England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY

		The Priory Courts 33 Bull Street B4 6DS Birmingham
		17th May 2011

HH JUDGE SIMON BARKER QC :

1. Hillsgate Properties Ltd (HPL) was wound up by order of District Judge Maughan on 20^th May 2010 at the first hearing of a petition which had been presented to the High Court, Birmingham District Registry, on 1^st March 2010 by Mr. Peter Windatt, who is the Trustee in Bankruptcy of Mr. Resham Khela. At the hearing on 20^th May, Mr. Windatt was represented by counsel and HPL was not represented.
2. The application before me is for an order that "the winding up petition [strictly the order] be rescinded". This application was issued on 25^th October 2010 by Mr. Ravinder Bhardwaj who is the former sole director of and sole shareholder in HPL. Mr. Bhardwaj is also a solicitor. In his evidence, Mr. Bhardwaj also refers to himself as an old friend of Mr. Khela. According to the application notice, Mr. Bhardwaj makes this application as a director of HPL and by reference to a director's loan account which is reflected in HPL's accounts, as a liability of that company. Indeed, according to HPL's accounts Mr. Bhardwaj is the only creditor of any substance.
3. By 25^th October 2010, the date of this application, more than five months had passed since the date on which HPL was wound up.
4. The Insolvency Rules 1986, Rule 7.47 provides:

"(1) that every court having insolvency jurisdiction in respect of companies may rescind, review or vary any order made in the exercise of that jurisdiction", and "(4) any application for rescission of a winding up order shall be made within five business days after the date on which the order was made".

Unless otherwise stated, in this judgment all references to "Rule" are to a rule in the Insolvency Rules 1986, and all references to a "Section" are to a section of the Insolvency Act 1986.

5. In the context of companies winding up, Rule 4.3 provides that :

"Where, by any provision in the Rules about winding up, the time for doing anything is limited, the court may extend time either before or after it has expired on such terms, if any, as the court thinks fit".

6. By the Practice Direction "Insolvency Proceedings", which is noted at [2007] BCC 842, the obligation to make an application for rescission of a winding up order within seven days – that is, five business days plus a weekend – is emphasised. The direction also provides that: (1) notice is required to be given to the Official Receiver; (2) applications must be made by a creditor, or a contributory, or the company and, if the company, jointly with a creditor or contributory, and any application must be supported by written evidence of the company's assets and liabilities; (3) if unsuccessful, the applicant will normally be ordered to pay costs, including those of the Official Receiver, because it would be unfair to make them payable by the company and thus fall on the general body of creditors; (4) where a winding up order was not opposed and the application is made promptly, a statement by the Applicant's legal representatives may suffice; otherwise formal written evidence will normally be required.
7. This application by Mr. Bhardwaj I take to be by the company supported by Mr. Bhardwaj as a creditor.
8. By Rule 7.51A, the provisions of the CPR, subject to certain modifications not relevant in this case, are applied to the Rules with any necessary modifications, except as inconsistent with the Rules. Thus, where an application is made for an extension of time after the expiration of the seven day period, the provisions of CPR 3.9, which relate to relief from sanctions, and CPR 39.3(5), which relate to applications to restore proceedings or set aside a judgment made following the non-attendance at trial, are, potentially at least, relevant. It is to be noted that the equivalent power to rescind a bankruptcy order in personal insolvency proceedings under Section 375 and the general power to revoke an order made under the CPR (see, for example, CPR 3.1(7)), whilst also being exceptional discretionary remedies and powers, are not expressly subject to any, let alone such a strict, time limit as that applicable to the rescission of the winding up of a company.
9. The proper course for an application for rescission is for it to be exercised in the first instance by the same judge or by a judge at the same level as the judge who made the order. Applications to a judge at a higher level should be appeals which are provided for under Rule at 7.47(2) (see, for example, the judgment of Blackburne J in Re Dollar Land (Feltham) [1995] BCC 740 at page 746 F to G).
10. The route by which this application for rescission comes before me is that it was initially before a district judge but in February of this year was directed to be adjourned to one of the Chancery CJs. In order to avoid any possible uncertainty, I, therefore, state for the record that this is not an appeal under Rule 7.47(2).
11. In Re Virgo Systems Ltd. [1989] BCC 833 Peter Gibson J, as he then was, considered an application in the following circumstances. An unopposed winding up order was made on 24^th May 1989. The statutory demand, petition and order did not come to the company's attention because the company's accountants had overlooked the director's instruction to change the registered office address from that of the formation agents to that of one of the company's officers. On 31^st May the Official Receiver contacted the company's accountants about the order and within seven days of the company being notified by its accountants an application was made. On the basis that there was a proper explanation for the directing minds not being aware of what had occurred and given that they had acted within seven days of becoming so aware, Peter Gibson J exercised the discretion to extend time, considering that to be the first question for the court to consider. Turning to the merits, on the facts it was clear that the creditors would be paid in full and promptly, that all the contributories agreed to the rescission of the winding up order, and that the liquidator's costs would also be paid in full. His lordship, therefore, concluded:

