R v Lord Chancellor, ex parte Lightfoot

JurisdictionEngland & Wales
JudgeMR. JUSTICE LAWS,Lord Justice Simon Brown,Lord Justice Chadwick,Mr Justice Rattee
Judgment Date23 July 1999
Neutral Citation[1998] EWCA Civ J0731-12
Judgment citation (vLex)[1999] EWCA Civ J0723-6
Docket NumberCase No: QBCOF 1998/1406/4,CO-847-98
CourtCourt of Appeal (Civil Division)
Date23 July 1999
R
and
The Lord Chancellor
Ex Parte Lightfoot

[1998] EWCA Civ J0731-12

Before:

Mr. Justice Laws

CO-847-98

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

CROWN OFFICE LIST

Royal Courts of Justice

Strand

London WC2

MR. R. ALLEN QC AND MISS U. BURNHAM appeared on behalf of the applicant. (Instructed by Public Law Project, London.)

MR. P. SALES appeared on behalf of the respondents. (Instructed by Treasury Solicitors.)

1

(AS APPROVED BY THE JUDGE)

MR. JUSTICE LAWS
2

In these judicial review proceedings the applicant is a lady who has debts amounting to nearly £60,000, and no significant assets. By far the largest debt is owed to the mortgagees of her previous home. After the break up of her marriage many years ago, she purchased her husband's interest in the house where they had lived in Beckenham. The time came, however, when she could no longer afford the mortgage repayments. The house was repossessed in 1993 and sold in 1995. But its market value had greatly decreased. She was caught up in the trap of what has become known as 'negative equity'. She owes the mortgagees over £40,000. She has suffered a series of other misfortunes, and there are a number of County Court judgments outstanding against her. She attributes her money problems to the breakdown of her marriage and to the economic recession of the early 1990s.

3

The applicant desires to present a debtor's petition for bankruptcy under s.272 of the Insolvency Act 1986 ("the 1986 Act"). If she were made bankrupt she would, within a fixed period, see an end to her indebtedness. Otherwise the debts will hang over her indefinitely. But she is debarred from presenting a petition because by paragraphs 8(1) and (2)(a), and 9(b), of the Insolvency Fees Order 1986 (the 1986 Order) she must first pay into court a deposit of £250 as security for the fees to be received by the Official Receiver for the performance of his duties on the making of a bankruptcy order. It is clear from these provisions and from rule 6.42(1) of the Insolvency Rules 1986 (the 1986 Rules) that she cannot file a petition unless she pays the deposit and produces the receipt for it when her petition is presented. The 1986 Act, the 1986 Rules, and the 1986 Order all came into effect on the same day, on 29 December 1986.

4

In these proceedings it is contended on her behalf that paragraphs 8(1) and 9(b) of the 1986 Order are, as it is put in Form 86A, unlawful and ultra vires "to the extent that [they] preclude the exercise of any discretion to waive the deposit required upon the presentation of the bankruptcy petition in circumstances where the petition is presented by the debtor on income support or otherwise wholly unable to pay such deposit". The actual or purported vires for the 1986 Order is (so far as material) to be found in s.415 of the 1986 Act. Mr Allen QC for the applicant submits that this provision is cast in general words which do not empower or justify the making of secondary legislation whose effect is to bar a person in the applicants position from access to the court. He relies upon R v Lord Chancellor ex parte Witham [1998] 2 WLR 849, a decision of the Divisional Court in which the judgments were given by Rose LJ and myself. The headnote reads in part at 849G "… Access to the courts [is] a constitutional right at common law which could be abrogated only by a specific statutory provision in primary legislation or by subordinate legislation whose vires in primary legislation specifically conferred the power to abrogate". Mr Allen says that this applies here.

5

Mr Sales for the Lord Chancellor (who is the subordinate legislator under s.415) submits that the case falls outwith the principle described in Witham; alternatively, the legislative history from 1883 onwards demonstrates a clear, consistent, and continuing intention on the part of Parliament to institute and maintain a regime relating to bankruptcy in which a deposit or security such as that now provided for by the 1986 Order must be paid before a petition can be filed.

6

The case is described in Mr Allen's skeleton argument as a test case. It is brought with the support of the Public Law Project, and with the assistance of information provided by members of the Money Advice Association, the Law Centres Federation, the Federation of Independent Advice Centres and the National Association of Citizens Advice Bureaux and others.

7

I will first describe the current legislation. The presentation of bankruptcy petitions to the court is governed by Part IX of the 1986 Act. Provision for an individual to petition for his own bankruptcy is made by s.264(1). The sole ground upon which a debtors petition may be presented to the court is that the debtor is unable to pay his debts (s.272(1)). The petition must be accompanied by a statement of the debtors affairs containing such particulars of the debtors creditors, his debts and other liabilities, his assets, and such other information as may be prescribed in the 1986 Rules (ss.272(2) and 384(1)).

