Karsten v Markham
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BRIGGS,Mr Justice Briggs |
| Judgment Date | 17 December 2009 |
| Neutral Citation | [2009] EWHC 3658 (Ch),[2007] EWHC 1509 (Ch) |
| Docket Number | Case Number: HC07C02255,Case No: 6133 OF 2006 |
| Court | Chancery Division |
| Date | 17 December 2009 |
[2007] EWHC 1509 (Ch)
Mr Justice Briggs
Case No: 6133 OF 2006
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Birgitta Meyer (instructed by Bevan Brittan LLP) for the Appellant
Blair Leahy (instructed by DWF Beckman) for the Respondent
Hearing date: 21 st June 2007
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.
Introduction
This is an appeal from a Bankruptcy Order made by Registrar Jacques on 7 th February 2007 on a petition presented on 12 th June 2006 and preceded by a Statutory Demand dated the 2 nd May 2006. The petition was opposed on behalf of the respondent (and appellant on this appeal) Mr Paul Charles Markham, on the basis that he denied owing the alleged or any debt to the petitioner Mrs Moira Karsten, and that there was, on the evidence, a genuine triable issue as to the existence of the debt, within the meaning of paragraph 12.4 of the Practice Direction on Insolvency Procedings.
In the forefront of Ms Karsten's case before the learned Registrar lay two documents, both apparently signed by Mr Markham, dated respectively the 17 th August and the 7 th October 2005, in each of which Mr Markham appeared to acknowledge an existing indebtedness in excess of £1.1million (albeit in slightly different amounts). Since it was common ground that there had been no repayments by Mr Markham since then, Mrs Karsten's submission was that it was an open and shut case.
In bare outline, the learned Registrar reached the same conclusion, mainly on the ground that Mr Markham's evidence seeking to explain away those two apparent admissions was incredible. In a careful reserved judgment he directed himself by reference to dicta in National Westminster Bank Plc v Daniel [1993] 1WLR 1453, Re a Company 006685 of 1996 [1997] BCC 830 and Portsmouth v Alldays Franchising Ltd [2005] EWHC 1006, and there has been no criticism of his description of the test to be applied. The main issue on this appeal is whether in applying that test he reached the wrong conclusion.
The matter did not however turn entirely on questions of credibility. It was submitted to the learned Registrar on Mr Markham's behalf that even if he were disbelieved as to the circumstances in which those two apparent admissions came into existence, there was nonetheless a genuine triable issue whether the second of them could be impugned for undue influence, on the ground that at and for a period prior to the relevant time Mrs Karsten had been Mr Markham's solicitor. That submission was rejected by the learned Registrar on grounds of legal analysis. Finally, even if there had been triable issues sufficient to deprive both of the above documents of their status of conclusive admissions, the learned Registrar held that there was in any event nothing to displace what he described as a presumption that payments made by one of two cohabitees to the other were to be regarded as loans, it being common ground that such payments had been made by Mrs Karsten to Mr Markham.
Again in summary, the main grounds of appeal before me are firstly, that the learned Registrar should not have dismissed Mr Markham's evidence about the apparent written admissions of debt as incredible: secondly that in any event they were both arguably tainted by undue influence; and thirdly that there was no legal principle that in the absence of an agreement to the contrary, payments made by one cohabitee to or for the benefit of another were to be regarded as loans. The arguments advanced by Miss Meyer on Mr Markham's behalf went a little beyond what had been submitted (by a different advocate) to the learned Registrar and even slightly beyond Mr Markham's written grounds of appeal but, having heard submissions from Miss Leahy on behalf of Mrs Karsten, I ruled that Miss Meyer should not be prevented from adducing those further arguments, dependent as they were upon evidence which had been before the learned registrar, in circumstances where it was not submitted by Miss Leahy that, had they been raised earlier, her client would have sought to adduce further evidence.
Miss Meyer also applied for permission to adduce further evidence on appeal, consisting of a fifth witness statement of Mr Markham dated 27 th February 2007. Initially, Miss Leahy neither objected nor consented to the admission of this further evidence, and I ruled that only a part of it should be admitted and only for a strictly limited purpose. During subsequent argument, Miss Leahy sought to rely more generally upon Mr Markham's fifth witness statement, and in the circumstances, with the agreement of both sides I then admitted it in its entirety.
