Nihal Mohammed Kamal Brake v Simon Lowes
| Jurisdiction | England & Wales |
| Judge | Paul Matthews |
| Judgment Date | 02 March 2020 |
| Neutral Citation | [2020] EWHC 537 (Ch) |
| Date | 02 March 2020 |
| Docket Number | Case No: 21 of 2019 and 166 and 167 of 2015 |
| Court | Chancery Division |
[2020] EWHC 537 (Ch)
HHJ Paul Matthews (sitting as a High Court Judge)
Case No: 21 of 2019 and 166 and 167 of 2015
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BRISTOL
INSOLVENCY & COMPANIES LIST (ChD)
IN THE MATTER OF STAY IN STYLE (IN LIQUIDATION)
AND IN THE MATTER OF NIHAL MOHAMMED KAMAL BRAKE
AND IN THE MATTER OF ANDREW YOUNG BRAKE
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Andrew Sutcliffe QC AND William Day (Instructed by Stewarts) appeared on behalf of The Chedington Court Estate Limited
Stephen Davies QC AND Daisy Brown (Instructed by Seddons) appeared on behalf of Mr and Mrs Brake
Monday, 2 March 2020
(12.28 pm)
Ruling on striking out the Bankruptcy Application
. Because of the pressure of time, I will not give as full a judgment as I might otherwise have done, but I hope this will be sufficient to explain my decision. This is an application on behalf of the Chedington Court Estate Limited to strike out some parts of an application brought by Mr and Mrs Brake, dated 12 February 2019, which has been referred to by various names at different times, but for present purposes I will call the Bankruptcy Application.
. This application seeks certain relief, in fact, quite a long list of different relief, but the points which are in issue in this application to strike out are the relief in respect of a transaction concerning a cottage known as West Axnoller Cottage and also a ransom strip of land adjacent. The ransom strip belonged to Mrs Brake personally until she became bankrupt in 2015. The cottage itself was vested in the Brakes and a Mrs Brehme, who was an investor (through another company) in a partnership, known as Stay-in-Style, on trust for for the benefit of that partnership. This partnership is also in liquidation.
. The paragraphs in the prayer which are under attack are (a), (b), (f), and such parts of (c) as are ancillary to the relief concerning the transaction. S amended, they read as follows:
“(a) An order reversing Mr Swift's decision to enter into the Contracts
(b) An order that the contract be set aside
(c) A declaration that the Licence is invalid and/or unlawful and/or of no effect and/or a direction that Mr Swift withdraw or otherwise terminate the Licence
(f) In the alternative to (d) and (e) above, a sale of Mr Swift's interest in the Cottage under the direction of the court”.
. There were proceedings between the Brakes and Mrs Brehme in 2012 and there was also a claim by Mr and Mrs Brake to the cottage by way of a proprietary estoppel. When Mr and Mrs Brake became bankrupt in 2015, that claim would have vested in their trustees in bankruptcy. There is an issue about the revesting of the claim to the cottage in Mr and Mrs Brake under section 283A of the Insolvency Act 1986, which will be dealt with partly at a trial in May before me and partly in other proceedings.
. So, in the Bankruptcy Application, the Brakes say that the transaction concerning the cottage and the ransom strip should be set aside, and as a consequence they would have the opportunity to get back the cottage. The Chedington Court Estate Limited says that the Brakes have no sufficient standing to bring the bankruptcy application in relation to relief sought in relation to the cottage transaction. The bankruptcy occurred in 2015, and the Brakes were discharged from that bankruptcy after a year, in the usual way, but of course the property of the bankrupts would have vested in the trustee in bankruptcy.
. The partnership was also in liquidation, and in early 2019 the liquidators entered into a transaction, and sold the cottage to the trustee in bankruptcy at that time, Mr Duncan Swift. It is that transaction which is sought to be impugned. Mr Swift then immediately sold, or subsold, such interest as he might have had in the property to the Chedington Court Estate. It is obvious that, if the claim of the Brakes for revesting of the cottage in them under section 283A is successful, the property will not have been sold by the trustee in bankruptcy to the Chedington Court Estate Limited, and, so far as it goes, these present applications would have been largely if not wholly futile.
. The Brakes claim both as trustees of the Brake family settlement (first and second applicants) and also as the bankrupts, or now former bankrupts (third and fourth applicants). I mention in passing that this is an irregularity, because parties should not appear on the record in two separate capacities. There are a number of authorities which deal with that (see eg Armstrong v Armstrong [2019] EWHC 2259 (Ch), [8]–[9]), but I do not pause to deal further with it now. In the present case it does not make any difference in substance, at least for present purposes. The Bankruptcy Application is brought, firstly, as against the ex-trustee in bankruptcy, Mr Duncan Swift, and, secondly, as against Chedington Court Estate Limited. It is a claim under section 303 of the Insolvency Act, which is the relevant provision dealing with attacking the decisions of trustees in bankruptcy.
. The arguments put forward by the Chedington Court Estate for saying that the Brakes have no standing in the bankruptcy application are these, in summary form. It says that the test for standing is that laid down by Lord Millett in Deloitte & Touche v Johnson [1999] 1 WLR 1605, 1611D-F, H. That was a liquidation case, and therefore fell under the equivalent of section 168 of the Insolvency Act. I say “the equivalent of because Deloitte was a Privy Council case and not actually under the UK insolvency legislation as all.
. In that case Lord Millett said on behalf of the Board (at 1611D-F, H):
“Where the court is asked to exercise a statutory power, therefore, the applicant must show that he is a person qualified to make the application. But this does not conclude the question. He must also show that he is a proper person to make the application. This does not mean, as the plaintiff submits, that he ‘has an interest in making the application or may be affected by its outcome.’ It means that he has a legitimate interest in the relief sought. Thus even though the statute does not limit the category of person who may make the application, the court will not remove a liquidator of an insolvent company on the application of a contributory who is not also a creditor: see In re Corbenstoke Ltd. (No. 2) [1990] B.C.L.C. 60. This case was criticised by the plaintiff: their Lordships consider that it was correctly decided…
The company is insolvent. The liquidation is continuing under the supervision of the court. The only persons who could have any legitimate interest of their own in having the liquidators removed from office as liquidators are the persons entitled to participate in the ultimate distribution of the company's assets, that is to say the creditors. The liquidators are willing and able to continue to act, and the creditors have taken no step to remove them. The plaintiff is not merely a stranger to the liquidation; its interests are adverse to the liquidation and the interests of the creditors. In their Lordships' opinion, it has no legitimate interest in the identity of the liquidators, and is not a proper person to invoke the statutory jurisdiction of the court to remove the incumbent office-holders.”
. Chedington relies also on Re Edennote Limited [1996] BCC 718, CA, where Lord Justice Nourse referred to persons being outsiders to the liquidation and, therefore, not having standing. He said (at 721F-H):
“It is neither necessary nor desirable to attempt a classification of those who may be persons aggrieved by an act or decision of a liquidator in a compulsory winding up. On the footing that the claims of secured creditors have been or will be satisfied, it is perfectly clear that unless and until there proves to be a surplus available for contributories (a most improbable...
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