Robert v Woodall [2016] EWHC 2987 (Ch)

Case No 1977 of 2009

[2016] EWHC 2987 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

ON APPEAL FROM MR REGISTRAR JONES

IN BANKRUPTCY

RE: JONATHAN CHIAM ELICHAOFF

AND IN THE MATTER OF THE INSOLVENCY ACT 1986

AND IN THE MATTER OF THE MATRIMONIAL CAUSES ACT 1973

Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NL

Date 25 November 2016

Before

Mr Robin Dicker QC

Between

IAN ROBERTAppellant

SARAH JANE DUNCANSON WOODALLRespondent

James Pickering (instructed by Darwin Law Ltd) for Appellant

Caroline Hely Hutchinson of Family Law Chambers for Respondent

Hearing Hearing date: 4 th November 2016

Judgment

Robin Dicker QC :

[1]This judgment concerns a further hearing in proceedings by the Appellant (the “Trustee”), the trustee in bankruptcy of Jonathan Chiam Elichaoff (the “Bankrupt”), against the Respondent (“Ms Woodall”). In procedural terms it involves applications, both by the Trustee and by Ms Woodall, for reconsideration of aspects of Morgan J’s order of 20 June 2016, which was made on the Trustee’s application on paper for permission to appeal against the order of Mr Registrar Jones of 15 March 2016. The substantive issues of law which are raised concern, amongst other things, the interaction between a bankruptcy under the Insolvency Act 1986 (the “1986 Act”) and financial provision and property adjustment orders under the Matrimonial Causes Act 1973 (the “1973 Act”).

The background

[2]The sequence of events which gave rise to the proceedings can be shortly stated:(1) The Bankrupt and Ms Woodall married in September 1999. On 19 November 2008 Ms Woodall presented a divorce petition.

(2) A statutory demand was served on the Bankrupt on 31 January 2009 by a creditor and a bankruptcy petition was presented against him on 9 March 2009.

(3) On 5 June 2009 the terms of a consent order were agreed between the Bankrupt and Ms Woodall, pursuant to which it was agreed, amongst other things, that the Bankrupt would make periodical payments to his wife and daughter of £24,000 per annum each and repay £1,412,300 to Ms Woodall.

(4) On 7 July 2009 the Bankrupt was made bankrupt on the creditor’s petition.

(5) On 16 July 2009 District Judge Stewart, in the course of matrimonial proceedings in the Kingston County Court, approved the consent order. The fact that the bankrupt had recently been made bankrupt was not drawn to the attention of the District Judge.

(6) On 13 November 2014 the Bankrupt tragically committed suicide.

The procedural history

[3]On 6 July 2015, some six years after the bankruptcy order, the Trustee issued an Application Notice in the bankruptcy against Ms Woodall (the “Application”). It sought, amongst other things:(1) A declaration that the consent order signed by the Bankrupt on 5 June 2009 alternatively the subsequent consent order approved by District Judge Stewart on 16 July 2009 (the “Consent Order”) was void (paragraph 1).

(2) An order for a lump sum or a property adjustment order or other order for financial provision in favour of the Trustee or alternatively the Bankrupt’s estate, including payment of a sum equivalent to the Bankrupt’s debts pursuant to ss.23 and 24 of the 1973 Act (paragraph 2).

(3) A declaration that payments made by the Bankrupt to Ms Woodall totalling some £40,000 were transactions at an undervalue pursuant to s.339 of the 1986 Act alternatively voidable preferences pursuant to s.340 of that Act (paragraph 3).

[4]Ms Woodall issued an application to strike-out the Application which was heard by Mr Registrar Jones on 23 February 2016. The effect of the Registrar’s order of 15 March 2016 was as follows:(1) He declared that all dispositions of property by the Bankrupt pursuant to the Consent Order were void pursuant to s.284 of the 1986 Act.

(2) He struck-out the Trustee’s application for a lump sum or a property adjustment order pursuant to ss.23 and 24 of the 1973 Act.

(3) He struck-out the Trustee’s application for a declaration in relation to the payments totalling some £40,000 in so far as it relied on s.339 of the 1986 Act.

