Hunt v Ubhi
| Jurisdiction | England & Wales |
| Judge | Lord Justice Newey,Lord Justice Males,Lord Justice Snowden |
| Judgment Date | 19 April 2023 |
| Neutral Citation | [2023] EWCA Civ 417 |
| Docket Number | Case Nos: CA-2023-000021 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 417
Lord Justice Newey
Lord Justice Males
and
Lord Justice Snowden
Case Nos: CA-2023-000021
CA-2023-000021-A
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Robin Vos (sitting as a Deputy High Court Judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
John Machell KC and Dan McCourt Fritz KC (instructed by Thursfields Solicitors) for the Appellant
Christopher Brockman and Phillip Gale (instructed by Francis Wilks & Jones) for the Respondent
Hearing date: 23 March 2023
Further written submissions: 30 and 31 March 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on 19 April 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
This is an appeal against a decision by Mr Robin Vos, sitting as a Deputy High Court Judge (“the Judge”), to continue a freezing order against the appellant, Mr Ravneet Ubhi, which had been granted on the application of the respondent, Mr Stephen Hunt, as provisional liquidator of “Black Capital”, which was alleged to be an insolvent partnership.
Basic facts
The appeal arises out of a petition to wind up “Black Capital”. The petitioners are a company of which a Mr John Mitchell is director and secretary, two daughters of Mr Mitchell, a niece and nephew of Mr Mitchell, and companies of which one or both of Mr Mitchell's daughters are directors. Between them, the petitioners claim to have invested a total of £13,702,750 with Black Capital, and they have calculated that they were owed more than £18 million by the date of the winding-up petition.
The petition was presented pursuant to article 7 of the Insolvent Partnerships Order 1994 (“the 1994 Order”) on 14 September 2022 on the basis that Black Capital was a partnership between Mr Ubhi and a Mr Sarju Patel. That same day, without notice applications were made to Mellor J for the appointment of a provisional liquidator and freezing orders. Both applications were successful. In the first place, at the petitioners' behest, Mellor J appointed Mr Hunt, a licensed insolvency practitioner with Griffins, as provisional liquidator, the petitioners having given a cross-undertaking in damages subject to a limit of £200,000. In turn, Mr Hunt applied immediately for freezing orders to be made against Mr Ubhi and Mr Patel, and Mellor J made such orders, specifying the maximum sum as £19 million. Mr Hunt gave a cross-undertaking in damages, but in a restricted form. The cross-undertaking read:
“If the court later finds that this order has caused loss to the Respondent, and decides that the Respondent should be compensated for that loss, the Applicant will comply with any order the court may make, save that this undertaking shall be limited to the amount of monies and the net realizable value of the unpledged assets of Black Capital (in provisional liquidation) taken into the custody or under the control of the Applicant in the course of the liquidation less the costs, expenses or other disbursements of the liquidation.”
The same counsel represented both the petitioners and Mr Hunt.
On 28 September 2022, the petitioners presented bankruptcy petitions against Mr Ubhi and Mr Patel. The petitioners subsequently obtained permission to amend the petition in respect of Black Capital to include reference to the petitions relating to Mr Ubhi and Mr Patel. These were stated to have been issued pursuant to article 8 of the 1994 Order.
The winding-up and bankruptcy petitions were all the subject of a hearing before Deputy Insolvency and Companies Court Judge Raquel Agnello KC (“the Deputy ICC Judge”) on 26 October and 4 November 2022. An application by Mr Ubhi to set aside a statutory demand which had been served on him on 3 October was also before the Deputy ICC Judge.
Mr Ubhi had claimed that he had never been a partner in Black Capital and, as the Deputy ICC Judge explained in paragraph 8 of her judgment, given on 17 November 2022, the question whether there was a dispute on substantial grounds on that point occupied the majority of the hearing. In the end, the Deputy ICC Judge concluded that the evidence “demonstrates a dispute on substantial grounds as to whether Mr Ubhi was a partner in Black Capital”: see paragraph 35. Both for that reason and on the basis that the petitioners had not complied with the requirements of article 8 of the 1994 Order, the Deputy ICC Judge dismissed the winding-up petition and the bankruptcy petition against Mr Ubhi and also set aside the statutory demand served on Mr Ubhi. Consequential matters were adjourned to a date to be fixed.
