National Westminster Bank Plc v King

This application raises an issue of some practical importance. Does the High Court have power under section 40(2) of the County Courts Act 1984 to order the transfer of proceedings to a county court, notwithstanding that the proceedings would otherwise fall outside the jurisdiction of the county court? Section 40(2), as substituted by the Courts and Legal Services Act 1990 with effect from 1 July 1991, provides that subject to certain provisions “the High Court may order the transfer of any proceedings before it to a county court”. Should this provision be read as subject to a qualification that it applies only to those proceedings which the county court would otherwise have jurisdiction to hear and determine? Section 40, as originally enacted, made clear that it was not subject to such qualification.

The claim in this case is to enforce a charging order over the residential property of a judgment debtor by an order for sale.

I will first refer to the provisions which govern the jurisdiction of county courts in this type of case.

The county courts were created by statute and, as such, their jurisdiction and powers are restricted to those conferred by or pursuant to statute. This is in terms confirmed by section 1(1) of the County Courts Act 1984 (CCA 1984): each county court “shall have such jurisdiction and powers as are conferred by this Act and any other enactment for the time being in force”. Sections 15 to 38 set out the extent of the county courts’ jurisdiction and powers as regards a wide variety of claim. Historically a major constraint on their jurisdiction was a financial limit on the value of the claim or property in issue. The “county court limit” is fixed by order in council and was last fixed in 1981 at £30,000. As a result of amendments made by the Courts and Legal Services Act 1990 (the 1990 Act) the financial limit was removed from several categories of claim, including claims in contract and tort and claims for the recovery of land.

The county court limit remains for “equity proceedings” as specified in section 23 of the CCA 1984. Section 23 provides that “A county court shall have all the jurisdiction of the High Court to hear and determine” seven categories of proceedings including:

“(c)

proceedings for foreclosure or redemption of any mortgage or for enforcing any charge or lien, where the amount owing in respect of the mortgage charge or lien does not exceed the county court limit.”

Section 3(4) of the Charging Orders Act 1979 provides that:

“Subject to the provisions of this Act, a charge imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor under his hand.”

Applications for an order for sale of property which is the subject of a charging order therefore fall within section 23(c), as confirmed by CPR 73.10(2). A county court’s original jurisdiction to enforce a charging order is therefore limited to those cases where the debt does not exceed £30,000.

By section 24, a county court’s jurisdiction in proceedings to which section 23 and other statutory provisions apply can be extended without limit by the written consent of all parties.

County courts have a more extensive jurisdiction as regards the making of charging orders. They have a largely exclusive jurisdiction to make charging orders to secure any judgment of a county court without limit and any judgment of the High Court not exceeding the county court limit, and they have a concurrent jurisdiction in the case of High Court judgments which exceed the county court limit: section 1 of the Charging Orders Act 1979.

It may seem strange that while county courts have an unlimited jurisdiction to make charging orders, they have a very limited jurisdiction to enforce them. The notes to CPR Part 73.10 in the White Book suggest the reason:

“It is one thing to make a charging order giving security to the judgment creditor and quite another thing to order a sale of the judgment debtor’s property. Just as the Court has a discretion whether or not to make the charging order so it has discretion whether or not to order the sale. It would be an extreme sanction and all circumstances would have to be considered. Where the property is the debtor’s home the Court will have to consider the provisions of Art.8 European Convention on Human Rights. To order sale is a draconian step to satisfy a simple debt and is likely to be ordered for example, in a case of the judgment debtor’s contumelious neglect or refusal to pay or in a case where in reality without a sale the judgment debt will not be paid.”

The position is therefore that while the county courts have a broad, and often exclusive, jurisdiction to make charging orders, their original jurisdiction to enforce charging orders is restricted to cases where the relevant debt does not exceed £30,000, unless the parties agree otherwise under section 24.

There is a possible complication depending on whether the charged property is in the sole name of the debtor on in joint names. Where the charged property is in the sole name of the debtor, the jurisdiction to make an order for sale arises under the inherent jurisdiction of the court, supplemented by section 91 of the Law of Property Act 1925 (the LPA). The county court limit applies in such cases, by virtue of section 23(c) of the CCA 1984. If the statutory power is exercised, it also applies by virtue of section 91(8) of the LPA and article 2(4) of the High Court and County Courts Jurisdiction Order 1991 (the 1991 Order). The court also frequently exercises the powers under section 90 of the LPA to make vesting orders or other orders to facilitate a sale: see Ladup Ltd v Williams & Glyn’s Bank Plc [1985] 1 WLR 851 at 855. Again, the exercise of these powers is subject to the county court limit: section 90(3) of the LPA and article 2(4) of the 1991 Order. Sections 90(3) and 91(8) of the LPA were added by the CCA 1984 (Sch 2 Pt II para 3).

