Carol Hayes v Timothy Hayes
| Jurisdiction | England & Wales |
| Judge | Mr Justice Nugee |
| Judgment Date | 12 June 2014 |
| Neutral Citation | [2014] EWHC 2694 (Ch) |
| Docket Number | Case No: CH/2014/0032 |
| Court | Chancery Division |
| Date | 12 June 2014 |
[2014] EWHC 2694 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
7 Rolls Buildings
Fetter Lane
London, EC4A 1NL
Mr Justice Nugee
Case No: CH/2014/0032
Mr Clive Wolman (instructed by NOT PROVIDED) appeared on behalf of the Appellant
Mr Adam Chichester-Clark (instructed by NOT PROVIDED) appeared on behalf of the Respondent
Approved Judgment
This is an appeal from an order of Mr Registrar Jones dated 17 December 2013 in which he dismissed a bankruptcy petition and ordered the petitioner to pay the respondent's costs. The petitioner is Mrs Carol Hayes (who I will call Mrs Hayes); the respondent is her ex-husband, Mr Timothy Hayes (who I will call Mr Hayes. Mr Registrar Jones refused permission to appeal, but permission was granted by Birss J on 24 February 2014.
Mr and Mrs Hayes were divorced a long time ago. I do not think I have the exact date, but a consent order dealing with ancillary relief was apparently made in 1991. Unfortunately, they have been embroiled in numerous disputes since then. It is not necessary, for the purpose of this appeal, to set out the detail of these disputes or give more than a very selective summary of the history of the litigation between them.
The petition debt is based on an order made in the Principal Registry of the Family Division by District Judge Waller on 2 August 2000 ordering Mr Hayes to pay Mrs Hayes a sum of £35,721.19, as being the amount of taxed costs payable under a previous order, itself apparently dating back to March 1995 and arising out of an unsuccessful appeal in family proceedings by Mr Hayes. The petition debt is based on that costs order together with six years' interest at the rate prescribed by the Judgment Act amounting together to £52,867.36. The petition debt itself is unsurprisingly not disputed.
Mr Hayes opposed the making of the bankruptcy order on the basis, among other things, that he has a crossclaim against Mrs Hayes which exceeded the petition debt. That crossclaim is a claim for damages under the Protection from Harassment Act 1997 which by section 1 provides that "a person must not pursue a course of conduct which amounts to harassment of another and which he knows or ought to know amounts to harassment of the other," and by section 3 creates civil remedies for breach of that prohibition including, by section 3(2), a claim for damages for, among other things, any anxiety caused by the harassment and any financial loss resulting from that harassment. Such a claim has been brought by Mr Hayes against Mrs Hayes and her partner, Mr Graham Butters, in the Watford County Court. That claim alleges that since February 2003, both defendants have maintained "an unrelenting campaign against the claimant and also against Margaret Hayes, his current wife." It says the common theme throughout has been the defendant's repeated allegations that the claimant has hidden monies in the order of £750,000 to £1 million abroad, a "pot of gold," which, if found, would not only be used to pay the costs debt, but also form a basis for setting aside the 1999 matrimonial consent order with a view to seeking an increased settlement.
That claim was brought in 2005 and has not yet come to trial. Two further matters should be mentioned by way of introduction: Firstly, in 2005, Mrs Hayes relied on the same debt to petition for Mr Hayes' bankruptcy and he was indeed made bankrupt on that petition on 23 March 2005. He was discharged from that bankruptcy on 27 March 2006. The debt was, however, at the time, not a provable debt with the result that Mr Hayes has not been discharged from that debt. Secondly, Mrs Hayes served a statutory demand on 22 January 2010 and Mr Hayes applied to set it aside relying, among other things, on the crossclaim in the Watford County Court. That application came before Mrs Register Derrett on 29 July 2011. At that stage, the only damages which it was suggested that Mr Hayes might recover in the Watford proceedings were damages for injury to his feelings and it was not suggested that he would recover more than £25,000. The Registrar dismissed his application on the basis that even if Mr Hayes was awarded such a sum it was far below the judgment debt and that a second crossclaim on which he relied in relation to the costs of that action could not be taken into account for these purposes.
