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
(Mr Justice Rimer)

		Royal Courts of Justice Strand London WC2 Thursday, 7th March 2002

1. LADY JUSTICE ARDEN: This is an application by Mr Clive Emile Gustav Cartwright for permission to appeal from the order of Rimer J dated 21st November 2001. By this order the judge dismissed Mr Cartwright's appeal against a bankruptcy order made against Mr Cartwright by District Judge Field sitting in the St. Albans County Court. This is a second appeal so CPR 52.13 applies. Mr Cartwright must show either that the appeal would raise an important point of principle or practice or that there is some other compelling reason for the Court of Appeal to hear it. This is in addition to the usual test that there must be a real prospect of success.
2. I will say a little about the background to these proceedings and to this application. The petition was brought by Mr. Cartwright's former wife and by his daughter by his former wife, and it was based on an order made in Hong Kong on 14th January 1994 for a lump sum payment and arrears of maintenance and interest thereon. The daughter was a supporting creditor in the sum of £74,851.56 under the same order. I will now read the description of the order set out in the petition:

"By a Consent Order made on 14th January 1994 by His Honour Judge Surman sitting in the District Court of Hong Kong in the case of Simone Mary Cartwright v Clive Emile Gustav Cartwright (Action No: 854 of 1993) in which proceedings the Debtor was the Respondent it was ordered that the Debtor pay to the Creditor the sum of HK$12,000.00 per month commencing on 1st December 1993 for the remainder of the joint lives of the Creditor and the Debtor, or until the Creditor remarries, or permanently cohabits with another man or until a further Order was made by the Court. As at the date hereof both the Creditor and the Debtor are still alive, and the Creditor has neither remarried nor permanently cohabits with another man. It was further ordered that the Debtor pay to the Creditor the sum of HK$72,000.00 within 28 days of the Decree Absolute being given in the said proceedings. The Decree Absolute was made on the 18th January 1994 and the Debtor consequently had until 15th February 1994 to make payment. The Debtor made one payment to the Creditor of HK$18,000.00 in March 1994 and a further payment of HK$37,500.00 in July 1994. In the premises, therefore the sum of HK$964,000.00 remains due and payable by the creditor to the debtor. Applying the exchange rate operable at the date hereof this equates to £85,505.32."

3. The only point which was taken before the judge and on this appeal was that the petition debt was not a provable debt and therefore could not form the basis of a petition. Mr. Cartwright submits that the order could not have been registered here. He says that there has been a change in his circumstances since the order was made in 1994 and that he is seeking to have the order set aside in Hong Kong.
4. Under the Insolvency Act 1996, section 383, a petition can be based on a debt which is not a provable debt but the court does not, save in exceptional circumstances, make an order on such a petition, Levy v Legal Services Commission [2001] 1 FLR 435. Provable debts are defined by Insolvency Rule 12.3(1), (2) and (3).
5. I will now go to the Insolvency Rules and read Rule 12.3(1), (2) and (3):

"(1) Subject as follows, in both winding up and bankruptcy, all claims by creditors are provable as debts against the company or, as the case may be, the bankrupt, whether they are present or future, certain or contingent, ascertained or sounding only in damages.

(2) The following are not provable -

(a) in bankruptcy, any fine imposed for an offence, and any obligation arising under an order made in family proceedings [or under a maintenance assessment made under the Child Support Act 1991]

...

'Fine' and 'family proceedings' have the meanings given by section 281(8) of the Act (which applies the Magistrates' Courts Act 1980 and the Matrimonial and Family Proceedings Act 1984)

...

(3) Nothing in the Rule prejudices any enactment or rule of law under which a particular kind of debt is not provable, whether on grounds of public policy or otherwise."

6. The question which the judge had to decide in this case was whether the petition debt fell within rule 12.3(2)(a) or 12.3(3).
7. In this connection I need to refer to section 281(8) of the Insolvency Act 1986. This provides:

"In this section -

'family proceedings' means -

(a) family proceedings within the meaning of the Magistrates' Courts Act 1980 and any proceedings which would be such proceedings but for section 65(1)(ii) of that Act (proceedings for variation of order for periodical payments); and

(b) family proceedings within the meaning of Part V of the Matrimonial and Family Proceedings Act 1984..."

