Anthony McGann v Eldonian Community Trust Limited

HHJ Halliwell: Introduction

1. I shall now give judgment on a disputed winding up petition (“ the Petition ”) in respect of Eldonian Community Trust Limited (“ the Company ”).

2. The Company is limited by guarantee. It is also a registered charity, formed for the benefit of a community in Vauxhall, Liverpool in connection with the development and regeneration of an area known as the Eldonian Village.

3. The Petitioner, Mr Anthony Edward McGann (“ Mr McGann ”), seeks an order, under IA 1986 s122(1) (f) on the basis that he is a creditor of the Company and the Company is unable to pay its debts. He contends that the Company is indebted to him in the aggregate sum of £18,755 for the amounts that he paid personally to defray the Company’s liabilities to third parties for the provision of legal and accountancy services. Mr McGann does not rely on the service of a statutory demand under Section 123(1)(a) but maintains that the Company’s inability to pay its debts can be inferred from its failure to pay the amounts due to him following an informal demand.

4. The Petition is opposed on a number of grounds. It is contended that, if Mr McGann, made the putative payments for professional services, they were not a liability of the Company and the Company never resolved to indemnify him. It is contended that the alleged indebtedness is based, in part, on an invoice for £14,400 which has retrospectively been amended so as to give a false impression about the identity of the client. It is also contended that the Company has a set off or cross claim against Mr McGann which exceeds the putative Petition debt.

5. Before me, at the hearing of the Petition, Mr Louis Doyle KC appeared on behalf of the Petitioner, and Mr Daniel Crowley, of counsel, appeared on behalf of the Company.

6. Whilst not formally joined as a party to the proceedings, the Charity Commission instructed Mr Conor McLaughlin, of counsel, to attend the hearing and I permitted him to make submissions on their behalf. Background

7. The Company was formed on 16 July 1987 and assumed an important role in the development and regeneration of the Eldonian Village area in North Liverpool following the closure of the Tate & Lyle sugar refinery in 1981. Members of the local community were involved in the management of the Company, its subsidiaries and their assets, including the Village Hall. This includes Mr McGann’s late father who was involved at the very outset. It also included sisters of Mr McGann. There is an issue in these proceedings about the extent of Mr McGann’s own involvement.

8. In 2018 the Company’s wholly owned subsidiary, Eldonian Leisure Limited, disposed of the freehold title to the Village Hall. It did so by transferring the property to Eldonian Community Based Housing Association Limited (“ the Housing Association ”). By a lease dated 15 May 2018, the Housing Association demised the property to another company, Eldonian Leisure Limited ( Eldonian Leisure ). Five years later, it re-let the property for a term of five years at a peppercorn rent.

9. By then, the Charity Commission had begun to have regulatory concerns about the governance of the Company. This included concerns about the repeated failure of the Company to hold annual general meetings, the late filing of the Company’s annual accounting documents and concerns about the management of the Company’s assets and potential conflicts of interest. The Charity Commission also considered that the directors had not been appointed in accordance with the Company’s constitution.

10. In these circumstances, the Charity Commission opened a statutory enquiry and issued the directors with guidance in relation to issues of future governance. Having determined that this was not being properly implemented, it then made an order, on 24 October 2024, appointing interim managers under the provisions of Section 76(3)(g) of the Charities Act 2011 .

11. By this stage, it appears Mr McCann had already instructed a barrister, through direct access, to give professional advice to the directors in relation to at least some of the issues raised by the Charity Commission. He was also involved in giving instructions to Brabners, on behalf of the directors, in connection with the Charity Commission’s requisitions.

12. On 18 December 2024, Mr McCann presented the Petition. The Petition did not contain a description of the Petition debt. However, it referred to an unsatisfied demand for payment in the sum of £18,755 and stated, in simple terms, that the Company was insolvent and unable to pay its debts when due. In a subsequent witness statement dated 20 May 2025, Mr McCann stated that it “represents the total sums paid by me on behalf of the Company in consideration for the provision of legal and accountancy services to the Charity.” It is apparently made up of a payment to Mishcon de Reya, solicitors, in the sum of £14,400, a barrister’s fees of £2,340 and a payment to BWM accountants in the sum of £1,285.

