MacPherson v Wise

MR JUSTICE NORRIS: Howard Macpherson is a property developer and a motor trader. He is also a director of Howard Land Limited of which he is also 100 per cent shareholder (“HLL”).

Mr Macpherson acknowledges that he owes money to Mr Dennis Wise, a friend and the godfather of one of his children. He admits indebtedness of at least £268,500. There are three sources for that indebtedness.

First, there is a loan agreement entered into on 30 November 2008 relating to an advance by Mr Wise to Mr Macpherson of £200,000. Under the terms of that written loan agreement, Mr Macpherson undertook to repay the loan on 30 November 2009 (or on his death if that should occur first). If the money was not so repaid, then what is described as a “penalty” of 30 per cent of the principal sum would be charged.

Secondly, there is an informal oral loan which was made on 19 August 2009. Mr Wise said that this was in the sum of £50,000. This Mr Macpherson originally disputed; but he now accepts that his dispute was based on a misreading of his bank statements and that £50,000 is due. Although a hearing such as this appeal (and such as the application before the District Judge) is not concerned with a detailed assessment of issues of credibility, Mr Macpherson’s misrecollection of the amount of the loan does not assist his cause. This loan was repayable in 14 days, therefore being repayable at the beginning of September 2009.

The third loan liability arises out of the proceeds of sale of Mr Wise’s Range Rover. Although this had been placed with Mr Macpherson for sale for some while, it appears that the sale was only eventually concluded on 10 January 2010. Mr Macpherson says that Mr Wise agreed that he would not ask for the sale proceeds immediately and that that also would constitute a loan.

Mr Macpherson’s attitude to this borrowing is that none of it is due for payment. He says that as two friends, he and Mr Wise entered into a legally binding agreement under which Mr Wise agreed that he would not call upon Mr Macpherson for payment until a particular event happened. Mr Macpherson’s evidence asserts that in January 2010, he had a conversation with Mr Wise in relation to repayment. He says:

“We discussed a number of issues but ultimately it was agreed that all of the monies due to Mr Wise would be repaid from the proceeds of sale of [one of HLL’s properties, Wells House].”

It should be made clear (and was made clear by Ms Williamson on Mr Macpherson’s behalf) that Mr Macpherson does not assert that there was a novation of the debt to HLL. He accepts that he remains personally liable for the debt. The thrust of his evidence is that the source of funds that would be available to him to repay the debt was identified.

Wells House is a substantial property belonging to HLL. Mr Macpherson’s witness statement in April 2010 said that the property was “currently” being marketed at £3.2 million. Ms Williamson invited me to read that evidence as meaning that it was being currently marketed in January 2010 when the agreement to which Mr Macpherson speaks is said to have been made. Borrowing by HLL from the National Westminster Bank is charged on the property. I am told that the amount of that indebtedness remains at about £1.8 million, though there may be subsequent charges. Under the terms of the NatWest “all monies” charge, their consent is required to the creation of any further security on the property.

Mr Macpherson’s evidence goes on to say that, for the avoidance of doubt, the agreement to pay Mr Wise from the proceeds of sale of Wells House was not conditional on Mr Wise having a second charge on the property or some other form of security. The agreement to wait until the sale of Wells House stood alone. According to Mr Macpherson’s witness statement, Mr Wise was nervous about something happening to Mr Macpherson and that he may have problems recovering the money from his estate. ( It will be remembered that the formal loan agreement for £200,000 rendered the debt payable on the death of the borrower, so this was plainly a concern of Mr Wise’s) . Mr Macpherson says that to that end Mr Wise was keen to have a form of security if it was possible, that at some point there was discussion about the possibility of taking shares in HLL or a second charge over Wells House, and that Mr Wise preferred the latter.

Mr Macpherson then says that he and Mr Wise had a further meeting on or about 1 February 2010 at a hotel in Gerrards Cross. At that meeting, they again discussed the possibility of Mr Wise having a second charge over Wells House and that Mr Macpherson agreed to chase this up. He then says that following that meeting he discussed the matter with NatWest.

It appears however that the question of a second charge was not again addressed until about 3 March 2010. On that day, Mr Macpherson sent an email to his solicitor and to Mr Wise in these terms:

“Andrew [that is the solicitor] please can Dennis’ lawyer call you to go through giving him a second charge over Wells House. I am expecting to be able to repay by the end of March 2010. The amount is £338,500. Please can you make this happen as soon as possible.”

