Singla v Hedman & Ors  EWHC 902 (Ch) (28 April 2010)Note: What follows on this and other pages constitutes information on the firm as it existed immediately prior to 21st August 2012.
We recently acted for Surjit Singla in his capacity as liquidator of 9MD UK Limited (“9MD”), a film production company, in an originating application against 9MD’s former director, Thomas Hedman, for wrongful trading under section 214 of the Insolvency Act 1986 (“The Act”) and against Gone to Hell Limited (“GTH”) to set aside certain transactions entered into by 9MD as transactions at undervalues under section 423 of the Act.
The facts underlying the section 214 claim were that in early 2006, 9MD (acting through Mr Hedman as sole director) approached One Step Beyond CC (another client) in relation to a film shoot in Namibia for the film “Nine Miles Down.” Despite not having financing in place and with no binding commitment from the lead actor, 9MD retained One Step Beyond to provide production facilities for the shoot. Filming was then halted only one day after it commenced due to the lead actor pulling out. Financing ultimately failed to materialize and 9MD discontinued production, leaving an outstanding debt to One Step Beyond of R3,677,742.98 (One Step Beyond later obtained a South African arbitration award based on that debt, which we then registered in England and used to obtain a winding-up order against 9MD).
The facts underlying the section 423 claim were that in late 2006, after it became clear that 9MD would not be able to produce the film, Mr Hedman and others transferred away 9MD’s rights in the screenplay of the film to enable GTH to produce the film instead. GTH did not pay anything to 9MD for those rights. The rights were therefore transferred away at an undervalue.
Upon analyzing the pleadings and disclosure in the case, we amended the claim in the summer 2009 to (1) add a claim for breach of copyright against GTH, and (2) add an alternative claim for breach of warranty against Stonewood Communications BV (“Stonewood”), which was the company which had sold the screenplay rights to 9MD in early 2006. The latter claim was based on an allegation by Mr Hedman and GTH that Stonewood did not own any rights in the screenplay as of the date on which it purported to transfer them to 9MD.
During disclosure it also came to light that some of the documents which had been used to transfer away 9MD’s rights in the screenplay had been executed after 9MD had gone into insolvent liquidation and had been back-dated in order to hide that fact.
The trial of the applications lasted eight days and included cross examinations of Mr Hedman and his business associate, Anthony Waller. Stonewood did not defend the proceedings, and GTH’s main witness, Kate Hoffman, ultimately refused to give oral evidence despite having served several witness statements. Mr Justice Peter Smith later concluded in his Judgment that Ms Hoffman’s reluctance to take the stand was “because she had seen how badly Mr Hedman and Mr Waller had performed as witnesses and she knew she was going to be subject to robust cross examination in respect of her role in various forged documents.”
On 28 April 2010, Mr Justice Peter Smith handed down judgment in favour of Mr Singla against all three respondents, who were accordingly ordered to pay Mr Singla’s costs. Mr Hedman and GTH were both ordered to pay £40,000 on account of Mr Singla’s costs. Mr Hedman was also ordered to pay £200,000 on account of his liability under section 214 and GTH was also ordered to pay £50,000 on account of its liability for infringement of copyright.
The Judgment of Peter Smith J dated 28 April 2010 is presently subject to appeal.
Link to the Judgment of Peter Smith J dated 28 April 2010:
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