Brian Herbert Cooke v Dunbar Assets Plc
| Jurisdiction | England & Wales |
| Judge | Mr Jeremy Cousins |
| Judgment Date | 29 July 2016 |
| Neutral Citation | [2016] EWHC 1888 (Ch) |
| Docket Number | Case Number: CH/2015/0022 |
| Court | Chancery Division |
| Date | 29 July 2016 |
[2016] EWHC 1888 (Ch)
IN THE HIGH COURT OF JUSTICE
ON APPEAL FROM
DEPUTY DISTRICT JUDGE BUCKLEY-CLARKE (No: 168 of 2014)
CHANCERY DIVISION
IN BANKRUPTCY
IN THE MATTER OF BRIAN HERBERT COOKE
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Rolls Building, Fetter Lane,
LONDON EC4A 1NL
Mr Jeremy Cousins QC,
Sitting as a Deputy Judge of the Chancery Division
Case Number: CH/2015/0022
Miss Aileen McErlean (instructed by Messrs Ronaldsons LLP, of 55, Gower Street, LONDON WC1E 6HQ) for the Appellant
Mr Joseph Curl (instructed by Messrs DLA Piper UK LLP, of 3, Noble Street, LONDON EC2V 7EE) for the Respondent
Hearing date: Wednesday 6th April 2016
JUDGMENT APPROVED
Mr Jeremy Cousins QC:
On 6th April 2016 I handed down judgment dismissing the appeal of Mr Brian Cooke ("Mr Cooke") against the decision of Deputy District Judge Buckley-Clarke whereby, sitting at the Luton County Court on 18th December 2014, she made a bankruptcy order against Mr Cooke. Only shortly before judgment was handed down, it became apparent that there was an issue between the parties as to the costs order which should be made. For Mr Cooke, Miss McErlean suggested that the appropriate order for costs was that they be treated as a cost and expense of the bankruptcy, whereas Mr Curl, for the petitioning creditor who was the successful respondent to the appeal, maintained that Mr Cooke should be ordered to pay the costs.
It was apparent when this issue was argued before me that neither counsel had had a full opportunity to research the point, upon which they were in fundamental disagreement as to issues of principle, and, therefore, I directed that I would reserve judgment, and allow counsel further time in which to conclude their researches on the issue. In the event, in accordance with a timetable which I approved, both counsel put in further written submissions (from Miss McErlean dated 20th April, 27th April, and 28th June 2016, and from Mr Curl dated 25th April and 25th May 2007) and further authorities, all of which I have considered.
The issues
Mr Curl and Miss McErlean, both of whom have considerable experience in bankruptcy matters, in the course of the hearing, agreed that the costs of the appeal had to be dealt with as falling within three possible categories:
(i) As a cost and expense of the bankruptcy, and thus falling to be dealt with in accordance with the order of priority set out in rule 6.224(1) of the Insolvency Rules 1986 ("the 1986 Rules").
(ii) As a provable debt in the bankruptcy.
(iii) As a liability outside of the bankruptcy, that is to say, as costs ordered against Mr Cooke personally.
(For convenience I shall refer to these respectively as Categories 1, 2, or 3.)
Miss McErlean's oral submission was that the costs must be dealt with as Category 1, but, alternatively, they should be ordered to be dealt with under Category 2. Mr Curl's submission as the hearing was that the costs should be ordered against Mr Cooke personally under Category 3. Counsel agreed further that it was a matter of law into which of these three categories that the costs liability should fall, and not a matter of discretion for the court.
With the benefit of time to research the matter more fully, counsel were able to elaborate upon and refine their submissions. Mr Curl, having initially submitted that the costs did not amount to an expense of the bankruptcy, in light of authorities to which I shall refer below, submitted that whilst costs should be ordered against Mr Cooke, it was permissible and appropriate to order a fall-back provision, namely, that to the extent that costs are not paid by Mr Cooke then the costs should be treated as a cost of his bankruptcy.
It is remarkable that despite the long-standing history of the jurisdiction to hear appeals in bankruptcy matters that no authority, reported or otherwise, which directly addresses the issue of costs on an appeal against a bankruptcy order, could be found by counsel, despite their extensive researches.
Both parties' submissions proceeded on the basis that a costs order should be made. The issues for me to decide are (1) under which Category (or Categories) a costs order permissibly can be made, and, (2) if I have any discretion in the matter as to allocation to a particular Category (or Categories), then the form of order that I should make.