(4) He ordered the Trustee to pay three-quarters of Ms Woodall’s costs of the application to strike-out.

[5]The Trustee applied for permission to appeal against certain aspects of the Registrar’s order.

[6]That application, which was made in the first instance in the ordinary way on paper, was considered by Morgan J. The effect of his order of 20 June 2016 was as follows:(1) He refused the Trustee permission to appeal against the order striking out the Trustee’s claim for a lump sum or a property adjustment order pursuant to ss.23 and 24 of the 1973 Act.

(2) He granted the Trustee permission to appeal against the order striking out the Trustee’s claim that payments totalling £40,000 were transactions at an undervalue pursuant to s.339 of the 1986 Act.

(3) He granted the Trustee permission to appeal against the order for costs.

[7]The Trustee now seeks to renew his application for permission to appeal against the order of Mr Registrar Jones striking out his claim for a lump sum or a property adjustment order under ss.23 and 24 of the 1973 Act. Ms Woodall, in turn, cross-applies to set aside Morgan J’s order in so far as it gave the Trustee permission to appeal against the decision striking out his claim that the payments were transactions at an undervalue pursuant to s.339 of the 1986 Act and against the order for costs.

The Trustee’s renewed application for permission: the claim under ss.23 and 24

[8]The first issue concerns the Trustee’s application for a lump sum or property adjustment order pursuant to ss.23 and 24 of the 1973 Act, a claim which, Mr Pickering, who appeared for the Trustee, frankly accepted was both innovative and novel.

[9]Mr Registrar Jones set out his reasons for striking out this claim in his judgment of 15 March 2016. He concluded that, in the light of the various authorities to which he referred, ss.23 and 24 of the 1973 Act created rights which can only be pursued by the spouses themselves and that “the rights do not extend beyond joint lives”. In short, the Bankrupt having died, such a claim under the 1973 Act is no longer possible. He concluded that the Trustee’s claim in this respect had “no merit whatsoever”.

[10]Morgan J dismissed the application for permission to appeal in respect of this aspect of the Trustee’s claim for similar reasons. As he succinctly put it: “Even if the Appellant could demonstrate that the bankrupt’s claim for ancillary relief came within the definition of “property” in section 436(1) of the Insolvency Act 1986, the Appellant could not be in any better position in relation to that claim than the bankrupt would have been (in the absence of the bankruptcy). The authorities relied on by the Registrar support the conclusion that such a claim cannot be pursued following the death of the husband/bankrupt”.

[11]Mr Pickering submitted that the Trustee has a real prospect of showing that the Registrar was wrong to have struck out this claim. He developed his submissions in three stages:(1) The first stage concerned the very broad scope of the provisions which define the bankrupt’s estate. S.283 of the 1986 Act provides that “a bankrupt’s estate … comprises (a) all property belonging to or vested in the bankrupt at the commencement of the bankruptcy …”. S.436 provides that “property” includes “money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent arising out of, or incidental to, property”. Such provisions are, Mr Pickering emphasised, very broad in scope.

(2) The second stage concerned the nature of rights under ss.23 and 24 of the 1973 Act. Mr Pickering submits that the Bankrupt’s rights against Ms Woodall were “property” within s.436 of the 1986 Act, either because they constituted a “thing in action” or because they were something “arising out of, or incidental to, property”. They were not, he submitted, claims of an entirely personal nature, like for example a claim for defamation and certain other types of claims, which do not vest in a trustee in bankruptcy. He submitted that such rights therefore vested in the Trustee on the commencement of the bankruptcy and before the Bankrupt’s death and that, having vested in the Trustee, they were unaffected by the Bankrupt’s subsequent death.

(3) The third stage concerned the scope of the court’s powers on an application under ss.23 or 24 of the 1973 Act. S.25 of the 1973 Act provides that, in exercising its powers in relation to a party to the marriage, the court shall in particular have regard to the matters set out in s.25(2)(a) to (h), including in sub-section (2)(b) “the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future”. Mr Pickering submitted that, whilst the reference to “needs” is plainly no longer apposite, given the death of the Bankrupt, the court could still make an order based on the “obligations” which he had to his creditors.

