MARPAUL SOUTHERN LIMITED v BETTESHANGER SUSTAINABLE PARK LIMITED

On an appeal against rejection of a proof of debt, the court determines on the evidence before it whether the claimant has proved the debt on the balance of probabilities. An office-holder’s role is neutral but investigative: every proof must be examined and supported by satisfactory evidence.

A document is a sham only where the parties share an intention that it should create the appearance of rights and obligations different from those they intend, including an intention to mislead third parties or the court. An artificial or uncommercial agreement, or later departure from its terms, is not by itself a sham. Findings of dishonesty require particular procedural fairness and a proper opportunity to respond.

Marpaul appealed under rule 14.8(1) of the Insolvency (England and Wales) Rules 2016 against the liquidators’ rejection of a proof of debt for approximately £1 million. The claim concerned construction and management works at a visitor centre owned by Betteshanger Sustainable Park Ltd.

The liquidators challenged the authenticity and effect of a JCT contract, alleging that it might have been backdated or created as a sham for funders. They also disputed the quantum of the claim and liability for post-suspension site-security and standard charges. The central issues were whether the JCT contract was genuine and binding, whether Marpaul had proved the unpaid account, and whether the later charges were liabilities of the Company.

1. Appeal and applicable approach. The appeal was allowed in substance. It was not an appeal in the true sense. The court’s task was to determine, on the evidence then before it, whether Marpaul had proved its debt on the balance of probabilities. The liquidators’ role was neutral but not passive; they were required to investigate the proof and require satisfactory evidence that it represented a real debt.
2. Sham. The court applied the principles in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 and Hitch & Ors v Stone [2001] EWCA Civ 63. A sham requires a common intention to create apparent rights and obligations different from those intended, together with an intention to mislead third parties or the court. The court may examine external evidence, including subsequent conduct. An uncommercial or artificial agreement is not necessarily a sham, and later departure from contractual terms may reflect variation rather than an absence of initial intention to be bound.
3. Dishonesty and fairness. A sham involves dishonesty, although the civil standard remains the balance of probabilities. Fraud and dishonesty are inherently improbable, so cogent evidence is ordinarily required, and there is a strong presumption against treating a formally signed document as a sham. The court must be extremely cautious before making an adverse dishonesty finding and must give the affected witness a proper opportunity to answer the allegation. The court applied that approach and found insufficient evidence that the JCT contract had been backdated.
4. Application. The JCT contract was genuine and was intended to formalise the contractual relationship between Marpaul and the Company. The cost-plan and valuation evidence supported the contractual payment mechanism, and Marpaul proved an unpaid balance of £698,484 plus VAT. No sufficient basis existed for liquidated damages. The post-January 2019 security and standard-charge instructions were separate instructions given on behalf of Hadlow College, not liabilities of the Company under the JCT contract.
5. Procedure and costs. A split trial was refused because the application was late, would cause further delay and costs, and the evidence could be assessed without expert assistance. Marpaul succeeded overall and was awarded its costs against the Company; the liquidators were entitled to an indemnity in respect of their costs.

The judgment records an appeal by Marpaul under rule 14.8(1) of the Insolvency (England and Wales) Rules 2016 against the liquidators’ rejection of its proof of debt. No separate lower-court citation is stated.