England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (BANKRUPTCY COURT)
(Mr Justice Pumfrey and District Judge Lethem)

		Royal Courts of Justice Strand London WC2 Monday, 7 October 2002

1. LORD JUSTICE WARD: I will ask Lord Justice Jonathan Parker to give the first judgment.
2. LORD JUSTICE JONATHAN PARKER:
3. Before the court today are two matters arising out of a bankruptcy order made against Mrs Mary Philomena Cullen as long ago as 24 March 1987. Mrs Cullen has hitherto acted in person throughout the proceedings, but before us she is represented by counsel, Miss Sally Mealing-McLeod. Miss Mealing-McLeod appears on a pro bono basis, and was instructed only a few days ago. We are extremely grateful for the assistance she has given us.
4. The first matter before us is an application by Mrs Cullen to reinstate an earlier application for permission to appeal against an order made by Mr Justice Pumfrey on 4 May 2001 dismissing her appeal from orders made by District Judge Lethem on 23 September 1999 and 31 October 2000, the combined effect of which was to confirm the bankruptcy order. Hence the application for permission relates to a second appeal and, as such, it is subject to section 55(1) of the Access to Justice Act 1999 and to rule 52.13 of the Civil Procedure Rules (which reproduces the provisions of that subsection). Section 55(1) provides that the Court of Appeal shall not grant permission for a second appeal unless the appeal raises an important point of principle or practice or there is some other compelling reason why the Court of Appeal should hear it. Mrs Cullen's original application for permission to appeal came before Lord Justice Chadwick (together with two other applications with which we are not concerned today) on 7 December 2001, at an oral hearing. Mrs Cullen did not attend the hearing. It later transpired that she was unable to do so as she had a hospital appointment later that day which she would have had to miss had she attended court. However, there was no evidence of that before Lord Justice Chadwick and, on the basis of the material then before him (or the lack of it), he was not satisfied that there was any good reason for Mrs Cullen's non-attendance. He accordingly proceeded to deal with the application in her absence. He concluded (in paragraph 15 of his judgment) that the application was bound to fail since it did not meet the requirements of section 55(1). He accordingly dismissed it.
5. Mrs Cullen subsequently applied to reinstate the application, supporting it with evidence demonstrating that there was indeed a good reason for her non-attendance on 7 December 2001. The application to reinstate came before Lord Justice Chadwick at an oral hearing on 23 May 2002, at which Mrs Cullen duly attended.
6. On this occasion Lord Justice Chadwick took the view, on the basis of further material submitted by Mrs Cullen, that (and I quote from paragraph 3 of his judgment):

"... there is a real possibility that the court could be persuaded that there is a compelling need to deal with this matter in this court."

7. He accordingly adjourned the application to be listed on notice to the trustee in bankruptcy and to the petitioning creditor, Whinhurst Investments Limited, with the substantive appeal to follow if the application to reinstate were to be allowed and permission to appeal were to be granted.
8. That is the first matter which is before us today. The trustee in bankruptcy appears by Mr Steven Thompson of counsel and the petitioning creditor appears by Mr Evan Price of counsel.
9. The second matter before us today is an appeal by Mrs Cullen and her husband (who appears in person and has made oral submissions) against an order made by District Judge Lethem on 30 April 2001 whereby he dismissed their applications to set aside an earlier order made by him on 23 February 2001. By his earlier order District Judge Lethem ordered the sale of a residential property at 24 Academy Close, Camberley, which is registered in the joint names of Mr and Mrs Cullen and which is occupied by them as their home. The order was made on the application of the trustee in bankruptcy, in proceedings under section 14 of the Trusts of Land and Appointment of Trustees Act 1996. I will refer to these proceedings hereafter as "the section 14 proceedings". The order in the section 14 proceedings declared that Mr and Mrs Cullen were beneficially entitled to the property as tenants in common in equal shares. The order also contained consequential provisions, including an order for possession. The order for possession was stayed, however, pending final determination of Mrs Cullen's appeal against the bankruptcy order. Neither Mr nor Mrs Cullen attended the hearing at which the order for sale was made.
10. The appeal in the section 14 proceedings (which is not a second appeal) proceeded initially in the High Court, but, following a direction made by Lord Justice Chadwick on 23 May 2002 (see paragraph 6 of his judgment), Mrs Cullen applied for it to be transferred to the Court of Appeal. The transfer was effected by an order made by Mr Justice Patten on 17 June 2002. Once again, Mr Thompson appears for the trustee and Mr Price for the petitioning creditor.
