England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE FC3 96/6288/B

IN THE COURT OF APPEAL (CIVIL DIVISION )

(MR JUSTICE JONATHAN PARKER )

Royal Courts of Justice

Strand

London W2A 2LL

Thursday 31st October 1996

B e f o r e

LORD JUSTICE MORRITT

LORD JUSTICE WARD

LORD JUSTICE POTTER

IN THE MATTER OF AUSTINTEL LIMITED

Application pursuant to Rule 7-28 of

The Insolvency Rules 1986

(Handed down transcript of

Smith Bernal Reporting Limited, 180 Fleet Street

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

MR JUSTIN RUSHBROOKE (instructed by Messrs Peter Carter-Ruck & Partners) appeared on behalf of the ex parte Applicant.

MR RICHARD SNOWDEN (instructed by Messrs Norton Rose) was invited by the court to speak for the Society of Practitioners of Insolvency.

J U D G M E N T

(As approved by the court)

©Crown Copyright

LORD JUSTICE MORRITT: The Insolvency Rules 1986 provide, in Rule 7-28, in respect of the records of the Court maintained pursuant to Rule 7-27 that:

"(1) Subject as follows, the court's records of insolvency proceedings shall be open to inspection by any person.

(2) If in the case of a person applying to inspect the records the registrar is not satisfied as the propriety of the purpose for which the inspection is required, he may refuse to allow it. The person may then apply forthwith and ex parte to the judge, who may refuse the inspection, or allow it on such terms as he thinks fit.

(3) The judge's decision under paragraph (2) is final."

On 11th January 1996 District Judge Kopf refused the application of Austintel Ltd to inspect the records of insolvency proceedings maintained by the Liverpool District Registry. Austintel Ltd renewed its application to Jonathan Parker J, sitting as the Vice-Chancellor of the County Palatine of Lancaster. On 8th May 1996 Jonathan Parker J refused it. This is an application by Austintel Ltd under RSC Ord. 59, r.14(3) for leave pursuant to Insolvency Rule 7-28 to inspect the records of insolvency proceedings at the Liverpool District Registry. Obviously the first point to be considered is whether in the light of paragraph 3 of Insolvency Rule 7-28 the Court of Appeal has any jurisdiction to entertain the application.

It is provided by the Supreme Court Act 1981 s.18 that:

"(1) No appeal shall lie to the Court of Appeal -

....

(c) from any order, judgment or decision of the High Court or any other court or tribunal which, by virtue of any provision (however expressed) of this or any other act, is final."

Counsel for the applicant contends that that provision does not preclude this court considering his application for three reasons. The first is because the prohibition is not contained in an act but in subordinate legislation with the consequence, it is submitted, that s.18(1)(c) Supreme Court Act 1981 does not apply. The second reason relied on is that, as it is submitted, Insolvency Rule 7.28(3) is only intended to prevent reapplications otherwise permitted by s.375(1) Insolvency Act 1986 and Insolvency Rule 7-47(1). The third submission is to the effect that the Applicant is applying not appealing to this court as recognised and permitted by RSC Ord 59, r.14(3) which provides:

"Where an ex parte application has been refused by the Court below, an application for a similar purpose may be made to the Court of Appeal ex parte within 7 days after the date of refusal."

I acknowledge the ingenuity of the submissions but I am quite unable to accept them. The legal force and effect of subordinate legislation such as the Insolvency Rules is derived from the primary legislation which authorises it. It was not submitted that Rule 7-28(3) was ultra vires Insolvency Act 1986; and given the width of the enabling powers contained in ss 411 and 412 Insolvency Act 1986 such a submission would have little chance of acceptance. Thus the legal force and effect of Rule 7-28(3) stems from Insolvency Act 1986. I can see no reason, and none was suggested, why the reference in s.18(1)(c) Supreme Court Act 1981 to "any provision (however expressed) of.. any other act" should not extend to provisions in subordinate legislation authorised by that other act as well as to provisions physically contained in it.

S.375 Insolvency Act 1986 provides:

"Appeals etc from courts exercising insolvency jurisdiction

(1) Every court having jurisdiction for the purpose of the Parts in this Group may review, rescind or vary any order made by it in the exercise of that jurisdiction.

