Sheida Oraki Ardeshir Oraki v Timothy Bramston and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice David Richards,Lord Justice McCombe,The Master of the Rolls |
| Judgment Date | 24 May 2017 |
| Neutral Citation | [2017] EWCA Civ 403 |
| Docket Number | Case No: A2/2015/2709 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 May 2017 |
[2017] EWCA Civ 403
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mrs Justice Proudman
Nos 2617 and 2618 of 2005
Royal Courts of Justice
Strand, London, WC2A 2LL
The Master of the Rolls
Lord Justice McCombe
and
Lord Justice David Richards
Case No: A2/2015/2709
Leon Hines (Solicitor, Hines & Co) for the Second Appellant
The First Appellant did not appear and was not represented
John Briggs (instructed by DAC Beachcroft LLP) for the Respondents
Hearing dates: 6, 7 and 8 December 2016
Introduction
The appellants, Dr Sheida Oraki and her husband Mr Ardeshir Oraki, brought an action for damages against the respondents as successive trustees in their respective bankruptcies. The respondents were alleged to have acted in breach of duty to the appellants in their conduct of the bankruptcies in a significant number of respects, but in particular it was said that they had prolonged the administration of the bankruptcy estates and had frustrated the appellants' attempts to annul their bankruptcies. Following a seven-day trial, Proudman J dismissed the action. This appeal is brought with permission granted by the judge.
At the start of the hearing of the appeal, Mr Hines on behalf of the appellants sought an adjournment on two principal grounds. The first was the ill health of Dr Oraki. Mr Hines was instructed to appear on behalf of Mr Oraki but not on behalf of Dr Oraki, save for the purpose of seeking an adjournment. As between herself and her husband, Dr Oraki has taken the lead in all or most matters concerning their bankruptcies and the judgment on which they were based and Mr Hines stressed the desire of Dr Oraki to attend the appeal and make submissions. Mr Hines did however tell us that there was no difference between the cases and submissions that each of the appellants wished to make. The second ground was that an adjournment might enable the appellants to raise the funds needed to instruct counsel and that this was particularly important in view of some of the legal issues that arose on the appeal. However, Mr Hines has had a close involvement on behalf of the appellants in this case and more generally in their bankruptcies for some time, so he is very familiar with their cases. Although he does not have higher courts advocacy rights, he was able to demonstrate to us significant advocacy experience. As regards issues of law, Mr Hines and we had the advantage of the skeleton argument prepared for the trial by experienced counsel then instructed for the appellants. In these circumstances, and given that this is a very long-running case, we refused the adjournment. Mr Hines presented the appeal fluently and forcefully.
Mr Hines also applied to amend the grounds of appeal but, for the reasons given at the time by the Master of the Rolls, we refused the application.
There is a very disturbing background to the appellants' bankruptcies. They were based on a judgment obtained against them by a firm of solicitors, Dean & Dean, in respect of apparently outstanding fees. Judgment was entered on 16 February 2004 for damages to be assessed, with an interim payment of £5,000 and costs of £3,858. Over eight years later, on 23 October 2012, it was ruled that the bankruptcies should be annulled and the judgment set aside, on the grounds that the judgment had been based on fraudulently charged fees. The judge, Mr Robert Ham QC (sitting as a Deputy High Court Judge), said that there had been a miscarriage of justice. His decision was made in the light of new evidence, that the solicitor employed by Dean & Dean who had handled the appellants' matter had been admitted as a solicitor as a result of dishonest representations as to his legal qualifications and the dishonest non-disclosure of his criminal record in the United States, and that he had been struck off as a solicitor, on proof of these allegations (among many others), by the Solicitors Disciplinary Tribunal in June 2012.
On 21 January 2013, Mr Ham QC made an order for the annulment of the bankruptcies, conditional on (among other things) payment of the costs and expenses of the bankruptcies but also providing a time limit for any application by the appellants to challenge the respondents' conduct as trustees in bankruptcy. The present proceedings were issued within that time limit.
