England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Rolls Building, Royal Courts of Justice 7 Rolls Buildings, Fetter Lane London, EC4A 1NL
		20/07/2017

Mr Justice Newey :

1. These proceedings arise out of the bankruptcy of the first claimant, Mr Kuldip Birdi. There were originally four defendants, but I struck out the claims against two of them in March. The remaining defendants ask that I strike out the claims against them as well (or grant summary judgment in their favour). They also contend that civil restraint orders should be made against Mr Birdi and the second claimant, Mr Raj Pal Senna.

Basic facts

2. Mr Birdi was adjudged bankrupt on 21 March 2012 on a petition presented by HM Revenue and Customs ("HMRC").
3. The first defendant, Mr Alan Price, was appointed as Mr Birdi's trustee in bankruptcy on 20 July 2012. With effect from 22 May 2014, the second defendant, Mr Gary Pettit, took over as Mr Birdi's trustee in bankruptcy, he and others having acquired Mr Price's insolvency practice.
4. Mr Birdi was discharged from bankruptcy on 4 July 2013. A 9-year bankruptcy restriction order has, however, been made against him with effect from 4 September 2014.
5. The present proceedings (number HC-2016-003094) were issued on 2 November 2016. The defendants originally comprised Mr Price, Mr Pettit, a Mr G Awde and a Ms Janet Hallamore. Mr Awde is an officer of HMRC and Ms Hallamore is an Assistant Official Receiver who handled Mr Birdi's bankruptcy.
6. The wide-ranging nature of the allegations advanced by the claimants is apparent from the "Brief details of claim" given in the claim form as follows:

"Breach of Insolvency Act 1986 s283

Misfeasance in public office

Breach of duty

Breach of Data [P]rotection Act

Unlawful interference with property

Trespass and co[n]version of property

Frustration of trade, loss of revenue/earnings and loss of goodwill

Defamation

Harassment

Alarm and distress

Damages and loss

Costs".

Among (many) other things, the particulars of claim alleged that Mr Price and Mr Pettit had been guilty of "cynical and flagrant" breaches of the Insolvency Act 1986 and Data Protection Act 1998, had "maliciously" supplied "entirely false and defamatory information" and had produced accounts that they knew to be false; that Ms Hallamore had "abused her position and power"; and that Mr Awde had "abused his power and position in a personal vendetta to bankrupt [Mr Birdi]".

7. Mr Birdi and Mr Senna issued a further claim, number HC-2016-003606, on 19 December 2016. The defendants to those proceedings were Mr Ashwin Mody and Ms Charlotte Walker of Ashteds, the solicitors acting for Mr Price and Mr Pettit; Ms Jessica Rajakumar, a barrister whom Mr Pettit instructed during 2016; and Mr Kevin McAndrew, an employee of Eddisons Commercial Limited ("Eddisons") who was involved with selling various items on instructions from Mr Price.
8. Here, the "Brief details of claim" in the particulars of claim referred to:

"Gross misconduct

Contempt of Court, causing alarm, distress, damage and loss

Perverting the course of justice, causing alarm, distress, damage and loss

Unlawful interference with property

Trespass and co[n]version of property

Frustration of trade, loss of revenue/earnings and loss of goodwill

Alarm and distress

Damage and Loss

Costs".

The particulars of claim asserted:

"In this period the Defendants pursued a course of action which amount to coercing encouraging, coaching, aiding and abetting others to breach their statutory duty, contempt of court, perverting the course of justice, economic duress and unlawful interference with property causing the Claimants considerable alarm, distress, damage and loss.

The Defendants wilfully and knowingly provided corrupt legal advice to Alan Price and Gary Pettit and engineered their false evidence in order to mislead the Court, to cover up gross misconduct and to improperly influence the outcome of legal proceedings."

