Re A Debtor (Nos. 49 and 50 of 1992)
| Jurisdiction | England & Wales |
| Judge | THE VICE-CHANCELLOR,LORD JUSTICE MANN,LORD JUSTICE EVANS |
| Judgment Date | 21 April 1994 |
| Judgment citation (vLex) | [1994] EWCA Civ J0421-1 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | CHBKI 93/0727/C |
| Date | 21 April 1994 |
[1994] EWCA Civ J0421-1
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(In Bankruptcy)
(Mr. A. Park Q.C., Sitting as a Deputy High Court Judge)
Before: The Vice-Chancellor Lord Justice Mann and Lord Justice Evans
CHBKI 93/0727/C
MR. M. HARRINGTON (instructed by J.W.J. Wallace-Jarvis) appeared on behalf of the Appellant.
MISS BARBARA HEWSON (instructed by Messrs. Foort Mercer) appeared on behalf of the Respondent.
Thursday, 21st April 1994
THE VICE-CHANCELLORMr. Peter Barnes carried on business in Bishop's Stortford, Hertfordshire as an estate agent and letting management agent. On 11th February 1992 he was served with a High Court order made in proceedings brought against him by one of his clients, a Mr. Charash. Mr. Charash claimed that Mr. Barnes had wrongly let property belonging to Mr. Charash. The order restrained Mr. Barnes from dealing further with the property, and required him to produce certain information and documents and to pay over money received by him in respect of the property.
Mr. Barnes turned to a solicitor, Mr. James Wallace-Jarvis, for advice and assistance in the conduct of the proceedings. That was on 12th February. A conference with counsel took place and other events occurred. Nine days later, on 21st February, Mr. Barnes withdrew his instructions. He says that he did so because he was alarmed at the escalating costs and was unhappy at Mr. Wallace-Jarvis's conduct of the matter.
Mr. Wallace-Jarvis then sent Mr. Barnes two bills, one for counsel's fees and the other in respect of his own charges. Counsel's fees amounted to £430, and Mr. Wallace-Jarvis's own fees were £1,807. With Value Added Tax, the total claimed was £2,629. Mr. Barnes did not pay. He made no payment of any amount.
On 23rd July 1992 Mr. Wallace-Jarvis served on Mr. Barnes a statutory demand under section 268(1)(a) of the Insolvency Act 1986. The sum specified was £2,746. That is the amount of the two bills plus interest. Inadvertently, Mr. Wallace-Jarvis omitted to complete all parts of the demand, and he made this good by serving a further statutory demand dated 3rd August for the like amount.
Mr. Barnes disputed his liability to pay. He applied to set aside the statutory demand. His application was dismissed by District Judge Withers, sitting in the Hertford County Court, on 17th December 1992. Mr. Barnes appealed. On 30th April 1993 Mr. Andrew Park Q.C., sitting as a Deputy High Court Judge of the Chancery Division, allowed the appeal and set aside the demand. Before this Court is an appeal brought by Mr. Wallace-Jarvis against that order.
One other introductory matter I should mention is that, after the hearing before the Judge, on 30th September 1993 Mr. Wallace-Jarvis applied to the High Court for a taxation of the bills under section 70(2) of the Solicitors Act. The taxation was completed earlier this month, when the two bills were taxed altogether in the sum of £2,068. We were told that counsel's fees were allowed in full, but a sum was taxed off Mr. Wallace-Jarvis's own charges by a reduction in the hourly rate charged by him.
The Deputy Judge based his decision on the ground that there is here an issue, which needs to be tried, in regard to Mr. Barnes' liability to pay the sum in question. In his affidavits Mr. Barnes has disputed the bills on various grounds. The Judge regarded some of them as hopeless, and none of them as highly convincing. Mr. Barnes says that some of the work was done without his authority, and that some of the work was done unnecessarily. When he withdrew his instructions, he was told that the costs incurred were between £800 and £1,000. Mr. Barnes did not avail himself of his right to seek a taxation, but the Judge pointed out that did not preclude him from disputing his liability to pay on grounds such as those I have mentioned. The Deputy Judge considered that, at the end of the day, Mr. Barnes would be found to be liable to pay something, but that Mr. Barnes did have a substantial argument that he might owe less than the bankruptcy level of £750.
Mr. Barnes had a second string to his bow. He claimed that Mr. Wallace-Jarvis agreed he would wait for payment until after the conclusion of the Charash litigation so far as his own charges were concerned, as distinct from counsel's fees. The Judge doubted whether Mr. Barnes would succeed in establishing the existence of such an agreement, but he felt unable to conclude that, on this, there was no issue to be tried. The Judge summed up his conclusion by saying, "Admittedly, Mr. Barnes seems to have said on some occasion that he might be prepared to pay up to £1,000 without waiting for the end of the Charash case, but that is not necessarily inconsistent with a prior agreement that he could not be required to pay anything."
On this appeal the first point taken on behalf of Mr. Wallace-Jarvis is that the statutory demand ought not to be set aside unless the whole of the debt is disputed on substantial grounds, or Mr. Barnes has a counterclaim or a cross demand which equals or exceeds the amount of the debt specified in the statutory demand. It is said that, on the Judge's appraisal of the evidence, that is not this case. Here, as the Judge found, Mr. Barnes is unlikely to establish that he owes nothing. Accordingly, it is submitted, the statutory demand should stand. Mr. Wallace-Jarvis can then present a bankruptcy petition. At the hearing of the petition the court will decide whether or not the sum for which Mr. Barnes is indebted exceeds the bankruptcy level. The mere fact that the amount of the debt is overstated in the statutory demand is not of itself a ground for setting aside the demand: see In re a Debtor [1989] 1 WLR 271 and In re a Debtor [1992] 1 WLR 507. In such circumstances, it is submitted, the debtor's remedy is to pay the part of the debt in respect of which there is no genuine triable issue and apply to set aside the statutory demand in respect only of the balance. I pause to observe, in passing, that in those cases there was no question of the undisputed part of the debt being less than the bankruptcy level.
The Deputy Judge rejected this argument. In my view, he was right to do so. I leave on one side any difficulty arising from the uncertainty as to the precise amount owed by Mr. Barnes. Section 267(2) enables a bankruptcy petition to be presented by a creditor if, but only if, the amount of the debt, or the aggregate amount of the debts, is equal to or exceeds the bankruptcy level, currently £750, and the debt, or each of the debts, is one which the debtor appears to be unable to pay. For this purpose a debtor appears to be unable to pay a debt if, but only if, the debt is payable...
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