Nihal Mohammed Kamal Brake v Simon Lowes
| Jurisdiction | England & Wales |
| Judge | Lady Justice Asplin,Lord Justice Henderson,Lord Justice Floyd |
| Judgment Date | 13 November 2020 |
| Neutral Citation | [2020] EWCA Civ 1491 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2020/0537 AND A2/2020/0685 |
In the Liquidation Application A2/2020/0685
In the Bankruptcy Application A2/2020/0537
[2020] EWCA Civ 1491
Lord Justice Floyd
Lord Justice Henderson
and
Lady Justice Asplin
Case No: A2/2020/0537 AND A2/2020/0685
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(Chancery Division)
His Honour Judge Matthews (sitting as a High Court Judge)
[2020] EWHC 537 (Ch) and ([2020] EWHC 538 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Stephen Davies QC and Ms Daisy Brown (instructed by Seddons Solicitors) for the 1 st and 2 nd Appellants
Ms Anna Lintner (instructed by Porter Dodson LLP) for the 3 rd, 4 th 5 th, 6 th and 7 th Appellants The 1 st, 2 nd and 3 rd Respondents were not represented and did not appear
Mr Andrew Sutcliffe QC and Mr William Day (instructed by Stewarts Law LLP) for the 4 th Respondent
Mr Stephen Davies QC and Ms Daisy Brown (instructed by Seddons Solicitors) for the Appellants
The 1 st Respondent was not represented and did not appear
Mr Andrew Sutcliffe QC and Mr William Day (instructed by Stewarts Law LLP) for the 2 nd Respondent
Hearing dates: 13 th–14 th October 2020
Approved Judgment
These appeals raise two questions. The first is whether discharged bankrupts in their personal capacity or as trustees of a family trust have standing to make an application under section 303(1) Insolvency Act 1986 seeking to impugn the acts and decisions of their former trustee in bankruptcy. The second is whether either or both discharged bankrupts in their capacity as trustees of a family trust or unsecured creditors in a compulsory winding up are persons “aggrieved” for the purposes of challenging the conduct of a liquidator under section 168(5) Insolvency Act 1986 and, accordingly, have standing to make an application under that sub-section.
The appeals are closely related and arise from two applications dated 6 February 2019 and 12 February 2019 respectively, which have been referred to as the Liquidation and the Bankruptcy Applications. Amongst other things, Mr and Mrs Brake sought to set aside a sale of certain interests in a property known as West Axnoller Cottage (the “Cottage”) and an adjoining strip of land, and have their bid for the Cottage, made in their capacity as trustees of the Brake Family Settlement (the “Settlement”), accepted instead of that of Chedington Court Estate Limited (“Chedington”), the only active Respondent in these appeals. Alternatively, they sought an order that the interests in the Cottage be sold under the direction of the court. Chedington's ultimate owner is a Dr Geoffrey Guy (“Dr Guy”). The Brakes are the First and Second Appellants in both the Liquidation and the Bankruptcy Appeals in their capacity as trustees of the Settlement. They are Third and Fourth Appellants in the Bankruptcy Appeal, in their personal capacities. The Third – Seventh Appellants in the Liquidation Appeal, together referred to as the “Unsecured Creditors”, were joined as applicants in the Liquidation Application on 13 March 2019.
The transactions in relation to the Cottage and the strip of land took place in late 2018 and early 2019 and involved both the Brakes' trustee in bankruptcy at that time, Mr Swift (the First Respondent in the Bankruptcy Appeal and the Third Respondent in the Liquidation Appeal), and Messrs Lowes and Toone (the First and Second Respondents in the Liquidation Appeal), the joint liquidators of a partnership known as “Stay in Style”, in which the Brakes had an interest (the “Partnership”).
