Truex v Toll
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Proudman |
| Judgment Date | 06 March 2009 |
| Neutral Citation | [2009] EWHC 396 (Ch) |
| Docket Number | Case No: CH/2008/APP/0491 |
| Court | Chancery Division |
| Date | 06 March 2009 |
[2009] EWHC 396 (Ch)
Before: Mrs Justice Proudman
Case No: CH/2008/APP/0491
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
IN BANKRUPTCY
Nicholas Preston (instructed by International Family Law Chambers) for the Claimant/Respondent
Duncan Macpherson (instructed by Cubism Law) for the Defendant/Appellant
Hearing dates: 13 th February 2009
Mrs Justice Proudman:
This is an appeal against a Bankruptcy Order made by Chief Registrar Baister on 14 th July 2008. The petition was presented on 29 th October 2007 by Mr Truex, a solicitor, against his former client Mrs Toll in respect of his costs and charges.
The facts
Mrs Toll retained Mr Truex in September 2006 to act for her in matrimonial proceedings. A final ancillary relief order had been made in the Family Division in April of that year. Mr Truex instructed counsel and dealt with various matters including a hearing on 7 th December 2006 when the case was listed for a further hearing on 19th March 2007 as to permission to appeal the April Order. Mrs Toll did not accept the advice of Mr Truex about the necessity for this hearing and a disagreement arose. On 12 th March 2007 Mrs Toll presented Mr Truex with a list of perceived complaints about his services.
Mr Truex issued four invoices to Mrs Toll in respect of fees totalling £14,971.25. The first two invoices were dated 9 th October 2006 and 8 th November 2006. Mrs Toll paid 5 sums (the last one on 23 rd November 2006) which cleared the first two invoices. However no payments were made in respect of the subsequent invoices dated 17 th January 2007 and 15 th March 2007.
On 15 th March 2007 Mr Truex applied to come off the court record, on the grounds of Mrs Toll's refusal to accept his advice and, as an additional and separate matter, her non-payment of his fees.
At the hearing on the 19 th March 2007 Mrs Toll sought an adjournment because she was unrepresented. Singer J conducted an inquiry to investigate the circumstances in which Mr Truex was ceasing to act. He was evidently concerned to discover whether the situation was Mrs Toll's fault, and whether her application was a delaying tactic. Mrs Toll attended that hearing, and at Singer J's request Miss Stephanie Wells, an assistant solicitor employed by Mr Truex, attended for questioning later on the same day.
Transcripts of both those hearings were before Chief Registrar Baister. Mrs Toll is of Russian extraction and English is not her first language. The transcripts show that she has some difficulty in expressing herself clearly in English. In some places she also said that she did not understand what was said to her.
Mr Truex served a statutory demand dated 16 th August 2007 for his outstanding fees. Mrs Toll neither complied with it nor applied to set it aside and Mr Truex issued a bankruptcy petition based on the alleged debt and referring to the statutory demand. The first hearing of the petition was on 18 th December 2007. Mrs Toll did not attend and the Registrar adjourned the hearing to 8 th February 2008.
On 6 th February 2008 Mrs Toll gave Notice of her intention to oppose the bankruptcy petition. The grounds included:
”1. There is a substantial dispute about the money said to be owed” and
4. Bill to be reviewed under the assessment procedure”.
Mr Truex filed an affidavit in support of his petition stating that at the hearing before Singer J Mrs Toll had agreed that the fees specified in the invoices were due and owing.
The hearing of the petition was further adjourned with directions for both parties to file and serve evidence. Mr Truex served evidence, Mrs Toll did not. There was to be a review on 18 th April 2008 but neither party was required to attend. On 8 th March Mrs Toll instructed her present solicitors. Emergency Public Funding was provided to cover the bankruptcy proceedings and also proceedings to be issued for assessment under s. 70 of the Solicitors Act 1974. The case was re-listed for the 4 th June 2008 when Deputy Registrar Briggs gave further directions for evidence and adjourned the matter to 14 th July 2008. In particular there was a direction that Mrs Toll file and serve a witness statement and all evidence on which she wished to rely by 18 th June 2008. Again, she adduced no evidence in compliance with this Order.
On 18 th June 2008 Mrs Toll issued proceedings in the Supreme Court Costs Office for an Order under s. 70(3)(a) of the Solicitors Act 1974 for a detailed bill and detailed assessment in relation to the two outstanding invoices. Mrs Toll was by then substantially out of time to bring such proceedings which have to be commenced within 12 months of delivery of the bill sought to be reviewed. After that date, no order may be made under the section save in “special circumstances”.