[12]I confess to some initial surprise at the suggestion that a trustee in bankruptcy is entitled, after the death of the bankrupt, to apply for an order for financial relief against the surviving party to the marriage, for the benefit of the bankrupt’s creditors, and that initial reaction was only reinforced during the course of Mr Pickering’s submissions.

[13]In my judgment, whatever other problems may exist with such a claim, the authorities clearly establish that a claim under ss.23 or 24 of the 1973 Act ceased to be possible following the death of the Bankrupt.

[14]In Harb v King Fahd Bin Abdul Aziz (Secretary of State for Constitutional Affairs intervening)

[2005] EWCA Civ 1324

the wife made an application for financial provision under s.27(6) of the 1973 Act on the grounds that her husband, the monarch of a sovereign state, had failed to provide reasonable maintenance for her. The husband’s claim to immunity from suit on the ground of sovereign immunity succeeded. Permission to appeal was granted. Prior to the hearing of that appeal, however, the husband died. The Court of Appeal ordered that there be no further order on the wife’s appeal, on the grounds that s.27(6) of the 1973 Act enabled the court to make orders against the other party to a marriage during joint lives only. It also concluded, despite some reservations, that a claim by one party against the other for, or in relation to, financial relief, is not a cause of action within the meaning of s.1(1) of the Law Reform (Miscellaneous Provisions) Act 1934 (the “1934 Act”) unless an order has been made in relation to the claim before the death.

[15]The following aspects of the judgments of the Court of Appeal are particularly important in this context:(1) The 1973 Act was a consolidating act and “should be interpreted against the background of previous statutes which had been consistently interpreted as meaning that applications for, or in relation to, financial provision by one party to a marriage against the other ceased when one of them died”; per Dyson LJ at [35]. In this respect, Dyson LJ referred to D’Este v D’Este

[1973] Fam 55

where Ormrod J said at p.59 “… the whole of the matrimonial causes legislation, right back to 1857, is essentially a personal jurisdiction arising between parties to the marriage or the children of the marriage … The fact that these applications abate by death derives, in my judgment, from the legislation which created the rights, if they are rightly called ‘rights’, and from no other source”. Dyson LJ described this passage from Ormrod J’s judgment as of considerable significance, and said that “No case has been cited to this court before (or since) D’Este’s case was decided in which an application for, or in relation to, financial relief by one party to a marriage did not abate on the death of one of them”. He also commented that Ormrod J’s comments were referred to by Lord Brandon in Barder v Barder

[1988] AC 20

without criticism.

(2) The terms of s.27 of the 1973 Act reinforce the conclusion that it provides a remedy only exercisable during their joint lives; per Thorpe LJ at [13]. Thus the right of application is given to “either party to a marriage” and the court is enabled to make orders against the other party to the marriage. As Thorpe LJ said at [9] “ … these provisions are expressly limited to applications made during the joint lives of the parties”.

(3) Although Harb was concerned with claims under s.27 of the 1973 Act, Dyson LJ referred at [39] to Law Commission’s Second Report on Family Property: Family Provision on Death (1974) (Law Comm No 61) which, he said, made it clear that Ormrod J’s exposition represented the law, and which said that “There will, however, be cases where, even under the present law, the former spouse or the judicially separated spouse had no such opportunity because the death of the other spouse has supervened before the court has made an order for financial provision in the matrimonial proceedings”. Dyson LJ said at [40] that “It is true that this passage refers to the position of former and judicially separated spouses. But, for present purposes, there is clearly no material distinction to be drawn between applications made under section 23 and those made under section 27 of the 1973 Act.” Both Thorpe LJ and Wall LJ’s similarly drew no distinction in this respect between s.27, on the one hand, and ss.23 and 24, on the other.

[16]Mr Pickering accepted that the purpose of both sets of provisions is to adjust the financial position of the parties to a marriage, but submitted that a claim could nevertheless be made by a trustee in bankruptcy under ss.23 and 24. He submitted that, unlike s.27, there is nothing in the wording of ss.23 and 24 which requires an application to be brought or pursued by a party to the marriage. Accordingly, he submitted, a claim for financial provision or a property adjustment order could be made by a trustee in bankruptcy, even though a similar claim could not be made under s.27.

