Moises Gertner v CFL Finance Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Marcus Smith |
| Judgment Date | 22 May 2020 |
| Neutral Citation | [2020] EWHC 1241 (Ch) |
| Date | 22 May 2020 |
| Docket Number | Claim No: CH-2019-000208 |
| Court | Chancery Division |
[2020] EWHC 1241 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
APPEALS (ChD)
On appeal from the order of Chief Insolvency and Companies Court Judge Briggs dated 15 July 2019
Royal Courts of Justice
Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
THE HONOURABLE Mr Justice Marcus Smith
Claim No: CH-2019-000208
Mr Mark Phillips, QC, Mr Jonathan Kirk, QC, Mr Frederick Philpott and Mr James Knott (instructed by Teacher Stern LLP) for the First Appellant
Ms Felicity Toube, QC and Mr Robert Amey (instructed by Stephenson Harwood LLP) for the Second Appellant
Ms Blair Leahy, QC and Ms Kate Urell (instructed by Mishcon de Reya LLP) for the Respondent
Hearing dates: 5, 6 and 9 March 2020
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.
This judgment was handed down remotely by email to the parties and circulation to Bailii on 22 May 2020. The deemed time of hand-down is 10:00am on 22 May 2020.
CONTENTS
| A. | INTRODUCTION | §1 |
| B. | THE MATERIAL HISTORY | §6 |
| (1) | Previous decisions of the courts | §6 |
| (2) | The background up to the hearing before Judge Briggs | §7 |
| (3) | The Briggs Decision | §8 |
| C. | THE MATERIAL LAW | §14 |
| (1) | Petitioning for bankruptcy | §14 |
| (2) | Individual voluntary arrangements | §19 |
| (a) | Interim order obtained by a debtor not an undischarged bankrupt | §22 |
| (b) | Proposal for an individual voluntary arrangement made by a debtor not an undischarged bankrupt | §27 |
| (c) | Proposal for an individual voluntary arrangement by an undischarged bankrupt | §29 |
| (d) | The nominee's report and the creditors' approval | §30 |
| (3) | Challenging an individual voluntary arrangement | §33 |
| D. | THE GROUNDS OF APPEAL | §39 |
| E. | CHALLENGING CFL'S DEBT ON SUBSTANTIAL GROUNDS | §43 |
| (1) | Introduction | §43 |
| (2) | Points that could have been taken earlier | §44 |
| (3) | Invalid under the Consumer Credit Act | §55 |
| (a) | Introduction | §55 |
| (b) | The first point: provision of credit so as to bring the Settlement Agreement within the Consumer Credit Act | §57 |
| (c) | The second point: policy reasons for disapplying the Consumer Credit Act | §63 |
| (d) | Conclusion | §67 |
| (4) | Penalty | §68 |
| F. | THE DECISION NOT TO STAY THE PROCEEDINGS ON THE PETITION | §77 |
| (1) | What is really in issue? | §77 |
| (2) | The nature of the Judge's discretion in this case | §87 |
| (a) | The nature of the discretion generally | §87 |
| (b) | Factors taken into account by the Judge | §90 |
| (c) | The nature of the discretion in this case: material and immaterial factors | §92 |
| (3) | The good faith rule | §94 |
| G. | DISPOSAL | §97 |
A. INTRODUCTION
. By his order dated 15 July 2019 (the Order 1), Chief Insolvency and Companies Court Judge Briggs refused an application by the First Appellant, Mr Moises Gertner, to stay 2 the hearing of a creditor's petition for the bankruptcy of Mr Gertner brought by the Respondent, CFL Finance Limited ( CFL). Accordingly, Judge Briggs ordered that Mr Gertner be made bankrupt on 15 July 2018 at 3:40pm.
. Judge Briggs stayed the bankruptcy pending the determination of Mr Gertner's appeal against the Order. The Second Appellant ( Laser Trust), a creditor of Mr Gertner's who opposes the petition also appeals the Order. Laser Trust is a trust established in Gibraltar by a Mr/Mrs Leib Levison. 3
. I describe the various grounds of appeal advanced by Mr Gertner and Laser Trust in Section D below. For present purposes, it is sufficient to note that the challenge to the Order proceeds on two broad fronts:
(1) First, as an attack on the debt asserted by CFL as the foundation for the petition. Mr Gertner contended that the debt was disputed on substantial grounds. Were this attack to succeed, then CFL's status as petitioning creditor would be undercut and it would be unnecessary to consider the second line of attack.
