Barons Finance Ltd v Barons Bridging Finance 1 Ltd & Anor

The Court of Appeal dismissed the appellant's challenge to the judgment of David Stone (sitting as a Deputy High Court Judge) which had declared a deed of assignment dated 31 March 2012 to be void. Central to the decision was the application of section 127 of the Insolvency Act 1986: the court held that assignments executed after the presentation of winding‑up petitions (and pending winding‑up orders) were void. The judge’s conclusions that the deed was also vulnerable to challenge under section 238 (transactions at an undervalue) and section 423 (transactions defrauding creditors) of the Insolvency Act 1986 were accepted. The Court of Appeal also upheld the judge’s refusal to adjourn the trial and his allowing the claimant to discontinue proceedings against the appellant where he no longer had a relevant interest; the restraint order under the Proceeds of Crime Act 2002 did not amount to an appointment of receiver nor confer standing on the appellant to represent the companies. Costs were ordered in the appellant’s favour in respect of his personal defence costs to date.

Background and parties:

• The claimant, Barons Finance Limited (in liquidation), challenged a deed of assignment dated 31 March 2012 which purported to transfer its loan book to Barons Bridging Finance 1 Limited and Reddy Corporation Limited. The sole director of those companies was the appellant, Mr Dharam Prakash Gopee.
• The liquidator alleged the deed was not executed on the date it bore and that it was void under section 127 of the Insolvency Act 1986. Further allegations invoked sections 238, 239 and 423 of the Insolvency Act 1986.

Procedural history:

• An order had originally been made in July 2015 declaring the deed void; that decision was overturned by the Court of Appeal on 14 June 2016 due to unfair trial, and the matter was remitted. The matter returned to the Chancery Division and was tried before David Stone (Deputy High Court Judge) ([2018] EWHC 496 (Ch)).
• Before the trial, the claimant sought permission to discontinue its claims against Mr Gopee personally; the judge allowed discontinuance but ordered Finance to pay Mr Gopee’s costs to date. The judge also refused an adjournment application by Mr Gopee and proceeded to determine the substantive challenges to the 2012 Deed.

Nature of claim and relief sought:

• Finance sought declarations that the 2012 Deed was void (section 127), relief under sections 238 and 423 of the Insolvency Act 1986, orders for recovery of payments, disclosure and rectification of the Land Registry to reinstate Finance as chargeholder, and injunctions restraining collection or dealing with the loans.

Issues framed by the court:

Whether the deed had been executed before presentation of the winding‑up petition (and therefore valid), or whether it post‑dated the petition and was void under section 127; whether the deed was vulnerable under sections 238 and 423; whether the claimant could discontinue against Mr Gopee and whether the trial should be adjourned; whether the restraint order under the Proceeds of Crime Act 2002 conferred on Mr Gopee any receiver‑type powers or standing; and whether alleged later assignments to Mr Gopee were effective or susceptible to validation.

Court’s reasoning and conclusions:

• The judge and the Court of Appeal concluded the deed had not been entered into until on or about 17 September 2012, after the presentation of the winding‑up petition, so it was void under section 127. The deed was also susceptible to challenge under sections 238 and 423.
• The restraint order made under the Proceeds of Crime Act 2002 did not appoint Mr Gopee as receiver or confer standing to act for the companies; paragraph 6 of that order simply extended the restraint to assets of the companies and did not create authority for him to represent them.
• Assignments alleged to have passed title to Mr Gopee (notably a purported assignment on 23 April 2017) were ineffective because winding‑up petitions/orders in respect of the companies were already pending or imminent, and no validation application had been pursued. The alleged assignments would also have contravened the restraint order.
• The judge was entitled to refuse an adjournment because, by the time of the hearing, Mr Gopee had no relevant interest in the subject matter, there were many parties awaiting determination of the litigation, and the proceedings had been long delayed. The Court of Appeal declined to remit or adjourn the appeal for belated challenges to the earlier winding‑up order where the time for appeal had long passed.

The appeal is dismissed. The Court of Appeal agreed with the judge that the 2012 Deed was not entered into until after presentation of the winding‑up petition and was therefore void under section 127 of the Insolvency Act 1986; the deed was also susceptible to challenge under sections 238 and 423. The judge was justified in allowing the claimant to discontinue against the appellant and in refusing an adjournment because the appellant no longer had a relevant interest, the restraint order did not make him a receiver or give him standing, the alleged later assignments were void, and no validation application had been pursued.

First instance and intermediate steps: Mr Halpern QC (Deputy High Court Judge) declared the deed void on 9-10 July 2015 (decision reversed by the Court of Appeal on 14 June 2016 for procedural unfairness and remitted). At first instance after remittal the matter was heard by David Stone (sitting as a Deputy High Court Judge) — reported at [2018] EWHC 496 (Ch) — who declared the deed void and made orders including rectification of the Land Registry. The present appeal to the Court of Appeal (this judgment) is [2019] EWCA Civ 2074 and was dismissed.