Hurst v Bennett & Ors [2001] EWCA Civ 1398

EWCA-Civ
Hurst v Bennett & Ors
[2001] EWCA Civ 1398 · 2001-10-08

LORD JUSTICE MUMMERY:

This

[1]application for permission to appeal arises out of the making of a bankruptcy order by Mr Registrar James against the applicant, Mr Hurst, on the petition of the respondents to this application, and out of the refusal of both Mr Registrar James and Ferris J (on appeal from the Registrar) to make an interim order under section 252 of the Insolvency Act 1986. Section 252 provides:
"In the specified circumstances the court may in the case of a debtor being an individual make an interim order under this section. (2) An interim order has the effect that during the period for which it is in force - (a) no bankruptcy petition relating to the debtor may be presented or proceeded with; and (b) no other proceedings no execution or any other legal process may be commenced or continued against the debtor or his property except with the leave of the court."
[2]Section 253 provides:
"An application to the court for an interim order may be made where the debtor intends to make a proposal to his creditors for a composition in satisfaction of his debts or a scheme of arrangement of his affairs from hereon referred to in either case as a voluntary arrangement."
[3]The section then sets out certain matters which must be provided for in the proposal.[4]This is an attempt to appeal from the order of Ferris J on 30th July 2001 dismissing Mr Hurst's appeal against the order of Mr Registrar James on 11th July 2001. I mention this to appeal it is important to note at the outset that this is a second-tier appeal. Permission to appeal can only be granted in limited circumstances. I refer to the Civil Procedure Rules 1998, 52.13.1:
"Permission is required from the Court of Appeal for any appeal to that court from a decision of a county court or the High Court which was itself made on appeal. (2) The Court of Appeal will not give permission unless it considers that - (a) the appeal would raise an important point of principle or practice; or (b) there is some other compelling reason for the Court of Appeal to hear it."
[5]The critical question is whether Mr Hurst's proposed appeal from Ferris J's dismissal of his appeal from Mr Registrar James raises an important point of principle or practice, or whether there is some other compelling reason for the Court of Appeal to hear his appeal.[6]Mr Hurst, who appears in person, says that both of these questions should be answered affirmatively, and that permission should be granted, and, if granted, the appeal should be allowed. Mr Adair, for the respondent petitioning creditors, submits in his skeleton argument that the test for granting permission has not been satisfied and the application should therefore be refused.[7]The background to the application is as follows. On 21st June 2000 a bankruptcy petition was presented against Mr Hurst. He is a solicitor. The petition was presented by former partners in his firm of Malkin Jones. That firm had been formed on 9th February 1989, but soon ran into financial difficulties and the practice ceased at the end of October 1990. There then followed prolonged litigation between Mr Hurst and other members of the firm.[8]The petitioning creditors are former members of the firm who claim to have incurred a liability to pay rent in respect of premises held by them on behalf of the firm. The petition was based on an unsatisfied statutory demand made on Mr Hurst on 12th May 1997. However, further action on that demand was delayed, pending an appeal by Mr Hurst to the House of Lords in respect of the main action, which he brought against his partners, and which had been dismissed by Carnwarth J as long ago as April 1995. It was not until 30th March 2000 that the matter was finally resolved by the House of Lords, when they dismissed Mr Hurst's appeal.[9]The hearing of the bankruptcy petition was due to take place on 16th March 2001. That date had been fixed following unsuccessful attempts by Mr Hurst to set aside the statutory demand on which it was based.[10]On 15th March 2001 (the day before the hearing) Mr Hurst issued a notice of application in the following terms: that there would be a hearing of an application by Mr Hurst for an[11]It is then stated that the ground on which he claims to be entitled to the order sought was set out in a witness statement made by him on 15th March 2001. The Registrar accepted an undertaking from Mr Hurst to issue the application forthwith and to file the proposal within seven days from 15th March.[12]The hearing of 16th March 2001 was adjourned. The adjourned hearing took place on 12th April 2001. Mr Hurst applied for an adjournment of that hearing. He asked for an extension of time until 4.00pm on Monday, 30th April 2001, in which to file his proposal for an Individual Voluntary Arrangement. The Registrar refused that adjournment. He made an order which recited that, upon his application for an interim order under section 252 of the Insolvency Act as set out in the notice of application dated 15th March 2001, and upon hearing Mr Hurst, the applicant in person, and counsel for the petitioning creditor, and upon reading the evidence, "it is ordered that the application be dismissed."[13]The Registrar gave a detailed judgment setting out the reasons for his order. He concluded at paragraph 39:
"Given the facts that the debt remained unpaid and that the petitioners (not surprisingly after this length of time and after the considerable latitude already extended to the debtor by the court) were implacably opposed to any further negotiation or delay, I determined that the only proper orders in this case were that the application for an interim order should be dismissed and that the debtor should be declared bankrupt."
[14]It appears that the Registrar was fully aware of the lengthy background to the events which preceded the making of those orders. He set out fully both the debtor's case and the petitioners' case and the debtor's reply to the petitioners' case. He then set out from paragraph 30 onwards the detailed reasons for his decision. He said in paragraphs 31 and 32:
