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Insolvency Law

Expert guidance on all aspects of corporate and personal insolvency

19 DEC 2013

Hellard & Wade v Chadwick & Tehrani

(Registrar Barber, 22 November 2013,(unrep.))

This is a case involving similar considerations as Dewji v Banwaitt, namely circumstances in which proceedings should be restricted by exercise of the court's discretion in the context of the personal insolvency regime. 

The Applicants and Respondents in the claim were respectively the trustees in bankruptcy of a Mr Mireskandi (‘Mr M') on the one hand, and on the other the trustee in bankruptcy of Mr Tehrani (‘Mr T') and Mrs Tehrani (‘Mrs T'). Mr M and Mr T had formerly traded together as solicitors. In 2006, Mr T retired from the partnership and he and Mr M executed a deed which set out, amongst other things, Mr T's entitlement to future fees. In 2007, Mr M lent money to Azadian Property Ltd (‘Azadian') of which he was a shareholder. In 2008, Mr M assigned the benefit of his loan account and shares to Mr T, in settlement of an earlier liability (‘the 2008 Assignment'). In 2009, Mr T assigned his rights in the loan and shares to his wife (‘the 2009 Assignment'). Mr T was made bankrupt in 2009. In 2011, Mrs T issued proceedings against Azadian, during which the latter paid £400,000 into court. There are a number of competing claims, but Mrs T has a claim for Berkeley Applegate relief in the sum of £100,000. In 2012, Mr M was made bankrupt.

In 2013, the Applicant's issued the current proceedings under sections 339 & 340 of the IA 86 impugning the 2008 Assignment (‘the Mireskandi Application'). R1 also issued an application against Mrs T that the 2009 Assignment be impugned under sections 339 and 340 of the IA 86 as well (‘the Tehrani Application').

Following the Mireskandi Application, the court was required to consider the effect of s 285 of the IA 86. Mr T was by this time a discharged bankrupt.

Two questions arose:

First, are the Applicants creditors of Mr T in respect of a debt provable in the bankruptcy?

Until impugned, the settled rights arising from the 2008 and 2009 Assignments are secure and the Applicants did not have a proprietary claim. The judge rejected an alternative claim by the Applicants that the relief sought was declaratory and focussed instead on whether their claim could be measured in money terms; he held that it could. 

The next question was whether it was a provable debt. He held that s 382 of the IA 86 and Rule 12.3(1) are drawn widely enough to encompass a contingent liability under sections 339 and 240 of the IA 86. Citing the inclusive approach adopted in the recent Supreme Court decision in Nortel, the judge was satisfied that the liability should be treated as arising ‘by reason of an obligation incurred before the commencement of Mr T's bankruptcy.'

The judge concluded that the Applicants were creditors of Mr T in respect of a debt provable in the bankruptcy.

Secondly, do the Applicants seek a remedy against the property of Mr T?

The judge noted that in the context of s 285(3)(a), a remedy cannot be construed as to include legal proceedings up to and including a declaratory or money judgment. The reasoning draws the distinction between the obtaining of a judgment against the estate and the enforcement of the same.

In the circumstances, the judge held that s 285(3)(a) does not operate to prevent the Applicants pursuing their claim against the estate up to and including judgment.

The court also considered whether to exercise its discretion to stay the Mireskandi claim pursuant to s 285(1) of the IA 86. The court held that the claim would be stayed for the following reasons:

(1)        It was a provable debt. 

(2)        All indications were that a proof, once submitted, would be accepted. There was therefore no need for proceedings to continue for the quantum of proof to be admitted.

(3)        Given the disorderly state of the Mireskandi claim, it would prejudice the orderly administration of Mr T's estate should the claim continue.

(4)        A stay would preserve the limited assets of Mr T's estate.

The court recognised that some prejudice to the Applicants would arise but held that it was outweighed by other factors. As a post script the court noted that office holder time costs and legal costs involved in such a trial may well balance out the prejudice of proving and being admitted in Mr T's bankruptcy.


Christopher Brockman of Guildhall Chambers appeared for Mrs Tehrani.

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