13. Mr McCann exhibited to his witness statement, a letter dated 11 November 2024 from Mischcon de Reya stating that “we received funds of £14,400 on account on 2 December 2022 from A McCann on file number 70144.1. These funds were used to settle the invoice dated 15 December 2024 for our work advising Eldonian Community Trust Limited”. He also exhibited an invoice dated 15 December 2022 from Mishcon de Reya – invoice no. 5223374 – under the heading “Defamation Advice – Threatened Publication” for “professional charges with work undertaken on your behalf for the period from 1 December 2023 to 9 December 2022…” in the sum of £14,400 (“ the Exhibited Invoice ”). In the Exhibited Invoice, “Eldonian Community Trust” was named as the Client.

14. The Petition came before the Court on 18 February 2024 when it was listed, with directions, for a substantive hearing on 27 August 2025; subsequently vacated and re-listed so as to take place on 14 October 2025.

15. Meanwhile, new trustees were formally appointed at the Company’s AGM. This was followed, on 27 March 2025, by the first meeting of new trustees. On 10 April 2025, the Charity Commission then made an order prohibiting the Company itself and Eldonian Leisure from entering into transactions in relation to the assets and property of Eldonian Leisure or dealing with the lease of the Eldonian Village Hall. Mr McGinn was also a party to the order together with one of his sisters, Ms Lisa Clarke and Mr Jamie Peters.

16. The Petition has been advertised. However, no supporting or opposing creditors were entered on the List of Appearances filed at Court prior to the hearing on 14 October 2025. Jurisdiction

17. The Petition was presented under this Court’s statutory insolvency jurisdiction ( IA 1986 s 122(1) and CA 2011 s113(2) ), not its jurisdiction with respect to charities or the administration of trusts for charitable purposes. No doubt, Mr McGann was aggrieved by the intervention of the Charity Commission. It is also conceivable he believed that, once the Company is wound up, this would put an end to the Charity Commission’s statutory enquiry. Whatever may have prompted him, Mr McGann presented the Petition on the footing that he was and is a creditor of the Company and thus has standing under the provisions of Section 124(1) of the 1986 Act.

18. On this basis, the proceedings are not charity proceedings within the meaning of Section 115(8) of the Charities Act 2011 . They have been brought as a class remedy for the benefit of the Company’s creditors, not to achieve a court determination in respect of the internal or domestic operation of the Company as a charity.

19. However, Mr McGann only has standing to present such a petition if and once established as a creditor, Mann v Goldstein [1968] 1 WLR 1091 at 1098-9 (Ungoed-Thomas J) (approved by the Court of Appeal in Stonegate Securities v Gregory [1980] Ch 576 ). He does not have such status in the event of a dispute in good faith and on substantial grounds as to the entirety of the petition debt or at least the statutory £750 limit for a statutory demand, Angel Group v British Gas Trading Ltd [2012] EWHC 2702 (Norris J). This does not include a cross claim otherwise than by way of set off. However, if it falls short of a set off, the Court can still take the cross claim into consideration in the exercise of its overall discretion when determining how to dispose of the petition, Re Bayoil SA [1998] BCC 988 . The Petition Debt

20. The conceptual basis for the Petition Debt was not fully developed in the evidence or argument. However, it is well established that payments or services for the benefit of a party can give rise to a restitutionary claim for unjust enrichment. This applies where the service has been freely accepted on the understanding that it was not being provided gratuitously. Agents and trustees are also entitled to rights of indemnity in some circumstances, whether contractual, restitutionary or statutory. However, this possibility has not been explored and developed in evidence; in part because Mr McCann is reluctant to be regarded as a director or trustee. There is also a suggestion that he might be entitled to a remedy based on estoppel. However, the conceptual and evidential basis for this is obscure and it has not been made out, not least because estoppel cannot generally be utilised to found a claim. Proprietary estoppel and estoppel by convention operate differently but Mr McCann is not seeking to invoke rights in property and no convention has been identified to bind the trusts of the charity or, more widely, the assets of the Company. If estoppel is somehow being deployed as a reply to the Company’s own case, the basis for doing so is obscure and it has not been developed in argument.

21. Mr McCann’s case is essentially based on the restitutionary remedy.

22. He maintains that each of the relevant payments was made for the benefit of the Company. It is at least implicit in his case that the Company, through its directors, engaged or authorised lawyers and accountants to provide the relevant services on its behalf.

