Mulkerrins (formerly Woodward (FC)) (Appellant) v. Pricewaterhouse Coopers (a firm) (formerly trading as Coopers & Lybrand) (a firm) (Respondents)
HOUSE OF LORDS
OF THE LORDS OF APPEAL
FOR JUDGMENT IN THE CAUSE
Mulkerrins (formerly Woodward) (FC) (Appellant) v . Pricewaterhouse Coopers (a firm) (formerly trading as Coopers & Lybrand (a firm)) (Respondents)
THURSDAY 31 JULY 2003
The Appellate Committee comprised:
Lord Bingham of Cornhill
Lord Nicholls of Birkenhead
Lord Lord Scott of Foscote
Lord Walker of Gestingthorpe
LORD BINGHAM OF CORNHILL
LORD NICHOLLS OF BIRKENHEADMy Lords,
LORD SCOTT OF FOSCOTE
LORD WALKER OF GESTINGTHORPE
Property is widely defined as including
That is the effect of sections 283, 306 and 436 of the Insolvency Act 1986, which replaced similar but by no means identical provisions in a succession of earlier statutes.
The relevant part of the order was the declaration that
The heading to the order as drawn up contains two errors. It refers to section 303 (2) (rather than section 303 (1)) and it refers to the respondent as KPMG (rather than Mr Blake). But no one has suggested that either error casts any doubt on the substance of the order. Mr Knowles QC (appearing in your Lordships' House for PwC) accepted that "no interest" means what it says - that is no interest at all, legal or equitable.
That is so, up to a point. On 3 February 1999 Aldous LJ's judgment in Ord v Upton lay in the future, and the notion of a trustee in bankruptcy being accountable (as a constructive trustee) in respect of part of the recovery to be achieved by prosecuting a right of action was, I think, unheard of. But it is, with respect, incorrect to say that the district judge was not in any way concerned with the beneficial ownership of the right of action and (as the Lord Justice went on to say) that she was concerned only with legal ownership. The fact is that she was concerned with both legal and beneficial ownership, viewed globally and without any need for differentiation between them. That was the all-or-nothing choice which counsel had placed before her as their agreed position. Whether it was right or wrong, the order of 3 February 1999 clearly and decisively determined the issue between the only two possible contenders for the right of action against PwC. But the Court of Appeal treated it as an "artificial world" and concluded that the deputy judge's reasoning was fallacious. The Court of Appeal allowed the appeal, determined the preliminary issue against Ms Mulkerrins, and dismissed her action.
Lord Hoffmann concluded that the systemic defect, if there was one, lay in the arrangements for legal aid and costs orders and not in the law of insolvency. His observations were directed to a different situation (where the trustee in bankruptcy assigned a right of action for financial loss which had undoubtedly vested in him) but they are also relevant to the present case.
But it is simply not necessary to explore this difficult area. In relation to the points raised in Mr Krolick's respondent's notice in the Court of Appeal it may be accepted that the order of 3 February 1999 was erroneous, and that it does not bind PwC by estoppel per rem judicatam or indeed by any other form of estoppel. But as the deputy judge said, the order certainly did bind the trustee in bankruptcy who was the only other possible contender for title to the right of action. The substantial effect of the order was not to assign the right of action, but to declare that it had not been affected by the bankruptcy. From the moment that the right of action arose, it was at all material times in the legal and beneficial ownership of Ms Mulkerrins. If the trustee in bankruptcy, as the only possible rival claimant, was bound by the order, its practical effect was not open to challenge by PwC.