THE LEGISLATIVE BACKGROUND
Appeals in insolvency proceedings
Provision for appeals in matters of individual insolvency is made by s375(2) of the Insolvency Act 1986 as amended:
"An appeal from a decision made in the exercise of jurisdiction for the purposes of those Parts by [the county court] or by a registrar in bankruptcy of the High Court lies to a single judge of the High Court; and an appeal from a decision of that judge on such an appeal lies […] to the Court of Appeal."
Chapter 8 of the 1986 Rules is headed "Appeals in Insolvency Proceedings". Rule 7.47 deals with corporate insolvency. Rule 7.48, headed "Appeals in bankruptcy [by the Secretary of State]" (which provision is not applicable in the present matter) is in the following terms:
"(1) In bankruptcy proceedings, an appeal lies at the instance of the Secretary of State from any order of the court made on an application for the rescission or annulment of a bankruptcy order, or for a bankrupt's discharge."
Rule 7.49A(1) provides that an "appeal against a decision at first instance may only be brought with either the permission of the court which made the decision or the permission of the court which has jurisdiction to hear the appeal".
The bankrupt's estate – definition and vesting
The bankrupt's estate is defined as follows in s283(1) of the 1986 Act:
"(1) Subject as follows, a bankrupt's estate for the purposes of any of this Group of Parts comprises—
(a) all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, and
(b) any property which by virtue of any of the following provisions of this Part is comprised in that estate or is treated as falling within the preceding paragraph."
Pursuant to s305(2) of the Act, it is the function of the trustee in bankruptcy to get in, realise and distribute the estate in accordance with Chapter IV of Part IX of the Act. The bankrupt's estate vests in the trustee immediately upon his appointment; s306(1).
Bankruptcy debt
By s382 of the 1986 Act, a bankruptcy debt is defined to mean "(subject to the next subsection) any of the following—
(a) any debt or liability to which he is subject at the commencement of the bankruptcy,
(b) any debt or liability to which he may become subject after the commencement of the bankruptcy (including after his discharge from bankruptcy) by reason of any obligation incurred before the commencement of the bankruptcy,
(c) any amount specified in pursuance of section 39(3) of the Powers of Criminal Courts Act 1973 in any criminal bankruptcy order made against him before the commencement of the bankruptcy, and
(d) any interest provable as mentioned in section 322(2) in Chapter IV of Part IX.
(2) In determining for the purposes of any provision in this Group of Parts whether any liability in tort is a bankruptcy debt, the bankrupt is deemed to become subject to that liability by reason of an obligation incurred at the time when the cause of action accrued.
(3) For the purposes of references in this Group of Parts to a debt or liability, it is immaterial whether the debt or liability is present or future, whether it is certain or contingent or whether its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion; and references in this Group of Parts to owing a debt are to be read accordingly.
(4) In this Group of Parts, except in so far as the context otherwise requires, "liability" means (subject to subsection (3) above) a liability to pay money or money's worth, including any liability under an enactment, any liability for breach of trust, any liability in contract, tort or bailment and any liability arising out of an obligation to make restitution."
Priority of debts and expenses upon bankruptcy
The priority of debts in the distribution of a bankrupt's estate is established by s328 of the 1986 Act:
"(1) In the distribution of the bankrupt's estate, his preferential debts shall be paid in priority to other debts.
(1A) Ordinary preferential debts rank equally among themselves after the expenses of the bankruptcy and shall be paid in full, unless the bankrupt's estate is insufficient to meet them, in which case they abate in equal proportions between themselves.
(1B) Secondary preferential debts rank equally among themselves after the ordinary preferential debts and shall be paid in full, unless the bankrupt's estate is insufficient to meet them, in which case they abate in equal proportions between themselves."
(Emphasis added)
Rule 6.224 of the 1986 Rules establishes the priority of the expenses of a bankruptcy. At (h), in a list running from (a) to (r), "the costs of the petitioner, and of any person appearing on the petition whose costs are allowed by the court".
Costs in insolvency proceedings
Chapter 6 of Part 7 of the 1986 Rules is headed "Costs and Detailed Assessment". Rule 7.33A(1) provides that the chapter applies in relation to costs in connection with insolvency proceedings. Rules 7.34A and 7.35 make provision for assessment of costs by the detailed procedure in accordance with the CPR; rule 7.36 deals with the costs of officers charged with execution of writs or other process, rule 7.37A is concerned with costs in respect of petitions presented by insolvents. Rule 7.38 makes provision in respect of costs paid otherwise than out of the insolvent estate. It is in the following terms:
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