(2) An appeal from a decision made in the exercise of jurisdiction for the purposes of those Parts by a county court or by a registrar in bankruptcy of the High Court lies to a single judge of the High Court; and an appeal from a decision of that judge on such an appeal lies, with the leave of the judge or of the Court of Appeal, to the Court of Appeal.

(3) A county court is not, in the exercise of its jurisdiction for the purposes of those Parts, to be subject to be restrained by the order of any other court, and no appeal lies from its decision in the exercise of that jurisdiction except as provided by this section."

That section is dealing with individual bankruptcy but the comparable provision applicable to companies winding up, namely Insolvency Rule 7-47, is in substantially the same terms.

The second submission for the Applicant accepted that Rule 7-28(3) was capable of overriding the statutory jurisdiction conferred by s.375 as well as the jurisdiction conferred by Rule 7-47. Though the point was not argued, in my view, that concession was right on the basis that the provisions of Rule 7-28 have statutory effect and deal with a specific matter. Thus the specific provision in Rule 7-28(3) may override the general provisions in s.375 and Rule 7-47. But no reason was suggested why the requirement of finality contained in Rule 7-28(3) should be restricted in its application to attempts to review, rescind or vary the order of the judge as contemplated by s.375(1) and Rule 7-47(1) but not extend to appeals pursuant to s.375(2) and Rule 7-47(2). In my view the unqualified requirement of finality must preclude an appeal under the latter provisions as well as a reconsideration under the former.

RSC Ord.59 deals with appeals to the Court of Appeal generally. Ord.59, r.14 deals with applications to the Court of Appeal. In my view it is plain from the context that the applications envisaged are those incidental to some substantive appeal whether past, pending or prospective. Rule 14(3) cannot have the effect of giving to the Court of Appeal jurisdiction to entertain an application when the jurisdiction to hear a substantive appeal for the same relief is excluded by s.18(1)(c) Supreme Court Act 1981.

It was suggested during the course of argument that the reference to the judge in Rule 7-28(3) was apt to include the judges of the Court of Appeal so as thereby to permit the application to this Court. I cannot accept that suggestion either. It is plain from the context that the judge referred to is the judge to whom an appeal lies from the registrar. As is apparent from s.375 Insolvency Act 1986 and Rule 7-47 that is the single judge of the High Court and not the Court of Appeal. The former cannot be construed so as to include the latter.

In these circumstances I consider that this court has no jurisdiction to entertain the application. I express no view on its merits on which, de bene esse, we heard submissions from Counsel for the applicant and, at their request and expense, for The Society of Practitioners of Insolvency. One matter became clear during the course of those submissions, irrespective of what the decision of this court would have been had it had jurisdiction. That relates to whether the Insolvency Rules sufficiently take account of advances in information technology. The rules appear to be drafted on the supposition that the records of insolvency proceedings required by Rule 7-27 are contained in a large book which the person referred to in Rule 7-28(1) asks a court clerk to produce for his inspection. Thus, it is assumed, the information obtainable is limited in practice to what the individual to whom it is produced can abstract while he has possession of it. But this may not take sufficient account of the fact that the court records are being computerised and the facilities available to the searcher enable him to match information in those records with the customer list of his clients. This is a topic which, in my view, merits the attention of Insolvency Rules Committee.

LORD JUSTICE WARD: On 8th May 1996 Jonathan Parker J. (sitting as the Vice-Chancellor of the County Palatine of Lancaster) dismissed Austintel Ltd's ex parte application pursuant to Rule 7.28 of the Insolvency Rules 1986 for liberty to inspect the register of winding up petitions maintained in the Liverpool District Registry and he refused them leave to make multiple searches of the Liverpool register. The learned judge was not satisfied as to the propriety of the purpose for which inspection was

required.

It is a decision which has important consequences for the applicant, its clients and employees on the one hand and for insolvency practitioners on the other. The consequence for the applicant is not only that the purpose of its business has been, or is perceived by it to have been tainted with impropriety but also because the livelihood of its employees has been put in jeopardy. The Society of Practitioners of Insolvency, determined to uphold good practice in this specialised but competitive field, voice through their counsel their concerns that multiple searches are capable of acting unfairly towards both the debtor and the body of creditors as a whole. One might think, therefore, that on either side the issues raised are serious enough fully to justify their being reviewed by the Court of Appeal. If, as I am in no doubt is the case, there is at least an arguable challenge to the judgment, then, for my part, I would be anxious to resolve those issues and distinctly unhappy if there were no jurisdiction to do so.

