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 CHANCERY DIVISION
(MR JUSTICE NEUBERGER)

		Royal Courts of Justice Strand London WC2A 2LL Thursday 20 December 2001

1. LORD JUSTICE CHADWICK: There are before me two applications by Mr Angelo Perotti for permission to appeal against orders made on 5 July and 26 September 2001 by Neuberger J in proceedings between Mr Perotti and Mr Kenneth Watson and others.
2. The background to those proceedings is summarised by the judge in his judgment of the 5 July 2001. It is unnecessary to rehearse it. It has been set out in a number of judgments in this Court; most recently in a judgment delivered on 13 December 2001.
3. The first of the orders, that of 5 July 2001, was made on an application by Mr Watson, by notice dated 24 May 1996, seeking permission to take payment for services which he claimed to have provided as attorney administrator of the estate of Mr Angelo Perotti's uncle, the late Mr Lorenzo Perotti, since his appointment as such in February 1986. The application asked for an assessment of that remuneration in the region of £52,000.
4. The application was made because the Will of Mr Lorenzo Perotti (drawn by Mr Watson) contained no professional charging clause upon which an executor or administrator could rely. The application was opposed by Mr Angelo Perotti, on his own behalf as a beneficiary entitled to 50 per cent of the residuary interest under the Will, and on behalf of one (perhaps two) of the other beneficiaries. The judge was content to assume that none of the beneficiaries consented to Mr Watson's application.
5. The judge directed himself to three questions: (i) whether he had jurisdiction to make the order; (ii) whether, if he did have jurisdiction, he should make an order in the exercise of his discretion; and, (iii) if he should make an order, in what sum should that order be?
6. The judge identified four grounds upon which Mr Perotti had contended that he had no jurisdiction to make the order sought:

(1) Although the application was issued on 24 May 1996, Mr Watson's affidavit in support was not served until January 1997, which was much later than the date required by the rules then contained in the Rules of the Supreme Court 1965.

(2) That the application was an abuse of the process of the court in that the issue whether or not Mr Watson should be paid should have been raised by Mr Watson in "the main action". In that context "the main , which is a lengthy action in which Mr Perotti had sought removal of Mr Watson as attorney administrator. That action had been heard by Rimer J, who delivered judgment on 26 March 1997. An appeal against Rimer J's order in the main action was dismissed by this court (Waller and Kay LLJ and Sir Martin Nourse) on 2 February 2001.

(3) Mr Watson had been a witness to the Will of Mr Lorenzo Perotti and so could not take any benefit from the estate, even under an order of the court.

(4) The facts were not exceptional. Mr Watson was not seeking authority to make charges for future work, he was seeking authority to charge for past work.

7. The judge rejected each of those grounds of opposition to jurisdiction for the reasons which he gave in his judgment of 5 July 2001.
8. The judge then turned to the question whether, in the exercise of his discretion, he should make an order on Mr Watson's application. In relation to that question he reminded himself of the observations of this Court in Re Duke of Norfolk's Settlement [1982] Ch 61; in particular those in the judgment of Fox LJ at page 79. He set out the three factors which, in his view, supported Mr Watson's contention that some order for remuneration should be made; and the five factors which Mr Perotti had urged as reasons for refusing to make such an order.
9. The judge expressed his conclusion on the second question in these terms:

"In my judgment, in the present case, despite the significant shortcomings of Mr Watson, it would not be right to refuse to exercise my discretion in his favour. The reasons said to justify exercising my discretion in his favour, when taken together, are plainly powerful.

In my judgment, the only strong reason against me exercising my discretion in Mr Watson's favour is the combined effect of the criticisms of his conduct made against Rimer J. The fact that Mr Watson has been found to be inept on a number of occasions is nonetheless not sufficient to persuade me that he should be deprived of the receipt of some money for the work he has done, bearing in mind the quantum of the work done, the express finding of Rimer J that much of the work was justified, the fact that where his ineptitude has caused the estate loss he has been ordered to pay compensation, the fact that Rimer J did not think Mr Watson's conduct was enough to justify his removal, and the fact that his ineptness and other shortcomings can be taken into account when assessing the quantum.

In my judgment, if I accede to Mr Perotti's suggestion that I should give Mr Watson nothing, he would have a significantly greater sense of justified grievance than would Mr Perotti and the other beneficiaries if I do that which I propose to do, namely to exercise my discretion in Mr Watson's favour."

