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 CHANCERY DIVISION
(MR JUSTICE PETER SMITH)

		Royal Courts of Justice Strand London, WC2
		8 February 2006

1. SIR MARTIN NOURSE: This is an appeal by Richard John Canty, the respondent in the proceedings, against an order made by Peter Smith J on 9 June 2005 dismissing Mr Canty's appeal against an order made by HHJ Wyn Williams QC in the Cardiff County Court on 16 June 2004. The applicant in the proceedings, Patrick Michael Boyden, is the appellant's trustee in bankruptcy ("the Trustee"). The principal provision of the order dated 9 June 2005 was an order for possession of the appellant's home, 1 Raldan Close, Barry, in the Vale of Glamorgan ("the property") with a view to its sale by the Trustee. I should state at the outset that Mr Canty's mother, Rita Grace Canty, would have had a similar interest in the appeal, but sadly she died after the judge's order was made. As Peter Smith J said, there is a long history of litigation in this case. He summarised it in the judgment he gave on 9 June 2005 and no elaborate repetition is required. It is only necessary to state such facts as are material to the decision that has to be made today.
2. In the year 2000 the appellant was living in the property with his mother, the property being registered, as I understand it, in the sole name of the appellant. On 4 July 2000 bankruptcy orders were made against both of them, the petitions being based on an unsatisfied judgment for £1,144.44 in respect of the assessed costs of a hearing in a boundary dispute in which mother and son were unsuccessful. In November 2001 an order for possession of the property was made, and in October 2002 applications to annul the bankruptcies were dismissed. The appellant's attempts to impugn those orders, whether by application for permission to appeal or otherwise, have long since failed.
3. Before the bankruptcy orders were made the appellant and Mrs Canty had commenced and pursued another boundary action, against a different defendant; in that action they were successful. At some point, because the whole problem arose through a solicitor's negligence, the defendant was replaced by the Solicitors' Indemnity Fund ("SIF"). The Cantys were awarded £4,950 in respect of mesne profits in that action, though the appellant contends that the correct figure ought to have been £42,075. Various orders for costs were made, both in favour of the Cantys and against them. It seems likely, however, that there would have been a balance on those orders in favour of the Cantys, though the position remains obscure.
4. In February 2004 the Trustee applied to the Cardiff County Court for directions as to the quantum and recoverability of the aforesaid orders for costs and mesne profits, and also for leave to enforce the order for possession of the property. The appellant and Mrs Canty countered by applying for an order, under Section 303(1) of the Insolvency Act 1986, that the Trustee be directed to apply for correction of the order for mesne profits under the slip rule and an order that the costs be assessed by a costs judge in London on an indemnity basis.
5. All four applications came before HHJ Wyn Williams, who, by his order dated 16 June 2004, dismissed the Cantys' applications and gave the Trustee leave to enforce the possession order in respect of the property. In his written judgment the judge said in regard to the Cantys' applications, at paragraph 9:

"The [Trustee's] response in short is that it would not be possible to meet the bankruptcy debts, costs and expenses by pursuing the claims for costs and mesne profits. Accordingly, he proposes that any final decision about the pursuit of costs should await the sale of the home of the Respondents. So far as the claim for mesne profits is concerned the [Trustee] has concluded that the same has no merit."

6. In paragraph 10 the judge correctly directed himself as to the test to be applied. He said :

"The Court's function is to interfere with the proposed course of action on the part of the Trustee only if it concludes that it is one upon which no reasonable man would embark."

In regard to costs, having considered that point, the judge said in paragraph 15:


"In my judgment, therefore, there is no basis upon which I could direct the [Trustee] to pursue the issue of the unpaid costs. I cannot say that the decision of the Trustee to await the realisation of the proceeds of sale of the Respondents' home before taking a final decision about whether it pursues the question of costs, is one which no reasonable man could take given (a) the likely difficulties involved in any recovery; (b) the estimated amount likely to be recovered if recovery takes place (£14,500 on the best estimate of the [Trustee]) and (c) the estimated amount as at 19 February 2004 which would be required to pay the costs, debts and interest in full."

7. The judge then went on to consider the alleged claim for mesne profits which he said, if anything, had even less chance of success. He concluded at paragraph 17:


"In my judgment paragraphs 126 and 127 of the Trustee's witness statements provide compelling reasons why there can be no possible basis for interfering with the [Trustee's] decision not to pursue the issue of mesne profits."

