Goel v Pick

This bankruptcy appeal, from an order of Mr. Deputy Registrar Schaffer dated 16th December 2005, concerns entitlement to a vehicle registration mark AMR 1T (“the VRM”). This mark was formerly allocated to a Mercedes motor car of which Mr. Amritpal Singh Virdi was the keeper. A bankruptcy order was made against Mr. Virdi on the 19th February 2003. The respondent, Mr. Robert Pick, was appointed Mr. Virdi’s trustee in bankruptcy on the 2nd May 2003.

Mr. Virdi is a solicitor. He practised under the name St John’s Solicitors until 20th March 2002 when the Law Society intervened in the practice.

As well as practising as a solicitor Mr. Virdi had dealings in property. In particular he became involved with the appellant, Dr. Tarlochan Singh Goel, in the acquisition, refurbishment and sale of a property known as 11 St. James’s Close, St. John’s Wood, London NW8 (“the Property”). Dr. Goel is a doctor of engineering and runs a building business. The arrangement between Mr. Virdi and Dr. Goel was as follows:

The building works, which are said to have cost about £40,000, were completed and the Property was sold, according to Mr. Virdi, in 1997. I understand that Mr. Virdi repaid Dr. Goel’s £50,000. Over the years immediately following the sale Mr. Virdi made payments to Dr. Goel amounting to £22,000 in respect of the building works, but these payments ceased at the time of the Law Society’s intervention. The balance of the cost of the building works and the whole of Dr. Goel’s profit share thus remained unpaid.

It appears that Mr. Virdi and Dr. Goel had some discussion about the outstanding indebtedness in the spring or summer of 2002, after the date of the intervention. At first Mr. Virdi seems to have proposed that Dr. Goel should have the motor car, which would have included the VRM. But it was realised that this could not be done because the car belonged to a finance company and Mr. Virdi could not clear the amount due under the financing arrangements. Mr. Virdi then suggested that Dr. Goel should take the VRM, which was, he thought, worth £15-16,000. He wrote a letter addressed to Dr. Goel and dated 24th June 2002 in the following terms

“Re Vehicle Regn No AMR 1T

Mercedes 280S

This is confirmation of the sale of the above vehicle and the number plate in consideration of the money due to you in respect of works of repair and materials supplied to 11 St. James’s Close, St. John’s Wood, London NW8 and your percentage of the profit”

Mr. Virdi also took certain formal steps which I shall describe in a moment, after I have set out the relevant statutory and other provisions. A fundamental issue in this appeal is whether these steps gave Dr. Goel any interest in the VRM. The Deputy Registrar held that they did not.

The assignment and transfer of vehicle registration marks is governed by statute and regulations made under statute. These confer certain powers and duties on the Secretary of State. Currently these powers and duties are exercised and performed by the Drivers and Vehicle Licensing Agency (“DVLA”). The legislation is contained in the Vehicle Excise and Registration Act 1994, under Section 21 of which vehicles which are to be used on the road have to be registered. Sections 23 and 26 provide, so far as material:

“23.

(1) Where the Secretary of State registers a vehicle under section 21(1) he shall assign to the vehicle a mark (“a registration mark”) indicating the registered number of the vehicle

(2)

The Secretary of State may, in such circumstances as he may determine –

(a)

assign a registration mark to a vehicle to which another registration mark has previously been assigned,

(b)

assign to a vehicle (whether on its first registration or later) a registration mark previously assigned to another vehicle,

(c)

…

(d)

…”

“26.

(1) The Secretary of State may by regulations provide for a person in whose name a vehicle is registered under this Act to be granted a right, exercisable on a single occasion falling within a period prescribed by the regulations, to have the registration mark for the time being assigned to the vehicle assigned to some other vehicle which is registered under this Act –

(a)

in that person’s name, or

(b)

in the name of some other person nominated by him in accordance with the regulations.”

It will be noted that VRMs are assigned to vehicles, not to registered owners or other individuals. The Secretary of State has power to assign or re-assign a VRM under Section 23(2) but a vehicle owner cannot require him to do so. The only relevant right which a vehicle owner has in relation to the transfer of a VRM from one vehicle to another is to seek the exercise in his favour of the Secretary of State’s power under Section 26.

The exercise of that power is governed by the Retention of Registration Marks Regulations 1993, SI 1993 No. 987, as amended. These regulations begin with certain definitions. A “right of retention” is a right of the kind mentioned in regulation 3. Regulation 3 provides

“3.

Subject to the following provisions of these Regulations, a person in whose name a vehicle which is recorded as being a registered vehicle in the GB records may be granted by the Secretary of State a right to have the registration mark for the time being assigned to that vehicle assigned to some other vehicle registered

(a)

in that person’s name; or

(b)

in the name of some other person nominated by him in the application for the grant of the right”

A “nominated person” is a person nominated as provided in regulation 3(1)(b).

