Jeremy Philip Elston v Lawrence King

JurisdictionEngland & Wales
JudgeMr Justice Marcus Smith
Judgment Date24 January 2020
Neutral Citation[2020] EWHC 55 (Ch)
Docket NumberCase No: 320 of 2013
Date24 January 2020
CourtChancery Division

[2020] EWHC 55 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS IN BIRMINGHAM

APPEALS (ChD)

On appeal from the order of Her Honour Judge George, sitting at the County Court at Lincoln, dated 15 January 2018

Birmingham Civil Justice Centre

33 Bull Street

Birmingham B4 6DS

Before:

THE HONOURABLE Mr Justice Marcus Smith

Case No: 320 of 2013

Appeal No: BM80020CH

Jeremy Philip Elston
Appellant (Applicant below)
and
(1) Lawrence King
(2) Sue Roscoe (trustees in bankruptcy of Jeremy Philip Elston)
Respondents (Respondents below)

Mr James Malam (instructed on a direct access basis by Mr Elston) for the Appellant

Mr James Morgan, QC (instructed by Freeths LLP) for the Respondents

Hearing date: 6 December 2019

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Marcus Smith

A. INTRODUCTION

1

. At a hearing before Her Honour Judge George, sitting in the County Court at Lincoln, Mr Elston (the Applicant before Judge George and the Appellant before me) sought restitution of monies paid out from his pension funds to his trustees in bankruptcy (the Respondents here and below 1) pursuant to an Income Payments Agreement made between them dated November 2014. 2 This was the second Income Payments Agreement entered into by the Appellant, but is the only agreement relevant for the purposes of this appeal. I shall therefore refer to it as the “Income Payments Agreement”.

2

. The basis for the Appellant's claim in unjust enrichment was that Income Payments Agreement had been concluded under a mistake of law and should be set aside and the payments made pursuant to the agreement repaid. 3 Her Honour Judge George dismissed the Appellant's claim in a judgment (the “Judgment”) dated 8 December 2017. The basis for dismissing the claim was as follows:

(1) The payments which the Appellant sought to recover had been made pursuant to a valid agreement, the Income Payment Agreement. Until that agreement was set aside, there could be no question of recovering payments made pursuant to that agreement.

(2) The parties to the Income Payments Agreement – that is, the Appellant and the Respondents – had proceeded on the basis of a common (or mutual) mistake of law as to the jurisdiction of the court to make an income payment order. However, for a common mistake to be capable of setting aside an agreement, the requirements laid down by the Court of Appeal in Great Peace Shipping Limited v. Tsavliris Salvage (International) Limited 4 needed to be satisfied. In this case, they were not because:

(a) The Income Payments Agreement constituted a compromise agreement, pursuant to which the risk of there being a subsequent change in the law was assumed by the Appellant.

(b) The Income Payments Agreement continued to be capable of performance.

(3) In any event, even if the foregoing was wrong, the Respondents had the benefit of a partial defence of change of position.

3

. The Appellant appealed against substantially all of the legal holdings of the Judge: her factual findings were not challenged. This appeal thus turns on whether, the Judge's factual findings being unchallenged, the Judge correctly applied the law to the facts.

4

. I propose to approach the questions in this appeal in the following way:

(1) First, I consider (in Section B below) the nature of the Income Payments Agreement that was concluded between the Appellant and the Respondents. Although it was, apparently, common ground before the Judge that the Income Payments Agreement was a form of statutory contract, 5 the Appellant's pleadings before the Judge kept the point open, 6 and I consider that it is important to understand precisely the nature of the instrument agreed between the parties when applying the law regarding common mistake in Great Peace Shipping.

(2) Secondly, I set out (in Section C below) the nature of the change of law that gave rise to the mistake of law alleged by the Appellant in this case. It is a peculiarity of subsequent changes in the law that what is, on any sensible view, not a mistake at all but a future revision of the law, has the potential of rendering past decisions taking a contrary view (or persons' understanding of such decisions) in effect mistakes capable of having private law consequences. That is the approach taken in Kleinwort Benson Limited v. Lincoln City Council, 7 where Lord Goff explained: 8

“…when judges state what the law is, their decisions do…have a retrospective effect. That is, I believe, inevitable. It is inevitable in relation to the particular case before the court, in which the events must have occurred some time, perhaps some years, before the judge's decision is made. But it is also inevitable in relation to other cases in which the law as so stated will in future fall to be applied…”

(3) Thirdly, I set out (in Section D below) the rules regarding the setting aside of transactions on grounds of mutual mistake, with specific reference to compromise agreements. Section D considers not only the law in this area, but also the Judge's conclusion that the Income Payment Agreement could not be set aside on grounds of common mistake.

