Courtman v Ludlam & Anor

Before me are two applications by Tyrone Courtman (“the Trustee”) who is the present trustee–in–bankruptcy of John Michael Ludlam (“Mr Ludlam”). The first of these applications was issued on 27 January 2009 and seeks the making of an extended, alternatively limited, civil restraint order (“CRO”) against each of Mr Ludlam and his wife, Caroline Lesley Ludlam (“Mrs Ludlam”). The second application was issued on 24 April 2009 and seeks relief under sections 366 and 367 of the Insolvency Act 1986 against both of Mr Ludlam and Mrs Ludlam. The substantive issues which arose on the second application were resolved during the course of the hearing before me and all that now remains is the question of costs. I shall deal with that issue of costs on hand-down of this judgment.

On the application for the CRO the Trustee was represented by Mr Sims. Mr and Mrs Ludlam appeared in person and each addressed me. It is right to point out, at this early stage, that Mr and Mrs Ludlam behaved with impeccable courtesy in and to the court and made their points in an economic and articulate way. Nevertheless, what they had to say left me with little confidence that they had seen the error of their previous ways and with no confidence whatsoever that they would not, in the future, engage in litigation, and make applications, which were entirely unmeritorious.

When considering whether or not to make a CRO I must consider each of Mr Ludlam and Mrs Ludlam independently and separately. If I decide to make a CRO against both I must consider carefully whether the same level of CRO is required as against each of Mr Ludlam and Mrs Ludlam.

As from 1 October 2004 (by virtue of the insertion of Rule 3.11 into Part 3 of the CPR) the court has had power to make a CRO against a party to proceedings. The principles applicable, and practice to be employed, are set out in Practice Direction C to CPR Part 3 (“the PD”). There are three levels of CRO:-

The CRO regime puts on a statutory basis the powers of the court, under its inherent jurisdiction, to prevent abuse of its process. The court’s armoury of powers under its inherent jurisdiction was identified, and explained, by the Court of Appeal in Bhamjee –v- Forsdick [2004] 1 WLR 88. Thus the limited CRO is the statutory reflection of a Grepe –v- Loam order (Grepe –v- Loam (1887) 37 Ch D 168). The extended CRO is the statutory reflection of the extended Grepe –v- Loam order which the Court of Appeal identified as being part of the armoury in Ebert –v- Venvil [2000] Ch 484. The general CRO reflects what Brooke L.J. had to say in Attorney General –v- Ebert [2002] 2 All ER 789 at para 35.

In R (Kumar) –v- Secretary of State for Constitutional Affairs [2007] 1 WLR 536 the Court of Appeal indicated (para 51) that the CRO scheme had reproduced faithfully the effect of the judgement in Bhamjee. Whilst the Court’s inherent jurisdiction to protect its process from abuse has always existed and has been preserved side by side with the statutory powers conferred on the court by the CRO regime, it would be a very rare case indeed in which a judge could rely on the inherent jurisdiction in an area which appeared to have been comprehensively covered by the statutory CRO regime (para 62).

Clearly neither a limited nor an extended CRO can be made unless the pre-conditions therefor as identified in paragraphs 4(1) and 4(2) above have been satisfied. If these pre-conditions are not satisfied then whatever the threat level of future unmeritorious applications or litigation a CRO cannot be made (save that in a wholly exceptional case the court might, perhaps, be able to make an order under its inherent jurisdiction. The present is not such a wholly exceptional case).

What, therefore, does “persistently” mean in para 3.1 of the PD? In Kumar the Court of Appeal cited (at para 68) the following passage from Bhamjee:

“By the time the order comes to be made the litigant for whom the further restraint has been adjudged necessary will have exhibited not only the hallmarks of vexatiousness…but also the hallmarks of persistent vexatiousness….We do not include the word “habitual” among the necessary criteria for an extended civil restraint order, but there has to be an element of persistence in the irrational refusal to take “no” for an answer before an order of this type can be made.”

At para 69 in Kumar the Court of Appeal stated that under the statutory CRO regime it was sufficient that the previous claims or applications were totally without merit, and that the litigant persisted in making them. The requirement for “vexatiousness”, or its modern equivalent, had gone.

