Glenister v Rowe
| Jurisdiction | England & Wales |
| Judge | LADY JUSTICE BUTLER-SLOSS,LORD JUSTICE MUMMERY,LORD JUSTICE THORPE |
| Judgment Date | 21 April 1999 |
| Judgment citation (vLex) | [1999] EWCA Civ J0421-15 |
| Docket Number | CHANI 1998/0865/3 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 April 1999 |
[1999] EWCA Civ J0421-15
Lady Justice Butler-Sloss
Lord Justice Thorpe
Lord Justice Mummery
CHANI 1998/0865/3
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
IN BANKRUPTCY
(MISS B DOHMANN QC —sitting as a Deputy High Court Judge)
Royal Courts of Justice
Strand
London WC2
JAMIE RILEY (Instructed by Stone Rowe Brewer, Twickenham, TW1 3NR) appeared on behalf of the Appellant
MARK ARNOLD (Instructed by Brooke North, Crown House, Great George St., Leeds, LS1 3BR) appeared on behalf of the Respondent
I will ask Mummery LJ to give the first judgment.
INTRODUCTION
The question in this case is: does a person against whom a costs order may be made have, before an order is actually made, a "contingent liability" for such costs within Section 382 of the Insolvency Act 1986 (the 1986 Act)? This question arises in the context of an application to set aside a statutory demand.
On 26 March 1998 Mr Deputy Registrar Jacques refused to set aside a statutory demand for £16,531.35 dated 3 December 1997 made by Miss Margaret Rowe on Mr Graham Glenister and he authorised the presentation of a Bankruptcy Petition.
On an appeal heard by Miss Barbara Dohmann QC (sitting as a Deputy High Court Judge) on 10 June 1998 the order of the Deputy Registrar was discharged and the statutory demand was set aside.
This is an appeal, with the leave of the judge, by Mrs Margaret Rowe against that order.
FACTUAL BACKGROUND
The dates of the relevant events are uncontroversial and crucial:-
(1)On 4 June 1985 Miss Rowe began proceedings against her solicitor, Mr Glenister, for alleged negligence and breach of trust.
(2)On 5 October 1990 Mr Glenister unsuccessfully applied to the Chief Master to strike out the proceedings against him for want of prosecution. He appealed to the Judge in chambers.
(3)On 20 June 1991 Millett J discharged the Master's order and struck out the proceedings against Mr Glenister, ordering Mrs Rowe to pay the costs.
(4)On 29 July 1991 Mrs Rowe lodged an appeal against that order.
(5) On 24 June 1992 Mr Glenister was made bankrupt.
(6) On 11 May 1994 Mrs Rowe was given leave pursuant to Section 285 of the 1986 Act to proceed with her appeal to the Court of Appeal. (The necessity for leave has been questioned in argument, but nothing turns on that point in the appeal.)
(7)The appeal was heard on 22 and 23 June 1995. Judgment was reserved. Mr Glenister attended the hearing and his trustee in bankruptcy was heard on the appeal with his consent.
(8)On 24 June 1995 Mr Glenister was discharged from his bankruptcy.
(9)On 25 July 1995 the Court of Appeal allowed Mrs Rowe's appeal and ordered her costs to be paid by Mr Glenister up to 8 June 1992, such costs to be taxed if not agreed. Costs for the later period were ordered to be paid by the trustee.
(10)On 5 September 1996 the costs of the appeal awarded to Mrs Rowe were taxed in the sum of £15,026.29.
(11)On 3 December 1997 the statutory demand was issued by Mrs Rowe's solicitors for that sum and interest. On 22 December 1997 Mr Glenister issued an application to set aside the demand.