[17]It is correct that there is no general rule that, where one of the parties to a divorce has died, any suit necessarily abates, so that no further proceedings can be taken in it; see Barder v Barder

[1988] AC 20

per Lord Brandon at p.37 and Harb v King Fahd Bin Abdul Aziz per Thorpe LJ at [16].

[18]But, in my judgment, the distinction which Mr Pickering draws between the wording of ss.23 and 24, on the one hand, and s.27, on the other, cannot bear the weight which he seeks to put on it. It is correct that s.27(1) states that “Either party to a marriage may apply to the court for an order …” and that similar wording is not found in ss.23 or 24. However, s.21 refers to claims under ss.23, 24 and 27, without suggesting that such a distinction exists, and ss.23 and 24 make clear that any order is an order that one party to the marriage shall make make financial provision for the other party to the marriage. There is nothing to suggest that an application under ss.23 or 24, but not one under s.27, may be brought by and for the benefit of someone who is not a party to the marriage or a child of the family.

[19]In any event, irrespective of who may bring such an application, the Trustee also needs to establish that such an application can be made by a trustee in bankruptcy for the benefit of the deceased bankrupt’s creditors. The suggestion that, whilst the Bankrupt may no longer have had any needs after his death, he still had obligations which the court can take into account in determining what order is appropriate is, in my judgment, misconceived. It is one thing to say that a court should have regard to all factors in determining whether and if so how to exercise its powers to adjust the financial position of the parties to a marriage whilst both parties remain alive. It is, in my judgment, quite another thing to say that the court can conduct the same exercise after the death of one spouse, for the sole benefit of that spouse’s creditors.

[20]Mr Pickering also submitted that there was an illogicality in the Registrar’s judgment. He submitted that the Registrar held that a court order compromising an application for financial provision under the 1973 Act was a disposition of property for the purposes of s.284 of the 1986 Act, and that he should therefore have concluded that it also constituted property which vested in the Trustee when the Bankrupt became bankrupt. This is, in my view, to misread the Registrar’s judgment. The point which the Registrar was making was that, to the effect that an order transferred property, such a transfer would constitute a disposition by the individual not the court, and thus s.284 of the 1986 would apply. He was not suggesting that a claim under ss.23 or 24 was itself property that was capable of vesting in a trustee in bankruptcy.

[21]There is, as Morgan J indicated when refusing permission to appeal, a further potential question as to whether the rights of a spouse under ss.23 and 24, or indeed under s.27, are causes of action at all. In Harb v King Fahd Bin Abdul Aziz, the Court of Appeal, despite some misgivings in this respect, held that it was bound to follow the clearly established line of authority that applications for financial relief under the 1973 Act are not applications in respect of a cause of action for the purposes of s.1(1) of the 1934 Act. Dyson LJ said at [52] that Lord Brandon in Barder v Barder had no reservations about what had been said in those authorities. If such claims do not constitute “causes of action” for the purposes of s.1(1) of the 1934 Act, as Mr Pickering accepted that they do not, it is not easy to see why they should nevertheless constitute “causes of action” for the purposes s.436 of the 1986 Act. Mr Pickering’s answer to this point, as I understood it, is that the sequence of events is important. In this case, he said, the critical point is that the Bankrupt became bankrupt before he died, such that the cause of action had already vested in the Trustee before his death, whilst, in a case under s.1(1) of the 1934 Act, the individual would have died before his assets vested in his estate. But this distinction does not avoid the need to show that the claim is a ‘cause of action’ for the purposes of the relevant section nor the need to show that it is one that is still capable of being pursued after one of the parties to the marriage has died.

[22]The conclusion that a trustee in bankruptcy is not able to bring claims under ss.23 and 24 of the 1973 Act for the benefit of a bankrupt’s creditors accords with the views of the authors of the Technical Manual issued by the Insolvency Service; see at paragraphs 31.9.63 and 30.119. It also accords with the views of the editors of Muir Hunter on Personal Insolvency, where the editors refer to the decision of the Court of Appeal in Platt v Platt (1976) 170 S.J. 199. Mr Pickering submitted, however, that Platt v Platt is a decision which is in the Trustee’s favour.

