Barons Bridging Finance 1 Ltd & Ors v Barons Finance Ltd

This is an appeal by the appellants, Barons Bridging Finance 1 Limited (“the first appellant”), Reddy Corporation Limited (“the second appellant”) and Dharam Prakash Gopee, the third appellant, (“Mr Gopee”) against a decision of Mr David Halpern QC (sitting as a deputy judge of the Chancery Division) dated 10 July 2015 whereby he declared that an assignment of the book debts of the respondent, Barons Finance Limited (“the Company”), was void under section 127 of the Insolvency Act 1986 (“the Act”) on the grounds, as he held, that it had been made after the commencement of the Company’s winding up or, even if that were not the case, should be set aside (a) under section 238 of the Act as a transaction at an undervalue and (b) under section 423 of the Act as a transaction to defraud creditors.

The deed entitled “Deed of Assignment of a Portfolio of Debts” pursuant to which the assignment was effected (“the assignment”) purportedly bore the date 31 March 2012. It was entered into between the Company and the second appellant of the one part (as assignor) and the first appellant and the second appellant of the other (as assignee). It was signed on behalf of all three companies by Mr Gopee as a director and witnessed by him in a stated capacity of “Secretary”.

The issue on the appeal is basically whether Mr Gopee had a fair trial in relation to the issue of the validity of the assignment.

At the hearing of the appeal, Mr Gopee, who appeared in person, was permitted by the court to address the Court on behalf of the other two appellants as well as on his own behalf. Miss Felicia Davy appeared as counsel on behalf of the Company, as she had done below.

Prior to its liquidation, the Company carried on business as a money lender. According to Mr Gopee’s evidence, all the Company’s loans, with the exception of one, were regulated under the Consumer Credit Act 1974 (“the CCA”) and by reason of non-compliance with the requirements of the CCA, the majority were, as it turned out, unenforceable.

In July 2008 the Company issued proceedings against a Mr and Mrs Mayendesa (“the petitioning creditors”) in respect of a loan and obtained a default judgment. The petitioning creditors successfully applied to set the judgment aside on the grounds that the loan agreement was in breach of the requirements of the CCA and obtained an order for costs in their favour. The costs were not paid and on 9 May 2012 they presented a winding up petition against the Company. On 19 September 2012, the Company was wound up under the provisions of the Act by order of the High Court of Justice, Manchester District Registry, following a contested hearing.

Mr Alan Brian Coleman (“the liquidator”) was subsequently appointed as liquidator of the Company with effect from 26 November 2012. Following his appointment, the liquidator requested details of the Company’s assets from its director, Mr Gopee, including details of all loans owed to the Company which might be realised for the benefit of its creditors.

By a letter dated 26 February 2013, Mr Gopee provided the liquidator with a copy of the assignment. The assignment purported to assign and transfer absolutely with full title guarantee all the debts currently held in the Company’s and the second appellant’s books and records which were to be handed over to first and second appellants on a date to be fixed. According to paragraph 4 of the assignment, the consideration for the assignment was the payment(s) to be made by the first and second appellants to a judgment debtor of the Company, Kensington Mortgage Company Limited (“KMC”) on behalf of the Company, following the latter’s actually unsuccessful appeal to this court on 15 November 2011. The relevant provisions of the assignment were as follows:

“1.

The Assignor is vested with various debts due to and owing by various borrowers which have been recorded in the books and records of the Assignor.

2.

Some of the debts are judgment debts carrying contractual interests in accordance with the terms and conditions set out in the various letters of offer signed and agreed by the debtors and are no longer secured on any properties or assets belonging to the debtors which are likely to be irrecoverable. Other debts are subject to the restrictions of the Consumer Credit Act 1974 the requirements of which the Assignor did not comply with and thus recovery can only be effective by way of litigation through the Courts. Some of the debts are held solely in the name of Barons Finance Limited while others are held jointly in the name of both Barons Finance Limited and Reddy Corporation Limited. Some of the debts were created in favour of Barons Finance Limited acting as agent for and on behalf of Reddy Corporation Limited which is the holder of a Consumer Credit License Number 478145, the renewal of which had been refused by the Office of Fair Trading but is currently under appeal the outcome of which will not be known until after the appeal hearing. Some of the debts are subject to counterclaims having been made by the debtors of the Assignor against Barons Finance Limited. Some of the debts are secured on the debtors’ properties which are in negative equity and others which are secured on properties having equity have been faced with the Consumer Credit issues the recovery of which and enforceability of which have been hampered and treated as bad debts.

