England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BRISTOL COUNTY COURT
(His Honour Judge Weeks QC)

		Royal Courts of Justice Strand London WC2 Thursday, 9th May 2002

1. LORD JUSTICE CHADWICK: The application listed for hearing by this court, and the only matter with which we are directly concerned, is a renewed application under reference 2002/0360 for permission to appeal against an order made on 8th March 2001 by His Honour Judge Weeks QC, sitting at Bristol as a judge of the High Court in the Chancery Division, on a bankruptcy appeal under section 375(2) of the Insolvency Act 1986 and rule 7.48(2) of the Insolvency Rules 1986.
2. The applicant, Mr. John Clarke, was adjudged bankrupt in the Bristol County Court on 31st January 2001. He appealed to the High Court, as he was entitled to do under the provisions to which I have referred, by notice lodged on 8th February 2001. It was that appeal which came before His Honour Judge Weeks on 8th March 2001. The judge dismissed that appeal. It is from his order made on that day that the applicant seeks permission to appeal.
3. The appellant's notice was lodged with this court on 9th November 2001. That was, of course, some seven and a half months out of time. No application to extend time was made in the appellant's notice itself, but an application for permission to appeal out of time was made by notice dated 10th February 2002; that is to say, some ten and a half months out of time. I shall return to the reasons given in the notice of 10th February 2002 to support the application for an extension of time later in this judgment.
4. The bankruptcy order was made on a bankruptcy petition presented on 8th December 2000 by Zurich Insurance Co. It was founded on a final costs certificate in the sum of £25,184.80 made in default on 16th September 1999 in the Newcastle upon Tyne County Court. The certificate was made in conjoined proceedings under references SR850169, SR755955 and PO606057. It followed an order for costs made in those proceedings by His Honour Judge Walton in that court on 14th May 1999. Permission to appeal from that order of 14th May 1999 was refused by this court (Thorpe LJ) at an oral hearing on 7th April 2000, and permission to appeal to the House of Lords was refused, also by Thorpe LJ, on 5th May 2000. As the order of 5th May 2000 makes clear, section 54(6) of the Supreme Court Act 1981 would have precluded a further appeal in any event.
5. The judgment debt in respect of the costs so certified - for that is what it was and is - has been the subject of a statutory demand dated 15th November 2000. There is nothing in the papers to suggest that any attempt was made to set aside that statutory demand under rule 6.4 of the Insolvency Rules 1986. The applicant gave notice of opposition to the bankruptcy petition under rule 6.21 of the Insolvency Rules. The notice is dated 18th January 2001 and is in these terms:

"The debts are in total dispute/counterclaim pending in current UK court actions (Lord Chancellor's Dept PO906926/Zurich 9232/Craven 8600) and ECHR PN 8597 (Gov. Defective court systems - article 6(1)). The latest judgment in the Court of Appeal (Brooke LJ 13:12.00) should be studied. This petition should be stayed until conclusion of all issues, to save further wasted costs.

Further the debts may be secured under the same/said insurance policy/Zurich policy, and proof of debt by way of receipts of moneys paid have not been tendered."

6. I shall return to that also later in this judgment.
7. The bankruptcy petition came before Deputy District Judge Jones in Bristol on 31st January 2001. Mr. Clarke did not appear. Zurich, as petitioning creditor, was represented by a solicitor. The same solicitor represented a supporting creditor, Mr. Richard Craven. We have been provided with a transcript of what took place on that day. The District Judge had read the notice of opposition and he referred to it. He was told, as was the case, that, in addition to the debt on which the petition was founded - that is to say, the judgment debt of £25,000-odd owed to Zurich in respect of costs - there was another judgment debt of £4,160.15 in favour of Mr. Craven. That debt represents a summary assessment of costs in proceedings BS008600.
8. Those were proceedings brought by Mr. Clarke against Mr. Craven, the barrister who had appeared for Zurich at the Newcastle hearing. The claim in those proceedings was dismissed on 13th December 2000, with an order for costs against Mr. Clarke. The transcript of 31st January 2001 records the following interchange between the solicitor for the petitioning and supporting creditors and the Deputy District Judge:

"DEPUTY DISTRICT JUDGE JONES: Very well. Anything more you want to say in this matter?

