Town and Country Properties (GB) Ltd and Others v Patel and Others
| Jurisdiction | England & Wales |
| Judge | Lady Justice Asplin |
| Judgment Date | 17 May 2023 |
| Neutral Citation | [2023] EWHC 1168 (Ch) |
| Docket Number | Case No: CH-2022-000234 |
| Court | Chancery Division |
[2023] EWHC 1168 (Ch)
Lady Justice Asplin
Case No: CH-2022-000234
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
Royal Courts of Justice
Strand, London, WC2A 2LL
Daniel Lewis and Jessica Brooke (instructed by Francis, Wilks & Jones) for the Appellants
John Machell KC (instructed by Thursfields) for the Third Respondent
Neither the First nor the Second Respondent appeared or was represented
Hearing date: 3 May 2023
Approved Judgment
This judgment was handed down remotely at 11.00 a.m. on 17 May 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
This is an appeal from two orders made by Deputy ICC Judge Agnello KC dated 17 November and 15 December 2022. By the first order, the judge dismissed a winding up petition in respect of the First Respondent, Black Capital (the “Winding Up Petition”), set aside a statutory demand and dismissed a bankruptcy petition against the Third Respondent, Mr Ubhi (the “Ubhi Bankruptcy Petition”) and dismissed a further application made by the Appellants. By the second order the Appellants were ordered to pay the Second Respondent, Mr Patel, and Mr Ubhi's costs.
The judge dismissed the Winding Up Petition and the Ubhi Bankruptcy Petition on the basis that there was a dispute on substantial grounds about whether Mr Ubhi was a partner of Black Capital and whether there was a partnership at all. She also dismissed the Winding Up Petition because she held that it was governed by Article 8 of the Insolvent Partnerships Order 1994 (the “IPO”) which requires the service of a statutory demand as the basis for an inability to pay debts and such a demand had not been served. The judge also concluded (albeit obiter) that the Winding Up Petition and the Ubhi Bankruptcy Petition were based upon claims for a liquidated sum. The citation for the judgment is [2022] EWHC 2914 (Ch).
The Appellants, who were the petitioners in relation to the Winding up Petition, the Ubhi Bankruptcy Petition and a further bankruptcy petition filed in relation to Mr Patel (together referred to as the “the Bankruptcy Petitions”) appeal the orders on three bases. They are that the judge: erred in holding that there was a substantial dispute as to the existence of the alleged partnership in the light of her findings as to part of Mr Ubhi's affidavit evidence; erred in her evaluation of Mr Ubhi's evidence and misdirected herself in holding that his evidence prevented there from being a “clear case” for the purposes of the Winding Up Petition and the Ubhi Bankruptcy Petition; and erred and misdirected herself in holding that the Winding Up Petition fell within Article 8 of the IPO rather than Article 7.
An amended Respondent's Notice was filed on behalf of Mr Patel in which he sought to uphold the judge's orders on different or additional grounds. They were: first, that the effect of presenting the Bankruptcy Petitions was to cause Article 8 of the IPO to apply to both the Bankruptcy Petitions and to the Winding Up Petition; and secondly, contrary to the judge's decision, that the debt relied upon in the Winding Up Petition was not a liquidated sum.
Neither Mr Patel nor Black Capital appeared nor were they represented before me. Mr Machell KC, who appeared on behalf of Mr Ubhi, sought permission to adopt Mr Patel's Amended Respondent's Notice and to argue the point in relation to the liquidated sum. Mr Lewis, who appeared for the Appellants, did not object and I gave permission for Mr Machell to do so.
This matter arises out of what has been described as a Ponzi scheme. Black Capital, which is said to have been operating an unauthorised collective investment scheme, offered high returns upon investments. It is suggested that those returns were being made in some part by paying existing investors from sums received from new investors. It is said that there were more than 300 investors in addition to the Appellants. It is alleged that Black Capital was a partnership and that Messrs Ubhi and Patel were the partners. It seems that this was accepted by Mr Patel, at least.
The Appellants are members of the same family and their companies. During the period from September 2018 until around July 2021, they invested considerable sums with Black Capital. The total sums invested plus “Expected Returns” are said to amount to as much as £18.3 million pounds odd. The Appellants became concerned about the security of the investments and the failure to repay them when promised. In September 2022, they obtained an order appointing a provisional liquidator of Black Capital, as an unregistered company, and freezing injunctions against Mr Ubhi and Mr Patel were granted.
