Melissa Jackson (Trustee in Bankruptcy of Stephen Anthony Ayles) v Stephen Anthony Ayles
| Jurisdiction | England & Wales |
| Judge | Briggs |
| Judgment Date | 23 April 2021 |
| Neutral Citation | [2021] EWHC 995 (Ch) |
| Date | 23 April 2021 |
| Docket Number | Case No: BR-2020-000382 |
| Court | Chancery Division |
[2021] EWHC 995 (Ch)
IN THE HIGH COURT OF JUSTICE
BUISNESS AND PROPERTY COURTS ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Rolls Building
London
EC4A 1NL
CHIEF ICC JUDGE Briggs
Case No: BR-2020-000382
Simon Passfield (instructed by FREETHS LLP) for the Applicant
Rebecca Farrell (instructed by LACEYS) for the Second Respondent
Thomas Samuels (instructed by HENCHLEYS) for the Third and Fourth Respondents
Hearing dates: 14, 15 April 2021
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.
Mr and Mrs Ayles undertook property development. They were unable to obtain finance from a conventional lender. Mr Pumphrey lent money secured on their matrimonial home.
Mrs Jackson was appointed Mr Ayles' Trustee-in-Bankruptcy after he was adjudicated bankrupt in 2016 with debts in excess of £3,600,000. The property of Mr Ayles is now vested in Mrs Jackson for the purpose of distribution to his creditors. Mrs Jackson has to collect in his property and now seeks possession and sale of the matrimonial home for that purpose. Enforcement of the security against the home would result in no available proceeds for the creditors of Mr Ayles.
Mrs Jackson makes this application within the bankruptcy proceedings seeking a declaration that the security held by Mr Pumphrey is unenforceable pursuant to the Financial Services and Markets Act 2000.
A second charge in favour of Mr and Mrs Pumphrey, secured against the matrimonial home several years later, is also challenged but on different grounds. It is said that the second charge is void as it was granted in the period between presentation of the bankruptcy petition and the making of the bankruptcy order. Shortly before trial the issue was conceded.
Background
The facts leading to the provision of finance and the taking of security are generally agreed. In particular there is no dispute regarding the following evidential matters:
5.1. Mr Pumphrey left school at 16 to train as a tool maker. At the early age of 23 he started a manufacturing business which made plastic injection mould tools. The business operated from Modern Moulds Business Centre (“MMBC”) and traded as a limited company. It was very successful. In 1990 he sold it to a listed company for an undisclosed but significant sum. A few years later he purchased MMBC from the buyer. In his written evidence he explains that he made the business into “a ‘one-stop-shop’ for custom moulded plastic products” where he “continued to focus on the design, engineering and manufacture of the plastic injection mould tools”. He also started another plastic business known as “Whistle Stop Plastics Ltd” and sold both businesses in 2012;
5.2. He was an early investor in real property, residential and industrial, in the UK and the United States. The rental income he receives is significant;
5.3. As a result of these activities Mr Pumphrey is a wealthy individual who was prepared to make loans to individuals and businesses;
5.4. Mr Pumphrey holds his rental property business, among other things, from MMBC;
5.5. Mr Ayles is a plasterer by trade but has learnt to be a general builder and manage building sites;
5.6. His experience has given him the ability to identify building projects capable of development with a view to profit;
5.7. Mr and Mrs Ayles are foster parents and desired a stable home to care for children;
5.8. They had little savings and needed money for a deposit to buy a home;
5.9. Mr Ayles was unable to obtain main-stream funding for projects that he had identified and turned to Mr Pumphrey;
5.10. Mr Pumphrey was willing and able to lend money on a secured basis, taking a charge over the property under development or improvement;
5.11. On each occasion he lent money to Mr Ayles he required monthly compound interest;
5.12. The loans made were expressed to be for a fixed short term;
5.13. In June 2008 Mr Ayles entered into the first funding agreement with Mr Pumphrey to build and develop 11A Canada Road in West Sussex (“Canada Road”);
5.14. Six or so months into the development Mr Ayles was diverted to assist Mr Pumphrey develop a property known as the Quadrant which did not complete until February 2011;
5.15. The sale of Canada Road was completed in March 2010. The sale proceeds were insufficient to repay the loan and interest due to Mr Pumphrey. Mr and Mrs Ayles received nothing from the proceeds. Mr Pumphrey received the return of his capital and £41,273.24 in interest. There was a short-fall of £6,563.16;
5.16. Soon after the sale, Mr and Mrs Ayles move into a property known as Anne Howard Gardens which requires development. Mr Pumphrey provides the finance on substantially similar terms as he provided finance on Canada Road namely, 1% per month for the first eight months of the loan and 2% thereafter, compounded monthly;
