Town & Country Properties (GB) Ltd v Black Capital (an Unregistered Company)
| Jurisdiction | England & Wales |
| Judge | Raquel Agnello |
| Judgment Date | 17 November 2022 |
| Neutral Citation | [2022] EWHC 2914 (Ch) |
| Docket Number | Case Nos: CR-2022-003123, BR-2022-000355, BR-2022-000356 |
| Court | Chancery Division |
[2022] EWHC 2914 (Ch)
DEPUTY INSOLVENCY AND COMPANIES COURT JUDGE Raquel Agnello KC
Case Nos: CR-2022-003123, BR-2022-000355, BR-2022-000356
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES COURT LIST (CHANCERY DIVISION)
Rolls Building
London
EC4A 1NL
Mr Daniel Lewis (instructed by FWJ Legal Limited) for the Applicant/Petitioners
Mr James Kinman (instructed by Grovesnor Law) for the Second Respondent
Mr Dan McCourt Fritz and Mr Tim Benham-Mirando (instructed by Thursfield Solicitors) for the Third Respondent
Hearing dates: 26 October and 4 November 2022
Introduction
On 14 September 2022, a petition was presented to this Court by Town and Country Properties (GB) Ltd, Lacuna Ventures Ltd, The Beauty Creative Limited, Vardo Ventures Ltd, Home to Home Exchange Limited, Sandra Mitchell, Lorna Mitchel, Jane Mitchel and Robert Mitchell (‘the Petitioners’) seeking to wind up a partnership known as Black Capital. That petition was presented pursuant to article 7 of the Insolvent Partnerships Order 1994 (‘the IPO’). No concurrent bankruptcy petitions were presented on the same day as against two of the partners of the partnership, being Mr Sarju Patel, the Second Respondent (‘Mr Patel’) and Mr Ravneet Ubhi, the Third Respondent (‘Mr Ubhi’). Thereafter, on 28 September 2022, the Petitioners issued bankruptcy petitions against Mr Patel and Mr Uhbi. Statutory demands had not been served in accordance with the Insolvency Rules prior to the issue of these bankruptcy petitions. On 10 October 2022, the Petitioners sought and were granted permission to amend the partnership petition so to refer to the bankruptcy petitions. The amended statement in the partnership 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 Insolvent Partnerships Order 1994.’ The order of 10 October 2022 also gave directions for the purposes of the hearing before me.
Before me, I have the partnership petition, the two bankruptcy petitions against Mr Patel and Mr Ubhi respectively, as well as an application by the Petitioners seeking permission pursuant to section 124(3)(a) of the Insolvency Act 1986 (as amended by paragraph 8 of Schedule 4 of the IPO) to present the Bankruptcy petitions on a date different from the winding up petition. There are also issues relating to the fact that the winding up petition, being now, it appears, a petition pursuant to article 8 of the IPO, was not preceded by a statutory demand in accordance with the IPO and the relevant amended legislation. Additionally, the bankruptcy petitions were not preceded by statutory demands served in accordance with the Insolvency Rules. The statutory demands are both dated 26 September 2022 with the petitions being issued on 28 September 2022 in both cases. The Petitioners seek a winding up order in respect of the petition and bankruptcy orders in relation to the two petitions. They seek various directions/orders to deal with the defects. These orders are opposed by the Respondents on various grounds as set out below.
The issues before me are as follows:-
(1) Is there a dispute on substantial grounds as to whether Mr Ubhi was a partner in the partnership, Black Capital
(2) Is the partnership petition for a liquidated sum, and
(3) Whether I should grant to the Petitioners the following orders—
(i) Dispense with the service of a statutory demand prior to the issue of the partnership petition or in some way waive the defect in the partnership petition as amended;
(ii) Waive the defect in that the bankruptcy petitions were issued prior to the expiry of the period of time for a debtor to apply to set aside the statutory demands;
(iii) Grant permission retrospectively to have presented the bankruptcy petitions after the presentation of the partnership petition
I will deal in this judgment with the issues in the order set out above after setting out a brief background including a summary of the history of the court proceedings.