8. As to Insolvency Rule 12.3(2), the judge held that the sum due was not within the Matrimonial Causes Act 1980, section 5(1). That provides a list of proceedings which are treated as family proceedings for the purposes of that section. The only relevant provision was Part 1 of the Maintenance Orders (Reciprocal Enforcement) Act 1972. The judge also mentioned another Act which for present purposes I put on one side as not immediately relevant. The judge held that the 1994 order made in Hong Kong was not capable of being registered under the 1972 Act and so the category of family proceedings in section 65(1) was not satisfied. The judge also expressed the view that the order was registrable under the Administration of Justice Act 1920 but his conclusion was that any such order was not within the list in section 65. He did not therefore have to consider any of the further provisions of section 65. Section 65 goes on to provide that, even if the proceedings fall under one of the categories in section 65, there is an exception that, subject to subsection (2) of section 65, those proceedings do not include proceedings for the enforcement of any order made, confirmed or registered under any of those enactments.
9. The question of the construction of that provision was considered by Mr Registrar James in Wehmeyer v Wehmeyer [2001] 2 FLR 84. He said this:

"It appears to me that the maintenance order falls within the description of family proceedings in subpara (m) above. It is not caught by the exception at (i) above because a petition in bankruptcy is not a proceedings for the enforcement of an order.

A bankruptcy petition seeks an adjudication in the nature of a declaration of insolvency, the consequence of which is the imposition upon the insolvent's estate of a statutory scheme for the distribution of his assets among his creditors. Mr Spon-Smith described bankruptcy as 'a system providing for the orderly distribution of the assets of insolvent persons amongst their creditors and the subsequent release of the debtor from any further liability'. I do not quarrel with that description. There is no requirement under the Insolvency Act 1986 for a creditor to have obtained a judgment or order in respect of the debt upon which he relies in his petition. A bankruptcy petition is therefore not an enforcement procedure."

10. Accordingly, the Registrar held that if family proceedings fall within one of the categories in section 65, they are not taken out of that category by reason of the exception in section 65 because a bankruptcy petition is not proceedings for the enforcement of any order made or confirmed under the particular statutory provision.
11. The judge in this case went on to consider section 32 of the Matrimonial and Family Proceedings Act 1984 and rejected the argument that the definition of family proceedings in that section could include these proceedings. He followed a decision of Neuberger J to that effect in Cadwell v Jackson [2001] BPIR 966. He quoted the relevant parts of the judgment of Neuberger J. Section 32 provides that:

"'family business' means business of any description which in the High Court is for the time being assigned to the Family Division and to no other Division by or under section 61 of (and Schedule 1 to) the Supreme Court Act 1981..."

12. Neuberger J said this:

"If one looks at the definition of 'family proceedings' in s.32 of the 1984 Act, it is to my mind impossible to contend that it extends to proceedings outside the United Kingdom. In order to be family proceedings, an action, or part of an action, has to be family business. The definition of family business is business 'which in the High Court is for the time being assigned to the Family Division and to no other division.' On the face of it, that does not cover proceedings which are outside the jurisdiction, whether or not they would, if within the jurisdiction, be assigned to the Family Division. If one looks at the whole purpose and thrust of the 1984 Act, it is, to my mind, solely concerned with proceedings in this country. That view is reinforced when one considers s.48(2) of the 1984 Act, which specifically provides that Part 5, which of course is where s.32 is to be found, 'extends to England and Wales only.'The reason for that provision is because Part 4, as the subsection goes on to the explain, 'extends to Scotland only.'

Counsel for Mrs Cadwell] points out that it is clear that if one goes, for instance, to s.33 of the 1984 Act headed as it is 'Jurisdiction of county courts in matrimonial causes' the definition of family business in s.32 is not quite as exclusive as it looks because it must extend to county courts. I agree, it appears to me that the definition in s.32 must of necessity extend to county court jurisdiction once one reads s.32, as one must, in the context of Part 5 as a whole. However, it does not mean, to my mind that the definition in s.32 extends to proceedings in foreign jurisdictions."

