Fitch v Official Receiver
| Jurisdiction | England & Wales |
| Judgment Date | 15 November 1995 |
| Judgment citation (vLex) | [1995] EWCA Civ J1115-5 |
| Docket Number | CHBK1 95/1579/C |
| Court | Court of Appeal (Civil Division) |
| Date | 15 November 1995 |
[1995] EWCA Civ J1115-5
Mr Justice Chadwick
Before Lord Justice Neill Lord Justice Millett Sir Iain Glidewell
CHBK1 95/1579/C
CHBK1 95/1580/C
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(BRISTOL DISTRICT REGISTRY)
MR A MANN QC (Instructed by Meade King, Bristol) appeared on behalf of the Applicants.
MR S MOVERLEY-SMITH and MR A TABACHNICK (15.11.95) (Instructed by The Official Receiver) appeared on behalf of the Respondent.
Mr. Fitch is a chartered accountant. Mrs. Fitch is his Wife. Bankruptcy petitions were presented against them by The Co-operative Bank plc on 14th. March 1995, and bankruptcy orders were made against them by Deputy District Judge Exton in the Swindon County Court on 31st. July. Mr. Fitch duly appealed against the bankruptcy order which had been made against him. His appeal was dismissed by His Honour Judge Moseley QC on 25th. August.
Mr. and Mrs. Fitch promptly applied for the bankruptcy orders to be rescinded under Section 375(1) of the Insolvency Act 1986. At the time of their applications there was no ground upon which they could properly seek rescission of the bankruptcy orders, but shortly afterwards they persuaded the petitioning creditor to change its mind and support their applications. These were referred by the District Judge to the Judge, and on 11th. September His Honour Judge Weeks QC adjourned the hearing of the applications until 5th. October in order to allow the creditors of Mr. and Mrs. Fitch to be approached, informed of the applications, and given an opportunity to attend.
The applications were originally listed to be heard in the Swindon County Court before Judge Weekes sitting in Bristol. On 5th. October, however, Judge Weekes was not available and the applications came before Chadwick J. He ordered that the bankruptcy proceedings should be transferred from the Swindon County Court to the High Court, Bristol District Registry, dismissed both applications, refused leave to appeal, and granted a short stay of advertisement of the bankruptcy orders which he later extended until 27th. October. Millett LJ granted leave to appeal on 25th. October and directed that the hearing of the appeals be expedited.
Mr. Fitch's Statement of Affairs disclosed total assets of £240,000, secured liabilities of £444,000 and unsecured liabilities of approximately £60,000. There was thus a deficiency of some £200,000 against secured liabilities, leaving nothing for the unsecured creditors. The petitioning creditor was owed £103,846 secured on land having an estimated value of £30,000. By the time of the hearing before Chadwick J, 5 creditors (including the petitioning creditor) with debts in excess of £120,000 supported the applications to rescind the bankruptcy orders, 5 (including the Inland Revenue) with debts in excess of £330,000 neither supported nor opposed, one with a debt of £8,800 had not yet replied and none opposed. Since the hearing before Chadwick J the last of the creditors to reply has done so; it supports the applications.
The reason which has led the petitioning creditor to change its attitude to the making of bankruptcy orders, and which has evidently commended itself to the other creditors, is that it is now believed that there is a serious risk that the existence of a bankruptcy order against Mr. Fitch will prejudice the recovery of a substantial asset for the estate. If that is the case then it is not in the interests of the creditors that the bankruptcy should continue; and a large body of the creditors appears to accept this.
It appears that Mr. Fitch, in partnership with Mrs. Fitch under the name Paratus Developments, has offered his services as a negotiator to a Jersey company Maldon Holdings Ltd. ("Maldon"). Maldon is concerned in the development of a leisure complex on the island of Tobago. In order to fund the development Maldon is proposing to enter into a joint venture with another group of companies for the production of gold bullion from ore in New Mexico. The mining and processing of the ore require funding which has been sought from a Swiss investor Sofitrac. Some idea of the scale of the venture can be obtained from the entries in Maldon's accounts which place a value on the mineral rights of US$75 million. Mr. Fitch has been concerned as an intermediary to negotiate the obtaining of the funds for the joint venture from Sofitrac. Maldon has agreed to pay a commission to Paratus. The evidence suggests that £248,890 fees have already been earned, but that Maldon is in no position to pay them unless the development proceeds; and that a further £112,500 by way of introductory commission will become payable by Maldon to Paratus if Sofitrac enter into funding arrangements for the gold mining and processing venture. In addition Mr. Fitch estimates that Paratus will become entitled to £150,000 by way of consultancy fees over the two year development period of the complex, and a further success fee of £300,000 on completion of the project. The total amount of such fees is £811,000 of which £248,890 may be regarded as already due, but none of which can realistically be expected to be received if the negotiations with Sofitrac fail.