10. Finally, the judge addressed the question of quantum. He concluded that the appropriate amount to allow by way of remuneration was £35,000. That represented a discount on the amount sought (£52,000) to reflect two factors. First, that Mr Watson had himself drawn the Will with no charging clause and had accepted the role of administrator in the presumed knowledge that there was no charging clause. Second, that Mr Watson's conduct had been the subject of significant criticism by Rimer J in the main action. The judge reduced the amount which would otherwise have been recoverable by a blameless executor under a charging clause (which he accepted would have been the £52,000 claimed) by £5,000 in respect of the first of those factors and by a further £12,000 in respect of the second factor: a total rejection of £17,000 bringing the amount of £52,000 claimed down to £35,000.
11. Subsequently, on 1 August 2001, the judge made a further reduction, to reflect the fact that he had been under a misapprehension as to the basis upon which the £52,000 had been claimed. He had thought that the £52,000 was a net figure, excluding VAT. He reduced the amount of £35,000 to £32,500 ex VAT for the reasons which he gave in a judgment on 1 August 2001.
12. The circumstances in which that adjustment was made were as follows. Mr Horne, counsel for Mr Watson, had written to the judge on 16 July 2001 to point out that the figure of £52,000 had included VAT, whereas the judge had proceeded on the basis that it did not. When that letter came to the attention of Mr Perotti, he wrote to the judge on 20 July 2001 in these terms:

"Clearly, I am presently severely oppressed by Court time limits and am, consequently, unable to address Counsel's said letter and draft Order in the meantime. There are many inaccuracies (I would say perverse conduct) in said documents which will need to be addressed at a hearing before you. Given the above, please fix a date for hearing some time between Monday 30 July and Monday 6 August. Alternatively, some time after 9 August."

13. The judge did not fix a further hearing for consideration of the altered figures. He wrote:

"Although Mr Perotti has written to say that he was not in a position to deal with the letter, two weeks have now elapsed, and, particularly, as I have formed a clear view as to the course I should take, I propose to deal with the issues raised in that letter now, rather than letting this matter, which has already dragged on for far too long, remain unresolved."

14. Mr Perotti submits, with some force, that the judge's adjustment from £35,000 to £32,500 (both ex VAT) did not properly reflect the misapprehension under which he had made his first decision. If the judge was going to allow for the fact that he had been working on figures which were gross figures instead of net figures, the logical reduction would have been down to about £28,000 ex VAT. Mr Perotti says that, if the judge was going to depart from the logic in his first judgment when making the adjustments which he made in his second judgment, he should have had an opportunity to be heard.
15. In my view that is a point on which permission to appeal should be granted. It seems to me that there is force in the point that the judge should not have made an adjustment which departed from the logic of his first judgment without giving Mr Perotti the opportunity to address him. If Mr Perotti did not have that opportunity, it seems to me the Court of Appeal should have the opportunity to look at that.
16. However, I am not persuaded that the permission to appeal should go beyond that limited issue. In particular, I am not persuaded that Mr Perotti should have permission, on an appeal, to reopen the question as to whether, if the judge had jurisdiction, he was right to exercise it in the way that he did.
17. Mr Perotti has filed an appellant's notice on 16 October 2001. That is some two and a half months after the order was made, but the time for seeking permission to appeal was extended by the order itself to fourteen days after the drawing up of the order. The order appears to have been drawn up on 27 September 2001, although Mr Perotti says he did not receive a copy from Mr Watson's solicitors until 15 October 2001. It is not clear whether, and if so when, he was sent a copy of the order by the court, but in the circumstances (and I record that Mr Watson's solicitors do not suggest otherwise) it would not be right to refuse an extension of time. Therefore, the question is whether he should have permission to appeal on the conventional test that permission should be granted if there is a real, as distinct from fanciful, chance of success, or whether there is some other compelling reason why the appeal should be heard (see CPR 52.3(6)).
18. In order to determine whether that test was satisfied, I look to the grounds of appeal set out in section 7 of Mr Perotti's appellant's notice, as incorporated in a substantial witness statement running to 14 pages, also dated 16 October 2001, and as developed by Mr Perotti in his oral submissions in this court.
19. There are eight points which Mr Perotti seeks to take. In saying that I do not overlook the fact that his witness statement runs to many more paragraphs than eight; but, when distilled and the repetition extracted, they come to this:

(1) It is said that the judge's conduct of the trial was unfair or unsatisfactory in that: (a) the judge failed to inform the parties at the outset that Mrs Abbate (Mr Perotti's sister and one of the beneficiaries) had written to the court on 17 June 2001 indicating that she did not want to be a defendant and that she would not agree to Mr Watson receiving anything in respect of the litigation; (b) that the judge treated him unfairly during the trial by interrupting, bullying and harrying him, preventing him from putting questions to Mr Watson and making him write out all the questions he wanted to put.

