“that the time for completion had expired- the ‘Completion Date’ being a month after the service of the option notice. It was submitted that Pendle’s debt to [LES] had been extinguished as from that date. Alternatively the issues of: (i) whether the Option Agreement was valid and binding, as between [LES] and Pendle and its LPA receiver; and (2) whether the exercise of the option has had the effect of extinguishing Pendle’s debt; and hence (iii) whether there is anything on which the guarantee bites, gave rise to a dispute on substantial grounds.”
“59. I can state my conclusions on the application of Rule 10.5(5)(b) quite shortly. Firstly, the indebtedness of the principal debtor, Pendle has not been discharged in circumstances where, although the Option under the Option Agreement has been exercised, no payment has been made by the Respondent. The maxim “Equity looks as done that which ought to be done” (See Snell’s Equity, 34th Edition, paragraph 5-015) may well be the basis for the existence of an equitable interest arising under a contract for the sale of land, but as the authors state, “Whilst the principle may be justifiable, it gains little real support from the maxim. First, where, for example A is under a duty to grant B a lease, or to assign a right to B by way of security, it seems odd that equity could somehow pretend the duty had been immediately performed. This leads to the absurdity that, for example, the court, having found that an assignment has not been made, then immediately says that it can, by putting on an equitable hat, regard that assignment as having occurred”. 60. I regard it as plainly incorrect, or no more than fanciful to contend that the debt has been discharged. It would in reality require a decree of specific performance to be made before this would be the case. Specific performance is, of course, an equitable remedy and it is not a foregone conclusion that it would be granted.”
“…In Remblance there was a substantial undisputed cross-claim which had survived a strike out application- the creditor was being sued by the principal debtor in the county court. There was a real prospect that the principal debt would be reduced or extinguished. In the present case the cross-claim was hypothetical, and there was no evidence that Pendle was willing or able to pursue it; and its existence had not been relied on by [the Appellant]. Pendle had maintained that the Option was unenforceable until August 2020, five months after the statutory demand was served. The reality was that the Property would be sold by the LPA receiver. The Applicant’s conduct as a co-director of Pendle bore the hallmarks of an evasive debtor.”
“Is it unfair and unjust to allow [LES] to go down the statutory demand route in circumstances where the principal debtor, Pendle, is not taking proceedings against the Respondent to compel it to complete the sale of the Property under the Option Agreement, the Option having been exercised? The Applicant’s case was not put in this manner. The evidence shows that Pendle has challenged the enforceability of the Option, and indeed there may be something to be said for the view that it repudiated it and that by its conduct the Respondent accepted the repudiation. But assuming for present purposes that there is a real, as opposed to a fanciful prospect that a court would grant specific performance against the Respondent, I note that this is not a case where [the Appellant] has said that for some reason [he] has been unable to procure that Pendle commences such proceedings for specific performance. He is a director and has a 47.5% shareholding and his solicitor has a 25% shareholding. There is no evidence of disagreements between the directors or with the other shareholders. Plainly it suited Pendle to do all it could to resist the consequence that the Property worth, perhaps, (at least at one point) up to£3 million , or at any rate worth more than the option price got sold for the sum due under the Option Agreement, until a late stage. With the possibility that the Property may end up being sold by a receiver, and one might imagine, the uncertainties over whether a suit seeking specific performance would succeed, I see no immediate prospect of Pendle taking such proceedings. I see no injustice in this case in permitting the insolvency route to be taken by [LES].”
“Following the Morgan Grenfell case and the Simms case, the bankrupt can only be deprived of privilege if IA 1986 expressly so provides or it is a necessary implication of the express language of its provisions. The only provisions relied upon by the Trustees in the present case on this aspect are the definition of “property” in section 436(1) and the treatment of a “power over or in respect of property” in section 382(4), in conjunction with the general provisions in sections 283 and 306 for the automatic vesting in the trustee of the bankrupt’s property comprised in his estate. All those provisions are in general terms. They do not expressly treat privilege as property of the bankrupt which automatically transfers from the bankrupt to the trustee. Nor is that a necessary implication of the provisions.”
“Even if it could be regarded as something personal to the appellant, it is clear from the authorities referred to above that the nature of the action needs to be one that relates “solely to his body, mind and character” (my emphasis), and that any damages seeking to recover compensation must be for damage to his body, mind and character as opposed to other causes of action which might be considered in respect of a right to property.”