"It is hard to see that anyone will suffer if the court exercises the jurisdiction."

12. Virgo may be characterised as a straightforward or classic case for rescission. Peter Gibson J's judgment identifies the two discretions and the elements requiring consideration on any rescission application, namely :

(1) should time be extended? Here the court must consider (a) whether there is a proper explanation for the failure to apply in time and (b) whether there is a proper explanation for the delay which has occurred, and,

(2) should the winding up order be rescinded? The court must consider (a) whether there are proper grounds for rescission and, if so, (b) what effect a rescission order would have on any and all persons interested in the company and affected by the winding up.

Both questions must be addressed properly by the Applicant if the court is to be satisfied that it should rescind a winding up order and thereby revive a company and return it to the control of its directors.

13. In Leicester v Stevenson [2002] EWHC 2831 (Ch) Lightman J refused to rescind a winding up order on an application made more than three years later. Lightman J held that the basis of the application was misconceived and, after concluding that there was no conceivable justification or proper excuse for such a delay, further observed that any application for an extension of time must be strictly justified if the extension is to cover any substantial period and that the jurisdiction (that is, the jurisdiction to rescind a winding up order) is to be exercised very cautiously.
14. The reason for the imposition of such a strict time limit to applications for the rescission of a winding up order was stated in Re Oakwood Storage Services Ltd. [2003] EWHC 2807 (Ch) to be that the winding up order necessarily affects persons apart from the petitioning creditor and the company itself. In that case, Hart J held on an appeal that, even though there was a substantial prospect that had the application to rescind been made in time it would have succeeded, the Registrar was entitled to refuse to make an order for rescission because the directors had not acted timeously once they were aware of the order and had not put forward sufficient reasons of the exceptional character required to justify the very considerable extension of time being requested. The extension of time in that case was less than three months, the relevant dates being : order made on 9^th April, directors becoming aware on 2^nd May, and application being made in June of 2003. As is apparent, the extension of time there sought was considerably shorter than that sought on the application before me.
15. In Papanicola v Humphreys [2005] EWHC 335 (Ch) Laddie J heard an appeal from a review hearing in a personal bankruptcy case, i.e. under Section 375 and not constrained by the five day time limit. In that case, Laddie J identified a number of points as guidelines to be borne in mind when exercising the review jurisdiction which guidelines are also relevant to corporate insolvency review and rescission applications. They include: (1) the onus is on the applicant to demonstrate the existence of circumstances which justify the exercise of a discretion in its favour; (2) such circumstances must be exceptional; (3) the circumstances relied upon must involve a material difference to what was before the court making the original order and not merely a more focused argument than that advanced previously; and, (4) where new evidence is relied upon which could and should have been deployed at the original hearing, account should be taken of any reasons why that did not occur or of the absence of such reasons.
16. In Wilson v The Spector Partnership [2007] EWHC 133 (Ch), a refusal to rescind came before Mann J as an appeal. The district judge hearing the application for rescission had refused to exercise the discretion to rescind on rejecting the Applicant's contention that there was no debt on which to found the petition. That was an end of the application on the merits, but the district judge went on to consider the question of delay and refused to extend time. In his judgment, Mann J addressed the discretions in the same order and rejected the appeal on all grounds.
