England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		15/03/2010

The Honourable Mr Justice Coulson:

1. This is a building claim brought by the employers for damages for breach of contract which, as we shall see, has been complicated by the conduct of the defendant contractor. The claim is modest by the standards of the TCC, being for just over £100,000, although there is a counterclaim of just over £50,000. This is the first day of the trial.
2. The case has thus far been managed by HHJ Toulmin CMG QC. That process has been made more onerous, and doubtless more expensive, by the defendant's failure to provide a cogent defence to the claim, or to comply with the orders of the judge. His most recent order was dated 26^th February 2010. That required various steps to be taken by way of final preparation for the trial. The defendant has played no part in those final preparations, despite the fact that this trial date was fixed as long ago as 2^nd October 2009.
3. On Friday 5^th March, the defendant apparently sacked his legal team. No explanation for that has been given and, as far as I am aware, no application has been made by his solicitors to come off the record.
4. On the afternoon of Wednesday 10^th March, the claimants' solicitors received a one-line e-mail from the defendant to say that he had authorised Rod Jones of Glaister Jones to act on his behalf. The claimants' solicitors then made repeated efforts to contact Mr Jones both that afternoon and all day Thursday 11^th March. Although those efforts were made both by telephone and by e-mail, they met with no success. The claimants' solicitors' researches showed that Mr Jones is an insolvency practitioner.
5. At 9.30 on the morning of Friday, 12^th March, the last working day before the trial, Mr Jones sent the claimants solicitors a fax in the following terms:

"Mr van Der Heiden has applied for an Interim Order under section 252 of the Insolvency Act 1986 to give him protection from his creditors and to assist him into promoting an Individual Voluntary Arrangement as an alternative to Bankruptcy.

The effect of an interim order is set out in section 252 of the Insolvency Act 1986 as follows:

a) no bankruptcy petition relating to the debtor may be presented or proceeded with…

b) no other proceedings, and no execution or other legal process, may be commenced or continued and no distress may be levied against the debtor or his property except with the leave of the court.

The Claimants have been notified of Mr Van Der Heiden's application for an Interim Order.

I expect the Interim Order to be made this morning and shall advise you as soon as that is the case".

6. I note that this fax:

a) Did not say to which court the application had been made

b) Did not enclose the application itself, or the supporting affidavit, or any of the other documents required by such an application

c) Was the very first indication that the claimants solicitors had received that the defendant was or might be insolvent;

d) Was erroneous in suggesting that the claimants had been notified of the application.

7. Accordingly the claimants solicitors responded by return in these terms:

" Please would you explain as a matter of urgency:

1. Who Mr Van Der Heiden's creditors are?

2. What are the amounts of each debt to each creditor?

3. To which court has the section 252 application been made and on what date?

4. Why has the section 252 application not been served on us

Please supply us with a copy of the application without delay

It is obviously unsatisfactory for Mr Van Der Heiden to make such an application on the eve of trial. If he was in genuine financial difficulties then properly supported information should have been supplied promptly as soon as it was known.

For the moment the High Court trial should proceed. Mr Van Der Heiden should attend. We will be bringing this to the attention of the trial judge in the meantime".

8. Mr Jones did not answer those valid questions. Instead on Friday afternoon he sent another fax saying that the Interim Order had been granted in Swindon County Court. He went on to say: "it follows from this that if the claimants wish to continue with their application against Mr Van Der Heiden despite the Interim Order being in force they must apply to the Swindon County Court which is the court that made the Interim Order. The claimants have been notified of the Interim Order and advised that this Court has been notified".

The last sentence makes little sense and was in any event untrue. No copy of the alleged order has been provided to the claimants or their solicitors, and neither Mr Jones nor the defendant are present at court today to assist on any of these matters.

9. Accordingly this morning Mr Woods, on behalf of the claimants, seeks my permission pursuant to section 252 of the Insolvency Act 1986 to continue with the trial. It seems to me that the claimants have an overwhelmingly strong case on the merits of that application. The trial has been fixed for 5 months. The claimants have incurred considerable costs in order to comply with the judge's earlier orders and to be ready for this trial. The defendant and Mr Jones have been notified not only of the trial but also of the claimants' determination to continue therewith. I am told that the costs do or may outweigh the sums at stake, and that an adjournment at this late stage would be financially disastrous for the claimants.
10. Moreover, it must be said that the conduct of both the defendant and Mr Jones has been at best cynical, and at worst, wholly unacceptable. I refer in particular to the last minute raising (for the first time) of the defendant's potential insolvency; the lack of any information about the defendant's financial position; the failure to provide any of the documents that were apparently provided to Swindon County Court; and the difficulties of ensuring any proper contact with Mr Jones. These all point inexorably towards this being a manipulative, last-minute, high-stakes attempt to avoid the consequences of today's trial.
11. However, if Mr Jones' second fax is right, then I have no jurisdiction to continue with this trial, no matter how strong the claimants' application may be that I do so. If I read his fax correctly, he says that only Swindon County Court can decide that this High Court trial can proceed. Mr Woods submits that that is wrong and that I have the jurisdiction to decide whether or not this trial should continue.
12. Section 252 of the Insolvency Act 1986 provides as follows:

"1). In the circumstances specified below, the court may in the case of a debtor (being an individual) make an interim order under this section

2). An interim order has the effect that during the period for which it is in force-….

b) no other proceedings and no execution or other legal process may be commenced or continued and no distress may be levied against the debtor or his property except with the leave of the court."

