England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
MR RECORDER NICHOLAS WARREN QC
(sitting as a Deputy High Court Judge)

		Royal Courts of Justice The Strand London, WC2A 2LL
		8 April 2005

Friday, 8 April 2005

1. LORD JUSTICE MUMMERY: There are two applications. They are both made on behalf of Mr Smurthwaite, for whom Mr Clive Wolman appears. The first is a renewed application for permission to appeal. The application was first considered on the papers by Arden LJ. She refused permission on all the grounds advanced on the basis that none of them had any real prospect of success.
2. The order which Mr Smurthwaite wishes to appeal against is one made by Mr Recorder Nicholas Warren QC, sitting as a Deputy High Court Judge on 13 December 2004. He heard an application for specific disclosure and service of lists of documents as set out in a schedule to the application of 11 November 2004. The deputy judge dismissed the application for specific disclosure, made various other directions and made an order - which is important for the purposes of the application for permission - that costs in respect of the interim application for specific disclosure be awarded to the respondents on a standard basis. The costs were summarily assessed as £6,000, including VAT, and were to be paid within 14 days. The number given to that application is 2005/0033. It turns out - though the first I knew of it was this afternoon when I was handed the bundle - that there is another application for permission to appeal in respect of a different order made at a later date, but arising out of the order of 13 December. The second application, which relates to the renewed application, does not appear to have been considered by a member of the Court of Appeal on the papers. I am somewhat at a loss to know how it was thought that it would be dealt with today. Anyway I have been handed the file of documents and I have had an opportunity to read the judgment of Laddie J dated 25 February 2005 and the appeal notice.
3. Laddie J dismissed an application issued by Mr Smurthwaite on 5 January 2005 for a review and other relief in respect of the order made on 13 December 2004 by the deputy judge. Laddie J also made an order for costs against Mr Smurthwaite of and occasioned by the application. They were summarily assessed at £10,600, including VAT, to be paid by 11 March 2004. Rather than rely on the technicalities of the position, namely that this application never seems to have been considered by a judge on the papers, I will treat this application as before me, along with the renewed application in 2005/0033. The number of the application for permission to appeal against Laddie J's order is 2005/0541.
4. In order to understand the bases of the two applications it is necessary to say a little about the background to this dispute. The proceedings are an application under section 262 of the Insolvency Act 1986. The applicant is Mr Smurthwaite. The respondents are Mr Simpson-Smith and Mr David Mond. The relief sought in the application is to set aside a voluntary arrangement. The voluntary arrangement came about in this way. As long ago as February 2000 Mr Smurthwaite paid an advance fee of about £40,000 to Mr Simpson-Smith in respect of the sale and restoration of a Ferrari car. When the car was delivered to Mr Smurthwaite in about May 2002, it was, he says, defective and it was a stolen car. In those circumstances he took proceedings for rescission of the agreement with Mr Simpson-Smith and for damages. He got a freezing order and an interim payment order. Unfortunately for Mr Smurthwaite Mr Simpson-Smith then made a voluntary arrangement with creditors. That is how Mr Mond comes into the picture. He is an insolvency practitioner and the supervisor of the voluntary arrangement. Mr Smurthwaite wishes to have that voluntary arrangement set aside.
5. It is in connection with those proceedings (which have been fixed for trial starting on 13 April 2005 in the Chancery Division) that an application was made for specific disclosure. It is unnecessary to go into the details of it, which are explained in the note of reasons for decision given by the deputy judge and refer to the background, the basis of the application and his reasons for dismissing it. The important point for present purposes is that very serious allegations are made about the way in which the application was responded to by Mr Simpson-Smith and Mr Mond. It is alleged that at the hearing before the deputy judge misrepresentations were made about the legal representation. Mr Simpson-Smith was not present at the hearing. The hearing seems to have been conducted on the basis that he was not represented by the advocate, Mr Doyle, who did appear. Allegations are made that there was a breach of duty to the court in relation to the representation of the respondents and that misrepresentation has prejudiced the applicant, Mr Smurthwaite.
6. The application for specific disclosure was resisted on the basis that there were no more documents to produce in the specified categories. What happened, however, within a short time of the order made by the deputy judge, was that over a hundred new documents were disclosed to Mr Smurthwaite's advisers which they consider should have been disclosed at the time of the hearing of the application. Thus what has happened is that, contrary to what was said at the hearing when an order for costs was made against Mr Smurthwaite, the respondents did have documents after all. On Mr Smurthwaite's case the court, he and his advisers had all been misled about the position on specific disclosure. It is said, therefore, that there is a real prospect of an appeal succeeding against the order which the deputy judge made. If the position had been honestly represented to the court and to the other side by the respondents, then an order would have been made for disclosure of the documents. It seems very unsatisfactory that Mr Smurthwaite should find himself having to pay to secure the production of documents, which were not produced when they should have been and were not produced until after he had been ordered to pay the costs of an application, which had the effect indirectly of bringing the documents to light.
7. There is another point, which was rejected by the deputy judge, about the relationship between Mr Simpson-Smith and a Miss Diane Williams and whether she is an "associate" of his for the purposes of the relevant provisions in the Insolvency Act. That raises a point as to whether she is the "reputed wife" of Mr Simpson-Smith within the meaning of section 435(8) of the Insolvency Act.