Where the charged property is in joint names, for example the debtor and his or her spouse, the charge attaches only to the debtor’s beneficial interest in the property, and the jurisdiction to enforce the charging order arises under section 14 of the Trusts of Land and Appointment of Trustees Act 1996. By virtue of article 2(1)(p) of the 1991 Order county courts have an unlimited jurisdiction under section 14. It has been suggested that this leads to the anomalous position that a county court has a limited jurisdiction in the generally simple case of a charge over a property in the debtor’s sole name but an unlimited jurisdiction in the generally more complex case of properties in joint names. Some support for this may be derived from the presence in the 1991 Order of article 2(4) restricting jurisdiction under sections 89 to 92 of the LPA and the absence of an equivalent provision for the enforcement of charges under section 14 of the 1996 Act.

This issue does not arise for decision in this case, because the property in question is in the sole name of the debtor and section 23(c) of the CCA clearly applies to the claim to enforce the charge. I should however say that, in my view, the apparent anomaly does not exist. Section 14 of the 1996 Act confers a variety of powers exercisable by the court on the application of a wide variety of applicant. In contrast, section 23(c) is confined to the enforcement of charges. In my view, the general jurisdiction conferred on county courts by article 2(1)(p) of the 1991 Order, which is secondary legislation, is subject to the specific limit on the enforcement of charges contained in section 23(c), which is primary legislation. It would seem that this is the view taken in the CPR: see the sentence in parenthesis in 73.10(2) and 73PD 4.1, neither of which distinguishes between the enforcement of charging orders over properties in the debtor’s sole name and properties in joint names.

The provisions for transfer of proceedings from the High Court to a county court are contained in section 40 of the CCA 1984 which provides as follows:

“(1)

Where the High Court is satisfied that any proceedings before it are required by any provision of a kind mentioned in subsection (8) to be in a county court it shall-

(a)

order the transfer of the proceedings to a county court; or

(b)

if the court is satisfied that the person bringing the proceedings knew, or ought to have known, of that requirement, order that they be struck out.

(2)

Subject to any such provisions, the High Court may order the transfer of any proceedings before it to a county court.

(3)

An order under this section may be made either on the motion of the High Court itself or on the application of any party to the proceedings.

(4)

Proceedings transferred under this section shall be transferred to such county court as the High Court considers appropriate, having taken into account the convenience of the parties and that of any other persons likely to be affected and the state of business in the courts concerned.

(5)

The transfer of any proceedings under this section shall not affect any right of appeal from the order directing the transfer.

(6)

Where the proceedings for the enforcement of any judgment or order of the High Court are transferred under this section-

(a)

the judgment or order may be enforced as if it were a judgment or order of a county court; and

(b)

subject to subsection (7), it shall be treated as a judgment or order of that court for all purposes.

(7)

Where the proceedings for the enforcement of any judgment or order of the High Court are transferred under this section-

(a)

the powers of any court to set aside, correct, vary or quash a judgment or order of the High Court, and the enactments relating to appeals from such a judgment or order, shall continue to apply; and

(b)

the powers of any court to set aside, correct, vary or quash a judgment or order of a county court, and the enactments relating to appeals from such a judgment or order, shall not apply.

(8)

The provisions referred to in subsection (1) are any made-

(a)

under section 1 of the Courts and Legal Services Act 1990; or

(b)

by or under any other enactment.

(9)

This section does not apply to family proceedings within the meaning of Part V of the Matrimonial and Family Proceedings Act 1984.”

The facts in the present case are as follows. On 16 September 2006 the claimant National Westminster Bank Plc (the Bank) entered judgment in default for £38,447.69 against the defendant (Mr King) on a claim issued in the Northampton County Court. On 14 March 2007 a final charging order was made by the Portsmouth County Court against a freehold property known as 67 Nelson Avenue, Portsmouth of which Mr King is the sole registered proprietor. The charging order secured the sum of £39,256 then owing under the judgment, together with any further interest becoming due and a sum for costs.

By a Part 8 claim form issued in the Chancery Division of the High Court on 2 May 2007, the Bank sought an order for sale of the property. In light of the amount secured by the charging order, this application could not be issued in the Portsmouth County Court.

It is the practice of the Chancery Masters to consider an application of this sort with a view to deciding, on their own initiative, whether it should continue in the High Court or should be transferred to an appropriate county court. In proceeding in this way, the view is taken that section 40(2) of the County Courts Act 1984 confers the necessary power of transfer even if the amount owing in respect of the charging order exceeds the county court limit. In reaching a decision in any particular case, the Masters have regard to the factors applicable to the case, including those listed in CPR 30.3(2) and section 40(4) of the CCA 1984.

