Nationwide Building Society v Wright
| Jurisdiction | England & Wales |
| Judge | Sir John Chadwick,Lord Justice Lloyd,Lord Justice Maurice Kay |
| Judgment Date | 29 July 2009 |
| Neutral Citation | [2009] EWCA Civ 811 |
| Docket Number | Case No: A2/2008/2467 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 July 2009 |
[2009] EWCA Civ 811
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NORTHAMPTON COUNTY COURT
HIS HONOUR JUDGE CHARLES HARRIS QC
6QZ13132
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Maurice Kay
Lord Justice Lloyd and
Sir John Chadwick
Case No: A2/2008/2467
Mr Marcus Flavin (instructed by Christopher Flood, Legal & Compliance, Nationwide House, Pipers Way, Swindon, SN38 1SN) for the Appellant
The respondents did not appear and were not represented
Hearing date: 30 June 2009
This is an appeal from an order made on 24 September 2008 by His Honour Judge Charles Harris QC, sitting in the Northampton County Court, in proceedings brought by the trustee in bankruptcy of Mr Jonathan Wright under section 3(5) of the Charging Orders Act 1979.
The section is in these terms, so far as material:
“3(5) The Court by which a charging order was made may at any time, on the application of the debtor or of any person interested in any property to which the order relates, make an order discharging or varying the charging order.”
The issue raised in the appeal is whether, and in what circumstances, the court should exercise its power under that section in a case where the debtor has been adjudged bankrupt but the charging order has been made before the commencement of the bankruptcy.
That issue arises from the terms of sections 346(1) and (5)(b) of the Insolvency Act 1986:
“346(1) Subject to section 285 in Chapter II (restrictions on proceedings and remedies) and to the following provisions of this section, where the creditor of any person who is adjudged bankrupt has, before the commencement of the bankruptcy –
(a) issued execution against the goods or land of that person, or
(b) attached to a debt due to that person from another person,
that creditor is not entitled, as against the official receiver or trustee of the bankrupt's estate, to retain the benefit of the execution or attachment, or any sums paid to avoid it, unless the execution or attachment was completed, or the sums were paid, before the commencement of the bankruptcy.
…
(5) For the purposes of this section –…
(b) an execution against land is completed by seizure, by the appointment of a receiver or by the making of a charging order under [section 1 of the Charging Orders Act 1979]; …”
[emphasis added]
Put shortly, the question is whether the effect of sections 346(1) and (5)(b) of the 1986 Act is that, notwithstanding section 3(5) of the 1979 Act, a creditor is entitled to retain the benefit of a charging order over land comprised in the bankrupt's estate where the charging order predates the commencement of the bankruptcy.
The underlying facts
Mr Wright (“the bankrupt”) was adjudicated bankrupt on 12 July 2006 on a petition which had been presented some two months earlier, on 17 May 2006, by the supervisor of an individual voluntary arrangement in respect of which he was said to be in default. The estate which vested in the trustee in bankruptcy on appointment included the bankrupt's share in property known as 15 Cedrus Court, Northampton: a property of which the bankrupt and his wife were registered as proprietors.
At the date when the bankruptcy order was made the bankrupt's share in 15 Cedrus Court was subject to a charging order in favour of the appellant, Nationwide Building Society. That charging order had been made to secure a judgment, in the sum of some £10,000, obtained by the Building Society on 7 April 2006 in respect of a credit card debt. An interim charging order had been made on 5 May 2006: that order was made final on 26 June 2006.
It can be seen that the interim charging order was made before the presentation of the bankruptcy petition. Although the final order was made after the presentation of the petition, it is common ground that the Building Society did not then know that the bankruptcy petition was pending. Further, although the petition was presented in the Northampton County Court, it is common ground that the District Judge who made the charging order – and who was subsequently to make the bankruptcy order—did not know that at the time. It has not been suggested that, under the practice then prevailing in that court, he should have known of it.