The creditors are persuaded that the successful completion of the venture depends on Mr. Fitch, and perhaps to a lesser extent Mrs. Fitch as his partner in Paratus, not being known to be bankrupt. They fear that Sofitrac would be likely to withdraw if it discovered that the person through all the negotiations were being conducted was the subject of an English bankruptcy order. Mr. Fitch would regard himself as bound in honour to disclose the existence of the order, which affected his status, even though he was not seeking to obtain credit for himself or his Wife. Moreover, even if Sofitrac was not deterred by the existence of a bankruptcy order, it is feared that it would prefer to withdraw from the negotiations altogether rather than have to deal with the kind of enquiries which the Official Receiver would be expected to make. Maldon's solicitors have recorded their client's view that the rescission of the bankruptcy orders would remove what it describes as "the very real risk" of Sofitrac terminating its relationship with Paratus which would be "disastrous for Maldon".
The Judge refused the applications for two distinct reasons:-
(1). The application was not an occasion for a rehearing of the appeal from the making of the bankruptcy orders. There had to be some new matter which had not been raised and was not available at the previous hearing. The only matter which could be identified as a change in circumstances since the hearing on 31st. July was the change in the attitude of the petitioning creditor. That change did not derive from any change in the underlying circumstances but from a reappraisal by the petitioning creditor of where its commercial interests lay. The material on which it conducted that reappraisal, however, had been available throughout. The Judge concluded his observations on this aspect of the case as follows:
"But what I might have done if dealing with this de novo is not material. The position is that all of this material was available at the time the bankruptcy order was made; it was put before His Honour Judge Moseley on appeal; and I cannot avoid concluding that its deployment again is nothing other than an attempt to have a further appeal hearing. The place for that is the Court of Appeal."
(2). The Court was being asked to rescind the bankruptcy order so that Mr. Fitch could continue to present himself as a person who was not bankrupt and had not been made bankrupt. That amounted to a deception to which the Court should not be a party. The Judge said:-
"I confess I find an application based upon the need for deception both surprising and distasteful. It seems to me that if the success of this venture does indeed depend on the presentation of Mr. Fitch as a person of unchallenged credit and reliability then it may be better that the venture fails. Certainly I think it better that the venture fails than that the Court lends its aid and approval to such a deception."
Counsel for the Official Receiver, who appeared before us and invited us to dismiss the appeal, did not feel able to support either of the reasons given by the Judge for refusing the applications. I shall deal with each in turn:-
(1). Change of circumstances.
Section 375(1) of the Insolvency Act 1986 reads as follows:
"(1) Every court having jurisdiction [in bankruptcy] may review, rescind or vary any order made by it in the exercise of that jurisdiction."
The Section replaced sections in identical terms in earlier Bankruptcy Acts: see Section 104(1) of the Bankruptcy Act 1883 and Section 108(1) of the Bankruptcy Act 1914. The jurisdiction is unique to insolvency,(having recently been...
To continue reading
Request your trial
- BBMB Factoring Bhd v Mariam bte Sasiman and Another Appeal
-
Keith Smeaton v Equifax Plc
...Insolvency Rules 1986, rule 6.223(B)(1) (until 1 April 2004); rule 6A.2 (since 1 April 2004) 6 Insolvency Act 1986, s.279(1) 7 See Fitch v. Official Receiver [1996] 1 WLR 242, 8 Insolvency Rules 1986, rule 6.213(2) The time period for such notification has varied over time: currently notifi......
-
Smeaton v Equifax Plc
...order. These three different ways of prematurely terminating a bankruptcy order are clearly set out and explained by Millett LJ in Fitch v Official Receiver 13 as follows: Section 375(1) of the IA 1986 reads as follows: ‘Every court having jurisdiction [in bankruptcy] may review, rescind or......
-
HM Revenue and Customs v Cassells
...I would emphasise the point made in the second of the stated principles, which echoes the dictum of Millett LJ as he then was, in Fitch v. Official Receiver [1996] 1 WLR 242 at page 249, namely that the circumstance must be one which justifies the exercise of the statutory discretion in fav......