England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
(His Honour Judge Boggis
(sitting as a deputy High Court judge))

		Royal Courts of Justice Strand London WC2 Friday 5th October, 2001

1. LORD JUSTICE ROBERT WALKER: These are renewed applications for permission to appeal from three separate but closely related orders all made by His Honour Judge Boggis, sitting at Birmingham as an additional judge of the Chancery Division, on 18th June 2001. There is also a late application to adduce further evidence.
2. The applicants are Mrs Urmila Thakrar and her daughter Miss Reena Thakrar. They wish to appeal only against the costs orders made against them respectively by the three orders dated 18th June 2001. At the beginning of this hearing I indicated that I would grant permission to appeal on one of the applications, 104 - I will explain later what I mean by that - and that I would adjourn to the appeal hearing the application to adduce further evidence in relation to 104. I have now decided that I should take the same course in relation to the other applications, that is 101 and 103.
3. Since all the parties in the various proceedings have the same family name, Thakrar, I will (without intending any familiarity or disrespect) refer to Mrs Urmila Thakrar as Urmila and to her daughter as Reena.
4. The costs orders were made in connection with three originating applications made in the Birmingham District Registry of the Chancery Division of the High Court designated as BM 30101, BM 30103 and BM 30104 respectively. I will refer to these as 101, 103 and 104. The costs orders were as follows:

(1) that Urmila should pay all the claimants' costs of 101;

(2) that Reena should pay all the claimants' costs of 103; and

(3) that Urmila and Reena should pay 75% of the claimants' costs of the application in 104.

5. The claimants in each case were Kirit Lalji Thakrar ("Kirit") and Mr Richard Hill, who is the trustee in bankruptcy of Mr Rasik Lalji Thakrar ("Rasik").
6. All three applications arose out of a complicated and contentious family dispute centred on a company called Ciro Citterio Menswear Plc ("the company"). The company had a substantial business as a retailer of men's clothing. Several members of the Thakrar family were shareholders in the company and were concerned with running the business: in particular Kirit and his brothers Rasik and Vinod Lalji Thakrar ("Vinod") and Rasik's son Nilesh Rasik Thakrar ("Nilesh"). Rasik was managing director. As the judge said in his judgment on 17th October 2000:

"The story of the family company is one of remarkable success. The Thakrar came to this country as Ugandan Asian refugees during the early 1970s. They acquired a men's wear shop in Birmingham. From that single shop they have built a business of some 170 shops with a staff of over 1000 and a turnover of more than £80m."

