Michael Thomas Leeds and Kevin John Hellard (in their capacity as the joint trustees in bankruptcy of the estate of Mr Christos Pandelis Lemos) v Christos Pandelis Lemos and Others

JurisdictionEngland & Wales
CourtChancery Division
JudgeJudge Hodge
Judgment Date17 Jul 2017
Neutral Citation[2017] EWHC 1825 (Ch)
Docket NumberCase No. BR-2015-003947

[2017] EWHC 1825 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

IN THE MATTER OF CHRISTOS PANDELIS LEMOS

AND IN THE MATTER OF THE INSOLVENCY ACT 1986

Rolls Building

Fetter Lane

London EC4A 1NL

Before:

His Honour Judge Hodge QC

(Sitting as a Judge of the High Court)

Case No. BR-2015-003947

Between:
(1) Michael Thomas Leeds and Kevin John Hellard (in their capacity as the joint trustees in bankruptcy of the estate of Mr Christos Pandelis Lemos)
Applicants
and
(1) Christos Pandelis Lemos
(2) Kalliopi Lemos
(3) Withers LLP
Respondents

Ms Felicity Toube QC and Mr Tony Beswetherick (Instructed by Gowling WLG (UK) LLP) appeared on behalf of the Applicants

Mr David Lord QC and Mr Sebastian Kokelaar (Instructed by Richard Slade & Company) appeared on behalf of the First Respondent

Ms Marcia Shekerdemian QC (Instructed by TLT LLP) appeared on behalf of the Second Respondent

The Third Respondent was not represented at the hearing

JUDGMENT APPROVED

1

Judge Hodge QC: This is my extemporary judgment on the hearing of an application, issued on 12 April 2017, by Mr Michael Thomas Leeds and Mr Kevin John Hellard in their capacity as the trustees in bankruptcy of Mr Christos Pandelis Lemos, case number BR-2015-003947.

2

This application raises fundamental questions as to the true meaning and effect of the decisions of Mr Justice Arnold at first instance in Shlosberg v Avonwick Holdings Limited [2016] EWHC 1001 (Chancery), reported at [2016] 3 WLR 1330, and of the Court of Appeal affirming Mr Justice Arnold's decision in the same case, [2016] EWCA Civ 1138, presently reported at [2017] 2 WLR 1075.

3

Those questions in turn require me to determine: (1) whether the principle formulated by Mr Justice Goff in the case of Crescent Farm (Sidcup) Sports Limited v Sterling Offices Limited [1972] Chancery 553, and hereafter referred to as the Crescent Farm principle, applies in bankruptcy; and (2) whether the second ground for decision of Mr Justice Peter Gibson in Re Konigsberg [1989] 1 WLR 1257 is still good law.

4

The application seeks: (1) directions in relation to the use that can be made of certain potentially privileged documents that the trustees in bankruptcy have obtained from the former solicitors of Mr Lemos, who are Withers; and (2) an order pursuant to section 366 (1) of the Insolvency Act 1986 requiring Withers to deliver up any further documents in their possession which relate to Mr Lemos's affairs or for an appropriate member of the firm to submit a witness statement containing an account of such affairs. Withers has confirmed that it is prepared to comply with such an order and therefore Withers are not represented before me and that part of the application is unopposed. It is common ground that the precise terms of the order should be addressed after I have delivered this judgment.

5

Mr Lemos was adjudged bankrupt on 11 March 2015 and he secured his discharge from bankruptcy on 12 March 2017. He is the first respondent to this application. He is represented by Mr David Lord QC, leading Mr Sebastian Kokelaar (of counsel).

6

The second respondent to the application is Mrs Kalliopi Lemos, the wife of the first respondent. She is represented by Ms Marcia Shekerdemian QC.

7

The applicant former trustees in bankruptcy are represented by Ms Felicity Toube QC, leading Mr Tony Beswetherick (also of counsel).

8

The evidence in support of the application is contained within a written statement of Mr Leeds (his ninth) dated 10 April 2017. Evidence in answer is contained in the witness statement of Mr Lemos dated 16 June 2017 (his second) and in the first witness statement of Mrs Lemos dated 9 June 2017. There are also written statements from the two sisters of the second respondent, Koula Mangos, dated 6 June 2017, and Maria Lemou, dated 7 June 2017. Evidence in reply is contained within the tenth witness statement of Mr Leeds dated 29 June 2017. Happily, nothing turns upon the precise terms of the witness evidence.