What seems, therefore, to be required is a persistence in making wholly unmeritorious claims. I note that in Supperstone –v- Hurst [2009] EWHC 1271 Mr Bernard Livesey QC (sitting as a Deputy Judge of the Chancery Division) regarded three wholly unmeritorious claims or applications by Mrs Hurst as being sufficient to constitute “persistence” (para 55). To my mind, three unmeritorious claims or applications must be the bare minimum for establishing “persistence”. The essential thrust of decisions such as Ebert, Bhamjee and Kumar is that the court should engage in a graduated, and proportionate, response to the identified abuse. This would make it logical for the statutory scheme to have a higher pre-condition threshold for the making of an extended CRO as opposed to a limited CRO (and an even higher threshold as a pre-condition for the making of a general CRO). The wordings of paras 2.1, 3.1 and 4.1 of the PD clearly confirm that this is the case. If the pre-condition threshold for a limited CRO is two or more applications which are totally without merit then “persistence” in para 3.1 of the PD must, on any logical analysis, require more than two unmeritorious claims or applications.

CPR Rules 3.3(7), 3.4(6) and 23.12 provide that where a statement of case or application is struck out or dismissed and is totally without merit, the court must specify that fact and the court must consider whether to make a CRO. CPR Rule 52.10(6) makes similar provision where an appeal court refuses an application for permission to appeal, strikes out an appellant’s notice or dismisses an appeal.

As will appear, only in the case of one court order (an application made to the Bristol County Court by Mr Ludlum) is it specified on the face of the order that the application was totally without merit. Nevertheless, the decision of the Court of Appeal in Kumar makes it clear that I am entitled to examine individual components of the litigation history to ascertain whether claims or applications were made “totally without merit”. The absence of a specific mantra on the face of an order is in no way conclusive. But I must take care not to substitute my own views for those of the judge who heard the claim or application. My task, as I understand it from paragraph 79 of Kumar, is to understand and identify the view adopted (or which must in the context have been adopted) by the relevant judge. Having ascertained that view, it is not for me to depart from it. I do not sit as an appeal court entitled to substitute my views for those of the relevant judge (after I have ascertained them). Thus I note that in Kumar the Court of Appeal was particularly careful to ensure that it correctly identified the basis on which the earlier judges had dismissed the proceedings (see para 70 and also para 19 where the Court of Appeal was unable to conclude that Poole J must have formed the view that the action was totally without merit, para 22 where, despite the Court of Appeal’s suspicions, there was no evidence before the Court of Appeal that the action was struck out on the grounds that it was totally without merit and para 30 where the Court of Appeal was able to conclude that Collins J had regarded action 4 as being totally without merit, even though he did not say so in terms).

Assuming that the pre-conditions for the making of a CRO are satisfied, it does not necessarily follow that a CRO should be made. The court has a discretion. It is clear that this discretion must be exercised in a proportionate manner. Whilst the party subject to a CRO is not absolutely prevented from approaching the court, nevertheless that party (unlike any other litigant) has to pass through the filter of obtaining permission from the specified judge. Therefore, the court should carefully consider in a graduated way whether a limited CRO would suffice before making (assuming the pre-conditions allow it) an extended CRO.

To my mind the most important factor in the exercise of the discretion is the “threat level” of continued issue of wholly unmeritorious claims or applications. No litigant has the substantive right to trouble the court with litigation which represents an abuse of the court’s process (see, for example, Bhamjee at para 33(iii)). The mischief of such unmeritorious litigation is not merely the unnecessary troubling of the opponents (frequently in circumstances where the opponents cannot enforce costs orders against the party bringing the unmeritorious litigation). Over and above this such unmeritorious litigation drains the resources of the court itself, which of necessity are not infinite. Hence, limited resources which should be devoted to those who have genuine grievances are squandered on those who do not (see paras 8 and 9 of Bhamjee). It is no defence for the party bringing the unmeritorious litigation to say that he genuinely, and honestly, believed that he had a viable grievance. As the Court of Appeal said in Bhamjee (para 4) in many, if not most, cases the litigant in question has been seriously hurt by something which has happened in the past. The litigant feels that he was unfairly treated and cannot understand it when the courts are unwilling to give him the redress he seeks. To my mind the only relevance of an honest belief in the validity of the unmeritorious claims which are being brought is that it may go to increase the “threat level” of future unmeritorious litigation. The question to be asked, quite simply, is will the litigant, now, continue with an irrational refusal to take “no” for an answer (cp. para 4 of the judgment of Lewison J. in Thakerar –v- Lynch Hall and Hornby [2006] 1 WLR 1511).

