England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice
		15th December 2011

MR. JUSTICE PETER SMITH:

1. This is an application by the debtor, Richard Bevin (hereinafter Mr. Bevin), for permission to appeal and, if permission granted, to appeal the decision of Deputy District Judge Freeman sitting in the Bournemouth County Court on 5^th July 2011, when he refused to set aside a statutory demand dated 31^st August 2010 served by the respondent (hereinafter Datum), claiming £1,258,201.15
2. The learned Deputy District Judge also granted Datum permission to present a bankruptcy petition forthwith, but it seems sensibly not to have done so pending determination of these applications. Datum has served a respondent's notice seeking to affirm the judgment below on alternative grounds I shall deal with later. On 20^th September 2011, Proudman J. directed that the application for permission to appeal and the grounds of permission and the appeal, if permission granted, was to be heard at the same time, and that is the present hearing.

Background

3. The detail appears in the judgment below of the Deputy District Judge. The demand arises out of two documents signed by Mr. Bevin, being facility letters dated 3^rd May 2007 and 30^th November 2007, whereby, on their face, Datum granted Mr. Bevin up to £1,400,000 facility as regards the May facility letter to fund the acquisition of property in Bournemouth, and to develop and sell them, and up to £900,000 for like purposes for other property in Bournemouth under the November facility letter.
4. Both facility letters, save in respect of the sums, are identical and provide for interest to be payable on the outstanding balance of 1.25 per cent per month, with a default rate of 3 per cent per month. Both required the execution of legal charges as security. Those securities were given. Both of them advised Mr. Bevin to seek legal advice, and he did obtain legal advice in respect of the arrangements before he entered into them. Further, the solicitors who advised him currently represent him on appeal, although I have heard nothing of what passed between him and them in relation to these documents. The charges were attested by a partner in the firm of solicitors, and advance monies were run through the respective solicitors' client account. The statutory demand claimed £2,314,731.14 was due. The difference between the net figures was based on the assessment of the value of security by Datum.

The challenge to the statutory demands

5. The application to set aside the statutory demand was issued on 20^th September 2010. There was, therefore, a long period between the issue of the challenge and its disposal by the Deputy District Judge. The grounds were set out in the witness statement of Mr. Bevin on the same date. He challenged the statutory demand on the basis that the arrangements were unfair and, therefore, reviewable under s.140A-C of the Consumer Credit Act 1974. That challenge was based on four suggestions of unfairness: First, the monthly rate of 1.25 per cent per annum; second, the compounding of the interest; third, the penalty rate of 3 per cent, and fourth, its compounding. In para.6 of his witness statement, he said that he would be seeking an order under the Consumer Credit Act to reduce the interest to zero and to make a capital adjustment. By that, I mean to reduce the capital liability due under the facility letter.
6. He introduced some further matters in paras.9 and 10 of his witness statement. In para.9, he said this:

"Mr. Fort [who he has described earlier as being an individual who owns and controls Datum Finance] and I are partners in the two property development ventures which gave rise to the loans upon which the demand is founded. Previously to the loans in question, pursuant to the partnership, Mr. Fort financed from his personal account money to buy and develop other properties with me. In return, he received a share of the properties and no interest when those properties were sold.

In respect of the developments which gave rise to the two loans in question, Mr. Fort elected in continuation of the partnership agreement to provide the finance through Datum for, he told me, tax reasons. He said that the fact that the money would come from his company, rather than directly from his personal account, would not make any difference to our profit share agreement, and that he, through his company, Datum, would take no more than half the profit on the deals as his share, and that no interest would be charged over and above that amount. In effect, he was dressing up his profit shares as interest, because this would be more tax efficient for him. If there was no profit, then there should be nothing due to Datum. If there was profit, then half is due to me".

At para.11, he said this:

"I left all financial matters to him, as he was in effect the controlling partner in the relationship. He is a very forceful person and I simply trusted him to deal with these things. When he asked me to sign up the loan agreement legal charges, I did so without question, trusting him implicitly".

