Hawk Recovery Ltd v Hall & Ors

This is my judgment on the Claimant’s application for directions in this claim. Specifically, the Claimant seeks a direction that the property in which the Defendants live be sold to pay a debt due from them and on the strength of which they were made bankrupt. At the hearing of the application on 18 March 2016, Thomas Grant QC and Stephen Hackett appeared before me for the claimant, whilst Benjamin Hawkin (instructed by the Bar Pro Bono Unit) appeared for the first and second defendants. The third defendant is not concerned in the application, and took no part in it. After the hearing, further evidence and written submissions were filed in a sequence ending on 4 April 2016.

This application is another stage in long-running and complex litigation, played out in many different actions in various courts, of which the Defendants complain as a vendetta conducted against them and their daughter Natasha Eustace, and said even by judges to be orchestrated by Paul Baxendale-Walker, her former lover. Some of the various actions were described in this way by Pitchford LJ in one of them (Bluebird Productions Ltd v Eustace [2015] EWCA Civ 423) as follows:

“3.

Some of the claims against the defendant are of the following type. In St George's Bank Holdings v Eustace, then in Sargespace Limited v Eustace, and in Hawk Recovery Limited v Eustace, the claimant sought the recovery of a flat or a bridging loan in respect of that flat and a Range Rover motor car; in Prentygast v Eustace, the claimant sues for outstanding taxi fares; in Hawk Consultancy LLC v Eustace, the claimant seeks to recover an alleged debt; in Sargespace Limited v Hall, [ie this case] the claimant seeks to establish its title to a house in which the defendant's parents live; in Independent Debt Management Limited v Eustace, the claimant seeks to recover the cost of work said to have been done at the defendant's home. In the present action, Bluebird Promotions Limited v Eustace, the claimant seeks to recover a further alleged debt. In short, it is the defendant's case that none of the money and property claimed is due and owing to the claimants. They comprise either earnings or gifts from Mr Baxendale-Walker.”

This unusual cornucopia of litigation has given rise to some judicial comment. As the Claimant’s own skeleton argument puts it,

“It is fair to say that there have been various judicial findings that are highly critical of Mr Baxendale-Walker and to the effect that the litigation against Ms Eustace is an abuse of process.”

Here is an example. In Bluebird Productions Ltd v Eustace [2014] EWHC 1095 (QB), Males J in giving judgment referred to an earlier judgment of his in another case, Sargespace Ltd v Eustace [2013] EWHC 2944 (QB), and went through the procedural history of the litigation. He said this:

“20.

… I have already noted that Haddon-Cave J expressed concern whether the freezing order was being used as part of a bullying campaign against Ms Eustace. Six months later it is clear that his concern was well founded.

21.

There is a multiplicity of separate proceedings which have been issued against Ms Eustace and even against her parents, not only in this country but also in the United States. Those proceedings have been brought by a bewildering variety of companies who claim to be entitled to an interest in the house referred to in the Sargespace judgment, or in the case of the action against Ms Eustace’s parents, claim to be entitled to an interest in or ownership of their house in the Isle of Wight.

…

27.

In my judgment, these matters show very clearly that it is indeed Mr Baxendale-Walker who, far from being a disinterested mediator, is the driving force behind all this litigation. It seems to me an overwhelming inference that it is being done as part of a vendetta against Ms Eustace following the breakdown of their relationship described in my judgment in the Sargespace action…

28.

All of this, in my judgment adds up to a very clear case of abuse of process…”

Refusing an application for permission to appeal against that decision, Pitchford LJ said ([2015] EWCA Civ 423), inter alia:

“28.