MR. HEELS: No, sir. Just so you are aware that we hold a sealed judgment in the sum of £4,160.15 for costs after his claim was dismissed against our client.

DEPUTY DISTRICT JUDGE JONES: Right. And I presume that will fall into the bankruptcy.

MR. HEELS: It will fall into the bankruptcy and our appearance is simply twofold: that first of all we are here to appear to support the petitioner so that you are aware that there are a body of creditors; and secondly, that if it had been the case that at the very last minute the debtor had discharged the debt, I would have been applying for a change of carriage order. But he has not, so I am not.

DEPUTY DISTRICT JUDGE JONES: Very well. I am satisfied that the debt is still outstanding, the debtor is not here, so I make a bankruptcy order."

9. I read that passage because there is a pending application in this court for permission to appeal against the order of 13th December 2000 in BS008600; that is to say, in what may be called "the Craven proceedings". That passage in the transcript of 31st January 2001 makes it clear that the Craven debt was not the debt upon which the bankruptcy order was made. There can be no doubt that, on the material before the District Judge, the bankruptcy order would have been made whether or not Mr. Craven had instructed solicitors to represent him as a supporting creditor.
10. Mr. Clarke appealed to the High Court. The grounds annexed to his notice of appeal are these:

"Grounds of appeal to annul the bankruptcy order

1. There are counterclaims/set-offs currently being pursued in the courts against four parties [Lord Chancellor's Dept/Zurich/Craven case numbers PO906926/BS009232/BS008600, and the UK government in the European Court of Human Rights under reference PN8597 regarding defective court systems] who it is alleged are jointly responsible for the liability involved in these debts, and other debts.

2. The cases are currently being reviewed at the Court of Appeal, [and at the European Court of Human Rights under reference PN8597] and when the judge made the original bankruptcy order he did not give due consideration to the judgment of Lord Justice Brooke dated the 13 12 2000.

3. The costs issues in these cases will only increase in these matters, and if the Court of Appeal/European Court of Human Rights find in the bankrupt's favour then clearly any bankruptcy order will in any event be null and void, with further wasted costs made payable to the bankrupt."

11. That appeal came before His Honour Judge Weeks on 8th March 2001. Mr. Clarke did not appear. The judge dismissed the appeal summarily, as appears from the transcript of proceedings. As I have said, it is from that order that permission to appeal is now sought.
12. The grounds of appeal upon which Mr. Clarke wishes to rely in this court are set out in section 7 of his appellant's notice. In fairness to him, although at the risk of some repetition because they follow the pattern in the earlier notice, I will read them in full:

" (1) There are counterclaims/set-offs currently being pursued in the courts against the petitioning creditor (ref: BS009232-3181/2000) Craven (ref BS 008600) and the Lord Chancellor's Dept (ref PO906926/2975/2000) and others, who are all responsible for this debt, and permission to appeal in these cases was granted by Brooke LJ on 13.12.00. (2) The bankruptcy order was made with indecent haste, as the linked cases have not yet been resolved in the Court of Appeal [ECHR]. (3) The debtor could not attend before any of the bankruptcy hearings before the Bristol County Court as that court/judges are under article 6 enquiries, and the debtor under article 6 asked that the hearings be moved to another county court, which was refused 'Inferior court provisions', maladministration. (4) Until the above linked cases are resolved a bankruptcy order cannot stand against the debtor by the same creditors who are subject to counterclaim/set off hearings."