7. That is clearly incorrect for two reasons. First, Mr. Bevin made some handwritten alterations to the loan documents, and second, of course, as I have said, he was afforded and obtained an opportunity to obtain legal advice. The paragraphs, therefore, contain assertions that, despite the clear wording of the facility letters and the subsequent terms providing for loan advances, repayment of interest and capital, the arrangement really was that of a partnership between him and Mr. Fort, with Datum being a conduit for the investment by Mr. Fort. I should say that material to be provided to me today confirms that Datum is owned by a different company and all of the shares in that holding company are owned by Mr. Fort. Mr. Fort is a director of Datum. Thus, Mr. Bevin asserts that the facility letter is a dressing up of the arrangement by Mr. Fort for tax reasons.

Terms of the partnership

8. The paragraphs just read out by me contain the entirety of Mr. Bevin's allegation that a partnership subsisted between him and Mr. Fort. The following terms appear from that paragraph. First, Mr. Fort has the obligation to contribute all of the capital for the acquisition and development. Mr. Bevin puts in no money, but provides his expertise. The profit, after development, is to be split 50/50. No interest is to be charged in respect of the sums advanced. No express agreement appears to have been made to deal with what the parties assumed would not be the case; that the venture would make a loss - this point was picked up by the Deputy District Judge - except the statement that, if no profit was made, nothing was due to Datum. By Datum, of course, he meant Mr. Fort.
9. That appears to suggest, therefore, that Mr. Fort/Datum take the entire risk of this development. If it makes a profit, it is shared 50/50 with Mr. Bevin. If it makes a loss, the entirety of the loss is borne by Mr. Fort/Datum. This is a very beneficial partnership for Mr. Bevin, and he cannot lose, in the sense that he might devote time, but, if that yields a profit, he takes half of it. If it does not make a profit, all of the losses are thrown onto Datum. I should observe, as the Deputy District Judge observed below, Mr. Bevin appears to be an experienced businessman.

Summary of arguments

10. There were, in effect, two arguments put forward before the Deputy District Judge. The first, as I have said, was that there was a partnership and that the documentation does not reflect the true position between Mr. Bevin and Mr. Fort. Second, an alternative argument, if that primary argument is rejected, is that, if it was actually as it appeared on the documentation a loan with terms as to repayment of capital and interest, then it was unfair.
11. The ground set out in the application notice and Mr. Bevin's witness statement in support was that under Rule 6.5(4)(b) of the Insolvency Rules 1986; namely that the debt was disputed on grounds that appear to the court to be substantial. As will appear from my analysis of the judgment below, there was, as part of those submissions, an argument dealing with the extent of any security obtained by Datum, and the value of that security.

Evidence in reply

12. The application was opposed by a witness statement of Steven Jelfs dated 31^st December 2010. He at all material times was a director of Datum. There is no evidence from Mr. Fort dealing with the allegation of partnership. The only reference to Mr. Fort appears in para.10.4 of Mr. Jelfs' witness statement, where he says:

"The funding to the applicant was made via Datum, as explained above. Mr. Fort has a substantial stake in Datum and is influential in its activities. This does not mean that, every time Mr. Fort gets involved with a borrower, a partnership or quasi partnership of any question, legal entity or otherwise, arises".

13. Mr. Jelfs does not address the primary assertion made by Mr. Bevin that there was a partnership. Mr. Jelfs exhibited to his witness statement a number of documents. First, there was exhibited the loan documents and the consequent charge. There was a significant document exhibited, which was a valuation report dated 20^th April 2010 provided by Thomas Lister (surveyors), and he also exhibited some correspondence which passed between Mr. Bevin and Datum. I will refer to this below in this judgment.