3.

The Assignor assigns and transfers absolutely to the Assignee, with full title guarantee all the debts currently held in the Assignor’s books and records which the Assignor shall hand over to the Assignee on a date to be fixed when for the purpose of executing a transfer of all the legal charges currently held in the name of Barons Finance Limited and other legal charges held in the joint names of both Barons Finance Limited and Reddy Corporation Limited shall be executed and which in any event shall not exceed a period of 6 months from today’s date. In the interim and from today’s date the Assignor shall manage the debts as the agent and or as the attorney of the Assignee, such power of attorney having been irrevocably granted by the Assignor to the Assignee with immediate effect upon the execution of this deed.

4.

The consideration for the assignment is the payment(s) to be made by the Assignee to a creditor of the Assignor known as Kensington Mortgage Company Limited(“Kensington”) following the unsuccessful appeal by Barons Finance Limited in the Court of Appeal under Reference A2/2010/0795 that took place on the 15^th November 2011. that such payments to Kensington by the assignee shall be in accordance with the settlement agreed with DLA piper UK LLP, the Solicitors acting for Kensington in their dated 20^th March 2012 addressed to Barons Finance Limited.

5.

The Assignment includes all the various money judgments obtained in different County Courts in the UK either in the name of Barons Finance Limited and or in the joint names with Reddy Corporation Limited without any exception or reservations which are the Assignee can apply at any time with immediate effect to be substituted through the appropriate court as a Claimant and or Joint Claimants where appropriate for the purpose of enforcing recovery of the said debts by the Assignee.

6.

If in the event there exists any residual security still owned by the Debtors other than real estate including any chose in action or chattels which can be recovered then this assignment also includes a transfer and assignment of the appropriate residual securities as well.

7.

The Assignor irrevocably undertakes to hand over on the day specified in paragraph 3 above all books, records, documents and legal charge deeds executed by the borrowers/debtors to the Assignee the titles and benefits of which shall with immediate effect vest solely in the name of the Assignee.

8.

The Assignor irrevocably undertakes to provide the Assignee and or anyone deriving title from the Assignee all documents, letters and or any instruments required for the purpose of recovering the abovementioned debts and to fully cooperate in the discharge and or enforcement or recovery of any securities which are associated with the debts.”

It does not appear to have been in dispute before the judge (or indeed in this court) that:

No schedule was attached to the assignment particularising the portfolio of debts allegedly included in the assignment.

The liquidator made an application for Mr Gopee to be publicly examined and for production of various documents. On 31 March 2014 the liquidator’s application for public examination was dismissed with costs but an order was made requiring Mr Gopee to produce copy agreements and payment schedules and various other documents in respect of the Company’s loans. In the event that Mr Gopee did not attend an interview at the liquidator’s office on 2 May 2014, the order provided that a private examination would be listed for 10 November 2014.

Pursuant to the terms of the order of 31 March 2014, and under cover of a letter dated 10 April 2014, Mr Gopee sent to the liquidator’s solicitors documentation relating to the loans, which appeared in the bundles at the hearing of the application and on the appeal. This information included copies of 81 “loan offer” letters sent by the Company, the names and addresses of the debtors, details of the amounts advanced to each debtor and details of the relevant security where appropriate. The documents supplied also included letters to the debtors notifying them of the purported assignment of their loans, said to have taken place on 3 November 2013, to another company with which Mr Gopee is connected, namely Speedy Bridging Finance Limited (“Speedy”). The letters to debtors appeared to be from both Speedy and the first appellant. No reference was made in such letters to the fact that, on the appellants’ case, there had been an intervening assignment of their loans by the Company to the first appellant on 31 March 2012.

On 2 May 2014 Mr Gopee duly attended for interview at the liquidator’s office.

As a result of the disclosure of loan documentation by Mr Gopee, the liquidator prepared a schedule in Microsoft Excel format which set out: the borrower; property address, date and amount of the loan advance and a schedule of payments (“the schedule”). On 6 May 2014, the liquidator sent a copy of the schedule to Mr Gopee for him to check and confirm that it was a full and accurate reflection of the loan book and for any inaccuracies or missing information to be corrected.

