Ebbvale Ltd v Andrew Lawrence Hosking (Trustee in Bankruptcy of Andreas Sofroniou Michaelides)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Wilson |
| Judgment Date | 30 January 2013 |
| Neutral Citation | [2013] UKPC 1 |
| Date | 30 January 2013 |
| Docket Number | Appeal No 0060 of 2011 |
| Court | Privy Council |
[2013] UKPC 1
Lord Walker
Lord Mance
Lord Clarke
Lord Wilson
Lord Carnwath
Appeal No 0060 of 2011
Privy Council
Appellant
Paul Chaisty QC
Jason T Maynard
(Instructed by Arnold & Porter)
Respondent
Christopher Parker QC
(Instructed by Holman Fenwick Willan LLP)
Heard on 12 July 2012
This appeal, which was heard on 12 July 2012, requires the Board to consider the circumstances in which a petition for an order that a company be wound up should be dismissed as being an abuse of the process of the court.
The appeal is brought by Ebbvale Ltd ("the company") against an order of the Court of Appeal (Sawyer P, Blackman and John JJA) dated 19 April 2010, whereby it dismissed the company's appeal against an order of the Supreme Court, Commercial Division, (Lyons SJ) dated 28 August 2008 that it be wound up.
On 30 January 2001 the company was incorporated in the Bahamas as an International Business Company; and it is registered there. The issued shares are held by, or at any rate in the name of, Mr Meletiou, a resident of Cyprus.
The respondent to the appeal is recorded as being Mr Andrew Hosking. Following the hearing, an issue has arisen about his status as the respondent to it. The circumstances surrounding the issue are as follows:
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(a) Mr Hosking was a licensed insolvency practitioner. Although the Board now learns that in April 2011 he resigned as a director of the Insolvency Practitioners Association, he has presumably continued to hold a licence to practise.
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(b) At the hearing it was understood by the company, by the Board and even by those representing him, that Mr Hosking was a member of Grant Thornton UK LLP. It is now clear that he resigned from membership of the firm on 30 June 2011.
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(c) On 21 December 2000, in England and Wales, Mr Andreas Michaelides had been adjudicated bankrupt and Mr Hosking had been appointed as trustee in bankruptcy of his estate. It is irrelevant that in due course Mr Michaelides was discharged from the bankruptcy.
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(d) As trustee of Mr Michaelides' estate, Mr Hosking had, in circumstances which the Board will explain, become a creditor of the company.
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(e) It was Mr Hosking who, in that capacity, had successfully petitioned for the order, dated 28 August 2008, that the company be wound up. He had therefore been made the respondent to the company's appeal to the Court of Appeal and to its further appeal to the Board.
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(f) At the hearing before the Board it was understood by the company, by the Board and even by those representing him, that Mr Hosking continued to be the trustee in bankruptcy of Mr Michaelides' estate. By a letter to the Registrar of the Judicial Committee dated 20 September 2012, however, the company's solicitors explained that they had recently come to understand that, by the date of the hearing, Mr Hosking was no longer the trustee.
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(g) The understanding of the company's solicitors turns out to have been correct. On 22 May 2012, on the joint application of Mr Hosking and of Mr Nicholas Wood, who is a member of Grant Thornton, a Registrar of the Companies Court had ordered that Mr Hosking be removed from his office as trustee in bankruptcy of Mr Michaelides' estate and that Mr Wood be appointed to the office in lieu of him. It also transpires that, following the hearing before the Board, namely on 2 August 2012, the Secretary of State released Mr Hosking from his liabilities as trustee pursuant to s 299(3)(b) of the Insolvency Act 1986.
The resulting issue about the right of Mr Hosking to have continued to oppose the appeal should not become a distraction from the subject-matter of the appeal; the Board will append a short resolution of it in a postscript to this judgment.
For a period until 19 December 2000 Mr Michaelides was registered at the Land Registry of England and Wales as the owner of properties which together formed Sunnyside Service Station, 87 Sunnyside Road, Crouch End, London N19. Sunnyside (which will be a convenient name for the properties) is, or was, a petrol station but it has development potential; and, at the hearing before the Supreme Court, Commercial Division, the company alleged that it was worth several million pounds. On any view it was, and is, of substantial value.