Following a review of the present case, Master Bragge ordered on 24 August 2007 its transfer to the Portsmouth County Court. Because the order was made on the Court’s own initiative, it included the standard permission for either party to apply to vary or discharge it. Neither party made an application.

District Judge Wilson, sitting in Portsmouth, was concerned whether, notwithstanding the order for transfer, the Portsmouth County Court had jurisdiction to hear and determine the Bank’s application, in the light of section 23(c) of the CCA 1984. On 26 September 2007, he ordered a directions hearing by telephone on notice to all parties. As directed by the order, the Bank’s solicitors submitted a skeleton argument. The skeleton argument addressed principally the merits of the application, but on the question of jurisdiction the position was taken that there was no discretion to transfer a case such as the present from the High Court to a county court. Mr King attended the hearing by telephone but was not concerned whether the case was heard in the High Court or in the county court.

District Judge Wilson decided that the county court did not have jurisdiction, by reason of section 23(c), notwithstanding the order for transfer under section 40(2). He ordered that the case be transferred back to the High Court in London. The district judge’s orders of 26 September 2007 and 28 November 2007 are both headed as being in the Portsmouth District Registry of the High Court, presumably reflecting his view that the county court had no jurisdiction in the matter.

Jurisdiction could unquestionably have been conferred on the Portsmouth County Court with the written consent of both parties, under section 24 of the County Courts Act 1984. The Bank did not suggest this to Mr King.

On 11 December 2007 the Bank’s solicitors wrote to the High Court, stating its position. Their view was “that neither the District Registry nor a County Court has the discretion to hear this claim…Accordingly we agreed with the Portsmouth District Registry that this matter should be transferred back to the Chancery Division of the High Court to be heard”. Having requested that the matter be listed for hearing, they said that they would welcome the court’s view as to whether a county court does have jurisdiction in these circumstances. An order was subsequently made for a directions hearing before a judge.

Mr King was not present or represented before me. The Bank instructed counsel, Paul Henton, to whom I am grateful for the careful preparation and presentation of his submissions, both at the hearing and subsequently in writing. The Bank does not now argue for or against the view that the Portsmouth County Court has jurisdiction by virtue of the High Court’s order for transfer. Its concern is to have clarity on the point. Counsel told me that there is an increasing number of applications by banks to enforce charging orders against debtors’ properties.

The concern of the district judge in this case can readily be appreciated. The limits on a county court’s jurisdiction are set by or pursuant to statute. Can an order of the High Court, exercising a statutory power of transfer, confer jurisdiction which the county court does not otherwise possess? It is arguable that the power of transfer must be subject to the implicit limitation that the transferee court has jurisdiction to hear the case.

The only express qualification to the High Court’s power of transfer in section 40(2) are the opening words, to which I will return. The language is otherwise clear and unambiguous: “the High Court may order the transfer of any proceedings before it to a county court”. If given its ordinary meaning, the provision is not constrained by the limits which otherwise exist on a county court’s jurisdiction.

As a matter of legislative policy, there is every reason to consider that the High Court should have an unlimited power of transfer. If, on consideration of the circumstances of an individual case, the High Court decides that it is suitable for determination by a county court, it is in keeping with the modern policy of assigning cases to the appropriate tier in the Court system that it should transfer it, irrespective of the county court limit.

The legislative history, in my judgment, conclusively establishes that this is the correct approach. Under the County Courts Act 1959 as originally enacted, the High Court’s power of transfer was in large part restricted by express provision to cases otherwise within the county courts’ jurisdiction: see sections 45, 50, 54 and 63.

Significant changes were introduced by the Supreme Court Act 1981. Sections 45, 50, 54 and 63 of the 1959 Act were repealed and a new Section 75A was introduced. Sub-sections (1), (2), (3) and (10) provided as follows:

“(1)

At any stage in any proceedings to which this section applies, the High Court may, in accordance with rules of the Supreme Court, either of its own motion or on the application of any party to the proceedings, order the transfer of the whole or any part of the proceedings to a county court if-

(a)

the parties consent to the transfer; or

(b)

the High Court is satisfied-

(i)

that, after allowance has been made for any payment, set-off or other amount admitted to be due, the amount remaining in dispute in respect of the claim is within the monetary limit of the jurisdiction of the county court; or

(ii)

that the amount recoverable in respect of the claim is likely to be within the monetary limit of the jurisdiction of the county court; or

(iii)

in the case of proceedings not involving an unliquidated claim, that the subject matter of the proceedings is or is likely to be within the limits of the jurisdiction of the county court; or

(c)

where only a counterclaim remains in dispute, the High Court considers that the amount recoverable in respect of the counterclaim is likely to be within the monetary limit of the jurisdiction of the county court; or

(d)

the High Court considers that the proceedings are not likely to raise any important question of law or fact and are suitable for determination by a county court.