23. He also contends that, at a meeting on 30 November 2022, the Trustees or directors authorised Mr McCann to “assist in the payment of legal/accountancy fees when required”. This was followed by a resolution providing that Mr McCann was “to be repaid any amount paid by himself personally or secured through third parties, for the payment of any legal/accountancy bills belonging to the Trust. Amount to be repaid immediately upon request”. The minutes of this meeting are undoubtedly important because they can be taken to have been deployed to show that Mr McGuinness did not make the payments gratuitously rather he did so on the understanding that he would ultimately be repaid by the Company.

24. Section 177 of the Charities Act 2011 provides that, in the Act itself, except as the context otherwise requires, the “charity trustees” are “the persons having the general control and management of the administration of a charity”. Where, as in the present case, there is a corporate vehicle, the directors of the company will generally be taken to exercise control and thus be treated as charity trustees. No doubt, this would include a de facto or shadow director.

25. In the present case, there is an issue as to the identity of the trustees – if indeed any were validly appointed - at the time of the relevant meeting. There is thus an issue as to whether the resolutions at the meeting were binding on the Company.

26. There is also an issue as to whether Mr McCann himself was a director or trustee. Mr McCann denies that he ever acted as a director or trustee. The Company maintains otherwise. The Challenge

27. In his oral submissions for the Company, Mr Crowley opposed the Petition on several grounds. His main grounds for doing so were as follows. (a) The Exhibited Invoice is a false document. By exhibiting it to his witness statement and relying upon it to advance his case, Mr McCann has committed a serious abuse of court process and, for this reason alone, the Petition should be struck out. (b) The Company’s putative directors were not validly appointed as directors when the alleged legal and accountancy services were provided and the Company was invoiced nor, indeed, were they validly appointed on 30 November 2022 when the Company putatively resolved to authorise payment. (c) The services were not provided to the Company and the Company was never liable to make payment. (d) The Company has a cross claim against Mr McCann for breaches of his duty as a de facto or shadow director. Analysis

28. Bearing in mind the overall context in which the Charity Commission opened its statutory enquiry and appointed interim managers prior to the appointment of new trustees, I am persuaded that there was and is a bona fide dispute between the parties on substantial grounds as to the Company’s putative indebtedness to Mr McCann.

29. It is a moot point whether each of Mr Crowley’s main submissions is, in itself, an answer to the Petition. However, the critical issue is whether the Company has done enough to show that there is a bona fide dispute on substantial grounds as to its putative indebtedness to Mr McCann.

30. Considered cumulatively and, mindful of the parameters of the test and the absence of supporting or opposing creditors, I am persuaded that the answer to the question is yes and the Petition should be dismissed.

31. I shall explain why. In doing so, I shall start with the main points in Mr Crowley’s oral submissions.

32. Mr Crowley’s first ground of opposition was that the Exhibited Invoice is a false document and that, by relying upon it to advance his case, Mr McCann has committed an abuse of the process of the court.

33. The Exhibited Invoice is an electronically generated document. The original hard copy has not been admitted in evidence. However, it appears to be based on an authentic document which has been altered by changing the name of the named client. In its original form, the named client or clients were “Eldonian Community Based Housing Association and others”. In the Exhibited Invoice, the name of the client was changed to “Eldonian Community Trust”. The reference, in the original document to “others” may, of course, have been intended to include the Company. However, there has been no explanation as such. One thing is clear. The name was changed so as to identify the Company itself as the only client. Once it was changed, the Housing Association was no longer identified as such.

34. There is no specific evidence as to when, how and by whom this was done. However, there is no room for doubt that it involves a significant retrospective alteration to the original invoice. By letter dated 2 October 2025, Mishcon de Reya advised Ms Butt of the Charity Commission that the original invoice was indeed issued with the Housing Association and others named as Client. They also confirmed that the Exhibited Invoice was not issued by the firm nor subsequently amended by the firm itself.

35. Mr Crowley submits that, in the absence of a proper explanation, it is to be inferred that the Exhibited Invoice was amended by or on behalf of Mr McCann in order to enhance his case in these proceedings.