The decision below

14. The Deputy District Judge handed down a carefully reasoned written judgment. He reviewed the evidence and summarised it, and then, from para.13, he addressed the question of the alleged partnership and says this:

"It is the essence of any partnership that the parties share any profits and losses. Mr. Bevin is completely silent on what happens to losses. The inference that can be drawn, possibly incorrectly, is that Mr. Fort/Datum put up all the money and so bear the loss. That does not look like a partnership".

15. He pointed out that Mr. Bevin was an experienced businessman (at para.15), had had advice of experienced solicitors (at para.16), and the loans were advanced through solicitors (at para.17). He then set out Rule 6.5(4) and referred to the fact that there was a substantial dispute going to the question of security, and correctly asked himself whether or not, on the material before him, there was a triable issue as to whether or not there was an oral agreement, as alleged by Mr. Bevin, which overrode the clear written agreement.
16. He concluded there was no triable issue in that regard. His reasons are short, and are set out in para.22, where he said this:

"I have considered the statements filed by Mr. Bevin and by Steven Jelfs on behalf of the creditor, and also the representation of both counsel. I do not consider on these particular facts that there is the remotest chance of convincing the court that there was a separate oral agreement which overrode the written agreement as alleged by the debtor. I do believe that, in coming to this conclusion, I have not resolved a conundrum as envisaged by the learned Judge in Keller v. BBR Graphics. In my view, the evidence is so inherently unlikely to be correct that the conundrum does not even arise. It amounts to no more than a smoke screen behind which the debtor hides to postpone the inevitable".

Figures

17. He then went onto consider what would happen if he was wrong about that primary finding in respect of the figures. That, with respect to him, is the wrong analysis. If he is wrong as to issue 1, then the conclusion would be that the statutory demand would be dismissed and there would be no inquiry as to the figures. If he is correct as to issue 1, then you go on to consider whether the issues over the figures provide an additional ground for Mr. Bevin to set aside the statutory demand. Therefore, the figures only become relevant on the basis that he rejected the primary submission of a partnership. He determined (and there is no issue on this before me) that, giving Mr. Bevin the benefit of all doubts, there is a capital liability outstanding as at the state of the demand of £1,079,746.68. That is giving the best possible credit for realisations that have taken place.
18. In paras.29 to 36, he assessed what the value of the security was, as against that capital figure. He relied entirely on that analysis on the Thomas Lister report, because he has been provided with no other material, beyond a statement in the statutory demand that Datum had a valuation of the remaining properties at £1,056,529.99. That is a precise valuation figure and, if there was such a valuation, it has never been produced.
19. Surprisingly, despite the fact that Mr. Bevin had at least seven months or more to put in his own evidence as to value, he chose not to do so, and simply rested on the Thomas Lister report as to the value of the security. As I have said, Datum in its statutory demand put in the value at £1,056,000-odd.
20. It is instructive to look at the Lister report. The first point to note about the Lister report is the terms of reference that the report was made under. The first sentence, which is at p.78 of the bundle, said that Thomas Lister Limited were instructed by Fusion Building Consultancy "to provide valuation and market advice for Datum Finance Limited, as mortgagee in possession, of the scheme". It is, therefore, not solely limited to providing a value of the property which is colloquially called "as is"; i.e. at the time of the date of the report. It is clearly, in my view, not providing a forced sale valuation, which is the correct basis for the valuing of securities that have to be given credit for in a statutory demand. I will refer to the authorities in that regard later in this judgment.
21. The report valued the four mews houses at £225,000 to £250,000 as the current figure. That gives a maximum value of those properties of £1 million. He valued the offices, "as is", between £40,000 to £50,000. He then suggested that, with some expenditure, the offices could be changed to residential use, which, after costs, would produce another £110,000. He also suggested that a phased sale of the individual mews houses would achieve a sale of £1.1 million.
22. The Deputy District Judge accepted those figures for the purposes of the hearing before him, and concluded that the security ought to be valued at £1.1 million plus the £110,000, giving a figure of £1.210 million, which is the figure that appears in his analysis at para.31. In para.32, he said:

"The creditor is entitled to rely on the figure which represents the value on a forced sale, but gives no reason nor calculation for departure from the figures given by its own valuer".