13. The same theme underlies the application for an extension of time in the notice dated 10th February 2002. Permission to appeal out of time is sought "because other issues in Clarke v Lord Chancellor's Dept, Clarke v Zurich, Clarke v Craven, 2000/2975/2975A/3181 are still pending linked to 402/005."
14. It is convenient, therefore, to turn to the judgment of Brooke LJ, delivered on 13th December 2000, on which Mr. Clarke places reliance. The application before Brooke LJ, under Court of Appeal reference 2000/2975, was an application for permission to appeal against an order made by His Honour Judge Rutherford in Bristol County Court in proceedings brought against the Lord Chancellor's Department (sued as Portsmouth County Court) in relation to the forms issued for use in connection with payment into court in the county court. The county court reference to those proceedings is P0906926; that is to say, it is one of the proceedings referred to in the grounds of appeal in these proceedings. Brooke LJ granted permission to appeal in that action. The background facts are fully set out in that judgment, which should be read together with this judgment. I need do no more than summarize them.
15. Mr. Clarke originally brought an action against the Zurich Insurance Company seeking substantial damages against Zurich arising out of damage to various properties in Northeast England. In August 1997 Zurich paid £3,000 into court. The court office sent Mr Clarke a notice that the payment had been made into court using a computerised version of Form N243. Mr. Clarke did not take that money out of court at any time before the matter came on for trial. As Brooke LJ observed, when the £3,000 was paid into court in August 1997, Mr. Clarke was not willing to accept it because he did not consider that it was sufficient. He made other efforts to settle the action. The judge recorded that at some stage he offered to settle for £5,700. Brooke LJ went on at paragraph 6 of his judgment to say this:

" . . . the matter came on for trial on 10th May 1999. He sought to take the money out of court that morning before the action was called on for trial but he says that Mr Craven, who appeared as counsel for Zurich, told him he was too late to do so and he, accordingly, took no further steps to try and take the money out. Judge Rutherford said that this was wrong. He said that right up to the trial Mr Clarke had the right to take the £3,000 out of court but there would have been serious costs implications in having left it so late.

7. On the appeal before Judge Rutherford, Mr Clarke also said that he attempted to take the payment out of court after the trial began and before judgment in the case. Judge Rutherford said that this had not been raised in his claim form and had not been said before the district judge. In the event, the trial of this action against Zurich lasted five days. His claim was dismissed and he had costs orders made against him of about £25,000."

16. It was in those circumstances that Mr. Clarke brought a claim against the Portsmouth County Court by proceedings commenced in November 1999. He claimed that the county court, or the Lord Chancellor's Department, owed him a duty of care and were negligent in issuing the form which was, at best, ambiguous, and in one respect at least incorrect. Judge Rutherford dismissed that assertion. He took the view that Mr. Clarke had not acted to his detriment as a result of anything in the form. Mr. Clarke had wanted to take the money out of court on the morning of the trial. The reason he was not able to do so had nothing to do with the form. It was, as he himself said, because counsel for Zurich said that he could not do it. That was not the fault of the Lord Chancellor's Department. So that action went.
17. Brooke LJ went on to say this at paragraph 19:

"I observe that there are two quite separate proceedings arising out of the same subject matter in the Bristol County Court. The first as against Zurich, and the second as against Mr Craven, the barrister who, it is said, advised Mr Clarke that he could not take the money out of court on the morning of the trial. So far as the action against Zurich is concerned, I have been told that that has been struck out by a district judge and an appeal to a circuit judge proved unsuccessful. Last month Mr Clarke lodged an application for permission to appeal to this court.

With respect to his action against Mr Craven, I was told that there was an application by the defendant to be listed before District Judge Daniel on 11th December (two days ago) in the Bristol County Court to strike that action out. Mr Clarke apparently wrote to the county court saying that it was inappropriate for District Judge Daniel to sit in this court case because he had a pending complaint under Article 6 of the Human Rights Act about District Judge Daniel sitting in the proceedings against the Lord Chancellor."

18. Brooke LJ identified, therefore, a point which he described as being of constitutional importance. The point was that district and circuit judges, who sat as single judges in the case, had been recommended for appointment or governed or controlled or could be dismissed by the Lord Chancellor, who was the defendant in the case. In those circumstances, they did not constitute an independent and impartial tribunal within the meaning of Article 6.1 of the European Convention of Human Rights. Mr Clarke said that they ought to have taken the point themselves; given the court's duty to take article 6 points with an unrepresented litigant. He also made the point that some of the same district and circuit judges who dismissed this action had been involved in the dismissal of the linked Zurich and Craven cases, and that they were not independent of the Lord Chancellor. Brooke LJ accepted that that was a point which was fit for argument in this court; and he gave permission for an appeal in the Lord Chancellor's Department action.
19. Brooke LJ then turned to the position in what I shall describe as the second Zurich action. He said this at paragraph 32:

"So far as the application for permission to appeal in the Zurich matter is concerned, I direct that the papers lodged with the court in relation to that application should be put before me so that I can determine what direction to give. Needless to say, if I give a direction with which Mr Clarke is dissatisfied, he would have the right to renew his application for permission before a judge (who might be me again, in court) if he wishes to do so."