THE JUDGMENT
The crucial question is whether the costs, which were the subject of the order made by the Court of Appeal on 25 July 1995, were a "contingent liability" of Mr Glenister at the date of his bankruptcy on 24 June 1992? It is common ground that, if they were a contingent liability, that was a "bankruptcy debt" within Section 281 of the 1986 Act and the discharge of Mr Glenister from his bankruptcy released Mr Glenister from that debt. It could not therefore be the subject of a valid statutory demand, though that did not affect the right of Mrs Rowe to prove for that debt in the bankruptcy.
The Deputy Judge set aside the statutory demand for the following reasons:—
(1)The court was only concerned with the costs order made by the Court of Appeal. That was the sum in the statutory demand.
(2) That sum was a "contingent liability" within Section 382(1)(a) and (3) of the 1986 Act to which Mr Glenister was subject at the commencement of his bankruptcy.
(3)The Deputy Judge analysed the legal position as follows:—
"What was the position as at 24th June 1992, the date when the appellant was made bankrupt? As at that date he had launched a strike out application which had failed before the Master, succeeded before the Judge, and was the subject of an appeal. If that appeal was prosecuted, succeeded, and if the Court of Appeal in the exercise of its discretion made a costs order against him, a series of events would have occurred which would bring the liability to pay costs into being. All the relevant costs had been incurred by the respondent plaintiff in the action before the bankruptcy, and before the bankruptcy the appellant defendant faced the position that if the three events I have listed occurred, such costs liability would necessarily arise."
(4)His discharge released him from that liability which, as a bankruptcy debt, fell to be met out of the bankrupt's estate, and no statutory demand for that sum could be made on Mr Glenister for it.
(5)An argument based on Section 382(1)(b) was rejected by the Deputy Judge on the ground that the costs liability did not constitute a debt or liability to which Mr Glenister had 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.
THE STATUTORY PROVISIONS
1. Costs
Although this appeal turns on the definition of "bankruptcy debt" in Section 382 of the 1986 Act, it is necessary to consider first the statutory provisions and rules of court relating to costs.
Section 51 of the Supreme Court Act 1981 , as substituted by Section 4 of the Courts and Legal Services Act 1990, provides that —
"(1)Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in -
(a) the civil division of the Court of Appeal;
(b) the High Court, and
(c) any county court,
shall be in the discretion of the court.
(2)…..
(3)The court shall have full power to determine by whom and to what extent the costs are to be paid."
Order 62 of the Rules of the Supreme Court provides —
"(1)…..
(2) No party to any proceedings shall be entitled to recover any of the costs of those proceedings from any other party to those proceedings except under an order of the court."
2. The 1986 Act
Section 282 provides —
"(1) "Bankruptcy debt", in relation to a bankrupt, means (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.
(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."
By Section 383(1) "Creditor" means
" (a) in relation to a bankrupt … a person to whom any of the bankruptcy debts is owed, and
(b) in relation to an individual to whom a bankruptcy petition relates, … a person who would be a creditor in the bankruptcy if a bankruptcy order were made on that petition."
The Authorities
Although the expressions "contingent debt" and "contingent liability" are not defined in the 1986 Act, they are the subject of judicial decision and discussion in authorities on the 1986 Act and on the earlier insolvency legislation. Some of the cases are concerned specifically with the nature of a claim for costs in legal proceedings. Others concern a different subject matter. A review of the authorities is necessary in the light of the wide ranging scope of rival submissions.
1. Pre-1986 cases on costs.
In the earliest cases, which preceded the Bankruptcy Act 1914, it was held that a claim for costs was not a contingent liability.
In Re British Gold Fields of West Africa [1899] 2 Ch 7 at 11 Lord Lindley MR said—
"But if an unsuccessful action is brought by a man who becomes bankrupt, then, if he is ordered to pay the costs, or if a verdict is given against him before he becomes bankrupt, they are provable: Ex parte Peacock. On the other hand, if no verdict is given against him and no order is made for payment of costs until after he becomes bankrupt, they are not provable. In such a case there is no provable debt to which the costs are incident, and there is no liability to pay them by reason of any...
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