“But in cases in which the plaintiff is claiming an interest in some property of the bankrupt, that property will have vested in the trustee. And in cases for debt or damages, the only assets out of which the claim can be satisfied will have likewise vested. It will therefore be equally true to say that the bankrupt has no interest in the proceedings. As we have seen, section 285(3) deprives the plaintiff of any remedy against the bankrupt’s person or property and confines him to his right to prove. On the other hand, there are actions seeking relief such as injunctions against the bankrupt personally which do not directly concern his estate. They can still be maintained against the bankrupt himself and he is entitled to defend them and, if the judgment is adverse, to appeal. This distinction was the basis of the decision in Dence v. Mason [1879] W.N. 177 in which a bankrupt wished to appeal against an order made before the bankruptcy granting an injunction to restrain passing off and ordering him to pay costs. His trustee declined to appeal but the court said, at p.177, that the bankrupt himself could appeal against the injunction “which was a personal order against him, notwithstanding the bankruptcy, though he had no interest in the order as to costs, his estate being now vested in the trustee.”
“Is there anything different about the judgment upon which the bankruptcy petition was founded? It is submitted that the difference is that in such a case the bankrupt does have an interest, because if he can get rid of the judgment, he may be able to have the bankruptcy order annulled on the ground that it should never have been made. Whether it is set aside or not will depend upon whether apart from the judgment the bankrupt would have been solvent or whether an order would in any event have been made on the application of supporting creditors: see In re Noble (A Bankrupt)[1965] Ch. 129 . On the other hand, it may equally be said that if only the bankrupt could pursue a claim for a large sum which he claims to be owing to him, he would be able to pay all his creditors and have the bankruptcy annulled on that ground. It is clear, however, that this is not a ground upon which he may bring proceedings. Furthermore, an exception for the petitioner’s judgment would give rise to anomalies in cases in which the defence was a claim of set-off, such as the applicant Mr. Heath asserts in this case. The contractual claim relied upon as a set-off would undoubtedly have vested in the trustee and therefore no longer be available to the bankrupt as a common law set-off to challenge the petitioner’s claim. It would fall to be set off for the purposes of proof undersection 323 of the Insolvency Act 1986 : see New Quebrada Co. Ltd. v. Carr (1869) L.R. 4 C.P. 651 , In re A Debtor; Ex parte Peak Hill Goldfield Ltd. [1909] 1 K.B. 430 . This right of set-off can be asserted only by the trustee. So in my view there is nothing sufficiently special about the petitioner’s judgment to take it out of the general principle. It must be borne in mind that rule 6.25(2) of theInsolvency Rules 1986 (S.I. 1986 No. 1925) says: “If the petition is brought in respect of a judgment debt, or a sum ordered by any court to be paid, the court may stay or dismiss the petition on the ground that an appeal is pending from the judgment or order, or that execution of the judgment has been stayed.”
“Normally, any cause of action which may lead to the recovery of money or other assets which form part of the estate in bankruptcy will form a part of the estate held on statutory trusts following the making of the bankruptcy order (Heath v Tang[1993] 1 WLR 1421 ). However the right to appeal against a bankruptcy order itself is of a different order as common sense and fairness dictate that the right of appeal against the bankruptcy order should remain with the bankrupt whose status has been fundamentally changed. Moreover, if Mr Couser were right on this point, the Trustee who decided to appeal against the bankruptcy order would be challenging the very order under which he acquired title to the bankrupt’s assets…”
“All this leads me to conclude that a bare right to appeal is not property within the meaning of s.436 of the IA. A right of appeal available to a bankrupt is one that the bankrupt loses locus to bring or maintain once he or she is adjudicated bankrupt because the only assets out of which the underlying liability can be met have vested in the trustee and not because the right is a chose that vests in the trustee. The trustee has a statutory right (but not the obligation) to exercise any right of appeal that the bankrupt might have had as and from the moment at which the bankrupt is made the subject of a bankruptcy order. Similarly a right to appeal available to a company in liquidation can only be exercised by the office holder once appointed because he she or they then become the only agents of the company entitled to do so. Again however that is not the result of the right to appeal being treated as a property interest.”