England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		10/04/2008

Mr Justice Warren :

1. This matter comes before me again in the circumstances which I will explain in a moment. Essentially, Mr Simms seeks clarification of the extent of the stay which I granted in paragraph 15 of my order dated 23 July 2007 and, in any event, a variation of it so that it becomes a stay without qualification pending appeal of my own orders and a similar stay of other costs orders made by Laddie J (confirmed by the Court of Appeal when Mr Simms appealed the substantive order made by Laddie J) and by the Court of Appeal on a separate appeal.
2. Since the date of my order, Mr Simms has issued an Appellant's notice raising the grounds of appeal on which I have given him permission to appeal. That permission allowed him to appeal from my decision refusing to discharge the freezing orders made against him by Lindsay J and Lewison J. In that notice, he sought permission to raise further grounds and sought a general stay of execution of my order. On 12 March 2008, the Court of Appeal (The Master of the Rolls and Thomas LJ) extended the permission to appeal which I had given, allowing Mr Simms to rely on an additional 6 grounds, one of which related to Mr Simms' case that there had been deliberate non-disclosure on the part of the claimants in obtaining the freezing orders. The Court did not deal with Mr Simms' application for a stay of execution: I understand that this may have been because time was running short. Instead, it was directed (in paragraph 4) that the application to vary or clarify paragraph 15.1 of my order be adjourned to me, on notice to DGI and it was directed that "any further application for permission to appeal from paragraph 4 of this order to this Court, or in relation to other interlocutory matters, will be determined by Lord Justice Thomas".
3. Pursuant to that direction, Mr Simms has applied to me by an application notice dated 17 March 2008 supported by a witness statement from him of the same date. He seeks an injunction restraining DGI from taking over the carriage of the bankruptcy proceedings against him which I come to in a moment; he also seeks an order that my order granting a limited stay be clarified/extended.
4. Mr Simms has for some time owed the Law Society an outstanding sum in respect of costs which he had been ordered to pay in the context of his disciplinary proceedings in an amount in excess of £275,000 plus interest. He also owes DGI the sums of £60,000 (Laddie J) and £30,000 (Court of Appeal) in respect of the costs orders I have already mentioned, dating back to February 2005 and April 2006 respectively.
5. On 13 December 2007, the Law Society issued a petition for the bankruptcy of Mr Simms following his failure to comply with a statutory demand in respect of the costs order in its favour which I have mentioned. It has comparatively recently come to the notice of DGI's legal team that Mr Simms is jointly and severally liable with certain others to two companies called Sisco Oil Ltd and Rubicon Investments Ltd in the sun of US$10 million following a consent order. Sisco and Rubicon gave notice of their intention to support the Law Society's petition, as did DGI.
6. Following a number of adjournments, the petition was eventually dealt with by the Registrar who, on 3 April 2008, made a bankruptcy order.
7. The effect of that order is that all of Mr Simms' assets vest in his trustee in bankruptcy immediately upon his appointment taking effect or, in the case of the official receiver, on his becoming trustee: see section 306 Insolvency Act 1986. So far as I am aware, no trustee has yet been appointed pursuant to sections 294 or 295; nor has the official receiver become the trustee under section 295. Accordingly, Mr Simms' assets remain, for the time being, vested in him. But the official receiver is the receiver of his estate under section 287(1).
8. Under section 285(3), no creditor shall, in respect of any provable debt, have any remedy against the bankrupt's assets. Instead, the creditor has rights of proof in the bankruptcy under the Act and the Insolvency Rules 1986.
9. Mr Samek submits that Mr Simms has no locus standi to make the application which he does. He relies in particular on the decision of the Court of Appeal in Heath v Tang [1993] 1 WLR 1421. That decision concerned two unrelated appeals where two appellants, each subject to a bankruptcy order, sought leave to appeal against the judgments upon which their bankruptcy orders were founded. In the first appeal, a trustee in bankruptcy of the appellant, Mr Tang, had been appointed; in the second appeal, no trustee of the appellant, Mr Stevens, had been appointed. After considering, and affirming, the well-established law that a bankrupt could not sue on a cause of action vested in his trustee, the court considered the position of a defendant who was, or who had during the course of the claim against him, been made subject to a bankruptcy order and where a trustee has been appointed. Where the action simply concerns a claim for debt or damages, the only assets out of which the claim can be satisfied will have vested in the trustee; the bankrupt therefore has, so it was held, no interest in the proceedings. He has no locus standi, on that basis, to proceed with an appeal against a successful claimant. Accordingly, Mr Tang was refused permission to appeal.
