England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LEEDS COUNTY COURT
(His Honour Judge Langan QC)

		Royal Courts of Justice Strand London WC2 Friday, 23rd November 2001

Friday, 23rd November 2001

1. LORD JUSTICE CHADWICK: This is an application for permission to appeal from an order made on 31 July 2001 by His Honour Judge Langan QC, sitting in bankruptcy as a Deputy Judge of the High Court in the Leeds District Registry, on an appeal from an order made by District Judge Wood on 31 May 2001. It is, therefore, an application to which CPR 52.13 and section 55(1) of the Administration of Justice Act 1999 apply. Permission to appeal to this court cannot be granted unless the appeal would raise some important point of principle or practice or there is some other compelling reason why an appeal should be heard by the Court of Appeal.
2. The applicant, Mr Frederick Anthony Craggs, was adjudicated bankrupt on 10 October 1994. He obtained his automatic discharge three years later on 10th October 1997. Nevertheless, the administration of his estate in bankruptcy has not yet been completed. On 28 April 1998 Mr William Duncan, an insolvency practitioner and a partner in the firm of Pannell Kerr Forster, was appointed trustee in bankruptcy of the estate. On 3 January 2001 Mr Duncan, as trustee, applied in the Harrogate County Court - which was the court then seized of the bankruptcy proceedings - for an order that Mr Craggs pay to the trustee the sum of £35,467.31. That was said to represent the proceeds of sale of an asset comprised in the bankrupt's estate. The application was supported by a witness statement signed by Mr Duncan on 12 December 2000. I will read paragraphs 4 and 5 of that statement:

"4.It has now come to my attention that about or before 1999 a property known as `Land at Carthorpe Village, Bedale' (`the Bedale Property') was gifted to Mr Craggs, his two brothers (SG and CC Craggs) and their two sisters (Mrs H D Gossmark and Mrs H J Gregory) by their parents. Mr Craggs interest in this property was not disclosed to the Official Receiver ... and has never been advised to me as Trustee in Bankruptcy.

5.Furthermore I believe that at the end of March this year the Bedale Property was sold and from the proceeds of sale Mr Craggs received £35,467.31 paid to him by the solicitors acting on the sale of that land, Eccles Heddon. The Bedale Property comprised part of Mr Craggs estate in bankruptcy and accordingly his interest in it vested in me on my appointment by virtue of section 306 of the Insolvency Act 1986."

3. That application came before District Judge Wood on 5 February 2001. She made an order in these terms:

"1. Mr F A Craggs should by 4.00pm on 9th March 2001 file at court and serve on the trustee copies of all statements of witnesses as to fact, such statements are to have annexed to them all documents referred to or relied upon.

2. The trustee shall, if so advised, by 4.00pm on 23rd March 2001 file at court and serve on Mr Craggs any evidence in reply, such evidence to include all documents referred to or relied upon.

3. The matter be heard for directions on Monday 2nd April 2001 at 10:00 at Harrogate County Court..."

4. In response to that order Mr Craggs made a witness statement dated 5 March 2001. Apart from an admission that he had had some interest in 1.6 acres of land which was held in trust and under the control of trustees other than himself, and that his brother had agreed to share with him the proceeds of property at Carthorpe, the witness statement is less than informative in relation to the subject matter of the trustee's claim. I need read only two passages of that statement:

"I did not mention [in 1994] the 1.6 acres of land because I thought it was held in trust and under the control of the other trustees."

5. But, after the Official Receiver had been told about the land by his ex-wife, Mr Craggs did disclose the asset to the Official Receiver at a subsequent interview:

"At this interview, I gave full details about this land. I explained that it was being farmed as agricultural land under the control of trustees. Because I was now Bankrupt, I would play no part in the control of the land anyway. The value of the Land would be about Two Thousand pounds per acre shared eventually among the Five children."

