Patley Wood Farm LLP v Kristina Kicks
| Jurisdiction | England & Wales |
| Judge | Lord Justice Arnold,Lady Justice Asplin,Lord Justice Lewison |
| Judgment Date | 28 July 2023 |
| Neutral Citation | [2023] EWCA Civ 901 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2022-002443 |
[2023] EWCA Civ 901
Lord Justice Lewison
Lady Justice Asplin
and
Lord Justice Arnold
Case No: CA-2022-002443
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, BUSINESS AND PROPERTY
COURTS IN BRISTOL, INSOLVENCY AND COMPANIES LIST (ChD)
His Honour Paul Matthews sitting as a Judge of the High Court
Royal Courts of Justice
Strand, London, WC2A 2LL
Andrew Westwood KC and Rowena Page (instructed by Gateley Legal) for the Appellants
William Day (instructed by Stewarts Law LLP) for the Respondents
Hearing date: 20 July 2023
Approved Judgment
Introduction
Kristina Kicks and Blair Nimmo (“the Trustees”) are licensed insolvency practitioners with extensive experience in insolvency, restructuring and asset recovery. They are the joint trustees in bankruptcy of Andrew Brake and Nihal Brake. On 25 November 2022 HHJ Matthews sitting as Judge of the High Court made an order under section 303(1) of the Insolvency Act 1986, for the reasons given in his judgment of the same date ( [2022] EWHC 2973 (Ch), [2023] BPIR 507), directing the Trustees (i) to make an application to join claim F00YEO95 (“the Eviction Claim”) which is currently on appeal before this Court, (ii) to file and serve written submissions and/or a witness statement (a) in opposition to ground 3 of the appeal and (b) in support of a possession order for West Axnoller Cottage (“the Cottage”) in favour of the Trustees and (iii) to attend and make oral submissions at any hearing of those matters. The Trustees appealed against that order with permission granted by Newey LJ. After hearing the appeal the Court announced that the appeal would be allowed with reasons to follow in writing. These are my reasons for concurring with that disposition of the appeal.
Background
The background to the appeal is of considerable complexity. I will endeavour to explain it as briefly and simply as I can, but some detail is necessary.
In September 2004 Mrs Brake bought West Axnoller Farm in Dorset (“the Farm”), which included Axnoller House. By 2008 Mr and Mrs Brake were living in Axnoller House. In February 2010 the Brakes entered into a partnership (“the Partnership”) with Patley Wood Farm LLP (“PWF”), whose principal was Lorraine Brehme. The Brakes contributed West Axnoller Farm as partnership property. The Partnership carried on a business of holiday lettings and events such as weddings. The Partnership was regulated by a partnership deed.
Adjoining the Farm is the Cottage. The Partnership acquired the Cottage after the execution of the partnership deed, in April 2010. Title to the Cottage was registered in the names of Mr Brake, Mrs Brake and Mrs Brehme; but it was partnership property, as contemplated by the partnership deed. Until 2012, the Cottage was used by employees of the Partnership. From 2012 onwards, it was used by the Brakes (and Mrs Brake's son Tom D'Arcy) when Axnoller House was let out for weddings.
A dispute arose between the Brakes and Mrs Brehme, which was referred to arbitration in accordance with the partnership deed. In December 2012, whilst the arbitration was on foot, the Brakes issued proceedings against PWF and Mrs Brehme seeking a transfer of the Cottage into the Brakes' sole names (“the Cottage Claim”). The Cottage Claim included a claim in proprietary estoppel. The Cottage Claim was stayed in February 2015 and has never been determined.
In June 2013 the arbitration was determined in Mrs Brehme's favour and an award of costs made against the Brakes. A charging order was obtained by Mrs Brehme in September 2014 securing the costs award over such interest (if any) as the Brakes held in the Cottage. Following a failure to pay the costs, the Brakes were made bankrupt in May 2015. The original trustees in bankruptcy were Duncan Swift and Jeremy Willmont, but Mr Willmont retired and was not replaced. As a result of the bankruptcies, the benefit of the Cottage Claim vested in Mr Swift.
The Partnership went into administration in July 2016 and liquidation in May 2017. Because the Cottage was partnership property, the three registered proprietors held their legal title on trust for the Partnership and, after its liquidation, for the benefit of the liquidation estate. On 6 January 2016 Chief Master Marsh made an order which recorded that the three partners had agreed that the Cottage be sold as part of the winding up of the Partnership.