However, in my view what is improper is the use of the court's process for ulterior and illegitimate motives. The judge found that Mr Baxendale-Walker was in pursuit of his personal interest to do with the relationship that had formerly existed between himself and Ms Eustace, bringing proceedings against her through what was effectively a multiplicity of nominees with the intention of ensuring that even if she was successful in her defence, she would nevertheless be ruined. His principal strategy was to use the litigation as intimidation and, as it was found by the judge, personally to use intimidation of her. As soon as the defendant put out one fire, another one appeared. This was the nature of the orchestration which it seems to me the judge had identified. The judge was, in my view, entitled to find that he, through the nominee companies, was misusing the court's process. There was an immediate and necessary relation between the application and the abuse because the form of the application was designed and intended to further that abuse.”

I also note in passing that in two more, very recent judgments in this Division, the Chief Master has also refused to grant summary judgment against Ms Eustace: Hawk Recovery Ltd v Eustace [2016] EWHC 115 (Ch); Briarleaf Ltd v Eustace [2016] EWHC 223 (Ch). In considering whether to make an order for costs in favour of Ms Eustace on the standard or indemnity basis in these two cases, the Chief Master said:

“I am going to make an award of costs on the indemnity basis. I have already indicated briefly why that is. It is because I have concluded, as have two judges previously, that the conduct of these proceedings as a whole is abusive and it is plain that although the individual conduct of those representing the two claimants has not been abusive, the underlying theme here is that these claims are brought against the defendant in a manner which is oppressive and is an abuse of the court’s process. It seems to me that it is not possible to have a clearer example of a case which is outside the norm and a case in which it is appropriate to make an order for indemnity costs.”

The claim in which this application is made is one principally for repayment of the sum of £310,320, but in the alternative for “restitutionary remedies on a proprietary basis”. In practice this means a claim to trace the sum referred to into the purchase of the residential property known as Sandpipers Lodge, Afton Road, Freshwater, Isle of Wight (“the Property”), which is the home of the Defendants, and of which they are and have been since it was acquired in 2012 the registered proprietors. The Defendants say they understood the money to be a gift to them by Mr Baxendale-Walker for the purpose of the purchase.

The claim to trace is made on the basis that the sum made available to the Defendants to buy their home was actually so made in breach of the terms of a trust from which it apparently came. That trust is said to have been created by a partnership in which Mr Baxendale-Walker then held a 99% interest. The Claimant is alleged to be the assignee of the rights of action in relation to the money. None of these allegations has been tested at a trial. The particulars of claim served with the claim form make explicit a claim by the Claimant to possession of the Property.

As mentioned above, there are or have been other legal actions between Mr Baxendale-Walker or companies or entities with which he is apparently connected and the Defendants. They include at least one other action in which a company connected with Mr Baxendale-Walker (not the Claimant) also claimed to be the beneficial owner of the Property. I rehearsed some of the procedural history of the litigation between the parties in a judgment given on 14 April 2015. I will not set it out again. What follows is only the barest summary.

This claim was begun by Part 7 claim form issued on 11 February 2014 in the Queen’s Bench Division. A professionally drafted defence to the claim was filed in March 2014. The action was later transferred from the Queen’s Bench Division to this Division. In October 2014 the Defendants were both adjudicated bankrupt on the petition of Mr Baxendale-Walker based on a failure by the Defendants to pay a costs order made against them in his favour in another, separate claim, in the sum of £75,000. The same insolvency practitioner, David Clements, was appointed as trustee in bankruptcy in relation to both of the Defendants. (I should say that I have not seen any evidence that there are any other significant debts owed by the Defendants.)

I interpose here to say that the Defendants are no longer bankrupt, having been automatically discharged under the Insolvency Act 1986, s 279(1), after one year, that is, in October 2015. But of course their assets (other than those excepted by statute) have vested in the trustee in bankruptcy, and continue to belong to him, for the purpose of paying debts. The Property is in a special position, because it is their only home. By s 283A(2) of the Insolvency Act 1986, to the extent that it belonged beneficially to the Defendants at the time of bankruptcy, it will revest in the Defendants after three years from the twin adjudications, that is in October 2017, unless in the meantime the trustee in bankruptcy has applied for an order for possession or to sell it. So far (as set out below) he has not done so.

