England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		17 July 2007

1. MR JUSTICE PATTEN: This is an appeal by the claimant in these proceedings, Lansforsakringar Bank, in relation to a judgment of Master Leslie given on 29 January 2007 on an application by the bank for an interim third party debt order pursuant to CPR part 72.2. The application related to the payment of the sum of £300,000, which I directed should be paid to the defendant, Dr Malcolm Wood, under the provisions of the Inheritance (Provision for Family and Dependants) Act 1975 from the estate of his late mother, following a trial which took place before me in Newcastle in April 2006.
2. The background to that claim and the reasons for my decision are contained in my written reserved judgment, which is to be found under neutral citation number [2006] EWHC 929. The outcome of those proceedings was that I directed that Dr Wood should receive as a lump sum from the residuary estate the figure of £300,000 and that that sum should be paid in the usual way out of the net estate in the due course of administration. The reason for making an order in that form is of course that under the provisions of section 2 of the 1975 Act the court's power to grant relief, including by way of making an order for a lump sum under section 2(1)(b) of the Act, exists only in relation to the net estate of the deceased and therefore any provision which the court directs should be made cannot interfere with the due administration of the estate, including in particular the payment of the debts and liabilities of the deceased.
3. Section 19 of the Act further makes it clear that an order made under section 2 is to be treated "for all purposes" (those are the words of the subsection) and shall for all purposes take effect and be deemed to have had effect from the deceased's death subject to the provisions of the order. Therefore the order which I made, like any similar order for financial provision, operates in effect as if it were a provision under the will for payment out of a proportion of the residuary estate.
4. Before I come to the jurisdictional issue which this appeal is concerned with, it is necessary for me very briefly to set out the immediate background to this particular claim. Some of the facts are referred to and formed part of the evidence before me in Newcastle but it is, I think, common ground that in December 1990 the defendant, Dr Wood, borrowed 300,000 Swedish krona from the claimant's predecessor in title in order to buy into a partnership in a Swedish law firm. That debt was on the evidence before me guaranteed by his parents, and Barclays Bank, as the correspondent bank for the Swedish bank which granted the loan, took (and I believe continues to hold, or at least did until recently when the property was sold) the title deeds to Dr Wood's parents' home in Gosforth in Newcastle as security.
5. On 27 January 1995 the bank obtained judgment in Sweden against the defendant arising out of the nonpayment of the loan in the sum of 300,000 krona plus interest at what I am told was a contractual rate of 18 per cent per annum, making a total of some 427,840 krona plus an additional 35 krona in costs. That judgment was registered in the Queen's Bench Division on 19 October 1995 and Dr Wood's appeal against that registration was dismissed by Butterfield J on 16 February 1996. To date nothing has been paid in relation to the judgment.
6. The present position is that the claimant is attempting to recover what it says is due to it under the judgment on two fronts. Firstly, from the executors of Mrs Wood's estate and, secondly, by way of these proceedings directly against Dr Wood himself. As things stand today the total sum due is something over 1.25 million krona, which amounts in sterling to about £97,000.
7. On 28 September 2006 an interim third party debt order was made but when the matter came back before Master Leslie on 29 January 2007 he declined to make the interim order final on the grounds that there was no jurisdiction under CPR part 72.2 in effect to attach as a debt due or accruing due within the meaning of that rule the sum of £300,000 to be paid out of Mrs Wood's residuary estate pursuant to my own order. It is that question of jurisdiction which arises for me today on this appeal.
8. I should say before I come to the question of jurisdiction, to some extent by way of an aside, that when I considered this matter last year I certainly was left with the impression from the executor's evidence that, although Dr Wood himself thought there might be grounds under Swedish law for disputing the guarantee liability of his parents, that was not the view of the executors. They took the position that Barclays continued to hold the deeds to the house in order to secure the guarantee liability and were (a) unwilling to release them and (b) in all probability could not be compelled to release them so as to enable the property to be realised free of that liability.
9. Mr Dinning certainly, so far as I can recall, took the position that for purposes of considering any grant of relief under the 1975 Act, and therefore for estimating the size of the estate available for distribution between the existing beneficiaries and the claimant, I needed to factor in the likelihood that the £97,000 odd would have to be discharged in favour of the bank in the course of administration of the estate. That, I think, is apparent from paragraph 61 of my judgment where I set out the facts as I believed them to be in relation to the Swedish bank liability and in paragraph 65 where I deal with the size of the estate. My reasons for making (what I considered to be) reasonable financial provision are set out in paragraph 73, which again reflects my understanding and intention that the provision in favour of Dr Wood should be made out of the residuary estate after payment of liabilities including that properly due to the bank.
10. I turn against this background to the issue of jurisdiction. CPR part 72.2 provides that:

