Simon Matthew Gwinnutt (as the First Respondent's Trustee in Bankruptcy) v Nicholas Frank Raymond George
| Jurisdiction | England & Wales |
| Judge | Lord Justice Newey,Lord Justice Singh,Lord Justice Baker |
| Judgment Date | 12 April 2019 |
| Neutral Citation | [2019] EWCA Civ 656 |
| Date | 12 April 2019 |
| Docket Number | Case No: A2/2018/2343 |
| Court | Court of Appeal (Civil Division) |
[2019] EWCA Civ 656
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
BUSINESS LIST (ChD)
His Honour Judge Davis-White QC (sitting as a Judge of the High Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Newey
Lord Justice Singh
and
Lord Justice Baker
Case No: A2/2018/2343
Mr Thomas Grant QC and Mr Stephen Hackett (instructed by J H Powell & Co) for the Appellant
Mr David Mohyuddin QC and Mr Ian Tucker (instructed by Howes Percival LLP) for the Respondents
Hearing date: 20 March 2019
Approved Judgment
It is now usual for barristers to enter into contracts with their instructing solicitors. However, that has been the case only since 2013, when “Standard Conditions of Contract for the Supply of Legal Services by Barristers to Authorised Persons 2012” promulgated by the Bar Council took effect and the cab rank rule was modified to allow a barrister to decline to accept instructions other than on the new Standard Terms or other standard terms of work. Before that, there was normally no contractual relationship between barrister and solicitor and, until section 61 of the Courts and Legal Services Act 1991 abolished any such rule, it had long been established that a barrister could not enter into a contract for the provision of his services. In Rondel v Worsley [1969] 1 AC 191, Lord Upjohn explained (at 278–279) that the following points were common ground:
“First, it is clear that counsel cannot sue for his fees. This has been established for nearly two hundred years and it is usually put upon the ground that a barrister is of too high an estate to condescend to the common arena to sue his client. Fees must be regarded as pure honoraria (see Thornhill v. Evans, per Lord Hardwicke, and In re May, per Kindersley V.-C.). It is true that Bayley J. in Morris v. Hunt put it on a more realistic though humdrum basis that counsel should ensure that he is paid before the case and the matter should not be left to chance afterwards, so that he cannot thereafter maintain an action; not a very good reason. Best J. in the same case really put the inability of counsel to sue upon the ground of public policy, namely, that counsel should not thereby have any temptation to endeavour to get a verdict. However, whatever reason may be ascribed it is clear that counsel cannot sue for his fees and this applies equally to fees for non-litigious work (see Mostyn v. Mostyn), though that was only a matter of admission, but in principle the admission was clearly right.
Secondly, a barrister does not enter into a contract, express or implied, with his client or with the solicitor who in all matters pertaining to litigation necessarily stands between the barrister and the lay client except in the case of dock briefs. At one time it was left open whether a barrister could expressly or impliedly contract with his client in litigious matters though I have no doubt it would always have been regarded as a breach of professional etiquette for him to do so; but I regard it as settled by Kennedy v. Broun that in fact counsel is incapable of doing so…. To sum up the result of these two points, fees due to counsel create no debt: Wells v. Wells; In re Sandiford (No. 2).”
In one of the cases to which Lord Upjohn referred, Kennedy v Broun (1863) 13 CBNS 677, Erle CJ, giving the judgment of the Court of Common Pleas, justified the then law in trenchant terms (at 736–739):
“The incapacity of the advocate in litigation to make a contract of hiring affects the integrity and dignity of advocates, and so is in close relation with the highest of human interests, viz. the administration of justice.
… But, if the law allowed the advocate to make a contract of hiring and service, it may be that his mind would be lowered, and that his performance would be guided by the words of his contract rather than by principles of duty,—that words sold and delivered according to contract, for the purpose of earning hire, would fail of creating sympathy and persuasion in proportion as they were suggestive of effrontery and selfishness; and that the standard of duty throughout the whole class of advocates would be degraded. It may also well be that, if contracts for hire could be made by advocates, an interest in litigation might be created contrary to the policy of the law against maintenance; and the rights of attorneys might be materially sacrificed, and their duties be imperfectly performed by unscrupulous advocates: and these evils, and others which might be suggested, would be unredeemed by a single benefit that we can perceive.”