Accordingly, it seems to me to be clear that the making of a CRO is in no way punishment for past conduct. But that past conduct is highly relevant in ascertaining what is the “threat level” of the continuation of future unmeritorious litigation. Equally, it would be wholly wrong to make a CRO simply because a bankrupt had deliberately refused to co-operate with his trustee or, indeed, done his best to ensure (other than by commencing unmeritorious litigation) that his estate in bankruptcy would prove to be as difficult as possible to realise. However, conduct of this nature in the past may go to inform the nature of the “threat level” for the future. Further, and a matter of relevance in the present case, it would be quite wrong to make a CRO simply because a litigant had a criminal conviction (even a criminal conviction for perjury on a matter which was linked to the issues in dispute in the litigation in which the CRO was to be made). But, again, the existence of that criminal conviction may go to inform the nature of the “threat level” of unmeritorious litigation for the future. Further, merely maintaining a wholly unmeritorious defence to a claim by another party to the litigation cannot, of itself, justify the making of a CRO. But again it may inform the nature of the “threat level” for future unmeritorious litigation.

Mr Ludlam was adjudged bankrupt on 2 March 2004. One of the major assets in his estate was his joint interest with Mrs Ludlam in a freehold property known as Montgomery House, Somersal Herbert, Ashbourne, Derbyshire (“the Property”). The Property included as well as Montgomery House itself another dwelling known as Mediaeval Cottage.

Mr Ludlam’s bankruptcy initially proceeded in the Derby County Court but was transferred to the Chancery Division by order made on 28 March 2006. The cause of that transfer was an application made by the Trustee against each of Mr and Mrs Ludlam whereby the Trustee sought to identify the extent of Mr Ludlam’s interest in the Property and to realise that interest for the benefit of Mr Ludlam’s creditors. The proceedings in the Chancery Division need to be read with some care because Mrs Ludlam mutates, according to no discernable pattern, from being First Respondent to Second Respondent and back again.

The Trustee’s application came on for its first substantive hearing before Mr Registrar Simmonds on 23 November 2006. Neither Mr nor Mrs Ludlam attended but the court received a communication that Mr Ludlam had been taken ill that very morning with severe asthma and had been taken to hospital. Accordingly, the Trustee’s application was adjourned to 12 December 2006.

On 12 December 2006 again neither Mr nor Mrs Ludlam appeared. Mr Registrar Simmonds delivered a short judgment refusing further to adjourn the Trustee’s application and, then, considered the Trustee’s application in the absence of Mr and Mrs Ludlam. Mr Registrar Simmonds held that immediately prior to 21 May 2001 the Property was jointly beneficially owned by Mr and Mrs Ludlam in equal shares. This involved rejecting a contention on behalf of Mr and Mrs Ludlam that whilst the legal estate in the Property was vested in them both nevertheless they held the Property on trust for Mrs Ludlam alone. That contention involved Mr and Mrs Ludlam relying upon a declaration of trust, a declaration of trust which Judge Orrell in the Derby County Court (in proceedings brought against Mr and Mrs Ludlam by Lloyds TSB) had already held to be a sham. Pitchers J had refused permission to appeal that decision of His Honour Judge Orrell. Mr Registrar Simmonds then found that a Transfer of the Property by Mr and Mrs Ludlam into the sole name of Mrs Ludlam on 21 May 2001 was both a transaction at undervalue within the meaning of section 339 of the Insolvency Act 1986 and, also, a transaction whose purpose was to put the Property beyond the reach of Mr Ludlam’s creditors within the meaning of section 423(3) of the 1986 Act. Accordingly, Mr Registrar Simmonds ordered that the equitable interest which Mr Ludlam had in the Property immediately prior to the Transfer of 21 May 2001 should vest in the Trustee as part of the bankruptcy estate. Mr Registrar Simmonds ordered that the Property be sold, with conduct of the sale being given to the Trustee and that Mr and Mrs Ludlam should deliver up vacant possession of the Property to the Trustee by 11 January 2007.