Mr Gopee replied by letter dated 3 June 2014, in which he asserted that he was unable to confirm the accuracy of the schedule as he did not understand Microsoft Excel and was not computer literate.

On 5 August 2014, following letters before action sent to the appellants, the liquidator issued an application against the appellants seeking inter alia an order setting aside the purported assignment of the Company’s loan book, on grounds that the assignment:

In a witness statement dated 11 December 2014, Mr Gopee sought an order for disclosure of various documents as set out in his letter to the liquidator’s solicitors, Stephensons, dated 9 December 2014 relating to the value of the underlying loans purportedly assigned. In this letter he explained that the alleged assignment was not at an undervalue:

“because a very large majority of the book debts were unenforceable and subject to the restrictions and stigmas attached to the contracts which the Office of Fair Trading (“OFT”) has claimed to be illegal.”

In his witness statement he referred to the fact that, in a judgment dated 5 February 2014, His Honour Judge Mackie QC had explained why many of the loans were illegal and unenforceable, for CCA reasons, not least because of Mr Gopee’s own alleged conduct in relation to the loans and that accordingly they were of very limited and restricted value. He stated:

“3.

The Applicant has amongst other allegations stated that it was a transaction to an undervalue which is something I dispute. This is because a very large majority of the book debts were unenforceable and subject to the restrictions and stigmas attached to the contracts which the Office of Fair Trading (“OFT”) has claimed to be illegal. The Applicant is aware of this and has been in constant communication with the OFT….

4.

Furthermore by a judgment dated 5 February 2014 Judge Mackie had described the types of the loans, their legality and their enforceability and my alleged own alleged conduct in connection with these loans. Thus the book debts are of very limited and restricted value….

5.

In order to seek justice relating to the value of those book debts, their recovery and enforceability it is essential for me to know what went on and what was decided by the OFT. I am not aware of any decision or findings of the OFT because so far all I know is that there was a meeting between the Applicant, his Legal Advisor and the OFT. I am also aware that the Applicant had been liaising closely with the OFT.

6.

Additionally there has also been secret communications between the Applicant and Judge Mackie. This is confirmed in the Odedra Case whereby Speedy Bridging Finance Limited (“Speedy”) which had re-acquired the book debts which are the subject of these proceedings obtained an interim Charging Order on the property of Mr and Mrs Odedra in the Luton County Court on 5^th February 2014. The Applicant was made aware of it by letter dated 17^th February 2014. This was to give the Applicant an opportunity to take part and or make his representations or claim in the debt/asset at a forthcoming hearing that was to take place in the Luton County Court.

……

“12.

During my various meetings with the Official Receiver I was informed that the Oft had mentioned to the Applicant that the loans relating to the book debts (being the subject of these proceedings) were of an illegal nature and thus the Applicant could be prosecuted if he sought to recover the debt. This obviously affects the value of the book debts very severely.

13.

Additionally soon after the winding up order was made, BF’s registered office was transferred to the Applicant’s business address. Thus correspondences relating to the various loans have been going to the Applicant which have not been passed back to the Assignee/Transferee. There also exist disputes with the various borrowers who have raised the Consumer Credit Legislation issues. The Applicant has all these communications which are relevant and important to ascertain the consideration that was payable on 31^st March 2012.”

Accordingly, in his letter, Mr Gopee asked for disclosure in the following terms:

“During my several appointments/interview with the Official Receiver I was told by the Official Receiver that the Office of Fair Trading had informed the Liquidator that he may be prosecuted if he tried to recover any moneys due under the Barons’ charges. This is because Barons Finance Limited did not have a Consumer Credit Licence.

I am therefore writing to request copies of the following:

(a)

All communications, correspondences and e-mails between the Liquidator and the Office of Fair Trading

(b)

All communications, correspondences and e-mails between the Liquidator and your firm with His Honour Judge Mackie or his clerk

(c)

All communications, correspondences and e-mails between the Liquidator and your firm with the Borrowers of Barons Finance Limited.

