England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
IN BANKRUPTCY
(His Honour Judge Weeks QC
sitting as a judge of the High Court)

		Royal Courts of Justice Strand London WC2 Friday, 16th November 2001

1. LORD JUSTICE ROBERT WALKER: This is an appeal by Mr. Dominico Berti who has appeared in person. He is appealing from an order of His Honour Judge Weeks QC made on 16th November 2000 when Judge Weeks was sitting as a judge of the High Court, Chancery Division in Bankruptcy. The appeal relates to bankruptcy proceedings taken against Mr Berti's late father, Mario Berti ("the deceased"). The deceased died on 13th January 2000 after presentation and service on him of a bankruptcy petition but before the petition had been heard. The petition had been presented on 17th December 1999 at a time when the deceased was very ill in hospital and his wife and son were trying to deal with his affairs as best they could.
2. The effect of this unusual sequence of events is that the court had to deal with some statutory provisions which are perhaps not widely known. At least one district judge in the Bournemouth County Court, which is where the proceedings started, thought that any bankruptcy petition would have to be dismissed automatically if the debtor died before a bankruptcy order was made. That belief was understandable but wrong.
3. I should therefore summarize the relevant provisions. Section 421 of the Insolvency Act 1986 enables provision to be made by statutory instrument for the Act to apply with or without modification to the administration of insolvent estates of deceased persons. The Administration of Insolvent Estates of Deceased Persons Order 1986 ("the Administration Order") was made under section 421. Article 5 provides as follows:

"(1) If a debtor, by or against whom a bankruptcy petition has been presented, dies, the proceedings in the matter shall, unless the court otherwise orders, be continued as if he were alive, with the modifications specified in Schedule 2 of this order.

(2) The reasonable funeral and testamentary expenses have priority over the preferential debts listed in Schedule 6 to the Act.

(3) If a debtor dies after presentation of a bankruptcy petition but before service the court may order service to be effected on his personal representative or other person as it thinks fit".

4. The modifications in Schedule 2 are not relevant here. Article 5(3) is also reproduced, almost word for word, in rule 6.16 of the Insolvency Rules 1986. These provisions do not in terms apply where a debtor dies after the service of the petition but before the petition has been heard, but rule 7.51 of the Insolvency Rules, as substituted by the Insolvency (Amendment) (No 2) Rules 1999, provides for the Civil Procedure Rules and any relevant Practice Directions to apply in any insolvency proceedings with any modifications, unless that would be inconsistent with the Insolvency Rules themselves. That lets in the general provisions in rule 19.8 of the Civil Procedure Rules as to the death of a party. Paragraph (1) is in the following terms:

"Where a person who has an interest in a claim has died and that person has no personal representative, the court may order -

(a) the claim to proceed in the absence of a person representing the estate of the deceased, or

(b) a person to be appointed to represent the estate of the deceased."

5. I will not read the other paragraphs of rule 19.8, but it is apparent from the rule as a whole that it gives the court quite wide powers to dispense with the need for a formal grant of probate or letters of administration after the death of a party. It seems to recognise that, especially with relatively small claims, the need for a formal grant may be disproportionate and cause unnecessary delay and expense.
6. Against that background I turn to the unhappy story of the deceased's experiences in hospital and his attempts to sue the hospital, and the equally unhappy story of Mr. Berti's experiences in the county court. I take what happened to the deceased shortly because that is essentially background, and this court has heard only one side of the story.
7. For the last five years of his life the deceased was in hospital for long periods. He and his family thought that he was badly treated, so badly as to give him a claim for damages for medical negligence. In August 1997 the deceased instructed solicitors, Steele Raymond of Wimborne, Dorset, to take proceedings against the Royal Bournemouth and Christchurch Hospitals NHS Trust. It appears that Mr. Berti accompanied his father on the first occasion when instructions were given but that the deceased was the solicitor's only client.
8. The claim for damages did not prosper. In December 1998 the solicitors applied to come off the record and an order to that effect was made on 18th January 1999. Two months later, following failure to comply with an unless order, the claim was struck out. When the solicitors came off the record the deceased had already paid them almost £5,000 on account of costs and disbursements incurred by them. But the solicitors had a claim for further costs and disbursements which the deceased did not pay and, it seems, wished to dispute. Certainly Mr. Berti, his son, strongly wishes to dispute it.
9. The deceased, who was of course in poor health, did not make any application to set aside a statutory demand for £4,987-odd made by the solicitors on 16th November 1999. That statutory demand came after various non-statutory demands and letters before action which the solicitors had sent to the deceased. Mr. Berti says credibly that his father was at that time very ill. He died within two months of the statutory demand. It appears that he died intestate, although in one judgment, that of District Judge Dancey given on 9th November 2000, Mr. Berti is recorded as having referred to a will. That seems to have been accepted before Judge Weeks as a misunderstanding.
10. The return date for the bankruptcy petition was 8th February 2000. On that occasion District Judge Weintraub was told by Mr. Berti and his mother, who both attended, of the deceased's death, a fact that the court was not previously aware of. The solicitors as petitioning creditor were represented at this and at all subsequent hearings. District Judge Weintraub was inclined to dismiss the petition on production of a death certificate, but did not take that course and adjourned the petition to 15th March. On 2nd March Mr. Berti wrote to the court stating that he wished to oppose the petition. He had not, it seems, been able to obtain legal advice or legal representation, although he had made strenuous attempts to obtain it.
11. On 15th March 2000 the matter came before Deputy District Judge Stone. The court has a full transcript of what happened on that occasion, and it is clear that the Deputy District Judge dealt with the matter informally. There was no discussion of the need for a grant of letters of administration or a representation order under rule 19.8 of the Civil Procedure Rules. The point does not seem to have been raised by either side or by the Deputy District Judge of his own initiative. Deputy District Judge Stone granted a seven day adjournment for Mr Berti to see a solicitor and, as the Deputy District Judge put it, to get his act together by putting in a defence. Mr Berti was unable to find a solicitor to act for him but he did put in his grounds of defence. He also issued a small claim against the solicitors, although here also there was an obvious difficulty, and probably a more fundamental difficulty, about his standing to make that claim. The grounds of defence that Mr. Berti wished to rely on in the bankruptcy proceedings were set out in a letter dated 18th March 2000, which he sent to the court. The nub of the defence is in the following passage:

"The solicitors, Steele Raymond were aware we were dissatisfied with their conduct while representing us. They were also aware the OSS (Office for the Supervision of Solicitors) and Legal Services Ombudsman were notified of our concerns. Furthermore, they were aware of my father's poor medical condition at the time of their demands, nonetheless hounded him. The actions of the firm of solicitors, Steele Raymond, contributed to my father's death in January this year.

It was inappropriate for the firm to use the route of bankruptcy which should only be applied on issues not in dispute. They knowingly used the wrong procedure and at a time my father was particularly ill. I enclose letters to OSS and Legal Services Ombudsman."

12. It is not appropriate for this court to go very far into the merits of the grounds on which the debt is disputed. However, it appears to me from that, and from some of the documents that have been placed before us, that this is not a case in which there cannot possibly be any reasonable ground for disputing the demand.
13. The adjournment directed by Deputy District Judge Stone proved to be longer than expected. The next hearing was on 3rd May 2000 before Deputy District Judge Hine. He took a much more formal view of the matter. The question of Mr. Berti's standing to defend the bankruptcy petition seems to have been raised on that occasion, though it is far from clear that the Deputy District Judge addressed his mind to whether there was any alternative to the need for a formal grant of probate or letters of administration. Mrs Bath, appearing today for the solicitors, who did not appear on that occasion, has very fairly accepted that it is impossible to tell from such extant notes as there are of a hearing (which was not tape recorded) whether the point was raised or not. She fairly accepts that there is no indication that Deputy District Judge Hine saw himself as having any alternative to requiring a formal grant of probate or letters of administration. That is reflected in the order made on 3rd May 2000. It was in the following terms:

"1. Personal representative to file notices of appearance in this petition by filing and serving certified copy letters of administration. . .

2. There shall be no appearance by or on behalf of the debtor in this petition save by formally appointed personal representative.

3. The personal representative shall notify the court and the creditors by letter that he adopts or rejects the letter dated 18th March 2000 as notice of matters in dispute and if he rejects the letter to file notice of matters in dispute...

4. The matter be listed for a disposal hearing on 23rd June 2000 at 10:30 am with a time estimate of fifteen minutes."

14. When I granted permission to appeal in this matter I said this about Deputy District Judge Hine's order:

"I am not at all sure that, had I been sitting in the Bournemouth County Court, I would have made an order in those terms. It required either Mr Berti or his mother to obtain a formal grant of Letters of Administration, a course which takes some time and which is often not required in a case such as this, where the estate is small because most of the property is joint property which passes automatically to a surviving widow. Under article 5 of the Administration Order, the deputy district judge could have ordered service (or, if necessary, reservice) of the petition on Mr Berti so as to give him standing without the formal grant; alternatively he could have taken the same course under rule 19.8 of the Civil Procedure Rules, as applied in insolvency matters. However, that was how Deputy District Judge Hine exercised his discretion."

15. There was not any appeal from that order. Moreover, as I have indicated, it may be that the Deputy District Judge's exercise of his discretion was flawed, in that he was not aware that there was any alternative course to requiring a formal grant of representation.
16. Instead of appealing Mr. Berti attempted to obtain Letters of Administration. His application letter dated 29th May was answered at some date during the first week of June with an official letter from the Court Service, Leeds District Probate Registry. The letter said:

"Probate/Letters of Administration is not normally required if assets are joint or under £5,000."