"The Zurich matter" - to which Brooke LJ refers in the final paragraph of that judgment - is a claim commenced by Mr. Clarke in the Bristol County Court against Zurich Insurance on 25th July 2000, under county court reference BS009232; that is to say, it is another of the proceedings referred to in the grounds of appeal in these proceedings.

20. The claim in that second Zurich action is for "breach of 36.15.6" - which, I think, is a reference to county court rule - "negligent misstatement/falsehood made by Zurich representatives on 10.5.99 causing huge losses, plus associated matters". The claim relates, therefore, to the circumstances on 10th May 1999 in the Newcastle upon Tyne County Court, when Mr Clarke attempted to take £3,000 out of court and so avoid the five day action which has led to the order for substantial costs - that is to say, which led to the petition debt in this bankruptcy.
21. The claim in BS00932 was struck out by District Judge Frenkel in Bristol on 22nd August 2000. Mr. Clarke sought permission to appeal against that order, and that application was refused on 16th November 2000 by His Honour Judge Bursell QC. Section 54(4) of the Administration of Justice Act 1999 provides that no appeal shall lie from an order of a court refusing permission to appeal.
22. In his judgment of 13th December 2000 Brooke LJ had directed, in the paragraph to which I have referred, that the application to this court for permission to appeal in BS009232 should be put before him on paper for directions. It is plain that at that date he had not seen the order of His Honour Judge Bursell QC. When a copy of that order was obtained, Brooke LJ directed that the application for permission to appeal against that order could not be entertained by this court. He referred Mr. Clarke to section 54(4) of the 1999 Act. Mr. Clarke was informed of that direction on 28th March 2001. Mr. Clarke's response was to seek an oral hearing. The grounds are set out in an application dated 31st March 2001:

"because human rights issues under article 6 arise and in the circumstances of the linked appeals with L.C.D. and Craven the Access to Justice Act 1999 section 54 may be incompatible, plus other human rights issues."

23. The Court of Appeal reference to the application for permission to appeal against the order of His Honour Judge Bursell QC in BS009232 is 2000/3181.
24. Mr. Clarke's application of 31st March 2001 for an oral hearing was put before Brooke LJ. He gave directions on 3rd April 2001 that the application in 2000/3181 should be listed before the full court for hearing with the appeal for which he had given permission in 2000/2975; that is to say, the appeal in the Lord Chancellor's Department action. For completeness, I should add that Brooke LJ had also directed that the application for permission to appeal against the order of 13th December 2000 made by the District Judge in the Craven action, BS008600, was to be listed with 2000/2975 and 2000/3181.
25. Those matters, involving as they do a question of constitutional importance - whether district and circuit judges are independent of the Lord Chancellor - and the important question whether section 54(4) of the Access to Justice Act 1999 is incompatible with the Human Rights Act, were all due to be heard by a full court presided over by the Master of the Rolls on 5th November 2001. The Treasury Solicitor had instructed counsel to assist the court.
26. Very shortly before that hearing, the Court of Appeal Office learned from the Treasury Solicitor that Mr. Clarke had been adjudicated bankrupt on 31st January 2001; that is to say, some nine months earlier. That raised the question whether Mr Clarke had any standing to pursue the appeal and the applications which were about to be heard in this court. In the circumstances, prima facie at least, the causes of action in the three matters which the Court of Appeal were to hear - that is to say, (1) the appeal in 2000/2975, the LCD action for which permission had been given, (2) the application for permission to appeal or a declaration of incompatibility in 2000/3181, the second Zurich action, and (3) the application for permission to appeal to this court in the Craven action, county court reference BS008600 - had vested in the trustee in bankruptcy under section 306 of the Insolvency Act 1986.
27. The Court of Appeal Office made inquiries of the Official Receiver, as trustee in bankruptcy, as to the position which he sought to take. The immediate response from the Official Receiver, in a fax sent on 29th October 2001, was that, as Mr Clarke had not complied with his statutory obligations with regard to the bankruptcy, the Official Receiver did not have sufficient information to consider any litigation that the bankrupt had commenced prior to the bankruptcy order. It has since become clear, in subsequent correspondence, that the Official Receiver takes the view that the causes of action do vest in the trustee in bankruptcy as part of the bankrupt's estate; that he is without funds to pursue them; and that he would consider a request by Mr Clarke for an assignment of those causes of action to him, but that he is unable to do so in the absence of co-operation from Mr. Clarke. The position is set out in a letter to the Civil Appeals Office of 28th February 2002:

"With regard to the question of the action initiated by Mr Clarke against the Lord Chancellor and the other related cases, the position the Official Receiver is taking is that, should Mr Clarke co-operate with the bankruptcy proceedings, he will consider a request by him for an assignment of the actions to him. In the absence of such co-operation the Official Receiver will be obliged to consider withdrawing the actions, or disclaiming them."

28. In the result, no progress has been made since November 2001 in the matters that were then listed for hearing by the full court. The view has been taken, understandably, that the sensible course is to hear Mr. Clarke's application for permission to appeal against the bankruptcy order, confirmed by Judge Weeks on 8th March 2001. It was in those circumstances that the application for permission to appeal was made on 9th November 2001, very shortly after the hearing in the Court of Appeal should have taken place.
29. If the application for permission to appeal against Judge Weeks' order and any subsequent appeal were allowed, the problems to which the bankruptcy has given rise will fall away and Mr Clarke can proceed with his appeal in 2000/2975. If that application is not allowed, the court will be in a position to give directions in the knowledge that Mr. Clarke is indeed a bankrupt and that the bankruptcy order is not capable of challenge.
30. I return, therefore, to the matter which is actually before us, the application for permission to appeal. The position in relation to that order may be summarised as follows. First, the petition was founded on a judgment debt for costs under the order of 14th May 1999. Second, permission to appeal against that order of 14th May 1999 had been refused by this court on 7th April 2000. Third, the petition was supported by a judgment creditor, Mr. Craven, with an unsatisfied order for costs in the sum of £4,000-odd. Fourth, there was not then any appeal against that order. Fifth, Mr. Clarke had commenced proceedings - the second Zurich action - in July 2000, which had been struck out by the District Judge on 22nd August 2000. Sixth, permission to appeal against the order of 22nd August 2000 had been refused by the county court on 16th November 2000. Seventh, section 54(4) of the Access to Justice Act 1999 precluded any further appeal against the order striking out the second Zurich action. Eighth, whatever might happen in the action against the Lord Chancellor's Department, for which Brooke LJ had given permission to appeal to this court, there was no reason to think that this court would give permission to appeal in the second Zurich action in the face of the clear prohibition in section 54(4) of the 1999 Act. There was no answer to the bankruptcy petition. The petition debt could not be challenged. The supporting creditor's debt could not be challenged; but, even if that debt were set aside, the court would still be faced with the unchallengeable petition debt. There was no pending cross-claim against Zurich; and no foreseeable circumstances in which there could be such a cross- claim.
31. In relation to that last point, there are two further matters to which I should refer. First, even if Mr. Clarke were to succeed in obtaining the declaration of incompatibility which he seeks in relation to section 54(4) of the Access to Justice Act, that would not affect the operation of that section in the second Zurich action - see section 4(6) of the Human Rights Act 1998. Second, even if Mr Clarke were able to overcome that hurdle, (perhaps in the light of retrospective amending legislation) there is no realistic prospect that he would obtain permission to appeal against the order striking out the second Zurich action on the merits. The reason is that the second Zurich action is, plainly, a collateral attack on the order for costs made in the first Zurich action on 14th May 1999.
32. It is pertinent in that context to note what Thorpe LJ said when refusing permission to appeal against the order of 14th May 1999. I read from paragraphs 11, 12 and 13 of the transcript of his judgment:

"11. Then, perhaps most emphatically, Mr Clarke complains that this action should have been aborted at the door of the court because he wanted to have out, he wanted an end of the litigation and there was a payment in. He points to the notice of payment in, which was dated 4th August 1997 and issued out of the Portsmouth County Court. It bears the court's seal. It is addressed to Mr Clarke and it says:

'Take notice that the defendant has paid into court the sum of £3,000 in satisfaction of your claim in this action. If you accept the payment made in satisfaction of your claim you must give written notice of acceptance to this court and every other party within 21 days after you receive this notice (or not less than 3 days before the day fixed for hearing of this action)(or before the hearing of this action begins)(or before judgment is given).'

