Ramsey v Hartley
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MEGAW,LORD JUSTICE LAWTON,LORD JUSTICE GEOFFREY LANE |
| Judgment Date | 24 February 1977 |
| Judgment citation (vLex) | [1977] EWCA Civ J0224-9 |
| Date | 24 February 1977 |
| Court | Court of Appeal (Civil Division) |
[1977] EWCA Civ J0224-9
In The Supreme Court of Judicature
The Court of Appeal
(Civil Division)
(From: Sir Douglas Frank, Q.C. sitting as Deputy High Court Judge - in Chambers)
Lord Justice Megaw
Lord Justice Lawton and
Lord Justice Geoffrey Lane
Mr. MURRAY PICKERING (instructed by Messrs. Hewitt, Woollacott & Chown) appeared on behalf of the Appellants (Fifth Defendants).
Mr. DAVID VADGHAN (instructed by Messrs. Speechly Bircham) appeared on behalf of the Respondent (Plaintiff).
The principal question in this appeal concerns the right of a bankrupt to pursue in his own name an action, started by him before his bankruptcy, in respect of which action the trustee in bankruptcy has assigned or purported to assign all rights to the bankrupt.
The action out of which the appeal arises was begun by the plaintiff, Mr. Alan Victor Ramsey, the respondent in this appeal, by a writ issued on 18th May, 1972. The first four defendants named in the writ were Mr. Hartley, Mr. Prickett, Mr. Hernon and Mr. Bond. The fifth defendant was the appellant in this appeal, a firm of chartered accountants, Maidment Penney Quick & Co.
In March, 1970, the plaintiff made an agreement with the first four defendants, who were directors of and shareholders in a company, C. & J. Prickett Ltd., for the purchase by the plaintiff of shares in that company. The plaintiff, in consideration of the purchase of the shares, paid £11,000 and lent the company £29,000. He also thereafter gave guarantees, jointly with the first and third defendants, of the company's indebtedness to two financial institutions, and he himself made further loans to the company. It was a disastrous transaction. The plaintiff alleges that the loss resulting to him was about £150,000.
The plaintiff's claim against the first four defendants was, primarily, on the ground that they were in breach of warranties given by them in the agreement for the sale of the shares: the warranties being as to the accuracy of accounts of the company, on the faith of which the plaintiff says that he entered into the contract.
The plaintiff's claim against the fifth defendant (to whom I shall refer hereafter as "the defendant", since none of the first four defendants is concerned in this appeal) was on a differentbasis. The defendant was not a party to the agreement for the sale of the shares. But the Plaintiff asserts that the defendant never the less owed him a duty of care in the circumstances of the sale. The defendant, it is said, knowing that the plaintiff would rely upon certain accounts prepared by the defendant in deciding whether or not to purchase the shares, was negligent in the preparation of those accounts, which, it is alleged, were inaccurate in various respects. If the accounts had been accurate, the plaintiff would not have entered into the contract and would not have incurred the losses which he has in fact incurred from the purchase of the shares and his subsequent commitments resulting there from. The defendant, while admitting that it owed a duty to the plaintiff — the nature and extent of the duty may he in dispute- denies that it was in any way in breach of that duty or that the accounts prepared by it were inaccurate. We do not in this appeal have to form any view on those issues.
The writ, as I have said, was issued on 18th May, 1972. On 31st August, 1972, the plaintiff was adjudged bankrupt, the adjudication relating back to 22nd June, 1972, a month after the issue of the writ. The trustee in bankruptcy is Mr. G.A. Weiss of Messrs. W.H. Cork Gulley & Co. The bankruptcy was, presumably, caused by the plaintiff's financial losses and commitments arising out of these transactions. The plaintiff is therefore contending, in effect, that the defendant is responsible for his bankruptcy.
On 5th October, 1972, the defendant's solicitors asked the plaintiff's solicitors for further and better particulars of the statement of claim before delivering the defence. The plaintiff's solicitors agreed to extend the time for delivery of the defence pending their consideration of the request for particulars. The further and better particulars were delivered 2 years and 9 months later, on 9th July, 1975. On 5th November, 1975, the defence was delivered.