11. As is evident from the date of the bankruptcy order, the proceedings have a long history. In the course of his lengthy and careful judgment, leading to his order of 4 May 2001, Mr Justice Pumfrey reviewed the procedural history of the litigation in some detail, and I gratefully adopt that review. There is no need to burden this judgment by repeating it in any detail. I will accordingly refer to the procedural history only in so far as it is necessary to do so in order to make this judgment intelligible.
12. I turn, then, to the first matter before us: that is to say, Mrs Cullen's application in the bankruptcy proceedings to reinstate her application for permission to appeal from the two orders made by District Judge Lethem, the combined effect of which was to confirm the bankruptcy order. The background to the application is, in summary, as follows.
13. On 18 August 1986 a bankruptcy notice was issued by the petitioning creditor, Whinhurst Investments Ltd, based upon a judgment for some £17,884 in respect of interim rent. Mrs Cullen applied unsuccessfully to set aside the bankruptcy notice. A bankruptcy petition was issued on 6 February 1987, which led to the making of the bankruptcy order on 24 March 1987. Mrs Cullen appealed against the bankruptcy order, and on 12 May 1987 her appeal was dismissed by Mr Justice Scott (as he then was). Permission to appeal against Mr Justice Scott's order was refused by the Court of Appeal (Lord Justice Fox) in January 1988.
14. Thereafter, Mrs Cullen did not co-operate with the trustee in bankruptcy, and on 27 January 1989 an order was made suspending her automatic discharge from bankruptcy.
15. The section 14 proceedings were eventually issued in September 1997: that is to say, more than 10 years after the making of the bankruptcy order.
16. In February 1998 Mrs Cullen applied for permission to apply to set aside the bankruptcy order. Her application was dismissed at first instance, and she appealed to the High Court. The appeal was heard by Mr Justice Jacob. He granted Mrs Cullen permission to apply to annul the bankruptcy, and he stayed the section 14 proceedings pending the outcome of that application. Mrs Cullen duly issued an application to annul the bankruptcy pursuant to section 282 of the Insolvency Act 1986, and that application came before District Judge Lethem on 23 September 1999.
17. Before District Judge Lethem the effective issue related to costs. The costs of the trustee amounted by then to almost £15,000. He was, quite properly, neutral on the issue of annulment provided that provision was made for his costs. The petitioning creditor consented to an annulment provided that no order for costs was made against it or against other creditors. Mrs Cullen, for her part, opposed any order that she pay the trustee's costs.
18. On the issue of annulment, Mrs Cullen submitted firstly that the judgment on which the bankruptcy notice, and hence the petition, were based was not a final judgment (as required by section 1(1)(g) of the Bankruptcy Act 1914, which was still in force at the material time) and that accordingly the petition was demurrable. In the alternative, she submitted that the petition was issued out of time and was demurrable on that ground. These were, of course, arguments which could have been, but which were not, addressed to Mr Justice Scott in May 1987 or, for that matter, to the Court of appeal in January 1988 on her unsuccessful application for permission to appeal from Mr Justice Scott's order. District Judge Lethem accepted both Mrs Cullen's submissions, but concluded that, applying Henderson v Henderson (1843) 3 Hare 100, Mrs Cullen could not reopen an issue which had already been determined by Mr Justice Scott. However, he took the view that it was nevertheless open to him to review the bankruptcy order, pursuant to section 375 of the 1986 Act, and that in so doing he was not constrained by Henderson v Henderson principles. He accordingly ordered that the bankruptcy order be rescinded, but conditional upon Mrs Cullen paying the trustee's costs (the exact figure was £14,966.33) within a specified period. He adjourned the section 14 proceedings generally, with liberty to restore.
19. Mrs Cullen took exception to the requirement that she pay the trustee's costs, and she applied to District Judge Lethem to review his order by deleting the condition. She also appealed against the order to the High Court.
20. The application to review came before District Judge Lethem on 31 October 2000. On reconsidering the matter, and based on an authority not cited to him on the previous occasion, District Judge Lethem concluded that Henderson v Henderson principles applied to a review under section 375 just as they did to an application under section 282. He accordingly set aside his earlier order and confirmed the bankruptcy order.
21. Mrs Cullen duly appealed against this second order of District Judge Lethem.
22. These two appeals came before Mr Justice Pumfrey on 4 May 2001, when (as I indicated earlier) he dismissed them. He examined Mrs Cullen's arguments with great care, but he rejected them. He concluded that the petition was not demurrable on either of the grounds suggested by Mrs Cullen, but that in any event Henderson v Henderson applied, with the result that it was not open to Mrs Cullen to advance contentions which she could have made to Mr Justice Scott and to the Court of Appeal in the context of her original appeal against the bankruptcy order. He accordingly concluded that District Judge Lethem was right to set aside his earlier order and to confirm the bankruptcy order.
