Popeley v Popeley
| Jurisdiction | England & Wales |
| Judge | Lord Justice Jonathan Parker,Mr Justice Moses,Lord Justice Ward |
| Judgment Date | 30 April 2004 |
| Neutral Citation | [2004] EWCA Civ 463 |
| Docket Number | Case No: A2 2003 1798 |
| Court | Court of Appeal (Civil Division) |
| Date | 30 April 2004 |
[2004] EWCA Civ 463
Lord Justice Ward
Lord Justice Jonathan Parker and
Mr Justice Moses
Case No: A2 2003 1798
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT
CHANCERY DIVISION
Mr Edward Bartley Jones QC
Sitting as a Deputy High Court Judge of
The Chancery Division
EWHC 2003 2028 CH
Royal Courts of Justice
Strand,
London, WC2A 2LL
Mr John Briggs (instructed by Messrs Portner and Jaskel) for the Appellant
Mr Jasbir Dhillon (instructed by Messrs Whitehead Monckton) for the Respondent
Crown Copyright ©
INTRODUCTION
This appeal raises questions as to the true meaning and effect of r.6.5(4) (a) of the Insolvency Rules 1986 ( SI 1986/1925) ("the Rules"), which confers a discretion on the court to set aside a statutory demand based on an undisputed debt where the debtor 'appears to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt …. specified in the statutory demand'; and as to the approach which the court should adopt in deciding how to exercise that discretion where (a) the 'cross demand' relied upon is a claim made in a pending action brought by the debtor against the creditor, and (b) the debt on which the statutory demand is based arises under a costs order made in proceedings closely associated with that action. It also raises a question as to the consequences of the failure of a district judge to give reasons when dismissing an application to set aside a statutory demand under the summary procedure prescribed by r.6.5(1) of the Rules.
The appeal is brought by Ronald Albert Popely ("Ronald") against an order made by Mr Edward Bartley Jones QC, sitting as a Deputy High Court Judge of the Chancery Division, on 25 July 2003. The deputy judge allowed an appeal by Ronald's brother John Henry Popely ("John") against an order made by Deputy District Judge Murphy ("the district judge") in the Canterbury County Court (in Bankruptcy) on 16 May 2003 dismissing John's application to set aside a statutory demand dated 23 April 2003 served on him by Ronald. By his order, the deputy judge set aside the statutory demand.
The statutory demand is based on John's liability under a costs order made by His Honour Judge Dean QC in the Wood Green Crown Court on 12 April 2002.
The proceedings in the Wood Green Crown Court concerned documents which had been seized by H.M. Customs & Excise with a view to criminal proceedings being brought against, among others, John and Ronald. In the Crown Court proceedings John sought permission to make use of certain of those documents in an action which he had commenced against Ronald in the Chancery Division on 13 August 2001 ("the First Action") .
John's application in the Crown Court proceedings was dismissed and an order for costs was made against him. Following a detailed assessment, the costs payable under the order were certified in the sum of £41,617.
John subsequently commenced a second action against Ronald in the Chancery Division ("the Second Action") claiming the same relief as that claimed in the First Action. The First Action and the Second Action have since been consolidated.
John having made no payment under the costs order, Ronald issued the statutory demand as a preliminary to the presentation of a bankruptcy petition against John. John applied to set aside the statutory demand. His application was dismissed by the district judge under the summary procedure prescribed by r.6.5(1) (as to which, see paragraph 38 below) . The district judge gave no reasons. John's appeal to the High Court was allowed by the deputy judge.
John contends that his claim in the consolidated action ("the Underlying Claim") is a 'cross demand' within the meaning of r.6.5(4) (a) ; and that, absent special circumstances (and he contends that there are none in the instant case), the court should exercise its discretion under the rule by setting aside the statutory demand.
Ronald contends that for the purposes of r.6.5(4) (a) the costs order made in the Crown Court proceedings falls to be treated in the same way as if it were an interlocutory costs order made in the consolidated action. On that footing, he contends that where an interlocutory order provides for the immediate payment of costs by a claimant or (as the case may be) by a defendant who is advancing a counterclaim, the paying party's claim in the action in which the costs order was made is not a 'cross demand' within the meaning of the rule. Alternatively, he contends that if and to the extent that in such circumstances the court has a discretion whether to set the statutory demand aside, it should not exercise such discretion by setting the statutory demand aside since to do so would be to subvert the interlocutory costs order in so far as it provided for the immediate payment of costs.