Something did happen. On 5 March 2010, there was a conversation between Mr Macpherson and Mr Wise in which Mr Wise was informed that a second charge had been prepared. Mr Wise had not received it so it was arranged that the two of them would drive to Mr Macpherson’s solicitor’s office to get it signed immediately. That happened and a form CH1 was signed. This relates to Wells House and is dated 5 March 2010. The “borrower” is described as HLL and the “lender” as Mr Wise. Box 7 of form CH1 charges Wells House by way of legal mortgage as security for the payment of the sums detailed in box 9. Box 9 describes the sums as:

“All amounts due under an agreement with Mr Dennis Wise to Howard Land Limited relating to the advancement of all monies in the sum of £338,500.”

It is common ground that on any footing this is not an accurate description of the “agreement”: but what the “agreement” actually was cannot be discerned from the form of the charge itself. According to Mr Macpherson, Mr Wise took that charge to his own solicitors and Mr Macpherson thinks that they applied to have it registered. They could not of course successfully do so because the charge in favour of Mr Wise could not be registered without the consent of the NatWest. It appears that this consent was only forthcoming in principle on about 12 May 2010; and I understand from the evidence that around that time the NatWest circulated a Draft deed of Priorities. The evidence does not disclose that written consent has actually been given or that the Deed of Priority has been agreed.

I have taken the dealings between Mr Macpherson and Mr Wise (according to the evidence of Mr Macpherson) down to 5 March. What then happened was that on 1 April 2010, Mr Wise served a statutory demand on Mr Macpherson in the sum of £338,000. The endorsement to the statutory demand said that Mr Wise claimed this sum as being pursuant to the written loan agreement dated 30 November 2008 and other sums advanced or had and received by Mr Macpherson on behalf of Mr Wise (the last being a reference to the Range Rover proceeds).

There was a dispute about service of the statutory demand; but that is no longer live.

Mr Macpherson immediately applied to set aside the statutory demand, asserting (on the material which I have already canvassed) that there was a legally binding agreement that he was not obliged to repay Mr Wise until Wells House had been sold.

The issue came before District Judge Devlin in the Slough County Court, who dismissed the application to set aside the statutory demand.

The issue which the district judge had to decide arose under Insolvency Rule 6.54(b), namely whether he should grant the application to set aside the statutory demand because the debt was disputed on grounds which appeared to the court to be substantial. It was not on that occasion for the district judge to undertake some form of trial. As was said in Re a Debtor [1995] Ch 66 at page 70e:

“The scheme of the bankruptcy legislation is that substantial disputes about indebtedness are not matters to be resolved by the bankruptcy courts as part and parcel of the bankruptcy process. The bankruptcy courts are not intended to be the forum for resolving such disputes. Where such a dispute exists, the creditor should pursue his claim in the ordinary way outside the bankruptcy courts. If he does so and he succeeds in establishing his claim and the judgment he obtains is not satisfied, he may then use that judgment as the basis for initiating and pursuing bankruptcy proceedings against the debtor.”

A consideration of whether there are substantial grounds for disputing the debt does not mean that the court is simply bound to accept that if, in respect of any issue, there is a dispute on the evidence, then the matter must go to trial. Accordingly, Ms Williamson’s submission that the district judge had either to accept the detailed evidence of Mr Macpherson and set aside the statutory demand, or alternatively to conclude that there was a dispute involving a factual investigation and it was necessary therefore to set aside the statutory demand, needs some qualification. That qualification was expressed in the judgment of Patten J Portsmouth vAlldays Franchising Ltd [2005] EWHC 1006 (Ch) where at paragraph [12] of his judgment, he said:

“The mere fact that a party in proceedings not involving oral evidence or cross-examination asserts that certain things did or did not occur is not sufficient in itself to raise a triable issue. That evidence inevitably has to be considered against the background of all the other admissible evidence and material in order to judge whether it is an allegation of any substance. Once the court considers that the evidence is reliable in that sense and not some attempt to obfuscate the real issues by raising a series of hopeless allegations, then it does of course become necessary to consider what the legal consequences of it are. The application of these principles can be particularly acutely difficult where the debtor asserts an oral agreement with his creditor that his creditor has legally postponed the due date for payment. But in such cases the question is not whether there are substantial grounds for thinking that some sort of agreement was reached. The question is always whether there are substantial grounds for thinking that the agreement asserted by the debtor was reached.”

