Scottish & Newcastle Ltd v Raguz
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Proudman |
| Judgment Date | 10 June 2010 |
| Neutral Citation | [2010] EWHC 1384 (Ch) |
| Date | 10 June 2010 |
| Court | Chancery Division |
| Docket Number | Case No: CH/2010/PTA/0093 |
[2010] EWHC 1384 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mrs Justice Proudman
Case No: CH/2010/PTA/0093
Christopher Stoner QC (instructed by Eversheds LLP, Newcastle) for the Petitioner/Respondent
Marion Lonsdale (instructed by LHP Law LLP, Redditch) for the Debtor/Appellant
Hearing dates: 28 May 2010
Mrs Justice Proudman:
This is an application by the defendant, Mr Raguz, for permission to appeal a decision of February 12 th 2010 of District Judge Nield in the Worcester County Court, (the appeal to follow if permission is given), coupled with an application to review his decision under s. 375 of the Insolvency Act 1986. Mr Raguz wishes to adduce fresh evidence for both purposes. By the Order appealed against, DJ Nield made Mr Raguz bankrupt on the petition of Scottish & Newcastle Limited, which had been presented on 30 th September 2009 and served personally on Mr Raguz on 10 th November 2009.
The petition debt of £211,275 is undisputed. It reflects sums paid by the petitioner to the freeholder of premises of which it was the original tenant and in respect of which it is entitled to seek an indemnity from the intermediate lessee to whom the petitioner assigned its interest. The extent of the underlying entitlement was litigated up to, and finally established in, the House of Lords in Scottish & Newcastle plc v. Raguz [2008] UK HL 65, [2008] 1 WLR 2494.
At the hearing before the Judge on 12 th February Mr Raguz contended that he was offering adequate security for the debt. Alternatively, he asked for the petition to be adjourned on the ground that as a result of a contemplated sale of the shareholding in Impney Group Ltd (“Impney”) of which he owned 55% (respectively “the Impney shares” and “his Impney shares”), he would soon receive funds sufficient to settle the debt. Impney owns and runs a large hotel (“the hotel”) in Worcestershire called Chateau Impney.
The appeal concerns the Judge's treatment of both these contentions. It is said that he erred (a) in not dismissing the petition on the ground that the petitioner was acting unreasonably in refusing Mr Raguz's offer of security, and (b) in not adjourning the petition for 3 months pending the outcome of the sale of the Impney shares or a sale of Impney's assets.
The relevant law
The provisions which the Judge had to consider are contained in s. 271(3) of the Insolvency Act 1986, namely,
“The court may dismiss the petition if it is satisfied that the debtor is able to pay all his debts or is satisfied—
(a) that the debtor has made an offer to secure or compound for a debt in respect of which the petition is presented,
(b) that the acceptance of that offer would have required the dismissal of the petition, and
(c) that the offer has been unreasonably refused.”
The approach that the Court should take to the question of an adjournment was explained by Henderson J in Ross and Holmes v. Revenue and Customs Commissioners [2010] 2 All ER 126 at 148–9, where he said,
“There is no doubt that the court retains a discretion not to make a bankruptcy order, even where the petition debt has been clearly established and any grounds of opposition have been dismissed. However, the authorities establish that in such circumstances the discretion to adjourn should only be exercised if there is a reasonable prospect of the petition debt being paid in full within a reasonable period: see Harrison v. Segger [2005] EWHC 411 (Ch) a7 [7], [2005] BPIR 583 at [7] per Blackburne J, and Re Gilmartin (a bankrupt), ex p bankrupt v. International Agency and Supply Ltd [1989] 2 All ER 835 at 838, [19898] 1 WLR 513 at 516 per Harman J. Furthermore, as Blackburne J said, '[t]here must be credible evidence to support such a prospect if the court is to grant an adjournment for payment.”
Appeals are governed by s. 375 of the Insolvency Act 1986, which is headed “Appeals etc. from courts exercising insolvency jurisdiction”. I am concerned with s. 375(1) and (2), which provide,
“(1) Every court having jurisdiction for the purposes of the Parts in this Group may review, rescind or vary any order made by it in the exercise of that jurisdiction.
(2) An appeal from a decision made in the exercise of jurisdiction by a county court…lies to a single judge of the High Court…”
It is common ground that an appeal requires the permission of the court, but that an application for a review does not. The two jurisdictions are discrete and different tests must be applied.