17. In relation to Rule 7.47 generally, and sub-rule (4) in particular, Mann J's analysis of the facts and his observations provide valuable guidance which may be summarised as follows: (1) the jurisdiction to set aside an order already made by a court is exceptional and has to be exercised cautiously, particularly where the order is a winding up order; (2) where there has been delay for a considerable period – in that case seven months – there must be evidence to explain the delay and the court should scrutinise it; (3) the court is not obliged to accept any explanation and should reject it where it is inadequate or unconvincing; (4) where an applicant has good reason to say that a winding up order should not have been made, the application should be made promptly and the reasons stated; (5) if relevant documentation is not immediately available to support the Applicant's evidence, that is not to be used as an excuse for delaying the application; and, (6) unjustified delay is fatal to the exercise of the jurisdiction under Rule 747.
18. Mann J's conclusion, both as to the merits by which the rescission application was decided and delay was that the district judge's decision was entirely correct.
19. More recently, in Metrocab and Another v Official Receiver and Others [2010] EWHC 1317 (Ch) Mr. Philip Marshall QC, sitting as a deputy judge of the High Court, approached the decision making process by deciding the merits issue before turning to delay (see paragraph 13 of that judgment). In that case, there were applications to rescind winding up orders in respect of two companies, one made four months and the other made three and a half months after the date of the winding up orders. By reference to the Court of Appeal decision in Sayers v Clarke Walker [2002] 1 WLR 3095 and to Rule 7.51, Mr. Marshall QC concluded that the provisions of CPR 3.9 should be used as a checklist when considering the extension of time discretion, which he proceeded to do and came to the conclusion that the delay was intentional and without proper justification. By way of observations on the approach to be taken when considering the merits of an application, Mr. Marshall QC stressed the exceptional nature of the order being sought and the need for a full explanation by the Applicant on whom the burden of proof lies.
20. Before me, Mr. Hansen, counsel for Mr. Bhardwaj, submits that the tendency evident from the case law is that the courts deal with applications on their merits and do not dismiss them in limine because they have been made late. In support of this contention, Mr. Hansen referred me to Re Turnstem Ltd. [2004] EWHC 1765 (Ch) in which case Lawrence Collins J, as he then was, dismissed an application on the merits which he described as misleading.
21. As I understand the authorities, the reality, unsurprisingly, is that failure to persuade the court to exercise either of the two discretions will be fatal to the application. In saying that, I should make clear that there may be a case where delay is not fully explained but the merits are so strong that the court is persuaded by the Applicant to exercise both discretions and to rescind the winding up order. However, in order to achieve such a result, I have no doubt that the court must be satisfied that any and all shortcomings in the failure to explain delay are the result of honest or inadvertent oversight or error on the part of the Applicant and, as Peter Gibson J put it, it must be "hard to see that anyone will suffer if the court exercises the jurisdiction".
22. Mr. Hansen submits that this is such a case and that the case on the merits is unanswerable. There are four strands to the argument on the merits of this case :

(1) the petition to wind up the company was an abuse of the process because it was run in parallel with bankruptcy petitions against Mr. Bhardwaj and another individual, Mr. Kaliq. Thus, there must have been uncertainty as to who the debtor was, which question should have been resolved in the ordinary way via proceedings, presumably under Part 7 of the CPR, and a trial;

(2) the debt has been paid. This, Mr. Hansen submits, occurred in October 2008, approximately one and a half years before the petition to wind up the company was presented, when payment was made on behalf of HPL directly to Mr. Khela;

(3) as an alternative to (2), Mr. Hansen submits that if, by reason of the fact that Mr. Khela was already bankrupt, any payment made to him and not to his Trustee resulted in the debt not having been paid, the payment, nevertheless, constituted after acquired property in Mr. Khela's hands and was, therefore, subject to the provisions of Section 307; and,

(4) in any event - and this is really the killer point - there never was an enforceable debt. The debt is based upon an oral agreement for the sale of land and is, therefore, unenforceable. The transfer records that the land was transferred for no consideration or monetary value and registration thereof is complete and that, Mr. Hansen submits, has conclusively determined the matter (see section 58 of the Land Registration Act 2002).