10. In such a case, it is for the bankrupt's trustee in bankruptcy to decide whether to pursue an appeal. If he declines to do so, the bankrupt can find a measure of protection, if he disagrees with the trustee's decision, in section 303 which allows him to challenge it. The bankruptcy court has power to direct the trustee himself to appeal or to allow the bankrupt to conduct the appeal in the name of the trustee although in this latter case, security would, almost inevitably, have to be provided.
11. Although, until the appointment of the trustee, the assets remained vested in the bankrupt, the Court of Appeal in Heath v Tang did not consider that this made any difference to the result in the case of Mr Stevens, where a trustee had not yet been appointed. Drawing attention to that difference between the case of Mr Tang and the case of Mr Stevens, Hoffmann LJ said this (see at p 1427):

"….we do not think that this matters. Section 285(3) made the costs order unenforceable against Mr Stevens personally as from the date of the bankruptcy order. He therefore has no interest in challenging that order. In any case, the appointment of a trustee is inevitable and it would be pointless to give leave to bring an appeal which would be stayed on his appointment. This application must therefore also be refused."

12. The first part of this reasoning applies in the present case. Section 285(3) renders the orders which I made, and the earlier costs orders, unenforceable against Mr Simms. I cannot conclude that Mr Simms nonetheless has an interest in challenging that order on the footing that he might succeed on an appeal consistently with the reasoning in Heath v Tang.
13. I ought to qualify the apparently absolute nature of the prohibition on a bankrupt bringing an appeal. It may be that the position, prior to the appointment of a trustee, is not that there is, as a matter of law, no locus standi for the bankrupt to appeal but is rather a matter for the discretion of the court, but where the discretion can, in the light of Heath v Tang be exercised only by refusing to allow him to do so. But in exceptional circumstances, it may be right that the bankrupt should be able to take some steps himself. For instance, if the time for appeal is about to expire, the bankrupt must surely be able to apply to the court for an extension of time to bring the appeal or perhaps even to lodge an Appellant's notice, unless it is said that that is the exclusive province of the official receiver as receiver of the estate.
14. More generally, it can be seen from the decision in Boyd & Hutchinson (a firm) v Foenander [2003] EWCA Civ 1516, that even in a case where a trustee in bankruptcy has been appointed, the bankrupt himself is not altogether prohibited from applying to the court. In that case, the trustee declined to pursue an appeal. The bankrupt asserted that he would be able to obtain an annulment of the bankruptcy order. The court of appeal expressed sympathy with the view that an adjournment of the appeal should be allowed to enable the annulment issue to be determined, although in expressing that view the Court certainly did not regard the bankrupt as having locus standi to pursue the actual appeal. However, the appeal was, as it happened, ready for hearing. The Court of Appeal considered, hardly surprisingly, that the question whether the appeal should be adjourned depended to a great extent on whether the appeal stood any real prospect of success. It therefore went on to examine the merits of the appeal, not as a hearing of the appeal itself, but to determine whether it should be adjourned. Having examined the merits, it considered there was no prospect of success and therefore declined an adjournment. Having declined an adjournment, it went on to decide the appeal by dismissing it, on the basis of its earlier consideration of the merits.
15. In the present case, I do not consider that Mr Simms has any locus standi to pursue the appeal; alternatively, if there is no strict legal bar to his appealing (no bar because his assets are still vested in him), he should not be allowed himself to continue his appeal ( I leave open the question whether he, rather than the official receiver as receiver of his estate, would be entitled to take steps, if any were necessary, to preserve the appeal for the benefit of the trustee when appointed). The possibility that Mr Simms might obtain an annulment of the bankruptcy order does not, in my judgment, make any difference to that conclusion. Unless and until annulled, the bankruptcy order remains in full force; the reasoning in Heath v Tang applies and the mere possibility of an annulment does not provide Mr Simms with an interest in his assets any more that the possibility of his winning his appeal does. Accordingly, he has, in my judgment, no right to make the application which he does; I consider that I should dismiss it on that ground alone.