9. Mr Price, Mr Pettit, Mr Awde, Mr Mody, Ms Walker, Ms Rajkumar and Mr McAndrew all issued applications for the proceedings against them to be struck out and/or for summary judgment in their favour. Mr Price and Mr Pettit further applied for extended civil restraint orders ("ECROs") to be made against Mr Birdi and Mr Senna. As regards Ms Hallamore, Mr Birdi and Mr Senna obtained a default judgment against her, but she applied for that to be set aside and the proceedings to be struck out and/or summary judgment.
10. For their part, Mr Birdi and Mr Senna applied for striking out and/or summary judgment against Mr Price, Mr Pettit and Mr Awde and also for permission to pursue committal proceedings. The application notice referred to "an open and shut case for Permission for Committal Proceedings, strike out and Summary Judgment".
11. The various applications came before me on 14 March of this year. Shortly before the hearing, Mr Birdi, who had hitherto been acting in person, instructed Mr Duncan Macpherson of counsel and, with the benefit of Mr Macpherson's advice, wisely decided to accept that his claims against Mr Awde and Ms Hallamore and in HC-2016-003606 were unsustainable and should be struck out. Mr Macpherson also explained to me that Mr Birdi was not pursuing either his application for permission to bring committal proceedings or his application for summary judgment against Mr Price and Mr Pettit. That is not to say, however, that Mr Birdi has abandoned his claims against Mr Price and Mr Pettit in their entirety. It is his position that he should be allowed to pursue a claim for trespass and conversion in respect of equipment which, he maintains, did not vest in his trustee in bankruptcy. In that connection, Mr Birdi now seeks permission to substitute new particulars of claim drafted by Mr Macpherson.
12. Unlike Mr Birdi, Mr Senna has continued to represent himself. After giving the matter some thought during the morning of 14 March, he indicated that he went along with Mr Birdi's decisions. In the circumstances, I proceeded to strike out the claims against Mr Awde and Ms Hallamore and all those advanced in HC-2016-003606. I further expressed the view that these various claims were totally without merit.
13. Attention then focused, for the remainder of 14 March and on 16 March, on whether claims in respect of the equipment should be permitted to proceed and on whether civil restraint orders should be made. When, however, the hearing resumed on 22 May, Mr Senna produced, without forewarning, a draft application notice asking for, among other things, my recusal, the dissolution of Precision Engineering Autos Limited ("Precision") to be reversed, Ashteds to be disqualified from representing Mr Price and Mr Pettit, a "Declaration that HRA trumps Insolvency Act" and a declaration that Mr Price and Mr Pettit "are removed by creditors". Mr Senna sought, too, to add "Spearing Waite LLP (Ashwin Mody)", "Ashteds Ltd (Ashwin Mody)", "Eddisons Commercial Ltd (P Davies & K McAndrew)" and "Official Receiver (J Hallamore)" as defendants.
14. I address below the suggestion that I should recuse myself. That apart, I have not treated the relief sought in the draft application notice as before me given that (a) the application notice has not been issued, (b) the parties had no notice of it in advance of the 22 May hearing and (c) it raised new matters.
15. There have been two other relevant occasions when applications have been characterised as totally without merit. In the first place, on 23 March 2016, in proceedings brought by Mr Pettit against Mr Birdi and his wife, Mr Registrar Briggs recorded that applications made by Mr Birdi for an extension of time and for permission to appeal were totally without merit. Secondly, Morgan J dismissed an application made by Mr Birdi and Mr Senna in the present proceedings as totally without merit on 16 December 2016.
16. The issues that fall for consideration now can, I think, be taken under the following headings:

i) Recusal;

ii) The equipment claims: Mr Birdi;

iii) The equipment claims: Mr Senna; and

iv) Civil restraint orders.

Recusal

17. The witness statement that Mr Senna made in support of his proposed application for, among other things, my recusal included this:

"Mr Justice Newey has made intemperate remarks and has been given information which has caused his Lordship to prejudge the case. I no longer trust Mr Justice Newey or have faith in his Lordship to provide a fair hearing."

18. During his oral submissions on 22 May, Mr Senna expanded on the reasons he was asking me to recuse myself. Among other things, he referred to the fact that I had said in March that I considered certain claims to be totally without merit; observed that he did not see how I could give him a fair hearing once I had read the application for civil restraint orders to be made; and said that, at the March hearing, I had shut him down when he was trying to take me through a number of points.
19. I have not been persuaded that I should recuse myself for these (or any other) reasons. I do not believe myself to have made "intemperate" remarks: the mere fact that I concluded that the claims that I struck out in March were totally without merit cannot possibly warrant the adjective. Again, neither my reading of the application for civil restraint orders, nor anything else, involved my prejudging the matters that I had to decide. As for trying to shut Mr Senna down at the March hearing, I tried to focus Mr Senna's submissions on the relevant points, but, when it became apparent that he would take longer than the time available that day, I adjourned (in the event, to 22 May).
20. In all the circumstances, I do not think that a "fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that [I am] biased" (see Porter v Magill [2002] 2 AC 357, at paragraph 103). I shall not, therefore, recuse myself.