17. The letter went on to explain how Mr Berti should proceed if he did nevertheless wish to obtain a grant. It seems that Mr Berti spoke on the telephone to the District Probate Registry. He also wrote to the Bournemouth County Court asking whether the letter from the District Probate Registry was sufficient to meet the county court's requirements. He received a letter dated 7th June 2000, indicating that his letter would be treated as an application to vary the order of 1st May and would be listed on 23rd June 2000.
18. I come to the hearing on 23rd June 2000 of which this court has a full transcript. I described that hearing as follows on the occasion when I granted permission to appeal:

"On 23rd June 2000 the petition came before District Judge Hurley - [I incorrectly referred to him as a deputy district judge] - who was the fifth district judge or deputy district judge who had had to deal with this matter. It is plain from the transcript that District Judge Hurley was not sympathetic to the failure to produce Letters of Administration. It may be that he found Mr Berti somewhat agitated and argumentative. Plainly the hearing was not a happy occasion. Mr Berti asked repeatedly: 'Who will defend my father?' - to which the answer was: '... you should have complied with the orders of the court, and obtained Letters of Administration.'

District Judge Hurley made a bankruptcy order and on 10th July 2000 District Judge Edwards found no reason to set aside that order."

19. District Judge Hurley does not seem to have made any reference to the letter reporting what had transpired between Mr. Berti and the District Probate Registry, despite the fact that that letter was to have been listed as an application to vary the order of 3rd May; nor did District Judge Hurley refer to the possibility of his making a simple representation order under rule 19.8 of the Civil Procedure Rules. Again, there is no indication that he was aware that that was one way in which he could exercise his discretion. So far as one can judge from what he said on that occasion, he seems to have been unaware of the possibility.
20. It is plain from the judgment of His Honour Judge Weeks QC, who heard the first appeal, that he was well aware of the possibility of a representation order. However, Judge Weeks did not make any reference to the correspondence with the Leeds District Probate Registry, or to the application which was or should have been listed before District Judge Hurley to vary the requirement for a formal grant, or to any possible deficiencies in the exercise of discretion on 3rd May and 23rd June, as a result of judges in the Bournemouth County Court having been unaware of the extent of their powers. The judge did not therefore consider whether these matters had flawed the exercise of discretion on those occasions, and, in particular, the exercise of District Judge Hurley's discretion, when he held that Mr. Berti should not be heard and made a bankruptcy order.
21. Mrs Bath has, in clear and moderate written and oral submissions, reiterated that, as a result of the orders made in the county court, Mr. Berti had no standing. She put forward in her written submissions, but did not pursue in her oral submissions, the suggestion that the reference in rule 19.8 of the Civil Procedure Rules to a personal representative could include an appointed executor without a grant. That cannot possibly be right. She said that this court should not interfere with an exercise of case management discretion, even in a case where one judge has given directions which were to some extent in conflict with those given by another judge.
22. This court is rightly slow to interfere with decisions, and especially case management decisions, made in lower courts in the exercise of judicial discretion. All courts have to make such decisions, often under pressure of time and events, and sometimes, as in this case, with a litigant in person who may at times seem to be stubborn and difficult. However, the overriding objective is to achieve justice. A course which is unjust, even if taken inadvertently, is likely to constitute a serious irregularity.
23. In this case I would not suggest that any of the decisions reached in the Bournemouth County Court was intended to cause any injustice. However, it does seem to me that two exercises of discretion were flawed by a failure on the part of the district judge or the deputy district judge to realise the full extent of their powers. I think that there is a danger that the result which has occurred is an unjust one, and it may have been caused by the succession of district judges and deputy district judges who had to pick up the file at short notice and did not approach the matter in the same way as their predecessors had done. We are told that Bournemouth County Court is a busy court at which a large number of deputy district judges do sit from time to time. That is an inescapable necessity in order to deal with business. However, it is plain that sometimes the lack of continuity can produce unfortunate results.
24. I would therefore allow this appeal and set aside the bankruptcy order. I would appoint Mr. Berti under rule 19.8 of the Civil Procedure Rules to represent his father's estate on the hearing of the petition, and I would direct a new hearing of that petition at a different trial centre. Precisely which different trial centre is a matter on which, if my Lords agree with me, it will be necessary to hear further submissions.
25. MR. JUSTICE LADDIE: I agree and would add only one matter. My Lord, Lord Justice Robert Walker, has explained why the appeal has been successful. It is to achieve a just resolution of this dispute and to allow the estate of the deceased, Mr. Berti, to be represented and for arguments to be advanced in response to the claims made by the solicitors against that estate. However, nothing that has been said in this court today should be taken as indicating that the solicitors were wrong in presenting the bills they did or that Mr. Berti junior will be successful in showing that the bills were not justified. If the litigation between the parties continues, both sides must realise that there will be costs consequences. In particular, in the case of Mr. Berti he must appreciate that he may not be able to show that all or the whole of the bill presented by the solicitors in 1999 was unjustified. If this matter proceeds, he must bear that in mind, as must the solicitors. Of course, if a sensible resolution of the dispute between the parties can be achieved, neither of them will, from this date forward, be exposing themselves to the risk of further costs orders made against them.
26. LORD JUSTICE PILL: I agree that the appeal should be allowed for the reasons given by Robert Walker LJ.
Order: Appeal allowed as per judgment with costs; case to be heard by any court on the western circuit other than Bournemouth County Court; costs order below reversed to the extent that there should be no order for costs below; respondent to pay the costs of the trustee in bankruptcy, such figure to be resolved in the bankruptcy proceedings if not agreed. (Order not part of the judgment of the court)