Barons Finance Ltd v Barons Bridging Finance & Anor

LADY JUSTICE GLOSTER: I am going to give permission in this case. Mr Gopee has taken me through the chronology of these proceedings, which were started by an application made by the liquidator on 15 December 2014 seeking to set aside a deed of assignment said to be dated 31 March 2012 by which the company in liquidation, Barons Finance Limited (which I shall refer to as BFL), is alleged by Mr Gopee on that date to have assigned its book debts.

It is accepted by the respondent that Mr Gopee's companies, who are appellants with him on this application, Barons Bridging Finance (1) Limited and Reddy Corporation Limited, indeed paid a sum in the region of £76,000, in that it paid off sums owing by BFL to another lender called Kensington. What is said, however, is that the deed of assignment was actually executed much later, apparently at some time in September 2012, after 9 May 2012 when the petition was issued. The winding-up order was made on 19 September 2012.

Mr Gopee appeals on grounds, first, that the judge had refused to allow and to consider the appellant's application dated 2 July 2015, which Mr Gopee says was on the court's file, and therefore had deprived the appellants of their right to a fair trial. That was an application for disclosure which had previously been made by Mr Gopee both in correspondence and in witness statements, a considerable time previously. What he was looking for were documents supporting the value of the book debts, which he claims were in the possession of the liquidators. That would have been correspondence with debtors where they were making claims that the debts were not due because they were made in breach of the Consumer Credit Act. He also wished to see correspondence with the OFT or the FCA, which he said also went to the value of the debts.

His second ground of appeal is that the judge had refused to allow the appellant's witness statement dated 9 July to be used on the grounds that it was late and not in the hearing bundle, whereas the judge had allowed counsel for the FCA to participate in the hearing without any notice to the appellants and had used documents provided by counsel for the FCA although they were not in the hearing bundle, and Mr Gopee complains on behalf of himself and the other two appellants on grounds of lack of parity of treatment and therefore lack of fairness.

As I have said, this is not the appeal of this case. Ms Davy, on behalf of the liquidator has, at the court's request, appeared on this application and has put in a helpful skeleton argument.

What concerns me about this case is that there was an allegation of fraud in relation to the assignment. It was said that Mr Gopee had backdated the document. However, because the judge did not permit him to put in his substantive witness statement dated 9 July, Mr Gopee, it appears, was not given the opportunity to give evidence or indeed to be cross-examined. This was a clear allegation of fraud. It was not pleaded as fraud in the particulars of claim, although, as Ms Davy accepted at trial, clearly the implication was that it was a fraud. Mr Gopee, although an experienced litigant in these courts, is, not surprisingly, not in the same position as experienced counsel to understand how to meet allegations of fraud. I have the impression from reading the judgment that it is certainly arguable, which is all Mr Gopee has to show here, that he was not actually given a proper opportunity to rebut the allegation of the backdating of the assignment, and the judge did not adequately consider the evidence relating to the backdating.

Although Ms Davy says Mr Gopee had every opportunity to make an application for specific disclosure of the evidence he says he needed from the liquidator relating to the value of the book debts, I am also concerned that the judge does not in fact adequately analyse the alternative claim in relation to transactions at an undervalue or as to what the evidence was relating to the debts transferred. The judge makes no reference to the filed accounts of the company, that is BFL, for the previous three or four years which are filed at Companies House, and disclose a value in the region of £60,000 to £70,000 for the book debts. He makes no reference to that at all. He says at paragraph 15 it is difficult to put a value on the debts allegedly transferred and then he refer to a judgment debt against Mr Kelly and the judge says "I have no evidence of that point", but in any event there is a mortgage over Mr Kelly's property.

It seems to me to be very clear from the correspondence and from what was in Mr Gopee's evidence, which he was not allowed to submit to the court, that there is clearly a real issue as to whether Kensington, a competing chargee in relation to the charge over Mr Kelly's property, had obtained priority over BFL, in which case the judgment debt against Mr Kelly for over £200,000 would have been of no value at all. Again, this is the sort of allegation that needed to be tested on cross-examination on proper evidence, with Mr Gopee having an opportunity to produce the evidence to demonstrate that the judgment was worthless because Kensington had priority over BFL in relation to the charge.

Secondly, the judge appears to rely on a schedule of debts produced by the liquidator. Again there is no analysis of how that reconciles to what is in the company's filed accounts. I mention they are not audited, although Mr Gopee tells me they were produced by accountants. What the judge says in relation to those is that there was a debt of about £35,000, above the limit under the Consumer Credit Act, to a particular debtor but Mr Gopee showed me that the offer of loan only related to a sum of £3,000 or £3,500, not a figure of £35,000 as shown in the schedule. Mr Gopee says that was in the bundle. Again the judge says Mr Gopee produced no evidence to substantiate. Mr Gopee's allegation is that the contracts are void are unenforceable under the Consumer Credit Act but that was of course because Mr Gopee was not entitled as a result of the judge's ruling to produce any evidence and it is certainly arguable that in those circumstances it was not procedurally fair to Mr Gopee to apply the principle in Armory v Delamirie (1722) 1 Strange 505, that in the absence of evidence he should resolve any evidential doubts against Mr Gopee.

Again those are the sort of points in relation to which it seems to me Mr Gopee has a reasonable prospect of arguing on appeal. Certainly the procedural history of this matter requires, I think, some investigation. As Mr Gopee tells me, he anticipated that there was going to be a pre-trial review before a High Court judge pursuant to an order made by Peter Smith J on 2 March 2015 in proceedings which were joined to these proceedings on that date by that order. Mr Gopee tells me he was not informed on the hearing on 2 March 2015 prior to the hearing but was only sent the order afterwards. It may be or it may not be that Mr Gopee's expectation that there was going to be a pre-trial review is some sort of explanation as to why he did not make an application for specific disclosure at an earlier stage. All in all I am concerned what procedurally happened about this matter.

I should also say that as the Lady Justice dealing with Barons Finance and related matters and applications to this court for permission to appeal, I know from my background reading that certainly numerous of Baron Finance loans have indeed been held to be unenforceable or subject to questions marks over enforceability as a result of breaches of the provisions of the Consumer Credit Act, and indeed the London Mercantile Court and now the Central London County Court have been involved in numerous such proceedings.

All in all I take the view that it is appropriate, because there is a realistic prospect of success, for Mr Gopee and Barons Bridging Finance Limited and Reddy Corporation Limited to have permission to appeal.

The appellants will have permission to extend the grounds of appeal provided that they serve and file amended grounds of appeal within 28 days of today addressing the evidential matters in relation to the findings of fraud and the findings of undervalue which do not, as it were, appear expressly in the grounds of appeal at the moment. I direct that the appeal should be listed for 1 day. Because I am involved in numerous matters related to Barons Finance and Mr Gopee, if feasible the constitution should include me and at least one other judge with Chancery experience. I shall reserve the costs of this application to the hearing of the appeal because if the appeal is lost by the appellants, then it seems to me there is a strong argument that the liquidator should have his costs of and incidental to today. I will also continue the stay pending the hearing of the appeal.