As to the Trustee's application for leave to enforce the possession order, the judge said at paragraph 19:

"The [Trustee] voluntarily took no action in respect of the possession order while the investigation of the claims for costs and mesne profits was undertaken."

He concluded at paragraph 20:

"Counsel for the Applicant says that the court has no option, in effect, but to accede to the application. Mr Canty tells me that the Second Respondent resides at the premises and that she is suffering ill health and is elderly. I have no reason to doubt what Mr Canty says. Yet as I understand the law that affords me no reason for refusing the [Trustee's] application. In short, on the basis of the information before me I cannot see any basis on which I can refuse to give permission for the order for possession to be enforced."

8. The appellant, who I ought to have said has throughout appeared in person, was granted permission by Hart J to appeal to a judge of the Chancery Division. We have been informed in the skeleton argument of Mr Allison, who has appeared for the Trustee both below and before us, that the first hearing before Peter Smith J on 26 May 2005 started at 11.00 am and ended at 5.30 pm. We have seen a transcript of that hearing, which runs to 158 pages, the first 126 of which are taken up, so far as relevant, with the appellant's submissions as to costs and mesne profits, mainly with the former. He also made a strenuous attempt to reopen his challenge to the bankruptcy orders.
9. At page 127 there was an intervention by the appellant's sister, who was with him in court. She made reference for the first time that day to the Trustee's application for leave to enforce the order for possession of the property, stating her belief that if it was enforced, her mother, who was then within a month or so of her seventy-seventh birthday, was bedridden and had not been outside the house for two years, would die. The judge was clearly impressed by that point. He asked Mr Allison whether the Trustee would agree that a sale of the property should be postponed until after Mrs Canty's death, but Mr Allison indicated that it was unlikely that the Trustee would, or indeed could, properly agree. The judge also told Mr Allison that he was singularly unimpressed with the suggestion that the value of the costs order that the appellant had against SIF could possibly be as low as £14,500 and there was then some discussion on that point.
10. In the end the judge adjourned the hearing so that the Trustee could file and serve an up-to-date figure required to discharge the bankruptcy debts and costs and expenses, and an up-to-date valuation of the property, and so that the appellant could file and serve medical evidence in respect of Mrs Canty and evidence as to the rehousing of her in the event of the enforcement of the order for possession of the property. The judge made orders accordingly and he adjourned the appeal to the first available date after 7 July, with liberty to apply. As part of the order the appellant gave an undertaking to provide access to the property to enable the estate agent appointed by the Trustee to value it properly. The judge explained to the appellant the serious import of the undertaking and the consequence of breaking it.
11. I must now read what Peter Smith J said to the appellant near the end of the hearing on 26 May, transcript page 155. Having said that he would adjourn the hearing to a date to be fixed, he continued:

"I want to make quite clear, Mr Canty, to you the following. In respect of your challenge to the bankruptcy order there is no prospect. In respect of your challenge to the question in relation to the mesne profits there is no prospect. I am going to set these out in a reasoned judgment. There is no prospect, in my view, as to resisting a decision that pursuing the Solicitors' Indemnity Fund further on the evidence before HHJ Williams was incorrect, save in respect of a possible further claim for costs on the alternative basis. However, I am not going to order them to do that necessarily. They have heard what I have said and they will consider that in the light of the adjourned hearing. I do not believe that any argument concerning that is going to be enough for them to be funded. It follows therefore that the house will have to be sold. Now, I have power to postpone the sale and if there is evidence which shows that a sale will have a very serious impact on your mother's illness and there is a significant equity in the property to protect the trustee, in those circumstances I might postpone the order for sale. But I want you to note that word 'might', because I have not made my decision because I have not heard all the evidence. If there is no equity in the property now, I will order a sale because there is no justification in them being kept out of their money because they are going to lose money. So do you understand the two interrelating factors - your mother's illness and equity in the property?"

The appellant said that he did understand it, and then went on to raise a different point.

12. On the following day, 27 May 2005, an assistant solicitor in the firm of the Trustee's solicitors was telephoned by the appellant, who told him that the hearing the previous day had been a "farce" and that he was going to appeal the order made by the judge. The appellant further stated that because he was going to appeal he would not comply with the directions made by the judge on 26 May. He added that he would not allow the property to be valued, and if the Trustee was to seek to send an agent to value the property he would be wasting his time and be incurring unnecessary costs. The solicitor replied to the appellant that he should seek to comply with the directions of the judge; otherwise they would refer the matter to the court.. But the appellant again stated his intention to refuse to comply with the undertaking and the directions.
13. The result was that on 31 May the Trustee, under the liberty to apply, issued an application to come before Peter Smith J on 9 June seeking an order:


"… to vary or discharge the order made by Peter Smith J on 26 May 2005."