In the meantime, Adam & Co, the mortgagee of West Axnoller Farm, had appointed receivers under the Law of Property Act 1925 in October 2014. West Axnoller Farm (but not the Cottage, which was not mortgaged) was sold to Sarafina Properties Ltd (“Sarafina”) in July 2015. In February 2017 Sarafina was acquired by The Chedington Court Estate Ltd (“Chedington”), a company owned and controlled by Dr Geoffrey Guy, and changed its name to Axnoller Events Ltd (“AEL”). Thereafter the Brakes operated the business at the Farm as employees of AEL. They continued to stay at Axnoller House, and at the Cottage when Axnoller House was let.
Following their bankruptcies, the Brakes moved into the Cottage and stayed there, rather than Axnoller House, with limited interruptions until at least October 2016. Thereafter, the Brakes moved back into Axnoller House and continued to use the Cottage as they had done before May 2015, i.e. when Axnoller House was let.
Relations between the Brakes and Dr Guy broke down in November 2018. The Brakes' employment was terminated and they were ordered to leave Axnoller House. The Brakes did not leave, and continued to stay in Axnoller House. These events led to claims being brought by the Brakes against Chedington and others in the Employment Tribunal (“the Employment Claims”) and by AEL against the Brakes for possession of Axnoller House (“the Possession Claim”). It is not clear from the materials before the Court what has happened to the Employment Claims, but for present purposes this does not matter.
On 2 January 2019 the liquidators of the Partnership accepted an offer from Chedington to buy the Partnership's interest in the Cottage. But the liquidators were unwilling to take legal action (even if financed by Chedington) to take steps to remove the Brakes from the legal title. Instead, the following plan was devised. Chedington would put Mr Swift in funds so as to enable him immediately to buy such right and title to the cottage as the liquidators could sell, thereby reuniting the beneficial interests in the Cottage. Mr Swift would then enter into a back-to-back sale to Chedington of such right and title to the Cottage as Mr Swift then had, and also of clean registered title as a result of an application to the court by him (financed by Chedington). In addition, and in order to demonstrate an appropriate benefit to creditors of the bankruptcies, a facilitation fee would be paid by Chedington to Mr Swift, of £30,000 (plus VAT) on the execution of the contract, together with £3,000 (plus VAT) per month until completion of the transfer enabling full registration, for a maximum of 12 months.
On 15 January 2019 two agreements were executed. The first was between the liquidators and Mr Swift by which the liquidators agreed to sell such right, title and interest (if any) as the Partnership had and could transfer in the beneficial and/or equitable interest in the Cottage. The second was a contract between Mr Swift and Chedington for the sale of the Cottage at a price of £500,000. It was a conditional contract. The conditions included the obtaining by Mr Swift of a court order authorising (i) the transfer of the whole of the beneficial interest in the Cottage to Chedington, (ii) the transfer of the legal title in the Cottage to Chedington and (iii) Mr Swift to execute any documents necessary to achieve (i) and (ii). The conditions remain unfulfilled.
Also on 15 January 2019 Mr Swift executed a licence permitting Chedington to occupy the Cottage as a residential property in common with Mr Swift and all others authorised by him.
For reasons that remain both mysterious and unexplained, Mr Swift did not apply to the court for an order as contemplated by the contract of sale or for possession of the Cottage. Instead, he authorised Chedington to take possession of the Cottage without a court order. Accordingly, on 18 January 2019 a team assembled by Chedington took possession of the Cottage by gaining entry and changing the locks. As at that date the Brakes were not resident in the Cottage, but they remained in possession of it.
In February 2019 the Brakes commenced proceedings under the 1986 Act against both the liquidators of the Partnership (“the Liquidation Application”) and Mr Swift (“the Bankruptcy Application”). The first purpose of these proceedings was to unwind the transactions between the liquidators and Mr Swift. The second purpose was (as against Mr Swift) to establish that the Brakes' pre-existing interests in the Cottage had revested in them in May 2018 under section 283A of the 1986 Act, on the basis that it was the Brakes' sole or principal residence at the date of bankruptcy, and Mr Swift had taken no steps to realise those interests three years later. In April 2019, by consent, Chedington was joined as second respondent to the proceedings against Mr Swift, because it claimed to be a successor in title to him. In June 2019 John Jarvis QC sitting as a Deputy High Court Judge made two orders by consent, one removing Mr Swift from office and the other appointing replacement trustees. The current office holders are the...
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...discussion of the position as it was down to March 2022, see Watson & Baister Bankruptcy: Law and Practice (2023), at 9.042-9.051. 2. [2023] EWCA Civ 901. 3. [2023] UKSC 4. E.g. Brake v Lowes; Brake v Swift [2020] EWCA Civ 1491, [2021] BPIR 1. 5. IA 1986, s 303(1). 6. IA 1986, s 263(3): the......