13. Section 385 provides that "'the court' in relation to any matter, means the court to which, in accordance with section 373 and Part x and the rules, proceedings with respect to that matter are allocated or transferred…."
14. Section 373 provides as follows:

"1). The High Court and the county courts have jurisdiction throughout England and Wales for the purposes of the Parts in this Group.

2). For the purposes of those Parts a county court has, in addition to its ordinary jurisdiction, all the powers and jurisdiction of the High Court and the orders of the court may be enforced accordingly in the prescribed manner.

3). Jurisdiction for the purposes of those Parts is exercised-

a) by the High Court in relation to the proceedings which in accordance with the rules are allocated to the London insolvency district and

b) by each county court in relation to the proceedings which are so allocated to the insolvency district of that court…"

15. In Calor Gas v Piercy [1994] BCC 69. HHJ Paul Baker QC, sitting as a high court judge, had to deal with an argument by the debtors that only the county court which had made an interim order had the jurisdiction to give leave under section 252. the judge rejected that argument. He referred to section 373 and he said this:

"In my judgment the master, who of course is part of the High Court, did have jurisdiction and I think it would be too restrictive to say that because one bankruptcy court has made an interim order or any other order, that precludes any other court from giving leave under section 252. It may be that in any particular case the court to which application for leave is made should decline to exercise its jurisdiction and transfer the proceedings to another court, as indeed happened subsequently when the proceedings before the Queens Bench Division were transferred into this division. I do not read sub-section 3) as cutting down the wide terms of sub-section 1)…"

16. In Clark v Coutts and Co [2002] EWCA Civ 943, Peter Gibson LJ referred to and expressly adopted that line of reasoning. Having set out the judge's comments in Calor Gas, he went on:

"I respectfully agree. In my judgment Parliament was deliberately seeking to avoid points on jurisdiction being taken in bankruptcy proceedings such as used to be the regular practice prior to the 1986 Act coming into force. Jurisdiction is conferred quite widely and, though in practice they will no doubt be powerful reasons why the County Court seised of the bankruptcy proceedings should be the court to consider whether leave should be granted, I do not accept Miss Andrews' submission that the High Court has no jurisdiction."

17. It seems to me clear that I am entitled to exercise the jurisdiction under section 252 of the Insolvency Act 1986 and, if I consider it appropriate, to give leave to the claimants to continue with these proceedings. There are a number of reasons for that conclusion.
18. First, there is nothing in the Act which indicates that, if an interim order is made by a county court, the High Court is in some way excluded from exercising any jurisdiction under section 252. If Mr Jones was right then neither the High Court (nor, if relevant, the Court of Appeal) would have any jurisdiction in relation to the continuation of this trial, and only the Swindon County Court could decide whether or not that trial could continue. That seems a remarkable result. If it were right, it would encourage those who are or might be in a parlous financial state to wait until the last working day before a trial, and then apply to an out of town county court for an interim order, so as to obtain, without any cost penalty, an effective adjournment of a High Court trial. It seems to me that the clearest possible words would be required in the 1986 Act for such a result even to be possible. In my judgment, there is nothing in the Act which makes any such provision.
19. Secondly, of course, there are the authorities to which I have referred, namely Calor Gas and Clarke. It seems to me that each of those are directly applicable to the present case and make plain that I have the necessary jurisdiction under section 252. Indeed, Clarke, being a decision of the Court of Appeal, is binding on me.
20. Thirdly, I consider that, properly construed, the Act provides that I do have the necessary jurisdiction. That construction can be arrived at in one of two ways. On one view, the words in section 385, which refer to "that matter", are in the present case referring to this trial: that is 'the matter' relevant to the application under section 252. This court is the court to which that matter has been allocated. The reference is not to the insolvency proceedings, which is not a matter with which this court is directly concerned.
21. If that were wrong then it seems to me that, pursuant to Rule 7.11 of the Insolvency Rules, that aspect of the bankruptcy proceedings which is related to this trial can and should be transferred from the Swindon county court to the High Court in order that it can be dealt with on the day which has been fixed for the last five months. Rule 7.11 provides for a general power of transfer which the High Court can exercise. It seems to me that it is entirely in accordance with the overriding objective for this court to order a limited transfer of that one issue.
22. On this alternative analysis, the only other point that arises is whether or not a single part of the bankruptcy proceedings (if that is what this trial is), can be transferred by me from the Swindon county court to the High Court. I believe that it can be separately transferred, because there is nothing in rule 7.11 which says that it cannot, and rule 7.11 (4) suggests that it can. Moreover I note that in Muir Hunter on Personal Insolvency in the June 2009 update, the learned editors say:

"It is suggested that in urgent and exceptional circumstances where it would be more appropriate for a judge of the High Court to deal with an aspect of the bankruptcy proceedings but that the proceedings should otherwise remain in the county court, the High Court could make a similar limited transfer order pursuant to rule 7.11 (4) without the formalities required by these transfer rules."

I respectfully agree with that conclusion, and in those circumstances (if it were necessary) I make a limited transfer order under rule 7.11 (4) so as to ensure that the aspect of the bankruptcy proceeding concerned with the defendant's potential liability to the claimants in this action be transferred to this court.

23. For all those reasons, therefore, I consider that I do have the necessary jurisdiction to consider the claimants' application for leave under section 252. Moreover, for the reasons set out in paragraphs 9 and 10 above, I consider that the merits of that application are overwhelming. I therefore give leave to the claimants to continue with this trial under section 252 of the Insolvency Act 1986.