Is there jurisdiction?

As is apparent form the face of the order the applicant applied for but was refused leave to appeal. It sought at first to renew that application to this court but was faced with the hurdle of s. 18(1) (c) of the Supreme Court Act 1981 which provides that:-

"No appeal shall lie to the Court of Appeal-

...

(c) from any order, judgment or decision of the High Court or any other court or tribunal which, by virtue of any provision (however expressed) of this or any other act, is final."

The applicant did not pursue the avenue of appeal but applied instead under RSC Ord. 59, r.14(3) because that provides:-

"Where an ex parte application has been refused by the Court below, an application for similar purpose may be made to the Court of Appeal ex parte within seven days after the date of refusal."

The difficulty the Applicant now has to overcome is that rule 7.28(3) of the Insolvency Rules provides that:-

"The judge's decision...is final."

No suggestion was made that the rule is ultra vires and the point was rightly conceded. The enabling provisions are Ss.411 and 412 of the Insolvency Act 1986 which enable rules to be made for the purpose of giving effect to the company insolvency/company winding-up parts of the Act and the insolvency of individuals/bankruptcy parts respectively. Express power is given to make such rules as may be necessary or expedient in connection with any of the provisions of Schedules 8 and 9 each of which allow for regulating the keeping of records and for regulating the practice and procedure of any court exercising jurisdiction for the purposes of the respective parts of the Act. Although there is no express provision that such rules "shall be of the same effect as if they were contained in this Act", it is, I apprehend, settled law that delegated legislation has statutory force whether the enabling Act expressly spells it out or not. Consequently, as Lord Herschell L.C. said in Institute of Patent Agents -v- Lockwood [1894] AC 347, 361:-

"You shall for all purposes of construction or obligation or otherwise treat them exactly as if they were in the Act. No doubt there might be some conflict between a rule and a provision of the Act. Well, there is a conflict sometimes between two sections to be found in the same Act. You have to try and reconcile them as best you may. If you cannot, you have to determine which is the leading provision and which the subordinate provision, and which must give way to the other. That would be so with regard to the enactment and with regard to rules which are to be treated as if within the enactment. In that case probably the enactment itself would be treated as the governing consideration and the rule as subordinate to it."

Here rule 7.28(3) does appear to be in conflict with rule 7.47 and with rule 7.48 read with section 375. To state their effect compendiously:-

"1. Every court, whether in the exercise of its winding-up jurisdiction or bankruptcy jurisdiction “may review, rescind or vary any order made by it in the exercise of that jurisdiction”

2. An appeal from a decision made in the exercise of that jurisdiction by a County Court or by a Registrar of the High Court lies to a single judge of the High Court; and “an appeal from a decision of that judge on such an appeal lies, with leave to that judge or the Court of Appeal, to the Court of Appeal."

Giving a plain and ordinary meaning to the words of rule 7.28(3), the finality of the judge's decision is at odds with both parts of these other provisions because:-

1. If the judge’s decision is final, that is an end of it and his decision is incapable of later review, rescission or variation.

2. If finality means that the application ends with the judge’s decision, then there can be no appeal from that decision or application for leave to appeal to the Court of Appeal.

Mr Rushbrooke submits that rule 7.28(3) has a very narrow purpose limited to excluding any application to the same court for a review rescission or variation of its order as provided for in the first part of rules 7.47 and 7.48 and section 375 as I set them out above. I can see some force in that submission. Rule 7.28 finds its place in a short but discrete chapter on "Court Records and Returns". The maintenance of the court’s records and making them available for public inspection are very much matters of internal housekeeping in respect of which it is right and proper that the court should keep control. It is for that court and only that court to decide how to do so. Notwithstanding a test of impropriety of purpose, the decision is essentially an administrative one. There is, it seems to me, good practical sense in saying that arguments about inspection end with the judge and that his decision is final. Thus Mr Rushbrooke may be right to submit that rule 7.28(3) prevails over the generalised provisions allowing review. It does not follow, however, that rule 7.28(3) has no more effect than that. Finality for one purpose must surely be finality for all purposes. If, as must be, finality of decision means that the decision-making process stops with the judge, then there it stops. It can advance no further. It cannot move on from there to the Court of Appeal. We cannot shut our eyes to the Insolvency Rules and look only at R.S.C. Ord. 59, r.14(3). Rule 7.28(3) denies us jurisdiction.