Two days after the adjudications, the Claimant applied for summary judgment on the proprietary part (ie non-provable in the bankruptcy) of the claim. That application was heard by Deputy Master Mark in January 2015. Although the Defendants had been represented by solicitors at an earlier stage, by now they were unable to afford legal representation. In addition, the First Defendant’s father had died the day before the hearing. Accordingly they were neither present nor represented at that hearing. Nor had they put in any evidence in answer to the application. By letter they asked for an adjournment. This was allowed so far as related to claims still vested in them following the bankruptcy, but otherwise was refused.

The Deputy Master accordingly heard the application to that extent. At its conclusion he granted a declaration that the Claimant was entitled to trace into and claim the beneficial interest in the Property, and ordered the Defendants to execute a Form TR1 transferring the legal title to the Claimant. On the other hand, the Deputy Master did not consider it right at this stage to order the Defendants to give up possession, and the Claimant has made no complaint about that.

The Defendants however refused to execute the transfer in Form TR1 that was sent to them by the Claimant. The Claimant subsequently issued a fresh application, for orders that (1) the trustee in bankruptcy of the Defendants be joined, and that he be ordered to execute the TR1, and also (2) that the Defendants give up possession of the Property to the Claimant. I heard this application in March 2015. The Claimant was then represented by junior counsel (Mr Hackett) and the Defendants attended in person, but were unrepresented.

After hearing argument from Mr Hackett, and inviting the Defendants to address me, I held that the legal title in the land was still vested in the Defendants as trustees, and that in light of the order of Deputy Master Mark the trustee in bankruptcy had no interest in it, legal or equitable. I declined to join him to the proceedings for the purpose of ordering him to execute the TR1, as there was no point in his doing so. I also held that the Claimant, being entitled only in equity, and without ever have been in possession of the land, was not entitled to possession as against the Defendants as legal owners (this not being a claim under the Trusts of Land and Appointment of Trustees Act 1996 by beneficiaries for the right to occupy the land subject to a trust of land). On Mr Hackett’s application, I gave permission to appeal on both points.

Subsequently, the Defendants sought to appeal the order of Deputy Master Mark out of time, and after a number of extensions of time to obtain all the necessary documents in January 2016 they obtained permission to appeal. The Claimant has appealed my own decision not to award possession to the Claimant (though not that relating to the legal estate), and both appeals are to be heard together. I should also add that, on 28 April 2015, the Claimant also issued an application for an order under the Trusts of Land and Appointment of Trustees Act 1996, but when it came to a hearing (before me) on 24 June 2015 it was adjourned pending the determination of permission to appeal, and so far as I know was never relisted. Finally, I mention that Mr Baxendale-Walker appears to have assigned the Defendants’ costs debt which founded the bankruptcy petition to the Claimant.

The present application is intended by the Claimant to enable it to recover the (assigned) bankruptcy debt even before the two pending appeals are determined. The Claimant says that, regardless of what happens on those appeals, the equitable ownership of the Property cannot be in the Defendants If the Defendants’ appeal succeeds, that means that the equitable interest was in the Claimants at the time of the bankruptcy, and therefore will have vested in their trustee in bankruptcy, Mr Clements. Pursuant to the Insolvency Act 1986, s 303, he can be directed by the Court to seek a sale of the Property (under the Trusts of Land and Appointment of Trustees Act 1996, s 14) for the purpose of realising the money needed to repay the debt now apparently due to the Claimant.

If on the other hand the Defendants’ appeal fails, and so it is determined that it was in the Claimant rather than the Defendants at the time of the bankruptcy, the Claimant is entitled to apply for an order for sale anyway, and, being the sole beneficiary, would expect to succeed. In this respect the Claimant cited Avis v Turner [2008] Ch 218, CA, and Saunders v Vautier (1841) Cr & Ph 240, 41 ER 482. Either way, says the Claimant, the Property can and should be sold, and on the Claimant’s application the Court should so direct at this stage.