I require sight of the above because of the limitation imposed upon the recovery of the debt due from the Borrowers which reflects, affects and or decides the value of the book debts in particular with the Consumer Credit legislation. This is highly important in order to ascertain the consideration that was paid on 31^st March 2012 for the book debts to Barons Finance Limited.

Since the registered office of Barons Finance Limited was changed to the Liquidator’s place of business all correspondence relating to the book debts have gone to the Liquidator. Barons Finance Limited had received valuable consideration as payment for its book debts and as such those documents ought to have been handed back to its assignee/transferee. I am therefore also requesting copies of all such correspondence if the originals cannot be provided as these are essential and relevant about the consideration especially where the debts are disputed on Consumer Credit Legislation grounds.”

The appellants received no reply to the letter.

At a directions hearing on 15 December 2014 before Mr Registrar Briggs, attended by counsel on behalf of the liquidator and Mr Gopee on behalf of the appellants, it appears that no order for specific disclosure was made. However, no specific order was made refusing Mr Gopee’s request for disclosure, perhaps because he had made no formal application. However, directions were given for both parties to provide standard disclosure. Directions were also given for the service of pleadings and evidence by both parties. The appellants were required to file and serve evidence on which they intended to rely by 23 February 2015. The case was also to be listed for a pre-trial review on 10 March 2015.

The Company’s particulars of claim, served by the liquidator and dated 30 December 2014, alleged that the Company’s book debts had a value in excess of £250,000, and therefore substantially in excess of the consideration stated in the assignment, namely the payments to KMC. The particulars of claim also alleged that the assignment had been brought into existence in September 2012.

In their defence dated 10 January 2015, the appellants denied those matters and additionally relied upon the Company’s abbreviated accounts which had been prepared and filed by a firm of professional Chartered and Certified Accountants at Companies House for the years ended 31 May 2008, 31 May 2009, 31 May 2010 and 31 May 2011 respectively which showed the value attributed to the Company’s debtors for the various years as ranging between a £71,968 and £87,972. They alleged that that supported their assertion that the consideration provided in respect of the assignment, namely the sums paid to KMC, was adequate consideration. The appellants denied that the assignment was backdated and positively asserted that it had been executed on 31 March 2012. They stated that “the payments [to KMC] by the first appellant and Mr Gopee could not have been made for any other purpose other than payments due under the Deed of Assignment dated 31/3/12.” The defence contained a statement of truth signed by Mr Gopee on behalf of himself and the first and second appellants.

In his reply the liquidator maintained his position that the assignment was at an undervalue, purportedly putting the appellants “to strict proof of the allegation that the value of the loan book is less than the amount stated in the Particulars of Claim.” In reality, of course, the burden of proof lay on the liquidator to establish the alleged undervalue.

The matter was next before the Companies Court on 2 March 2015. This was by accident rather than by design. In a separate case in which the Company was the defendant (Case 30/2015) to a claim by two of its borrowers for declaratory relief that a loan made to them was unenforceable by virtue of breaches of the CCA, the matter came before Peter Smith J. For reasons of case management, the learned judge took the view that the two matters (i.e. that case and the present application) should be heard together and made an order to that effect. Neither Mr Gopee nor the other two appellants were represented or present at the hearing and indeed had not had notice of it.

A further pre-trial review took place on 10 March 2015, before Mr Registrar Briggs when all parties were present, including Mr Gopee. According to the liquidator, at that hearing Mr Gopee again raised the issue of disclosure, effectively in the same terms as his letter of 11 December 2014. However, the order did not refer to any such application in the recitals, and again no specific order refusing such an application for specific disclosure was made. None of the directions made on 10 March appeared to require the appellants to do anything other than to serve a skeleton argument in accordance with the Chancery Guide. They principally imposed requirements on any party who wished to challenge the relief sought in Case 30/2015 to lodge notice of objection and evidence in support. The appellants did not wish to do so and accordingly did not lodge any such documents.

