Re Recover Ltd ((in Liquidation))
| Jurisdiction | England & Wales |
| Judge | Mr Justice Pumfrey |
| Judgment Date | 25 March 2003 |
| Neutral Citation | [2003] EWHC 536 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: 004209 of 2000 |
| Date | 25 March 2003 |
[2003] EWHC 536 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2R 2LL
The Honourable Mr Justice Pumfrey
Case No: 004209 of 2000
In the Matter of Recover Limited (in Liquidation)and in the Matter of the Insolvency Act 1986
Owen Rhys (instructed by Anderson's Litigation Solicitors) for the 1st, 4th, 6th and 7th Defendants and Applicants
Marc Dight (instructed by Wright Son and Pepper) for the respondent liquidator
Hearing dates : 27 January 2003
Approved Judgment
Mr Justice Pumfrey:
Introduction
Mr Hornan was appointed the liquidator of Recover Limited ('the Company') on 27 February 2001. A winding up order was made in respect of the Company on 22 November 2000 on the petition of HM Customs and Excise. The report to the creditors prepared by the official receiver shows a deficiency of £6,364,611, of which £250,000 represents legal fees which were alleged to be due and owing to a firm of solicitors, Messrs Dibb & Clegg, in respect of substantial litigation in which the company had been involved. The company traded in oriental carpets and the official receiver reported that the reason for its failure was the theft of stock and the cost of and disruption caused by the litigation. Messrs. Dibb & Clegg's bill is the largest proof accepted by the liquidator. Certain alleged investors in the Company have proved for a sum in excess of £5.5m, but I understand those proofs have not been accepted by the liquidator.
Mr Kenneally was the partner in Messrs Dibb & Clegg with conduct of the litigation on behalf of the Company. He is now a partner in Wright Son & Pepper. The litigation was a dispute between two factions of an extended Iranian family, each of whom sought control of the business and stock and the premises from which the trade in carpets was carried on in the United Kingdom. The action was tried before Ebsworth J in 1999 and resulted in victory for the defendants, who were (1) the Company, (2) Latifa Latif ('Latifa') (3) Latif Group Limited, (4) Kazem Ravanparvar, (5) Ali Reza Latif ('Ali', Latifa's brother) and (6) Rougieh Ravanparvar. The unsuccessful plaintiffs were (1) Light Connections Limited, (2) Melody Enterprises Limited (the third respondent to the liquidator's proceedings), (3) Melody Trading Limited (the second respondent to the liquidator's proceedings), (4) Mohammed Saleh Latif and (5) Mohammed Amin Latif ('Mohammed Amin', the fifth respondent to the liquidator's proceedings).
The proceedings before Ebsworth J were complex. A central issue was the right to occupy, and so inevitably the beneficial ownership of, premises known as Latif House, First Way, Wembley. Ebsworth J found that the Company was beneficially entitled to a 66% interest in Latif House. The liquidator now seeks an order for the sale of Latif House. He also seeks orders in respect of 120 Arthur Court, Queensway ('Arthur Court'), the registered proprietor of which is the sixth respondent ('Naema') and of 39 Crooked Usage, Finchley ('Crooked Usage') of which the registered proprietor is the seventh respondent ('Export Global'), which is said to be owned by the fourth respondent ('Khalil'). Arthur Court was transferred to Naema by Khalil in 2000.
Latifa Latif (or Bostani), Ali Latif and Naema Latif are the children of one Abdul Latif. Latifa is bankrupt on the petition of her former solicitors Llewellyn Zeitman. She instructed Mr Kenneally in the proceedings. The claim was originally made against Latifa and the Company only, the remaining defendants being added by the plaintiffs. They did not assert a positive case, as I understand it, inconsistent with that advanced by Latifa and the Company.
The Liquidator's claim
The liquidator's claim, which was launched on the 10 June 2002, may be summarised as follows
(i) A declaration that Latif House is held by Latif Group SL as to 66% on trust for the Company and as to 34% for the Melody Companies and an order for sale. This claim corresponds to the findings of Ebsworth J as to the beneficial ownership of Latif House.