23. In addition, Mr. Hansen submits that at all times the company was solvent, or, put more accurately, that the only creditor of any value was Mr. Bhardwaj himself in respect of a director's loan account and, being also the sole director and sole shareholder in the company, he could properly defer or overlook any claim for repayment of that liability if and as he so chose.
24. None of the authorities cited to me contain guidance or a direction from the court to the effect that the merits should be considered first or that there is an established practice to that effect. For my part, I prefer the sequence followed by Peter Gibson J and, therefore, start with the question, "Should time be extended?"
25. Requiring adherence to procedural rules, including time limits, and a proper and convincing explanation for any failure is an important aspect of the due administration of justice. Expedition is an essential ingredient of the overriding objective, as also is the attainment of finality. That this is so is evident from the importance which the court attaches to the provisions of CPR 3.9 and CPR 39.3(5) when applications are made to set orders aside. For recent appellate authority making this absolutely clear to courts of first instance, see Forcelux Ltd. v Binnie [2009] EWCA (Civ) 854 and Hackney LBC v Findlay [2010] EWCA (Civ) 8.
26. Forcelux concerned relief from forfeiture of a lease and was thus an unusual case. Warren J, sitting as a judge of the Court of Appeal, considered what would constitute a trial for the purposes of CPR 39.3 and the Court of Appeal held that the first hearing of a possession application at which the Respondent did not attend was not a trial, although such a hearing could have become a trial had there been attendance and depending on the circumstances and how the hearing had developed.
27. In Hackney, Arden LJ gave a judgment with which Wilson LJ, as he then was, and Toulson LJ agreed, holding that in possession proceedings CPR 39.3(5) and CPR 3.9 are to be applied by analogy and that, in the absence of unusual and compelling circumstances, precedence should be given to the provisions of CPR 39.3(5) above those enumerated in CPR 3.9.
28. CPR 39.3(5) provides that the court may only set aside an order if an Applicant has (a) acted properly when he found out about the order, (b) a good reason for not having attended at the trial, and (c) a reasonable prospect of success at trial.
29. CPR 3.9 provides that, on an application for relief from any sanction imposed for a failure to comply with the Rules or a court order, the court will consider all the circumstances, including: (a) the interests of the administration of justice; (b) whether the application has been made promptly; (c) whether the failure to comply was intentional; (d) whether there is a good explanation for the failure; (e) the extent to which the party in default has complied with other Rules, Practice Directions, orders and pre-action protocols; (f) whether the failure to comply was caused by the party or his legal representative; (g) whether the trial date or likely trial date can still be met if relief is granted; (h) the effect which the failure to comply had on each party; and (i) the effect which the granting of relief would have on each party.
30. Mr. Hansen, for Mr. Bhardwaj, submits that, whilst these authorities are of direct application to possession cases, they are of no, or very limited, relevance or assistance in this case, being concerned as it is with an application to rescind a winding up order. Mr. Bagshaw, counsel for Mr. Windatt, submits that the decisions of the Court of Appeal are to be applied by analogy to applications to set aside or rescind a winding up order.
31. I prefer and accept Mr. Bagshaw's submission. There is nothing in the Court of Appeal judgments expressly or, on a fair reading, impliedly limiting the scope of the guidance given to applications to set aside possession orders only. On the contrary, the Court of Appeal is drawing on the CPR to derive useful guidelines and criteria to be borne in mind when considering any application to set an order aside. An application to set aside a possession order may result in a person or family being able to return to their home and recommence family life or a business being able to return to its trading premises and recommence operations. An application to set aside a winding up order may enable a company to recommence its business under the control of its former directors. These are both decisions where the outcome is likely to have a material impact extending beyond the parties involved. Moreover, it is important to remember that in Rule 7.51A expressly provides for the application of the CPR to winding up proceedings.
32. So I turn to the question what, if any, explanation does Mr. Bhardwaj put forward for failing to make an application within five business days?
33. There is no clear explanation by Mr. Bhardwaj to establish either that he or HPL was unaware of the petition or of the winding up order made on 20^th May or that there was any alacrity at all on his part.
34. Insofar as prompt action or delay was addressed in Mr. Hansen's skeleton argument, it was submitted that :

