In Petterson v Hutt a liquidator sought an interim injunction preventing any enforcement steps being taken under two general security agreements (GSAs). In the substantive proceeding, the liquidator sought to have the GSAs set aside.
Five weeks before entering voluntary liquidation, High Street Management Limited (HSM) entered into two GSAs with the first respondents; Mr Hutt, a former director of the company, and FR Trustee (Hutt) Ltd. A short time after HSM was placed in liquidation, Mr Hutt appointed the second respondents as receivers under the GSAs.
The liquidator argued that Mr Hutt remained a shadow director of the company and that the Court should exercise its power under section 299 of the Companies Act 1993 to set aside a security made in favour of an insider. The liquidator also applied under section 293 of the Act to set aside the GSAs on the ground that HSM was unable to pay its debts immediately after the GSAs were entered into.
In Petterson v Hutt, the High Court granted interim orders preventing the respondents from taking any steps to realise or recover assets of HSM. In finding that there was a serious issue to be tried, Toogood J noted that Mr Hutt continued to exercise control over HSM, negotiated with creditors on its behalf and executed the GSAs on behalf of HSM as the debtor. Moreover, Mr Hutt's relatives had been appointed to the directorship and he arranged that one of the company's creditors receive payment directly from him.
See Court decision here.