By letter dated 10 March 2015, Mr Gopee reiterated his request for disclosure as per his letter dated 9 December 2014. He made it clear that the appellants needed the information in order to file a reply to the liquidator’s witness statement dated 13 June 2014. By letter dated 12 March 2015, the liquidator’s solicitors replied saying the information requested was not relevant to the proceedings and was not information to which Mr Gopee was entitled. The solicitors informed Mr Gopee that the liquidator would seek his costs on an indemnity basis should Mr Gopee issue an application for disclosure. In a further letter dated 23 June 2015 Mr Gopee complained that the appellants were unable to agree the bundle because he had been striving to seek disclosure of documents and that, although the liquidator had mentioned a court order which “declined to let me have discovery of the documents required”, he had not seen that order. In fact there had been no such order positively dismissing any application by Mr Gopee for disclosure. Mr Gopee also complained in the letter that he would not get a fair trial if the requested disclosure was not made. On 24 June 2015 the liquidator’s solicitors wrote declining to give the requested disclosure for the reasons already given.

In the light of this refusal Mr Gopee issued a formal application on 2 July 2015 for disclosure of the documents as per his letter dated 9 December 2014. The application was sealed by the court on that date but marked with a hearing date in September. It does not appear that the application was served on the liquidator prior to trial. The application for disclosure was supported by a witness statement dated 2 July 2015. Mr Gopee explained in that witness statement that he needed the information from the liquidator as to whether the loans were being paid and as to whether there were any difficulties in their recovery because of non-compliance with the CCA requirements. He explained that the liquidator, in calculating the value of the book debts for the purpose of the assignment, had looked at only one side of the coin, namely the total amount of sums advanced. Mr Gopee explained that in order to ascertain whether the consideration for the assignment adequately reflected the value of the book debts, it was necessary for there to be a consideration of the extent to which, if at all, the debts were in fact recoverable. For this reason it was necessary to consider individual cases where the Company had had difficulty in recovering its loans, whether by litigation or otherwise. Mr Gopee gave particular examples of instances where he knew that problems had arisen. What he sought from the liquidator was full disclosure in relation to other individual cases so that there could be at trial a proper evaluation of the value of the book debts at the time of the alleged assignment.

On the first day of the hearing of the liquidator’s application, 9 July 2015, Mr Gopee produced, “for the first time” according to the judge, his disclosure application, supported by the witness statement dated 2 July 2015. However, the judge refused to entertain the application for disclosure, saying:

“6.

…… [Mr Gopee]’s claim that he was hampered from defending these proceedings by the absence of documents. I have not heard that application I say nothing about its merits. I merely make the following observations:

6.1

Mr Gopee is no stranger to the courts. He must know that any application for disclosure needs to be properly made. He was unable to give me any good reason why the application was not made sooner.

6.2

If there are any documents which Mr Gopee needs and which the liquidator has failed to provide (as to which I make no comment), that cannot explain his failure to put in evidence to rebut the allegation that the deed of assignment was backdated.”

On the morning of 10 July 2015, Mr Gopee produced a typed four page witness statement dated 9 July 2015 with an exhibit of 104 pages. Both the statement and the exhibit dealt principally with the position relating to the Company’s judgment debt against a Mr Kelly in the sum of approximately £205,000 and the fact that, in reality, it was not enforceable because KMC had successfully asserted a prior charge over the property which stood as security for the loan. Counsel for the liquidator did not suggest at the hearing of the appeal that the information contained in the statement was new to the liquidator. However, the judge refused to allow Mr Gopee to rely on his statement. In his judgment, which is reported at [2015] EWHC 2007 (Ch), but is not available on BAILII,

“7.

This morning he sought to serve a 4 page witness statement which was typed and had an exhibit of 104 pages. I refused to permit him to rely on this statement or the documents exhibited. I gave judgment this morning and concluded that no good reason had been given for the delay, nor for the failure to seek an extension, that it would be unfair to the liquidator to have to deal with this evidence today and that an adjournment would be costly for the liquidator and unfair to other litigants.”

The judge then went on to conclude that, in the absence of any evidence from Mr Gopee, he was entitled to draw adverse inferences from him in relation to the alleged backdating of the assignment. He said:

“8.

The burden is on Ms Davy to prove her case, but if she provides prima facie evidence, then it may be proper to draw an adverse inference from Mr Gopee's failure to put in a witness statement to the contrary. I direct myself in accordance with Brooke LJ's statement in n Wisniewski v. Central Manchester Health Authority [1998] PIQR 324 at 340:

"(1)

In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.

(2)

If a court is willing to draw such inferences they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.

(3)

There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.

(4)

If the reason for the witness's absence or silence satisfies the court then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.

9.

