England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
CIVIL DIVISION
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
BANKRUPTCY COURT

		The Royal Courts of Justice The Strand London Thursday 23 May 2002

Thursday 23 May 2002

1. LORD JUSTICE CHADWICK: This is an application for permission to appeal from an order made on 25 March 2002 by Blackburne J, dismissing an appeal from an order made on 7 January 2002 by Mr Registrar Jacques, sitting as the Bankruptcy Appeals Registrar. The present application, therefore, is one to which CPR 52.13 applies. Permission to appeal cannot be given unless this court considers that the appeal for which permission is sought would raise some important point of principle or practice, or that there is some other compelling reason why the Court of Appeal should hear a second appeal in this matter. If that test is not satisfied the application must be refused: see section 55(1) of the Access to Justice Act 1999.
2. The underlying facts may be stated shortly. On 29 August 2001 solicitors for PricewaterhouseCoopers, a firm of accountants, signed a statutory demand under section 268(1)(a) of the Insolvency Act 1986 demanding payment by the applicant, Mr Ernest Juer, of the sum of £10,000. That sum was due under an interim order for costs made against Mr Juer on 12 July 2001 in proceedings which he had brought against PricewaterhouseCoopers, amongst other defendants, in the Queen's Bench Division of the High Court under reference HQ 00/03079. There was some difficulty in serving the statutory demand. But eventually, on 6 November 2001, Mr Juer applied in the Brighton County Court, under rule 6.4 of the Insolvency Rules 1986, to have the demand set aside. That application was dismissed on paper and without a hearing by a deputy district judge on 7 November 2001.
3. In the meantime, on the basis that the statutory demand had been served on 17 September 2001, PricewaterhouseCoopers had presented a bankruptcy petition against Mr Juer. That petition was presented on 15 October 2001. A date, 4 December 2001, was fixed for the hearing of that bankruptcy petition.
4. On 3 December 2001, the day before the bankruptcy petition was due to be heard, the applicant filed an appellant's notice in the High Court. He sought to appeal -- as he was entitled to do under rule 7.48(2) of the Insolvency Rules -- from the order of 7 November 2001. But that appellant's notice was out of time, by ten days or so. Accordingly, the applicant sought an extension of time, for reasons which he gave in section 8 of his appellant's notice.
5. On 4 December 2001 the bankruptcy petition was adjourned by the Brighton County Court to await the outcome of the application for an extension of time for an appeal; and, if that application were successful, the outcome of the appeal itself. Mr Juer tells me that the adjourned hearing of the petition is now due to take place, subject to any order made in this court, on 6 June 2002.
6. The application for an extension of time for appealing came before the Registrar of Bankruptcy Appeals on 7 January 2002. He refused that application. The applicant appealed to the High Court Judge from the registrar's order of 7 January 2002. That appeal came before Blackburne J on 25 March 2002. This court has been provided with a note of judgment prepared, it seems, by counsel for the petitioning creditor on 15 April and approved by the judge on 18 April 2002. No transcript of the judgment has been made available. Mr Juer tells me that the mechanical recording system was not in operation on that day. Be that as it may, the note of that judgment is full and careful; and, as I have said, it has been approved by the judge.
7. The judge dismissed the appeal against the registrar's refusal to extend time. He gave two principal reasons. First, he was not persuaded that he ought to interfere with the registrar's decision that no adequate explanation had been given for the delay. The judge observed, correctly, that it was immaterial that he, if exercising his own discretion, might have taken a different view on that point. The registrar had exercised his discretion as he did and that exercise of discretion had to be respected unless it could be shown that the registrar had applied a wrong principle, had taken account of matters which he should not have taken into account or had left out of account matters which he should have taken into account; or that otherwise his decision was so plainly wrong that it went outside the generous ambit within which a reasonable disagreement was possible. The judge said this:

"I take the view that the Registrar was entitled to come to the view that no adequate explanation had been given for the delay."