The judge was plainly aware of the letter from Mrs Abbate because he refers to the question "Which beneficiaries support the application"? As I have said, he assumed that none of them was consenting to the claim for remuneration. In those circumstances, bearing in mind that Mr Perotti had the letter of 17 June, it does not seem to me that there is any unfairness shown.

As to the treatment of Mr Perotti during the trial. The judge himself commented on the difficulties which arose during Mr Perotti's cross-examination of Mr Watson. Mr Perotti and Mr Watson have been in a serious dispute involving allegations of misconduct over some considerable period, including a lengthy trial. In those circumstances, it is not at all surprising that the judge felt the need to keep a firm hold on the cross-examination of Mr Watson lest it should go beyond the bounds of relevance. It is plain from looking at the transcript of the evidence of Mr Watson that the judge did have to intervene from time to time to confine Mr Perotti to the point. Having some experience of Mr Perotti's advocacy, I do not find it difficult to understand why the judge thought it was necessary to do that. It does not appear to me from the transcript that the judge overstepped the proper bounds of judicial control in what was, inevitably, a difficult application to manage.

(2) Mr Perotti attacks the judge's decision that he had jurisdiction, particularly on the grounds that matters ought to have been brought before the court in the first action. That seems unrealistic. The first action was for the removal of Mr Watson as an administrator. It would have been extremely inconvenient to have dealt with remuneration until that question had been decided.

(3) The judge is criticised on the grounds that he gave insufficient weight to certain factors affecting the exercise of his discretion. But he set out the factors urged by both sides; and the weight to give to those factors was essentially a matter for him. I am not persuaded that the Court of Appeal would think it right to interfere with the exercise of his discretion.

There are three other matters upon which the judge or counsel are said to have erred.

(4) Mr Perotti criticises Mr Watson's counsel, Mr Horne, for failing to draw the judge's attention to relevant authorities. But the judge's attention was drawn to the decision of this Court in Re the Duke of Norfolk, and no authority has been cited which indicates that that was not the relevant authority for the judge to consider in a matter of this kind.

(5) It is then said that the judge ought to have appreciated that his findings violated Article 1 of the First Protocol of the European Convention on Human Rights. That protocol guarantees an individual respect for his right to his property. The judge had in mind that this Will did not have a charging clause but that, nevertheless, work had to be carried out in order to administer the estate. There is no reason why the beneficiaries under a Will should have an absolute right to have work carried out for nothing. Mr Perotti says he would have done the work; but, in the circumstances of this case, that was really not a viable course once Mr Watson was in the saddle.

(6) Mr Perotti invites the Court to deal with this matter as a test case; by which he means, I think, that the case raises matters of novelty or importance which would justify the Court hearing it on an appeal even though the Court regarded the prospects of success as minimal. In my view, there is no reason to regard this as a case of that nature. The Court of Appeal has dealt with the principles in the Norfolk case within the last 20 years and they do not need to be restated.