"Upon the application of a judgment creditor, the court may make an order ... requiring a third party to pay to the judgment creditor --

(a) the amount of any debt due or accruing due to the judgment debtor from the third party."

The critical words therefore are "any debt due or accruing due to the judgment debtor from the third party" and the issue which I have to decide is whether Dr Wood's entitlement to share in the residuary estate under my order is such a debt.

11. The first point to be made is that the words of CPR part 72.2 replicate without alteration the provisions of the old order 42 of the Rules of the Supreme Court under which it was possible to garnishee debts due to the judgment debtor. In relation to that jurisdiction there is clear authority, which is not disputed as part of this appeal, in the case of McDowell v Hollister [1855] 25 LT 185 that the interest of a beneficiary under a will entitled to a pecuniary legacy cannot be attached by way of a garnishee order.
12. In more recent times the Court of Appeal in Re Jennery (deceased) [1967] Ch 280 had to consider an application by a widow in whose favour an order for a lump sum payment under what was then the 1938 Inheritance Act had been made, but in circumstances where that payment had not yet been made by the executors, for a four-day order under RSC order 42 rule 2 requiring the executors to pay the money. The judge had refused to make an order and the appeal was dismissed on the grounds that an order for the payment of a lump sum under the Inheritance Act does not constitute an order for the payment of a sum of money such as to enable the court to exercise the jurisdiction under order 42. Russell LJ at page 285 said this:

"Great stress is laid on the form of that order as showing that it is an order for payment of a sum of money. I observe in the first place that it is not an order that any person should pay a sum of money, it is simply an order that it should be paid to the plaintiff out of the capital of the estate. That order, to my mind, follows exactly what is required and appropriate under the form of the statute which provides that the court may order provision to be made out of the deceased's net estate and that the provision may be made by way of periodical payments or it may be by way of a lump sum payment.

"It seems to me that what the order is doing is fulfilling the powers of the court under the statute, namely, to establish the rights of a dependant, and I consider further that those rights, when they are established by an order, have no greater effect than that of making that person the equivalent of a beneficiary under the will, with or without any special directions which might have been made in the will under which any particular legacy is to be paid out of capital or out of income or out of one property or asset rather than another.

"I can find no resemblance, except the most superficial one, between an order made in this form under this Act and any order for payment which can be made the subject of an application for a four-day order. The proper step for a dependant to take is the ordinary step that a beneficiary of an estate has open to him if he or she is unable to get satisfaction from the trustees or personal representatives, but that is not the step that has been taken here."

13. In my judgment, the reasoning of the Court of Appeal precludes an application of the kind made by the bank for relief under CPR part 72.2. By the same process of reasoning it is quite clear that the effect of the order under section 2 of the 1975 Act was simply to re-order in effect the provisions of the deceased's will and not to make anything equivalent to an order for the payment of money that can properly be described as a debt within the meaning of CPR 72.2.
14. Although there is clear authority that for purposes of both the garnishee jurisdiction, and therefore CPR 72.2, a debt does not have to be immediately payable in order to come within the meaning of the rule, it does, nonetheless, have to be a debt properly so called and, whatever may be the precise boundaries of that definition, it seems to me by analogy as a clear matter of authority that it does not extend so far as to encompass either monies due, whether by pecuniary legacy or a share in the residuary estate under a will or the equivalent of that in the form of an order made under section 2 of the 1975 Act.
15. For those reasons I conclude that the master was clearly right in the decision which he came to and the appeal will therefore be dismissed.