Ms Williamson was right to remind me that in answering that question, there need not be a complete and compelling case. One is always directing one’s attention to whether there is a triable issue. It is in that light that I approach the district judge’s judgment and the appeal against it now brought by Mr Macpherson.

The first ground for the order is to be found summarised in paragraph 7 of the transcript of the District Judge’s judgement. I will say at the outset that in relation to an extempore judgment given in a pressured County Court list, I do not intend to take any point on any infelicities in expression - particularly where (as here) the transcript is not in a satisfactory form. In paragraph 7, the district judge said that he was not satisfied that there was a genuinely triable issue. He said that it was not credible that Mr Wise was simply saying to Mr Macpherson that he would wait for payment for some indefinite time in the future on some indefinite terms. He said:

“If Mr Macpherson is right, Mr Wise never knew when he was going to be paid, if he would ever be paid. It is said on his behalf and I accept it is a good point that nothing was said to him, this even on Mr Macpherson’s own case. What would happen if the property was not sold? With whom it would be marketed? For how long, what rights Mr Wise would have to intervene if matters were not progressing? No evidence that he had seen any valuation. Who was to be employed to sell the property? How in effect the company would arrange [and I interpose “the sale and distribution of the proceeds”]. What would happen if the amount of the security went up?”

In my judgment, the district judge’s description of Mr Macpherson’s case as “not credible” does not demonstrate any error of law. It is true that the learned district judge’s judgment conflates what happened on 25 January 2010 with what happened on some unidentified subsequent occasion and on 1 February 2010 when there was some sort of agreement to provide a legal charge; but I think it is none the worse for that. (I think it was probably only on the hearing of this appeal that it was accepted that any agreement that was made on 25 January 2010 could not be legally enforceable for want of consideration). The learned judge was correctly asking himself whether any credence was to be accorded to the evidence that there was an unconditional legally binding bargain to await (without the payment of interest in the meantime) the occurrence of some event in the indeterminate future. His conclusion that it was incredible seems to me to be right.

Ms Williamson challenged that conclusion. She made three points. First, she said that anyone who took the view that Mr Macpherson’s evidence was not credible had to explain why Mr Wise pressed for and eventually took a legal charge which he took to his solicitors. She said that Mr Wise does not answer that challenge. But in my judgment the evidence does meet the challenge. Mr Macpherson and Mr Wise had (it is now common ground) informally and without creating a legal bargain, agreed in January 2010 that Mr Macpherson should be offered a further opportunity to pay the debt. As the email of 3 March which Mr Macpherson sent to Mr Wise makes clear, Mr Macpherson expected to complete the sale or alternatively obtain other funding to repay the debt by the end of March 2010. The legal charge is readily explicable as supporting a further opportunity for him to pay the debt within that time scale. When he failed to do so, on the very next day, Mr Wise issued his statutory demand. These events seem to me to undermine the criticism that there is no explanation for the legal charge other than a legally binding agreement to postpone repayment indefinitely.

The second point made by Ms Williamson was that the district judge’s analysis overlooks the informality of arrangements between Mr Macpherson and Mr Wise. But this it seems to me, places a hurdle in the way of Mr Macpherson rather than Mr Wise. If informality is the characteristic of the relationship and if there was an informal but non-binding agreement in January 2010, it is Mr Macpherson who faces the difficulty of saying that there was in fact a subsequent formal legally binding relationship. What was it that caused the change from informal arrangements between friends to a legal binding bargain of the sort which Mr Macpherson asserts?

The third point that Ms Williamson made was that the district judge’s incredulity overlooks the fact that Wells House was already on the market. In fact, the evidence is somewhat obscure as to the date on which Wells House went on the market (although of course it lay within Mr Macpherson’s power to make everything crystal clear). All one knows for sure is that when he made his witness statement in April 2010, it was then currently on the market. On may (by a process of teasing the text) read out that sometime before March 2010 the property was put on the market. But it is not possible to conclude that it was on the market in January 2010. Even if it was, there is no evidence to suggest the perceived imminence of a sale. More than one year on, the property is not sold: there is interest at a price of £2.7 million (although there is a problem over funding the purchase). So the state of the evidence did not demonstrate an imminent sale in January 2010. I do not think that even if the property had already been on the market, that would have disentitled the district judge from reaching the legal conclusion that the evidence from Mr Macpherson was incredible.