23. It is against that judgment of Mr Justice Pumfrey that Mrs Cullen now seeks permission to appeal.
24. I turn first to her appellant's notice. It contains 11 proposed grounds of appeal, which are set out in extenso in Lord Justice Chadwick's judgment of 7 December 2001. As I indicated earlier, Lord Justice Chadwick came to the conclusion on that occasion that there was, in effect, no substance in them. I have to say that I agree.
25. The first ground of appeal seeks to challenge the jurisdiction of the County Court to enter the judgment on which the bankruptcy notice and the petition were based. The second ground of appeal seeks to challenge the Bankruptcy Court's jurisdiction to make the bankruptcy order. But it is plainly not open to Mrs Cullen to seek to advance such arguments, given the length of time which has elapsed since her appeal against the bankruptcy order was dismissed by Mr Justice Scott and since her application to the Court of Appeal for permission to appeal against Mr Justice Scott's order was refused.
26. Mrs Cullen's third ground of appeal seeks to challenge the jurisdiction of District Judge Lethem to review the bankruptcy order under section 375 of the 1986 Act; but even if she were to succeed on that ground, she would be no better off, since the bankruptcy order would stand. In any event, I cannot see any substance in the point.
27. Mrs Cullen's fourth ground of appeal seeks to challenge the order suspending her automatic discharge. I cannot see any ground for such a challenge. In any event, the order was made more than 13 years ago and was not appealed.
28. Mrs Cullen's fifth ground of appeal is that District Judge Lethem failed to take proper account of the evidence before him. I can see no basis whatever for that assertion.
29. Mrs Cullen's sixth ground of appeal is that District Judge Lethem had no jurisdiction to impose a term as to costs in his order dated 23 September 1999 rescinding the bankruptcy order (it will be recalled that the rescission was conditional on Mrs Cullen paying the trustee's costs amounting to nearly £15,000). I can see no basis for that challenge, which in any event does not help Mrs Cullen, given that District Judge Lethem subsequently set aside the entirety of that order.
30. Mrs Cullen's seventh ground of appeal is to the effect that District Judge Lethem should not have allowed the petitioning creditor to oppose the annulment of the bankruptcy on 31 October 2001, given that on the earlier occasion the petitioning creditor had consented to an annulment. But this overlooks the fact that the petitioning creditor's consent was conditional on no order for costs being made against creditors. In any event, even if correct, this could not amount to a ground for challenging the bankruptcy order.
31. Mrs Cullen's eighth ground of appeal once again challenges the jurisdiction of District Judge Lethem to make his order of 31 October 2001. There is no substance in that ground of appeal.
32. By her ninth ground of appeal, Mrs Cullen contends that Mr Justice Pumfrey misdirected himself by failing to have regard to the lack of jurisdiction of the lower court and thereby erred in law. There is no substance in this ground of appeal.
33. By her tenth ground of appeal, Mrs Cullen alleges various breaches of her human rights, including her rights under Article 6 of the European Convention on Human Rights (the right to a fair trial). I can see no basis whatever for these allegations.
34. By her eleventh and final ground of appeal, Mrs Cullen relies on the overriding objective set out in rule 1.1(1) of the CPR, viz to deal with cases justly. I can, for my part, see no basis for a suggestion that she has been treated unjustly by the courts in this litigation.
35. In her helpful oral submissions on Mrs Cullen's behalf, Miss Mealing-McLeod seeks to raise once again the argument that the judgment on which the bankruptcy notice and the petition were based was not a final judgment, and that the bankruptcy order is accordingly a nullity. She accepts that Mrs Cullen had a full opportunity to raise this argument on her appeal against the bankruptcy order, and she is not in a position to place before us any explanation why the point was not taken, save that Mrs Cullen was acting in person. She submits, however, that justice requires that Mrs Cullen be allowed now to raise the point.
36. I cannot accept that submission. I take full account of the fact that Mrs Cullen was acting in person. Nevertheless, in my judgment the principle of Henderson v Henderson plainly applies, and there is no basis whatever for allowing Mrs Cullen now to raise a point which she could have raised, but did not raise, when applying to set aside the bankruptcy notice and subsequently when opposing the making of a bankruptcy order and then appealing against it. In any event, from what I have seen of the point, I am satisfied (as was Mr Justice Pumfrey) that there is no substance in it.
