Re Saunders (A Bankrupt)
| Jurisdiction | England & Wales |
| Judgment Date | 1996 |
| Date | 1996 |
| Court | Chancery Division |
Bankruptcy - Jurisdiction - Leave to bring proceedings - Proceedings against bankrupt begun by writ issued after bankruptcy orders made - Leave not obtained - Whether leave can be given retrospectively -
The plaintiffs, having brought proceedings in tort and contract claiming damages against the defendant solicitors, discovered that before the issue of the writs the defendants had been made bankrupt by orders of the court. The plaintiffs sought leave under section 285(3) of the Insolvency Act 1986F1 to commence the proceedings.
On the hearing of the applications: —
Held, granting the applications, (1) that the practice of the English courts between 1891 and 1969 had been to treat insolvency proceedings begun without the stipulated requirement for leave not as an irretrievable nullity, but as capable of redemption by granting leave retrospectively; that, since the Insolvency Act 1986 had refrained from employing emphatic language making retrospective leave impossible but used language having clear roots in the earlier statutes, it was open to the court to give effect to the statutory purpose rather than frustrating it; and that, accordingly, leave might, in appropriate circumstances, be given under section 285(3) notwithstanding that the proceedings had already commenced (post, pp. 480C–E, 491D–E, 492E–G).
(2) That unlike section 130(2) of the Act of 1986, whereby leave might be given to commence or continue proceedings after a winding up order, section 285(3) related only to the commencement of proceedings and therefore the jurisdiction in bankruptcy could only be exercised to grant leave to commence proceedings; and that, accordingly, since the facts justified it, the court would exercise its discretion by granting leave (post, pp. 492H–493B).
The following cases are referred to in the judgment:
Angelstad, In re (
Attorney-General v. Sidney Sussex College, Cambridge (
Battiston v. Maiella Construction Co. Pty. Ltd. [
Benjamin (A.J.) Ltd., In re (
Blais v. Bankers' Trust Corporation Ltd. (
Bristol Airport Plc. v. Powdrill [
Brown v. E.G. Laurie Ltd. [
Canada (Wheat Board) v. Krupski (
Carr v. British International Helicopters Ltd. [
Clarke, In re; Ex parte Clarke (
Coastal Construction Pty. Ltd., In re (
Colchester Estates (Cardiff) v. Carlton Industries Plc. [
Excelsior Textile Supply Pty. Ltd., In re [
Floreat Plumbing Pty. Ltd., In re (
Forsikringsaktieselskapet Vesta v. Butcher [
Glen v. Gregg (
Gray v. Raper (
Horsham Kyosan Engineering Co. Ltd., In re [
Howe v. R.M. MacDougall Pty. Ltd. (
Hutton (A Bankrupt), In re [
Lloyd v. Great Western Dairies Co. [
McGettigan v. Cork Insulation Co. (unreported), 4 October 1991,
McGillivray v. Everall Construction (Edmonton) Ltd. (
Murray and Murray v. United Pacific Transport Pty. Ltd. [
National Employers Mutual General Insurance Association Ltd., In re [
Nazir Ahmad v. Peoples Bank of Northern India Ltd. (
Oceanic Life Ltd. v. Insurance and Retirement Services Pty. Ltd. (
Pilcher, In re; Pilcher v. Hinds (
Police Authority for Huddersfield v. Watson [
Reg. v. Lord Mayor of London, Ex parte Boaler [
Rendall v. Blair (
Standard Trust Co. v. Turner Crossing Inc. (
Stewart v Intercity Distributors Ltd. [
Sydney Formworks Pty. Ltd., In re (
Testro Bros. Consolidated Ltd., In re [
Thomson v. Mulgoa Irrigation Co. Ltd. (
Trusts & Guarantee Co. Ltd. v. Brenner [
Walker, Ex parte (
Walkley v. Precision Forgings Ltd. [
Wanzer Ltd., In re [
Wilson v. Banner Scaffolding Ltd., The Times, 22 June 1982
The following additional case was cited in argument:
Rae, In re [
SUMMONSES
The first, second and third plaintiffs, Bristol & West Building Society, Amiralli Kassam Damji and Zerin Damji, and U.C.B. House Loan Corporation Ltd., had brought proceedings claiming damages, inter alia, in tort and contract on 21 February 1995, 12 December 1994 and 2 June 1995 respectively against their solicitors, in each case the defendants, Philip James Saunders and Clive Paul Bearman. On discovering that the defendants had been adjudged bankrupt prior to the issue of the writs, the plaintiffs sought leave to commence those proceedings retrospectively by summonses dated respectively 31 August 1995, 22 November 1995 and 25 October 1995 against both defendants and their trustees in bankruptcy.
