Expandable Ltd and Others v Rubin
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE PATTEN |
| Judgment Date | 24 July 2007 |
| Neutral Citation | [2007] EWHC 2463 (Ch) |
| Docket Number | Case No: 3641 of 2001 |
| Court | Chancery Division |
| Date | 24 July 2007 |
[2007] EWHC 2463 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Patten
Case No: 3641 of 2001
Mr D Lightman (instructed by Serle Court) appeared on behalf of the Claimant
Mr H Boeddinghaus (instructed by 4 Stone Buildings) appeared on behalf of the Defendant
The application before the Registrar was based on the letter having been mentioned in paragraph 23 of Mr Rubin's second witness statement within the meaning of Civil Procedure Rule 31.14. In the alternative, specific disclosure is sought of the document under CPR 31.12. In the event that neither of these courses is open to the appellants, they seek an order for its production by inviting the court to exercise its supervisory jurisdiction over Mr Rubin as an officer of the court under the rule in ex parte James [1874] LR 9 Ch App 609 so as to ensure that Mr Rubin acts fairly and honourably between all potential claimants to the assets under his control.
It is necessary to begin by saying something about the background to the application. Mr Rubin is the supervisor of a failed IVA in respect of Mr Clarke dated 3 December 2001. Mr Clarke is now bankrupt. I am told there is an issue between him and the trustees in bankruptcy as to whether he is obliged to transfer to them the assets remaining in his hands. These comprise £684,000 plus accrued interest, which was paid to him by Allied Dunbar on 22 September 2004 as representing the debtor's share from the sale and development of land in Hendon, acquired as part of a joint venture with Allied Dunbar.
Before these issues can be resolved between Mr Rubin and the trustees in bankruptcy, there is a prior question which relates to the debtor's entitlement to the Hendon project monies. This consists of a claim by the appellants to a proprietary or beneficial interest in those monies, which, if well founded, would leave nothing for the creditors of Mr Clarke's estate. This claim was first notified in August 2005 by Expandable Ltd through its solicitors, Goldkorn Matthias Gentle. Mr Rubin gave an undertaking not to distribute the funds without first giving them 14 days' notice.
It is not either necessary or appropriate for me to go into the basis of the claim, let alone its merits, on this appeal. Suffice it to say GMG asserted a claim by their client to one-half of the £684,000, but soon thereafter raised the claim to the whole of that sum.
The basis of the claim is a letter of 14 May 2001 signed by the debtor, which refers to Prime Trust having paid £245,000 pursuant to a verbal agreement with Mr Robert Noonan, who is a Gibraltar resident and has, according to his witness statement, advised Prime Trust, a Gibraltar company. Prime Trust in turn is described as the administrator of Expandable Ltd, itself another Gibraltar company. The letter goes on to refer to an agreement that Expandable would, in return, receive 50 per cent of Mr Clarke's profit share from the sale of the Hendon land. The letter does not in terms refer to any trust over the monies or any other form of security, nor does it put a date on the agreement.
Mr Rubin says in his witness statement that in an initial discussion the debtor suggested Expandable Ltd had no proprietary interest in the monies. Following this, he wrote to GMG seeking further information in support of the claim. In September 2005, Mr Rubin held a further interview with Mr Clarke, who said Mr Noonan had advanced the sum of £245,000 to him, but that the money was to be repaid from the proceeds of two other property developments. In March 2001, he said that he had needed to raise £1 million to buy out Allied Dunbar's interest in the Hendon project. Mr Noonan had asked for a letter which could be used to seek finance from potential backers. This was the letter of 14 May.
In the event, Mr Noonan failed to come up with the finance and the debtor obtained it from other sources. Mr Rubin said that as a result of this and from his own assessment of the letter, he notified GMG in November 2005 that he considered there to be no basis for Expandable Ltd's claim.
There was then the further interview with the debtor in December 2005, conducted by Mr Zaidi. He reported that Mr Clarke had changed his story and now said that the £245,000 borrowed from Mr Noonan through one or other of the appellants was used for general cash flow purposes and that he had promised Mr Noonan 50 per cent of the profit from the Hendon project after deducting his costs, which were to include the monies borrowed in order to buy out Allied Dunbar. The letter of 14 May was to provide Mr Noonan with comfort in approaching banks and was not intended to record the exact terms of the loan of £245,000.