"31. It was an unusual step to allow an application for an interim order to be issued without the filing of a proposal in accordance with the Insolvency Rules. On 15th March, however, I had been afforded comfort by the fact that an insolvency practitioner had already been instructed and was represented before me by a solicitor. I accepted the undertaking that the proposal would be finalised within seven days. 32. In spite of the extensions of time which I subsequently granted to Mr Hurst to comply with his undertaking to file the proposal, there was still no proposal by the time of the hearing on 12th April. To make matters worse, there was no longer a nominee involved either. Mr Hurst did not appear to me to be taking his obligation to the court seriously."
[15]He went on to set out other reasons for his decision.[16]There was no appeal by Mr Hurst against the Registrar's refusal of his application for an adjournment or against the dismissal of his application under section 252.[17]What happened next was that on 11th May 2001 Mr Hurst issued another application. By that application he sought a series of orders. "1. For an order annulling the Bankruptcy Order made against me on 12 April 2001 on the ground that it ought not to have been made. 2. For permission to reinstate my application for an interim order under section 252 of the Insolvency Act 1986, which was issued on 15 March 2001 and dismissed on 12 April 201. 3. Alternatively, for a review of his decisions on 12 April 2001, pursuant to section 375 of the Insolvency Act 1986. 4. For a stay of advertisement of the Bankruptcy Order pending the hearing of this application."[18]Mr Hurst made a witness statement dated 11th May 2001 in support of that application. In particular, he mentioned the fact that a witness statement made by Mr Simmons, one of the petitioning creditors, dated 14th March 2001, contained several factual inaccuracies. Details of those are drawn to the court's attention. Mr Hurst, during his submissions today, has emphasised his point that the inaccuracies in Mr Simmons' witness statement had been causative of the Registrar's refusal of Mr Hurst's application for an adjournment.[19]The matter came before the Registrar on 21st May. On that date the Registrar dismissed Mr Hurst's application to annul the bankruptcy order, but adjourned the rest of the application. According to a note made by Mr Hurst of that hearing the Registrar made an order adjourning the application for review of the dismissal of the application for an interim order to a date to be fixed. According to the note, during the hearing the Registrar advised Mr Hurst to exhibit his IVA proposal and the nominee's report to a witness statement for the Registrar to consider at an adjourned hearing.[20]The adjourned hearing took place on 22nd June. The Registrar reserved judgment and he handed down a detailed judgment on 11th July declining to make any order as a result of his review, save that the stay of advertisement of the bankruptcy order be lifted.[21]On 16th July Mr Hurst served a notice of appeal, and, pursuant to an order made by Pumfrey J, the hearing of the appeal from the Registrar's decision was expedited. It was heard by Ferris J on 30th July. Ferris J dismissed the appeal and ordered Mr Hurst to pay the respondents' costs assessed in the sum of £2,948.49, including Value Added Tax. Mr Hurst then served an application for permission to appeal dated 31st July. At an oral hearing on 2nd August Mr Hurst asked me to make an order staying advertisement of the bankruptcy order. A short stay was granted pending an oral hearing on notice, which was fixed to be heard today.[22]The main plank of Mr Hurst's submission is that permission to appeal should be granted to appeal, he says, the appeal raises an important point of principle or practice, as illustrated by the difference in approach of the Registrar and of Ferris J. Although they both agreed that no interim order ought to be made, they approached the matter in a different way, and Mr Hurst says that this difference of approach by two judges experienced in insolvency law is a reason for him to be granted permission to appeal.[23]In order to understand the difference of approach it is necessary to refer first to section 375(1) of the 1986 Act. That provides:
"Every court having jurisdiction for the purposes of the Parts in this Group may review, rescind or vary any order made by it in the exercise of that jurisdiction."
[24]That has to be read with the provisions in Part VIII concerning Individual Voluntary Arrangements. Section 255(1)(c) limits the cases in which an interim order can be made. It provides:
"(1) The court shall not make an interim order on an application under section 253 unless it is satisfied... (c) that no previous application has been made by the debtor for an interim order in the period of 12 months ending with that day."
[25]The Registrar approached the matter in this way. He noted that section 255(1)(c) was aimed at the mischief of unnecessary expense being incurred by repeated applications for an interim order. The Registrar went on to hold, however, that the jurisdiction to review under section 375(1) was very wide and applied to this case. He held that he should treat the proposal, which had been filed by Mr Hurst on 12th June 2001, following his application of 11th March 2001, as his first application, and approach the matter on the basis that there had not been a previous application which fell within section 255(1)(c). So he held there was no bar to him entertaining an application for an interim order under section 255(1)(c). There were, he held, fresh circumstances which justified him entertaining an application for a review under section 375(1), those circumstances being, in particular, a proposal and a nominee, neither of which had been properly formulated for his consideration at the hearing on 12th April. The Registrar went on, however, to decline to make any order on the review, holding that the circumstance were not sufficiently cogent or material to justify him rescinding his earlier order of 12th April.[26]On the appeal by Mr Hurst, Ferris J took a different approach to the interrelationship between section 375(1) and 255(1)(c). In the judge's view the case was caught by section 255(1)(c). It was not, therefore, appropriate to entertain an application for a review under section 375(1). Ferris J held that 255(1)(c) applied to this case, to appeal Mr Hurst was in fact making a second application for an interim order within the 12-month period from the making of a previous application. The previous application for an interim order had been made on 15th March. It had been heard and dismissed on 12th April. The fact that it was dismissed, to appeal it was not properly formulated and there was no nominee, did not, in fact, prevent it from being an application on which the court made a decision to dismiss it.