The facts are stated in the judgment.
Stephen Rees Davies for the first and second plaintiffs.
Adrian Jack for the third plaintiff.
Michael Gadd for the defendant solicitors.
The trustees in bankruptcy of the property of the solicitors did not appear and were not represented.
3 April. LINDSAY J. read the following judgment. Philip James Saunders and Clive Paul Bearman are both bankrupts who practised together as solicitors. I have before me a number of applications in bankruptcy concerning their respective estates. In each a party who had thought himself duly to have begun proceedings by issuing a writ as plaintiff against the particular individual as defendant, having now learnt of the bankruptcy and having found it to have commenced before he had issued his writ, now seeks leave under section 285(3) of the Insolvency Act 1986 to commence those proceedings. Leaving aside that it begs the question to describe the parties as “plaintiff” and “defendant” and the papers already issued as “proceedings,” I shall describe the parties and the papers as such.
In a number of cases before me the plaintiff is the Bristol & West Building Society. In another the plaintiffs are a Mr. Dhamji and another. In a further case or cases the plaintiff is U.C.B. Home Loans Corporation Ltd. (“U.C.B.”). Mr. Jack appears for U.C.B., and Mr. Stephen Davies appears for the other plaintiffs. Mr. Gadd is in all the cases instructed on behalf of the bankrupts on the instructions of the solicitors to the insurers to the Solicitors' Compensation Scheme. In the proceedings the individual defendants are sued both in contract and in tort in respect of their duties as solicitors to the respective plaintiffs.
I should first read section 285(3):
“After the making of a bankruptcy order no person who is a creditor of the bankrupt in respect of a debt provable in the bankruptcy shall — (a) have any remedy against the property or person of the bankrupt in respect of that debt, or (b) before the discharge of the bankrupt, commence any action or other legal proceedings against the bankrupt except with the leave of the court and on such terms as the court may impose. This is subject to sections 346 (enforcement procedures) and 347 (limited right to distress).”
The section is sufficiently similar in most respects to section 130(2) of the Insolvency Act 1986 that learning under the one is likely to be applicable to the other, although it is to be noted that where a compulsory winding up order is made there is an automatic bar to further steps in proceedings which had begun before the commencement of the winding up (see section 103(2)) whereas in bankruptcy pre-existing proceedings are provided for in a different way: see section 285(1) and (2).
It is Mr. Gadd's case that section 285(3) requires that the leave of the court to the commencement of proceedings can be given only before they commence; that in point of jurisdiction retrospective consent is not a possibility and that so-called proceedings begun without leave are a nullity which no late giving of leave can thereafter validate. On many facts such a submission would involve, if successful, only the making of a fresh start by way of the plaintiff seeking leave, obtaining it and then recommencing proceedings. Time and money would there have been wasted but nothing else. But in the cases before me there can be no effective fresh start as, if fresh proceedings were to be launched, they would assuredly be met with limitation defences to which, I think I may take it, the plaintiffs have as yet found no answer. Matters have thus been argued on the basis that, if the plaintiffs' existing proceedings cannot be retrospectively validated by being given leave even at this stage, then they will all necessarily fail.
The facts involved in the various proceedings have barely been glanced at; rather the question has been largely raised as one of principle: are the plaintiffs' proceedings irretrievably null or can they be validated by a late leave given after their respective commencements? I say only “largely raised” as a matter of principle as, at one point in the argument, some practical considerations are invoked which depend on the facts.
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