12. Obviously, the notice as submitted by the defendants to the court was a pretty slip-shod notice. Manifestly they should have deleted those provisions which they did not intend to apply. Obviously, the Portsmouth County Court did not supervise the draft but simply stamped it and sent it out.

13. Mr Clarke says that he was entitled to rely on one of the provisions which allowed acceptance at any time before judgment was given. Of course, that was not a view accepted by the defendants. Understandably, money that they might have been prepared to pay in settlement in August 1997 was not there in May 1999 after they had had to incur the costs of preparation for trial. That is not something, regrettable though it may be, that would begin to justify the grant of permission; and it is reassuring to hear from Mr Clarke that he has made complaint to the court service in respect of these shortcomings."

33. I read those paragraphs because they show, as clearly as may be, that the point which Mr. Clarke wants to raise in relation to the county court forms was squarely before Thorpe LJ when he refused permission to appeal on 7th April 2000. It was plainly a point which was properly before him because it went to the exercise of the judge's discretion in relation to the order for costs which he made. It would have been open to the judge, perhaps, to have taken the view that Mr. Clarke should not be required to pay the whole costs of a five day hearing in the circumstances which have been described. He did not take that view and Thorpe LJ plainly thought that there were no grounds for this court to interfere. In those circumstances, the claim in the second Zurich action is rightly described, in my view, as an attempt to challenge by collateral attack, or to relitigate, the point already decided against Mr. Clarke on 14th May 1999 and in respect of which he has been refused permission to appeal by this court in April 2000. Such an attempt would, unsurprisingly, lead to an order for striking out. There is no viable cross-claim against Zurich Insurance.
34. In those circumstances, this is a bankruptcy order made on an unchallengeable judgment debt in respect of which there is no cross-claim. This court cannot entertain a second appeal against that order. For those reasons I would dismiss the application for permission to appeal which is now before us. If my Lord agrees, it will then be necessary to go on to consider what directions, if any, we should give in relation to the further hearing of the matters which were due to be heard by the full court in November 2001.
35. SIR SWINTON THOMAS: I agree that permission should be refused for all the reasons given by Chadwick LJ.
36. LORD JUSTICE CHADWICK: The application for permission is refused. I now go on to consider what should be done about the three pending matters in the Court of Appeal. Plainly, the problem which was identified at the end of October continues to exist; that is to say, the person who wishes to pursue the appeal and the applications, Mr. Clarke, is not the person in whom the causes of action are vested. The person in whom the causes of action are vested - that is to say, the Official Receiver as trustee in bankruptcy - does not wish to, or because he has no funds, is not in a position to pursue that appeal and those applications. In those circumstances, the direction that I would propose is that those matters be listed for a directions hearing in this court before a single Lord Justice, with notice to the Official Receiver as trustee in bankruptcy, so that each party - that is to say, Mr. Clarke and the Official Receiver - may show cause, if they wish to do so, why that appeal and those applications should not now be struck out. The court would be assisted by representation on behalf of the Official Receiver, in the circumstances that the view has already been expressed in this court that the matters raise important questions which need to be determined. For my part, I think it right to say that I hope that the Official Receiver and the Department will consider carefully whether this would not be a proper case in which public funds should be used for the purpose of representation at that directions hearing, so that the court can receive the assistance that it requires. I say that because there are obviously no funds in this bankruptcy which will enable representation to be provided out of the assets.
37. I direct that a transcript of our judgments and these remarks be provided, not only to Mr. Clarke at public expense, but also to the Official Receiver. I direct that that directions hearing is to be listed for hearing in this court not later than the week beginning Monday, 24th June. It is necessary that it be resolved, sooner rather than later, whether the appeal in 2000/2975 and the related applications are to proceed.
38. LORD JUSTICE SWINTON THOMAS: I agree.
Order: Application refused; directions given as per judgment.