The equipment claims: Mr Birdi

21. A bankrupt's property generally vests in his trustee in bankruptcy: see sections 283 and 306 of the Insolvency Act 1986. By virtue of section 283(2)(a) of the Act, however, that is not the case as regards "such tools, books, vehicles and other items of equipment as are necessary to the bankrupt for use personally by him in his employment, business or vocation".
22. Mr Birdi maintains that this exception is in point in the present case and, hence, that he retained ownership of the relevant items. He claims that the exception applied to certain equipment that was sold by Eddisons by means of an online auction in September 2013. The lots in question included four vehicle lifts, a brake tester, an exhaust gas analyser, a headlamp aligner, a number of diagnostics testers, various other pieces of testing equipment and some specialist tools. According to Mr Birdi, he is a master technician for Ferrari and other supercars and the equipment in question was "necessary to [him] for use personally in his employment, business or vocation" and so never fell within his estate for bankruptcy purposes or vested in either Mr Price or Mr Pettit. Mr Birdi says, moreover, that Mr Price was well aware before September 2013 that he (Mr Birdi) was a leading Ferrari mechanic. In the circumstances, so it is said, Mr Birdi has real prospects of establishing that the seizure and/or disposal of the items constituted conversion and/or trespass. The new particulars of claim further plead that Mr Price did not have reasonable grounds for believing that he was entitled to act as he did or was negligent and that Mr Pettit holds the proceeds of sale on trust for Mr Birdi.
23. While seeking permission to substitute fresh particulars of claim, Mr Macpherson noted that Mr Birdi's complaints are already to be found in the existing particulars of claim. Thus, the particulars of claim state, for instance, that Mr Birdi is "a Ferrari Master Technician", that he carried out his work with a "comprehensive range of specialist tools and diagnostic equipment which [he] had acquired", that Mr Price and Mr Pettit "seized Claimants' tools of trade using clandestine and unlawful means" and "recklessly disposed of [them] … at a mere £68,454" and that the "reality is that the tools of trade are specifically excluded from 1^st Claimant's estate by S283 Insolvency Act 1986".
24. For her part, Miss Kira King, who appeared for Mr Price and Mr Pettit, drew my attention to things that Mr Birdi had said in the course of his bankruptcy. It seems that, when he was disputing the bankruptcy petition, Mr Birdi sent the Court a document in which he represented that his assets included "Equipment" worth £50,000, "Spare Parts & MOT Station" worth £550,000 and "Ferrari Testing Equip." worth £20,000. Once, however, the bankruptcy order had been made, he stated in his preliminary information questionnaire that he had no "machinery, plant and equipment" and explained in a supplement that the figures he had put on "Equipment", "Spare Parts & MOT Station" and "Ferrari Testing Equip." were estimates, before saying:

"I do not know if these are still in the unit's or not. The tools and equipment have been in the units for years and years and some won't have any value."

Subsequently, during his public examination, Mr Birdi said that the "Spare parts and MOT equipment" were in fact worth about £40,000 and that the value attributed to "Equipment" was also unrealistic. The "Equipment", Mr Birdi observed, comprised "just bits and bobs" and "Spare parts were inflated to get assets high".

25. Mr Birdi also spoke during his public examination of equipment having been leased to Precision. He had himself, he said, ceased trading by the end of 2011 and "all the garages" and "the equipment" had been leased to Precision. The premises had been leased to Precision rent-free for two or three years and the equipment had also been provided without any payment.
26. Miss King placed reliance, too, on sections 299 and 304 of the Insolvency Act. These mean, she argued, that Mr Price could not have any liability if he had reasonable grounds for believing himself to be entitled to seize and dispose of the items at issue.
27. Mr Macpherson, however, suggested that it is unclear what the references to equipment and the like in the public examination and the supplement to the questionnaire related to. On instructions, he told me that the items now in dispute were not amongst those said to have been leased to Precision. As, moreover, can be seen from the draft substituted particulars of claim, it is Mr Birdi's case that, after ceasing to trade on his own account in December 2011, he "operated his Business as a consultant to Precision".
28. Mr Macpherson also drew my attention to the broad construction of section 283(2) of the Insolvency Act adopted in Wood v Lowe [2015] EWHC 2634 (Ch). In that case, Judge Saffman, sitting as a Judge of the High Court, expressed the view that section 283(2) can apply even where a bankrupt is unable to use tools for a time due to ill health and without the tools being physically used by the bankrupt. On the latter point, Judge Saffman said this:

"I do not see the exemption in s283(2) as requiring that the bankrupt himself physically uses the tools in any event. A bankrupt may for example set up a small business (as long as he is not a director or shadow director of a company and as long as he is aware of the restrictions on taking credit etc) in which the tools may be used by another. They still provide the bankrupt with the facility to earn, which is the rationale of the exemption."

29. To accede to the application for summary judgment made by Mr Price and Mr Pettit, I must be satisfied that the claim that Mr Birdi wishes to pursue has no real prospect of succeeding. In this context, a "realistic" prospect of success is to be distinguished from a "fanciful" one (see Swain v Hillman [2001] 1 All ER 91, at 92). A "realistic" claim is one that "carries some degree of conviction" and "in some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents" (see Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch), at paragraph 15(ii)). On the other hand, it would be wrong to conduct a "mini-trial" (see Swain v Hillman, at 95). "The criterion which the judge has to apply under Pt 24 is not one of probability; it is absence of reality" (Three Rivers DC v Bank of England (No 3) [2001] UKHL 16, [2003] 2 AC 1, at paragraph 158).
30. In the present case, I have ultimately decided that the right course is to allow Mr Birdi's claim in respect of the equipment to which he contends that section 283(2) of the Insolvency Act applied to proceed to trial. The claim clearly faces serious hurdles, but I do not think I would be justified in concluding that it has no "realistic" (as opposed to "fanciful") prospect of success. True it is that Mr Birdi appears to have put contradictory figures on the equipment's value, but that of itself goes more to the value of any claim than to whether section 283(2) was applicable at all. It is also fair to say that comments Mr Birdi has made about Precision's role raise questions as to whether, by the time the bankruptcy order was made, the equipment was being "used personally" by Mr Birdi in "his employment, business or vocation". I can see, too, that the protection afforded to a trustee in bankruptcy by section 304(3) of the Insolvency Act may prove important. In the end, however, it seems to me that there is sufficient substance in Mr Birdi's case for its merits to be determined at trial rather than on a summary basis. Whether or not the claim is likely to succeed, it is not evident on the available evidence that it suffers from an "absence of reality".
31. In the circumstances, I shall grant Mr Birdi permission to amend his particulars of claim by substituting particulars along the lines of the draft prepared by Mr Macpherson for the existing document. Mr Birdi will thus be able to pursue the claims now put forward in respect of the equipment, but no other claim against Mr Price or Mr Pettit. The further claims found in the present version of the particulars of claim will fall away.
32. Miss King suggested that any grant of permission to amend the particulars of claim should be made conditional on Mr Birdi meeting outstanding costs liabilities. I have not, however, been persuaded of this. The claims advanced in the new particulars of claim can, after all, be found in the original particulars of claim. The replacement particulars of claim will serve to excise claims rather than to introduce one.

The equipment claims: Mr Senna

33. Mr Senna told me during his submissions that his claim is limited to four items of equipment, which, he said, belong to him.
34. The existing particulars of claim explain Mr Senna's involvement in the proceedings in this way:

"2^nd Claimant is Raj Pal Senna, the holder of a Promissory Note from the 1^st Claimant in respect of tools of trade and dated from 20 Nov 1997 to 20 Feb 2009, extended to 20 Nov 2012. The tools of trade were bought with money and security provided by 2^nd Claimant over a period of at least 9 years from 1997 to 2008."