20. Finally, Mr Perotti suggests that the Court of Appeal should order Mr Watson to attend the appeal hearing in order to explain his conduct; but his conduct was a matter for Mr Watson to explain to the judge. Mr Watson was cross-examined before the judge. The Court of Appeal is not the place in which to conduct an inquiry by cross-examination into Mr Watson's conduct.
21. For those reasons, I propose to grant permission to appeal limited to the question whether the judge was entitled to make the adjustment to quantum without hearing submissions on the part of Mr Perotti. I refuse permission to appeal all on the other matters which Mr Perotti wishes to raise on his appeal against the order of 5 July 2001.
22. I turn now to the second application; that for permission to appeal from the order made by Neuberger J on 26 September 2001. By that order the judge dismissed Mr Perotti's application made by notice of 20 August 2001 for a declaration that the freezing order made on 18 June 1999 in respect of Mr Perotti's assets (including two flats, 64 Ivor Court, Gloucester Place, NW1 and 43A Ridgmount Gardens, WC1) did not prohibit other creditors of his from registering charges on his property with the Land Registry. The judge dismissed that application for the reasons set out in the judgment which he gave; and he refused permission to appeal.
23. It is necessary to explain a little more of the factual background in order to understand the context in which that application was made to Neuberger J. The freezing order dated 24 June 1999 was made by Rimer J in the main action to which the defendants were Mr Watson, Mr Mario Impanni (the executor of Lorenzo Perotti), Mrs Abbate and her husband Mr Vincenzo Abbate. Rimer J had made orders in the main action for the payment of costs by Mr Perotti. A substantial amount in respect of costs was due to Mr Watson under that order. Mr Perotti was also liable to pay costs in other litigation against Mr Watson and two solicitors, Miss Foss and Miss Hudson.
24. The freezing order was made on the application of Mr Watson, Miss Foss and Miss Hudson in the circumstances that Rimer J was persuaded in June 1999 that there was a real risk that Mr Perotti would seek to put his assets out of the reach of those creditors and so prevent them from enforcing the costs orders which had been made in their favour.
25. Having obtained the freezing order, Mr Watson's solicitors, Barlow Lyde & Gilbert, also obtained registration of inhibitions against dealings with the two properties by entries on HM Land Registry. The freezing order was plainly served on Mr Perotti. On 20 June 1999 Mr Perotti transferred, by way of assent, 64 Ivor Court to his daughter, now Mrs Driscoll. That disposition was later held by Laddie J on 10 September 2001 to be a breach of the freezing order and, so, a contempt of court. Mr Perotti was committed to prison for three months; a sentence which he has now long since served. His appeal against that committal order was dismissed by this Court on 13 December 2001.
26. On 22 June 2001, some two years after the freezing order was made, Mr Perotti executed three charges: the first was a charge over 43A Ridgmount Gardens in respect of his sister, Mrs Abbate, to secure the sum £22,663.80 which had been agreed between them as the costs payable to her under the order made in the main action; the second was a further charge over 43A Ridgmount Gardens in favour of his mother, Mrs Ida Perotti, to secure the sum of £11,108.73; and the third was a charge over 64 Ivor Court - which at the time he was maintaining was the property of his daughter - in favour of Mrs Ida Perotti to secure the sum of £60,000.
27. Mr Perotti sought to register those charges against the respective titles at the Land Registry. By letters dated 1, 8 and 15 August 2001, the Land Registry indicated that the application to register could not proceed until the inhibitions were removed. Unsurprisingly, Barlow Lyde & Gilbert refused consent to the removal of inhibitions and to the registration of charges; taking the view, no doubt, that charges over the property subject to their freezing order, created after the date of the freezing order, would diminish the prospects of recovery. It was in those circumstances that, shortly thereafter, Mr Perotti applied to the court by the application of 20 August 2001.
28. The judge expressed the provisional view that the charges of 22 June 2001 were in breach of the freezing order of 24 June 1999 and that Mr Perotti was in contempt of court. Without seeking to pre-empt the decision of any court which may be faced with that question in proceedings brought in respect of the alleged contempt, it seems to me that the judge was right to take the view that a charge over those properties was a breach of the freezing order. The freezing order, in terms, prohibits Mr Perotti from disposing of, or dealing with, in any way, any of his assets in England, whether in his own name or not, up to the value of £283,000. The assets include, in particular, the property known as 43A Ridgmount Gardens, London, WC1 and 64 Ivor Court, Gloucester Place, London, NW1. Whether or not the charge has the effect of diminishing the value of Mr Perotti's assets, it is plainly a disposition or with those assets. In those circumstances it is plainly an act which is restrained by the freezing order.
29. Mr Perotti came to the court, under his application of 20 August 2001, to ask the court to make a declaration that dispositions made in breach of the court's order should be registered at the Land Registry notwithstanding the inhibitions which result from that order. In my view that is an application which the court could not properly have granted. I see no prospect that, on an appeal to this Court, it would take a different view from the view taken by Neuberger J.
30. I should make it clear that I do not decide whether the charges, as created are enforceable in law or in equity by the chargees (that is by Mrs Abbate and Mrs Ida Perotti). Nor do I decide whether the chargees would succeed in a claim to register those charges. I suspect that those matters would turn on the extent to which they have knowledge of the terms of the freezing order. I suspect, also, that it may be difficult, in the circumstances in which evidence was given by Mrs Ida Perotti on the application before Laddie J in September 1999, and having regard to the letters written by Mrs Abbate at that time, for either of them to avoid a conclusion that they did have knowledge of the terms of that order. But those are not matters which I decide. Whether the charges can be enforced is a future question. Nothing which I say in this judgment is intended to prevent Mrs Ida Perotti or Mrs Abbate from asserting their claims to be secured creditors in any proceedings brought by them. These are not proceedings brought by them and I am not prepared to treat them as if they were.
31. These proceedings are brought by Mr Perotti to obtain the assistance of the court in affecting a disposition which the court, by its order, had directed him not to make. That application cannot succeed.
32. Accordingly, I dismiss his application for permission to appeal against the order of 26 September 2001.
Order: Permission to appeal against order of 5 July 2001 granted limited to the question whether the judge was entitled to make the adjustment to quantum. Permission to appeal refused against order of 26 September 2001. Transcript of judgment to be provided at public expense. (Order does not form part of approved judgment)