23. With respect to the Deputy District Judge, it is plain that the figures that he has arrived at are not a forced sale valuation. He appears to have equated that top line figure as being the forced sale valuation. That is not, in my view, a correct reading of the report. In my view, the report did two things. It valued the mews houses and the offices in their present state, but also, in effect, advised Datum that, with a more lengthy sale process, a higher price could be obtained for the mews and, if Datum spent some money in changing the offices, the net result might be to achieve £110,000.
24. That is a long term strategy. It is something which Datum, as mortgagee, could if it wished have embarked upon, but that requires time. What it most certainly is not is the forced sale value of the property on the assumption that Datum wishes to sell the property now. The valuation is alternatively stated to be, as I have said, £1,050,000, based on the maximum current value of the mews and the maximum current value of the offices.
25. It is clearly arguable that the current value, as advised by Thomas Lister, might itself be higher than the forced value. Forced values tend to be below market value. But that is not put in issue by Datum, and Datum's figure in the statutory demand is only £7,000 above that value. It seems to me that, on the material before him, the Deputy District Judge ought to have concluded that the maximum forced sale value of the security at the time of the statutory demand was indeed the figure set in the statutory demand.
26. That is the exercise which is required to be done in assessing the security to be referred to in the statutory demand. That appears from Platts v. Western Trust 1966 BPIR 339 at 347, and Owo-Samson v. Barclays [2003] BPIR 1373 at 1375 and 1387. It is submitted on behalf of Mr. Bevin that in neither of these decisions, although they are both, of course, Court of Appeal decisions, was there any argument as to the basis of the analysis, and that the observations in Platts by Sir Christopher Slade are nothing more than observations, and they were adopted by concession in the Owo-Samson case.
27. That might be right, but I am firmly of the view that that is the correct test for valuing the security for the purposes of the statutory demand, because a secured creditor wishing to realise his security has a duty to obtain the best price reasonably obtainable. It has long been established that you measure the best price by reference to the proposed sale at that time, whatever the market conditions might be at that time. The mortgagee is not obliged to wait, in a depressed market, for the market to rise. Thus, for example, in the present environment, one might say a mortgagee might be better advised to wait in the hope, like Mr. Micawber, that the property market will improve. As long as a mortgagee makes his decision bona fide to exercise his power of sale, he cannot be criticised for that if it turns out to be a bad time to sell, as long as he does his best to obtain the price in that market.
28. That appears from a number of well-known cases. I give two examples. One is American Express v. Hurley and another is Medforth v. Blake. They concerned receivers, but the principle is the same. It seems to me, therefore, that it is correct that the valuation exercise required on the security should be on the basis that the security is there to be realised immediately. On that basis, the only possible correct method of assessment is on a forced sale value, and not on a hope value based on works which would have to be done at the expense of Datum, or on the basis of a wait for the market to improve.
29. These suggestions in the Lister report are market strategies, which might afford Datum a better return, if it is so minded. But it is plainly not the forced value. The forced value at its height, in my judgment, as I said is the figure in the statutory demand. That means that, when one looks at the security, one has a headline undisputed capital debt of £1,079,746.68. Giving credit for the value in the statutory demand of £1,056,529.99, that leads to a shortfall on the capital itself of £23,216.69.
30. With respect to the Deputy District Judge, he has, on his analysis, fallen into error in arriving at the figure for values, which covered the entirety of the capital, according to his calculations. He was wrong to do that in law and based on the Thomas Lister report.
31. The respondent, Datum, is therefore correct, and the respondent is entitled, by virtue of their respondent's notice, to seek to affirm the decision (that is to say the decision not to set aside the statutory demand) on other grounds; namely that, whatever the other arguments are - and I will come to deal with those in a moment - if the amount of debt is the sole remaining issue, an uncontested sum of £23,216.69, irrespective of capital, remains due from Mr. Bevin as at the date of the statutory demand in any event and is not secured.
32. I should say in this context, for completeness, that, given the nature of the loan, a very large sum advanced to Mr. Bevin, as an experienced businessman, to acquire and develop and sell for profit a number of properties, it is inconceivable, in my view and beyond the reach of sustained argument to believe that, if Mr. Bevin reached the stage of arguing that the loan rate is unfair for the purpose of s.140A-C of the Consumer Credit Act 1974, he has any prospect in the exercise of that consideration of reducing the capital obligations to Datum.
33. I cannot conceive of any circumstance where the capital is provided by Datum to enable him, in effect, to embark on something whereby he would make the profit could be so unfair that he should not have to pay the entirety of the capital below. So, when you put that together, there is, in my view, looking at the correct principles, which I am entitled to do and must do at this stage, no prospect of Mr. Bevin being able to say there is no sum due under the statutory demand.
34. As I said above, that assumes that there is no argument over the partnership, because, if there is an argument over the partnership, then, as I have said, the figures do not arise, because there is an issue over the terms of the partnership and what the respective liabilities.