36. On this basis, he submits that the whole Petition should be struck out.

37. It was authoritatively established, in Arrow Nominees v Blackledge [2001] BCC 591 , that the court has jurisdiction to strike out an unfair prejudice petition for forgery of disclosed documentation. No doubt, the same principle applies to a winding up petition. In Arrow Nominees (supra), the Court of Appeal struck out the petition on the basis that there could no longer be a fair trial owing to the forgery of correspondence and use of such correspondence to advance the case of one of the parties. In the light of the Supreme Court’s judgment in Summers v Fairclough Homes Ltd [2012] 1 WLR 2004 , the principle is founded on the Court’s jurisdiction to strike out a case for abuse of the process of the Court. However, it is also clear from Summers (supra) that the jurisdiction should only be exercised in exceptional circumstances where it is reasonable and proportionate to do so.

38. In the present case, Mr McCann’s case is not being tested, at trial, in the same way as Arrow Nominees or Summers (supra). This is the final hearing of the Petition and it is being determined on the witness statements and exhibited documentation. There has been no cross examination of witnesses. Moreover, the Exhibited Invoice relates to the period prior to the intervention of the Charity Commission and the appointment of new trustees. The current representatives of the Charity Commission and the new trustees can have no direct knowledge of the transactions to which the forgery relates. Moreover, no proper explanation for the forgery has been given.

39. In these circumstances, I have treated Mr McCann’s case and the evidence which he now deploys in support of his case with a great deal of caution. I have looked for independent corroboration in everything that he says. Where there is no independent corroboration, I have attached only limited weight to his evidence on the more contentious issues. However, if I proceed in this way, I am not persuaded that the Petition should simply be struck out owing to the forgery. To do so would be disproportionate.

40. Mr Crowley’s second submission was that the Company’s putative directors and trustees were not validly appointed as directors when the alleged legal and accountancy services were provided and the Company was invoiced nor, indeed, were they validly appointed on 30 November 2022 when the Company putatively resolved to authorise payment and the putative resolution at the meeting were not binding on the Company.

41. If this is correct, it undermines Mr McCann’s case because it is an essential condition of the restitutionary remedy that the respondent freely accepted the service on the understanding that it was not being provided gratuitously.

42. On balance, I am persuaded that the Company has done enough at least to show that there is a bona fide dispute on substantial grounds in relation to this issue.

43. This is essentially for the reasons and on the evidential basis set out in Paragraph 30 of the witness statement dated 12 February 2025 of Saiqa Butt, of the Charity Commission. It includes the Company’s failure to hold annual general meetings notwithstanding the requirement for a third of the trustees to retire by rotation pursuant to Articles 42 and 43 of the Articles of Association. It also includes the Company’s failure to maintain a register of members and, on the supposition that the only members were the original members of whom there were only 17, that no quorate meeting could have been held.

44. In answer to this point, Mr Doyle submitted that any material defect of procedure, including a defect in relation to the appointment of committee members, would have been rescued by Article 53 . This provided that: “All acts bona fide done by any meeting or the Executive Committee or of any committee of the Executive Committee or by any person acting as a member of the Executive Committee, shall, notwithstanding it be afterwards discovered that there was some defect in the appointment or continuance in office of any such member or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every person had been duly appointed or had duly continued in office and was qualified to be a member of the Executive Committee”.

45. In answer to Mr Doyle’s submission, Mr Crowley submitted that Article 53 is not wide enough to cure the wholesale procedural defects in the present case. In doing so, he relied upon Morris v Kanssen [1946] AC 459 in which the House of Lords concluded that the defective appointment of a director and allotment of shares were not validated by provisions similar to Article 53 in Section 143 of the Companies Act 1929 and Article 88 of Table A . The House of Lords’ decision was made on the basis that these provisions were designed to avoid transactions where had been a slip in the appointment of a director not to override the substantive provisions.

46. Of course, this gives rise to an issue of degree. If, in the present case, the issues in relation to the appointment of the directors and trustees come for consideration in the future, the courts will no doubt expect the parties to adduce evidence of the overall factual context to assess the way in which company business has been dealt with in the past. However, these are not matters on which this court can make a conclusive determination on the hearing of a disputed winding up petition. This is particularly so where there is very limited evidence in relation to these matters and, for the most part, it has been provided by a single interested party, Mr McCann, whose evidence must be treated with a measure of caution for the reasons that I have already given.