16. However, if I am wrong about that, Mr Simms' application for a stay of my order and earlier costs orders rests on the basis that with such a stay he will be able to obtain an annulment whereas absent a stay he clearly will not be able to do so. The reason, according to him, that absent a stay, he would not be entitled to an annulment is because he will not able to put in place the funding to pay off the Law Society and, clearly, unless and until the Law Society is paid, there can be no prospect of an annulment. In contrast, if there is a stay, he will be able to raise the funding and pay of the Law Society. Once the Law Society is paid off, then he says that he will be able to obtain an annulment. This is on the basis that the Sisco/Rubicom debt will be paid off this week by those jointly liable with him. Thus a failure to order a stay will stifle the appeal.
17. There are some difficulties with this line of argument. First, the point about funding is a new point and one which has not been demonstrated on the evidence. There is nothing before me from the funder to show what its position is. I do not understand why a stay would make any difference to his willingness to provide funding. Further, there is no evidence from any funder, or from those liable with Mr Simms for the Sisco/Rubicon debt, to show that that debt will in fact be paid as Mr Simms indicates (or at all).
18. Secondly, the second part of the reasoning in Heath v Tang set out in paragraph 11 above – that leave to appeal should not be given when inevitably a trustee would be appointed upon which event the appeal would be stayed – has a precise parallel in the present case: even if I were to grant the stay of my order which Mr Simms seeks, and his appeal were to continue, the appeal would inevitably be stayed once a trustee was appointed which inevitably will be the case. It would be pointless to grant a stay of my order when the appointment of a trustee is inevitable and when it will be for that trustee to decide whether to continue with the appeal.
19. Thirdly, it seems to me to be highly unlikely that Mr Simms would in fact be able to obtain an annulment even if the Law Society were paid off and the Sisco/Rubicon debt discharged. To see why that is so, it is necessary to look at the relevant statutory provisions.
20. Annulment is dealt with in section 282. The relevant provision so far as concerns Mr Simms, is section 282(1)(b) which gives the court power to annul the bankruptcy where it appears to the court that "to the extent required by the rules, the bankruptcy debts and the expenses of the bankruptcy have all, since the making of the order, been either paid or secured for to the satisfaction of the court". Rule 6.211 Insolvency Rules 1986 provides that all the bankruptcy debts which have been proved must be paid in full subject to sub-rule (3). That sub-rule provides that if a debt is disputed the bankrupt must have given such security as the court considers adequate to satisfy any sum that may subsequently be proved to be due.
21. In the present case, the sums due under my order and earlier costs orders are plainly provable debts. It is true that they are disputed debts in the sense that they are subject to appeal; at best, from Mr Simms' point of view, that brings them into sub-rule (3) in which case, to obtain an annulment, Mr Simms would have to provide security for the full amount of my order, not just the amount of the interim payments on account or damages and costs which I have ordered, as well as for the earlier costs orders. It is improbable that Mr Simms would in fact ever be able procure the provision of such security. At least, there is not a shred of evidence that he would be able to do so. The conclusion in this respect is the same whether or not a stay of my order and the earlier costs orders is granted.
22. So far as concerns the earlier costs orders, I do not consider that I have any jurisdiction to grant a stay in respect of them. One order, that of Laddie J, has effectively been affirmed by the Court of Appeal the other was an order of the Court of Appeal itself. Any application to stay should be made to that Court (although if I am right in my conclusions so far, the Court of Appeal is faced with the same objection as to locus standi as I face).
23. So far as concerns my own order, I would not, in the light of the three difficulties just considered, grant any further stay.
24. That makes it unnecessary to construe my order or to decide whether I have power to vary it. As to the former, it is clearly the case that DGI was entitled to support the Law Society's petition and is entitled to prove in the resulting bankruptcy (indeed, I do not think that the Court could prevent DGI from proving since that is a statutory right). Further, it is clear that DGI is entitled to petition in respect of any debt, even one arising as a result of orders in the action, other than my own orders for damages and costs. I do not propose to say anything more about whether I have power to vary my order granting a limited stay.
25. I add that the possibility of an annulment might, I suppose, be a ground for the adjournment of the appeal if, by the time the appeal is listed, the trustee has indicated that he will not pursue the appeal and Mr Simms has been unable to obtain a satisfactory direction under section 303. But that would be a matter for the Court of Appeal and not for me, let alone for me at this stage of the proceedings.
26. Mr Simms' applications are therefore refused