The Claimant complains that the Defendants have remained in possession of and resident at the Property free of charge, and only because of the uncertainty as to who owns the equitable interest. Meanwhile, Mr Baxendale-Walker’s entitlement to costs in the sum of £75,000 has been outstanding since the bankruptcy in October 2014, and there are no other assets out of which it can be satisfied. The Claimant refers to the evidence of the trustee in bankruptcy Mr Clements that, had his title to the Property been clear, he would have applied for an order for sale. It also points out that, since there are no minors living at the Property, the Insolvency Act 1986, s 337, is not engaged.

The Defendants for their part submit that this application as a part of the current claim is a further abuse of the process. It is simply part of the campaign of harassment against the Defendants and their daughter already referred to. They say it is also abusive as an attempt to circumvent my own ruling in April 2015, which is in any event under appeal.

At the hearing I raised the possibility that, if the Defendants’ appeal succeeded, and they were held entitled to the equitable interest in the property, subject of course to their bankruptcy, it would make sense for them to find a friend or relation ready to lend them the £75,000 or so necessary to pay of the bankruptcy debt and so free the Property of that shackle. On the other hand, if the Defendants’ appeal failed, there would be no point in doing so. So they may be waiting for the appeals to be heard, in order to decide what to do. The Defendants agreed, and said that someone in their family had been identified for that purpose. I gave the Defendants permission to file and serve further evidence on this point, to be followed by serial written submissions of the parties.

The First Defendant made a witness statement dated 20 March 2016, supported by a statement of truth, in which he said that a family member was willing to clear the bankruptcy debt, but that, given the harassment of the Defendants and their daughter which they alleged, he was unwilling to identify this person more precisely, for fear that pressure be put on him or her, in the shape of what he called “legal harassment, dirty tricks and abuse that we have endured over the last two and a half years”. But he expressly confirmed that

“Should the Court decide that we are indeed the lawful owners of the property, we will then arrange for the debt to be paid. If this does not happen, then the trustee in bankruptcy will be able to sell the property and settle the debt. Either way Mr Paul Baxendale Walker will get paid.”

On 30 March 2016 the Claimant filed and served written submissions in response to this evidence. Part of these is devoted to refuting the allegations of harassment insofar as these were based on behaviour of the Claimant’s legal team in this litigation, or knowledge of the behaviour of other lawyers. I accept that the allegations of harassment in the First Defendant’s witness statement are not particularised in any detail, and in any event may refer to actions other than this one, or to behaviour outside any legal action at all (for example, the allegations of a private detective gaining access to the Defendants’ home, and of abuse on the internet). I do however note in passing that the same counsel (leading and junior) were involved for the Claimant in the Bluebird Productions case, and the same junior counsel in the Sargespace case, both mentioned above, though in neither case the same solicitors.

The Defendants in short written submissions in reply dated 4 April 2016 repeat the allegations of harassment, and reject the denials on behalf of the Claimant. On the material before me, and in the absence of further evidence and cross-examination, I cannot find, and do not base my decision in this application on any finding, that the Claimant’s legal team in this claim has been guilty of any behaviour amounting to harassment. In particular I do not need to resolve the argument about what Mr Grant QC may or may not have said at earlier hearings.

At the same time, it is notable that the denials on behalf of the Claimant are carefully restricted to the knowledge of the present legal team in this action. I have however no doubt that the Defendants’ perception of harassment is very real. It is supported by the comments of judges in other cases involving the same or related parties (some of which I have cited). And those perceptions are relevant for other purposes. But I am not going to base my actual decision on harassment. Instead, I intend to focus on the particular application made here.

