Ltd” the sum of £295,857.37 and “contra P&P loan account” £353,891.
60.	The KT purchase ledger records, in addition to the payments in respect of K&K’s trade creditors, transactions between KT and P&P pursuant to the trading relationship between them and, in particular, purchases of stock by KT from P&P.  The purchase ledger demonstrates that the account between KT and P&P moves into balance at the end of June 2001.  It follows, therefore, that over the whole of the period to that date from the 1st October 1999 KT is shown to have discharged the outstanding indebtedness of K&K to its trade creditors listed on the Wong schedule including the indebtedness of P&P, together with the indebtedness arising from KT’s purchases from P&P up to the end of June 2001.
61.	At paragraph 2 of her witness statement of the 30th July 2004 the Liquidator says this:-
“2		I use the word “purported” because I do not believe that the bought ledger [of K&K] is genuine.  If not fictitious it is deeply flawed and suspect, both in form and in detail, for the reasons set out in paragraph 3 below, I believe that the bought ledger was drawn up after the event by a person, currently unknown, in an attempt to strengthen the Respondents’ defence of these proceedings.”
62.	This allegation that K&K’s purchase ledger, admittedly disclosed very late, is sought to be supported by the matters set out in the following sub-paragraphs (a) to (h) of paragraph 3.  It is said that the purchase ledger is shown to be a forgery because, 
(a) 	it contained no blank pages – it was a loose leaf book – 
(b)	 all its entries were in one handwriting “with the same pen albeit that the entries are supposed to have been made over a period of 4½ years” 
 (c) 	the cheque references do not correlate to other records of K&K – in fact only in one instance – 
(d)	 the Wong Schedule list of ledger balances in “a number of instances” does not correlate to the bought ledger – there appear to be instances of this including the accounts of Palmier and P&P. 
(e)	Discrepancies between the bought ledger and the Verma Schedule –instances including the miscellaneous account, the Palmier account and the P&P account of which 5 also appear under (d) above,
(f)	the absence of a folio page in respect of Palmier repeated under (e) above,
(g)	no consistency of start date of the ledgers
(h) 	the fact that both Mr Verma and Balvinder “appear to have made common errors when extracting data from the bought ledger” in respect of 3 of the accounts.
Mr Wong, K&K’s bookkeeper, who gave evidence answered these allegations in a witness statement of the 17th August 2004 and deals with each of the discrepancies and peculiarities pointed up by the Liquidator.  The Liquidator criticises those answers in a further witness statement of the 7th January 2005.  I need not set out these answers and replies.  Mr Wong confirmed in cross-examination that all the entries in the K&K purchase ledger were made by him and that there was no folio in respect of Palmier because he had removed it on the instructions of Balvinder.  I will return to the question of the Palmier account shortly.  Suffice it to say that the apparent discrepancies between the K&K bought ledger, the audit working papers and the Wong Schedule are only of materiality to the matters which I have to decide in respect of the account of P&P.  That there are discrepancies in sofar as they concern the accounts of other trade creditors between those three sources does not seem to me to be capable of supporting the suggestion that the bought ledger was drawn up by Mr Wong after the event “in an attempt to strengthen the Respondent’s defence to these proceedings”.  They are examples of sloppy book-keeping and if anything, seem to me, to indicate that the K&K purchase ledger produced by the Respondents was not forged.   The discrepancies in the P&P account are explained by the concluding page of that account as I have described.  It seems to me that the Liquidator’s allegations, in effect, of a conspiracy between the Respondents and Mr Wong to forge entries in K&K’s bought ledger are entirely unjustified.  In any event there is ample support for Balvinder’s case as to the amount “paid” by KT in consideration for the transfer of the business in the KT bought ledger and bank statements which are not suggested to have been forged. 
63.	At paragraph 22 of Miss Giret’s opening written submissions the following appears:-
“22	There is a dispute of fact between the parties as to whether or not Kay Textiles Ltd did in fact pay the sum of £170,000 on account of goodwill.  The figure of £170,000 was calculated by deducting the sums attributable to stock and debtors from the creditors which were taken over by Kay Textiles. The Liquidator claims that in fact Kay Textiles did not take over £497,000 worth of creditors, or if they did, it has not discharged the company’s liability to Palmier in the sum of £188,000.  The Liquidator claims that when the figures have been adjusted properly to reflect the transactions that the audited accounts of the company show took place, Kay Textiles did not in fact pay any sum in respect of goodwill.”
It was Balvinder’s case, as already pointed out, that K&K challenged £188,000 of the balance due as a result of purchase of stock by K&K from Palmier which turned out either not to have been delivered of to have been of substandard quality.  It was for this reason that he instructed Mr Wong to remove the folio in respect of Palmier from K&K‘s bought ledger and that no amount in respect of Palmier appears on the Wong Schedule.  
64.	It is apparent that the Liquidator’s suggestions in respect of the Palmier account are misconceived.  The Respondents do not suggest that in paying for the transfer of K&K’s business, KT paid any sum in respect of an indebtedness from K&K to Palmier.  If K&K had paid the balance of £188,000 shown on the Verma Schedule it would have strengthened their case that they had paid full value for the business transferred since they would have assumed a greater burden to that extent than that now contended for.  It seems to me that whether or not there is a continuing liability from K&K to Palmier is entirely irrelevant to the issues which I have to decide.   But it should perhaps be noted that there is some evidence that Palmier assigned this indebtedness from K&K to a factor and that the liquidator of Palmier does not appear to have made any claim against K&K either to enforce or prove for any sum alleged to be due.
65.	Contrary to the contentions of the Liquidator I find that the Respondents have established that KT has discharged trade creditors of K&K existing at the 30th September 1999 in a sum which exceeds the value of K&K’s stock and debtors as of that date by approximately £170,000.
66.	Turning to the Liquidator’s second contention under this head I can see no basis for the Liquidator’s contention that a valuation of the business of K&K as at the 30th September 1999 in the circumstances of “scenario 2” or  “scenario 3”  in paragraph 2.5 of the note of the meeting of experts on 26th January 2005 is appropriate.  To do so would be to include in the value of the business for sale the benefit of a service contract imposing appropriate terms of future service or cooperation on Balvinder in favour of K&K of which a purchaser could take the benefit.  It follows that in accordance with paragraph 2.8 of the note the Liquidator on whom the burden of proof rests can only rely on a valuation of the business of K&K as at the 30th September 199 of £190,000.  In my judgment it further follows that it is not demonstrated that the Respondents committed misfeasance in permitting K&K to dispose of its business to KT in September 1999 at a price which, though less, is not unreasonably less than that value.
67.	For these reasons it seems to me that the Liquidator’s application fails.