The nature of the claims made in the present action was essentially one of professional negligence, as Proudman J said in her judgment. It was said that through their acts and omissions, the respondents failed to carry out their duties as trustees in bankruptcy to the standard required of an insolvency practitioner. The judge was right to express the duty in these terms, rather than, as pleaded, with the "same level of skill and care as a reasonable man of commerce would display in the management of his own affairs", and there is no appeal against the standard as stated by the judge. Although the judge noted that claims of improper conduct were also made, they were not pleaded as such and the judge's comment reflects, I think, the way in which the case was in part presented at trial. In any event, the judge found at [13] of her judgment that there had been no conscious wrongdoing by either of the respondents and there is no appeal against that finding.
So far as relevant to this appeal, the claims pursued by the appellants are for damages for loss said to have been caused to them personally for breach of duty owed by the respondents to the appellants personally. The claims are not for loss caused to their bankruptcy estates or for compensation to be paid to their estates.
This is an important distinction. Any claim for loss to the estate, for example by selling an asset at an undervalue, would be subject to the requirement under section 304(2) of the Insolvency Act 1986 (the Act) for the leave of the court where the claim is brought by the bankrupt. Because at all material times the estates were accepted to be solvent, in the sense that there would be a surplus, once sufficient assets had been realised to pay the provable debts and the costs of the bankruptcy, the appellants would have an obvious standing to make a claim in respect of loss to the estates. They did indeed make one claim for compensation to be paid to the estates in respect of an alleged failure to pursue debts and claims said to be owed or available to the estates and obtained permission under section 304(2) to do so. That claim was rejected by Proudman J and is not pursued on this appeal.
The personal claims made by the appellants raise some novel and difficult issues of law on, first, the duties, if any, owed by a trustee in bankruptcy to the bankrupt personally, as opposed to the bankruptcy estate of which he is trustee, and, second, if such duties exist, on the effect of a release under section 299 of the Act of a trustee who has ceased to hold office.
In my view, the right approach to this appeal is to consider first the factual bases of the relevant claims. The judge rejected the claims on the facts, before considering whether they were in any event maintainable at law.
The procedural history and the chronology of events are crucial to a consideration of the issues on this appeal. I will first set out first a brief chronology of the proceedings between Dean & Dean and the appellants.
The proceedings between Dean & Dean and the appellants
In and before 2002, Dean & Dean acted on behalf of the appellants and their matter was handled by Mr Shahrokh Mireskandari, who was then an employee of the firm. There was a dispute about fees and Dean & Dean issued proceedings and applied for summary judgment. On 16 February 2004, judgment was entered in the Brentford County Court against the appellants for damages to be assessed, with an interim payment of £5,000 and costs of £3,858 awarded against the appellants (the 2004 judgment). An appeal was dismissed by HH Judge Wakefield, who ordered the appellants to pay the costs of the appeal assessed at £11,193, and permission to appeal to the High Court was refused on the papers by Bean J (as he then was) and by Bell J following an oral hearing.
Dean & Dean threatened bankruptcy proceeding against the appellants, but refused to accept payment of the full amount of the judgment debt unless the appellants withdrew a complaint to the Law Society. The appellants refused to accept this wholly improper condition and Dean & Dean responded by petitioning for the bankruptcy of the appellants. Bankruptcy orders were made against Mr Oraki on 1 September 2005 and against Dr Oraki on 10 January 2006.
In June 2006, the appellants issued their first application in the Brentford County Court to set aside the 2004 judgment and to dismiss the claim. At a hearing on 24 July 2006, HH Judge Behar dismissed the application. Permission to appeal was refused on the papers in October 2006 by Butterfield J, who stated that it was "a hopeless appeal" with "not the remotest prospect that the appeal would succeed". On a renewed oral application for permission to appeal on 13 December 2006, Keith J dismissed the application.
In 2008, allegations were published in the press that Mr Mireskandari had been convicted of a criminal offence in the United States, that his legal qualifications were bogus and that he had obtained admission as a solicitor by fraud. In December 2008, the Solicitors Regulation Authority intervened in his practice, which had the automatic effect of suspending his practising certificate.
The appellants had all along protested that the judgment against them was based on fraud on the part of Dean & Dean, and in particular on the part of Mr Mireskandari....
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