37. Accordingly, in my judgment the requirements of section 55(1) of the Access to Justice Act 1999 and of CPR rule 52.13 are not met, and I would accordingly dismiss the application.
38. I now turn to the second matter before us today: that is to say, the appeal of Mr and Mrs Cullen against District Judge Lethem's order dated 30 April 2001 refusing to set aside the order for sale which he had made on 23 February 2001.
39. The applications to set aside the order for sale were made under CPR rule 39.3(3), which enables the court to set aside a judgment obtained in a party's absence. Rule 39.3(5) provides that the court may grant such an application only if the applicant (a) acted promptly in making the application to set aside, (b) had a good reason for not attending the hearing, and (c) has a reasonable prospect of success at the trial.
40. According to a note of the District Judge's judgment which is before the court today, and which has not been the subject of challenge, no evidence was filed by either Mr or Mrs Cullen on the application to set aside the order for sale. Having recited the relevant procedural history, the District Judge expressed himself as satisfied that Mr and Mrs Cullen had acted promptly in making the application to set aside. However, he concluded that there was no evidential basis for a finding that either of them had a good reason for not attending the hearing on 23 February 2001. He then went on to consider the arguments put forward by Mr and Mrs Cullen for the setting aside of the order for sale, and concluded that they had no reasonable prospect of success. In particular, he referred to a contention made by Mr Cullen to the effect that Mrs Cullen has no interest in the property the subject of the order because he, Mr Cullen, had previously bought out her interest. The District Judge noted that, in a lengthy affidavit sworn by Mr Cullen in opposition to the section 14 proceedings, and prepared with the benefit of legal advice, he had made no mention of this fact. The District Judge concluded that that was bound to affect his chances of success.
41. Miss Mealing-McLeod tells us on instructions that the reason for Mr and Mrs Cullen's non-attendance on 23 February 2001 related to their health, but she accepts that there was no evidence to that effect before the District Judge.
42. As to the merits of the trustee's application, Miss Mealing-McLeod points firstly to the substantial delay by the trustee in commencing the section 14 proceedings. She suggests that some of the creditors whose claims were agreed by the trustee in the early stages of the bankruptcy may now be untraceable or, in the case of limited companies, have been wound up and dissolved. She also complains of a lack of information from the trustee as to how the proceeds of realisation of another property have been applied.
43. Despite Miss Mealing-McLeod's submissions, however, I can, for my part, see no basis on which the District Judge's judgment on the applications to set aside the order for sale can be impeached. Absent any evidence from Mr or Mrs Cullen explaining their non-attendance at the hearing when the order for sale was made, the District Judge was bound to dismiss the application. But in any event, I agree with him that there are no real prospects of Mrs Cullen being able to overturn the order for sale. There does indeed appear to have been a substantial delay on the part of the trustee in bringing the section 14 proceedings, but that does not mean that the creditors' claims simply go away. Proofs of debt have been submitted and the trustee has accepted the claims. The claims remain on foot and have to be satisfied. In any event, one consequence of the delay has been that Mr and Mrs Cullen have been able to enjoy their property for a further ten years or so.
44. In the course of the oral hearing today we expressed the hope that the parties might be able to reach some sort of compromise over the short adjournment, but (perhaps inevitably in the circumstances) no compromise emerged. It is therefore necessary for us to deal with Mr and Mrs Cullen's appeal. For the reasons I have given, I would dismiss that appeal.
45. I would only add this. We have heard submissions from Mr Thompson on behalf of the trustee as to the delay which has undoubtedly taken place, for which he was not in a position to offer us any explanation. Mr Thompson did, however, assure us that if the order for sale were to be upheld, as it has been, then the trustee would inevitably give serious consideration to the possibilities of reaching a compromise and, in particular, would be prepared to furnish Mrs Cullen with up-to-date evidence as to the amount of the creditors' claims, so that any discussions with a view to a compromise could take place in the context of up to date and reliable information as to the extent of the indebtedness which the trustee seeks to recover. Subject only to that, however, I would dismiss this appeal.
46. LORD JUSTICE MUMMERY: I agree with the judgment of Lord Justice Jonathan Parker.
47. LORD JUSTICE WARD: I also agree with the judgment of my Lord. The result is that the application by Mrs Cullen for permission to appeal is dismissed and both appeals against the possession order are likewise to be dismissed.

Order: application for permission to appeal dismissed and appeals dismissed; petitioning creditor's costs of today to be an expense of the bankruptcy; Mrs Cullen to be provided with a transcript of this judgment at public expense.