7. Unhappily that success story has come to an abrupt end. What happened was that in 1998 differences arose between the brothers and Kirit was excluded from participating in running the company. In June 1999 Kirit commenced proceedings under section 459 of the Companies Act 1985. The principal defendants were Rasik, Vinod and Nilesh, although the company was also joined, in the ordinary way, as a party.
8. On 20th January 2000 there was a consent order for the individual respondents to purchase Kirit's shares, which were to be valued (in accordance with a procedure specified in the order) at 21.78% of the value of the entire ordinary share capital of the company, without any discount.
9. Despite the detailed terms of the consent order the valuation machinery broke down, for reasons which are set out in detail in the judge's judgment of 17th October 2000. Consequently the judge had to take on the task of valuation himself, and there was a nine-day hearing before him. He found that Rasik had been guilty of deception in the financial records and information which he had provided to the accountants on both sides of the valuation exercise. The judge valued Kirit's shares at £6.14 million.
10. In his order of 17th October 2000 the judge, as well as fixing the price, made ancillary directions and took undertakings from Rasik, Vinod and Nilesh not to dispose of their assets, and to make affidavits as to their assets. There were also directions for interim payments totalling £550,000 on account of costs. The timetable for payment of the purchase price was stood over to 13th November 2000 and on that date the judge ordered payment of £3.5 million by 29th December 2000. This was in fact £3 million net, since an interim payment of £500,000 had already been paid. The timetable for payment of the balance was stood over to the new year. Eventually the balance was ordered to be paid by 16th March 2001. The undertakings as to non-disposal of assets were renewed.
11. It is now clear that Rasik acted promptly and deliberately, in breach of his undertaking, in an attempt to put assets into the ownership (or apparent ownership) of his wife Urmila and his daughter Reena, so (as he hoped) to put them out of the reach of his creditors. The proceedings designated as 101, 103 and 104 were intended to frustrate (and to a large measure succeeding in frustrating) that attempt to defy the court and to cheat his creditors.
12. I do not propose (especially as I am giving permission to appeal) to go through all the complicated transactions in chronological order. The general effect was that a very large sum of money - over £700,000 - came to be invested in various ways, all or most of which had been discussed at a meeting at Rasik's house in Edgbaston near Birmingham on 22nd March 2001 when Mr Brannan, a financial adviser, obtained the signatures of Urmila and Reena to a number of proposed forms and other documents. Urmila and Reena have said, in witness statements which were made last week and which they now seek to have admitted in evidence, that they signed these documents without question, after no more than a brief glance, because Rasik asked them or told them to do so.
13. Inevitably, one of the questions that arises on the challenged costs orders is as to the position of women in an Asian family, even though Urmila has lived in this country for nearly 30 years and Reena has lived in this country all her life and has had the benefit of education in this country, including university education. She is now a student at Bristol University.
14. The sum of over £700,000 which I have mentioned was drawn from various sources. Some was from insurance policies or bonds effected and kept up by Rasik. One of them seems to have been held in trust, without any room for argument, since 1982. Another is the subject of a far more questionable alleged assignment in 1998. Other substantial funds came from a director's loan account with the company. This was paid off, it seems, by no fewer than 12 cheques for odd amounts, but totalling the round sum of £498,000 which were drawn on 9th February 2001, although not all of them seem to have been either presented or honoured. Full details of the transactions, so far as they appear from documentary evidence, some of it obtained as a result of a search order, are set out in a very useful chronology prepared by Kirit's counsel which was before the judge and which is in the bundles before me.
15. The search order was made on 4th April 2001. On the same day the judge made a freezing order against Reena and ordered her to make an affidavit as to her assets. These orders were made on the basis of an affidavit sworn on 3rd April 2001 by Kirit, who had already obtained some documents indicating that Rasik, Vinod and Nilesh were dissipating or concealing their assets. Rasik had written letters to the Scottish Widows Fund and to Friends Provident in terms which contradicted what he had said in his affidavit of assets which he had made on 27th October 2000.
16. The first order was made against Reena. There was no order against Urmila at that stage because her part in the various transactions had not yet come to light. The first order against her came on 20th April 2001.
17. On 19th April 2001 Reena swore her first affidavit in accordance with the direction in the order of 4th April. Reena did not in her first affidavit disclose other assets worth a total of £207,000 until after she had been cross-examined on her first affidavit, as she was on 20th April. In a second brief affidavit made on 10th May she deposed that she had learned:

"that without my knowledge my mother has made certain investments on my behalf."

18. I should mention that by this time the company had gone into administration under Part II of the Insolvency Act 1986. The order was made by Hart J on 12th March 2001. Moreover, on 14th May 2001 Rasik was adjudicated bankrupt. At the time of the search order and when the three originating applications were launched he had not therefore yet been made bankrupt, although this must have been predictable as likely to happen in the near future.
19. I will summarise as briefly as I can the particulars of the three originating applications 101, 103 and 104 - which have led to the costs orders which are directly in issue. For some unfathomable reason, 103 seems to have come before 101. 103 was issued on 4th April 2001 (the same day as the search and freezing orders) and it was issued against Rasik and Reena. It was issued (as all three applications were) under section 423 of the Insolvency Act 1986, which relates to the transactions defrauding creditors. It related to three separate payments, the two largest being of sums which are easily confused - £183,925.42 and £138,925.55. Those are indeed distinct payments and not the result of a copying error. The third alleged payment of £7,000 was not pursued.
20. The sum of £183,925 was paid on 20th February 2001 by Scottish Amicable and went into Reena's Abbey National account. The sum of £138,925 was paid on 29th January 2001 by Scottish Widows and went into the same account.
21. This originating application was subsequently amended to insert a further claim for £100,000 invested in March 2001 in a Scottish Widows Flexible Investment Bond.
22. 101 was issued on the 18th or 19th April 2001, after Kirit's advisers had been able to study the documents obtained under the search order. It related to a sum of £44,507 drawn by Rasik from his self-administered pension plan and paid into a joint account with the Bank of Scotland. This seems to have been intended to go into a Scottish Mutual Investment Bond in Urmila's name.
23. 104 followed hard on the heels of 101 on 20th April. Initially the defendants were Rasik and Urmila, Vinod and his wife, and Nilesh and his wife. Later Reena was added as the 7th defendant. One of the points made by Mr Wyvill is that Reena was added only three days before 104 was disposed of, and yet she was ordered to be responsible for 75% of the whole of the costs.
24. So far as relevant 104 related to the cheques totalling no less than £498,000 which were intended to be paid by the company, although as I have mentioned not all of these cheques seem to have been either presented or honoured.
25. As I have mentioned, on 20th April Reena was cross-examined on her affidavit. The judge referred to this in his judgment on costs. Speaking of Rasik's undertakings, the judge said:

"Rasik Thakrar regarded that promise as completely worthless so far as he was concerned. Within days, he was doing all he possibly could to get his assets away from Kirit. In order to sustain that line, Rasik involved his wife and his daughter. Rasik gave not one moment's thought to the position of his wife and daughter. I hope he was truly ashamed when he saw his daughter crying in the witness box, required as she was, a student of 21 years, to answer questions involving very large sums of money in which she had been implicated wholly because her father thought it appropriate to try and deceive the Court and his brother."

26. Plainly, the judge had to bear in mind, and did bear in mind, Reena's age and the fact that she and her mother are women in an Asian family, albeit one which had been settled in England for nearly 30 years. It will also be material on the hearing of the appeal to bear in mind that since the beginning of April 2001 - that is, more than two months before the costs judgment - Urmila and Reena have been receiving legal advice, which appears to have been both wholly independent and highly competent. These are all factors which bore on the difficult exercise of discretion which the judge had to make.
27. On 14th May the judge gave directions in all three matters. Each of his orders contained the court's permission under section 424(1)(a) of the Insolvency Act 1986 for the applications under section 423 to continue. They would continue on behalf of, and for the benefit of, every victim of the impugned transactions: see section 424(2).
28. By the order of 14th May freezing orders were continued against both Urmila and Reena, in respect of separately specified assets. Urmila was to be cross-examined on 17th May, and an application to set aside the order for her cross-examination was made and was adjourned to the same date.
29. In the event, the judge's order on 17th May was made partly by consent. Rasik's trustee in bankruptcy was joined as a claimant. Various assets were to be vested in the trustee in bankruptcy, together with the documents of title. The administrators of the company were given the opportunity to claim the sum of £183,925.
30. Questions of costs were stood over to 18th June 2001, with the claimants' solicitors to serve "a short written statement of matters relied on in support of the costs application" by 7th June and the other side to respond by 13th June. In the event the first statement was served five days late, and no response seems to have been made to it because time had run out.
31. The claimants' statement (accompanied by the detailed chronology which I have already mentioned) relied basically on two matters which are among the principles mentioned in rule 44.3 of the Civil Procedure Rules: the outcome (as the claimants said, success; as the present appellants say the issues became academic) and the conduct of Urmila and Reena. It was said that they were among the members of the family who had been involved (no doubt at the instigation of Rasik) in an exercise to put assets out of the reach of Kirit as a judgment creditor. Reena's alleged lack of knowledge of her mother's activities was put in issue, although very much at the last moment, by that statement.
32. No affidavit evidence was put in, at that stage, by Urmila and Reena. Mr Wyvill has pointed out to me that no directions for affidavit evidence had been given on 17th May. Had they applied to put in evidence it may be that such permission would have been given and also that they would have been cross-examined. These are all issues which will have to be considered at the hearing of the appeal.
33. On 18th June the judge gave a judgment which runs to three pages of transcript. Although that might be thought to be a relatively short judgment, it is a relatively long judgment to give on a question of costs, on which the court often states its reasons quite briefly.
34. I have already summarised the costs order which the judge made on that occasion. Although I have thought it right to give a judgment summarising the background to the matter in some detail, it is not I think appropriate that I should say any more about the reasons which the judge gave for the exercise of his discretion or about the grounds of appeal which Mr Wyvill puts forward for attacking that exercise of discretion, submitting that the judge's reasons were either not available to him or were unfounded or were irrelevant.
35. All I need to say is that I am finally narrowly persuaded that I should give permission to appeal, not merely on 104 but also on 101 and 103, and that I adjourn the application to adduce further evidence in all three applications to the hearing of the appeal by the full court.
36. The costs of this application will be costs in the appeal.
ORDER: Permission to appeal granted; costs of these applications to be costs in the appeal. (Order not part of approved judgment) ____________________