The background facts and court proceedings
I take some of this background from the helpful skeleton of Mr Daniel Lewis acting on behalf of the Petitioners. The Petitioners are members of the same family and their companies. Over the period from September 2018 until about July 2021, they invested personally, or through a company in which one or more of them had a substantial interest. The total sum invested, according to Mr John Mitchell, one of the investors, is £13,702,750. Mr Mitchell asserts, on behalf of all Petitioners, that the total sum due is £18,362,520. This sum gives credit for post 1 December 2021 credits. As alternatives, Mr Daniel Lewis, acting on behalf of the Petitioners, identified lower sums which he submitted were liquidated sums due and owing. I deal with this below.
On 15 September 2022, the Petitioners sought and obtained, at a without notice hearing, an order appointing a provisional liquidator of Black Capital as an unregistered company (an article 7 petition) and a freezing injunctionsagainst Mr Patel and Mr Ubhi. The grounds for making the application are set out in the affidavits filed in support and set out concerns relating to the safety of their investments and the failure to repay them when promised. These interlocutory proceedings have now been adjourned to come on before a High Court Judge in the week commencing 21 November 2022. As far as I am aware, there will be an application seeking to discharge the freezing orders. It is of course important for the Judge hearing the interlocutory proceedings to know the outcome of the hearing before me and therefore I have ensured that this judgment is handed down prior to the 21 November 2022.
Mr Stephen Hunt, the Provisional Liquidator, has filed various witness statements and affidavits. He states that Mr Patel and Mr Ubhi have not cooperated with him as Provisional Liquidator and that he has not been provided with access to Black Capital's trader accounts, its email account and the Hello Sign platform (an electronic platform to enable, amongst other matters, the electronic signing of documents). Additionally, Mr Hunt states that ledgers and accounting records have also not been provided. Mr Hunt estimates that by the end of 2021, there were more than 300 investors with managed fund agreements between themselves as investors and the partnership. Mr Hunt has carried out an analysis of the bank statements which have been disclosed by Mr Ubhi and he states that this analysis demonstrates that the partnership has been operating as a Ponzi scheme. Effectively the high returns being made to the existing investors were being paid from sums received from new investors. He states that less than one fifth of the incoming money were used to make actual investments. Mr Hunt's evidence in this regard makes for some disturbing reading. He states that he has been unable to locate any assets or funds held by the partnership. It appears from at least what Mr Hunt sets out that Black Capital was operating an unauthorised collective investment scheme.
Mr Patel accepts that the business of Black Capital operated as a partnership between himself and Mr Ubhi. He made an application seeking to set aside the statutory demand which had been presented against him. He asserted that from November 2019, the clients, assets and debts and liabilities of the partnership were taken over by Black Capital Partners Limited. This application was summarily dismissed by ICC Judge Jones on 7 October 2022 who stated, ‘this does not release the partners from their existing liabilities to the creditors unless the creditor consented to the assignment. This is not suggested in the evidence.’ Mr James Kinman, who appears on behalf of Mr Patel, made submissions in relation to the defects in the petitions as well as submitting that the petition could not succeed because it was not for a liquidated sum. His submissions on these points were adopted by Mr Dan McCourt Fritz and Mr Tim Beham-Mirando, acting on behalf of Mr Ubhi. As I have indicted above, I will deal with these issues after determination of first issue. For this reason, I will not set out at this stage any further procedural background.
The issue of whether there is a dispute on substantial grounds as to whether Mr Ubhi was a partner in Black Capital – summary judgment test
The majority of the time before me was spent on the issue as to whether there was a dispute on substantial grounds relating to Mr Ubhi being a partner of the Black Capital Partnership. Although the matter arises by way of an application to set aside the statutory demand which has been served on Mr Ubhi, the bankruptcy petition is also before me. The fact that I have both the application to set aside the statutory demand as well as the bankruptcy petitions before me does not, in my judgment, alter the test. I have used the words above, namely, whether there is a dispute on substantial grounds as to whether Mr Ubhi was a partner of Black Capital, which is one of the ways the test has been formulated in the relevant case law. It is well established that what I have before me is a summary judgment test.
There are many cases which set out this test, sometimes using different wording or expressions. However I will set out certain passages from the decision of Lady Justice Arden in Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329. That case involved an...
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Town and Country Properties (GB) Ltd and Others v Patel and Others
...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). 3 The Appellants, who were the petitioners in relation to the Winding up Petition, the Ubhi Bankruptcy Petition and a further bankruptcy......