8. When this matter was first opened by Mr Wolman I asked him what the position was as regards the trial. He initially indicated that his client would be seeking a postponement of the trial fixed for next week if permission to appeal were granted, and that the trial would have to await the outcome of the appeal. I indicated to Mr Wolman that it was not the function of the Court of Appeal to interfere with the fixing of hearings in the Chancery Division, and that I thought it unlikely that the trial would be adjourned, even if I gave permission to appeal. I was unable to see how the appeal outcome could actually affect the trial. I also mentioned to Mr Wolman that the main grounds on which he was seeking permission to appeal - namely that there had been misrepresentations made to the deputy judge at the hearing in December 2004 in respect of representation of the parties and in respect of whether there were any more documents in the specified categories - required him to go to the court which made the order seeking to set it aside on the basis of misrepresentation, rather than appealing to the Court of Appeal on the basis that the order made was an erroneous one. It is for Mr Smurthwaite's advisers to decide what steps, if any, they take down that road.
9. The important practical point is this. First, there is no way in which, even if I granted permission, this appeal would be decided before the beginning of the trial next week. Time is simply too short. Secondly, as I have already mentioned, I cannot see that it is necessary for this appeal to be decided ahead of the trial. Indeed, the trial may have an outcome which makes it unnecessary to pursue this appeal. It seems to me that it would not be fair to Mr Smurthwaite if I simply followed the same procedure as Arden LJ of rejecting his application. I agree with Arden LJ about the difficulties that there are in this appeal succeeding, save in one respect, and that is the question of costs. It seems to me that there is a real prospect of success in Mr Smurthwaite contending that he should not have to pay the costs of an application which, though unsuccessful at the date when the order was made, proved in fact that he was right in believing that the respondents had documents which should have been disclosed. It may be, as I have said, that the best way of seeking to deal with that position is by an application to the judge in the Chancery Division to set aside the order for costs on the basis that there has been misrepresentation as to the possession of the specific documents.
10. In order to keep the position open for Mr Smurthwaite, what I propose to do today is to grant him permission to appeal against the order for costs. I shall in the first instance limit the permission to appeal to that item, but I shall adjourn the remainder of the application to be dealt with at a renewed hearing after the outcome of the trial is known. There will be an opportunity, therefore, to Mr Smurthwaite to have the position on costs remedied by the court at first instance; but if, for some reason, it is not possible to do that, there will be the possibility - I can say no more - of that being done by this court. I should make it clear that granting permission to appeal is only a sign that the court thinks there is a real prospect of the appeal succeeding. It is not a guarantee that it will succeed.
11. As to the remaining grounds of appeal, it seems to me that it is premature for this court to decide whether or not to grant permission. The outcome of the trial may be such that it never becomes necessary for this court or any other court to consider the other grounds. Mr Wolman tried to persuade me that there would be some benefit to his client - and he suggested to the trial judge - to have the view of this court on the issue of "reputed wife". In my view that is not something which it would be right for this court to do ahead of the facts of the case being established at a trial. It is not normal procedure, in the absence of an express order for the trial of a preliminary issue of law, for this court to make rulings of law on issues ahead of the trial at which the facts would be established and legal argument can be made.
12. As for the suggestion made by Mr Wolman that there are other categories of documents, which are relevant to the reputed wife issue that is a matter on which the deputy judge ruled, my view is that there are difficulties in the appeal succeeding, but I would not refuse permission at this stage. It is open to the advisers of Mr Smurthwaite to see if there are some other ways of seeking to secure the documents which they suspect are relevant to that issue and are in the possession of the respondents. It is by no means unknown for applications for further disclosure to be made at the trial.
13. As for the appeal against the order made by Laddie J, what I propose to do is simply to adjourn the application for permission. It is obviously connected with the first application and there may be grounds for examining the decision which Laddie J made. But again I see no practical need, or even practical possibility, of that being substantively dealt with ahead of the trial. I would simply adjourn the application 2005/0541, along with the adjournment of the remaining part of the application in 2005/0033.
14. One final matter is that Mr Wolman sought on behalf of Mr Smurthwaite an order for the stay of execution of the orders for costs. He pointed to the financial situation of Mr Simpson-Smith with his voluntary arrangement and said that it would be appropriate to grant a stay rather than allowing Mr Simpson-Smith to enforce the orders for costs. I agree. It seems to me that if I am granting permission on the order against costs in 2005/0033 I should stay execution of that order against Mr Smurthwaite and I would do the same in relation to the order for costs made by Laddie J. The stay will continue, pending the final determination of the applications for permission to appeal.
15. So to sum up, first, there is a real prospect of the appeal succeeding against the order for costs made in 2005/0033. I adjourn the remaining grounds of appeal for which permission is sought until after the outcome of the trial is known. I also adjourn the application for permission to appeal in 2005/0541, in each case granting a stay of execution of the order for costs.

(Application 2005/0033 granted on costs issue only, remaining grounds of appeal for which permission is sought are adjourned; application 2005/0541 adjourned; stay of execution of the orders for costs).