[23]In Platt v Platt a judge in matrimonial proceedings ordered that periodical payments should be secured on the husband’s house. The judge was not told that a bankruptcy notice had been given to the husband. The husband was subsequently made subject to a receiving order and later adjudicated bankrupt. The trustee sought to appeal on two grounds. His first contention was that the order should be set aside because it was unfair as between the wife and the general body of creditors. Sir John Pennycuick held that this contention was wrong in principle, because “the issue in the matrimonial proceedings lay between the wife and the husband, and the other creditors would not have been entitled to be present. The judge was concerned to do what was fair between the husband and the wife and was not concerned to weigh the interests of the wife and the other creditors”. This is, as the editors of Muir Hunter on Personal Insolvency observe, consistent with the approach taken by the Registrar. Mr Pickering, however relied on the second ground which was relied upon by the trustee in that case, namely that the order was unfair as between the wife and the husband. This does not assist him. Sir John Pennycuick’s conclusion on this point was that “assuming, without deciding the point, that the husband’s right of appeal vested in the trustee, the trustee would have virtually no chance of success in establishing that the judge’s order was unfair as between the husband and the wife”. Mr Pickering is correct to say that the Court of Appeal appears to have considered that the right of appeal may have been a right “arising out of, or incidental to, property”. However, this is understandable given that it was an appeal against an order securing the periodical payments on the husband’s house. The decision does not assist the Trustee in the present case.

[24]Various other points were made by Ms Hely Hutchinson on behalf of Ms Woodall. She submitted, for example, that the application under the 1973 Act for a lump sum or property adjustment order had been made in the wrong court, by the wrong procedure and by an applicant with no locus standi. Given my conclusion, as expressed above, I do not need to address such further submissions.

[25]In my judgment, for the reasons set out above, the Registrar was correct to have struck out the claim on the basis that the Trustee had no real prospect of obtaining the relief sought and Morgan J was correct to have dismissed the Trustee’s application for permission to appeal on the basis that an appeal against that order has no real prospect of success.

[26]I should add that none of this means that, if, during joint lives, the applicant spouse obtains a secured provision order against the respondent spouse then the order, duly obtained during joint lives, does not continue to benefit one spouse after the death of the other; see Thorpe LJ in Harb v King Fahd Bin Abdul Aziz at [13]. Nor does it mean that, in the event that an order is made in favour of a bankrupt, a trustee in bankruptcy may not be able to have recourse, for the benefit of creditors, to any assets subsequently obtained as after-acquired property under s.307 of the 1986 Act.

Ms Woodall’s cross-application

[27]Ms Woodall cross-applies to set aside Morgan J’s order in so far as it gave the Trustee permission to appeal against the decision striking out the claim that the payments of some £40,000 were transactions at an undervalue pursuant to s.339 of the 1986 Act and to appeal against the order for costs.

[28]Applications for reconsideration of an order giving permission to appeal are not lightly to be made. Save in exceptional circumstances, it is a misuse of the court’s resources and a waste of costs for the court to consider the substance of an appeal on some intermediate date between the permission hearing and the full appeal.

[29]In Nathan v SVI Smilovitch

[2002] EWCA Civ 759

Longmore LJ said that: “For my part, unless the nature of the application shows that some decisive authority or decisive statutory authority has been overlooked by the Lord Justice granting permission to appeal, an applicant would normally have to show that the single Lord Justice had actually been misled in the course of the presentation of an application”.

[30]In Barings Bank Plc v Coopers & Lybrand [2003] C.P. 2, Parker LJ referred to Longmore LJ’s judgment and said:

“37. In my judgment the power conferred by paragraph (1) of rule 52.9 is emphatically not a power to, in effect, entertain an appeal against the grant of permission … In my judgment the power to set aside a grant of permission to appeal is not available for the purpose of second-guessing the single judge who granted the permission and thereby generating satellite litigation; rather, its purpose is to enable the court to do justice in those rare cases where something in the nature of an irregularity has occurred in the granting of permission, whether by reason of the single judge having been misled or for some other like reason. 38. … 39. I would accordingly dismiss this application, and in doing so I would express the hope that in future practitioners will think twice before launching an application of this kind, in the knowledge that only in very limited circumstances will such an application be likely to succeed”

. Laws LJ agreed, saying that “it seems to me to be of the highest importance that the court should very firmly discourage the bringing of satellite litigation under the guise of an application under CPR 52.9.”