On 14 th July 2008 the Chief Registrar made the Bankruptcy Order and, as a result, on 26 th July 2008 Master Simons stayed Mrs Toll's application, with liberty to either party to apply. As I have said, Mrs Toll chose not to give evidence and all the facts and matters I have alluded to are matters of record or appear from evidence given by or on behalf of Mr Truex.
The Order of Chief Registrar Baister
The Chief Registrar made the Order, in his own words, “very reluctantly”. He considered the case to be a borderline one. For the same reason he also gave permission to appeal.
It is common ground that he was correct to state that solicitors' costs which have not formed the subject of a judgment, assessment or agreement are not a liquidated sum for the purpose of founding a bankruptcy petition.
However (and this is at the root of the dispute before me) he also took the view that he could make a Bankruptcy Order if there was evidence that Mrs Toll had accepted Mr Truex's invoices. He therefore looked for, and found in the transcripts of the hearing on 19 th March 2007, an admission of the fees claimed in the two outstanding invoices.
He held that Mrs Toll had (to use his own words “just about”) admitted the invoices at the hearing before Singer J. He felt, he said, driven to that conclusion because Mrs Toll had put in no evidence, despite directions that she should do so. She could have explained the context of what she had said to Singer J or shown (if such was the case) that there had been a pattern of asking for a breakdown of costs or otherwise established that the invoices were genuinely in dispute. He viewed Mrs Toll's application out of time to have the costs statutorily assessed with, as he put it, “something of a jaundiced eye”, having regard to the date when the statutory demand was served, the progress of the petition proceedings and the total absence of evidence from Mrs Toll. He concluded that there was no bona fide dispute, and he said that even if he was wrong about that it was inconceivable that Mrs Toll did not owe Mr Truex a sum exceeding the statutory minimum of £750.
Provisions of the Insolvency Act 1986
The petition is founded on s. 267 of the Insolvency Act 1986 which provides that a petition may be presented if, but only if, certain requirements are met at the date of presentation. For present purposes the relevant requirements are as follows:
a) the debt is at least equal to the bankruptcy level of £750,
b) the debt is for a liquidated sum,
c) the debt is one which the debtor appears to have no reasonable prospect of being able to pay and
d) there is no outstanding application to set aside a statutory demand served in respect of the debt.
S. 268 deals with service of a statutory demand. A statutory demand which is neither complied with nor set aside enables the petitioning creditor to satisfy the court as to inability to pay under s. 267 (2) (c). It is common ground that it does not assist him as to whether the debt founding the petition is for a liquidated sum.
What is the nature of a solicitor's bill?
Muir Hunter on Personal Insolvency quotes a statement by Mr Registrar Simmonds in an unreported case ( Re Le Winton, July 31st 2007) to the following effect:
“…in order to convert what is clearly an unliquidated sum to a liquidated sum there must be…clear and unequivocal conduct or agreement on the part of the debtor to demonstrate acceptance of those bills of costs such as to forego the right of assessment and to convert them to a liquidated sum.”
This was the principle that the Chief Registrar sought to apply in the present case. It was only his doubts about how clear Mrs Toll's agreement was that gave rise to his reluctance. The appellant challenges the principle as understood by the Chief Registrar and, in the alternative, his application of it.
In In re a Debtor (no 88 of 1991) [1993] Ch 286 Sir Donald Nicholls V.—C appeared to find no defect of principle in a statutory demand based on an untaxed solicitors' bill. However there had been a number of cases in which it was explained that the basis of a solicitor's bill was a demand for reasonable remuneration for services rendered which, until taxed, or the reasonableness of the remuneration claimed was otherwise determined, was a bill for a sum unquantified and thus unliquidated: see e.g. In Re Laceward Ltd [1981] 1 WLR 133 at 137, Re a Debtor No 32 of 1991 (no 2) [1994] BCC 524 at 527. Indeed in the latter case Vinelott J held that it was an abuse of process for a firm of accountants to serve a statutory demand for the amount of their bill.
Curiously, however, less than two months after giving judgment in No 32 of 1991 (no 2) Vinelott J, without reference to his earlier decision, allowed statutory demands to lie despite the debtors' argument based on the right to taxation of the underlying bill: Re a debtor No 833 of 1993 and No 834 of 1993 [1994] NPC 82. I have been...
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