8

The court may by s.264(2) read with s.272(1) make a bankruptcy order if it is satisfied that the debtor is unable to pay his debts. Where an order is made, the bankruptcy continues until the individual is discharged (s.278); in a case such as the applicants, by s.279(2)(b) the bankrupt will generally be discharged from bankruptcy at the expiration of three years beginning with the bankruptcies commencement. The effect of discharge is that subject to certain qualifications which I need not describe, the bankrupt is released from all the bankruptcy debts (s.281). While the bankruptcy is in effect, the Official Receiver has important duties. In essence he must protect the estate, and investigate the bankrupts conduct. He may be obliged to decide whether to summon a general meeting of the bankrupts creditors for the purpose of appointing a trustee. If such a meeting is held, he must conduct it. Mr Sales skeleton argument accurately describes a debtors bankruptcy as "a procedure whereby the petitioner seeks relief from her debts, pursuant to a process whereby to ensure fair treatment of the creditors, that all the debtors assets are collected in, and that there is rateable distribution among the creditors it is necessary for a third party (the Official Receiver or, in some cases, an insolvency practitioner) to undertake the task of getting in the assets and distributing them".

9

But even though a debtor is unable to pay his debts, s. 273(1) prohibits the making of an order if it appears to the court:

"(a) that if a bankruptcy order were made the aggregate amount of the bankruptcy debts, so far as unsecured, would be less than the small bankruptcies level, [currently £20,000],

(b) that if a bankruptcy order were made, the value of the bankrupts estate would be equal to or more than the minimum amount, [currently £2,000],

(c) that within the period of five years ending with the presentation of the petition the debtor has neither been adjudged bankrupt nor made a composition with his creditors in satisfaction of his debts or a scheme of arrangement of his affairs, and

(d) that it would be appropriate to appoint a person to prepare a report under section 274 of the Act."

10

This provision does not on the facts apply in the applicants case, but it is of some importance upon the issue whether a constitutional right of the kind discussed in Witham is involved here, and I should describe the consequences of its application. Where the court finds that these four matters apply, it must appoint a person who is qualified to act as an insolvency practitioner in relation to the debtor to prepare a report stating whether the debtor is willing to make a proposal for a voluntary arrangement; and if so, whether in the opinion of the writer a creditors meeting should be summoned to consider such a proposal (s.274(1), (2)). A voluntary arrangement enables a debtor to enter into binding arrangements with all his creditors for the implementation of a composition in satisfaction of his debts or a scheme of arrangement for his affairs, and so provides a mechanism for the debtor to secure a moratorium on his debts whilst avoiding formal bankruptcy. It binds all creditors entitled to attend and who have notice of the creditors meeting which approves the debtors proposals, whether they attend or not (s. 260). There are further provisions contained in ss.252 and 274 which I need not set out.

11

I should refer also to s.275, which provides for a shortened form of procedure (summary administration) where a bankruptcy order is made on a debtors petition if (in particular) "the aggregate amount of the bankruptcy debts so far as unsecured would be less than the small bankruptcies level…" Like s.273 this has no application on the facts to the present case; but as part of the overall scheme established under Part IX of the 1986 Act, it is, again, material to what I may call the Witham argument."

12

In light of part of Mr Allen's argument for the applicant, I should next refer to ss.265 and 266. S.265 is headed "Conditions to be satisfied in respect of debtor". Ss.1 provides:

"A bankruptcy petition shall not be presented to the court under Section 264(1)(a) or (b) unless the debtor -

(a) is domiciled in England and Wales,

(b) is personally present in England and Wales on the day on which the petition is presented, or

(c) at any time in the period of three years ending with that day -

(i) has been ordinarily resident, or has had a place of residence, in England and Wales, or

(ii) has carried on business in England and Wales."

13

Section 266 is headed "Other preliminary conditions". Ss.3

14

provides:

"The Court has a general power, if it appears to it appropriate to do so on the...

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2 books & journal articles
  • The Constitutional Logic of the Common Law.
    • United States
    • Vanderbilt Journal of Transnational Law Vol. 53 No. 1, January 2020
    • 1 January 2020
    ...[2003] QB 151, [60], [62], [64] (Eng.), cited in HS2 Action All. [2014] UKSC 3 at [208]. Cf. R v. Lord Chancellor, ex parte Lightfoot [2000] QB 597, 614 (Eng.) ("[Constitutional rights as I have sought to describe them will generally be creatures of the common law. Statutes enacted by Parli......
  • Chapter VIII. Decisions of national tribunals
    • United States
    • United Nations Juridical Yearbook No. 2008, January 2008
    • 1 January 2008
    ...the Judge’s conclusion at the end of [25], after referring to Bishopgate v Maxwell [1992] BCLC 475 and R v Lord Chancellor ex p Lightfoot [2000] QB 597: “All that can, I think, be derived from those authorities is that it is proper to look to see whether the context in which the relevant le......

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