Morris v Bank of India
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE CLARKE,LORD JUSTICE POTTER |
| Judgment Date | 22 September 2004 |
| Neutral Citation | [2004] EWCA Civ 1286 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 September 2004 |
| Docket Number | A2/2004/1001(A) |
[2004] EWCA Civ 1286
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CIVIL DIVISION
(LORD JUSTICE MUMMERY)
Royal Courts of Justice
Strand
London, WC2
Lord Justice Potter
Lord Justice Clarke
A2/2004/1001(A)
A2/2004/1001(B)
In The Matter of Bank of Credit and Commerce International Sa
And In The Matter of Bank of Credit and Commerce International (Overseas) Limited
And In The Matter of The Insolvency Act 1986
MR C PURLE QC, MR D EATON-TURNER AND MS BLAIR LEAHY (instructed by Messrs Lovells) appeared on behalf of the Applicants
MR G MOSS QC AND MS H STONEFROST (instructed by Messrs Penningtons) appeared on behalf of the Respondents
In late 2003 Patten J heard an application which lasted 18 days, in which the liquidators of BCCI SA and BCCI (Overseas) Limited (which I will together call "BCCI") sought compensation from the Bank of India ("BOI") under section 213 of the Insolvency Act 1986 ("the 1986 Act"), which provides as follows:
"(1) . If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, the following has effect.
"(2) . The court, on the application of the liquidator may declare that any persons who were knowingly parties to the carrying on of the business in the manner above-mentioned are to be liable to make such contributions (if any) to the company's assets as the court thinks proper."
It was the liquidators' case that the business of BCCI was carried on with intent to defraud creditors and/or for a fraudulent purpose within the meaning of section 213(1) of the 1986 Act, and that BOI was a knowing party to the carrying on of the business in that manner and was liable to make contributions to BCCI's assets within the meaning of section 213(2) .
It was common ground that, in order to succeed, the liquidators had to show that BOI knew that the Central Treasury Division ("CTD") of BCCI in London was guilty of fraud. It being common ground between the parties that the CTD itself was guilty of fraud, the type of knowledge alleged is what is colloquially known as "blind eye knowledge".
The application before Patten J concerned six transactions involving BOI and BCCI. The issue before the judge was whether those at BOI responsible for entering into the transactions in issue knew that they were thereby assisting BCCI to perpetrate a fraud on its creditors. It was common ground that a finding of knowledge must involve a finding of dishonesty.
The judge acquitted the board of directors at BOI of personal knowledge, but held that a Mr Samant had the relevant knowledge in the case of four of the six transactions. The judge imputed that knowledge to BOI, although Mr Samant, while employed by BOI, was not a member of the board. It is not necessary to recite the facts in any detail for the purposes of this application. It is sufficient to say that, having so held, the judge acceded to the liquidators' application under section 213 of the 1986 Act.
By an order made on 26th March 2004, he ordered BOI to pay a total of 82,302,941, inclusive of interest, plus costs. The amount of interest was itself nearly 40 million because the transactions to which the application related took place in the early to mid-1980s. The judge refused permission to appeal. BOI renewed its application for permission to appeal to this court. It was considered on paper by Mummery LJ, who granted permission on 15th July. In doing so, he gave these reasons:
"I am not satisfied that the proposed appeal has a real prospect of success, but will grant permission as this is a substantial matter involving rival contentions that require the attention of the full court on an inter partes hearing in order to resolve them satisfactorily."
He gave a time estimate of one and a half days.
On 2nd August, the liquidators issued a notice of application seeking an order setting aside the order granting permission to appeal. The ground on which the application is stated to be made is that:
"Neither the fact that the appeal is a substantial matter, nor that it involves rival contentions, is a compelling reason why the appeal should be heard."
The relevant provisions of the CPR provide as follows:
"52.3(6) Permission to appeal will only be given where —
"(a) the court considers that the appeal would have a real prospect of success; or
"(b) there is some other compelling reason why the appeal should be heard."
"52.9(1) The appeal court may —
"(a) …
"(b) set aside permission to appeal in whole or in part;
"(c) …
"(2) The court will only exercise its powers under paragraph (1) where there is a compelling reason for doing so."
It is important to note that in rule 52.3(6), paragraphs (a) and (b) are disjunctive. Thus the court will give permission to appeal, either (a) where the court considers that the appeal would have a real prospect of success, or (b) where there is some other compelling reason why the appeal should be heard.
As I read the rule, while no doubt in the vast majority of cases the lord justice considering the application on the papers will indeed consider whether the appeal has a real prospect of success, the rule does not require him to do so. He or she can focus on paragraph (b) in an appropriate case. To my mind, the statement to the contrary in paragraph 52.3(6) of Volume One of Civil Procedure 2004, where the editors state, "Ground (b) only arises for consideration if the proposed appeal has no real prospect of succeeding" is not correct. It is further to be noted that the rule does not identify what does or does not amount to a compelling reason. Moreover, by rule 52.9(2) the court will only set aside permission granted under rule 52.3 where there is a compelling reason to do so.
The court has considered applications under rule 52.9(1) (b) on a number of occasions since the advent of the CPR, and has shown a very marked reluctance to accede to them. The current note to rule 52.9 in Volume One of Civil Procedure 2004 is entitled "Cautionary note" and reads as follows:
"This tempting provision should not lure advocates into tactical skirmishing or into manoeuvres designed to wear down the opposition. Save in exceptional circumstances, it is a misuse of the court's resources and a waste of costs for the court to consider the substance of an appeal on some intermediate date between the permission hearing and the full appeal…"
The relevant principles have been considered in a number of cases, albeit I think it is right to say, as Mr Purle has observed, that all were cases in which the challenge was to the conclusion that the appeal had a real prospect of success. It is, perhaps, sufficient to refer to Barings Plc (in liquidation) v Coopers & Lybrand [2002] EWCA Civ 1155. In that case, Jonathan Parker LJ said this:
"34. 'Compelling reason' in this context…[I interpose to say that he is there referring to the compelling reason in 52.9(2) ] …connotes, in my judgment, something which is sufficiently serious to be in the nature of an irregularity in the grant of permission. In Nathan v Smilovitch [2002] EWCA Civ 759 Longmore LJ said, at paragraph 9, referring to an application to set aside a grant of permission to appeal:
"'For my part, unless the nature of the application shows that some decisive authority or decisive statutory provision has been overlooked by the Lord Justice granting permission to appeal, an applicant would normally have to show that the single Lord Justice had actually been misled in the course of the presentation of an application.'
"37. In my judgment the power conferred by paragraph (1) of rule 52.9 is emphatically not a power to, in effect, entertain an appeal against the grant of permission. Yet that, in substance, is what Mr Butcher has invited this court to do in relation to the bonuses issue. In my judgment the power to set aside a grant of permission to appeal is not available for the purpose of second-guessing the single judge who granted the permission and thereby generating satellite litigation: rather, its purpose is to enable the court to do justice in those rare cases where something in the nature of an irregularity has occurred in the granting of permission, whether by reason of the single judge having been misled or for some other like reason…
"39. I would accordingly dismiss this application, and in doing so I would express the hope that in future practitioners will think twice before launching an application of this kind, in the knowledge that only in very limited circumstances will such an application be likely to...
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