13. So the learned judge applied the decision of Neuberger J on that point.
14. However, as against that, Mr. Registrar James, a senior and very experienced Registrar in bankruptcy, has held both in an unreported case, Re Dodal, cited by Neuberger J, and in the reported case of Wehmeyer v Wehmeyer, that a claim for maintenance arrears, which gave rise to a judgment which could not be a provable debt, was not in itself capable of sustaining a debt on the grounds of public policy. Rimer J considered that point and held that it was distinguishable because the debts in this case could have been registered under the Administration of Justice Act 1920 which was not referred to in section 65 of the Matrimonial Causes Act 1980, and because the order in 1994 had not registered in this country and the concept of public policy was ill-defined. In the judge's view the question was purely one of statutory construction. If the order was not made within family proceedings as defined in Insolvency Rule 12.3(2), it was a provable debt.
15. This application is for permission to appeal. In my judgment, there is a real prospect of success on appeal and there is an important point of principle or practice which makes it expedient for the Court of Appeal to hear the appeal, for the following reasons. First, there is a difference in view as between two experienced judges of the Chancery Division on the one hand, and the Chief Registrar in Bankruptcy on the other hand, as to the scope of Insolvency Rule 12.3(3). There are clearly matters within that subrule which are not within sub- rule (2). They would include, as Muir Hunter on Personal Insolvency points out at paragraph 7-1259, debts arising out of illegal transactions and debts arising out of partnership or quasi partnership relationships. He there cites Re Meade [1951] Ch.774. Also one might anticipate that foreign revenue claims are not provable debts because of that subrule. If Parliament has decided that maintenance orders registered here should not be provable, it is reasonably arguable that the arrears under those orders which are not registered here are not provable either.
16. Second, as to the 1994 order, it may well be that this is an order which could have been registered under the 1972 Act. Hong Kong is a country to which that Act applies by virtue of the Maintenance Orders (Reciprocal Countries) Order 1979.
17. Third, as respects section 1 of the Administration of Justice Act 1920, it may be arguable that under the 1920 Act that provision is not applicable here because, while Hong Kong was a Dominion at the time of the order, it would not have been a Dominion at the time of the application. It may also be arguable that no sum was payable by the judgment and that accordingly that Act does not apply.
18. Fourthly, moreover it is at least arguable that there could not be an action on the judgment at common law on the grounds that the order of 14th January 1994 was capable of being varied. I assume for this purpose that the law of Hong Kong is the same as the law of the United Kingdom and was so in 1994. The position in this jurisdiction is that a maintenance order is capable of being varied by the court even in respect of arrears which have been built up. Thus, the decision in Beatty v Beatty [1924] 1 KB 807, a decision concerning arrears under a maintenance order made under the laws of New York, is distinguishable. I bear in mind that in the present case there was an order for a lump sum as well as for regular maintenance, but Mr Cartwright has made two substantial payments towards that lump sum. On my calculations, which Mr Cartwright has confirmed as being approximate, there is only about £1,500 remaining due under the lump sum order if those two payments are attributed to the lump sum. It may be that that is a matter which Mr Cartwright could have discharged if it is not an order which could have been varied.
19. I propose to give permission to appeal for the reasons which I have given. I would further give directions that the estimate for this matter seems to me to be half a day or less and that it ought therefore to be entered into the short warned list. I would also direct, if possible, that this matter should be heard before the end of June. This is an appeal from a bankruptcy order which is hanging over Mr Cartwright's head. The existence of this appeal will make it impracticable for the Official Receiver to take any steps in relation to the bankruptcy until the appeal is disposed of. I would also direct that, if possible, the court should include one Lord Justice with expertise in insolvency and one with experience in family law on this appeal. I also direct that there should be a transcript provided at public expense to Mr Cartwright.
Order: Application allowed as per judgment.