The question raised by the present appeal is whether, where a bankruptcy order is made against a barrister, fees due to him pursuant to an honorarium rather than a contract vest in his trustee in bankruptcy. The first respondent, Mr Nicholas George, is a barrister who was adjudged bankrupt on 21 March 2012 and the appellant, Mr Simon Gwinnutt, has been his trustee in bankruptcy since 24 April 2012. Mr Gwinnutt contends that sums “owed” to Mr George when he became bankrupt vested in him as trustee in bankruptcy under section 306 of the Insolvency Act 1986 (“the 1986 Act”). However, His Honour Judge Davis-White QC, sitting as a Judge of the High Court, rejected that argument. In an impressive and erudite judgment now reported at [2019] Ch 52, he answered in the negative the following preliminary issue:
“whether any expectation of the First Defendant to receive fees arising out of work carried out by him on a non-contractual basis before his bankruptcy (‘Pre-Bankruptcy Work’), or any payment received by the First Defendant after the date of his bankruptcy in respect of Pre-Contractual Work, automatically vests in his trustee in bankruptcy pursuant to s.306 IA 86”.
The Judge concluded in paragraph 102 of his judgment:
“Any unpaid fees of Mr George as at the date of commencement of his bankruptcy which arise under a non-contractual, honorarium engagement do not, or have not, vested in his trustee in bankruptcy.”
Mr Gwinnutt appeals against the judge's decision.
The statutory framework
Section 306 of the 1986 Act provides for “[t]he bankrupt's estate” to “vest in the trustee immediately on his appointment taking effect or, in the case of the official receiver, on his becoming trustee” without any conveyance, assignment or transfer. By section 283(1), subject to exceptions relating to, for example, equipment necessary for the bankrupt's business and items satisfying basic domestic needs, a “bankrupt's estate” encompasses “all property belonging to or vested in the bankrupt at the commencement of the bankruptcy”. Section 436 states:
“ ‘property’ includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property”.
Very similar, though not quite identical, explanations of “property” were to be found in predecessor legislation: the Bankruptcy Acts of 1914, 1883 and 1869. Section 4 of the 1869 Act stated:
“ ‘Property’ shall mean and include money, goods, things in action, land, and every description of property, whether real or personal; also, obligations, easements, and every description of estate, interest and profit, present or future, vested or contingent, arising out of or incident to property as above defined”.
Unlike section 436 of the 1986 Act, therefore, section 4 of the 1869 Act said “shall mean and include” rather than “includes” and “whether real or personal” in place of “wherever situated”. The only other respects in which it differed from the 1986 Act were in its references to “easements”, “estate” and “profit”.
Sections 307 and 310 of the 1986 Act deal respectively with after-acquired property and income. Section 307 allows a trustee in bankruptcy to claim for the estate any property that is acquired by, or devolves upon, a bankrupt after the commencement of the bankruptcy. A bankrupt's “income” can, however, be claimed for his estate only under section 310 (see section 307(5)). Under section 310(1), the Court may make an “income payments order” “claiming for the bankrupt's estate so much of the income of the bankrupt during the period for which the order is in force as may be specified in the order”. Section 310(2) imposes a limit on what may be ordered:
“The court shall not make an income payments order the effect of which would be to reduce the income of the bankrupt when taken together with any payments to which subsection (8) applies below what appears to the court to be necessary for meeting the reasonable domestic needs of the bankrupt and his family.”
An income payments order cannot last longer than three years, but can continue after the bankrupt has been discharged (see section 310(6) of the 1986 Act). In contrast, section 307 has no application to property acquired by a bankrupt after his discharge. Nowadays, a bankrupt is normally discharged from bankruptcy at the end of the period of one year beginning with the date on which the bankruptcy commences (section 279(1) of the 1986 Act). Section 279(3) empowers the Court to extend the period, but “only if satisfied that the bankrupt has failed or is failing to comply with an obligation under this Part” (section 279(4)).
The 1869 Act, too, contained provisions concerned with income. Section 90, for instance, provided:
“Where a bankrupt is in the receipt of a salary or income other than as aforesaid, the Court upon the application of the trustee shall from time to time make such...
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