(4) Fourthly, I consider (in Section E) the change of position defence.

B. THE NATURE OF THE INCOME PAYMENTS AGREEMENT

5

. The Income Payments Agreement was made pursuant to section 310A of the Insolvency Act 1986.

6

. Section 310A provides as follows:

Income payments agreement

(1) In this section “income payments agreement” means a written agreement between a bankrupt and his trustee or between a bankrupt and the official receiver which provides—

(a) that the bankrupt is to pay to the trustee or the official receiver an amount equal to a specified part or proportion of the bankrupt's income for a specified period, or

(b) that a third person is to pay to the trustee or the official receiver a specified proportion of money due to the bankrupt by way of income for a specified period.

(2) A provision of an income payments agreement of a kind specified in subsection (1)(a) or (b) may be enforced as if it were a provision of an income payments order.

(3) While an income payments agreement is in force the court may, on the application of the bankrupt, his trustee or the official receiver, discharge or vary an attachment of earnings order that is for the time being in force to secure payments by the bankrupt.

(4) The following provisions of section 310 shall apply to an income payments agreement as they apply to an income payments order—

(a) subsection (5) (receipts to form part of estate), and

(b) subsections (7) to (9) (meaning of income).

(5) An income payments agreement must specify the period during which it is to have effect; and that period—

(a) may end after the discharge of the bankrupt, but

(b) may not end after the period of three years beginning with the date on which the agreement is made.

(6) An income payments agreement may (subject to subsection (5)(b)) be varied—

(a) by written agreement between the parties, or

(b) by the court on an application made by the bankrupt, the trustee or the official receiver.

(7) The court—

(a) may not vary an income payments agreement so as to include provision of a kind which could not be included in an income payments order, and

(b) shall grant an application to vary an income payments agreement if and to the extent that the court thinks variation necessary to avoid the effect mentioned in section 310(2).”

7

. The terms of section 310A strongly suggest that an income payments agreement is a contract between the bankrupt and his trustee in bankruptcy or the official receiver, 9 albeit one that is subject to the statutory controls set out in section 310A. That was the conclusion of His Honour Judge Hodge (sitting as a Judge of the High Court) in Booth v. Mond, and I agree with him. 10

8

. In this case, the Income Payments Agreement made provision for the Appellant to pay to the Respondents, by way of contributions to his bankruptcy debts, certains sums of money out of various pension plans taken out by the Appellant. The details do not matter: all that needs to be noted is that the Appellant was obliged to draw down available lump sums under his pension as and when they became available to him pursuant to the terms of those plans.

9

. The Income Payments Agreement concluded with the following paragraphs:

“I understand that when this agreement is signed by either of my Trustees in Bankruptcy it will become a legally binding document and that it may only be varied by written agreement with either of my Trustees in Bankruptcy or by order of the Court.

If, for any reason, I cannot maintain the payments or they cannot be made, I will tell my Trustee in Bankruptcy immediately and explain the reason.

This agreement will come into force and become legally enforceable after it has been signed by both the debtor and the Trustee in Bankruptcy.”

10

. Pursuant to the Income Payments Agreement, the following payments were facilitated by the Appellant: 11

C. THE “MISTAKE” OF LAW

Date

Amount

20 January 2015

£20,546.75

22 January 2015

£2,647.92

30 January 2015

£14,697.06

3 February 2014

£10.00

4 February 2015

£1,717.47

27 November 2015

£2,647.92

27 January 2016

£1,717.47

24 November 2016

£2,647.92

6 February 2017

£1,717.47

Total

£48,349.98

11

. The question of “mistake” is a slippery one when it comes to legal analysis. This Section simply seeks to deal with the factual position, and leaves the legal questions to be dealt with in Section D.

12

. The change in the law, which gives rise to the Appellant's contentions regarding a mistake of law, is very clearly set out in [16] ff of the Judgment, which I gratefully draw...

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