Mr Rushbrooke has not taken up Lord Herschell's suggestion that the enactment is the leading provision so that rule 7.28(3) is subordinate to section 375 and the corresponding rules 7.47 and 7.48. If that were the position, then there would be a right to appeal with leave of the judge or this Court. Must rule 7.28(3) give way to section 375? For reasons already given, rule 28(3) prevails over the first part of the section. It cannot be right that it does not give way to one part of section 375 but does to the other. The express provision that the judge’s decision is final must also prevail over the general provision that an appeal from his decision lies with leave. The Court of Appeal cannot interfere.

Not without regret at the conclusion, I am no longer in doubt that we do not have jurisdiction either to entertain a renewed ex parte application or to grant leave to appeal.

Like my Lord, I find that the rules do not cater for the advances in information technology nor for the shifts in insolvency practice which years of recession have produced. Since the problems raised in argument before us seem unlikely simply to go away and since the most energetic Rules Committee is unlikely to be able to legislate quickly enough to alleviate them, I venture to express some views, obiter and tentative though they may be. I start from the common ground that it would be entirely proper for an individual creditor to search the register to establish whether insolvency proceedings had been commenced against a named debtor before commencing his own winding up proceedings against that company or that individual. The submissions tended to concentrate on insolvent companies and I limit myself to the problems arising in winding-up. The next question is whether a search made for credit control purposes is tainted with impropriety. Assume that an individual creditor has reason to believe that his customer may be in financial difficulties. Is it wrong to search the register to ascertain whether proceedings have commenced against the company in order more accurately to evaluate the risk of extending further credit or supplying further goods? I understand the argument that it may be most unfair to the debtor that another creditor finds out about the proceedings before he does or before he can restrain the advertising of the proceedings which would inform the world. But that is not the point. What must be improper is the purpose of the search. I cannot see that to search for credit - control purposes is to search for an improper purpose. Next, what if the search is conducted with a further purpose in mind, namely to support any petition which he may discover has been filed, in order to gain the benefits of substitution as in the event that the debt of the petitioning creditor is satisfied. I do not see that as a commercially improper step to take. Mr Snowden, for the Society of Practitioners of Insolvency submits that until the petition has been advertised there can be no legitimate interest in discovering whether there are proceedings in progress and if so to ascertain what has taken place. I cannot see how the creditor’s legitimate interests can be so circumscribed. If the creditor learns from some source other than inspection of the register that proceedings have been instituted, he is not obliged to wait until the petition has been advertised before giving notice of his support. If he can proceed within existing rules I do not see why he should be criticised for searching the register in order to be able to do so. It is said that it is of fundamental importance that all creditors stand on equal footing and that one should not gain an advantage over another. But the register is open to all and so the playing field does not cease to be level simply because some of the players do not know how to play the game.

If an individual creditor can legitimately make a search of the register in respect of one his debtors, he can properly enquire about all of them. He can search every day or every week if he has the resources to do so. If he can do it himself, he can do it through an agent. If Austintel were to search on behalf of one of their clients in respect of a list of the clients’ customers, I find it difficult to see how that search can be said to be conducted for an improper purpose.

That, of course, is not what has been happening. Austintel have not gone to the Liverpool County Court as agent for their clients with vast lists of names to search for. Their business arrangements with their clients are not organised in that way. Jonathan Parker J. made the finding - with my emphasis added-that:-

"The purpose for which each of the applicants seeks leave to inspect the Liverpool Register is predominantly that of abstracting the entirety of the information entered on the register and making such information available to its customers and subscribers on commercial terms."