The state of affairs on that day was recorded by the judge in his judgment at paragraph 6 as follows:

"Mr Canty has been duly served and he has also had communication from my Clerk informing him of the hearing today. He has not attended court today, but on my request the Trustee's solicitors have telephoned Mr Canty and I understand he has told them that he is aware of the court hearing but he is not attending for two reasons. First, it is an application by the Trustee and therefore he does not need to attend (which is correct, although it does make it difficult for him to make any representations if he is not here). Second, he is going to appeal the order anyway, which is somewhat surprising as he has not yet heard the result; no doubt he believes the result will not be in his favour."

14. I should add that on 2 June the appellant had written a letter to the judge saying:

"I will be seeking leave to appeal any order that you intend to make on the first available date after 7 July 2005 at 10.00 am unless of course you intend to make a real proper order."

In his judgment the judge went on to say that it was quite clear that the appellant was not prepared to comply with orders of the court but that there was no point in taking committal proceedings; and that he would set aside the order he had made on 26 May, continue in effect the hearing of the appeal and give reasons why it failed.

15. By that stage the Trustee had put in evidence to the effect, first, that the amount required to discharge the bankruptcies had risen from about £160,000 to £202,894 and, secondly, that agents had already advised on a 'drive past' basis (a proper valuation had not been possible by reason of the appellant's breach of his undertaking to give access) that the open market value of the property was £145,000 to £165,000 and that the estimated restricted realisation price was £135,000 to £140,000, figures which on any footing would have resulted in a substantial shortfall on the amount required to discharge the bankruptcies. There was of course no up-to-date evidence as to Mrs Canty's health nor or any evidence at all as to the possibilities of rehousing her. I put it in that way because the appellant has handed us today a copy of a medical report on Mrs Canty's health dated 10 August 2004, which he says was before Peter Smith J on 26 May. It must be said that that report showed that Mrs Canty was at the time in very poor health.
16. On 9 June the judge gave a full judgment on the merits of the appeals to him, concluding at paragraph 23:


"I would, if I had been sitting as HHJ Williams QC, come to the same conclusion on all the material that was before him, and I come to that conclusion on the merits now on all the material now before me including the additional material provided for the purposes of the appeal."

By his order made on 9 June the judge set his order of 26 May aside; he dismissed the appeals of the appellant and Mrs Canty; he made an order that they should deliver up possession of the property to the Trustee by 4.00 pm on 23 June 2005; and he made a direction in these terms:

"It is directed that the Respondent does pursue, to the extent that he shall in his sole discretion determine appropriate, the prospect of recovery for the benefit of the bankruptcy estates from the Solicitors' Indemnity Fund in respect of costs orders pre-dating the making of the bankruptcy orders in relation to the Appellants."

So although the judge had taken the view that the figure of £14,500 was very likely too low, he left it to the Trustee to decide for himself after the sale of the property whether that matter should be taken further or not.

17. The appellant sought permission to appeal against the order of 9 June. His application came before Arden LJ on 10 October 2005. In giving judgment her Ladyship read the Trustee's notice of application dated 31 May 2005. She read the passage I have read from paragraph 6 of Peter Smith J's judgment, and stated that the appellant's complaint had been that he had had no notice that the judge would go on and hear his appeal on the merits on 9 June and that he would have vigorously opposed any application to restore the appeal on that date. She continued at paragraph 11:

"I go back to the form of the application made before the judge. In my judgment, it is arguable that all the respondents were applying for was a discharge of the order, or variation of the order made on 26 May 2005 for an adjournment in the terms made by the judge and which I have already read out. Accordingly, notwithstanding paragraph 6 of the judge's judgment, Mr Canty's appeal was not put before the judge. It seems to me that this is a matter which is arguable on the papers which I have seen. Moreover, in my judgment, Mr Canty is entitled to raise that point, notwithstanding that the judge decided that the appeal had no prospect of success in reaching that conclusion. The judge did not have the benefit of argument from Mr Canty."