6. Subsequently, as Mr Craggs pointed out in paragraph 7 of his witness statement, the land acquired development potential. The cottage nearby was demolished and his brother informed him that the family had agreed to share the proceeds with him, although he had no share in the cottage. More light, however, was shed upon the matter by a witness statement made by the trustee on 28th March 2001. He said this:

"The asset in question is land at Carthorpe, Bedale, North Yorkshire ... . At the time I made my application requests had been made of Eccles Heddon for them to provide copies of their file relating to the sale of part of the Property so that I might confirm the basis upon which the Respondent acquired his interest and disposed of it. At the same time as I made my application against the Respondent I also made an application for delivery up of Eccles Heddon's file and a complete copy of that file was delivered up to my solicitors on 2 February 2001.

My solicitors have now reviewed Eccles Heddon's file. There is now produced and shown to me marked `WD4" copies of documents taken from Eccles Heddon's file to which I shall refer by page numbers. These documents show the position to be as follows:

(a)The Respondent obtained his interest in the Property on 14 March 1989. That interest was obtained by way of a Deed of Gift from the Respondent's parents, Frederick Craggs and Jean Craggs to the Respondent and three of his siblings as trustees, holding the Property on trust for the Respondent and four of his siblings.

(b)Part of the Property was sold on 15 March 2000 and the Respondent received £35,467.31."

7. The documents which the trustee exhibited included a plan, which shows that access to the 1.6 acres of development land (itself edged green) was over an access way, which included a small slither of land edged red which was not included in the green land but which was necessary in order to be able to gain access to it. That red land is described in a judgment as the "rampant" land; but it would more appropriately be described, I think, as a ransom strip.
8. The evidence included, I am told, a statement from Mr Craggs' brother, Mr Charles Clive Craggs. The version of the witness statement in the bundle provided to me is dated 9th May 2001; but Mr Craggs tells me that it was in substantially the same form on 7th March 2001 and that it was before the district judge. Mr Charles Craggs said this. He was farming in partnership as F Craggs & Sons. The applicant was not involved, and had no share, in the partnership. There was a transfer, in March 1989, of the 1.6 acres, forming the land edged green, to the family trust. He went on:

"Adjoining the trust land was a cottage and garden, known as 4, East End, Carthorpe, which was purchased by the farm partnership, but which was not included in the land transferred to the family trust.

The Trust Land was used for grazing cattle until part was sold and the access to the field was through 4 East End, Carthorpe which also provided access to a 46 acre field ploughed and used for arable operations.

We demolished the cottage at 4 East End Carthorpe, and sold a plot for building to Mr Derek Petty.

Mr Petty then introduced us to Messrs WRP Dunn and FL Dunn who wished to purchase land for a further three plots, and an agreement was reached on the condition that detailed planning permission be obtained.

But detailed planning permission could not be obtained without a suitable access to the site and we had to create the access from the land from 4 East End Carthorpe. It was from this access, that benefit for building was provided and it was a specific condition of the sale, that we had to surrender our rights of access."

9. That, when related to the plan, is a reference to the red slither. Mr Charles Craggs went on to say that:

"The remainder of the trust land ... is still being farmed by the Farm partnership with the value being that of agricultural land. The prospect of any benefit being obtained for that land is unlikely unless a new access can be created.

Therefore it was decided among the family, that the proceeds from the access be shared among the five members indicated in the original trust, because the prospect of any further inheritance was remote.

So far as my brother Frederick Anthony was concerned, he was included despite the fact that he had been made bankrupt."