(1) the checklist under CPR 3.9 is to be applied but not as a totting-up exercise, and a party is not to be punished for incompetence. The merits, submitted Mr. Hansen, are so strong that the balance of injustice clearly favours an extension of time. That was addressed at paragraphs 11 to 14 of the skeleton argument and also in oral submissions;

(2) the applicant and his solicitors were fully engaged in dealing with a parallel and equally abusive bankruptcy petition over the period of the delay. This was addressed at paragraph 38 of the skeleton and again also in oral submissions; and,

(3) on 28^th September 2010, when making an order to adjourn a public examination of Mr. Bhardwaj, District Judge Musgrave gave Mr. Bhardwaj an opportunity to make this rescission application which he has done. DJ Musgrave's order was that if Mr. Bhardwaj was to issue an application it should be in substantially the same form as the draft then before the court and should be supported by evidence, all of which was to be issued before 10^th October 2010. If that was done, the public examination set for 9^th December 2010 would be further adjourned pending the outcome of the rescission application.

35. In his evidence put forward as supporting the application, Mr. Bhardwaj's explanation includes :

(1) I accept that there has been some delay on my part in the personal bankruptcy proceedings but this was borne out of my confusion, frustration, fear and illness;

(2) I apologise for the delay in filing my application to rescind in respect of HPL. I only received a letter from the Insolvency Service dated 14^th October 2010 and the court order of DJ Musgrave today (that is, 21^st October of 2010); and,

(3) I may have incorrectly relied upon a letter dated 6^th October 2010 sent to me by the liquidator whereby he states that I had been allowed until 26^th October to file this application.