8. He went on to indicate that if he had been exercising the discretion in the place of the registrar, he might well have taken a more lenient approach to the question of delay.
9. The second reason given by the judge was that he was firmly of the view that the registrar was entitled to consider the underlying merits of the proposed appeal; and was entitled to come to the view that there was no prospect of success in an application to set aside the statutory demand, and so no purpose in extending time to appeal against the order made in the County Court on 7 November 2001.
10. The only ground upon which the applicant could hope to rely, on an application to set aside the statutory demand or on an appeal against a refusal to do so, was the existence of a properly arguable cross-claim of an amount sufficient to extinguish the petition debt. The petition debt itself was a judgment debt. It has not been challenged, and is not now challengeable.
11. The cross-claim advanced by the applicant (although not, so far as I am aware, ever pleaded or set out in a comprehensive and particularised form) is based on an assignment to him by a company, Ernest George Ltd -- of which he and his wife were the only shareholders and he was a director -- of its claims against two individuals who were (or had been) administrative receivers of the company and who were (or had been) partners or employees of PricewaterhouseCoopers. The assignment is contained in a deed dated 19 September 2000, made by the liquidator of the company. It appears from the recitals to that deed to have been made in the not unfamiliar circumstances that the liquidator had no assets or funds which he could employ in pursuit of the claims which Mr Juer, as a former director and shareholder, was asserting on the company's behalf. Those claims are set out in the schedule to that deed. They begin with a claim for reimbursement of excessive payments to the debenture holders; and include a claim for reimbursement of excessive amounts paid for legal and professional fees and a claim for damages in respect of the sale of the business at an undervalue.
12. The claim, as the applicant explained it to the judge and as it appears from the skeleton argument prepared for use in this court -- and developed ably, succinctly and coherently by the applicant in his oral submissions -- may be summarised as follows.
13. In April 1993 the company was placed in administrative receivership by an appointment under a debenture granted a few weeks earlier by the company to National Westminster Bank Plc as security trustee for a syndicate of itself and two other banks. The debenture contained the fixed and floating charges over book debts commonly found in a standard bank security. The receivers collected book debts of considerable value. The receivers' report indicates receipts of some £2.8m from that source.
14. The applicant contends that the fixed charge was ineffective in relation to book debts in the light of the advice of the Privy Council in Agnew v Commissioners of Inland Revenue [2001] 3 WLR 544; an appeal from New Zealand more familiarly known as the "Brumark" case. It is impossible on the material available to form any view as to the strength of that contention; but I would not dismiss it as unarguable.
15. The difficulty for the applicant is that, even if that contention could be made good, it is not at all clear that it provides any foundation for a cross-claim against the petitioning creditors, PricewaterhouseCoopers. There are two obvious difficulties. The first is that on its face the claim is a claim against the individuals who are administrative receivers and not against the firm, PricewaterhouseCoopers. It is necessary to keep in mind that receivership is an individual, not a partnership, appointment. The second problem is that, if the fixed charge over book debts was ineffective, the banks no doubt will seek to rely on the floating charge in the debenture; so that, subject to the claims of preferential creditors, the assets will be available to meet their debts.
16. Mr Juer has pointed out in this Court (although not, I think, in the courts below) that in the circumstances of the case there might be a real difference between the liabilities secured by a fixed charge and the liabilities secured by a floating charge; having regard to the provisions in section 245 of the Insolvency Act 1986. That section provides that a floating charge created within the period of two years ending with the onset of insolvency will be invalid except to the extent of the aggregate of monies paid to the company at the same time as, or after the creation of, the charge. Again, I would not dismiss that contention as conceptually unarguable. But there is simply no material which would enable this Court to form a view whether or not, on the facts of this case, the liabilities secured by the floating charge would be less extensive than the liabilities that would have been secured by a fixed charge.
17. The judge accepted the submission of counsel for PricewaterhouseCoopers that, having regard to the difficulties which he had identified and which I have rehearsed, it was impossible to say that the registrar had been wrong to take the view that there was really no triable issue in relation to the cross-claim; at least on the material that was before the registrar and before the judge.
18. It was in those circumstances that the judge dismissed the appeal against the registrar's decision not to extend time.
19. As I indicated at the outset of this judgment, in this Court permission to appeal cannot be granted unless the appeal would raise some important point of principle or practice, or there is some other compelling reason why the Court of Appeal should hear a second appeal in this matter. There is no point of principle or practice in this case. The question whether or not to extend time in circumstances of delay is essentially a matter for the judge or registrar to whom that discretion is entrusted. It cannot be said that, in deciding how to exercise his discretion, the Registrar of Bankruptcy Appeals was not entitled to form a view as to the likely merits of an appeal if an extension were granted. Nor, in my view, can it be said, on the material that was before the registrar or Blackburne J, that the registrar's view as to the likely merits of a cross-claim against PricewaterhouseCoopers was one which this Court could hold to be plainly wrong.
20. An obvious difficulty for the applicant is that, if there were a cross-claim, it might have been expected to be advanced in the very proceedings which led to the costs order of £10,000, which is itself the petition debt.
21. In those circumstances, this is an application which must be refused. That does not have the effect that Mr Juer is immediately adjudged bankrupt. The bankruptcy petition will now come before a judge in the county court. Mr Juer will have the opportunity to put before that judge the points which he seeks to make in opposition to the petition and which the judge is required to consider under section 271 of the Insolvency Act 1986. He will be entitled to say to the judge who hears the petition that this is a case in which there has been no oral hearing on the merits of his cross-claim. That is because the refusal to set aside the statutory demand was an exercise on paper; and there has been no substantive appeal against that order because Mr Juer has not been given an extension of time in which to appeal.
22. The judge whose task it is to hear the petition may think, therefore, that this is a case in which, on the material put before him, he will wish to consider in some detail whether or not there really is an arguable cross-claim against the administrative receivers; and whether, if there is a cross-claim against the administrative receivers, or even an arguable cross-claim against them, it would be right to make a bankruptcy order on the petition of the firm of which they are members. That is not to say that the cross-claim can be set off against the petition debt. It is simply to point out that bankruptcy is a discretionary remedy. A court might well take the view that that discretion should not be exercised in favour of a professional partnership in circumstances in which there was a substantial cross-claim against two of its members acting in a professional capacity. It would be unfortunate if the firm were thought to be relying on what many might see as a technicality to stifle a claim which (if valid) it might otherwise be expected to meet.
23. Nothing that I say will, or should, affect the exercise by the county court of the discretion entrusted to it. But it is important that the county court should appreciate that, in refusing permission to appeal against the refusal to extend time, this Court does not intend to prejudge the question whether or not this is a case in which a bankruptcy order should be made.
ORDER: Applications refused