[31]Mrs Hely Hutchinson accepted that the same principles apply to the present case and, it is right to say, recognised the high hurdle she had to satisfy, but submitted that the Trustee’s application for permission to appeal to Morgan J had been made on the basis of seriously incomplete and misleading information. She also contended that, given the Trustee’s renewed application for permission in respect of paragraph 2 of the Order, the cross-application was proportionate and consistent with the overriding objective.

The claim under s.339 of the 1986 Act

[32]The first issue on the cross-application concerns Morgan J’s order granting the Trustee permission to appeal in relation to the Registrar’s order striking out the claim that payments totalling £40,000 were transactions at an undervalue pursuant to s.339 of the 1986 Act.

[33]Whilst they were still married Ms Woodall made numerous payments to the Bankrupt and, on occasions, the Bankrupt made payments to Ms Woodall. In particular, payments amounting to £40,000 were made by the Bankrupt to Ms Woodall in November and December 2008, and thus shortly before the statutory demand was served on him.

[34]The Application seeks to recover these payments on the basis that they either constituted transactions at an undervalue under s.339 of the 1986 Act or were voidable preferences under s.340 of the 1986 Act. The distinction between the two claims depends on whether the payments made by Ms Woodall to the Bankrupt were made by way of gift or constituted loans. If they were made by way of gift then, the Trustee contends, the £40,000 was paid to Ms Woodall without consideration and constituted a transaction at an undervalue. Alternatively, if the payments made by Ms Woodall were made by way of loan then, the Trustee contends, the £40,000 was repaid to Ms Woodall with a desire to prefer her in the event of his bankruptcy and are recoverable as voidable preferences.

[35]The Registrar struck out the Trustee’s claim under s.339 to recover the payments as constituting a transaction at an undervalue. He did so on the basis that he concluded that, as a matter of fact, the payments made by Ms Woodall to the Bankrupt had been made by way of loan. In paragraph 24 of his judgment he said: “I have found no explanation in the evidence for why the financial information provided by Ms Woodall has not been accepted. On its face it establishes a running account of loans to Mr Elichaoff and repayments by him when he was able to do so. That being so, the last 5 re-payments cannot be treated as lacking consideration. I do not understand how it can be suggested otherwise and absent any explanation in the evidence to the contrary, the application to strike-out succeeds in respect of the claim under section 339 IA”.

[36]Morgan J reviewed that decision and gave the Trustee permission to appeal, on the basis that in his judgment it was reasonably arguable that the Registrar should not have struck out that claim.

[37]The Trustee’s written skeleton argument which was provided to Morgan J in support of his application for permission to appeal addressed the issue as follows:(1) It said that “Over the last few years of their marriage, the Respondent made numerous payments to the Bankrupt. Occasionally (but only occasionally) the Bankrupt would make payments back to the Respondent. It is the Respondent’s case that the payments from her to the Bankrupt were loans which were repayable on demand. In his statutory interview, however, the Bankrupt told the Official Receiver that the payments from the Respondent to him were “not really loans”. The obvious inference is that the payments were simply gifts from one spouse to another – as commonly happens within a marriage where one party earns more than the other – with there being no legally binding obligation to repay”.

(2) It referred to the fact that the Registrar had referred to the financial information provided by Ms Woodall and then set out paragraph 24 of the Registrar’s judgment in full (which I have already quoted above).

(3) It said that the Registrar’s conclusion was expressed to have been made “absent any explanation in the evidence to the contrary” and submitted that the Registrar appeared to have overlooked or failed to take account of “the above evidence on behalf of the Applicant (which clearly does amount to an “explanation … to the contrary”)”.

[38]Mrs Hely Hutchinson makes a number of points in support of her submission that the Trustee misled Morgan J and failed to make full and frank disclosure.