The appeal jurisdiction involves the consideration of whether the judgment below was wrong. As Chadwick J said in Vadher v. Weisgard [1997] BCC 219 at 221,
“…this appeal to me- brought under s. 375(2) of the Insolvency Act 1986 and 7.4(2) of the Insolvency Rules 1986 ( SI 1986/1925)—is a true appeal and…I should not interfere with the district judge's order unless satisfied that he had exercised his discretion on a wrong principle, or had taken into account matters which he should not have taken into account or had failed to take into account matters which he should have taken into account. It is not open to me, on an appeal of this nature, to set aside the district judge's order on the basis that I might myself have exercised the discretion differently.”
S 375(1) gives the court a power of review which goes beyond an appeal if the conditions for the application of the section are satisfied. The rationale was explained by Vinelott J in In re a Debtor No 32 of 1991 (No 2) [1994] BCC 524 at 528, where he said,
“The court's power of review under s. 375(1) is an exceptional power, not to be found in any other jurisdiction. The reason for conferring this exceptional power on the court in exercising bankruptcy jurisdiction must, I think, lie in the fact that bankruptcy results in a serious restriction on the debtor's freedom of action and on his reputation. It should not be resorted to in place of the ordinary process of appeal, save in cases where the court is satisfied that there has been something amounting to a miscarriage of justice which cannot be corrected by the ordinary process of appeal.”
In Papanicola v. Humphreys [2005] EWHC 335 (Ch), [2005] 2 All ER 418, Laddie J reviewed the authorities, (in particular the decision of the Court of Appeal in Fitch v. Official Receiver [1996] 1 WLR 242) and summarised the requirements for engagement of the s. 375(1) jurisdiction. Laddie J formulated the following propositions in relation to s. 375 (at paragraph [25]):
“(1) The section gives the court a wide discretion to review vary or rescind any order made in the exercise of the bankruptcy jurisdiction. (2) The onus is on the applicant to demonstrate the existence of circumstances which justify exercise of discretion in his favour. (3) Those circumstances must be exceptional. (4) The circumstances relied on must involve a material difference to what was before the court which made the original order. In other words there must be something new to justify the overturning of the original order. (5) There is no limit to the factors which may be taken into account. They can include, for example, changes which have occurred since the making of the original order and significant facts which, although in existence at the time of the original order, were not brought to the court's attention at that time. (6) Where the new circumstances relied on consist of or include new evidence which could have been made available at the original hearing, that, and any explanation the applicant gives for the failure to produce it then or any lack of such explanation, are factors which can be taken into account in the exercise of the discretion.”
Laddie J stressed that, on the basis of the authorities, there must be “something new”, “the concept that something has changed”, “a material difference”. As he went on to say (at paragraph [26]),
“If there is no change in circumstances, the only way to challenge the order is by appeal. The court is not to review its order simply on the basis that the applicant wants to present substantially the same facts and the same arguments but more forcefully and attractively.”
Evidence before the court on 12 th February 2010
The background to the offer at the time of the hearing on 12 th February 2010 is as follows. Mr Raguz initially offered a charge over his Impney shares, an assignment of a right of indemnity against a Mr Virani (an assignee of the lease) and a charge over some land near the hotel. However Impney went into administrative receivership and in anticipation of this the offer of a charge had been withdrawn on 18 th November 2009.
By 14 th December 2009 Mr Raguz was seeking an adjournment on the basis that he had offered an assignment of the right of indemnity from Mr Virani and charges over three pieces of land, although it was clear by that stage that the terms of the charges had changed in that the security was not to be enforceable until June 2010. His evidence did not state, as was the case, that all of the properties offered as security were subject to prior charges. Those charges were thought by the petitioner to be substantial but the exact extent was not known. Moreover Mr Raguz adduced no professional valuations of the properties at that stage.
Further, in his first witness statement (of 10 th December 2009) Mr Raguz gave evidence of a potential purchase of the Impney shares. No detail was given about the purchase, although it was said that the purchaser preferred, largely for fiscal reasons, to buy the Impney shares rather than buy the hotel from the administrators. In his second witness statement (of 11 th December) Mr Raguz adduced a very short email from a representative of Keyroll...
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