The following further regulations are material:

“4.

(1) An application for the grant of a right of retention shall be made to the Secretary of State and shall be accompanied by

(a)

to (e) [various documents relating to the vehicle to which the registration mark is currently assigned, plus a fee]

…

4A (1) The nomination of a nominated person may be made either-

(a)

in the application for the grant of the right of retention; or

(b)

after the grant of the right of retention (but before the right is exercised) if the Secretary of State accepts an application by the grantee in relation to which the conditions specified in paragraph (3) are fulfilled

(2)

At any time before a right of retention is exercised a person may be nominated in place of a person already nominated if the Secretary of State accepts an application by the grantee in relation to which the conditions specified in paragraph (3) are fulfilled.

(3)

[sets out the conditions]

`5. (1) Subject to the provisions of paragraph (2) a right of retention may be exercised only during the period of one year starting with the date on which the relevant retention document is issued.

…

9.

(1)If the Secretary of State decides to grant a right of retention he shall issue to the grantee a retention document. That document shall state –

(a)

the date of the grant;

(b)

the name and address of the grantee and, where appropriate, the name of the nominated person;

(c)

the date on which the period of one year mentioned in regulation 5(1) ends;

(d)

the registration mark in respect of which the grant has been made; and

(e)

the type of vehicle to which the registration mark was assigned at the time of the grant.

…

10.

(1) A right of retention shall be exercisable on only one occasion

(2)

Subject to the provisions of regulation 11, a right of retention shall be exercisable by the grantee –

(a)

surrendering to the Secretary of State, for retention by him, the retention document;

(b)

…

(c)

sending to the Secretary of State, for endorsement and return, such of the following documents as relate to the vehicle in respect of which the grantee proposes to exercise the right of retention

(i)

– (iii) …

(3)

In this regulation “the vehicle” means the vehicle to which the grantee proposes that the registration mark shall be assigned

…

13.

A right of retention shall not be transferable, but without prejudice to the vesting of any such right in a person by operation of law”

The regulations thus deal with two types of transaction. The first is when the registered owner of a vehicle to which a particular VRM has been assigned wishes that VRM to be transferred to another vehicle owned by him. This will be appropriate where the registered owner replaces his old car with a new one which he wishes to have the same VRM. The other type of transaction is where the owner of a vehicle to which a particular VRM has been assigned wishes that VRM to be assigned, perhaps in return for payment, to a vehicle belonging to another person.

I leave on one side cases where the owner (“the first owner”) wishes the VRM to be assigned to another car of his own. Where the first owner desires the VRM assigned to his vehicle (“the old vehicle”) to be assigned to a vehicle (“the new vehicle”) belonging to another person (“the second owner”) the first owner must start by obtaining a right of retention. To do this he must make an application under regulation 4, accompanied by various documents relating to the old vehicle and the appropriate fee. The application may, but need not, identify the second owner as the nominee. If it does, this nomination may be changed pursuant to regulation 4A at any time before the right of retention is exercised. The VRM will only be assigned to the new vehicle after the first owner has exercised the right of retention granted to him as a result of the regulation 4 application. In order to do this the first owner must identify the new vehicle and supply to the Secretary of State the documents regarding the new vehicle which are required by regulation 10(2)(c).

The documents before the court show that Mr. Virdi applied for a right of retention in respect of the VRM on the 9th July 2002 and such a right was granted to him on the 15th July 2002, the right being exercisable until the 9th July 2003. The retention document, which is in a standard printed form, names Dr. Goel as the nominee. It also contains boxes for completion by Mr. Virdi at a later date in order to achieve certain further things, including a change of nominee and the exercise of the right. As to the latter Mr. Virdi was required to identify the vehicle to which the VRM was to be assigned and to sign in the relevant box. These boxes were not completed before Mr. Virdi became bankrupt.

After the bankruptcy the finance company which owned Mr. Virdi’s car repossessed and sold it. I understand that before the sale Mr. Pick took steps to obtain a right of retention for himself, as Mr. Virdi’s trustee in bankruptcy, and that this right remains unexercised pending the conclusion of these proceedings.

Dr. Goel has maintained that Mr. Virdi’s rights in respect of the VRM were transferred to him by the letter dated 24th June 2002 which I have read. The trustee in bankruptcy rejected this claim on the ground that the letter has no such effect or, if it has, the transfer constituted a preference pursuant to section 340 of the Insolvency Act 1986. By an application dated the 2nd July 2002 the trustee in bankruptcy sought declarations to this effect. This application came before Mr. Deputy Registrar Schaffer, who held that there was no effective transfer of the VRM by Mr. Virdi to Dr. Goel and indicated that if he had been of the opposite view he would have found that the transfer constituted a preference.