On 23rd December, 1975, as appears from the affidavit of a partner in the firm of solicitors acting for the defendant, that firm asked the plaintiff's solicitors to confirm that, although their client was now bankrupt, his trustee in bankruptcy "had assigned his alleged claim against the defendants in the action to him". There was apparently no suggestion at that stage that such an assignment would he invalid or irregular. The query was merely leading up to an intended application for security for costs. On 30th December, 1975, the plaintiff's solicitors wrote as follows: "We thank you for your letter of the 23rd December and confirm that our client has been assigned his claim against your clients and the co-defendant in this action, by his trustee in bankruptcy. As requested, we would advise you that Mr. Ramsey's trustee in bankruptcy is Mr. G.A. Weiss…."
On 16th January, 1976, the defendant initiated the interlocutory proceeding which has ultimately led to this appeal. A summons was issued asking for security for costs to be given by the plaintiff. We have not seen a copy of the summons, but it was concerned with security for costs and nothing more. While the summons was pending, the plaintiff's solicitors on 3rd March, 1976, supplied the defendant's solicitors with a copy of the assignment, which had been executed on 20th December, 1974.
The summons for security for costs was heard by Master Bickford Smith on 3rd May, 1976. He, of his own initiative, raised the question whether the action was properly constituted, the trustee in bankruptcy not being either the plaintiff or a plaintiff. It was not suggested that it was wrong for the learned Master to raise this question, although it had not been raised by the parties. No objection was taken, or is now taken, to the question being raised and decided. It is the principal question which we are asked to decide on tills appeal.
On that issue, it is necessary to refer to the terms of thepurported assignment of 20th December, 1974. I say "purported" because, if some of the defendant's contentions are right, the assignment was invalid.
The parties to the deed of assignment are, first, Mr. Weiss, the trustee; second, the plaintiff, as assignee; third, the plaintiff's wife, as surety. We are not concerned with the surety precisions. The instrument recites the action begun on 18th May, 1972, the receiving order and the adjudication in bankruptcy. It recites that the trustee thereby became entitled "to all the then existing rights and title of the assignee in…. the action" and that the trustee had agreed to assign as thereinafter set out.
Clause 1, slightly pruned, reads: "In consideration of the Assignee's covenants hereinafter appearing the Trustee as Trustee in Bankruptcy of the Assignee hereby transfers conveys and assigns to the Assignee All Those Rights in title to and choses in action relating to or in any wise arising out of the matters giving rise to the claim more particularly set out in the Statement of Claim…. to the intent that hereafter the Assignee shall be solely entitled (subject as hereinafter mentioned) to all proceeds profits damages interest or other monies of whatsoever kind or howsoever arising out of such action".
Clause 2 contains the assignee's covenants. In summary, they are: (a) to indemnify the trustee against costs? (b) if the action is successful, to pay the trustee 35 per cent. Of the net proceeds: "net", that is, after the deduction of costs which the assignee may have to pay. Then (c), which, rather ineptly, is Included among the assignee's undertakings, provides that the assignee shall hold the rights, title and benefit assigned to him as his own without any claim by the trustee or the bankrupt estate.
Master Bickford Smith held that a mere right to litigate cannot be assigned: that this purported assignment was of that character:that, therefore, it was not valid, and so the action was not properly constituted. He regarded it as an "undesirable result" that the bankrupt could continue the action and, as the Master put it, "avoids costs". It is not accepted on behalf of the plaintiff that that would necessarily be the consequence in the present case if the action failed against the defendant.
The Master, having decided that the action was not properly constituted, stayed the action. He did not deal with the matter actually raised on the summons, the question of security for costs.
The plaintiff appealed to the Judge in Chambers.
The appeal was heard by Sir Douglas Frank, Q.C., sitting as a Deputy High Court Judge, on 9th December, 1976. He allowed the appeal, holding that the action was properly constituted. He relied on Kitson v. Hardwick (1872) 7 Common Pleas 473, rejecting various contentions on behalf of the defendant. On the other issue - the defendant's application for security for costs - he rejected the defendant's contention that the plaintiff was a "nominal plaintiff" under Rules of the Supreme Court Order 23 Rule 1. He further held that, even if the plaintiff were a "nominal plaintiff", it would be "manifestly unjust" that the court should exercise its discretion to order security for costs.
The defendant appeals on both issues. I deal first with the first issue: should the action, as at present constituted, with the plaintiff as the only plaintiff, and without the trustee being a party, be stayed?
Counsel for the defendant, in addition...
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