Thus the particular questions which fall for decision on this appeal are: firstly, whether, as a matter of construction of r.6.5(4) (a) and in the particular circumstances of the instant case, the Underlying Claim is a 'cross demand' within the meaning of the rule (for if it is not, the rule does not apply) ; and secondly, if so, what approach the court should adopt to the exercise of its discretion.
Permission for a second appeal was granted by Peter Gibson LJ on the papers on 29 October 2003.
THE FACTUAL BACKGROUND
Prior to 1999 John and Ronald carried on various property ventures together, in England and abroad. In early 1999 differences arose between them and discussions took place with a view to a sale of their jointly-owned assets, which included properties in England, in Northern Cyprus and in France. John claims that in the course of those discussions a concluded agreement was reached which Ronald has breached by realising the jointly-owned assets for his own benefit, to the exclusion of John. That is the Underlying Claim, which John values at more than £1.8 million.
On 13 August 2001 John commenced the First Action, advancing the Underlying Claim and seeking relief in the form of accounts and inquiries as to the sale of the jointly-owned assets, a declaration that he is entitled to a one third share in the net proceeds of sale of such assets, and, further or alternatively, damages for breach of contract.
On 20 August 2001 the Claim Form and the Particulars of Claim in the First Action were served on Ronald by first-class post, at his last known address in England. On 19 September 2001 Ronald issued an application contesting the jurisdiction of the English courts, on the grounds that he was neither present in the jurisdiction on 20 August 2001, nor resident or domiciled in the jurisdiction at that time, and that accordingly the purported service of the proceedings on him was bad. Further or alternatively, he contended that the High Court was not the appropriate forum for the adjudication of the Underlying Claim.
In February 1998 a number of documents had been seized by H. M. Customs & Excise in connection with criminal proceedings which were at that time contemplated against, among others, John and Ronald (in the event the contemplated criminal proceedings were never brought to trial) . On 28 November 2001 John issued an application in the Wood Green Crown Court for an order that he be permitted to use certain of those documents in the First Action and in another action which he had commenced in the Bromley County Court (the latter action is not material for present purposes) . A further application to similar effect was issued on 13 March 2002.
John's applications, which were opposed by Ronald, were heard by His Honour Judge Dean QC on 12 April 2002. He dismissed the applications with costs, to be the subject of a detailed assessment.
In the meantime, Ronald applied for security for costs in the First Action. On 14 January 2002 Master Winegarten made no order on the application, and no order as to costs. Ronald appealed against the Master's order, and on 17 June 2002 Mr Peter Leaver QC, sitting as a Deputy High Court Judge, allowed the appeal. He directed that John provide security in the sum of £75,000, and that the First Action be stayed in the meantime. He further ordered that John pay Ronald's costs of the appeal, which he summarily assessed in the sum of £35,000. John applied to the Court of Appeal for permission for a second appeal.
On 10 July 2002 Ronald applied for a detailed assessment of the costs payable by John under the order made in the Crown Court proceedings.
John made no payment under the costs order made by Mr Leaver QC, and on 29 July 2002 Ronald issued a statutory demand in respect of such costs, in the sum of £35,000 plus interest. The statutory demand was served on 2 August 2002. John applied to Canterbury County Court to set aside the statutory demand. On 19 September 2002 the district judge dismissed that application, with costs.
In paragraph 22 of his judgment in the instant case, the deputy judge quoted a passage from the transcript of the proceedings before the district judge, describing it as containing the crux of the district judge's reasoning. In the passage in question the district judge said this:
"It does not seem to me that the proceedings [i.e. the First Action] which are currently stayed, amount to, in themselves, a counterclaim or set-off or cross demand. This depends on whether your application to the Court of Appeal [i.e. for permission to appeal] is successful. It is for the High Court to determine the merits of your claim. Obviously, if you are...
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