Ms Davy relies on the following evidence:

9.1

Mr Gopee made witness statements on 20 June and 27 July 2012 in answer to the winding-up petition, alleging that the petitioner was in fact indebted to his company. This is inconsistent with his current claim that of all the Company's debts were transferred in March 2012. When I asked Mr Gopee about this, he said it was a mistake. That is simply not credible, given that the whole purpose of these statements was to show that the petitioner was a debtor and not a creditor of the Company.

9.2

The liquidator's witness statement sets out the mortgages which were transferred pursuant to the assignment. The statement gives the dates on which the assignment of each mortgage was recorded at the Land Registry. The earliest date is 17 September 2012. It is highly unlikely that the assignee would have waited nearly 6 months before registering the transfers.

9.3

A Mr Kelly obtained a mortgage loan from Kensington and then obtained a further loan from the Company. For reasons which are irrelevant to this application, the Company lodged a unilateral notice to protect its loan ahead of Kensington's registered charge. I have been taken to a letter from DLA Piper, acting on behalf of Kensington, confirming that the Company obtained a judgment against Mr Kelly for £205,378 in 2011. Mr Gopee accepted that the judgment was in that amount, or thereabouts. (I shall return to this judgment on the question of undervalue.) It appears from the Land Register that the transfer of the benefit of the unilateral notice from the Company to the Respondent was not made on 12 October 2012, which is after the Company had been wound up.

9.4

I have seen the application to transfer the benefit of the unilateral notice. This is signed by Mr Gopee and contains the phrase:

"By a transfer of a portfolio of charges dated 17/9/12 and assignment of all debts due and owing under the charge of the same date made between [the Company and the 1st Respondent] and [the 1st and 2nd Respondents] ..."

10.

In answer to these last three points, Mr Gopee submitted that that assignment contemplated a subsequent formal transfer of the charges within 6 months, and that this happened on 17.9.12. He claimed that this was the reason why the applications to the Land Registry were made on or after that date.

11.

I find that Mr Gopee's attempts to explain away the evidence against him were thoroughly unconvincing:

11.1

There is no witness statement on this point - not even the one which I refused to admit.

11.2

I have not been shown the alleged transfer on 17th September 2012.

11.3

It makes no sense to delay the transfer by almost 6 months, given that a winding-up petition had been presented in May 2012.

11.4

The natural reading of the phrase I have quoted is that the words "of the same date" refer to the assignment. It is striking that there is no reference to the March date.

12.

I am satisfied that the evidence relied on by Ms Davy makes good her prima facie case that he fraudulently backdated the assignment. In the light of his failure to produce any evidence to the contrary and in the light of his submissions, which were thoroughly unconvincing, I am satisfied that Mr Gopee has fraudulently backdated the assignment, which was made after 9th May 2012 and almost certainly not before 17th September 2012. It follows that the assignment is automatically avoided, unless I make an order in the Respondents' favour under section 127. Given that this is a case of fraud for the benefit of the various companies controlled by Mr Gopee, it would be difficult to imagine a less meritorious case.

13.

In view of this conclusion, there is no need to consider the liquidator's other arguments, but I will do so briefly in case the matter goes any further. I do so on the assumption (contrary to my finding) that the assignment was genuinely made in March 2012.” (My emphasis in all cases of bolded text in this judgment.)

The judge then went on to conclude that the assignment of the book debts was “at a significant undervalue and therefore was liable to be set aside under section 238 of the Act”. In this respect he said as follows:

“Transaction at undervalue

14.

Ms Davy accepted for the purpose of this application that the consideration was £76,500. It appears that Kensington obtained a costs order against the Company in this sum and it is said that the 1st Respondent paid the liability on the Company's behalf.

15.

It is difficult to put a value on the debts allegedly transferred, but Ms Davy said as follows:

15.1

There is the judgment debt against Mr Kelly for £205,378 (see above), which by itself substantially exceeds £76,500. Mr Gopee submitted that there was no prospect of being repaid because Mr Kelly was a man of straw. I have no evidence on that point, but in any event there is the mortgage over Mr Kelly's property. DLA Piper state that the Company maintained that its charge had priority over Kensington. Mr Gopee accepted before me that the Company never withdrew that assertion before it was wound up.