By paragraph 7 of Mr Registrar Simmonds’ order Mr and Mrs Ludlam were to co-operate in the sale of the Property and to do all such acts and to execute all such documents as might be necessary to give effect to the sale within seven days of request. Paragraph 8 provided that in the event of either Mr or Mrs Ludlam failing to execute any document or documents within seven days of request then a Registrar of the court was permitted to execute the same on his/her behalf by application in writing and, unless otherwise ordered, without a hearing.

Mr and Mrs Ludlam each made application, under section 375 of the 1986 Act, for review of Mr Registrar Simmonds’ decision. That application was heard by Registrar Derrett on 30 January 2007. Mr Ludlam appeared in person, Mrs Ludlam was represented by counsel. In a detailed and careful judgment Registrar Derrett dismissed both Mr and Mrs Ludlam’s applications for review.

I pause at this stage because Mr Sims, on behalf of the Trustee, suggests that already by this time Mr and Mrs Ludlam had made applications which were totally without merit. He says that, albeit by informal communications with the court, they made application for adjournment of the hearing on 23 November 2006. That adjournment, he says, was granted on the basis that adequate medical evidence would be provided and no adequate medical evidence was subsequently provided. Again, albeit by informal communications with the court, they sought to have the hearing on 12 December 2006 adjourned, again without submitting adequate medical evidence. Subsequently, as I understand it, this submission became more refined so that it was only the informal application to adjourn the hearing on 12 December 2006 which is said to be totally without merit (on the basis that no adequate medical evidence was supplied). Further Mr Sims said that the applications to Registrar Derrett on 30 January 2007 were totally without merit.

I have no difficulties whatsoever in rejecting these submissions. Before Registrar Derrett (but not before Mr Registrar Simmonds) was evidence from the local hospital that Mr Ludlam had been hospitalised for a couple of hours on the morning of 23 November 2006, he being discharged back to the care of his GP with the hospital concluding that he did not have a chest infection. Also before Registrar Derrett was Mrs Ludlam’s contention that the main reason for her not attending on 12 December 2006 was the emotional strain she was under because of the criminal proceedings to which I shall shortly refer. She also said that, on the morning of 12 December 2006, Mr Ludlam was again ill and she had to take her father to hospital that morning for an operation. Whilst, therefore, I may have my suspicions that Mr and Mrs Ludlam were either playing with the court process or, at the minimum, burying their heads in the sand, I most certainly cannot say with any degree of confidence that their applications for adjournment were totally without merit. Nor, as Mr Registrar Simmonds had made his Order in their absence, can I say that it was totally without merit for them to wish to receive the benefit of a hearing before Registrar Derrett at which they had (in the case of Mrs Ludlam through counsel) full opportunity to present their case to the court.

Mr Ludlam made an application to Evans-Lombe J on 17 January 2007 to stay issue of a writ of possession pending the hearing before Registrar Derrett. Clearly that application cannot be said to be devoid of merit and Mr Sims does not suggest that it was.

Following the hearing before Registrar Derrett, Mrs Ludlam made application for permission to appeal the order of Mr Registrar Simmonds. Permission to appeal was refused by Morgan J on paper on 2 July 2007. Morgan J gave concise, but detailed, reasons. First, Mrs Ludlam had no real prospect of success in appealing against Mr Registrar Simmonds’ decision not to adjourn the hearing on 12 December 2006. That decision was well within the range of decisions which could have been made by the Registrar. Morgan J then indicated that the issues before Mr Registrar Simmonds had fallen into two parts. The first issue related to whether Mr Ludlam did, or did not, have a half share in the Property before the Transfer of 21 May 2001. Morgan J indicated that this issue had already been tried and decided by His Honour Judge Orrell in the Lloyds TSB proceedings and Pitchers J had refused permission to appeal that decision. Each of Mr and Mrs Ludlam were parties to that decision and were bound by an issue estoppel, not only as against Lloyds TSB but also as between themselves. The Trustee could assert that issue estoppel, standing as he did in the shoes of Mr Ludlam, as against Mrs Ludlam. The fact that Mr and Mrs Ludlam might now wish to advance new arguments could not be put forward to undermine the decision of Judge Orrell (on the basis of Henderson –v- Henderson (1843) 3 Hare 100). The second part of the Registrar’s decision related to whether the requirements of sections 339 – 342 and/or 423-425 of the Insolvency Act 1986 were made out. There was no real prospect of a successful appeal against the Registrar’s decision on those matters.