First, there is the question of the third-party funder. Notwithstanding the scepticism of the Claimant, I can see every reason why a person who knows the Defendants should be prepared to pay off the debt of some £75,000 to save their home, as long as the value of the Property is greater. I am sure that, if it were likely to be smaller, the Claimant would have told me. I can also see why the Defendants should fear to reveal the identity of the funder, even if, according to the Claimant, such fears are misplaced. The Claimant’s arguments on this point, even if correct, might have some force in determining the motives of someone as highly trained as, say, a chancery barrister. But they are far too logical for persons in the position, and with the experiences and existing perceptions, of the Defendants.

The Claimant criticises the absence of discussion of the terms of the funding. In my judgment, there is no substance in this. Family life is not conducted on the same basis as commercial banking. Blood is, as they say, thicker than water. The Claimant also argues that the Court should decide the present application by putting itself in the position of being faced with an application by the trustee in bankruptcy for an order for sale. It says that the trustee in bankruptcy has no funds to make such an application, but that the Court has the power to give directions as if the trustee in bankruptcy had done so.

The Claimant says that in such a case the trustee in bankruptcy should succeed on one of two separate bases, either (1) under the Trusts of Land and Appointment of Trustees Act 1996, s 14, or (2) under the rule in Saunders v Vautier. As to the first, the Claimant says there are no children to take account of, and no exceptional circumstances under the Insolvency Act 1986, s 335A. Any “harassment” is legally irrelevant. As to the second, the Claimant says that the trustee in bankruptcy would be entitled as sole beneficial owner to have the trust dissolved and the legal title conveyed to him.

The problem with this argument is that it depends on the Defendants’ appeal being unsuccessful, and the decision of Deputy Master Mark being upheld. If the Defendants’ appeal succeeds, however, the landscape changes dramatically. The second route outlined above (Saunders v Vautier) will simply fall away. As to the first (the Trusts of Land and Appointment of Trustees Act, s 14), the Defendants say they will be able to pay off the bankruptcy debt with the help of the unidentified family funder. Now, I do not see how a Court in that case could properly exercise its discretion to order the sale of a property in order to pay a particular bankruptcy debt when the amount of the debt is being offered in cash to the trustee in bankruptcy. No example of such a case was cited, and I respectfully doubt that any could be found.

In my judgment, therefore, what this application comes down to is whether the Court should wait until the appeals are disposed of, in order to see what happens. Permission to appeal was given to the Defendants in January. I cannot imagine that the hearing of the appeals can be more than a few months away, at most. If I accede to this application, the Defendants will have to vacate the Property as and when a buyer is found, if not earlier. It is their home, so they will have to find somewhere else to live, and move all their possessions. If on the other hand I refuse this application, the Claimant will be kept out of its money, or out of its beneficial entitlement to the Property (as the case may be), until the appeals are decided.

On the appeals, it may turn out that the Defendants are successful, and the Claimant has no beneficial interest in the Property at this stage (there will still have to be a trial in due course). In that case they will still have to pay the bankruptcy debt in order to be able to remain in the Property. But they have said they will do this. Or it may turn out that they are unsuccessful, and the Claimant has a beneficial interest now. In that case they will, one way or another, have ultimately to vacate the Property. (If the Claimant succeeds in its appeal against my own order, then immediately; otherwise once a TR1 is executed, whether by the Defendants or a court officer.)

Balancing the one against the other, in my judgment greater justice is achieved by allowing the Defendants to continue in possession of the Property pending the hearing of the appeals. The harm to the Defendants in ordering sale now, if ultimately they are successful, is far greater than the harm to the Claimant in not doing so if ultimately it is. I am reinforced in my view by the considerations of Art 8 of the European Convention on Human Rights. The right to respect for the home adds weight to the conclusion at which I had already arrived, and therefore I do not consider it separately.

Accordingly I dismiss the application. I am provisionally minded to make an order, as requested in the Defendants’ skeleton argument, for costs to be paid by the Claimant under the Legal Services Act 2007, s 194. But I will hear submissions on this point, and any other consequential matter, at the hand-down of this judgment, unless of course the parties are able to agree the order, in which case no attendance is required.