On the transfer point the Deputy Registrar’s reasons appear in paragraphs 14 and 15 of his written judgment, where he said:

“14.

In my view the position is clear. There was no transfer of the VRM to Dr. Goel. There was an agreement between the Debtor and Dr. Goel that he would give him the Mercedes vehicle and the VRM but title to the vehicle could not pass because it was financed. Dr. Goel thought that he would have the benefit of the VRM but what the Debtor failed to do, whether deliberately or otherwise, was to assign the VRM to Dr. Goel by signing as “grantee” the retention document sent out by the DVLA in July 2002. The application made in July 2002 was an application – nothing more. The retention document was given to the Debtor. Dr. Goel had no rights as nominee and the Debtor remained the owner of the VRM. When the Debtor realised belatedly that he had not done so in July 2003, it was too late as the Bankruptcy Order had been made. Subject to any point on equity only the trustee in whom the VRM by that time had vested, could complete the agreement.

15.

Does Dr. Goel have a right as to specific performance? In my view not after the date of the Bankruptcy Order. By then the VRM vested in the trustee and he had no obligation to complete the agreement even if one existed. Does Dr. Goel have any other general equitable remedy? In my view no. At best he has a contractual right to acquire the VRM but to complete that right in equity he would have to show that the Debtor did everything necessary to assign the VRM to him. This on the facts the Debtor did not do. That makes in my view any equitable assignment inoperative – see by way of analogy in a case not cited to me re Fry [1946] 2 All ER 106”

I entirely agree with what the Deputy Registrar said in paragraph 14. Indeed the contrary has not really been suggested on this appeal. The statutory machinery for the “transfer” of a VRM from one vehicle to another has simply not been operated. Mr. Virdi, having obtained a right of retention, did not exercise it in favour of Dr. Goel or at all.

The aspect of the case which is dealt with in paragraph 15 of the Deputy Registrar’s judgment is more difficult. I cannot accept his reasoning that in order to complete what the Deputy Registrar regarded as his contractual right to acquire the VRM Dr. Goel would have to show that Mr. Virdi had done everything necessary to assign the VRM to him. If Dr. Goel could show this he would not need the assistance of law or equity to assert his entitlement. Nor can I accept the relevance, even by way of analogy, of Re Fry [1946] 2 All ER 105. That case is an example of the application of the principle that there is no equity to perfect an imperfect gift. But that principle is only applicable to voluntary dispositions and, in the present case, if there was an attempt to dispose of anything it was done for valuable consideration.

In my judgment the real difficulty in this case from the point of view of Dr. Goel is to analyse the legal nature of the transaction between him and Mr. Virdi in a way which establishes the existence of a proprietary interest capable of being assigned. For procedural reasons there was no written pleading of Dr. Goel’s case and his three witness statements do not assist in this respect. In argument before me the main contention of Mr. Beaumont, on behalf of Dr. Goel, was that the right to the VRM was a chose in action and that it had been assigned to Dr. Goel by the letter of 24th June 2002, which operated as either a legal or an equitable assignment.

The problem about this analysis is to know what is meant by “the right to the VRM”, or, to put the point in a slightly different way, what was the subject matter of the supposed assignment. A VRM is an item of property only in a very qualified sense. Essentially it is a mark or number assigned to motor vehicles by a governmental agency for regulatory reasons. It is only as an incident of the requirement that every road vehicle shall have a VRM assigned to it that certain marks or numbers have come to be regarded as attractive by reason of their novelty or distinctiveness and thus to have a value. A glance at press advertisements shows that some VRMs are traded, or at least offered for sale, at substantial prices. But if one speaks of the disposal or acquisition of a particular VRM one is inevitably referring to the process of retention and nomination prescribed by the regulations. What Mr. Beaumont referred to as “the right to the VRM” is, in my view, nothing more nor less than the ability to resort to the regulatory machinery in order to obtain the transfer of a VRM from one vehicle to another. I do not think this can be described as a chose in action. Even if it can, it is not capable of being “assigned”, as distinct from being exercised in accordance with the regulations.

It would, I think, be somewhat easier to describe a right of retention, once granted, as a chose in action. But this is of no assistance to Dr. Goel. No right of retention existed in respect of the VRM at the time of the letter of 24th June 2002. In any event the transfer of such a right is expressly prohibited by regulation 13.

In the notice of appeal it was suggested that, as an alternative to assignment, Dr. Goel could rely on proprietary estoppel. In my view, however, this runs into the same difficulty as assignment, namely the impossibility of identifying any item of property which is the subject of an estoppel. In any event there is nothing to suggest that Mr. Virdi stood by while Dr. Goel acted to his detriment.

I therefore reach the same conclusion as the Deputy Registrar in respect of legal or equitable assignment or other equitable relief, although I do so by a somewhat different route.