15.2

The liquidator has produced a schedule of debts owned by the Company. Mr Gopee was asked to verify this and failed to do so. I am satisfied that I should apply the principle in the old case of Armory v. Delamirie (1722) 1 Strange 505, i.e. that I should resolve any evidential doubts against Mr Gopee. The liquidator says, and I accept, that the schedule shows outstanding debts of some £373,000, which includes £40,000 which was the original sum lent to Mr Kelly. Mr Gopee says that some of these debts are contracts which are void or unenforceable under the Consumer Credit Act. He has produced no evidence to substantiate this. On the contrary, the evidence is that he has pursued the hapless debtors for payment. It does not lie in his mouth to assert that these debts are worthless. Once again, I apply Armory v. Delamirie. In any event the Schedule includes at least one debt of about £35,000 which is above the limit under the Consumer Credit Act. I am satisfied that Ms Davy has made good her submission.

15.3

Finally, she points to paragraph 36 of the Defence in these proceedings, which says that Mr Gopee has provided the liquidator with a bundle of loan offer agreements which formed "part of" the book debts assigned on 31st March, thereby implying that there are more.

16.

I am amply satisfied that this was a transaction at a significant undervalue and is therefore caught by section 238.”

For similar reasons he concluded that the transaction was also voidable pursuant to section 423 of the Act as one entered into for the purpose of defrauding creditors. He said in this respect that:

“Transaction to defraud creditors

18.

I have already concluded that the transaction was at a substantial undervalue. The additional requirement imposed by s. 423 is to show that Mr Gopee's purpose was to defraud creditors. For the reasons given above, this is the only proper inference to draw, and there is no evidence from him to the contrary. If the transaction had not been avoided, I would have held that it should be rescinded so as to restore the status quo ante.”

Accordingly he concluded:

“19.

……. that:

19.1

The assignment was made after the commencement of the winding-up and therefore void.

19.2

If that is wrong then I am satisfied that it should be set aside under both sections 238 and 423.”

In his order dated 10 July 2015 the judge made a declaration that the assignment was void under section 127 of the Act on the basis that it had been fraudulently backdated. He also made various consequential orders reflecting his judgment requiring the appellants jointly and severally to repay all monies collected in respect of the loans together with interest, and to pay costs on the indemnity basis to be subject to a detailed assessment if not agreed. He also granted injunctions restraining the appellants from collecting any monies due under the loans or otherwise dealing with the loans.

The appellants sought permission to appeal the judge’s order on a number of grounds. At an oral hearing on 28 August 2015, I granted the appellants permission to appeal on the grounds that:

At the hearing of the appeal, Mr Gopee on behalf of all appellants sought to support their grounds of appeal by two skeleton arguments and by oral submissions. Mr Gopee told us that he had laboured under some difficulty in that in the period from 23 September 2015 to 22 January 2016 a provisional liquidator had been appointed to take over the administration of the first and second appellants. During that period Mr Gopee had not been involved in the appeal on their behalf.

Miss Davy sought to uphold the judge’s decision for the reasons which he gave as developed in the respondent’s skeleton argument and her oral submissions.

I have concluded that the appellants, and in particular Mr Gopee, have not received a fair trial in this case. My reasons may be summarised as follows.

The critical allegations made by the liquidator, although not expressly pleaded as such in the particulars of claim (as they should have been), were that Mr Gopee had fraudulently backdated the assignment so as to enable the first and second appellants to acquire the Company’s principal asset, its loan book, at an undervalue. Those allegations were necessarily related.

In circumstances where the defence (supported by Mr Gopee’s statement of truth) and his witness statements in support of his applications for disclosure, denied both the backdating and the transfer at an undervalue, and Mr Gopee, albeit an experienced litigant, was acting as a litigant in person, it was in my judgment wrong for the judge not to have allowed him to have given evidence. The judge should have allowed Mr Gopee to go into the witness box and give evidence in chief in order to support his defence and be subjected to cross-examination; alternatively the judge should have accepted his additional witness statements as evidence and allowed him to be cross-examined on them.

There was nothing in the exhibits to the further witness statements dated 2 and 9 July 2015, which the liquidators should not have been in a position to deal with either immediately or overnight. If a lengthier adjournment had been required, no doubt an appropriate order could have been made in relation to the costs of any such adjournment. The information related to matters with which the liquidator must have been very familiar, including in particular the value of the loan to Mr Kelly given KMC’s assertion of priority to the Company’s security for the loan.

