TOWN AND COUNTRY PROPERTIES (GB) LTD AND OTHERS v PATEL AND OTHERS

For an application concerning a statutory demand or winding-up petition, the court asks whether the alleged dispute has a real prospect of success and is substantial. It must avoid conducting a mini-trial, but need not accept factual assertions at face value. Evidence may be rejected without cross-examination in a clear case where it is demonstrably unsupportable, particularly when contradicted by contemporaneous documents.

An appellate court should interfere with an evaluative decision only for an error of law, an identifiable flaw in the reasoning, or a conclusion which no reasonable judge could reach. A debt is liquidated only where it is pre-ascertained or calculable by contractual machinery. A liability cannot be treated as liquidated in part and unliquidated in part.

The appellants appealed orders dismissing a winding-up petition against Black Capital, a statutory demand and bankruptcy petition against Mr Ubhi, and a further bankruptcy petition against Mr Patel. The underlying claims arose from investments in an alleged partnership operated as Black Capital.

The Deputy ICC Judge held that there was a dispute on substantial grounds about whether Mr Ubhi was a partner and whether a partnership existed. She also held that the winding-up petition was governed by Article 8 of the Insolvent Partnerships Order 1994, and that part of the alleged debt was liquidated.

The appeal challenged the evaluation of the evidence, the application of Articles 7 and 8, and the characterisation of the alleged debt as liquidated. The central issues were whether the partnership dispute had a real prospect of success and whether the sums claimed were liquidated debts.

1. Appeal dismissed. The appellants failed to show any error in the Deputy ICC Judge’s conclusion that there was a dispute on substantial grounds as to whether Mr Ubhi was a partner of Black Capital.
2. The applicable test under rule 10.5(5)(b) of the Insolvency (England and Wales) Rules 2016 was whether the dispute had a real prospect of success. The court was not required to conduct a mini-trial. It could subject affidavit evidence to critical analysis and reject factual assertions in a clear case, particularly where they were contradicted by contemporaneous documents. That power had to be exercised cautiously.
3. The judge was entitled to consider the evidence in the round. Although aspects of Mr Ubhi’s evidence lacked credibility, the independent contractor agreement, employment contract, payslips, other witness evidence and documentary material created a real, rather than fanciful, prospect that no partnership existed. Rejecting some of his evidence did not require rejection of the remaining evidence or an inevitable finding that he was a partner.
4. The appellate court should be reluctant to interfere with an evaluative decision unless there was an error of law, an identifiable flaw such as a gap in logic or failure to take account of a relevant factor, or a conclusion which no reasonable judge could have reached. No such flaw was established.
5. The court declined to decide the relationship between Articles 7 and 8 of the Insolvent Partnerships Order 1994, observing that the issue was interesting and difficult but not determinative on the appeal.
6. The liquidated-sum ground in the Respondent’s Notice succeeded. A liquidated sum must be pre-ascertained or calculable by contractual formula or machinery. Under the relevant managed fund agreements, the amount payable after the fixed term depended on the investment, including profits and losses, and required an account. The risk provision was a warranty as to maximum loss, not a covenant to repay 90% of the investment. A liability could not be liquidated and unliquidated in parts.

• High Court (Chancery Division): Deputy ICC Judge Agnello KC dismissed the winding-up petition, set aside the statutory demand and dismissed the bankruptcy petitions by orders dated 17 November and 15 December 2022. The judgment was cited as [2022] EWHC 2914 (Ch).
• High Court (Business and Property Courts): Lady Justice Asplin dismissed the appeal. To the extent necessary, she allowed the Respondent’s Notice on the liquidated-sum issue.