[39]The first series of points concern the nature and content of the bankrupt’s statement on which the Trustee relies:(1) The skeleton argument lodged by the Trustee in support of the application for permission to appeal described the Bankrupt’s comment as having been made in his ‘statutory interview’. Mrs Hely Hutchinson says that in fact it was made during a short telephone conversation, initiated by the Bankrupt to a Mr Connolly of the Official Receiver’s office, from the residential drug rehabilitation centre where the Bankrupt was then residing. Mr Pickering accepts that this is correct and that the description in the skeleton argument was an error.

(2) In addition, the skeleton argument quoted the Bankrupt as saying that the payments from Ms Woodall to him were “not really a loan”. Mrs Hely Hutchinson submits that this was misleading because the full comment, as recorded in a file note made by Mr Connolly, was that “He also said that he had ‘borrowed’ approximately £1.4 million from his ex wife although there was no written agreement and he had not included her on his creditor list as it was not really a loan”.

[40]Given the importance now ascribed to the Bankrupt’s comment, it is unfortunate that it was described as having been given as part of a statutory interview, when it was not. One might also have expected the skeleton argument to have quoted it in full. However, I do not consider that it can be said that Morgan J was misled as a result. The Trustee’s skeleton argument was lodged together with a relatively slim bundle of documents. That bundle included an extract from a witness statement by the Trustee’s solicitor, Andrew Darwin of Darwin Law Ltd, which referred to the communication and exhibited a copy of Mr Connolly’s file note. That file note, which Morgan J would have seen, made it clear that the Bankrupt was telephoning from what was described as a residential secondary care institution and set out his comment to Mr Connolly in full.

[41]Mrs Hely Hutchinson makes three further criticisms of the way in which the Trustee’s application for permission was made. She submits that:(1) The Trustee did not make it clear that the Registrar’s attention had not been drawn to the alleged significance of the file note in the chronology, skeleton argument or oral submissions made by Mr Pickering on his behalf.

(2) The Trustee did not make it clear that, on that hearing, Mrs Hely Hutchinson had nevertheless drawn the Registrar’s attention to the file note in numerous documents, thus making it practically impossible that the Registrar was not aware of it.

(3) The Trustee failed to include in the appeal bundle all of the evidence which was before the Registrar which pointed to the existence of the running account and the status of Ms Woodall as a creditor.

[42]Identifying the material which needs to be included in a skeleton argument seeking permission to appeal and in the appeal bundle involves an exercise of judgment, in which the appellant has to find an appropriate balance between providing the court with too much and too little.

[43]I do not consider that the order giving the Trustee permission to appeal should be set aside on these grounds.

[44]Although the Registrar said that he had “found no explanation in the evidence for why the financial information provided by Ms Woodall has not been accepted”, he did not refer to the file note or explain why he considered this insufficient, although the conversation was referred to by the Trustee in his evidence and in his skeleton argument for the hearing. Morgan J considered that, in such circumstances, permission to appeal should be granted on the basis that it was reasonably arguable that the Registrar should not have struck out the claim. He was not misled in reaching this conclusion by the terms of the skeleton argument. Nor, in my judgment, was he misled as a result of the Trustee omitting from the appeal bundle the evidence which pointed to the existence of the running account, the existence of such material and its potential significance having been apparent from the relevant paragraph in the Registrar’s own judgment. Nor, in my view, did the Trustee fail to make full and frank disclosure by failing to set out the extent to which each of the parties had referred to the file note at the hearing. The critical point was that the Bankrupt had made a comment about the nature of the payments which, on one construction, was capable of throwing doubt on the nature of the payments, but which, for whatever reason, the Registrar did not expressly deal with in his judgment.

[45]Mrs Hely Hutchinson also submits that permission to appeal should be set aside on the ground that Mr Pickering failed in his duty on behalf of the Trustee to seek clarification from the Registrar, in the 11 days between circulation of the draft judgment and it formally being handed down, during which Counsel were invited to submit comments. She submits that during this period the Trustee should have referred to the existence of the File Note to the Registrar and invited him to deal with it before sealing his order.