The Background Facts
Before addressing the grounds of appeal directly, I must first describe something of the relevant factual background. It is common ground that in 1999/2000 Mr Markham and Mrs Karstsen began a sexual relationship together, for most of which they cohabited, living together as what used to be called man and wife but is now more commonly called partners. To distinguish their relationship from that of business partners I shall call them domestic partners. Their relationship began at a time when Mr Markham had already been declared bankrupt, and Mrs Karsten, who has been a practising solicitor throughout, acted for and assisted him in relation to his bankruptcy from the outset of their relationship, if not a little time before it commenced. It appears that she also acted for Mr Markham in relation to other legal matters, and the evidence suggests (as is common ground) that a solicitor/ client retainer between Mrs Karsten (or a firm of solicitors by whom she was employed) and Mr Markham subsisted until May 2006, albeit the evidence does not show continuous activity on her part in relation to his legal affairs.
It is, as I have said, common ground that during their relationship Mrs Karsten made numerous payments to or for the benefit of Mr Markham. Mrs Karsten's case is that they amounted in aggregate to well in excess of £1 million, and although the amount of the payment is not agreed, she produced documentary evidence before the Registrar of payments amounting in aggregate to a very substantial sum.
Mrs Karsten does not suggest that the basis on which she made these payments was recorded in a written agreement between them. She said that they were all loans, whereas Mr Markham said that they were the aggregate of gifts and payments made on the basis on an informal understanding that, by way of quid pro quo, he would provide her with emotional support, some business advice and would look after her three children.
From time to time prior to 2005, it appears that Mrs Karsten made unsuccessful attempts to have this financial aspect of their relationship set down and agreed in writing. For example, Mrs Karsten produced a copy of a declaration of trust dated 1 st October 2002, between Mr Markham and herself, signed by her but not by him, recording that “£1,100,000 having been lent to the said Paul Markham by Moira' O'Hara (her maiden name) it is hereby DECLARED the property known as 2 Codrington Mews, London W11 1AW is held in trust by the said Paul Markham for the said Moira O'Hara”
In his turn Mr Markham produced as an exhibit to his fourth witness statement copies of what he described as correspondence passing between him and Mrs Karsten between 2 nd and 4 th April 2002 in which, on 2 nd April, she said that she would not enforce any debt she had against him until he died, and in response on the 4 th April he asked for a short note confirming that the monies that she had paid for things were “gifts not a loan or debt” which she declined to provide. That evidence having come too late for a reply, the learned Registrar was told on instructions that Mrs Karsten denied ever having sent the purported letter of 2 nd April, and the learned Registrar described both documents as suspicious, and Mr Markham 's evidence about them as incredible.
In my judgment, the question whether those letters were written as Mr Markham suggests is (if relevant) plainly a triable issue. The learned Registrar's conclusion that they were suspicious and that the evidence which referred to them was incredible was based upon the assumption that the letter of 2 nd April from Mrs Karsten gave the confirmation requested by Mr Markham in his letter of 4 th April. In fact it did nothing of the kind since, while proffering deferred enforcement, it plainly described the payments as giving rise to debts rather than having been gifts. In my judgment Mr Markham' s evidence about them, whether true or not, is not inherently incredible.
Mrs Karsten deposed to a further effort in 2004 to persuade Mr Markham to record an agreement about their financial relationship in writing, and she produced a more detailed from of agreement, again, signed by her but not by him, containing an acknowledgement of a £1.1 million loan and providing for a trust of 2 Codrington Mews by way of extinction of part of the debt by reference to the value of the property as at 1 st October 2000, less any outstanding mortgage, and further providing for the balance of the debt to be secured on a property owned by Mr Markham in Paris. She described in her evidence how she even gave Mr Markham money with which he should have obtained legal advice before signing the document, but which, in the event, she said that he used to defray other expenses. Again, nothing was signed.
The parties' sexual relationship ended in 2005 but they continued to cohabit, sleeping in separate rooms until April or May 2006. Mrs Karsten's case (and...
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