I would add that nothing less than a proprietary right can assist Dr. Goel. A purely contractual obligation on the part of Mr. Virdi, remediable only in damages, will not be enough for him. He would only be an unsecured creditor in respect of any damages that might be awarded. Moreover the calculation of damages would have to take account of the fact that, if Dr. Goel had become entitled to the VRM, the amount due to him in respect of building works would be reduced

Having regard to my conclusion that Dr. Goel is not entitled to the VRM the question of preference does not arise. I will therefore deal with it only briefly.

There can be no doubt that if the VRM passed to Dr. Goel this constituted a preference within the meaning of section 340(3) of the Insolvency Act 1986. Dr. Goel was a creditor of Mr. Virdi and, if he had obtained the VRM, this would have put him in a better position, in the event of Mr. Virdi’s bankruptcy, than he would have been in if he had not obtained the VRM. It is also accepted on this appeal that Mr. Virdi was insolvent at the 24th June 2002 in that, by reason of the Law Society’s intervention, he was unable to pay his debts as they fell due. The question is whether the other requirements of section 340 are satisfied so as to give the court power to nullify the transaction.

The issue raised on this part of the appeal is whether Dr. Goel was an associate of Mr. Virdi at the time when the preference was given. This is relevant in two respects. First, under section 340(4), the court cannot avoid the preference unless Mr. Virdi was influenced by a desire to put Dr. Goel into a better position in the event of his bankruptcy. If Dr. Goel was an associate this influence is presumed unless the contrary is shown. If Dr. Goel was not an associate the trustee in bankruptcy would have to prove the requisite intention. Secondly only preferences given at “the relevant time” can be avoided under section 340. If Dr. Goel was an associate the relevant time is any time within the period of two years ending with the making of the bankruptcy order. A disposition made by the letter dated 24th June 2002 would be well within this period. If Dr. Goel was not an associate the relevant period is six months ending with the date of the bankruptcy order and a disposition made on 24th June 2002 would be outside it.

Under section 435 (3) a person is an associate of any person with whom he is in partnership. On this appeal it was not seriously disputed that Mr. Virdi and Dr. Goel were in partnership together in respect of the acquisition, conversion or refurbishment and sale of the Property. This is so notwithstanding that they joined together for this one venture only. The argument that was relied on behalf of Dr. Goel was that, under section 340(5), the recipient of the preference must have been an associate at the time the preference was given and, as at 24th June 2002, the venture in relation to the Property had been finished for some time, with the result that the parties were no longer associates. Section 435(3) says that “a person is an associate of any person with whom he is in partnership” not of “any person with whom he has been in partnership” (emphasis added). If the legislature had wanted to include a former partner within the definition it could easily have said so. It was said that this has in fact been done in relation to spouses where, under the concluding words of section 435 (8), references to a husband or wife include a former husband or wife.

The Deputy Registrar rejected these arguments and held that Dr. Goel was an associate of Mr. Virdi. He referred to a number of sections of the Partnership Act 1890, including in particular sections 38 and 39. I think it is worth setting out the first part of section 38, which provides

“After the dissolution of a partnership the authority of each party to bind the firm, and the other rights and obligations of the partners, continue notwithstanding the dissolution as far as may be necessary to wind up the affairs of the partnership, and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise.”

The Deputy Registrar noted Mr. Beaumont’s submissions that after the sale of the Property Mr. Virdi and Dr. Goel were no longer carrying on business in common with a view to profit and that, under section 32 of the Act, their partnership was dissolved by the termination of the single adventure they had entered into. He concluded, however, that they remained partners, and thus associates, because they still had duties towards each other until the affairs of the partnership were fully wound up.

I agree with the Deputy Registrar on this matter. I cannot accept that Mr. Virdi and Dr. Goel had ceased to be in partnership together, at any rate for the purpose of winding up their affairs, when the transaction relating to the VRM was itself entered into with a view to reducing the sum for which Mr. Virdi was accountable, as a partner, to Dr. Goel.

It follows that I accept that Dr. Goel was an associate of Mr. Virdi and that the assumed disposition of the VRM was made within the relevant period. He dealt with the requisite intention in paragraph 31 of his judgment. There he seems to have been satisfied, apparently without reliance on the presumption, that Mr. Virdi was affected by the requisite intention. I do not think that, in the absence of the presumption, I would have been prepared to take this view, although I do not enjoy the Deputy Registrar’s advantage of having heard Mr. Virdi cross-examined. But I am influenced by the presumption and the Deputy Registrar’s implied, if not express, finding that it had not been rebutted, with which I agree.

If, therefore, I had found that the VRM had passed to Dr. Goel I would have been prepared, like the Deputy Registrar, to set aside the disposition under section 340.

This appeal must therefore be dismissed.