ROLLS BUILDING
REMOTE HEARINGS IN HEARING ROOM 10
Before INSOLVENCY AND COMPANIES COURT JUDGE BARBER
Thursday 12 November 2020
At 11:30 AM by Microsoft Teams
BR-2019-****** S J B ***
BR-2019-*** J S********
This was a hearing following an application made by the petitioner Assetz SME Capital Limited to bankrupt two debtors, *SJB and *JS, who purportedly had debt outstanding from a mortgage secured against a residential property.
ICC Judge Barber started by detailing the backdrop for today’s hearing. She explained that at a non-attended pre-trial review in April 2020 ICC Judge Jones felt that the debtors position “lacked clarity and needed articulation” in order that the application either be disposed of today or to benefit from further directions.
It is understood that counsel for the debtors, Mr Richard Devereux-Cooke, was instructed today under the Direct Access Scheme and the debtors had effectively acted as Litigants in Person since the conclusion of a possession trial heard before His Honour Judge Moloney QC in 2017.
The judgement from that trial has been requested, but it is understood from submissions made by Mr Devereux-Cooke that HHJ Moloney QC ruled that despite the intentions of Assetz the loan advanced was effectively a regulated mortgage.
It is understood Assetz were found to have been “at fault by entering into this contract when not authorised to do so”, but the judge exercised his discretion to allow the possession to go ahead, therefore permitting “the effect of the loan to continue”.
Mr John Vickery, counsel representing Assetz, told the court that the issues raised today in the debtors Notice of Opposition “could and should” have been raised at the previous trial and were therefore captured under the so-called Henderson v Henderson ruling which as helpfully explained on Wikipedia:
“was a decision of the English Court of Chancery which confirmed that a party may not raise any claim in subsequent litigation which they ought properly to have raised in a previous action.”Mr Vickery further submitted that the debtors were required to show a “genuine triable issue” to prevent the court granting the bankruptcy and that the notice of opposition was “not even close”.
Responding to the lack of clarity Mr Devereux-Cooke told the court it “was unfortunate the debtors were not able to continue with representation” following the trial which with “no disrespect intended” has meant the debtors have “not set out their position in a very clear way”. He submitted that there was enough detail within the notice of opposition to indicate what direction the debtors would go in if they could continue their cross claims against the ‘parties’.
In defining the ‘parties’ involved Mr Devereux-Cooke told the court that whilst the petitioner is Assetz (who manage the P2P lending business involved) behind them are the actual lenders. Reference was made to the cases of
The Lendy London Loan and
the Unbolted loan from which it was asserted this meant the “true counter party in these matters are the individual members of the lending syndicate.”
In response Mr Vickery told the court that there had been a “certain amount of clutching of straws taken from other cases” but in any event the judgements given in the
Lendy London Loan and
Unbolted cases were contract specific. He told the court there were a number of clauses in this loan agreement that clearly shows the petitioner was contracting not just on their own behalf but also on behalf of syndicate members.
It was further submitted by Mr Devereux-Cooke that the debtors had not been given a breakdown of the sums owing. He explained that according to a witness statement from Mr McGrath (understood to be Sean McGrath Head of Legal and Recoveries at Assetz) the charged property sold for over £1.5m but the return shown from the receivers was some £900k. No sufficient explanation for the distribution of the missing £600k had been given it was claimed.
It was further submitted that listed within the witness statement by Mr McGrath were two items which put Assetz into the position of creditor, and therefore entitled to bring this petition. The first was the exit fee and Mr Devereux-Cooke pointed to a clause in the contract which stated that the exit fee was taken from retained monies and so had therefore already been paid and was not owing.
The second item was listed as “the interest rate margin” which was some 50% of the interest owed. Mr Devereux-Cooke explained that the question that now “arose was whether the syndicate members knew of the margin”, “if they hadn’t been told and hadn’t given informed consent then that raised issues around the law of agency and therefore whether agency is valid”. The “syndicate might even have a claim against Assetz” it was suggested.
A claim made in the notice of opposition that the property had been sold under value was not advanced by Mr Devereux-Cooke as it was admitted such a claim should be made against the receivers.
In passing judgement ICC Judge Barber said she considered it “premature” to grant the application for the disclosure of investor details but “wasn’t dismissing the application at this point”.
The court would not be ruling on the Henderson v Henderson issue today, but this presented a “great difficulty” for the debtors. ICC Judge Barber said the court could in any event go behind the decision of a Judge on occasions where a Judgement had been obtained by fraud or where a significant miscarriage of justice had occurred. To be clear these were given as examples and not necessarily representative of the current situation.
ICC Judge Barber said the debtors were “entitled to a detailed breakdown” of the proceeds following the sale of the property and this should be set out in a Witness Statement.
It is understood that the matter will be listed for a pre-trial-review in February 2021.
ICC Judge Barber said the parties should, in the event of any “tricky points” being raised, think about sending the matter up for consideration by a High Court Judge, located a few storeys higher at the Roll’s Building. “There’s a lot of talent on the 4th floor” she told the court.