Basis for the decision on partnership

35. Although he does not say so explicitly at para.22, which I have already read out, the Deputy District Judge has rejected Mr. Bevin's witness statement. At this early stage of a dispute, he can only do so if he finds that the witness statement is incredible, along the lines of the well-known decision of the court under the old rule of Order 14 in National Westminster Bank v. Daniel.
36. In my view, where a person commits himself on a witness statement with a statement of truth, which carries with it, of course, the potential for prosecution for contempt of court and perjury at an appropriate level, the witness statement should not be lightly dismissed at a summary stage. Where there is a dispute which is alleged to turn on an oral agreement, generally that should lead, in my view, to the triable issue.
37. However, it is not absolute, as the National Westminster Bank v. Daniel case shows. The tribunal does not have to accept a statement on its face if the tribunal concludes that it is incredible. That necessarily involves a certain robustness. But the dividing line between a robust analysis of the witness statements at this summary stage and condescending into a mini trial, which is not appropriate, is always a difficult line to judge.
38. One has to make allowances for the witness statements and give credit for them, and not reject them lightly, as I have said. Deputy District Judges and District Judges do of course face, day in and day out, applications like this, with assertions of oral arrangements which bear no relation to the written documentation. It is impossible to avoid becoming sceptical when these kinds of arguments are put forward time after time. But one has to put aside that scepticism, and one has to analyse the statement, and one then must, in my view, give effect to what is said in the statement unless it is incredible. To do otherwise can lead to a potential denial of justice, because everybody ought to have their day in court to be given the opportunity to stand at the witness table (as it now is in these modern courts) and say on oath there was, in Mr. Bevin's case, an oral agreement.
39. The Deputy District Judge did not, as I have shown, really give any reasons for rejecting Mr. Bevin's witness statement. It is fundamental, in my view, that, if a tribunal is going to reject a witness statement with a statement of truth, reasons must be given. If a person's written statement so tendered is rejected, that person is entitled to know why it is rejected.
40. On that basis, in my judgment, the Deputy District Judge fell into error in not explaining why he was rejecting Mr. Bevin's fundamental evidence. Given that, it is open to me at this stage to analyse the evidence that was before him and come to my own conclusion as to whether or not, on the evidence, Mr. Bevin has made by his evidence a triable issue as to whether or not there was a partnership between him and Mr. Fort.
41. The following factors are relevant. First, Mr. Bevin asserts that there was a partnership orally agreed. Second, he provides no extraneous evidence to support that assertion. Third, he raised this allegation for the first time in his witness statement in support of his application to set aside the statutory demand. Fourth, there were number of opportunities where Mr. Bevin ought, in my judgment, to have raised this issue. I will deal with those further in this judgment.
42. Against that, Mr. Fort has not chosen to give evidence to challenge what Mr. Bevin says in his witness statement. That can, in appropriate circumstances, lead to an inference that he does not do so because he will not, in effect, gainsay in a signed witness statement, with the relevant sanctions applicable to that, to contradict what Mr. Bevin says.
43. There are a number of authorities to this effect, starting with Wisniewski v. Central Manchester Health Authority, and followed in a number of decisions of mine, Rock (Nominees) Ltd v RCO (Holdings), Lennox Lewis v. Eliades, and EPI Technology. The principle was affirmed expressly or by implication in the Court of Appeal in both Lennox Lewis and Rock.
