Darren Edwards (Trustee in Bankruptcy of Jagdev Singh Wasu) v Aurora Leasing Ltd
| Jurisdiction | England & Wales |
| Judge | Prentis |
| Judgment Date | 20 January 2021 |
| Neutral Citation | [2021] EWHC 96 (Ch) |
| Docket Number | BR-2013-001594 |
| Date | 20 January 2021 |
| Court | Chancery Division |
[2021] EWHC 96 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN BANKRUPTCY
RE: JAGDEV SINGH WASU
AND RE: THE INSOLVENCY ACT 1986
The Rolls Building, 7 Rolls Buildings,
Fetter Lane, London, EC4A 1NL
ICC JUDGE Prentis
BR-2013-001594
Ian Tucker (instructed by Mills & Reeve LLP) for the Applicant
Tony Beswetherick (instructed by Sherrards Solicitors LLP) for the Third Respondent and (instructed by Charles Russell Speechlys LLP) for the Sixth Respondent
Hearing date: 20 November 2020
The bankruptcy and this application
Jagdev Singh Wasu (the “Bankrupt”) qualified as a dentist in November 2003, practising until an order of the General Dental Council of 28 March 2013 erasing his name from the Register of Dentists. His appeal against that order was dismissed by Haddon-Cave J on 3 December 2013.
On 23 March 2013 HMRC presented the petition on which he was bankrupted on 18 October 2013, founded on a statutory demand personally served on 4 December 2012 (the “Petition”). Darren Edwards (the “Trustee”) was appointed his trustee in bankruptcy with effect from 24 December 2013; on that date the estate vested under section 306 of the Insolvency Act 1986 (the “Act”). The Bankrupt remains undischarged pursuant to the order of Chief Registrar Baister of 2 February 2015, not yet having complied with the obligations imposed on him by the Act.
Shortly before the expiry of a potential limitation period, on 4 October 2019 the Trustee issued this application under (materially) section 284 of the Act (the “Application”). There were ten independent Respondents, the majority of whom have settled. This is the determination of the Application against the third and sixth Respondents, Aurora Leasing Limited (“Aurora”) and Howard de Walden Estates Limited (“de Walden”). The Trustee has been represented by Mr Tucker, and the two Respondents by Mr Beswetherick. Each is to be commended for their vigorous and thoughtful argument in a case which (aside from one minor issue) now centres on just one word in section 284(4)(a), “value”.
Aurora: facts
As described in the statement of its director, Anthony Gerson, Aurora provides equipment leasing services: it purchases from third parties equipment which is specified by the customer to whom it is then leased.
On 17 March 2013 a broker, Wayne Evans of Joefizz Asset Finance Limited (“Joefizz”), emailed Mr Gerson a proposal to finance the acquisition of dental equipment from Hague Dental Supplies (“Hague”) (the “Equipment”). The proposed client was identified as Wasu Medical Centre (the “Partnership”), and the quoted cost of the Equipment was £233,100 plus VAT. In his accompanying assessment Mr Evans described the proposition as being “strong new business”: the Partnership ran a “very successful” doctor's surgery in Harrow, and now “Moving into Dental too and son will be managing the operations. His CV is enclosed, which demonstrates very clearly his business acumen”. The business was to be run “from premises they own outright near Harley St”.
The Bankrupt was not a member of the Partnership, which was between his parents, Dr Paramjit Singh Wasu (“Dr Singh Wasu”) and Harmander Kaur Wasu. Both were in the end bankrupted by Aurora for non-payment of obligations under the ensuing lease. Aurora's petition against the Bankrupt as guarantor was pre-empted by HMRC's.
On 16 January 2019 Dr Singh Wasu made a witness statement in support of a stay of his bankruptcy, in which he provided a little background: “Jagdev wished to establish a dental practice in Weymouth Street… As well as obtaining premises, it was necessary to obtain dental equipment. It was proposed that the dental practice be operated by a company”, which he identifies as Weymouth Medical Limited, incorporated on 19 June 2014 and of which Dr Singh Wasu was director and sole shareholder. The date of incorporation leads one to think that the last part of this evidence cannot be right, given the date of Haddon-Cave J's order and the dealings with the Equipment I will describe below.
