Bhogal & Anor v Knight, Court of Appeal - Chancery Division, October 23, 2018, [2018] EWHC 2952 (Ch)

Resolution Date:October 23, 2018
Issuing Organization:Chancery Division
Actores:Bhogal & Anor v Knight


Neutral Citation Number: [2018] EWHC 2952 (Ch)

Case No. CH-2018-000183



Rolls Building

Royal Courts of Justice

Rolls Building

Fetter Lane, London EC4A 1NL

Date: Tuesday, 23 October 2018



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B E T W E E N:

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MS M. JONES (instructed by Cubism Law) appeared on behalf of the Appellants.

MS K. ROGERS (instructed by Fletcher Day) appeared on behalf of the Respondent.

Hearing date: 18 October 2018

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1 This is an appeal against an order of Deputy District Judge Harvey in the Brighton County Court, made at a hearing on 5 June 2018, that there should be no order for costs. The appellant seeks the costs of their application at first instance and that the respondent pay the costs of the appeal. Permission to appeal was granted by Arnold J on 29 August 2018.


2 The background is that the appellants, Mr and Mrs Bhogal, challenged a decision of the respondent, Mr Jeremy Knight, who acts in his capacity as a joint supervisor of an Individual Voluntary Arrangement (``IVA'') in respect of a Mr William Broughton, to reject their claim in the IVA. The challenge was brought under Section 263 of the Insolvency Act 1986.

3 Based on the facts not now in dispute, the appellants had lent Mr Broughton a total of £87,000 which had not been repaid. There was no written loan agreement. Mr Broughton became bankrupt on 29 March 2017. An IVA proposal was put forward on 28 April 2017, and the appellants made a claim in the IVA, but this was rejected on the basis of insufficient evidence. The supervisors accepted that a loan had been made but thought that it had been made to a company of which Mr Broughton was a director, a company called Baron Estates (Brighton) Limited, which had subsequently gone into liquidation. The supervisors considered that the appellants were claiming that they had a guarantee from Mr Broughton, which the supervisors did not consider was supported by evidence.

4 The sources of the confusion were, it seems, both the fact that the funds lent were actually paid to the company rather than to Mr Broughton, and the fact that there was a letter written by Mr Broughton to the appellants on 8 May 2008 which referred to the loan. Whilst the terms of that letter did refer to loans ``made to me'', i.e. to Mr Broughton, the letter also stated that Mr Broughton would ``personally guarantee'' that the loans were repaid.

5 The appellants' claim in the IVA was formally rejected on 30 January 2018, but this clearly followed earlier correspondence. It seems that not all of this correspondence was available to the court, but the evidence that was available did include an e-mail dated 4 January 2018 from Mr Knight to Mr Bhogal. That e-mail stated that ``According to your own evidence'', as well as the records of the company, £87,000 was lent to the company. The e-mail refers to the letter of 8 May 2008 and states that, on the basis of the information provided:

``I do not consider that the guarantee is valid and enforceable.''

The 30 January rejection also made a specific reference to ``your claim to hold a personal guarantee''.

6 The appellants issued their application challenging the supervisor's decision on 28 February 2018. The application was supported by a witness statement from Mr Bhogal (the First Appellant) dated 12 March 2018. Mr Knight put in no evidence in response. An initial hearing before another Judge on 20 March 2018 was adjourned because there was insufficient time to deal with the application, although certain directions were made, including giving the appellants relief from sanctions for failing to comply with the time limit for making a challenge and requiring a further witness statement in response to a request from Mr Knight that further evidence was needed. A second witness statement was produced by Mr Bhogal on 28 March 2018 attaching e-mail correspondence between Mr Knight and an accountant for the company to which the funds had been paid. That e-mail correspondence was initiated by Mr Knight...

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