Nihal Mohammed Kamal Brake v Simon Lowes
| Jurisdiction | England & Wales |
| Judge | Paul Matthews |
| Judgment Date | 03 March 2020 |
| Neutral Citation | [2020] EWHC 538 (Ch) |
| Date | 03 March 2020 |
| Docket Number | Case No: 21 of 2019 and 166 and 167 of 2015 |
| Court | Chancery Division |
[2020] EWHC 538 (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
Anna Lintner (Instructed by Porter Dodson LLP) appeared on behalf of certain Liquidation Creditors
Tuesday, 3 March 2020
(10.30 am)
Ruling on strike out of Liquidation Application
. Yesterday, I gave judgment in relation to an application relating to what has been called the Bankruptcy Application, and I prefaced that with some background. I am not going to repeat that background, but it is relevant also for the judgment which I am about to give. This concerns a further insolvency application, known as the Liquidation Application, which was issued on 6 February 2019 by Mr and Mrs Brake (to which some of the liquidation creditors were joined on 13 March 2019). I am now giving judgment on the ordinary application issued by Chedington Court Estate Ltd and dated 30 January this year, in substance to strike out the Liquidation Application in relation to the main parts of the relief sought.
. I should have prefaced this judgment by saying that I am aware that we have had to get quite a lot into a very short time, and so I have not had as much time for consideration as I might have had. Also I have not got an enormous amount of time to give judgment. But I confirm that I have read all the skeleton arguments and all the documents to which I was referred. It is just that, in the time available, obviously, I cannot refer to everything in this judgment.
. In this application to strike out, Chedington (the applicant) says that the first two applicants in the Liquidation Application, Mr and Mrs Brake, in their capacity as trustees of the Brake family settlement, have no legitimate interest in the relief which is sought in that Application. It says this because that Application seeks (i) to reverse or set aside the liquidation sale agreement by which the liquidators of Stay-in-Style sold the partnership's interest in West Axnoller Cottage to the former trustee in bankruptcy, Mr Duncan Swift, (ii) a direction that the liquidators should accept the family trust's own bid on 21 December 2019 for the partnership's interest in that property and (iii) a direction for the resale of the cottage.
. The reason that Chedington says that the trust has no legitimate interest is because the trust is an outsider to the liquidation, in the sense that it is not a creditor or a contributory. Instead, the trust's complaint is that it has been denied the opportunity to acquire the cottage. I was referred to the cases of Re Edennote [1996] BCC 718, and Mahomed v Morris [2001] BCC 233, both in the Court of Appeal, where that Court expressly said that persons who are not creditors or contributories but are denied an opportunity to acquire property in the liquidation estate have no standing to complain in the insolvency. I referred to these cases in my judgment yesterday and they are just as relevant — in fact, even more so (because they concern a liquidation rather than a bankruptcy) — today.
. The Brakes, on the other side, say that this point about their standing has been raised very late. I agree. It has been raised late. But at the same time, it is still some time before the trial and, if it can be dealt with, as the parties wish me to deal with it, then I shall deal with it. If it is a good point, it is none the worse for being raised at a late stage. The Brakes say that the trust has an interest in this application, because their son lived in the cottage, because their furniture and their other possessions were placed there and used, and because the property was also used as family overflow accommodation. But, as Mr Sutcliffe QC said, and I agree, these are not interests of the trust in the relief sought. The trust's interest here is not as it might be for the Brakes personally, that they were in some way former owners and occupiers, but simply as a disappointed bidder in the sale process. No relief in this application is sought in relation to the furniture or the son's previous occupation. So I do not consider that there is anything in that.
. The Brakes, as I have said, do not claim in a personal capacity in this application, but simply as the trustees of the family trust. Even if they claimed in that personal capacity, they are not creditors of the partnership. They were formerly contributories, but even if there were a surplus in the estate, they would not get any of it because (as they were formerly bankrupt) it would go to their trustees in bankruptcy.
. However, the Brakes say that they are interested in the bidding process, and it is true that they were bidders, but in their capacity as trustees. So their argument has been effectively that it is not just contributories or creditors that can complain about the process carried on inside a liquidation, but also, to some extent, complete outsiders. They rely in particular on a decision of Mr Justice Sales (as he then was) in Hellard v Michael [2009] EWHC 2414 (Ch), and a decision of the Privy Council in Hickox v Brilla Capital Investments Master Fund SPC Ltd [2015] 2 BCLC 387. Hellard, however, was a case where the trustee in bankruptcy was, in fact, the applicant, so the question of standing did not arise. There was no discussion about this at all. It is true that Mr Justice Sales in that case said, in general terms (at [9]), that the court has “a general supervisory jurisdiction in respect of trustees in bankruptcy to ensure that they behave properly and fairly as between the persons affected by their decisions”. But it is also to be noted that, in that case, the (respondent) bankrupt was hardly an outsider. Mr Justice Sales held in that case that the process had not been conducted fairly, and in particular there was an asymmetry of information, so the process was set aside and ordered to be rerun. Because the question of standing was not raised (I assume because the trustee in bankruptcy was the claimant and it did not arise) this is not an authority which really assists the Brakes. However, if it were capable of standing to support the wider proposition that the Brakes put forward, then I would respectfully say that to that extent it cannot stand with the Court of Appeal's decisions in Re Edennote and Mahomed.
. So far as concerns Hickox v Brilla, that was a claim that the bidding process in which a judge had become involved had been conducted unfairly. It concerned the liquidation of a company. Hickox was a secured creditor, and Brilla was an unsecured creditor. The sale was in accordance with the court order. The liquidator sold a particular asset of the company to Hickox, and Brilla complained. The claim actually failed on the facts. There was no argument about outsiders, there was no discussion about the test for court intervention and, indeed, the only case cited in the whole judgment was the decision in Carmichael v National Power plc [1999] 1 WLR 2042, HL. This is an authority on the interpretation of oral statements, about as far removed from the test for intervention by the court under section 168 as it is possible to imagine. I cannot regard this case as an authority for the proposition that an outside bidder can complain under section 168 for failure to follow the bidding process. But, in any event, even if it purported to lay down a wider test than that in Re Edennote and Mahomed, it is a decision of the Privy Council, and in accordance with the rules of precedent I must follow decisions of the Court of Appeal (which are binding on me) in preference to decisions of the Privy Council. So I take the view that these cases do not assist the Brakes in relation to the question of the test. The test is that laid down in the Court of Appeal cases to which I have referred.
. As I have already said, the Brakes have also argued that the trust has a legitimate interest in the outcome of this application because the family trust of which they are trustees was set up for the benefit of the Brakes' son, Tom. Now, I have, this morning, been supplied — I asked for it yesterday and it has been supplied this morning – with a copy of the Brake family settlement, which I have read. It is dated June 2013, and it is quite a short document, which sets up an entirely discretionary trust with an overriding power of appointment in favour of the class of beneficiaries. That class consisted, at the outset, of the settlor's son, Thomas Conyers D'Arcy, Mr Brake's niece, and (importantly) any other person or class of persons nominated in writing by the settlor (who, of course, is Mr and Mrs Brake acting jointly), or by any one of the beneficiaries, and whose nomination is accepted in writing by the trustees (Mr and Mrs Brake again). So it is an open-ended class, and effectively could cover anyone in the world, except the “excluded persons”, who are defined as the settlor and any future spouse or civil...
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