Barons Bridging Finance 1 Ltd & Ors v Barons Finance Ltd

A litigant in person must have a proper opportunity to present evidence on central allegations such as fraud, backdating and undervalue. It is unfair to refuse relevant evidence or disclosure and then draw serious adverse inferences from its absence.

The court must fairly assess evidence bearing on recoverability and value before deciding whether a transaction is at an undervalue or intended to defraud creditors. Where procedural failures prevent a fair trial, the appeal should be allowed and the matter remitted for case management and, if necessary, retrial.

The High Court, Chancery Division, declared that an assignment of a company's book debts was void under the Insolvency Act 1986, alternatively setting it aside as a transaction at an undervalue and a transaction intended to defraud creditors. The decision is reported at [2015] EWHC 2007 (Ch).

The appellants, including the company's director who acted in person, challenged the refusal to hear late disclosure and witness evidence and the drawing of adverse inferences from its absence. The central issue was whether the appellants had received a fair trial concerning the assignment's alleged backdating, value and purpose.

1. Disposition. The appeal was allowed. Lady Justice Gloster delivered the judgment, with Lord Justice Kitchin agreeing. The appellants had not received a fair trial consistent with their Article 6 rights. The High Court's declaration under the Insolvency Act 1986, and its alternative conclusions concerning undervalue and fraud on creditors, could not safely stand.
2. Opportunity to present evidence. The allegations of fraudulent backdating and acquisition of the company's principal asset at an undervalue were central and interconnected. The defence and witness statements denied them. The judge should have allowed Mr Gopee, although experienced in litigation, to give evidence in chief and be cross-examined, or should have admitted his further statements and allowed cross-examination.
3. Disclosure and valuation. The material put forward raised a strong prima facie case that the value of the loan book might not exceed the consideration paid. Relevant matters included the company's filed accounts, Consumer Credit Act enforceability problems, adverse decisions in Olubisi and Mackanju, Kensington Mortgage Company's asserted priority over security for the Kelly debt, and information held by the liquidator and regulators. The judge should have considered whether relevant disclosure was available. A late application did not justify refusing it where the opposing party could deal with the material immediately or after a proportionate adjournment with appropriate costs directions.
4. Adverse inferences. It was wrong to determine Mr Gopee's credibility while refusing him the opportunity to give evidence, and then to use the resulting absence of evidence against him. The reasons relied on for inferring backdating were equivocal. In particular, the absence of notices to debtors meant that, under section 136 of the Law of Property Act 1925, legal ownership might have remained with the company while a beneficial interest had passed. The judge also failed properly to analyse the loan schedule, security priority and evidence concerning unenforceability.
5. Remittal. The matter was remitted to a different High Court judge or deputy judge for an urgent case management conference. Directions were to address specific disclosure, evidence, replies, cross-examination, the date and length of a retrial, and any other necessary matters.

• Court of Appeal (Civil Division): appeal allowed and matter remitted to the Chancery Division for case management and retrial directions.
• High Court, Chancery Division: the deputy judge declared the assignment void under the Insolvency Act 1986, alternatively setting it aside under sections 238 and 423. Decision reported at [2015] EWHC 2007 (Ch).