In a subsequent paragraph of his judgment (treated on this appeal as giving rise to a separate ground, but in truth I think no more than an elaboration of the earlier ground) the district judge said that the witness statement of Mr Macpherson was “very thin” on the contractual agreement. It seems to me that if this is a separate conclusion, it demonstrates no error of law on the district judge’s part. Reading the judgment as a whole, the district judge well understood for what purpose he was evaluating the evidence: and his comment on the weight of the evidence does not suggest he was conducting a trial rather than asking whether there were substantial grounds for believing that the oral agreement of which Mr Macpherson spoke existed

Ms Williamson disputes this analysis. She says that Mr Macpherson’s evidence cannot on any footing be described as “thin”. I disagree. First, the evidence of the terms of the agreement pursuant to which HLL offered and Mr Wise appears to have accepted a legal charge, are very thin. The legal charge itself is plainly wrong as to that agreement. There is a suggestion that the charge was in support of a guarantee of Mr Macpherson’s indebtedness by HLL: but there is no written record of any such guarantee and nothing has been produced from the company’s books suggesting that the company agreed to guarantee its director’s debt. Mr Wise’s rights to enforce the charge are entirely unspecified. Although solicitors were involved in the preparation of the charge, there is no record of the instructions they received - what it was they were being asked to do.

Secondly, the actual agreement on which Mr Macpherson relies, (that is the legally binding one that was reached after 25 January 2010) is not in fact identified in terms of occasion or date, or by reference to the terms of any conversations or by any other supporting detail.

Accordingly, it seems to me that the description of the evidence as “very thin” is justified. (The criticism of Mr Wise’s evidence as “lacking particularlity” and “failing to address the questions” has to be seen in that light. Mr Macpherson’s failure to identify the occasion on which the crucial agreement which bound Mr Wise was reached does not enable Mr Wise to address the evidence himself and provide an answer to the case against him).

The third criticism that was made of the district judge’s judgment was that in a concluding paragraph (which, again, I think is no more than an elaboration of the earlier paragraphs) he found that the discussion between the parties on what was happening:

“…was exactly as Mr Wise says. That is, this is what Mr Macpherson wanted to happen. He was saying “I will do this” but that is not a contractually binding agreement. He wanted it to happen.”

I do not think criticism of this paragraph is justified. Undoubtedly, there was discussion going on. That is not in dispute. The key question is whether there are substantial grounds for believing that out of that discussion the agreement for which Mr Macpherson contends arose. The district judge considered that the overwhelming probability was that what occurred was exactly what Mr Wise said, namely that there was discussion but never a concluded outcome in the terms alleged by Mr Macpherson. I do not consider that that conclusion can be criticised.

The final point argued on this appeal related to estoppel. Ms Williamson submitted that if she failed to persuade me that there were substantial grounds for believing that Mr Wise had entered into a legally binding agreement not to demand payment until after the sale of Wells House, then an alternative analysis might be that Mr Wise was “not entitled to issue and serve a statutory demand”. Although she was somewhat shy in using the term, she was arguing in favour of a promissory estoppel. She said that Mr Macpherson had suffered detriment in reliance on Mr Wise’s alleged statement that he would not pursue payment. In particular, Mr Macpherson had incurred liability to HLL because if Mr Wise enforced the charge against HLL, then Mr Macpherson would have to indemnify HLL. That does not seem to me to be a “detriment”, since Mr Macpherson is on any footing bound to pay Mr Wise the amount of the indebtedness (be that £338,500 or some other figure).

Then, Ms Williamson submitted that Mr Macpherson, in obtaining the legal charge from HLL, had exposed himself to claims for costs by a potential future office holder in HLL because perhaps it was not right that HLL should guarantee the personal debts from Mr Macpherson. That again does not seem to me to be relevant “detriment” for the purposes of the doctrine of estoppel. Then, she said that the costs of preparation of the legal charge had been incurred; but in truth there is no evidence as to what those costs were or who paid them or assumed liability for them. In truth, it seems to me the position is that whatever happened in relation to the legal charge, Mr Macpherson owed a substantial sum to Mr Wise and he owes no more now (to whomsoever he owes it).

I have therefore concluded that the district judge was right in considering that there are no substantial grounds for thinking that there was a legally binding agreement between Mr Macpherson and Mr Wise that Mr Wise could not lawfully demand payment of his debts until such time as Wells House was sold (no matter how long that took).