36. In his very recent evidence, dated 4^th March 2011, Mr. Bhardwaj acknowledges that a statutory demand was served on HPL in July 2009. He also acknowledges that the petition was served on 16^th March 2010 (see paragraph 32 of that statement) and does not suggest that he was not aware of the hearing date on 20^th May which was, of course, in the usual way endorsed upon the petition served on the company. Thirdly, Mr. Bhardwaj says that he had been going through difficulties because his solicitors' practice had ceased to trade and he was going through personal difficulties as well. He says that he assumed that once the Petitioner had accepted that £52,000 had been paid to Mr. Khela, the court would rescind, revoke or review the order made of its own initiative (see paragraph 44) and, finally, he says that he did not make the application sooner because he did not have evidence of payment to Mr. Khela until July 2010, which, of course, was more than three months before the date when the application was actually made.
37. As is apparent, there is no adequate explanation for the very substantial delay of five months. Moreover, the last reason given is not an acceptable reason for delaying the making of an application (see the decision of Mann J in Wilson) and, in any event, it was followed by a delay of more than three months.
38. The only realistic inference to draw from HPL's non-attendance at the hearing of the winding up petition on 20^th May is that it was intentional.
39. That is not surprising when put in context. On 3^rd March 2010, the only asset of substance owned by HPL was the eleven freehold garages transferred by or purchased from Mr. Khela. But, on that day they were transferred by HPL to another company, De La Frog Ltd which is owned by Mr. Bhardwaj's brother, and the transfer was again recorded as being for no monetary consideration. The only liability of any significance recorded in HPL's books was the director's loan account due to Mr. Bhardwaj. As I see it, Mr. Bhardwaj appears to have concluded that by the winding up petition he was being saved the trouble and expense of putting HPL into liquidation himself.
40. I pause here to observe that Mr. Bhardwaj's evidence is that HPL was formed on 1^st October 2004 for the purpose of acquiring these eleven garages as current assets, i.e, as trading stock rather than for investment. Accordingly, their disposal would bring an end to the purpose for which HPL had been formed.
41. The real purpose of issuing the application appears from District Judge Musgrave's order and it was to adjourn or avoid, if possible, a public examination. Even then, Mr. Bhardwaj failed to comply with the order of the court which required issue by 10^th October. That was a hearing at which he, a solicitor, was present at and acted in person.
42. Mr. Bhardwaj's evidence, even put in the most favourable light, as shone by Mr. Hansen's skilful submissions, is, in my judgment, hopelessly inadequate on this issue. Moreover, I am far from satisfied that it is candid and I reject it as an explanation.
43. Whether measured against the straightforward question should the time limit of five days be extended, bearing in mind the nature of the application and the guidance given by the cases concerning winding up rescission applications or by analogy with CPR 39.3(5), under which the failure on any of the three points is fatal (and, in my judgment, Mr. Bhardwaj would fail under both (a) and (b) of 39.3(5)), there is no proper basis on which the court could exercise the discretion to extend time. On the contrary, there are very good reasons to refuse so to do.
44. For completeness, I should refer to CPR 3.9 and consider the criteria there enumerated. First, of course, regard is to be had to all the circumstances. That will include consideration of what is said about the merits; for present purposes I note that Mr. Hansen submits that the case is unanswerable and, in equally firm terms, Mr. Bagshaw, for Mr. Windatt, supported by both Mr. Taylor, the Official Receiver, and Mr. Murtagh for the liquidator, submit that it is misconceived and weak. I shall return to these conflicting submissions in due course but, for present purposes, under consideration of CPR 3.9 the merits remain inconclusive.
45. As to the specific matters listed: (a) the interests of the administration of justice would be done a disservice in this case by the extension of the time; (b) the application was not made promptly; (c) failure to comply was intentional; (d) there has been no good explanation for delay; (e) HPL and Mr. Bhardwaj have disregarded other orders of the court (see the order of District Judge Musgrave); (f) failure to comply is the responsibility of the Applicant, he was present at the hearing on 29^th September last year and he knew the deadline for the issue of any application notice; (g) ability to meet the trial date is irrelevant in this case; (h) failure to comply has resulted in the winding up progressing, costs being incurred, the petitioning creditor, a Trustee in Bankruptcy, still claiming to be unpaid, concern being expressed as to trading assets of value passing through HPL's hands apparently for no consideration, and, unsurprisingly, interest now being taken by HMRC; (i) as to the effect of granting relief, HPL and Mr. Bhardwaj have made no offer, or, at least, none notified to me, to pay the Official Receiver's or the liquidator's costs, the Petitioner would be left with an unpaid debt and outstanding costs, and the company (currently party to a transaction which is void by reason of Section 127 because the petition to wind the company up was presented two days before the transfer to De La Frog Ltd) will be restored and the transaction legitimised. Mr. Bhardwaj himself may then choose to put the company into creditors voluntary winding up and, having control of the appointment of the liquidator, achieve the same result but avoid the difficulties that are now faced. From whatever perspective the question of extension of time is approached, in my judgment, there is only one resounding answer.
46. I now return to the merits and the four matters advanced by Mr. Hansen on behalf of Mr Bhardwaj.