Morgan J did not expressly record that Mrs Ludlam’s application for permission to appeal was totally without merit. I cannot, with any degree of confidence, conclude that he so regarded it. He may well have regarded the application for permission to appeal as being a final legitimate step taken by Mrs Ludlam to test the validity of Mr Registrar Simmonds’ order. Now, however, was undoubtedly the time for Mr and Mrs Ludlam to accept reality and acknowledge defeat. They had been told, in clear and concise terms, by a High Court Judge why Mr Registrar Simmonds had got it right. Sadly, it is from this point that Mr and Mrs Ludlam seem to have been unable to face up to reality and to take “no” for an answer.

I referred above to criminal proceedings. The Transfer of 21 May 2001 (and also, I think, the declaration of trust) was one of the subjects of a number of criminal indictments brought against Mr and Mrs Ludlam for the offences of: (i) perverting the course of justice (ii) perjury (iii) fraudulently carrying out the Transfer in anticipation of bankruptcy and (iv) operating a company, The ICT Forum Limited (“ICT”), whilst Mr Ludlam was bankrupt. Mr and Mrs Ludlam were tried at Leicester Crown Court in March and August 2007. Mr Ludlam was convicted of all the offences and Mrs Ludlam of all the offences save those relating to the operation of ICT. As a result Mr Ludlam was sentenced to 18 months’ imprisonment and Mrs Ludlam to 9 months’ imprisonment. Their appeals against these criminal convictions were dismissed on 27 March 2009. I am conscious that each of Mr and Mrs Ludlam have now served their sentences and should not be punished twice for the same offence. Nor does it follow that because, in the past, they have perverted the course of justice and committed perjury then they will necessarily do so in the future. They may well have learnt their lesson. I do not, therefore, hold these criminal convictions, of themselves, against them when considering whether or not to make a CRO. However, the existence of the criminal convictions are relevant in two respects. First as part of the history of what subsequently occurred. Mr and Mrs Ludlam continued to seek to challenge the order of Mr Registrar Simmonds after they had been convicted of these criminal offences. That only underlines how totally without merit were their subsequent attempts, following criminal conviction, to attack the order of Mr Registrar Simmonds. Secondly, as a result of these criminal convictions compensation or forfeiture orders have been, or are in the course of being, made in the criminal courts against Mr and Mrs Ludlam. Mrs Ludlam told me that she had already been ordered by the criminal courts to pay £105,000 by 29 December 2009 with a sentence of 2 years in default. Mr Ludlam told me that the proceedings to ascertain what sum he would be ordered to pay were still in progress. It was obvious from what Mr and Mrs Ludlam had to tell me that both were concerned about the possibility of a further period of imprisonment for failure to comply with the orders of the criminal courts. It was also clear that this concern was a major factor in justifying their present litigious activities. They were anxious to engage in civil litigation to improve their position in the criminal courts by reducing the amount ordered to be paid. Their concerns over these matters, therefore, go to inform the nature of the “threat level” of future unmeritorious proceedings from each of them.