35. In the course of his submissions, Mr Senna stated that he was not relying on a single piece of paper. There are, he said, eight or nine letters or other documents containing arrangements between himself and Mr Birdi.
36. Miss King argued that Mr Senna has no real prospect of establishing any relevant interest in the equipment in question. Nobody, she said, has ever seen the promissory note (or any of the other documents) on which Mr Senna seeks to rely. The fact that the matter was adjourned from March to May makes that, Miss King suggested, the more significant: Mr Senna had plenty of time to assemble any documentation, but nothing has been forthcoming. In any case, Miss King submitted, a promissory note would not have made Mr Senna the owner of anything, but would, if anything, have given him a money claim against Mr Birdi. On top of that, there was, Miss King said, no mention of Mr Senna until the proceedings were launched. In that connection, Ms Hallamore noted in a witness statement dated 19 December 2016 that she had "no previous knowledge of Mr Senna", that she had "no record of Mr Birdi ever mentioning that tools and equipment were subject to a promissory note" and that Mr Birdi "did not mention Mr Senna either at the time [of his public examination] or more recently in an application for an injunction against the same defendants which was issued on 24 March 2016".
37. I find these arguments compelling. It seems to me, in the circumstances, that Mr Senna has no real prospect of proving that he has or had any material interest in any of the equipment at issue. Mr Senna's unsupported, and inadequately explained, assertions of ownership do not carry any conviction.
38. I shall, accordingly, grant Mr Price and Mr Pettit summary judgment against Mr Senna. I shall further record that I consider his claim against them to have been totally without merit.

Civil restraint orders

39. Mr Price and Mr Pettit ask for an ECRO to be made against each of the claimants.
40. Paragraph 3.1 of Practice Direction 3C empowers the Court to make an ECRO where "a party has persistently issued claims or made applications which are totally without merit". This condition appears to me to be satisfied as regards both Mr Birdi and Mr Senna. As mentioned above, applications made to Mr Registrar Briggs (by Mr Birdi) and to Mr Justice Morgan (by Mr Birdi and Mr Senna jointly) were characterised as totally without merit last year. Further, I took the view in March of this year that all of the claims made in HC-2016-003606 and those advanced in the present proceedings against Mr Awde and Ms Hallamore were totally without merit. In this judgment, moreover, I have recorded that I consider Mr Senna's claims against Mr Price and Mr Pettit to have been totally without merit. In addition, the applications that Mr Birdi and Mr Senna made in HC-2016-003606 for striking out and/or summary judgment and permission to bring committal proceedings must, I think, be regarded as totally without merit.
41. It is also relevant to have in mind the draft application notice that Mr Senna produced on 22 May. Among other things, this proposed that, despite my striking out of claims against Mr Mody, Mr McAndrew and Ms Hallamore in March, "Spearing Waite LLP (Ashwin Mody)", "Ashteds Ltd (Ashwin Mody)", "Eddisons Commercial Ltd (P Davies & K McAndrew)" and "Official Receiver (J Hallamore)" should be added as defendants to these proceedings. Mr Senna seems to be someone who, as regards matters relating to Mr Birdi's bankruptcy, refuses "to take 'no' for an answer" (to adopt words used by the Court of Appeal in Bhamjee v Forsdick [2002] EWCA Civ 1113, [2004] 1 WLR 88, at paragraph 42). In all the circumstances, I consider it appropriate to make an ECRO against Mr Senna for a two-year period.
42. The case for making an ECRO against Mr Birdi would be just as strong but for Mr Macpherson's recent involvement. With the benefit of his advice, however, Mr Birdi has made sensible concessions and sought to persist only with a claim which I have decided should be permitted to proceed. I cannot know, of course, whether Mr Birdi will continue to instruct Mr Macpherson or any other lawyer. As things stand, though, it seems to me, on balance, that I should not make an ECRO against Mr Birdi. To do so when Mr Birdi has Mr Macpherson acting for him would be liable to complicate conduct of the litigation needlessly and to be wasteful of the time of the judge identified in the order. On the other hand, it will be open to Mr Price and Mr Pettit to renew their application for an ECRO against Mr Birdi if he makes any further claims or applications that are totally without merit.

Conclusions

43. I can summarise the outcome as follows:

i) I shall grant Mr Birdi permission to amend his particulars of claim by substituting particulars along the lines of the draft prepared by Mr Macpherson for the existing document;

ii) As against Mr Senna, I shall grant summary judgment in favour of Mr Price and Mr Pettit;

iii) I shall make an ECRO against Mr Senna, for a two-year period, but shall not make one against Mr Birdi.