On 22 March 2013 Aurora made an offer to the Partnership through Joefizz. Backed by guarantees from the Bankrupt and his parents, the Equipment would be leased over 36 months, with an initial rental fee of £23,310 plus VAT followed by monthly rentals in advance, the “Initial rental and arrangement fee to be paid and cleared prior to activation of lease agreement”. This offer was accepted by Dr Singh Wasu on behalf of the Partnership on 26 March 2013, which was conveyed to Aurora by Mr Evans on 2 April together with a £360 cheque, drawn on the Partnership, for the arrangement fee. The requisite deeds of guarantee were entered into on 19 April 2013, and it was probably around the same time that the Partnership executed the lease agreement.
There followed a delay, which Mr Gerson says did not trouble him as it was not unusual in Aurora's business, until on 26 July 2013 the Bankrupt wrote a cheque on his account for the initial rental of £27,972, which Mr Evans passed to Aurora; it was banked on 9 August 2013, and cleared on 14 August 2013. It is this payment which is the basis of the Trustee's application against Aurora.
Until receipt and clearance of the initial rental, it is Mr Gerson's unsurprising evidence that Aurora would neither purchase the Equipment, nor itself execute the lease. It executed the lease on 16 August (the “Equipment Lease”), and on 19 August 2013 paid Hague £279,720 for the Equipment. Aurora had no knowledge of the Petition at this point, nor until 30 May 2014.
The Partnership defaulted on the monthly rental payments under the Lease almost immediately. By November 2013 Aurora had instructed debt collectors, and on 23 January 2014 obtained default judgment against the Partnership for some of the arrears; the same day, it terminated the Equipment Lease. The Equipment was ultimately sold back to Hague for only £34,799.
de Walden: facts
In his assessment for Aurora, Mr Evans wrongly described Dr Singh Wasu and his wife as owning outright a property near Harley Street from which the dental business would run. As specified in the Equipment Lease, the Equipment was to be installed at 29 Weymouth Street, London W1 (the “Property”). This was let by de Walden to Wasu Property Limited (“WPL”) under a lease (the “Property Lease”) entered into on 7 November 2012, granting a 10-year term from 26 October 2012 with a rent-free first six months followed by quarterly payments, commencing with £50,199 due on 29 April 2013. WPL had been incorporated on 23 May 2012, on which date the Bankrupt and his parents were appointed directors together with a Ranjit Singh Wasu. 34% of the shares were held by the Bankrupt, the remainder divided equally between his parents. The Bankrupt apparently resigned as a director on 24 May 2013, although this was not notified to Companies House until 7 January 2014. According to Paul Manktelow of de Walden, WPL entered possession of the Property on 7 November 2012 and de Walden re-took possession on 8 January 2015, by when WPL owed around £110,000. WPL was dissolved, without an intervening insolvency event, on 26 June 2016.
The Trustee seeks £81,006 from de Walden consisting of three payments, each made before de Walden was aware of the Petition.
On 19 July 2013 £30,807 was debited from the Bankrupt's account on clearance of a cheque drawn in favour of a partnership called Alexander Reece Thomson (“ART”). ART acted as an agent for WPL in negotiating with de Walden, and is the second Respondent to the Application (although not in respect of this cheque). On 25 July 2013 it made a bank transfer to de Walden of the same amount, which de Walden allocated to the quarter ending 23 June 2013.
Secondly, by cheque dated 7 August 2013 the Bankrupt paid £25,199 to de Walden, allocated as part payment to the subsequent quarter.
Thirdly, by cheque dated 16 August 2013 the Bankrupt paid £25,000 to de Walden, being the balance for the September quarter.
Aside from his dealings with ART, Mr Manktelow says he dealt only with the Bankrupt concerning the Lease. On the occasions he attended the Property, there was never any answer at the front door, although often there were visible two or three individuals, including the Bankrupt's wife, working in the front room. On re-taking possession it was noted that the ground floor was set up as an office, while upstairs were massage tables.
The law, and its application
Section 284(1):
“Where a person is made bankrupt, any disposition of property made by that person in the period to which this section applies is void except to the extent that it is or was made with the consent of the court, or is or was subsequently ratified by the court”.
By subsection (2):
“Subsection (1) applies to a payment (whether in cash or otherwise) as it applies to a disposition of property and, accordingly, where any payment is void by virtue of that subsection, the person paid shall hold the sum paid for the bankrupt as part of his estate”.
Subsection (3) provides the period.
“This section applies to the period beginning with the day of… the presentation of the bankruptcy petition and ending with the vesting, under Chapter IV of this Part, of the bankrupt's estate in a trustee”.
Subsection (4) is the material disapplication.
“The preceding provisions of this section do not give a remedy against any person—
(a) in respect of any property or payment which he received before the commencement of the bankruptcy in good faith, for value and without notice that the… bankruptcy petition had been presented, or
(b) in...
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