10. That was the state of the evidence when the matter came back before District Judge Wood on 2 April 2001. She adjourned the matter for a full hearing on 31 May 2001 with a time estimate of two hours. It is plain that her intention was that the hearing on 31 May 2001 should be the effective hearing of the trustee's application.
11. Following the directions hearing on 2 April 2001 the applicant filed the revised witness statement, made by his brother Mr Charles Craggs, to which I have referred.
12. In essence, therefore, the issue for the district judge was whether the whole of the proceeds of sale - from which it seems to have been common ground that the applicant received the sum of to £35,000, or thereabouts - were proceeds of the sale of the land held by the family trust in which the applicant had had a share; or whether part, at least, of those proceeds were attributable to the land which had been acquired by the farm partnership at 4 East End, Carthorpe in which the applicant had had no interest - but which were the subject of a post-bankruptcy gift made to him by three of his siblings.
13. The district judge referred to the plan - which is, itself, referred to in a letter dated 7th March 2001 from Hambleton District Council. It is clear from the plan that the land edged green is a development plot for three houses. It is clear also that access to the green land is over the small slither of land edged red, formerly occupied by the cottage known as 4 East End, which, as the plan shows, is to be demolished. The district judge said this in her judgment of 31 May:

"It seems to me to be perfectly clear that you [that is Mr Craggs] had an interest in this land, which is shown edged green on the plan that I have which came with the letter from Hambleton Council, and there is a letter included in exhibit WD/4, which is extracts from the file of Eccles Heddon."

14. She went on:

"The letter on that file, dated 2nd December 1999 and addressed to Mrs J Craggs is referring to building land at Carthorpe. It is an offer from developers, Dunn Development, of £180,000 for the land that has outline planing for three houses, and according to Mr Craggs that land was the green land, not the land edged red.

It seems to me that whatever Mr Craggs is saying about that being a rampant strip, the reality is that here no actual value was put on that rampant strip; no value was apportioned as between the various owners of the land that eventually came to be sold to Dunn Developments, and it seems to me to be completely disproportionate to the issues here and the values that are at stake to go down the road of trying to value a piece of land like that after the event."

15. She referred later in her judgment to it being a wholly barren exercise now to go back and try to do a valuation exercise when that was not the intention of the owners of the land at the time.
16. In short, therefore, the district judge held that the applicant had had a one-fifth share to the development land (the green land) sold for £180,000; and that, although it would or might have been possible to attribute some part of that purchase price to the slither of red land in which the applicant had had no interest at the date of his bankruptcy, that was not done when the land was sold off in March 2000. If that had been done, then so much of the apportioned value of the red land as formed part of the share of the proceeds distributed to the applicant would have been properly treated as a post-bankruptcy gift to him by his siblings, as members of the farm partnership, and so would not have formed any part of the bankruptcy estate. But, because the transaction was not carried out in that way, the one-fifth share of the proceeds of sale had to be treated as attributable to the share in the green land which was, or had been, an asset of the bankruptcy estate. As the district judge said, in an exchange following the delivery of her judgment on 31 May;

"Because there is no evidence that there was any value attached to that red strip of land which was also included in the sale, then it seems to me that the proceeds properly to go are the £35,000 odd that you received and that is my decision in the matter.

The applicant appealed to the High Court. It appears from his Appellant's Notice that he relied upon two grounds:

(1) that he had not expected the hearing on 31 May 2001 to be a substantive hearing - so he had not arranged for his brother to be present, nor to provide expert evidence; and

(2) that the district judge was wrong to attribute no value to the red land which had in fact been included in the sale.

That appeal was heard by a His Honour Judge Langan QC on 31 July 2001. The arguments on behalf of Mr Craggs were put forward by Mr Cassidy - whom the judge described as his lay representative. After a thorough - and, if I may say so, a conspicuously careful - review of the facts pertaining to the land, the judge identified the two points raised by the Appellant's Notice to which I have referred. In relation to the first he said this:

"The first is a procedural point. It is said that neither the bankrupt nor Mr. Cassidy realised that the issue of substance in the case was to be tried before the district judge on 31st May, and hence they came unprepared for a fair fight. I have to confess to some scepticism about that submission because the previous order of the learned district judge, made I think on 2 April, had specified two hours as the time to be allocated to the case on 31 May, which would have been an extraordinarily long time for a directions hearing but an understandable time for a trial of an issue of this kind. In any event, written evidence from the bankrupt and his brother and from the local authority were before the district judge on 31 May."