44. Mr. Fort has not given any reason as to why has not provided any evidence. The best that can be said is that, if he has produced a witness statement, he would have simply denied it, and then that would have been paraded against him, because it would be said on behalf of Mr. Bevin "There you are, there are two witness statements and they flatly contradict each other".
45. That is a high risk strategy, in my view, at this stage. However, it is significant that, despite the fact that Mr. Bevin received a letter of claim in October 2010, which had been preceded by a letter of demand on 23^rd September 2009, and despite the fact that he wrote to Datum on 9^th December 2008 suggesting a refinancing of the arrangements, at no time on any of those occasions, despite having an opportunity to do so, did he ever set out that the documentation did not reflect the true agreement between him and Mr. Fort. That is particularly significant in relation to his own letter of 9^th December 2008, which can only be read and given any credence to on the supposition that he was bound by the terms of the facility letters.
46. Equally, when one analyses what Mr. Bevin says in paras.9 and 10 of his witness statement, the partnership that he put forward and its terms, in my view, are incredible. I cannot conceive any credible circumstance that an experienced businessman like Mr. Fort would, in effect, hand over in total nearly £2 million to enable Mr. Bevin to use it to make a profit, half of which would go in his pocket, on the basis that Mr. Fort was risking his capital and Mr. Bevin was risking nothing, apart from having his time wasted. In my view, such a partnership, as alleged, is incredible.
47. Therefore, my conclusion on the evidence is that, despite the high risk strategy of not providing evidence by Mr. Fort, the assertion of a partnership orally agreed, as made by Mr. Bevin, to contradict the clear written agreement is incredible. I, therefore, agree with the conclusion of the Deputy District Judge, and I can see ground 1 having no prospect of success. Therefore, I would refuse Mr. Bevin permission to appeal to argue that there was a partnership.
48. So we are at this stage. I have rejected his argument that there is a triable issue over a partnership. I have determined that £23,216.69 is due in respect of capital. I now go on to consider the question of interest. My determination means that Mr. Bevin will have to pay a minimum of that figure of £23,216.69 if he wishes to stop the bankruptcy proceedings.
49. The Deputy District Judge analysed the interest position in para.46 and following of his judgment. He came to the conclusion that there was interest due which exceeded the value of the security. Of course, in doing that exercise, he gave credit to the value of the security in excess of the figure that I have given by some £70,000. He concluded, on that analysis, that there would be due unsecured interest of £69,746.68 as a minimum.
50. How did he come to that conclusion? Having referred to the Consumer Credit Act provisions and having referred to the decision of Floyd J. in Davenham Trust, which I accept the submissions on behalf of Datum has no relevance, he said this at para.47:

"Mr. Gunaratna, counsel for the creditor, argued it is highly unlikely that any judge hearing such an issue [that is to say as to interest] would direct, even if finding that the 3 per cent rate was a penalty, that no interest at all was payable. He pointed out that, even if the rate were reduced to 5 per cent per annum, a sum in excess of £200,000 would be due for interest. I agree with that and feel that he was being excessively cautious. I doubt that a judge at that point would have reduced the interest rate below the original 1.25 per cent per month or 16 per cent per annum, leaving a much greater sum".