By an order of 3 March 2020, HHJ Paul Matthews, sitting as a judge in the High Court, struck out substantial parts of the Bankruptcy Application and the entirety of the Liquidation Application. He did so in relation to the Bankruptcy Application, on the basis that the Brakes had no standing to seek the relief claimed under section 303(1) Insolvency Act 1986 whether as bankrupts or trustees of the Settlement. In relation to the Liquidation Application, he did so on the basis that neither the Brakes as trustees of the Settlement, nor the Unsecured Creditors, had standing for the purposes of section 168(5) Insolvency Act 1986. See [2020] EWHC 537 (Ch) in relation to the Bankruptcy Application (the “Bankruptcy Judgment”) and [2020] EWHC 538 (Ch) in relation to the Liquidation Application (the “Liquidation Judgment”). The judge gave permission to appeal his decisions.
Mr and Mrs Brake appeal the judge's order in relation to the Bankruptcy Application in their personal capacity as former bankrupts and as trustees of the Settlement. Those parts of the order relating to the Liquidation Application are appealed by the Unsecured Creditors and by the Brakes as trustees. Neither Mr Swift, the Brakes' former trustee in bankruptcy, nor the joint liquidators of the Partnership took part in the hearing before the judge, nor were they represented before us. Only Chedington, the successful bidder for the Cottage and the adjoining strip of land, was represented.
Background
These appeals arise against a very complex factual background in which there are a number of long running and hostile sets of proceedings between the parties (and between the Brakes and Dr Guy/Chedington, in particular) in relation to the ownership and occupation of the Cottage. The essential background details are as follows. In February 2010, seeking investment in their luxury holiday lettings and wedding venue business, the Brakes entered into the Partnership with Patley Wood Farm LLP (“PWF”), the investment vehicle of a Ms Brehme. In April 2010, the Cottage was acquired by the Partnership and registered in the names of the Brakes and Ms Brehme, who held it on trust for the Partnership. At that time, Mrs Brake was already the registered and beneficial owner of the adjoining strip of land, having purchased it in 2006. Disputes arose between the partners which were referred to arbitration.
In December 2012, whilst that arbitration was on foot, the Brakes issued separate proceedings in the High Court against Ms Brehme and PWF. As amended, the Brakes' claim sought the transfer of the Cottage from the Partnership to the Brakes in their personal capacity, and included a claim in proprietary estoppel.
The arbitration concluded in 2013 with a final award in favour of PWF, a costs order against the Brakes and the dissolution of the Partnership. In March 2015, having failed to pay the costs awarded in the arbitration, the Brakes were adjudicated bankrupt. The Brakes' interest in the Cottage (through their High Court claim) and Mrs Brake's interest in the adjoining strip of land vested in Mr Swift as their trustee in bankruptcy. In May 2017 the Partnership was put into liquidation.
Earlier the same year (in February 2017), Chedington had acquired Sarafina Properties Limited. This company owned the mansion and surrounding farmland which were the premises at which the wedding and the luxury holiday lettings businesses were conducted and were adjacent to the Cottage.
As I have already mentioned, the transactions which are central to these proceedings took place in late 2018 and 2019. Events surrounding the transactions are in dispute between the parties. For the purposes of the Bankruptcy and Liquidation Applications and, therefore, for the purposes of these appeals, however, it is necessary to proceed on the basis of the Appellants' pleaded case.
It is alleged that in around December 2018, Mr Swift colluded with Dr Guy/Chedington and the joint liquidators of the Partnership so that Chedington could purchase the available interests in the Cottage and occupy it before 17 January 2019, when eviction proceedings brought by Dr Guy against the Brakes were due to be heard, thereby denying the Brakes the opportunity to purchase the Cottage themselves, undermining their claims for re-vesting of their beneficial interest in the Cottage pursuant to section 283A Insolvency Act 1986 and facilitating their eviction.
On 18 December 2018, Mr Swift, as the Brakes' trustee in bankruptcy, sold the strip of land adjacent to the Cottage along with such rights as he had to horses and furniture owned by the Brakes to Chedington for an aggregate sum of £102,000. These sales were carried out privately, without informing the Brakes or offering them the chance to bid, and allegedly contrary to marketing advice.
On the same date, the joint liquidators of the Partnership invited bids for the Partnership's interest in the Cottage from Dr Guy and Mrs Brake. The bids were required to be made by 21 December 2018 and were subject to certain conditions. Amongst other things, they were required to be made...
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