Ord v Upton
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE ALDOUS,LORD JUSTICE MANTELL,LORD JUSTICE KENNEDY |
| Judgment Date | 07 December 1999 |
| Judgment citation (vLex) | [1999] EWCA Civ J1207-27 |
| Docket Number | Case No: 99/0549/B3,Case No : 99/0549/B3 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 December 1999 |
[1999] EWCA Civ J1207-11
Lord Justice Kennedy
Lord Justice Aldous and
Lord Justice Mantell
Case No: 99/0549/B3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
NEWCASTLE-UPON-TYNE DISTRICT REGISTRY
HIS HONOUR JUDGE BEHRENS QC
Louis Doyle (instructed by Hay & Kilner for the Appellant)
Robin Mathew QC and Richard Selwyn Sharpe (instructed by Smithson Clarke for the Respondent)
Tuesday, 7 December 1999
Mr Ord, the appellant, was born on 15th May 1965 and in about 1981 commenced work as a labourer. In 1988 he developed back pain and in August 1990 he underwent a micro-discectomy which was successful. On 18th July 1991 he again had back pain and shortly thereafter consulted Dr Wadehra. Mr Ord alleges that Dr Wadehra was negligent in the treatment that he prescribed. On 14th September 1995 Mr Ord was adjudged bankrupt and Mr Robin Upton, the respondent, was appointed as his trustee in bankruptcy with effect from 16th October 1996. Mr Ord was discharged from his bankruptcy on 15th September 1997.
On 17th February 1997 Mr Ord issued a writ of summons against Dr Wadehra and the Newcastle Health Authority claiming damages for personal injury occasioned to him by reason of their alleged negligence. By consent the action against the Newcastle Health Authority was discontinued; but the proceedings against Dr Wadehra are continuing and I understand that liability has been accepted.
According to a report prepared for use by Mr Ord on the assessment of damages in the action, Mr Ord has a substantial claim. He claims over £170,000 for loss of past earnings and interest thereon amounting to just over £45,000. His claim for future loss exceeds £730,000 and of course he has a claim for general damages for pain and suffering as well.
The trustee claimed to be entitled to the damages for financial loss up to the period of Mr Ord's discharge from bankruptcy. Mr Ord contended that, on the assumption that he had a valid cause of action against Dr Wadehra, no part of the cause of action or the damages vested in his estate on bankruptcy. That dispute caused Mr Ord to apply to the court, pursuant to section 303 of the Insolvency Act 1986, to have the issues between himself and the trustee settled. He sought guidance from the court as to whether any part of his damages claim vested in the trustee and, if so, which part. He also sought guidance as to whether, in the event that the trustee was entitled to any part of the damages, the benefits received, which were repayable under the Compensation Recovery Scheme, should be repaid out of the damages that were recovered by the trustee or the damages that he recovered. The benefits consisted of about £5,700 paid as incapacity benefit and just over £2,000 for disability living allowance. Some of the payments were made in respect of a period prior to the adjudication on 14th September 1995 but none were in respect of periods after discharge.
Those issues came before HHJ Behrens. His conclusion is contained in the order that he made on 11th May 1999.
"1. Mr Ord's cause of action against Dr O. Wadehra for damages for personal injury comprised in proceedings in the High Court of Justice, Queen's Bench Division, Newcastle upon Tyne District Registry, 1997-O-No. 266, does constitute property part of which is vested in the Trustee and part of which is vested in Mr Ord, as follows:
1.1. the claim for loss of earnings in respect of the period up to the date of Mr Ord's discharge from bankruptcy (15 December 1997) vests in the Trustee; and
1.2. the claim for pain and suffering, loss of amenity, loss of mobility and all losses after the date of discharge, continue to vest in Mr Ord.
2. Any liability pursuant to the Social Security (Recovery of Benefit) Act 1997 for recoupment of the Incapacity Benefit should be discharged from the part vested in the Trustee; any liability for the recoupment of Mobility Component of the Disability Living Allowance should be discharged out of the part vested in Mr Ord."
With leave of the judge, Mr Ord appealed. He contended that the cause of action for negligence did not vest in his estate and the trustee was not entitled to any part of the damages that would be recovered. He did not suggest that if that was not right, the conclusion reached by the judge as to how the liability to repay benefits should be discharged was wrong. The trustee supported the conclusion reached by the judge.
