Maxine Reid-Roberts and Brian Burke (the Joint Trustees in Bankruptcy of the Insolvent Estate of Audun Mar Gudmundsson) v Hsiao Mei-Lin

JurisdictionEngland & Wales
JudgeFrith
Judgment Date10 April 2024
Neutral Citation[2024] EWHC 759 (Ch)
CourtChancery Division
Docket NumberCase No: BR-2019-001475
Between:
Maxine Reid-Roberts and Brian Burke (the Joint Trustees in Bankruptcy of the Insolvent Estate of Audun Mar Gudmundsson)
Applicants
and
(1) Hsiao Mei-Lin
(2) Audun Mar Gudmundsson
Respondents

[2024] EWHC 759 (Ch)

Before

Deputy Insolvency and Companies Court Judge Frith

Case No: BR-2019-001475

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

INSOLVENCY AND COMPANIES LIST (CHD)

In Bankruptcy

Re: Audun Mar Gudmundsson (a Bankrupt)

In the Matter of the Insolvency Act 1986

And in the Matter of Section 14 of the Trusts of Land and

Appointment of Trustees Act 1996

Rolls Building

Fetter Lane

London

EC4A 1NL

Steven Fennell (instructed by DLA Piper UK LLP) for the Applicants.

Thomas Robinson (instructed by Advocate, formerly the Bar Pro Bono Unit) for the First Respondent.

The Second Respondent did not appear and was not represented.

Hearing dates: 23 February 2024 and 10 April 2024

Approved Judgment

This judgment was handed down by the judge remotely by circulation to the parties' representatives by e-mail and release to The National Archives. The date and time deemed for hand down is deemed to be 10.00 a.m. on 10 April 2024.

Frith

Deputy Insolvency and Companies Court Judge

Introduction.

1

This is an application dated 13 February 2023 (the “ Application”), issued by Maxine Reid-Roberts and Brian Burke (the “ Applicants”) acting in their capacity as the Joint Trustees in Bankruptcy of the insolvent estate of the Second Respondent, who is the Bankrupt in these proceedings (the “ Bankrupt”). It seeks declarations as to the beneficial ownership of a former matrimonial home located in Tuffnell Park, London N19 (the “ FMH”); orders under s.335A of the Insolvency Act 1986 (“IA86”) for immediate possession and sale of that home; and orders under s.375 IA86 to vary previous costs decisions of this Court.

2

The First Respondent, Hsiao Mei-Lin (“ Ms Lin”) is the former spouse of the Bankrupt. She still lives in the FMH with the two children of the marriage who are now aged 10 and 14. In addition, there are two lodgers who are in occupation under informal arrangements agreed between them and Ms Lin.

3

At the hearing before me, the Applicants were represented by Counsel, Mr Steven Fennell. The First Respondent was represented by Counsel, Mr Thomas Robinson. The Bankrupt indicated in correspondence that he did not intend to participate in the hearing. He did not attend and was not represented. I am grateful to both Counsel and those instructing them for their skeleton arguments, supplementary notes and oral submissions.

4

Ms Lin opposes the application on two principal grounds. First, she seeks a declaration that the Second Respondent's beneficial interest in the FMH has not in fact vested in the Applicants, as Trustees in Bankruptcy of the Bankrupt as they contend. She submits that in fact, before the relevant bankruptcy order was made and in the context of the Respondents' separation after a marriage breakdown, the Bankrupt had made a written disposition of his interest in the FMH under s.53(1) of the Law of Property Act 1925 to Ms Lin in return for her agreeing to take responsibility for looking after their children (then aged four and eight years old). She relies on the Court of Appeal decision in Hudson v Hathway [2023] KB 345. She submits that the written disposition divested the Bankrupt of his beneficial interest in the FMH prior to the making of the bankruptcy order. Consequently, it did not form part of the insolvent estate in the hands of the Applicants and, as a result, they have no further interest in the property capable of founding an order for possession.

5

This point was raised for the first time in the skeleton argument lodged by Mr Robinson shortly before the hearing. It was therefore not dealt with in Mr Fennell's skeleton argument. To ensure that the parties could deal properly with it at the hearing, I directed that he should be at liberty to file further submissions on this point, with Mr Robinson having the right to respond, if so advised. In the event, both parties were able to provide further submissions at short notice, for which I was very grateful. I have where appropriate adopted the contents of the skeleton arguments and supplementary notes in relation to the chronology of events and the facts which were not, in the main in dispute.