Moreover, so far as the allegations of assignment at an undervalue were concerned, the material supplied by Mr Gopee clearly raised a strong prima facie case that the value of the loan book did not exceed the consideration that was actually paid by the first and second appellants. Such evidence included:

In such circumstances, the liquidator’s claim that, whatever the true value of the loan book, “it was and importantly [Mr Gopee] believed it to be, substantially in excess of £76,500 and not less than £250,000” clearly merited a serious challenge. However late Mr Gopee’s July request for disclosure was (and, as he pointed out, he had in fact made frequent earlier requests in correspondence, and there had never in fact been any actual order from the court, from which the appellants could have appealed, dismissing their earlier application for specific disclosure), the reality was that the liquidator himself must have been in a position to give information about his subsequent dealings during the course of the liquidation with the Company’ debtors, which might have been highly relevant to the loan book’s value as at the date of the purported assignment. Moreover, while not all of the liquidator’s correspondence with the OFT or the FCA would necessarily have been disclosable, it may well be that some of such correspondence would have been relevant as having a bearing on the recoverability of loans and thus the value of the loan book.

Accordingly, the judge’s failure to permit Mr Gopee to give evidence, and further the former’s decision to draw serious adverse inferences from the fact that Mr Gopee had not done so (see e.g. paragraphs 11 and 12 of the judgment), were in my view wrong in principle because they resulted in the appellants having an unfair trial. Not only did the appellants not have a proper opportunity to present their case but they also suffered the disadvantage of that failure being used evidentially against them. In my judgment, whatever view the judge took of Mr Gopee’s experience as a litigant, the judge nevertheless should, in all the circumstances of the case, have given him, as a litigant in person, a proper opportunity to give evidence. He should also have given serious consideration as to whether there was any documentation within the possession of the liquidator which might have borne on the recoverability of the loans and accordingly the value of the loan book as at the date of the assignment.

Nor was I impressed with the judge’s reasons for concluding that the liquidator’s prima facie evidence “makes good [Ms Davy’s]’s prima facie case that [Mr Gopee] fraudulently backdated the assignment”; see paragraphs 9 to 12 of the judgment. First, in order to assess the credibility of the appellants’ defence, as the judge clearly did (see, for example, paragraphs 9.1, 11 and 12 of the judgment), the judge needed to hear from Mr Gopee, as a witness giving his evidence, whether in cross-examination or in chief, not as a litigant advocate presenting submissions under the stress of questioning from the judge. Second, as to the other points:

In my view because, as the reported judgments against him and his companies make clear (some of which I have been involved in refusing permission to appeal to Mr Gopee and his companies), Mr Gopee has had, to put it mildly, somewhat of a chequered career in the courts in relation to his conduct of the Company and his other associated money lending companies, the judge mistakenly found it all too easy to infer fraud against Mr Gopee and the other appellants. That is exemplified by the judge’s statement, at paragraph 12 of the judgment, that “Given that this is a case of fraud for the benefit of the various companies controlled by Mr Gopee, it would be difficult to imagine a less meritorious case.” In my judgment, that comment demonstrates the lack of objective impartiality which the judge failed to bring to his analysis of this case. That assertion is no more than conclusory.

Inevitably the judge’s conclusions in relation to the backdating issue were informed by his views as to whether the transaction was at an undervalue. In relation to this issue also, in my judgment the judge adopted an approach to the evidence which was unduly favourable to the liquidator and which failed adequately to evaluate the materials which Mr Gopee had put forward, whether they were strictly admitted in evidence or not. Thus for example:

For the above reasons I am not persuaded that the judge was entitled, on the materials before him, to draw the inferences which he did and consequently to come to the conclusion that the assignment was at an undervalue and consequently a transaction made with the intention of defrauding creditors.

Accordingly I would allow the appeal. The appellants did not have a fair trial consistent with their rights under article 6.

In my judgment the correct course is for the matter to be remitted back to the Chancery Division, to a High Court judge, or deputy High Court judge, other than Mr David Halpern QC, for an urgent case management conference, at which the court should consider the making of directions in relation to:

I agree.