5.17. After development or improvement by Mr Ayles, Anne Howard Gardens is sold. In July 2013 Mr and Mrs Ayles receive £7,305.53 from the sale proceeds. The capital advanced by Mr Pumphrey is returned to him with interest of £105,103.23;
5.18. In the same month Mr Ayles seeks funding to purchase a home in Weymouth (the “Weymouth Property”) intended to be a family home for Mr and Mrs Ayles. The mother of Mrs Ayles lent £30,000 and Mr Pumphrey agreed to lend £180,000 to acquire the property. The purchase of the Weymouth Property completed in September 2013. The loan made by Mr Pumphrey was secured by a first charge with interest at 0.75% per month for twelve months compounded monthly. After the initial twelve month period the interest rate increased to 1% compounded monthly. I shall refer to this loan as the “Weymouth Loan”;
5.19. Mr Ayles identified a development opportunity in Lyme Regis in 2014 and obtained funding from a bank to build 5 new homes. Mrs Ayles' unchallenged evidence is that in June 2015 one of the subcontractors lost his life on the building site which had a significant effect on Mr Ayles. He was investigated by the Health and Safety Board and the bank withdrew its funding. Although Mr Ayles was acquitted of all charges he became financially paralysed by the incident; and
5.20. The inability to build-out the Lyme Regis site meant that there were no profits to repay Mr Pumphrey for the lending on the Weymouth Property.
In dispute is whether lending to individuals and businesses amounts to a business. Mr Pumphrey says not.
In cross-examination he said:
“I am not in that business- I had a significant business from manufacturing and renting property- that is my main stay of my income and not from what I consider to be helping people.”
Counsel for Mrs Ayles persisted and elicited the following response from Mr Pumphrey to the question of whether he intended to make a profit on the loans he made:
“yes no one has said that I did not want to make a profit- it is a fair profit”
There is some dispute about when Mr Pumphrey first met Mr Ayles. His written evidence is that Mr Ayles mentioned to him that he may have seen him at a motorcycle event in 2006. Mr Pumphrey does not recall meeting him until 2007 or 2008. He was pressed on the issue in cross-examination and responded: “I may have met them prior to that date”.
There is documentary evidence supporting a meeting in early 2008 between Mrs Ayles and Mr Pumphrey's assistant at MMBC, Emma Swan. Mrs Ayles approached MMBC to hire a shipping container for the purpose of storing building equipment and materials. Mr Pumphrey acknowledged that he was likely to have met Mrs Ayles during the course of the transaction that resulted in a formal agreement for hire of the container. He would also have met Mr Ayles. There is no evidence of an earlier relationship or meeting.
In cross-examination Mr Pumphrey was asked why people asked him to lend money. He speculated that people knew he was interested in helping local business and had available funds: “friends approach me for money; I think they do so because I am approachable and have money.”
Legal structure
Certain activities in respect of “regulated mortgage contracts”, including “entering into a regulated mortgage contract as lender” or making arrangements “for another person to enter into a regulated mortgage contract as borrower”, if carried on by way of business, are regulated activities and, accordingly, cannot be engaged in by unauthorised persons: Section 19 Financial Services and Markets Act 2000 (“FMSA”); Art 61(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.
In Helden v Strathmore Ltd [2010] EWHC 2012 Newey J found that Strathmore Ltd (“Strathmore”) contravened s.19 and the loans were unenforceable by reason of sections 26 and 28 FSMA. He explained [64]:
“ Section 19 of FSMA bars anyone but an ‘authorised person’ or an ‘exempt person’ from carrying on a ‘regulated activity’ in the United Kingdom (the ‘general prohibition’). Section 22(1) provides that an activity is a ‘regulated activity’ if, among other things, it is ‘an activity of a specified kind which is carried on by way of business’ and either (under section 22(1)(a)) ‘relates to an investment of a specified kind’ or (under section 22(1)(b)) ‘in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to...
To continue reading
Request your trial
-
Kinled Investments Ltd v Zopa Group Ltd
...transaction in question itself or because the service provider was not an authorised person. 208 More recently, in Jackson v. Ayles [2021] EWHC 995 (Ch), Chief ICC Judge Briggs drew attention to the fact that, in Helden, in the Court of Appeal, Lord Neuberger MR said, obiter, that “people ......
-
Jackson V Ayles
...Ayles [2021] EWHC 995 (Ch) was an application by a trustee in bankruptcy for possession and sale of the bankrupt's matrimonial home. The interest in the judgment is that she also sought a declaration that security held over the property by a lender, Mr Pumphrey, was unenforceable by reason ......