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Mr Justice Newey (whose MG Rover Report is critiqued in the latest Private Eye - see also the "Farepak Convention" article) has recently handed down a huge judgment in the case of Soutzos v Asombang & Ors  EWHC 842 (Ch). The case concerns a lengthy judicial consideration of property development financing in the greater London area. The substance of the case comes down to a couple of specific points regarding some rather substantial loans, totaling some £620,000. As the learned judge states:
"...none of that money has been repaid. However, Mr Asombang was made bankrupt in 2008, and he contends that he was released from liability, pursuant to section 281 of the Insolvency Act 1986, in respect of his loans to Dr Soutzos when he was discharged from bankruptcy last year. Dr Soutzos argues otherwise on the strength of section 281(3) of the Act, which provides that a person's discharge from bankruptcy does not release him from "any bankruptcy debt which he incurred in respect of … any fraud or fraudulent breach of trust to which he was a party". It is Dr Soutzos' case that he was induced to make the loans to Mr Asombang by fraudulent misrepresentations and that section 281(3) means that Mr Asombang continues to be liable to him for these misrepresentations."
With specific regard to the bankruptcy the learned judge noted:
"On 13 December 2007 HM Revenue and Customs presented a bankruptcy petition against Mr Asombang. The petition alleged that Mr Asombang owed a total of £382,946.64. Part of this was attributed to a judgment for £69,914.37 which had been obtained against Mr Asombang on 1 December 2004 and which remained largely unpaid. The indebtedness was otherwise said to arise from tax and national insurance contributions going back, in part, to the year 2002/2003, with interest, penalties and surcharges. A statutory demand was stated to have been served on Mr Asombang in October 2007.
A further bankruptcy petition was presented on 15 January 2008. In this case, the petitioners were Mr and Mrs Penna and a Mr Bernard Kelly. Mr Asombang was said to owe Mr Kelly £148,346.95, principally pursuant to an agreement made on 30 September 2003 by which Mr Asombang had undertaken to repay £119,200.22 within nine months. A rather larger sum, £337,756.93, was alleged to be owed to Mr and Mrs Penna. The petition explained as follows:"The debt due to Mr and Mrs Penna arose in the course of a series of written transactions between them and [Mr Asombang] between 2001 and 2004 in which Mr and Mrs Penna advanced moneys to the debtor to finance the debtor's business as a property developer, against the debtor's promises to repay the same together with agreed fees and interest upon the several dates and the terms set out therein."
At about the end of February 2008, Dr Soutzos, by his solicitors, himself served a statutory demand on Mr Asombang. A similar statutory demand was served on 29 February 2008 on Miss Dawkins, but she applied to have the demand set aside.
On 30 April 2008 Mr Asombang was adjudged bankrupt on the petition which had been presented by Mr and Mrs Penna and Mr Kelly."
The case all contains a discussion of the place of trusts in insolvency. Happy reading!
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