On 19 December 2000, namely two days prior to the adjudication of Mr Michaelides as bankrupt and to the appointment of Mr Hosking as his trustee, Mr Leonidas Andreou and Mr Pantelis Andreou, who are alleged to be brothers, became the registered owners of Sunnyside.
Following his appointment Mr Hosking formed the view that Messrs Andreou did not exist or that, if they did exist, they were not genuinely involved in the acquisition of Sunnyside. He considered that the change in the registration of ownership of Sunnyside was purely cosmetic and that, in law or at least in equity, Mr. Michaelides had remained its owner on the date of the adjudication and that accordingly Sunnyside had then vested, and should be recognised as having vested, in him. So in August 2001 Mr Hosking registered a caution against Sunnyside. And in December 2003 he commenced proceedings in the High Court of England and Wales, Chancery Division, for a declaration that, if they existed, Messrs Andreou, whose names to this day remain on the register as the legal owners of Sunnyside, held the title on a bare trust for him and that the Land Register be so rectified as to show him to be its owner. Messrs Andreou, if they exist, have taken no part in the proceedings.
Meanwhile, however, Mr Hosking had been apprised of an allegation that in September 2001 Messrs Andreou had sold Sunnyside to the company. The allegation was that the company had paid £750k for Sunnyside, of which £380k had been advanced out of a loan of £450k which in June 2001 National Westminster Bank plc ("the bank") had made to the company. Mr Hosking was also told that, as a result of the caution which he had registered, the company had been unable to register its title to the property and that, for the same reason, the bank had been unable to register the mortgage on Sunnyside upon which it had insisted by way of security for the company's repayment of the loan of £450k plus interest. Sceptical about the ultimate destination of the £380k and about both the source and, again, the ultimate destination of any other money paid towards the balance of the alleged purchase price of £750k, Mr Hosking formed the view that the company was under the effective control of Mr Michaelides and that, accordingly, the alleged sale of Sunnyside to it was but a further attempt on his part to hide his continuing ownership of it. When in December 2003 he came to issue the proceedings for the establishment of his ownership of Sunnyside, Mr Hosking therefore made the company a further defendant to them; and, inasmuch as the bank was claiming to hold a mortgage on property which he alleged to be vested in himself, he made the bank yet a further defendant to them.
Criminal proceedings were brought in England against Mr Michaelides in relation to Sunnyside. The charge was that he had conspired to defraud the creditor who had petitioned for his bankruptcy and who at one stage had held security over Sunnyside. The action brought by Mr Hosking was stayed pending resolution of the criminal proceedings. In the Spring 2007 Mr Michaelides was acquitted of the charge, whereupon the stay was lifted and Mr Hosking's action began actively to proceed.
In September 2007 Mr Hosking reached a settlement of his claim as against the bank. The terms were that, in consideration of payments to the bank of £80k by Mr Hosking (the source of which he does not make clear) and of £295k by solicitors who had represented not only the company but also, as one might infer, the bank in the purported purchase and mortgage of Sunnyside, the bank would assign to him both the debt owed to it by the company amounting to £450k plus interest (of repayment of which the company was by then in default) and the purported mortgage over Sunnyside; and the assignments were effected on 5 October 2007.
Mr Hosking's purchase of the bank's debt was on any view an unusual transaction for a trustee in bankruptcy to enter into. His purpose in doing so has not been clearly explained but, as Lord Mance suggested in the course of the hearing, it could be regarded as a way of his insuring against the possible loss of his action against the company. Were he to lose, he would have a substantial claim against the company, acquired by him for a small fraction of its value, and Sunnyside would represent ample security for it. But, were he to win, it might well be impossible to enforce the debt: for the company appears never to have had any substantial assets apart from its alleged interest in Sunnyside and the mortgage would be void inasmuch as, in that event, the company would have no mortgageable or other interest in Sunnyside, ownership of which indeed would already be vested in Mr Hosking himself.
It is clear, however, that Mr Hosking's acquisition of the bank's debt also enabled him to apply pressure to the company in relation to his action, to which by then it was the only active defendant.
Early in March 2008 Mr Hosking served on the company, at its registered office in Nassau, a statutory demand for payment of £582k, comprising the principal debt of £450k plus interest. The demanded payment was not made but the company has never disputed its liability to make it. Mr Hosking's petition to the Supreme Court for an order that the company be wound up for failure to respond to the demand bears a court stamp dated 1 May 2008; but it appears that he...
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