17. It is plain that the judge did not think much of the suggestion that the applicant had not had a proper opportunity to put his case before the district judge on 31 May.
18. Judge Langan then went on to address the second point. He said this:

"The second point taken is one of greater substance, and it is this. It is said that the learned district judge was wrong to refuse to attribute any part of the £180,000 to the access strip. As a matter of common sense, it is said, that some undifferentiated part of the proceeds of sale must be attributed to the access strip. It is suggested that a starting point might be the Stokes principle, familiar to practitioners in the field of compulsory purchase, under which one third of the profit to be derived from a development is sometimes attributed to a so called ransom strip. The point is taken that, as regards the bankruptcy, the access strip has a status very different from that of the trust land. In no way was the access strip, or any interest in it, vested in the bankrupt at the date of adjudication, and so it never vested in the Trustee. Mr. Cassidy submits that in these circumstances there should be a new trial in order that the court may determine what part of the £180,000 should properly be treated as having been payable to the bankrupt in respect of his interest in the access strip. In no way, it is said, can it be right to conclude that the whole of the one fifth of the unapportioned purchase price was referable to his interest in the trust land."

19. The judge went on to say that he had considered those submissions carefully. He referred to the witness statement of Mr Charles Craggs; which he regarded as of particular importance. He summarised that statement in these words:

"Mr Charles Craggs is saying, in effect, that he and the other two persons interested in the access strip simply threw the access strip into the family melting pot, the melting pot being the trust land, and permitted any value attributable to the access strip to be dealt with as part and parcel of the trust property."

20. For those reasons the judge dismissed the appeal.
21. The applicant seeks permission to appeal to this Court. The points which he wishes to put before this court on an appeal are, in substance, the same points as he advanced before His Honour Judge Langan - namely (1) that he did not have a fair trial before the district judge because he was unprepared; and (2) that the red land - being in the nature of a ransom strip - must be given some value. On the last latter point the applicant wishes to rely on further evidence which, as he submits, shows that the value of the red land was £56,700 - that is to say, about one-third of the total price of the £180,000 paid by the developers.
22. It is important to keep in mind that, as I pointed out at the beginning of this judgment, an appeal against the order of 31 July 2001 would be a second appeal to which section 55(1) of the Access to Justice Act 1999 applies. It is not enough that I might think that the applicant has a real prospect of success on an appeal. The statutory test which I have to apply is whether the appeal would raise an important point of principle or practice - which, plainly, it does not - or whether there is some other compelling reason why it should be entertained by this Court. If I were persuaded that the decisions of the district judge or of His Honour Judge Langan were plainly wrong - so that it would be unjust to allow those decisions to stand - then I would treat that as a compelling reason why a second appeal should be entertained. But I am not so persuaded. In particular I am not persuaded that Mr Craggs was denied a fair opportunity to put his case before the district judge or before Judge Langan. The directions of the 2 February 2001 were plainly intended to bring home to the applicant the need to put in writing and file at court the material on which he wished to rely. The problem for him now is that he did not put before the district judge, either in April or in May 2001, the valuation upon which he now wishes to rely. Further, he did not put before the judge any material to indicate that there was any intention at the time of the sale off of the development land in March 2000 to apportion any part of the proceeds to the red slither - and there is still no such material. Although there is a letter from Dunn Developments dated 11 July 2001 saying that it would be usual for the smaller part of the land to command one-third of the site value, there is no indication that that was a matter which anybody thought about or addressed at the time.
23. I accept that other judges might have come to a different conclusion on the material in this case to that reached by this judge. I could not say that an appeal would have no real (as distinct from a fanciful) prospect of success. But I cannot hold that the conclusion reached by the district judge on the evidence before her - or the conclusion reached by His Honour Judge Langan - was so plainly wrong that it would be unjust to allow those decisions to stand. Mr Craggs has had his opportunity to put his case before the courts. It would not be appropriate, now, for this court to interfere so that the whole matter would have to be retried.
24. The statutory test is not satisfied in the present case and I dismiss this application.
Order: Application dismissed.