(2) Secondly, and assuming the first attack failed, Mr Gertner and Laser Trust contended that Judge Briggs erred in refusing to stay proceedings on the petition so as to enable a proposal for a voluntary arrangement, made by Mr Gertner and supported by Laser Trust, to be considered by Mr Gertner's creditors. I shall, for reasons that will become obvious, refer to this proposal as the Second Proposal. The support of Laser Trust, in this regard, is important. By value, Laser Trust is (by a significant margin) Mr Gertner's largest creditor, holding well in excess of 90% of Mr Gertner's debt. Given the support of Laser Trust, were the Second Proposal to be considered at a creditors' meeting, it would almost certainly be approved by the requisite majority. Given these circumstances, both Mr Gertner and Laser Trust contended that Judge Briggs had erred in law in declining to stay proceedings on CFL's petition.
. The hearing before Judge Briggs, which culminated in his Order, is part of a long history between, inter alios, Mr Gertner, CFL and Laser Trust. It is necessary to set out this history, in some detail, before the issues arising out of this appeal can be grappled with. It is also necessary, for the same reason, to describe – at least by way of overview – the insolvency processes that may culminate in a voluntary arrangement, and the
. These matters are addressed in Section B below (which sets out the material history) and in Section C below (which outlines the material law). Thereafter, this judgment is structured in the following way:
(1) Section D sets out the various grounds of appeal advanced by Mr Gertner and Laser Trust.
(2) Section E considers and determines the points arising out of the contention that CFL's debt was disputed by Mr Gertner on substantial grounds. Essentially, these grounds were that the debt was unenforceable by virtue of the Consumer Credit Act 1974 and/or was void as a penalty. CFL contended that these points were without substance. However, CFL also contended that it was, procedurally speaking, too late for Mr Gertner to make these points in any event. This contention is also considered in Section E.
(3) Section F considers and determines the points arising out of Judge Briggs' decision not to stay the proceedings on CFL's petition.
(4) Section G states how this appeal is to be disposed of.
B. THE MATERIAL HISTORY
(1) Previous decisions of the courts
. The matter before me has previously come before the courts on three substantive occasions:
(1) First, before His Honour Judge Andrew Keyser, QC, sitting as a Judge of the High Court. Judge Keyser's decision, dated 27 January 2017, has a neutral citation number [2017] EWHC 111 (Ch) and I shall refer to it as the Keyser Decision.
(2) Secondly, before the Court of Appeal (Patten, Floyd and Coulson LJJ), hearing an appeal from the Keyser Decision. The Court of Appeal's decision, dated 30 July 2018, has a neutral citation number [2018] EWCA Civ 1781 and I shall refer to it as the Court of Appeal Decision.
(3) Thirdly, before Chief Insolvency and Companies Court Judge Briggs, resulting in the Order. The Order was consequential upon Judge Brigg's decision, dated 15 July 2019. This has a neutral citation number [2019] EWHC 1839 (Ch) and I shall refer to it as the Briggs Decision.
(2) The background up to the hearing before Judge Briggs
. The background facts are as follows:
(1) Mr Gertner is a property consultant and businessman. CFL is a private limited company registered in England and Wales under company number 05718498. CFL, amongst other things, provided short term finance to others.
(2) In 2008, CFL provided a short-term loan facility to a company known as Lanza Holdings Ltd ( Lanza). Lanza is a company owned and/or controlled by the Gertner family and the loan facility was guaranteed by Mr Gertner. In proceedings under Claim No HC10C03795, CFL commenced proceedings against Mr Gertner under the guarantee he had given. These proceedings, which were defended, were settled by way of a “Tomlin” order made on 26 September 2011 (the Tomlin Order). The Tomlin Order conventionally provided as follows:
“All further proceedings in this action between [CFL] and [Mr Gertner] be stayed upon the terms set out at Schedule 1 to this Order, save for the purposes of carrying the said terms into effect for which [CFL] and [Mr Gertner] are at liberty to apply. [CFL] and [Mr Gertner] shall have permission to apply to the Court to enforce the terms of settlement without the need to bring a new claim.”
(3) Schedule 1 to the Tomlin Order contained a settlement agreement (the Settlement Agreement) between CFL and Mr Gertner. So far as material, the Settlement Agreement provided:
“RECITALS
(1) CFL is the Claimant in proceedings in the High Court of Justice Chancery Division the title and claim number of which is CFL Finance Limited (Claimant) v. Mr Moises Gertner (Defendant) claim number HC10C03795 (“the Proceedings”).
(2) CFL claims the following sums from Mr Gertner in the Proceedings:
(a) The capital sum of £1,700,000;
(b) Simple interest at the rate of 2.25 per cent per month on £1,700,000 from 13 June 2008 to 23 September 2008;
(c) Simple interest at the rate of 2.25 per cent per month on £,1700,000 from 24 September 2008 to 13 October 2008;
(d) Compound interest on the...
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