He then he went on to hold - and again I add the emphasis - that:-

"The carrying into effect of the purpose which I have just described results, and is intended to result, in the applicant maintaining what is for all practical purposes a duplicate of the register maintained by the court, but with the difference that whereas the register maintained by the court is subject to the court’s power to control inspection conferred by Rule 7.28(2), the “duplicate” register is outside the rules and thus outside the control of the court. In my judgement that difference is crucial."

There is arguably a difference between the purpose of the search and the consequences of it. Austintel require inspection of the register in order that they may make a copy of it in order that they may be able to inform their clients, in one electronic way or another, whether the customers' names appear in order that they may take whatever commercial action they consider to be appropriate in the light thereof. I do not regard the purpose of the commercial exploitation of the information In that way to be improper. What the learned judge appears to have found to smack of impropriety is the consequence of their achieving their purpose, namely their having control over the whole of the information on the register when, by the rules, the court is the only arbiter of when, how and to whom the records are to be disclosed. I am not sure this eliding of purpose and consequence is a correct application of rule 7.28(2) which entitles the court to refuse to allow inspection only if it is “not satisfied as to the propriety of the purpose for which inspection is required.

It may be this is a mere semantic difference between us because I agree that the court should not abdicate responsibility for keeping control of the information on its register. If, however the purpose for which the information is sought is legitimate (i.e. collecting it as agent for onward transmission to the client only in respect of their named customers) and if the court can be satisfied that no use will be made of the other information, then the interests of the applicant and the court can be reconciled. A fresh application, even an application for leave to make multiple searches of the register, may be acceptable on different terms from those proffered in this instance. I do not spell out what I consider proper terms to be. Trial and error and a bit of imagination should enable the applicants to continue a viable enterprise though perhaps with different terms of business and at the same time ensure that the court does not abdicate its responsibility. One could start with an undertaking not to search the register save as agent for clients whose identity can be disclosed to the judge if he requires to be satisfied about it or even from time to time requires to be satisfied about it. The undertaking must be to search only for those whose names are provided in advance by the client. The information must be disclosed only to client and only in respect of those persons he has identified. That may be enough to exclude abuse of the system by the so called “ambulance chasers” who have no list of names to enquire into and who conduct multiple searches precisely for the purpose of establishing that data base. I should add that no one suggests that Austintel are in that disreputable line of business or permit their system to abused in that way. If the terms were, in a sentence, exacted to allow the applicant to do as much as but no more than an individual could do in respect of one or more named debtors, then I do not see why the practice should be curtailed at least before the Rules Committee have had fuller opportunity to consult and to decide.

I have ventured these views very conscious that they may carry little weight. Because I agree that we lack jurisdiction, the application must be dismissed.

LORD JUSTICE POTTER: I agree with the reasoning and conclusions of Morritt LJ and Ward LJ on the question of jurisdiction.

I do so reluctantly because, like Ward LJ, I consider that, bearing in mind the wider implications of the Judge's decision, as well as its likely effect upon the applicant's business (which does not appear to be "improper" in any commercial sense) it would have been desirable for the Court of Appeal to review the operation of Insolvency Rule 7.28.

It seems plain that the presumption of the rule is in favour of the public right of inspection, with a power reserved to the Court for the proper regulation of the use of its records. However, as a result of the advances in technology and the desire of organisations with a large customer base to exercise credit control, the legitimate desire of individuals and companies to make use of the right of inspection conferred by the rule has led to problems of the kind canvassed before Parker J. It also seems to me plain that any access or search which an individual or company is at liberty to effect should, in the ordinary way, also be able to be carried out by an agent employed for the purpose.

That said, the activities of the applicant go further than simple agency services and, hence, the judge was required to consider the applicant's own intentions and the effect of permitting the applicant to make wholesale searches for its own business purposes. I do not criticise the decision of the judge in relation to the individual application before him, but its definitive nature in relation to other applications for multiple searches should not be assumed.

It remains the position that applications to make multiple searches fall to be considered and decided on an individual basis, having regard to the nature and status of the applicant's business and of any undertakings which may be offered or required in order to eliminate or neutralise such features or effects of the applicant's method of business as appear to the judge to raise doubts as to the propriety of the applicant's purpose in applying to make the search.

I agree with Morritt LJ that the practical and policy questions involved in applications of this kind and consequent upon the computerisation of court records call for urgent consideration by the Insolvency Rules Committee.

Order: Application refused.