The Official Receiver & Anor v Azam Iqbal Haq & Anor

The court considered an application by the Official Receiver (acting as liquidator) for summary judgment against the sole director and shareholder, Mr Azam Iqbal Haq, and (originally) default judgment against his spouse. The OR relied on insolvency and company law causes of action, including allegations that payments from the company were payments at undervalue under the Insolvency Act 1986 and breaches of directors' duties under the Companies Act 2006 (sections 171, 172 and 174).

Applying the summary judgment test in CPR 24.3 and the authorities on evaluating evidence at the summary judgment stage, the court declined to enter summary judgment. The OR discontinued the proceedings against the spouse and did not press strike out of the defence. The court found that factual disputes and evidential gaps (including the true recipient and purpose of many payments, possible overlap with salary and director's loan account entries, and untested bank records) meant Mr Haq had a real prospect of successfully defending the claims. The Salary Claim was not pressed to summary judgment and will proceed to trial, as will the Payments Claims and the director's loan account claim.

Background and parties: Wifime Ltd was wound up following an HM Revenue & Customs petition. The Official Receiver (OR) as liquidator issued proceedings against the companys sole director and shareholder, Mr Haq, and his spouse (R2), seeking repayment of sums alleged to have been improperly paid from the companys bank account, repayment of an alleged outstanding directors' loan balance and repayment of salary paid without contractual entitlement.

Relief sought: The OR sought default judgment against R2 and summary judgment against Mr Haq for (i) salary payments of

(The paragraph above contains no additional factual material beyond the judgment but summarises the character of the claims.)

Procedural posture and issues: The hearing concerned whether the court should enter summary judgment under CPR 24.3. The court had to decide whether Mr Haq had no real prospect of defending: (a) the Salary Claim (alleged absence of contractual entitlement), (b) the Payments Claims (payments from the company to the spouse or, as later alleged by Mr Haq, to himself, alleged to be gratuitous or in breach of directors' duties), and (c) the DLA Claim (an outstanding directors' loan balance recorded in the company's accounts). The OR relied on company accounts, bank payment schedules and witness statements; Mr Haq largely relied on oral submissions and had not filed written evidence in advance.

Court's reasoning and subsidiary findings: The court applied established summary judgment principles and authorities on the courts ability to evaluate evidence without holding a mini-trial. It gave Mr Haq an opportunity to respond despite procedural non-compliance. The OR discontinued proceedings against the spouse and did not pursue strike out. The OR did not press summary judgment on the Salary Claim when confronted with arguments about the Duomatic principle and the company accounts recording salary, so the court found there was a real prospect of defence requiring trial. For the Payments Claims the court identified substantial factual issues: many payments contain secondary reference lines suggesting they may be salary or expense reimbursements; Mr Haq produced a screenshot purporting to identify the recipient account; the OR had not obtained bank payment trace information; and there may be double counting between different heads of claim. On the DLA Claim the court identified apparent payments into the company account after the ledger balance date which might have discharged the loan, and potential overlap with other payments; absent further evidence the court could not be satisfied the defendant had no real prospect of defending. Because of these factual disputes and evidential gaps, summary disposal was inappropriate.

Outcome and directions: The court refused to enter summary judgment on the contested claims and directed that the claims against Mr Haq proceed to trial as soon as practicable, with liberty for the OR to apply to amend the Points of Claim and further directions to be addressed on handing down.

This was a first instance decision refusing summary judgment. The court declined to enter summary or default judgment against the respondents and directed that the contested claims (salary, payments and directors' loan account) proceed to trial. The court reached this outcome because there were live factual disputes, potential overlap between pleaded heads of claim, evidential gaps (including untraced recipient bank records) and the OR had discontinued the claim against the spouse; accordingly the court concluded the respondent had a real prospect of defending and a trial was required.