The application under section 3(5) of the Charging Orders Act 1979
An application to discharge both the interim charging order of 5 May 2006 and the final charging order of 26 June 2006 was made by the trustee in bankruptcy by notice dated 6 November 2007. It came before Deputy District Judge Jolly on 16 May 2008. He made the order sought. He held, correctly in my view: (i) that the final order would not have been made if the District Judge had known, at the time, that there was a pending bankruptcy petition; (ii) that, in the circumstances that the District Judge did not know of the pending bankruptcy petition, the final charging order was properly made; and (iii) that the existence of the pending bankruptcy petition, and the bankruptcy order subsequently made on that petition, were not, of themselves, sufficient to establish a right to have the charging orders set aside. It was a matter of discretion whether or not to accede to the application. He concluded:
“Mr Wright was in a hopelessly insolvent position in the spring of 2006. Nationwide Building Society was only one of [his] 32 creditors. They took steps, perfectly validly and in good faith to protect their interest, but given the balance of interest and the nature of the assets available in this case for distribution to creditors, I think it is appropriate for me to exercise my discretion in favour of the trustee in bankruptcy and discharge the Charging Order.”
The Building Society appealed to the County Court Judge. He dismissed the appeal for the reasons set out in the judgment which he delivered on 24 September 2008. After consideration of the authorities cited to him, he concluded that section 3(5) of the 1979 Act gave the court a discretion “to discharge or vary when it considers after proper consideration of the circumstances that it is correct to do so”. That was not to be done lightly “because that would destroy the advantages of a charging order which is a useful remedy which the law provides”. He went on, at paragraph 11 of his judgment, to say this:
“The question therefore is, did the deputy district judge fail to consider what he ought to have considered? Or afford manifestly too little, or too much, weight to any particular factor, to such an extent that the exercise of his discretion should be set aside? I answer that question in the negative. It appears from the analysis of his Judgment that he did identify and consider the relevant and important features of this case. The close proximity in time of the Charging Order and the bankruptcy proceedings. The accident of listing which got the Charging Order heard before the bankruptcy. The number of creditors and the extent of the assets or, as he put it, the “Balance of interest and the nature of the assets available for distribution” and the relevance of the delay in applying to set aside.” It might have been a good idea for him to have mentioned specifically that he took into account the fact that the creditor had obtained and would lose the advantages of a Charging Order but that is implicit in the Judgment as a whole. Accordingly while I do not say that I would have reached the same conclusion as Deputy District Judge Jolly in the exercise of my discretion, this is not a case [in] which I find that the decision was outside the borders of that which a reasonable judge could reach. Accordingly the appeal will be dismissed.”
The Deputy District Judge had made no reference in his judgment to the provisions of section 346 of the Insolvency Act 1986. The Building Society's grounds of appeal to the County Court Judge included the following:
“The effect on enforcement procedures of bankruptcy is governed by section 346 of the Insolvency Act 1986. That section provides that where the execution is completed before the commencement of the bankruptcy the judgment creditor is entitled to retain the benefit of the execution. Even if this does not completely exclude the operation of the discretionary jurisdiction under section 3(5) of the Charging Orders Act 1979, such discretion should not be exercised to circumvent the clear policy of the Insolvency Act, and is limited by the policy and provisions of that act, to which the learned District Judge did not give sufficient weight.”
The County Court Judge referred to that ground of appeal at paragraph 5 of his judgment: “Mr Flavin [counsel for the Building Society] … says in effect that when Section 3(5) of the Charging Orders Act is read in conjunction with Section [346] of the Insolvency Act 1986 it was not properly open to the district judge to make the Order he did”. At paragraph 10 he said this:
“It seems to me that though it is undoubtedly the case that a charging order is a remedy of real utility and value, designed to assist a creditor astute enough to obtain one and although the fact that he has obtained one is a very material factor for a judge considering discharge, to have in mind, Section [346](1)of the Insolvency Act does not have the effect of limiting Section 3(5) in the way that the building society suggests. I reach that conclusion because:
1) If this effect was intended by the legislature it would have been expected to have said so explicitly and it does not.
2) The language of Section [346](1) is not without explicit provision apt...
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