47. I am mindful that the incoming managers and trustees and the Charity Commission itself do not generally have direct knowledge of the circumstances in which and the understanding on which the putative payments were made or the governance of the Company at the time. To a substantial extent they will have to proceed by inquiry. However, there is plainly a bona dispute on substantial grounds as to whether the putative directors and trustees were validly appointed at the time of the putative payments and resolutions or can be treated as such. On the evidence before me and in this forum, I cannot conclusively determine the issues to which this gives rise nor, more generally, whether the Company can be taken to have freely accepted the service putatively provided to it by Mr McCann on the understanding that it was not being provided gratuitously.

48. Mr Crowley’s third point was that the relevant payments were not made in respect of services for the Company and the Company was never liable to make payment for such services. He submitted that this can be shown from contemporaneous documentary evidence. He also relied on the notes of a meeting on 22 March 2023 between the Charity Commission and representatives or trustees of the Company at which Ms Marie McCann stated that she had personally paid for legal advice from Mishcon de Reya amounting to £15,000. He submitted that Mr McCann now seeks credit himself for the same payment or payments.

49. To maintain – as Mr Crowley did at one point in his oral submissions – that “the contemporaneous evidence all contradicts the debt” is to put it too high. However, in my judgment, the evidence in relation to the underlying debt does require further investigation. For the reasons I have already given, it would be inappropriate for me to rely solely on Mr McCann’s uncorroborated evidence in relation to this issue. It is highly relevant that the Housing Association, rather than the Company, was named as the Client in the original invoice. It is also relevant that, to a substantial extent, the advice appears to have related to a potential claim in defamation based on allegations about the disposal, apparently at a gross undervalue, of property that had once been vested in the Company. No doubt a company can sue for slander to title but there is every possibility that advice was really being sought in relation to the reputation of individuals rather than corporate entities. I wouldn’t put it any higher than this. However, at the moment, the evidence on this aspect has not been properly explored and it cannot reasonably be suggested the liability is so obvious that there is no substantial ground for challenge.

50. Mr Crowley’s final point was that the Company has a cross claim against Mr McCann for breach of fiduciary duty as a shadow or de facto director of the Company. If and to the extent this is alleged to furnish the Company with a set off and the set off equals or exceeds the Petition debt, the issue would remain whether there is a bona fide dispute on substantial grounds. If, however, it falls short of a set off, the issue is rather different. In the hypothetical event this were the only barrier to a winding up petition, the Petitioner would not lack standing to present a petition. The outcome of the Petition would then be a matter for the reasonable exercise of a judicial discretion in accordance with the principle in Re Bayoil SA (supra).

51. There is a significant amount of speculation in this part of Mr Crowley’s argument. It involves showing that Mr McCann acted as a de facto or shadow director and that, in doing so, he committed breaches of his duties to the Company which were causative of a loss.

52. The argument is founded on Mr McCann’s historic links to the Charity, through his family and contemporaneous documentation showing that, from time to time, he acted on the Company’s behalf for example when instructing a barrister, Mr Shepherd on direct access.

53. Mr Crowley also makes a series of allegations in relation to the mismanagement of the Company’s affairs, including the disposal, for only £1, of the site of a former primary school to Banaras Holdings LLC a company registered in St Christopher and Nevis, the failure to comply with the Charity’s governing document and the law and more generally a failure to act in the Charity’s best interests.

54. At times, Mr McCann appears to have acted on behalf of the Company. He may have acted as a de facto director taking it upon himself to do things that would ordinarily be done by a lawfully appointed director. It is also conceivable that, through his family relationship, he was able to dictate some of the decisions taken in relation to the Company’s affairs. However, there is no substantial evidence on which I can reasonably conclude this is so or indeed that it is likely to be so.

55. There is also no evidence that Mr McCann was involved in the decisions in relation to the mismanagement of the Company’s affairs to which Mr Crowley now refers. It is, of course, conceivable he was involved but it cannot be put any higher.

56. In my judgment, this part of the Company’s case was and is, in itself, too speculative to furnish it with a defence to the Petition. It does form part of the overall background but, in the hypothetical event that I was not otherwise satisfied that the Petition should be dismissed, I would not have been inclined to dismiss the Petition on this basis alone.