[46]As Arden LJ said in Re T (A Child)

[2002] EWCA Civ 1736

at [50], on receiving a copy of a draft judgment, an advocate ought immediately to draw the judge’s attention to any material omission of which is then aware or then believes exists, as it would be unsatisfactory to use an omission by a judge to deal with a point in a judgment as grounds for an application for appeal if the matter has not been brought to the judge’s attention when there was a ready opportunity to do so, as unnecessary costs and delay may result.

[47]In my view, it would have been appropriate for those acting for the Trustee to have drawn the attention of the Registrar to the existence of the file note, if they intended to rely on it, to ensure that he had not overlooked it. That would, at least, have given any judge hearing an application for permission to appeal the benefit of the Registrar’s views on that document, and might have avoided additional cost and delay.

[48]Nevertheless I do not consider that this omission should lead to the order for permission being set aside. Morgan J had the benefit of the file note and concluded that it was reasonably arguable that the Registrar should not have struck out the claim. Unless he was misled in reaching that decision, it would not be appropriate for me to second guess his decision. Without expressing any view on the ultimate merits of an appeal, I should, however, add that, having been shown the material relating to the running account, I doubt that it would have led him to have refused permission.

The order for costs

[49]The second issue on the cross-application concerns Morgan J’s order granting the Trustee permission to appeal in relation to the Registrar’s order on costs.

[50]The Registrar ordered the Trustee to pay three-quarters of Ms Woodall’s costs of the strike-out application and any additional costs incurred in respect of the paragraph of the Trustee’s application struck out, including costs relating to the decision to strike out the claim for relief under ss.23 and 24 of the 1973 Act, and ordered that the remainder of the costs of the strike out application were costs in the Trustee’s Application.

[51]Morgan J granted permission to appeal against that decision on the basis that it was reasonably arguable that the Registrar’s approach was wrong in principle.

[52]The Trustee, in his Skeleton Argument in support of his application for permission to appeal to Morgan J, submitted that:(1) As he had been entirely successful in respect of paragraph 1 of the Application and was unsuccessful on paragraph 2 of the Application, the starting point was that the Trustee should have been awarded his costs in respect of paragraph 1 and Ms Woodall should have been awarded her costs in respect of paragraph 2.

(2) The Registrar had erred in principle in making a different order because he had wrongly concluded that the Trustee had brought paragraph 1 solely to enable him to make the claim in paragraph 2 of the Application. Ms Woodall had, the Trustee submitted, also robustly resisted the claim under paragraph 1, which caused considerable costs to be incurred.

[53]Mrs Hely-Hutchinson submits that a full and fair picture was not put before Morgan J on the Trustee’s application for permission to appeal in respect of costs. She says that:(1) The Trustee was not “entirely successful” in respect of paragraph 1 of the Order, which merely reflected the terms of s.284 and did not declare the Consent Order void.

(2) The Trustee was therefore unsuccessful in setting aside the claim for repayment of the loan of £1.4 million.

(3) Although the Trustee perceived paragraph 1 of the Application as a necessary pre-condition to his application under ss.23 and 24 of the 1973 Act, in fact it served no purpose whatsoever as the Consent Order had not dismissed the Bankrupt’s spousal claims.

(4) It was a misrepresentation to suggest that the claim under s.284 had been “robustly resisted” by Ms Woodall, as a detailed description of the history of the proceedings would demonstrate.

[54]In my judgment, there is nothing in these points which leads to the conclusion that Morgan J was misled, such that his order granting permission should be set aside.

[55]The short point of substance, as it seems to me, is that the Registrar concluded that paragraph 1 and 2 of the Application were inextricably entwined and that “in reality the purpose of the first issue was to reach the second”, when it was at least arguable that paragraph 1 had a potentially wider significance. The Consent Order included an agreement by the Bankrupt to repay Ms Woodall approximately £1.4 million. If the Trustee was bound by that order, there was an obvious risk that Ms Woodall would argue that the Trustee could not challenge her status as a creditor whether in the bankruptcy or otherwise. Whilst the Trustee might have been able to address this issue in the context of a proof of debt by Ms Woodall, that did not preclude him from seeking to have it determined as part of the Application.

Conclusion

[56]Accordingly, I dismiss both the Trustee’s renewed application for permission to appeal and Ms Woodall’s cross-application.