Stephen Hunt (as Trustee in Bankruptcy of Janan George Harb) v Janan George Harb Hrh Prince Abdul Aziz Bin Fahd Abdful Aziz
| Jurisdiction | England & Wales |
| Judge | The Master of the Rolls |
| Judgment Date | 27 October 2011 |
| Neutral Citation | [2011] EWCA Civ 1239 |
| Date | 27 October 2011 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2011/1224 |
[2011] EWCA Civ 1239
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Kevin Prosser QC
Case No HC0C01922
Royal Courts of Justice
Strand, London, WC2A 2LL
The Master of the Rolls
Lord Justice Aikens
and
Lord Justice Lewison
Case No: A2/2011/1224
and
Adam Deacock (instructed by Burton Woolf & Turk) for the Appellant
Rebecca Page (instructed by Howes Perceval) for the Respondent
Hearing date : 26 October 2011
This is the judgment of the court to which all members have contributed.
The question raised by this appeal is this. If a trustee in bankruptcy assigns a claim on terms that the bankrupt's estate will receive a share of any recovery on the claim, can he safely assume that no order for costs will be made against him if the claim fails?
Mrs Janan Harb claims to have secretly married the late HRH the King of Saudi Arabia ("the King") in 1968. In May 2003, several years after they had separated, her solicitors sent a draft statement to the King, setting out the basis of a claim which she was bringing against him under section 27 of the Matrimonial Causes Act 1973.
Some five weeks later, she claims to have met the King's son, HRH Prince Abdul Aziz Bin Fahd Bin Abdul Aziz ("the Prince"), and that he orally agreed to pay her £12 million and transfer to her two properties in Cheyne Walk, Chelsea in exchange for her withdrawing certain allegations made in the draft statement, withdrawing the section 27 application, and in discharge of the King's promises to provide for her during her life. Mrs Harb says that she duly complied with her obligations under the agreement but that the Prince did not. This is the claim in issue.
On 7 April 2008 Mrs Harb became bankrupt on her own petition. Her estate consisted of assets valued at around £200,000 and liabilities of over £3.5 million. There is no creditors' committee. Upon her bankruptcy, the claim vested in Mrs Harb's trustee in bankruptcy (now Mr Stephen Hunt) pursuant to sections 306 and 311(4) of the Insolvency Act 1986 ("the 1986 Act"). The six year limitation period for bringing the claim was running and would have expired in June 2009. Mrs Harb was keen that the claim should be brought because if it were successful her creditors would be paid in full; and there would be a substantial surplus for her.
The trustee took the view that the claim had a reasonable prospect of success; although he had not been able to make detailed investigations. Accordingly on 15 June 2009, shortly before the limitation period was about to expire, the trustee issued the claim against the Prince ("the claim"), which was served on him outside the jurisdiction. The Prince applied to set aside service, relying on the State Immunity Act 1978. In effect, his case was that, at the time of the alleged agreement in 2003, he had plenipotentiary powers as sovereign on behalf of his father, the King of Saudi Arabia.
The trustee knew that he would need to obtain After the Event ("ATE") insurance to cover his liability for the Prince's costs if the claim failed, and third party funding in respect of his own costs. He thought that he would be able to do so. Suffice it to say that that his hopes in that respect were not fulfilled. He was unable to obtain ATE insurance and he was unable to find third party funding. So he discontinued the claim against the Prince.
For the purpose of the present application, it was common ground that the claim is not a vexatious one, and we have not been addressed in any detail on the merits of the claim. However, it is worth pointing out that, even on the basis of this very short summary, it is not without its legal difficulties. First, of course, there is the question of the Prince's contention that he has the protection of the 1978 Act. On the face of it, at least, the strength of the contention that the 1978 Act hurdle can be surmounted depends on an assessment of the evidence, which so far has only been lodged by the Prince. At this stage, it is impossible to assess the strength of the competing arguments on the point.