51. Then coming to those figures, he concluded £69,000/just under £70,000 was due. In so doing, of course, he has taken onboard the unfairness challenge raised on Mr. Bevin's behalf, and he has determined at this summary stage that the unfairness challenge would lead to a conclusion that Mr. Bevin could not hope for more than a reduction of the interest rate to 5 per cent per annum.
52. It is, of course, even more fatal to Mr. Bevin when one looks at the true value of the security as it should be, as set out above. In fact, the learned Deputy District Judge expressed the view that it would be far more likely that the interest rate would be assessed at 16 per cent.
53. To my mind, he can only embark on that exercise if he has evidence to support the conclusion, as opposed to supposition. It is self evidenced, to my mind, that, where there is an issue as to unfairness, it is going to be very difficult at a summary stage to resolve that issue one way or the other. I might follow the instincts of the Deputy District Judge, and believe that a commercial arrangement between Mr. Bevin and Mr. Fort would inevitably lead to a rate of interest. I might also believe that 5 per cent per annum secured in 2007 looks like a low or a reasonable rate of interest. But that is not the test and that is not evidence. One has to be careful to put aside one's beliefs and speculations, and decide cases on evidence. This is especially so where the conclusion shuts out a party at a summary stage, and deprives him of an opportunity fully to deploy the issue as to unfairness.
54. This is the more so, because the legal burden on establishing the unfairness is not on Mr. Bevin. By contrast, s.140A(9) says:

"Where the [debtor] alleges the relationship between the creditor and the debtor is unfair to the debtor, it is for the creditor to prove to the contrary".

55. This is important, because it is not, in my judgment, incumbent on Mr. Bevin to show a prima facie case as to unfairness or any case as to unfairness. As the section says, all he has to do is to make an allegation of unfairness. If he makes that allegation, the legal burden is on the creditor to prove that the arrangement was not unfair. The creditor in this case, Datum, has not adduced any evidence on unfairness whatsoever.
56. I do not, therefore, accept that Mr. Bevin has a burden at this stage, in effect, to reverse that legal burden by putting a showing on first. What one would do is what happens in many areas, which is that the issue is raised on the person on whom the legal burden falls has to provide the first show. Let me give two examples.
57. Under the Misrepresentation Act 1967, misrepresentation can be actionable if it is made fraudulently, negligently or innocently. Where the representation is made and relied upon, that is an actionable misrepresentation, unless the person who makes the misrepresentation proves there are reasonable grounds for him making it. So all the person has to do in that situation is say "There was a misrepresentation". It is not incumbent on him to say whether it was innocent, negligent or fraudulent.
58. Equally, where one deals as a consumer and exclusions clauses arise for consideration, the exclusion clauses can only survive if they satisfy the reasonableness test. It is not for the person who wishes to challenge those exclusion clauses to prove that they are unreasonable. It is for the creditor seeking to rely upon those exclusion clauses to prove that they are reasonable.
59. So what happens under s.140(9) is Mr. Bevin makes an assertion. The creditor then has to prove that the clauses are reasonable, and he would have to set out his case for so doing. At that stage only would Mr. Bevin be required to make a showing to challenge the factors which the creditor asserts show that the arrangement is unfair. No analysis like this took place before the learned Deputy District Judge.
60. Accordingly, in my view, he fell into error. As there is no material to challenge the assertion that the arrangement was unfair, this is an issue which must go to trial. It would not be enough, of course, for the creditor to produce evidence and expect Mr. Bevin to reply, because that would be a mini trial. It would only be possible if the creditor produced evidence and persuaded the tribunal at this summary stage that, in the light of that evidence, there is nothing that Mr. Bevin can say to lead to the conclusion that the provisions are fair. That, in my view, is a virtually impossible exercise at this summary stage, when all material has not been deployed.
61. I am aware that the view I have expressed is said not to be the position in Chitty on Contracts. But I remind myself of what Megarry J. said in the well-known case of Cordell v. Clanfield Properties. There, Megarry J. was faced with an issue over the effect of s.65 of the Law of Property Act 1925. The issue was as to whether or not A could reserve an easement in favour of a different plot of land.
62. In a well-known textbook called Megarry & Wade, of which Megarry J. was one of the two authors, he, as an academic, had decided he could. In the other then competing academic book on land law by Cheshire, there was no reference to s.65 at all. The argument was to whether or not Megarry J. should follow his own academic views or follow those contrary ones in Cheshire. He rightly pointed out that the thought processes of an academic are different. They are gestation, they are consideration, and they put them out. That is a completely different process to that which takes place in the courts. As he observed, argued law is tough law. It certainly is in my court, and people have to argue their cases.
63. I am not persuaded that the learned authors in Chitty are correct, because it flies in the face of what, to my mind, was the clear intent of the wording under s.140A(9), that all is required to invoke the unfairness procedure is an assertion. This makes sense, because it means that the parties who wish to uphold arrangements have the duty to justify them.
64. So my conclusion, therefore, is, despite the fact that there is no interest secured whatsoever, I do not accept at this stage it can be said that Mr. Bevin should be barred out in raising an issue as to the unfairness of the level of interest. That too is an issue which ought to go to trial. It is, of course, well demonstrated by the fact that, however tempting the submissions are put forward on behalf of Datum as to the rate, submissions are not evidence. The learned Deputy District Judge fell into the trap of the allure of the 5 per cent figure, and he should have concluded that there was before him no evidence at all to enable him even to come to any kind of provisional view on the unfairness of the arrangement.
65. It follows, therefore, that I would grant him permission to appeal and allow him permission to appeal on the question of interest, but only that. I will, as I have said, refuse him permission to appeal on the argument that there was a partnership, and I determine that the Deputy District Judge was wrong to give credit for the enhanced value of the properties and ought to have valued the security for the purposes of the statutory demand in the figure set out in the statutory demand, which means that, in my judgment, the statutory demand can stand in respect of the reduced figure of £23,216.69. That is the figure which Mr. Bevin must pay to avoid a bankruptcy. That is my determination on this appeal.