47. First of all, Mr Bhardwaj raises abuse of process because there were two petitions running simultaneously which must point to uncertainty and to an abuse of process. At first glance that may seem so. However, it overlooks the fact that the bankruptcy petitions against Mr. Bhardwaj and Mr. Kaliq were defended by Mr. Bhardwaj on the basis that HPL was liable for any payment due to Mr. Khela. This forms no part of Mr. Bhardwaj's evidence on the merits and again points to a lack of candour on his part. What is clear from the Trustee's evidence is that the petitions against Mr. Bhardwaj and Mr. Kaliq were discontinued. There is no express acknowledgement that £52,000 has been paid in satisfaction of the debt. On the contrary, Mr. Windatt continued to assert that the debt was unpaid by and still due from HPL.
48. As to the second point, that the debt was paid in October 2008, Mr. Bhardwaj here refers to the fact that three and a half years after the transfer of the eleven garages and six months after Mr. Khela's bankruptcy, which Mr. Bhardwaj says was unknown to him at the time, a new bank account was opened at the State Bank of India, Birmingham branch, in Mr. Khela's name and a cheque from Mr. Bhardwaj for £52,000 was paid into, and then dishonoured in the course of clearing through, that account. Some two weeks later Mr. Bhardwaj caused £52,000 to be paid into that account by a CHAPS transfer. Within three months all of that money had been withdrawn, £11,000 in two large cash withdrawals and the balance in two large cheques to third parties, one of whom was a witness to the nil value transfer of the garages by Mr. Khela to HPL.
49. So much for the circumstances. What Mr. Bagshaw relies upon is the statutory consequences of bankruptcy. By Section 306(1), a bankrupt's estate vests in the Trustee immediately upon his appointment, taking effect from the Official Receiver or the Trustee becoming the Trustee. This occurred in this case on 17^th June 2008 following the bankruptcy order made against Mr. Khela on 14^th April. By Section 306(2) the mode of such vesting is "without any conveyance, assignment or transfer". Thus, in my judgment, the payment to Mr. Khela in October 2008, i.e. after 17^th June 2008 (the date on which without assignment, conveyance or transfer the estate of the bankrupt vested in the Trustee), did not and could not discharge that debt. The fact, if it was a fact, that HPL or Mr. Bhardwaj did not have notice of an assignment is irrelevant because no assignment is necessary. That does not mean that the £52,000 is lost, merely that it is recoverable only from Mr. Khela by whichever of HPL and Mr. Bhardwaj should claim the beneficial interest in that debt.
50. Thirdly, Mr Hansen contends that payment of the debt constituted after acquired property. Here, Mr. Hansen relies upon Section 307(1) which provides that a Trustee in Bankruptcy may by notice in writing claim from the bankrupt's estate any property which has been acquired by or has devolved upon the bankrupt since the commencement of the bankruptcy. Mr. Hansen submits that the debt has been and is to be treated as paid and Mr. Windlatt, the Trustee of Mr. Khela, should not be allowed to resile from or change his position. This submission is made by reference in particular to a letter dated 23^rd August 2010. However, on reading that letter set in its factual context, what is actually accepted is that neither Mr. Bhardwaj nor Mr. Kaliq were liable for the debt. That was on the basis that, (1) Mr. Bhardwaj had asserted that HPL was liable and, (2) the garages had been transferred to HPL.
51. Mr. Bagshaw's short answer is that the Trustee did not give notice in writing and Section 307 was not engaged or applicable. I agree.
52. Finally, fourthly, Mr Hansen submits that in fact there never was an enforceable debt. Mr. Hansen submits that the agreement was oral and was not within section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, which requires that a sale or other disposition of land can only be made in writing and only by incorporating all the terms which the parties have agreed into one document or where the contracts are exchanged into each. This may be done expressly or by reference to some other document but here there is none. The agreement is said to have been oral for £43,000 payable in monthly instalments over six months. No instalment was paid. According to Mr. Bhardwaj, this was because Mr. Khela's family accused him of getting Mr. Khela drunk and/or exerting undue influence in order to secure the transfer. This allegedly continued through to the transfer which was prepared by a conveyancer working for Mr. Bhardwaj's firm, Rais & Co. Mr. Hansen also relies on section 58 of the Land Registration Act 2002 which provides that entry in the Register as proprietor of a legal estate has the effect of vesting the legal estate.
53. In response to this latter point, Mr. Bagshaw submits that section 58 does not create an unassailable title and does not preclude a claim to recover title to the property which, if it succeeds, will result in a court order requiring alteration or amendment of the Register at HM Land Registry. That is, of course, correct, see, for example, section 56 of the 2002 Act and Schedule 4 thereto which provides for the alteration to be made to correct a mistake. A mistake in this context would include following a fraud or where the mistake is caused or substantially contributed to by the proprietor. In a case such as the present, Mr. Bhardwaj and HPL would be seen as one person; in other words, the corporate veil would be pierced. It is accepted by Mr. Bhardwaj that there was an agreement for the sale at £43,000 and he asserts that the £52,000 was arrived at as a compromise between the figure of £43,000 and a figure suggested in the end by Mr. Khela's family of £66,000. There is no question of the garages having been a gift to HPL by Mr. Khela. If there is no enforceable debt, the garages should be restored to Mr. Khela's estate.
54. The company now being in liquidation and the circumstances of the sale and transfer being, to put it as neutrally as possible, murky, it is, in my judgment, entirely appropriate that HPL should remain in liquidation and that the liquidator should investigate the circumstances of the acquisition and disposal of the garages.
55. Accordingly, the application would fail on the merits, if not already decided by the effect of Rule 7.47(4) and my refusal to extend time.
56. I therefore dismiss the application.