Sean Bucknall v Gina Louise Wilson
| Jurisdiction | England & Wales |
| Judge | Mr Justice Trower |
| Judgment Date | 30 July 2021 |
| Neutral Citation | [2021] EWHC 2149 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH-2020-000146 |
[2021] EWHC 2149 (Ch)
THE HONOURABLE Mr Justice Trower
Case No: CH-2020-000146
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
ON APPEAL FROM ICC JUDGE JONES
IN THE MATTER OF PETER HERBERT FOWLDS (A BANKRUPT)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
James Morgan QC and Andrew Brown (instructed by Coffin Mew LLP) for the Claimant
The Respondent acting in person
Hearing date: 10 th May 2021
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE Mr Justice Trower
Introduction
This is an appeal against a decision of ICC Judge Jones handed down on 22 May 2020 ( [2020] EWHC 1200 (Ch)) by which he dismissed an application for relief pursuant to s.340 of the Insolvency Act 1986 (“s.340” and “the Act” respectively). The applicants are the trustees in bankruptcy (the “trustees”) of Peter Herbert Fowlds, who was made bankrupt on 22 March 2017 on a petition presented by his son, Mark Fowlds, on 19 January 2016.
The background to the application, and indeed the bankruptcy as a whole, was described by the judge as tragic and most unfortunate. It is understandable that he took that view. As he explained at the beginning of his judgment, the bankruptcy emanated from a bitter family dispute between Peter Fowlds and Mark Fowlds, who is the only significant creditor in the bankruptcy. This led to litigation in which Mark Fowlds obtained judgment against Peter Fowlds on 15 July 2014 as a result of which the father became indebted to his son in an amount which, together with interest and an interim award of costs, exceeded £700,000.
The application related to a preference in the form of a payment of a sum of £47,675.51 (the “Payment”) by Peter Fowlds to his stepdaughter, Gina Louise Wilson (“Ms Wilson”), on 4 September 2014. The Payment was made in partial discharge of Peter Fowlds' indebtedness to Ms Wilson arising out of accountancy services that she provided during the period of the litigation.
The final order made on the application was unusual in at least one respect. Having determined that all the elements of a preference claim under s.340 were satisfied, the judge nonetheless decided that this was a case which was sufficiently out of the norm for him to refuse relief altogether. The factors that caused him to reach that conclusion were that Ms Wilson received the preference on a commercial basis, that she acted in good faith, that she no longer has the preference or its proceeds, that she had changed her position so that it would be inequitable to require restitution and that she will face wholly disproportionate consequences should an order for restitution be made.
At the heart of the trustees' appeal is a challenge to the judge's decisions that Ms Wilson had established a change of position, and that this was a relevant factor in his determination to grant no relief. On the question of the relevance and importance of change of position, the trustees contended that two decisions of Sales J ( 4Eng v Harper [2009] BCC 746 (“ 4Eng”) and Trustee in Bankruptcy of Claridge v Claridge [2011] BPIR 1529 (“ Claridge”)) were to that extent wrong.
The Background Facts
For the purposes of this appeal, it is not necessary to recite the background facts in any detail. The judge gave an outline of them in paras [32] to [55] of his judgment. In large part, he did so for the purposes of explaining why he was satisfied that the elements of a cause of action under s.340 had been met. There is no appeal against his conclusion that this was the case. I can therefore take this aspect of the case quite shortly.
The dispute between Peter Fowlds and Mark Fowlds arose out of work which they carried out together in relation to certain residential property developments and investments. A development in Hastings ran into difficulties during the 2008 financial crisis, which led to a major dispute between them concerning how much, if anything, Peter Fowlds owed Mark Fowlds, and whether Mark Fowlds had abused his position and defrauded Peter Fowlds whilst managing the property companies and their properties.
Ms Wilson, who is a qualified management accountant, became involved in the dispute in about 2010 when she was retained by Peter Fowlds to provide certain services including drawing up an account of the property dealings. The judge found as a fact that the agreement between Peter Fowlds and Ms Wilson was that she was retained to be paid at a rate of £40 per hour and that the amounts so earned would be paid when Peter Fowlds could afford to settle her invoices. The judge also found that, although Ms Wilson was retained because she was Peter Fowlds' stepdaughter, the retainer was agreed and the services were provided on a professional, arm's length, commercial basis. There was no challenge to these findings on this appeal.