(2)

Subject to subsection (3) of this section, this section applies to all proceedings commenced in the High Court which (disregarding any limitation by reason of amount or value or annual value) a county court would have jurisdiction to hear and determine if they were commenced in it.

(3)

This section does not apply to the following proceedings, namely-

(a)

matrimonial causes;

(b)

applications relating to the adoption or custody of, or access to, minors (including applications relating to guardianship or custodianship).

(10)

Where proceedings are transferred to a county court under  this section, the county court shall have jurisdiction-

(a)

to hear and determine those proceedings; and

(b)

to award any relief, including any amount of damages, which could have been awarded by the High Court.”

Sub-section (2) made clear that the High Court’s power of transfer, particularly in cases falling within sub-section (1)(d), was not restricted by monetary limits on the county courts’ jurisdiction. Section 75A was re-enacted as section 40 of the CCA 1974, which was a consolidating statute.

In 1988, the Report of the Review Body on Civil Justice was published (Cm 394). The Review Body considered the transfer system, stating in its report:

“165.

It had become apparent by the time of the Supreme Court Act 1981 that mere increases in County Court jurisdiction were of little effect in relieving the High Court of County Court level business. Existing powers to transfer cases down depended on application by a party and were in any case subject to meagre financial limits. The 1981 Act contained two significant changes. The High Court was empowered to make a transfer of its own motion and there was to be no overall monetary limit on the exercise of the power.

167.

Assuming a single point of entry for personal injuries, transfer down will not normally be applicable to such cases but it will continue to be important to sustain and fortify the transfer down system for other general High Court cases. It is therefore suggested that a sifting mechanism be retained at the point where cases are set down for trial in the High Court. This system should apply to all general list cases. It should not apply to public law cases. Specific consideration should be given to applying it to each of the other specialist areas.”

Its recommendations included that cases in the High Court which did not comply with the criteria of substance (minimum £25,000), importance or complexity should be transferred to a County Court. There was no suggestion of cutting back on the High Court’s existing power of transfer.

The purpose of Part I of the Courts and Legal Services Act 1990 was to give effect to the recommendations of the Civil Justice Review, as was made clear by the Lord Chancellor in debates on the bill in the House of Lords (Hansard Vol. 514 cols 123-124). Section 2 replaced section 40 of the CCA 1984 with the section in its current form. Section 1 of the 1990 Act conferred a power by order to make provision for the allocation of business between the High Court and county courts. The 1991 Order was made pursuant to section 1 and both the Order and the replacement of section 40 (and other transfer provisions) took effect on 1 July 1991. It would seem in the highest degree unlikely that there was any intention to reduce the High Court’s power of transfer, and certainly none can be discerned from the debates on the bill in Parliament.

The power of transfer under section 40(2) is expressed to be subject to any provision of a kind mentioned in section 40(8). The only relevant provisions are those of the 1991 Order. As I have already mentioned, article 2(4) is expressed to confer jurisdiction under sections 89 to 92 of the LPA on county courts where the amount arising in respect of the mortgage or charge at the commencement of the proceedings does not exceed £30,000. To some extent it duplicates section 23(c) of the CCA 1984, as well as sections 90(3) and 91(8) of the LPA. Like many of the 1991 Order’s provisions, it was included in exercise of the power under section 1(1)(b) of the 1990 Act to confer jurisdiction on the county courts. It does not qualify the power of transferring proceedings from the High Court.

It may be noted that while section 40(10)(b) of the CCA 1984 as originally enacted re-appeared as a new section 38(1), there was no re-enactment of sub-section (10)(a) which provided that where proceedings were transferred to a county court, it should have jurisdiction to hear and determine the proceedings. It is, however, implicit. If the transfer is to be effective, the county court must thereby be given the requisite jurisdiction.

In my judgment, therefore, the power of transfer under section 40(2) of the CCA 1984 is not limited to cases which would otherwise be within a county court’s jurisdiction. It follows that Master Bragge had power to make the order for transfer in the present case on 24 August 2007 and that as a result the Portsmouth County Court had jurisdiction to hear and determine it.

Mr Henton on behalf of the Bank accepted that it was more appropriate, particularly from Mr King’s point of view, that the present case should proceed in the Portsmouth County Court rather than in the High Court. I will therefore direct its transfer to that court. As to costs, I do not consider it appropriate in all the circumstances that Mr King should bear the Bank’s costs of the directions hearing before District Judge Wilson on 26 November 2007 or the further costs incurred since then in dealing with the issue of jurisdiction, including the costs of the hearing before me. The Bank has made clear that it does not oppose a direction that there be no order as to these costs.