[27]On Ferris J's analysis what Mr Hurst then attempted to do was to make a second application for an interim order. It was what the judge described as a "fresh application". Evidence that it was a fresh application appeared from the fact that it was a differently formulated proposal than that which was put before the court on the first application. In those circumstances the judge concluded that section 375(1) could not properly be used in order to get round the clear wording of the statutory bar of section 255(1)(c). I agree with Ferris J that it was not appropriate to use section 375(1) in this case as a way of reviewing the Registrar's earlier order of 12th April. I cannot see any answer to the point that Mr Hurst did make an application for an interim order. It was before the Registrar. He heard argument on it, as appears from his reasoned decision, and he came to a conclusion on it in his order dismissing it on 12th April 2001.[28]I ask myself what was it that the Registrar heard on 22nd June 2001 on which he gave his decision on 11th July? In substance it was an application for an interim order. It was not the same application as had been before the Registrar on 12th April. This time there was a nominee and there were more detailed terms. I cannot see how it can be disputed that it was a different application from that which had been before the court previously. In those circumstances it would not be a proper use of section 375 to circumvent an express prohibition made by Parliament in section 255(1)(c). This is not a case, in my view, in which a review was sought under 375(1) to appeal of a change in circumstances following the dismissal of the previous application. I would make it clear that Ferris J did not hold (and I would not hold) that section 375(1) can never properly be used in respect of the court's jurisdiction in relation to interim orders. Ferris J's decision is confined (and my reasoning would be confined) to the facts of this case. It would not be proper to use section 375(1) to circumvent the prohibition of second applications within the 12-month period specified in 255(1)(c). In those circumstances I have come to the conclusion that in this case the appeal proposed by Mr Hurst does not raise any important point of principle or practice, either in relation to section 375(1) or section 255(1)(c). On the facts of this case the answer is as obvious as Ferris J said it was.[29]During the course of his submissions Mr Hurst emphasised a number of points, of which I should mention two in particular. He repeatedly stated that what he was complaining about was the fact that Mr Simmons had put a statement before the court on 12th April, which misled the Registrar into refusing an adjournment and then proceeding to make an order dismissing the application for an interim order. Mr Hurst addressed the court in detail on the various respects in which he said Mr Simmons' statement had misled the Registrar.[30]In my judgment, this argument is misconceived in relation to the point which Mr Hurst identified as an important point of principle or practice. The argument which Mr Hurst sought to emphasise might have been appropriate as an argument to put before the court on an appeal from the decision of the Registrar refusing the adjournment and proceeding to dismiss the application for an interim order. As already indicated, Mr Hurst did not seek to appeal the Registrar's order. In fact he accepted that on the material that was put before him the Registrar reached the right order. He says that, if he had attempted to put the points on an appeal which he raised in his application for a review, he would have met the difficulty of adducing new evidence on an appeal.[31]In my judgment, this whole argument does not begin to meet the difficulty which Mr Hurst has to face by the clear terms of section it 255(1)(c). It does not answer the point that there was an application before the Registrar which was dismissed, and what he sought a month later was to put forward a different and fresh application for an interim order within the period of 12 months; and that is caught, for the reasons I have given, by section 255(1)(c).[32]The second point which Mr Hurst raised was the question of an estoppel created by the circumstances in which the application made by him on 11th May was adjourned by the Registrar on the 21st May to the hearing which later took place on 22nd June. As I understand it Mr Hurst says that those circumstances were that everybody went away on 21st May under the impression that the Registrar would deal with this application of his under section 375(1); and in that belief he incurred considerable expense in the preparations for the hearing of 22nd June. Therefore there is, he says, an estoppel which prevents Mr Adair from raising the point under section 255(1)(c), though Mr Hurst has candidly told the court that he and his advisor were aware of a possible difficulty under section 255(1)(c) when this matter was brought by them to the Registrar.[33]In my judgment, the argument on estoppel is misconceived. I cannot see anything in Mr Hurst's note of what happened at the hearing on 21st May as containing any representation which would give rise to an estoppel which would allow the court (or any of the parties to the case) at a later stage to ignore the express terms of section 255(1)(c). I agree also with the comments which were made by Ferris J on this point (according to the note of his judgment which was prepared by Mr Adair). Ferris J recorded Mr Hurst's argument as follows:
"Mr Hurst says that even though this might be the case [that is referring to section 255(1)(c)] the petitioning creditors are estopped from relying on the effect of section 255(1)(c). He said at that everyone went away from the hearing on the 22nd May in the knowledge that Mr Hurst would formulate a new proposal. Mr Hurst does not base his arguments regarding an estoppel on anything said, but rather that the petitioning creditors did not draw his attention to the fact that they would be questioning jurisdiction."