The 15 July 2014 judgment obtained by Mark Fowlds included an order for payment by Peter Fowlds in the sum of £254,141, together with interest to be assessed. On 18 November 2014 the interest was assessed in the sum of £279,165. Peter Fowlds was also ordered to pay £200,000 on account of costs pending detailed assessment and a further sum of £53,330.70, which the judge described as arising under part 36 of the CPR. It appears that Peter Fowlds sought to appeal, and obtained both an extension of time and a stay of execution until 1 September 2014. The judge said that the steps taken on the appeal were not entirely clear from the papers, but in the event permission to appeal was refused in April 2015 (the judge said that the application was dismissed as being out of time).
The Preference
Meanwhile, on 15 August 2014, i.e. shortly after the judgment obtained against him by Mark Fowlds, Peter Fowlds had sold a number of properties (the “August 2014 realisations”), from the proceeds of which he paid solicitors and counsel in respect of the litigation and certain other debts including fees due to agents and conveyancing solicitors. Amongst the properties sold on 15 August 2014 were a property in Brighton and a property in Hove (the “relevant properties”), the net proceeds of which amounted to £47,747.51.
By the time of the August 2014 realisations, Peter Fowlds was indebted to Ms Wilson in the sum of £99,330 pursuant to invoices she had rendered dated 23 February 2012, 3 July 2013, 8 January 2014 and 28 July 2014. On 4 September 2014 the sum of £47,747.51 realised from the sale of the relevant properties was transferred to Ms Wilson. The Payment, derived as it was from this sum, was the preference with which these proceedings are concerned. I will return later in this judgment to the findings made by the judge on what happened to the Payment after it had been received by Ms Wilson.
The judge's conclusion was that the effect of the payments made out of the realisations of the properties in August 2014 was that all of Peter Fowlds' creditors apart from Mark Fowlds and Ms Wilson were paid in full. Ms Wilson received part payment to the extent of 48% of the amount she was owed. Nothing was paid to Mark Fowlds.
The judge concluded that Peter Fowlds chose to pay what he could to Ms Wilson having first paid his other creditors in full. He was satisfied that Peter Fowlds made the Payment because Ms Wilson was owed money as a commercial creditor, not because she was a creditor who was also his stepdaughter. The judge said that he had reached the conclusion that the fact that she was also Peter Fowlds' stepdaughter was the reason why he decided he did not have to pay her in full, in contrast to the other creditors (apart from Mark Fowlds). It was not the reason why he paid her in the first place. These conclusions are not challenged on appeal.
The Bankruptcy
Shortly after the Payment was made to Ms Wilson, Mark Fowlds took a number of steps to enforce the judgment he had obtained against Peter Fowlds. They included a freezing injunction and orders for the disclosure of assets. There were also committal proceedings. On 19 January 2016, Mark Fowlds presented a bankruptcy petition against Peter Fowlds based on a statutory demand dated 11 August 2015 which was itself founded on the judgment debt. A bankruptcy order was eventually made by Mr Registrar Baister on 22 March 2017.
On 19 October 2017, the trustees' solicitors sent a letter of claim to Ms Wilson. The letter asserted the trustees' claim that Ms Wilson was an associate of Peter Fowlds, that the Payment was made to her as a creditor of Peter Fowlds within the period of two years prior to the bankruptcy petition, that it put her into a better position than she would have been in if the Payment had not been made and that, because she was an associate of Peter Fowlds, it was to be presumed that he was influenced by a desire to prefer her. The trustees contended that the Payment was therefore a preference within the meaning of s.340 of the Act and should be set aside. The letter also urged Ms Wilson to seek independent legal advice.
Some limited efforts were then made to mediate the dispute, which given the relatively modest amount of money at stake was an obvious and sensible course for the parties to adopt. Unfortunately, those...
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