18. It is clear that the papers that Arden LJ had seen did not include a transcript of the hearing on 26 May, in particular page 155. It is perfectly clear from a reading of that transcript as a whole that the appellant's appeal was put before the judge and that the judge did have the benefit of an argument from him, though not on 9 June because the appellant chose not to be there. Moreover, it must have been perfectly clear to the appellant (indeed as much could be said to appear from his letter to the judge of 2 June) that the judge would proceed to determine the appeals on 9 June and would very likely, amongst other things, make an order for the possession of the property. I should point out that the hearing before Arden LJ was not on notice, and it must be extremely doubtful whether she was given the information that she ought to have been given in order for her properly to consider whether permission to appeal should be granted or not.
19. I turn to the points that the appellant has sought to make today. He has made yet another sustained attempt to reopen his challenge to the bankruptcies, in particular by trying to put in a requisition notice and by questioning the constitution of the Trustee and his predecessor to act as trustee in bankruptcy. As my Lord, Buxton LJ, made very clear to Mr Canty at several points this morning, it is impossible for this court now to go into the making of the bankruptcy orders or the other matters consequent thereon which have already been determined on previous occasions.
20. The appellant has also read to us in full a skeleton argument which was before Arden LJ and in which it is alleged that the order for possession of 9 June was obtained by fraud. I have got the impression that Mr Canty has not put it quite as strongly today as he had put it in the skeleton argument, but it is perfectly clear that the allegation, whether of fraud or something less, is completely unfounded.
21. Finally, I must mention the appellant's proffering of a report of a decision of Laddie J relating to the rescission of a bankruptcy order. For the reasons I have already given in relation to his attempt to reopen his challenge to the bankruptcies that decision has no bearing on the present appeal. In summary, the appellant has been unable to show any ground at all on which this court could interfere with the decision of Peter Smith J on 9 June 2005, or with any provision of the order he then made, and that means that this appeal must be dismissed.
22. LORD JUSTICE DYSON: I agree.
23. LORD JUSTICE BUXTON: I also agree. Mr Canty left the court in no doubt that he was, and continues to be, extremely aggrieved about the making of the bankruptcy order, but this court is not concerned with that today. He has had ample opportunity, over the years, to complain of that to various of Her Majesty's judges, his ability to challenge that issue expiring with the refusal by Chadwick LJ on 11 April 2003 of Mr Canty's application for permission to appeal against an order rejecting his complaints made by Neuberger J on 24 October 2002. We were concerned today only with the matter upon which Arden LJ had granted permission; that is to say, whether the order made by Peter Smith J on 9 June 2005 was lawful and justified, Mr Canty complaining that he had no notice of what Peter Smith J would be likely to do and did not have an opportunity to put argument on those points to that judge.
24. As my Lord has demonstrated, once one looks at the proceedings on 26 May 2005, out of which the judge's order of 9 June emerged, and looks at the verbatim transcript of them, which we have had the opportunity of reading in full, two things are wholly apparent. First of all, that Mr Canty was given by Peter Smith J the most ample opportunity to argue the points that he wished to put before that judge and was not deterred, any more than he has been deterred before us, by the attempts of the judge to explain to him the limited nature of the issues that were before him. The proceedings went on, it would appear, for something like five and a half hours, and took the form of a sustained dialogue between Mr Canty and the judge, in which the judge made every effort to explain to Mr Canty what the difficulties were in his way, and in the passage that my Lord has read made it absolutely clear to Mr Canty that the judge rejected the contentions that Mr Canty had put before him, but was prepared to adjourn the matter to another hearing for two purposes only; one, so that Mr Canty could put in further evidence about the state of health of Mrs Canty, and secondly, so that the Trustee could pursue a further valuation of the premises, that of course being dependent upon the Trustee being afforded access to those premises. Mr Canty broke the undertaking that he gave the judge that he would allow the Trustee to enter, and did not produce any further medical evidence.
25. In those circumstances, it can have been no surprise to him whatsoever that the judge went ahead on 9 June to the substance of the matter. There was no other reasonable course that the judge could have followed, the conditions for that hearing on 9 June having been removed by Mr Canty's own act. Had Arden LJ seen the whole of the documents and been given a full account of what happened on 26 May 2005, which plainly she was not, I have little doubt that she would not have granted permission to appeal in this case. In any event, for the reasons given by my Lord, which I have ventured simply to underline, this appeal has no merit and must be dismissed.

Order: Appeal dismissed.