The judge went on to say:

"It is clear to me that there was no obligation to do so. In any event I accept entirely what Mr Adair says in that he construed the application as one made under Section 253 of the Act and drew the attention of the court to the fact that section 255(1)(c) created a bar to a second Application. I see no reason to say that they represented that he could proceed free from jurisdictional problems. In any event an estoppel cannot confer on the court a jurisdiction that it would not otherwise have."
[35]I agree with Ferris J.[36]In the course of his skeleton argument and of his oral submissions to the court Mr Hurst drew the court's attention to a considerable number of detailed aspects of this case. I intend no disrespect to him when I say that it is not necessary for me to deal with those points in order to determine whether he should have permission to appeal on the basis of Rule 52.13(2)(a) or (b) of the 1998 Civil Procedure Rules.[37]For the reasons I have given my conclusion is that the court should not give permission to appeal, because the appeal does not raise any important point of principle or practice in relation to the court's jurisdiction under 375(1) and 255(1)(c) regarding interim orders. In my view, the legal position is clear. There was no jurisdiction to entertain the application for an interim order on which judgment was given by the Registrar on the 11th July 2001.

LORD JUSTICE JONATHAN PARKER: I agree. (Application dismissed with costs assessed in the sum of £2,969.81 including VAT; costs to be treated as the petitioners' costs under Rule 6.22(4)(i)(h) of the Insolvency Rules 1986).

order

"1. That there be made in respect of the Applicant an interim order pursuant to Section 252 of the Insolvency Act 1986."

Cited in 1 later judgment