6

The second principal ground for Ms Lin's opposition to the application is that there are further and separate reasons why it would not be “just and reasonable” under s.335A IA 1986 to make the immediate possession and sale order that is sought:

a. The bankruptcy order was made on 26 February 2020, some seven days before the Family Court made a property adjustment order under the Matrimonial Causes Act 1973. This ordered the Second Respondent to transfer his interest in the FMH to the First Respondent. That order followed a hearing that had concluded almost a year earlier, on 20 February 2019. Ms Lin submits that the delay in handing down judgment was largely due to the Bankrupt, who, she submits asked the Judge to delay whilst failing to disclose to the judge or herself, first, the service of a statutory demand on him on 18 November 2019; second, the presentation of a bankruptcy petition on 22 December 2019; and finally, the making of the bankruptcy order itself. By failing to make those disclosures, Ms Lin asserts that the Bankrupt frustrated the effect of the property adjustment order, because it was eventually made on a date after the bankruptcy order when his beneficial interest was already vested in the Applicants by operation of law. She further asserts that this was his intention, relying on subsequent written communications to that effect given to the Applicants and their solicitors. She submits that had the judgment had been handed down earlier, the matrimonial order transferring the Bankrupt's interest could have taken effect before the commencement of the bankruptcy thereby securing her tenure of the FMH unassailably moving forward.

b. The FMH is home to Ms Lin's two children, now aged 10 and 14. The older child, has been diagnosed with Attention Deficit Hyperactivity Disorder (“ ADHD”). Both children and Ms Lin have suffered psychological trauma, due to the Bankrupt's abusive and violent behaviour during the marriage. She was also subjected to physical abuse. There was evidence that he used prostitutes. He had a serious addiction to methamphetamines. The equipment that he used to satisfy his addiction was discovered by his children at the FMH during an access visit. He agreed to subject himself to a drug test regime as a condition for continued access to his children. Ms Lin noticed anomalies in a clear drugs test that he produced. She contacted the test company who confirmed that it was a forgery. He admitted this both in the family proceedings and under cross examination at a hearing before Chief ICC Judge Briggs in March 2021 when he dismissed an application to annul the bankruptcy issued by Ms Lin.

c. Ms Lin submits that after years of trauma, the children are now beginning to receive the stability of a family home. They are apparently well settled in local schools. She is concerned that both she and her children will suffer again, if they are forced to move home. Ms Lin has herself been diagnosed with complex developmental trauma arising from the breakdown of what appears to have been a tempestuous and abusive marriage. She no longer works in her previous occupation as an artist, devoting all her time to the care of her children. The FMH is now the family's sole source of income, as rooms in it are rented to two other occupants who pay her rent. Ms Lin and her children share one bedroom, and the remaining rooms provide £1700 per month (gross) in income. Meanwhile, she asserts that her husband resides in a five-bedroom house in Iceland, which he owns outright. He pays negligible amounts to her for the maintenance of the children of the marriage, claiming that his current financial circumstances preclude him from so doing.

d. Ms Lin submits that the assets in the bankruptcy are unclear largely due to what the Family Court described as the “complex and deliberately opaque structures” set up by the husband with the assistance of Mr Stephen Jones, the Bankrupt's solicitor and tax adviser. The Bankrupt was a banker and investment manager, with interests in Icelandic property, Icelandic companies, pension funds and possibly offshore trusts. The Applicants have identified the value of the Icelandic property and a company asset as £925,000 before costs of sale. They have recently agreed to settle their claims to these assets for £203,000. Other assets remain to be investigated and realised. Ms Lin has questioned the decision to accept this sum.

e. She also takes issue with certain claims in the bankruptcy, which she asserts are similarly opaque. Ms Lin submits that it is unclear as to the level, if any, at which they will be submitted for proof and admitted for dividend purposes. They currently total £2.574m, of which £2.31m is claimed by a company called Esquiline Finance Limited (“ EFL”). EFL is a vehicle of the above-mentioned Mr Jones and his group of Jirehouse companies. Mr Jones has been sentenced to two terms of imprisonment; first, for 14 months for contempt in proceedings commenced against him by disaffected investors and second, for a further term of 12 years following his conviction for offences including fraud. EFL, the main creditor of the Bankrupt's Estate played a significant part in facilitating the fraud. His legal practice conducted through the Jirehouse structure has been the subject of an intervention by the Solicitors' Regulation Authority and he has also been struck off the Roll of Solicitors.

f. EFL is now in compulsory liquidation with two other insolvency practitioners from the Applicants' firm Quantuma, acting as its...

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