LATER

66. I come now to the question of costs. CPR 44 says that the prima facie rule is to the victor, the spoils. 44.3 enables the court, if it thinks appropriate, to make an issue based assessment. Let us look at the reality. The application before the Deputy District Judge was to set aside the statutory demand. It failed, because the Deputy District Judge determined that there was £69,000 outstanding. That decision still stands today as a result of my decision.
67. I can see no reason, therefore, to upset the order that was made below. When it comes before me, the position is that the statutory demand still stands, albeit in a figure reduced from £69,000 to £23,000. It has been reduced because the appellant has succeeded in knocking out the interest liability. The appellant has failed in respect of his primary argument that the whole arrangements did not directly reflect the position as set out in the loan documentation. He has also failed, again, to set aside the statutory demand, because he has lost on the subsidiary point that the Deputy District Judge erred in how he calculated the value for the security. That is the respondent's notice.
68. It is, in my view, a bold submission, when one comes out of a hearing with a statutory demand still in place, and no suggestion yet that there can be a payment of the amount of the statutory demand, to suggest that the successful creditor, who has upheld the statutory demand, should somehow pay the costs. I cannot think that that is the principle, and I decline so to order.
69. However, it does seem to me that the creditor must concede some costs, because he has not won on every point. That is an exercise which is largely stochastic in cases like this, and I will, therefore, doing the best I can by trying to remember what arguments took place over what period yesterday, determine that it should be appropriate that the creditor should have two-thirds only of his costs of dealing with the appeal, because that reflects, in my view, the position that, in reality, the creditor has substantially won, because they came to the hearing with a statutory demand and they have left the hearing with a statutory demand. There have been no proposals or offers made in respect of the figure of £23,000-odd. The fact that Mr. Bevin needs time to put his witness statement and means and the like into play suggests that he does not have immediate recourse to funds to pay the £23,000. I have given him an indulgence, by preventing Datum from presenting a petition for four weeks.
70. Taking all those into account, as I say, the proper course, to my mind, is not to disturb the order below, and to order Mr. Bevin to pay two-thirds of the hearing before me, which I will now assess.
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