A week later, on 24 November 2022, there was the hearing before the Judge. The Judge determined that, under the terms of the order of Mellor J appointing him, Mr Hunt remained provisional liquidator until the Deputy ICC Judge had dealt with matters arising from her judgment. The hearing before the Judge was otherwise concerned with whether the freezing orders (and, in particular, that against Mr Ubhi) should be continued. By this stage, Mr Hunt had given evidence to the effect that he considered Black Capital to have operated a “Ponzi scheme”.
The Judge gave judgment on 15 December 2022. He concluded that the freezing orders against Mr Ubhi and Mr Patel should continue. In the course of the judgment (“the Judgment”):
i) The Judge said in paragraph 63 that, “although there are some areas in which criticisms could be made of the way in which the application was presented [before Mellor J], none of these are, in my view, either taken on their own or looked at cumulatively, sufficiently material to amount to a breach of the duty to provide full and frank disclosure”;
ii) The Judge said in paragraph 75 that he had “no doubt that there is a good arguable case that Mr Ubhi was a partner in Black Capital” and that it followed that “there is in my view a good arguable cause of action against Mr Ubhi, being his liability to contribute to any shortfall in the assets of Black Capital”;
iii) The Judge said that he was “satisfied that there is a good arguable case that, although Mr Ubhi may not have had access to the investors' funds, he was aware of and assisted in the Ponzi scheme” (paragraph 86) and that “it can be inferred … that there is a real risk of dissipation of Mr Ubhi's assets particularly in the light of the evidence that both he and companies with which he is connected have received significant sums from Black Capital” (paragraph 88); and
iv) The Judge said in paragraph 103 that he was “satisfied that … the balance of convenience lies in favour of continuing the freezing orders despite the fact that the cross-undertaking in damages is in this case of limited value”.
It was also on 15 December 2022 that the Deputy ICC Judge addressed matters consequential on her judgment. Among other things, she stayed the dismissal of the winding-up petition against Black Capital and ordered that Mr Hunt's appointment as provisional liquidator should continue pending an application by the petitioners for permission to appeal against her decision. On 21 December, Leech J further stayed the Deputy ICC Judge's order until the petitioners' application for permission to appeal had been determined and, on 10 January 2023, Leech J granted the petitioners permission to appeal and directed that, while the appeal was pending, the dismissal of the petition to wind up Black Capital should be stayed and Mr Hunt's appointment as provisional liquidator should continue.
Mr Hunt's investigations to date have led him to conclude that “the creditors (investors) in Black Capital are in the region of £35,000,000 – £50,000,000” (to quote from a witness statement made by Mr Hunt's solicitor on 12 December 2022).
What is before us is an appeal by Mr Ubhi against the Judge's decision of 15 December 2022.
The legal context
Part IV of the 1994 Order, comprising articles 7 and 8, provides for an “insolvent partnership” to be wound up on the petition of a creditor as an “unregistered company” for the purposes of Part V of the Insolvency Act 1986 (“the 1986 Act”). Article 7 of the 1994 Order applies where the petitioner does not present a concurrent insolvency petition against any member or former member of the partnership in his capacity as such, while article 8 is applicable where there is such a concurrent petition. In the latter case, the partnership's inability to pay its debts is to be established through the service of statutory demands on both the partnership and one or more members or former members: see section 222 of the 1986 Act, as modified pursuant to article 8 of, and schedule 4 to, the 1994 Order. Where, on the other hand, there is no concurrent petition against a member or former member, there is no necessity to serve any statutory demand. The inability of the partnership to pay its debts can in such a case be established in other ways: see article 7 of, and schedule 3 to, the 1994 Order.
Where a winding-up order is made in respect of a partnership and there are no concurrent bankruptcy orders against its members, partners can be called on to contribute to the extent necessary to pay its debts pursuant to section 226 of the 1986 Act. In this regard, section 74 of the 1986 Act will apply, but without subsection (2)(a) to (d): see section 221(5) and (6) of the 1986 Act, as modified by schedule 3 to the 1994 Order. Where there is a concurrent bankruptcy order against a partner, which is what the petitioners were seeking by their bankruptcy petition against Mr Ubhi by the time of the...
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