However, quite apart from this, the claim faces a second problem. Following the passing into law of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, there are obvious problems about a claim framed in contract, when the alleged agreement is oral and involves, inter alia, an obligation to transfer land. It is true that the pleaded agreement does not simply relate to land but also to money, but it is nonetheless a single alleged contract, which, at least on the basis of current authority, would appear to fall foul of section 2 of the 1989 Act–see Grossman v Hooper [2001] EWCA Civ 615, [2001] 2 EGLR 82, and Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd & Anor [2004] EWHC 2547 (Ch), [2005] 2 P&CR 8.
Whatever problems the claim might face, Mrs Harb was aggrieved by the trustee's decision to discontinue the claim and she applied to the court to set aside the notice of discontinuance, joining the trustee, and also the Prince (who has played no part on this appeal, although he appeared by counsel below). In a succinct and clear judgment, given on 22 March 2011, Mr Kevin Prosser QC ("the deputy judge") sitting in the Chancery Division, allowed the application and set aside the notice of discontinuance–see [2011] EWHC 714 (Ch). He held that the trustee had no power to discontinue the claim but ought to have applied to the court for directions under section 302 (2) of the 1986 Act. In his judgment he said, at para 41:
"On any such application Mr Hunt would explain that although the Claim was not vexatious and was potentially very valuable, he was no longer able to pursue it. On the other hand, Mrs Harb (who would no doubt be joined in the application) would explain that she was willing and able to purchase the Claim for a more than merely nominal price. It would occur to the court that, if Mrs Harb was willing to purchase the Claim, then so too might one or more of the creditors; moreover, the possibility of the Prince being willing (notwithstanding his claim to immunity) to make a payment to Mr Hunt to settle the Claim could not be ruled out either. In those circumstances the court, having regard to the best interests of the creditors and of Mrs Harb as persons interested in the estate, and giving some weight to the public interest that bankruptcy should not be too readily available as a means of stifling claims which may have substance, would direct that before serving notice of discontinuance Mr Hunt should invite offers from Mrs Harb, the creditors and the Prince with a view to assigning to, or settling with, the highest bidder (so that Mr Hunt would receive more than his costs if any of the assignment or settlement) instead."
Accordingly the deputy judge set aside the notice of discontinuance and directed that the proceedings relating to the claim should be adjourned for a reasonable period while trustee invited offers for the claim, but that if no such offers were received he could serve a fresh notice of discontinuance. Paragraphs 9(a)–(h) of the order drawn up to give effect to his judgment ("the order") set out a sensible procedure whereby the trustee would seek offers for the claim, give notice of the offers and any decision to the bidders, who would then have an opportunity to challenge the decision in court. Thus far there is no complaint about his decision.
However in the final paragraph of his judgment the deputy judge said:
"In response to a request for guidance from Mr Hunt, I add that Mr Hunt would in my view be entitled to reject any offer to purchase the Claim on terms that all or part of the net proceeds of a successful Claim will be paid to him or applied for the benefit of the creditors. This is because the purchaser would in my view be acting as the mere nominee or delegate of Mr Hunt, who would accordingly continue to be at risk of liability for costs. And Mr Hunt would also be entitled to give preference, in the offer process, to the creditors and Mrs Harb over the Prince. For example he might decide to accept an offer made by a creditor or Mrs Harb if it equals or is not substantially less than any offer made by the Prince, or he might decide to give the creditors and Mrs Harb the opportunity to match or beat the Prince's offer even though his is the highest, and for that purpose to inform them of the amount to match or beat."
This indication was embodied in paragraph 9 (i) of the order, which was to this effect:
"The [trustee] may reject any offer…on terms that all or any part of the net proceeds of a successful claim will be paid to him or applied for the benefit of the creditors on the grounds that the purchaser would in pursuing the claim after sale be acting as the mere nominee or delegate of the [trustee] who would accordingly continue to be at risk of liability for costs."
It is against that paragraph of the deputy judge's order that Mrs Harb appeals.
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