The issue between the parties is clear, but I have not found its resolution easy. It depends in the end upon construction of the following sections of the Insolvency Act 1986. Section 306 vests the bankrupt's estate in his trustee. It is in these terms:
" 306 Vesting of bankrupt's estate in trustee
(1) The bankrupt's estate shall vest in the trustee immediately on his appointment taking effect or, in the case of the official receiver, on his becoming trustee.
(2) Where any property which is, or is to be, comprised in the bankrupt's estate vests in the trustee (whether under this section or under any other provision of this Part), it shall so vest without any conveyance, assignment or transfer."
What forms part of the bankrupt's estate is defined in section 283. The relevant parts of that section are as follows:
" 283 Definition of a bankrupt's estate
(1) Subject as follows, a bankrupt's estate for the purposes of any of this Group of Parts comprises-
(a) all property belonging to or vested in the bankrupt at the
commencement of the bankruptcy, and
(b) any property which by virtue of any of the following provisions
of this Part is comprised in that estate or is treated as falling within the preceding paragraph.
(2) Subsection (1) does not apply to-
(a) such tools, books, vehicles and other items of equipment as are
necessary to the bankrupt for use personally by him in his employment, business or vocation;
(b) such clothing, bedding, furniture, household equipment and
provisions as are necessary for satisfying basic domestic needs of the bankrupt and his family."
Section 436 contains the following explanation of the word "property":
"In this Act, except in so far as the context otherwise requires (and subject to Parts VII and XI)-
….
"property" includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property; …"
It follows from section 306 that upon Mr Ord being adjudged bankrupt, his estate vested in his trustee. That estate included all his property as defined in section 436, excluding such things as books, clothing etc. His claim for negligence committed by Dr Wadehra is a thing in action within that definition and therefore it would seem that Mr Ord's action vested in the trustee. However that simple answer appears to conflict with the way that sections 306, 283 and 436 of the 1986 Act have been interpreted. Also as both parties accept that there are certain actions which do not vest in the trustee. As Hoffmann LJ pointed out in Heath v Tang [1993] 3 AER 694 at 697:
"The bankrupt as plaintiff
The property which vests in the trustee includes 'things in action': see s 436 of the 1986 Act. Despite the breadth of this definition, there are certain causes of action personal to the bankrupt which do not vest in his trustee. These include cases which-
'the damages are to be estimated by immediate reference to pain felt by the bankrupt in respect of his body, mind, or character, and without immediate reference to his rights of property.' (See Beckham v Drake (1849) 2 HL Cas 579 at 604, 9 ER 1214 at 1222 per Erle J. See also Wilson v United Counties Bank Ltd [1920] AC 102, [1918– 19] All ER Rep 1035.)
Actions for defamation and assault are obvious examples. The bankruptcy does not affect his ability to litigate such claims. But all other causes of action which were vested in the bankrupt at the commencement of the bankruptcy, whether for liquidated sums or unliquidated damages, vest in his trustee. The bankrupt cannot commence any proceedings based upon such a cause of action and, if the proceedings have already been commenced, he ceases to have sufficient interest to continue them. Under the old system of pleadings, the defendant was entitled to plead the plaintiff's supervening bankruptcy as a plea in abatement. Since the Supreme Court of Judicature Act 1875, the cause of action does not abate but the action will be stayed or dismissed unless the trustee is willing to be substituted as plaintiff: see Jackson v North Eastern Rly Co (1877) 5 Ch D 844."
Section 436 is not in truth a definition of the word "property". It only sets out what is included. As will appear later from the cases that have been decided over many years, actions which relate to a bankrupt's personal reputation or body have not been considered to be property and therefore they do not vest in anybody other than the bankrupt. They relate solely to his body, mind and character and any damages recovered are compensation for damage to his body, mind and character as opposed to other causes of action which have been considered to be a right of property. Thus causes of action to recover damages for pain and suffering have been held not to vest in the trustee. That has led to a number of oddities. For example, the parties agree that if at the time of the bankruptcy, the bankrupt had in his...
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