9

By way of overview, the joint trustees in bankruptcy have in their possession certain documents which they obtained from Withers in the course of the discharge of the trustees' functions. Some of those documents may be subject to legal professional privilege belonging to Mr Lemos either alone or jointly with his wife. Mrs Lemos has also suggested that some of the documents might be subject to her sole privilege, although she has yet to review the documents to confirm her position in relation to any particular documents. If any document were subject to Mrs Lemos's sole privilege, the trustees accept that they cannot, at least prima facie and without more, use those documents free from that privilege. However, it seems unlikely, at least to the trustees, that there will be any such documents.

10

The trustees believe that a number of the Withers documents are likely to be useful as evidence for the purposes of proceedings under section 423 of the Insolvency Act 1986 relating to transactions defrauding creditors. Those proceedings would be to set aside certain transactions entered into by Mr Lemos many years prior to his bankruptcy and relating to the ownership of the house 27 and 27A Bracknell Gardens, London NW3, in which Mr and Mrs Lemos live. Those proceedings, if successful, would result in the recovery of what is said to be an extremely valuable asset for the benefit of Mr Lemos's substantial creditors.

11

In particular, certain of the Withers documents have already been seen by the Court of Appeal in the different context of an application to reinstate relief by way of a freezing injunction that came before the Court of Appeal, the reference to which is Lemos v Lemos [2016] EWCA Civ 1181. In that appeal the court concluded, partly as a result of a review of the contents of those documents, and reversing a decision of Mr Justice Cooke, that those documents provided a good arguable case that there should be section 423 relief.

12

At paragraph 22 of their judgment, however, the Court of Appeal, in agreement with the first instance judge, held that there was insufficient evidence, for the purpose of maintaining the freezing injunction, to lead the court to suppose that it had been the common intention on the part of Mr and Mrs Lemos and the trustees that at any relevant time after the transfer of the house in 1994 Mr Lemos should have any beneficial interest in the property. The Court of Appeal recorded that to come to that conclusion would mean that Mr Lemos's declaration of trust, and a trust in favour of the second respondent which followed shortly thereafter, were both shams in which the trustees had participated knowing that the truth was the opposite of what was provided for in the documents.

13

The Court of Appeal found it difficult to accept the argument that the applicant for freezing relief, Joanna Lemos, who is the sister of Mr Lemos, could succeed under this head without alleging that the documentation was a sham. However, as I have indicated, the Court of Appeal did reinstate the freezing injunction on the footing that there was a good arguable case that there should be relief at the instance of Joanna Lemos under section 423 of the 1986 Act.

14

The property, which is said to be worth currently in the order of £16.5 million, is presently registered in the joint names of a Bermudian trustee company and one of its directors. The offshore trustees, together with the two respondents to this application, contend that they hold the property on trust for Mrs Lemos alone.

15

The applicants say that this hearing is not concerned with the merits or otherwise of the section 423 claim but with the prior question of what use the trustees can make of such of the Withers documents which it ultimately turns out are subject to either the sole privilege of Mr Lemos or the joint privilege of himself and his wife.

16

The need for these directions arises because of a dispute between the trustees in bankruptcy, on the one hand, and Mr and Mrs Lemos, on the other, over the former's ability to make use of the Withers documents. The trustees wrote to Mr and Mrs Lemos seeking confirmation that they did not object to the deployment of certain of the Withers documents for the purposes of proceedings relating to the property. In response, (1) Richard Slade & Co, who are the solicitors acting for Mr Lemos, stated that he objected to the use of the documents on the basis that they were privileged and he would not consent to waive such privilege; and (2) TLT LLP, the solicitors acting for Mrs Lemos, wrote in similar terms and further accused the trustees of having acted unlawfully in relation to their use of certain of the documents.

17

During the course of this hearing I have made it clear that in the absence of Joanna Lemos, the judgment creditor who had obtained the freezing injunction and who had deployed certain of the documents in the Court of Appeal, it would not be appropriate for me to decide any questions about the propriety or the present or future use of those documents in the extant section 423 proceedings.

18

In the course of his submissions Mr Lord, acting for Mr Lemos, indicated that whether the actions of the trustees in bankruptcy in passing documents to Joanna Lemos were right or wrong were not matters for the court on the hearing of this application, although he made it clear that Mr Lemos's rights in that respect were reserved.

19

The responses of both respondents place reliance upon the decision of the Court of Appeal in the Avonwick case. In this judgment I shall have to consider the true meaning and effect of that judgment and its implications for trustees in bankruptcy.

20

I make it clear that I am only considering the position of a trustee in bankruptcy. I am not concerned with the position of a liquidator of a company.

21

It became apparent during the course of...

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    ...even where there is a potentially conflicting statutory power to inspect or possess the relevant documents: see Leeds v Lemos [2017] EWHC 1825 (Ch) at [66]; R (on the application of Ford) v Financial Services Authority [2011] EWHC 2583 (Admin) at [63]; and Twin Benefits Ltd v Barker [201......
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    • Mondaq UK
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