57. For the record, I have taken into consideration Mr McCoughlin’s submissions on behalf of the Charity Commission. Whilst his attendance at the hearing was not specifically required as part of the Charity Commission’s functions, Mr McCoughlin attended to assist the court and, in doing so, draw my attention to matters of particular concern and explain the Charity Commission’s current stance. For the avoidance of doubt, this has been of some assistance to me in understanding the factual background.

58. For his part, Mr Doyle accepted from the outset that the issue of whether his client has standing to present a winding up petition must be determined by applying the familiar test of whether there is a bona fide dispute on substantial grounds. However, he submitted that, even on this narrow test, his client succeeds.

59. He submitted that there could be no reasonable dispute that his client at least paid the sum of £14,400 to Mischon de Reya and it was obvious from the minutes of the meeting on 30 November 2022 that the Company had agreed to pay or indemnify him for it. He submitted that it was no answer for the Company to rely on breaches of the Articles since if there were any breaches, they could be cured by Article 53 of the Company’s Articles of Association and, if not, the Company was now estopped from relying upon the breaches.

60. Whilst Mr Doyle presented his client’s case with clarity and skill, I am not persuaded by any of these arguments. The test in relation to the issue of standing does not present a high bar for the Company. The Company needs only to show there is a bona fide dispute on substantial grounds. Given the intervention of the Charity Commission, the information that has become available during the course of its inquiries and, more generally, the circumstances in which the current directors were appointed, it would be surprising for their stance to be otherwise than bona fide. However, in my judgment regardless of whether Mr McCann ultimately seeks to sue by ordinary action and, if so, the outcome of such an action, I am satisfied that, from the perspective of the Company’s current directors, the dispute is genuine and based on substantial grounds.

61. It is by no means obvious that the relevant amounts were paid to discharge the Company’s debts nor is it obvious that the Company’s duly appointed directors authorised Mr McCann to make the payment on the understanding that it was not being provided gratuitously. I cannot, in this court, determine whether the Company is bound by the putative resolution on 30 November 2022 nor can I determine whether any procedural defect can be cured though Article 53 or by estoppel. If the resolution is void, it certainly cannot be suggested that Mr McCann has an unanswerable case based on estoppel. If there is a species of estoppel open to him, whether by way of reply or otherwise, there will be issues in relation to his understanding at the time and the requirement of detrimental reliance which the court will have to evaluate at trial following an ordinary action. Post Hearing correspondence

62. Following the hearing of the Petition on 14 October, Mr Doyle emailed the court to make some additional submissions. The additional submissions included some additional observations in relation to the evidence already before the court. When canvassed with the Company and the Charity, through their legal representatives, the point was taken was that no further submissions should be entertained on the basis that the hearing has now closed.

63. In R (MH (Eritrea) v SSHD [2023] 1 WLR 482 , Elisabeth Laing LJ observed, at [54], as follows. “As a general rule, the parties should not unilaterally send submissions to the court, after the end of the argument, which raise points which should have been raised during the hearing. If, however, there is a matter which has arisen during the hearing, on which they wish to make further submissions, they should raise that with the court during the hearing. The court will then be able decide whether such submissions are necessary. If, after the hearing, counsel wish to raise a further point, they should tell the other party or parties, and ask the court's permission before filing anything else. If the point concerns an issue which arose for the first time at the hearing, or which has unexpectedly come to light immediately afterwards, the court may well agree to the filing of further short submissions, provided that the point is raised promptly after the hearing (and subject to a right of reply). An advocate will, however, rarely be given permission to file a document which puts forward arguments which could and should have been made during the hearing.”

64. It is unclear whether there were any exchanges between counsel after the hearing. However, it is not obvious that Mr Doyle’s submissions are limited to an issue which arose for the first time at the hearing, or which has unexpectedly come to light immediately afterwards.

65. However, I am mindful of the Court of Appeal’s guidance that advocates will rarely be given permission to file a document which puts forward arguments which could and should have been made during the hearing.

66. In the absence of compelling reason for doing so, I have not taken Mr Doyle’s additional submissions into consideration. Disposal

67. The Petition is dismissed.