England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(His Honour Judge Behrens,
sitting as a Judge of the High Court)

		The Royal Courts of Justice The Strand London WC2A Friday 16 February 2001

Friday 16 February 2001

1. LORD JUSTICE ROBERT WALKER: This is an application for permission to appeal in what would be a second-tier appeal. By s 55 of the Access to Justice Act 1999 a second appeal to the Court of Appeal may be permitted only if it would raise an important point of principle or practice or for some other compelling reason.
2. Mr and Mrs Eyers, the defendants in proceedings brought by Barclays Bank plc ("the bank"), wish to appeal from an order made on 16 October 2000 by His Honour Judge Behrens, sitting at Leeds as an additional judge of the Chancery Division of the High Court. That order dismissed the Eyers' appeal from an order of Deputy District Judge Rooze made on 19 July 2000, refusing to set aside statutory demands served on 12 April 2000 by the bank.
3. Although I have the benefit of two judgments (that of the deputy district judge having been praised by Judge Behrens for its thoroughness), the facts are fairly complicated and, to my mind, still in some respects obscure.
4. In 1997 Mr Eyers was the director of two companies (which I will refer to as "NRWM" and "Melmerby") which were engaged in the waste disposal business. Both companies had borrowings, amounting to over £500,000 in total, from the bank. This borrowing had been guaranteed in the case of one of the companies, NRWM, by Mr and Mrs Eyers. Mr Eyers decided that NRWM should cease trading and that he would take over its business as a sole individual trader. That plan was interrupted by a winding-up petition presented against NRWM. The bank agreed a refinancing package with Mr Eyers which increased his personal liability to the bank, either as a principal or a guarantor. The bank held security for Mr Eyers' indebtedness, including, but not limited to, the matrimonial home.
5. Then on 13 April 1999 a bankruptcy order was made in York County Court against Mr Eyers in respect of a relatively small debt to a separate creditor. Mr Eyers made proposals for an individual voluntary arrangement and the proposal was approved at a creditors' meeting on 14 May 1999. The bankruptcy order was subsequently annulled on 30 July 1999.
6. Mr Eyers has stated (in paragraph 17 of an affidavit which he swore, that being one of relatively few paragraphs of the affidavit not objected to by the bank as inadmissible) that the bank accepted that it would be relying on its security and would not vote at the creditors' meeting. Nevertheless, it seems to me (although this point seems not to have been considered below) that the bank was bound by the arrangement so far as its security might prove insufficient, whether or not it attended or voted at the creditors' meeting, so long as it had notice of it: see s 260(2)(b) of the Insolvency Act 1986. Equally, however, on that view the voluntary arrangement bound Mr Eyers in relation to all his creditors, including any secured creditor who had not troubled to vote but had notice of the meeting.
7. The proposal (which was before Judge Behrens, although it had not been before the deputy district judge) required Mr Eyers to sell various assets and to collect various debts. Other assets (listed in paragraph 3.10 of the proposal) were to be excluded from the arrangement. All proceeds were to be paid to the supervisor, Mr Peter O'Hara. Paragraph 4.23 of the proposal was in the following terms:

"All assets held by the Supervisor under the terms of this arrangement will be subject to a trust in favour of the Supervisor until full discharge of the Nominee's and Supervisor's fees and expenses, including any agent employed by the Nominee and Supervisor. No other trust whether implied or otherwise will be created by this proposal."

8. That seems to have been an attempt to secure priority for the supervisor's fees and expenses. It cannot be right to suggest that a trust never arises under an individual voluntary arrangement, since section 253(2) of the Insolvency Act 1986 provides for the nominee (who is usually the same person as the supervisor) to act in relation to an individual voluntary arrangement "either as a trustee or otherwise for the purpose of supervising its implementation".
9. What actually happened, however, was that many of the debts which Mr Eyers was meant to collect and pay to the supervisor were paid into his overdrawn account with the bank. A VAT refund of about £14,500 (elsewhere in the papers stated as £19,500) was one instance of this. The total paid into the account in this way seems to have been about £27,000. This led to a prolonged and somewhat inconclusive correspondence between the supervisor and the bank. However, by October 1999 the bank had apparently agreed to pay the sum of about £27,000 to the supervisor (so increasing, or perhaps it would be right to say reinstating, the amount of Mr Eyers' secured indebtedness to the bank) but the bank had not actually made the payment.
10. Some of the correspondence before the courts below is marked "without prejudice" but these bare facts are essential to an understanding of the settlement agreed between Mr and Mrs Eyers and the bank, which was eventually entered into on 31 January 2000. It was negotiated and prepared by solicitors, but it is not at all easy to understand. The heart of the agreement is in clauses 4 and 5, which I will read:

"4. Settlement

In consideration of the grant of time to Mr Eyers (at the request of Mrs Eyers) and from forbearing to sue or enforce the Existing Securities and subject to clauses 7 and 8 below, the Bank will accept the Settlement Sum in full and final settlement of the liabilities as follows:

4.1 Mr Eyers will pay the sum of £300,000 on 31 January 2000;

4.2 Subject to clause 5 below, Mr and Mrs Eyers will jointly and severally pay the further sum of £50,000 together with interest at 4% over the Bank's base rate for the time being calculated on a daily basis from 10 December 1999 by not later than 4 pm on 14 March 2000;

4.3 all payments shall be made without any set off (other than in compliance with clauses 4.2 and 5) or deduction whatsoever and time shall be of the essence as to the date for each payment.

5. Prompt Settlement

If, but only if, Mr and Mrs Eyers shall have paid the sums payable under clauses 4.1 and 4.2 above by the due dates, the Bank will waive, release or reimburse (as the case may be) the capital sum of £27,000 (being part of the sum of £50,000 pounds payable under clause 4.2) together with interest calculated thereon on the basis specified in clause 4.2."

11. The settlement sum of £350,000 pounds was significantly less than the acknowledged indebtedness, which was more than £406,000. It is obviously no coincidence that the sum of £27,000 mentioned in clause 5 approximated to the credit which the bank had received in apparent disregard of the terms of the individual voluntary arrangement. The sum of £300,000 was duly paid, apparently under a new refinancing which Mr Eyers had arranged with HSBC. No part of the £50,000 was paid by the due date, except so far as the bank's receipt of £27,000 prior to the settlement agreement could be treated as payment by Mr Eyers made under (and, necessarily, since) the settlement agreement of 31 January 2000.
12. The deputy district judge rejected that argument for reasons which may have relied too much on correspondence which (as evidence of the course of negotiations) probably ought not to have been admitted. I comment that this case is a striking illustration of the difficulty of separating out evidence as to the commercial context of an agreement (which is admissible and necessary) and evidence of negotiations (which is not admissible).
13. Judge Behrens grappled more fully with the terms of the agreement itself. He noted that the indebtedness of over £406,000 acknowledged by Mr Eyers included the £27,000, in the sense that it took account of what Mr Eyers' overdraft would be once the £27,000 had been paid over to the supervisor. So to treat the £27,000 as somehow discharging £23,000 would, arguably, be double counting.
14. Mr David Partington, who has appeared at short notice for Mr and Mrs Eyers, has said on their behalf everything that could possibly be said. He has indeed sought to raise, as the important point of principle to be argued on appeal, a point as to attornment which seems not to have been raised even in the most cursory way before the deputy district judge or before Judge Behrens.
15. Mr Partington has to some extent abandoned what was originally put forward as the important point of principle in the application, that is a point about whether a trust can ever arise under an individual voluntary arrangement. The skeleton argument (not, I think, prepared by Mr Partington) referred to some observations by Hoffmann J in Re Naeem [1990] 1 WLR 48, 51. It seems to me clear from s 253(2) of the Insolvency Act 1986, which I have already mentioned, that Hoffmann J was not in Naeem stating any principle. His observations were directed to the facts of the particular case in the context of who should pay the costs of a particular application. I am not attracted by the new point on attornment and I am not persuaded that there is any important point of principle or practice so as to justify a second appeal. It seems to me that any future appeal would essentially be about the construction of a badly-drafted settlement agreement which has now been considered by two judges, and on which they have both reached the same conclusion.
16. Since no important point of principle or practice is raised, nor is there any other compelling reason for a second appeal, it may not be necessary to go too far in considering whether the judge was right for the right reasons. Mr Partington's submissions have persuaded me that it may be that, had this matter been considered more fully at an earlier stage, other arguments might possibly have been deployed with more success. I prefer not to go further than that. I am simply not persuaded that this is a case in which it would be right to permit a second appeal, and I must dismiss the application.
ORDER: Application dismissed (Order does not form part of approved Judgment)