On 14 September 2022, the Winding Up Petition was presented against Black Capital pursuant to Article 7 of the IPO. The Bankruptcy Petitions were presented on 28 September 2022. Statutory demands in relation to them were dated 26 September 2022. On 10 October 2022, the Appellants sought and were granted permission to amend the Winding Up Petition to refer to the Bankruptcy Petitions. The amended statement in the Winding Up Petition is as follows: “The Court is referred to bankruptcy petitions issued against the Partners Mr Sarju Patel and Mr Ravneet Ubhi on 28 September 2022 which have been issued by virtue of Article 8 Insolvency Partnership Order 1994” (the “Amendment”).
The judge was concerned with three main issues. They were: (i) whether there was a dispute on substantial grounds as to whether Mr Ubhi was a partner in the alleged Black Capital partnership; (ii) whether the Winding Up Petition was for a liquidated sum; and (iii) whether the Appellants should be granted various remedial orders waiving certain defects in the processes and granting permission retrospectively to have presented the Bankruptcy Petitions after the Winding Up Petition. She considered the application of Articles 7 and 8 of the IPO under this head.
The first issue, namely, whether there was a dispute on substantial grounds as to whether Mr Ubhi was a partner in Black Capital, arose out of an application to set aside the statutory demand which had been served on Mr Ubhi. The judge concluded that the source of the issue did not affect the test which she had to apply, which was whether there was a real prospect of success as to whether there was a dispute on substantial grounds [8] and [9]. In this regard, she quoted a passage from the judgment of Arden LJ in Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329 at [21] confirming the test and commenting upon its application as follows:
“… In my judgment, the requirements of substantiality or (if different) genuineness would not be met simply by showing that the dispute is arguable. There has to be something to suggest that the assertion is sustainable. The best evidence would be incontrovertible evidence to support the applicant's case, but this is rarely available. It would in general be enough if there were some evidence to support the applicant's version of the facts, such as a witness statement or a document, although it would be open to the court to reject that evidence if it were inherently implausible or if it were contradicted, or were not supported, by contemporaneous documentation: see also per Lawrence Collins LJ in the Ashworth case, para 34. But a mere assertion by the applicant that something had been said or happened would not generally be enough if those words or events were in dispute and material to the issue between the parties. There is in the result no material difference on disputed factual issues between real prospect of success and genuine triable issue.”
The judge went on to note that it was not for her to conduct a mini trial and that where there are bare assertions in a witness statement which were contradicted by contemporaneous documents, it was open to the court to determine that the statements were inherently implausible but that such a determination is reserved for clear cases [10]. In that regard, she quoted a passage in Lord Hamblen's judgment in the Supreme Court in HRH Emere Godwin Bebe Okpabi v Royal Dutch Shell Plc [2021] 1 WLR 1294 at [110] in which he had addressed the circumstances in which factual assertions might be rejected, as follows:
“110 In his judgment at para 190 the Chancellor rejected the complaint that Fraser J had conducted a mini-trial and considered that he was doing no more than subjecting the evidence to critical analysis. He cited para 10 of Potter LJ's judgment in ED & F Man Liquid Products Ltd v Patel [2003] CP Rep 51 in which it was observed that factual assertions do not have to be accepted by the court if it is “clear” that there is “no real substance” in them, “particularly if contradicted by contemporary documents” — ie if they are demonstrably unsupportable. That is only going to be so in clear cases. As Carnwath LJ observed in Mentmore International Ltd v Abbey Healthcare (Festival) Ltd [2010] EWCA Civ 761 at [23], referring to both Potter LJ's judgment in the ED & F Man case and Lord Hope's judgment in the Three Rivers case [2003] 2 AC 1:”
“If Mr Reza was hoping to find in those words some qualification of Lord Hope's approach, he will be disappointed. The Three Rivers case was specifically cited by Potter LJ. He was in my view intending no more than a summary of the same principles. Lord Hope had spoken of a statement contradicted by “all the documents or other material on which it is based” (emphasis added). It was only in such a clear case that he was envisaging the possibility of rejecting factual assertions in the witness statements. It is in my view important not to equate what may be very powerful cross-examination...
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