By the time the petition came on for hearing before Mr Registrar Jones, however, matters had radically changed. The Watford proceedings were, by then, proceeding on the basis of there being a trial on liability alone in the first instance, but in May 2012, the Watford County Court ordered Mr Hayes to serve a schedule of loss. Mr Hayes consulted counsel, a Mr Terence Vaughan, and he settled such a schedule detailing losses amounting to over £1 million, almost wholly for loss of earnings. In a nutshell, Mr Hayes' case is that he was, until 2003, deriving an income from a successful software business, but that as a result of the harassment of which he complains that income ceased in 2003, and attempts by him to obtain further employment or to develop software products were unsuccessful. This is also said to have been caused by the harassment. The schedule of loss makes it clear that he attributes these losses, not only to the harassment alleged against Mrs Hayes and Mr Butters, but also that which he alleges against a Mr Willoughby, an ex-employee of his business, against whom he has taken separate proceedings for harassment in the Cambridge County Court. Those proceedings have ultimately proved successful for him in that Mr Hayes established at trial that Mr Willoughby had engaged in a campaign of harassment against him, and after appeals to the Court of Appeal and the Supreme Court, that campaign has been held to be unlawful.
With that interruption I can come to the issues. There is no dispute as to the general practice of the Bankruptcy Court which is that a bankruptcy order will not be made if the debtor has a crossclaim against the creditor which exceeds the petition debt and if there is a genuine and substantial dispute as to that crossclaim. The practice in the Companies Court was set out in Re Bayoil SA [1999] 1 WLR 147 which was subsequently applied by Rimer J in Re a Debtor (No. 87 of 1999) [2000] BPIR 589 to the similar position in bankruptcy. He said at page 592:
"I regard the most helpful authority as being in Re Bayoil. The case was concerned with the principles as to when a cross-demand by a company will justify the dismissal of a winding up petition based on an undisputed debt. That is, of course, not this case, but I consider that those principles do, by way of analogy, also provide relevant guidance as to the circumstances in which the court can or should set aside a statutory demand based on an undisputed debt when faced with a cross-demand raised by a debtor."
He went on to say that the essence of what the Bayoil case decided was accurately summarised in the head note, which he quoted as follows:
"Where a winding up petition was based on an undisputed debt but the company had a genuine and serious crossclaim, which it had been unable to litigate, exceeding the amount of the petitioner's debt, the court would, in the absence of special circumstances, exercise its discretion by dismissing or staying the petition."
Subject to one point he, as I say, accepted that a similar practice applied in bankruptcy; the one point being that he expressed some doubts about the part of Re Bayoil which appears in the headnote as the words "which it had been unable to litigate." I was taken on a helpful tour of the authorities by Mr Chichester-Clark, who appears for Mr Hayes, which I am satisfied establishes that those words do not impose a pre-condition on the practice, but that the current position is best summarised in the Court of Appeal decision in Popley v Popley [2004] EWCA Civ 463 where Jonathan Parker LJ said at paragraphs 123 to 124 that
"123. …
As to that [that is the requirement that the crossclaim must be one which the debtor has been unable to litigate], I respectfully share the concerns of Rimer J in Re a Debtor [which I have referred to] and of Park J in [another case called] Montgomery. I respectfully agree with their view that Nourse LJ's reference to this requirement probably derives from the terms of the headnote to the report of LHF Wools.
124.
Be that as it may, I do not, in any event, understand Nourse LJ to be intending to lay down any absolute requirement to the effect that the debtor must demonstrate that he is unable to litigate his crossclaim. Rather, I understand Nourse LJ to be doing no more than indicating that where, as in LHF Wools, there has been delay in the prosecution of the crossclaim, the delay must not be such as to throw real doubt on the genuineness of the crossclaim."
I accept that as being the current practice.
In the present case, of course, Mr Hayes is litigating the crossclaim. It is not something which has merely been put forward at the last moment in response to the petition.
Mr Registrar Jones held that there was a genuine and substantial dispute on the crossclaim, both as to liability and as to quantum. The quantum being put forward on the hearing before him was not the full £1 million odd set out in the schedule of loss, but was based on an Advice on Quantum from another barrister, Mr Neil Addison, dated 3 July 2012, privilege in which had been waived by Mr Hayes. Mr Addison's advice was given on the basis of the allegations made by...
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