(ii) A declaration that Arthur Court was held initially by Mohammed Amin and subsequently by Naema upon trust for the Company and an order for sale, and an account of the proceeds of sale (if any) in respect of the sale from Mohammed Amin to Naema. Arthur Court was not the subject of the earlier litigation.
iii) A declaration that Crooked Usage has at all times been the sole beneficial property of the Company, and that Export Global holds it on trust for the Company, and an order for sale; alternatively a declaration that the Company transferred Crooked Usage to Export Global at an undervalue and consequential directions. Crooked Usage was not the subject of the earlier proceedings.
The liquidator's case in respect of the three properties is set out in detail in his witness statement of 29 April 2002. The case is comparatively straightfoward. Taking the three properties in turn:
Latif House —The ownership of this property was conclusively determined by Ebsworth J on the basis of a written declaration of trust made between (1) Latif Group SL (2) the Company and the Melody companies. This was prepared by solicitors and executed on behalf of the Company by Latifa and Ali Reza Latif. Amin Latif and Saleh Latif signed for Latif Group SL, described as 'the nominee'. Evidence was given at trial by the plaintiffs to suggest that the document was not executed as it purported to be, but this evidence was rejected on the basis of the attendance notes kept by Messrs Child and Child, who prepared it.
Arthur Court —This is a leasehold property, the lease having been registered in the name of Mohammed Amin Latif in December 1986. In a statutory declaration made on 11 December 1997 (the same day as a statutory declaration in respect of Latif House, as to which see below) Latifa said that the Company was entitled to the whole beneficial interest in the lease pursuant to a declaration of trust made 6 June 1996 between Mohammed Amin Latif and the Company. The liquidator does not have a copy of this declaration of trust. The property was conveyed to Naema, in 2000, but there is no consideration paid to the company for this transfer.
Crooked Usage —the Company was registered as sole proprietor of the property at 25 September 1998. On 15 February 2000, nine months before the making of the winding up order, the property was transferred to Export Global, which is registered in Gibraltar, and the liquidator can find no evidence that Export Global paid for the property.
He observes that
i) at trial, the Defendants contended that the Company was entitled to 66% of Latif House on the basis of a written Declaration of Trust dated 10 October 1995. This declaration of trust was upheld by Ebsworth J.
ii) On 11 December 1997, Latifa made a statutory declaration in support of the registration of a caution over Latif House in order to protect the company's interest as 66% beneficial owner. This statutory declaration was prepared by Dibb & Clegg (Mr Kenneally says, by his partner Mr Beynon, who confirms this in a witness statement).
iii) It is now suggested that the Company is not the beneficial owner of Latif House, but that Latif Group SL holds it upon trust for those who financed its purchase from administrative receivers appointed by Barclays Bank over a company called Pars Orient Limited, which was the Latif's earlier corporate vehicle.
iv) The documentary material upon which the respondents to the liquidator's application rely in support of their contention that the company is not entitled to a 66% interest in Latif House was provided to the liquidator in a box provided by Abdul after trial. None of these documents (all of which are in English) were produced at trial, although Khalil Ravanparvar is one of the partners in the Tehran partnership which in part underpins the business in England. He had given a witness statement to Mr Kenneally through an interpreter, but did not appear to give evidence and the witness statement was not admitted.
v) If genuine the documents are inconsistent with the case advanced by the defendants at the trial. Leading counsel has advised that if genuine, they are of no effect, but that is not something with which I am concerned.
vi) So far as the case concerning Crooked Usage is concerned, the contention is again that the Company is trustee of the property for Khalil by virtue of a declaration of trust dated 15 April 1999, found for the first time in Abdul's box of documents.
The present application .
The present application is to remove Mr Kenneally as the solicitor for the liquidator. It is made by the first respondent (Latif Group SL}, the Spanish company representing the interests of the family and its group; Khalil; Naema and Export Global. None of the applicants, therefore, was a party to the principal proceedings.
The application is supported by four witness statements of one James Donald Rory Anderson. The witness statements contain a number of allegations against Mr Kenneally, one of which (a serious one) is 'not relevant to these proceedings [but] included for fullness'. This attempt to introduce prejudice is remarkable only for its frankness. The grounds relied on before me are
i) Mr Kenneally has, by virtue of his position as an unsecured creditor, a financial interest in the proceedings;
ii) He is likely to be called...
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