This did not convince Mr Rubin of the claim to a proprietary interest and more information was asked for. He had doubts, he said, and apparently still has doubts about aspects of Mr Clarke's account. But he says he did consider that Mr Clarke's version of the agreement was more credible than that put forward by Mr Noonan. Ultimately, however, he decided that the matter was not sufficiently clear-cut for him to reject the claim outright and so he decided to issue an application under s.363 of the Insolvency Act, seeking the determination of the court on the issue. The application was issued in October 2006.
Mr Noonan put in a witness statement of 25 January 2007 giving his account of the matter and producing a number of new documents not previously disclosed. Mr Boeddinghaus referred me to various paragraphs in the witness statement, including paragraph 35 which deals with the telephone conversation with Mr Clarke in November 2002 and which he says is inconsistent with the claim to a proprietary interest.
I do not propose to go into any of the detail of this. It is enough to record that, having seen this evidence, Mr Rubin took the view that he was now satisfied that there was no basis for the claim and did not need or propose to seek the directions of the court. His position is set out in his second witness statement made on 21 February 2007, in which he comments on the progress of the application and the further evidence which has been filed. He makes it clear in paragraph 17 of this witness statement that, if the appellants wish to proceed further, he is content provided Expandable Ltd gives security for the costs of his application. It was eventually agreed that the application should continue but with the appellants, in effect, having carriage of the proceedings.
This takes me to the source of the present application and this appeal. For some time Mr Rubin resisted producing the notes of interviews and other communications with Mr Clarke on the grounds that they are privileged. In the end, this resistance was abandoned and the appellants now have copies of all written communications with the debtor, including the debtor's note to Mr Rubin containing his second explanation of the purpose of the £245,000 loan and the note of Mr Zaidi's interview with him in December 2005. He sets this out in paragraphs 22 and 23 of his witness statement in the following terms:
“22. I confirm that the above-mentioned documents represent the totality of my written communications with the Debtor (including those of my Solicitors on my behalf) concerning the issue of the Expandable claim As I have indicated in my first witness statement, I regret to say that I do not consider the Debtor to be a reliable source of information, hence the emphasis I have sought to place (from the time that the Expandable claim was first mentioned) on information and documentation provided by Expandable.
23. In particular it will be noted that there are several inconsistencies between Mr Clarke's note to me and what he told Mr Zaidi. For example in his note to me Mr Clarke suggests that the monies he had received were for the purposes of investing in China. However with Mr Zaidi his emphasis changed to suggesting that the money went towards funding the Hendon Land Project though he also says in that same note that the monies were in fact used to cover his office overheads. I think it right I draw the Court's attention to the fact that after Mr Zaidi had interviewed Mr Clarke he wrote to me enclosing a copy of his note of the meeting and drawing my attention to the discrepancies (which, by the way, I did not think in any way assisted Expandable/Prime Trust with their claim). I was curious to know from Mr Clarke why that was and I therefore telephoned him seeking an explanation. Mr Clarke initially informed me that when he had written his note to me he was confused as to events, after such a long period of time. I recall saying to Mr Clarke initially informed me that when he had written his note to me he was confused as to events, afters such a long period of time. I recall saying to Mr Clarke that he seemed pretty clear of the relevant events in his note. At that stage I recall Mr Clarke breaking down during our conversation. Mr Clarke advised me that subsequent to preparing his note for me he had been contacted by Mr Noonan who was obviously aware that I had instructed Edwin Coe to query Expandable's claim. Mr Clarke advised me that Mr Noonan had sought to exert pressure upon Mr Clarke to change his story to one that was favourable to him. Mr Clarke explained that Mr Noonan was in a position to do so as it seemed that Mr Noonan had commenced possession proceedings against a property I understood Mr Clarke and his wife to be occupying. Mr Clarke further advised me that Mr Noonan had...
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Expandable Ltd and Others v Rubin
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