Neither Mr nor Mrs Ludlam were prepared to accept Morgan J’s reasons for refusing Mrs Ludlam permission to appeal and both made renewed oral applications for permission to appeal. It is not entirely clear to me how Mr Ludlam was able to do this since he appears to have had no subsisting application for permission to appeal. That said, on 9 November 2007 Evans-Lombe J refused Mrs Ludlam’s application for permission to appeal the order of Mr Registrar Simmonds. On 22 November 2007 Sir Donald Rattee (sitting as a Judge of the High Court) dismissed Mr Ludlam’s application for permission to appeal the order of Mr Registrar Simmonds. Neither order records, on its face, that the renewed oral applications for permission to appeal were totally without merit but I have no difficulties in concluding that they were totally without merit. Nor do I have any difficulties in concluding that such must have been the view of each of Evans-Lombe J and Sir Donald Rattee. Indeed as to the hearing before Evans-Lombe J, Mr and Mrs Ludlam told me that at one point the judge refused to hear any further submissions from Mrs Ludlam’s counsel. That simply underlines how Evans-Lombe J. must have regarded the renewed oral application before him as being totally devoid of merit. And whilst Mrs Ludlam was represented by counsel at the hearing before Evans-Lombe J, I do not see how that, of itself, can prevent her renewed application for permission to appeal being totally without merit. The fact, however, that counsel was prepared to support her renewed application for permission to appeal is a factor which I should, and will, bear in mind when I come to the exercise of my discretion as to whether, or not, to make a CRO. As to the application by Mr Ludlam before Sir Donald Rattee, I find it astonishing that Mr Ludlam could have thought it appropriate to maintain this application after Evans-Lombe J had refused Mrs Ludlam’s application. Nor is it easy to see how he had any locus to make this application (so far as I can see he had no subsisting application for permission to appeal Mr Registrar Simmonds’ order). And even if Mr Ludlam did, indeed, have such locus it is difficult to see what interest he had in appealing Mr Registrar Simmonds’ order since, of course, any interest which he had had in the Property was clearly vested in the Trustee.

The Trustee had difficulties in recovering possession of the Property and did not obtain vacant possession thereof until 30 April 2008. A potential purchaser of the Property (a Mr Taylor) had been in the wings for some time. He was, ultimately, prepared to pay £1,025,000 for the Property. He was ready willing and able to proceed immediately. Whilst others visited the Property, and certain of them showed some interest in purchasing it, no one else was able to proceed immediately. The Trustee was, of course, now seeking to sell the Property in a highly challenging market and, further, its condition had substantially deteriorated since the commencement of the bankruptcy. When vacant possession was recovered numerous fixtures and fittings had been removed, such as internal doors, an AGA cooker, various white goods, sanitary ware, panelling and external flagstones. The Trustee was advised by a Mr Flint, a partner in the well known firm of Knight Frank, to accept Mr Taylor’s offer in the sum of £1,025,000. However, Mrs Ludlam would not sign the contract for sale and so the Trustee made application on 11 July 2008 to have the sale documents signed on Mrs Ludlam’s behalf by a Registrar (in accordance with the terms of the order of Mr Registrar Simmonds).

Mrs Ludlam countered by issuing an application on 17 July 2008 seeking suspension of the operation of the order as made by Mr Registrar Simmonds. Both applications came on for hearing before Chief Registrar Baister on 4 September 2008. The essence of Mrs Ludlam’s application was that the Trustee was selling at an undervalue and that the Property should be exposed to the market for a far longer period. This application was clearly hopeless. Under the terms of the order of Mr Registrar Simmonds it was for the Trustee to sell the Property (conduct of the sale had been given to him) and if Mrs Ludlam had any valid grounds for contending that the Trustee was selling the Property at an undervalue then her remedy lay in bringing separate proceedings for her loss - not in seeking to prevent the Trustee exercising his rights under and in accordance with the order of Mr Registrar Simmonds which had now long since become final. But, as it happened, Mrs Ludlam did not even have any evidential grounds for suggesting that the Property was being sold at an undervalue. It was a matter of pure assertion by her. In anticipation of the hearing before Morgan J on 13 October 2008 the Trustee obtained confirmation from Mr Flint by e-mail of 1 October 2008 that if the intended sale to Mr Taylor were to fall through then, granted the catastrophic market, any future sale would be at a minimum of £100,000 below the current agreed price. Further, the Trustee obtained a second opinion from Edward Caudwell of Caudwell & Co on 6 October 2008 to the effect that if the Property were to be brought to the market that day, then a figure in the region of £900,000 to £950,000 subject to contract should be quoted and Caudwell & Co would hope to achieve something close thereto. Clearly, therefore, the sale to Mr Taylor was at a highly favourable price. Doubly so was this because the equity in the Property was being rapidly reduced by insurance costs of £1,629 per quarter and interest on the outstanding mortgage of some £2,800 per month. Mr and Mrs Ludlam had long since ceased to pay the mortgage and, as at 1 October 2008, £707,000 odd was due to redeem it. Further, a sale to Mr Taylor would reduce future selling and marketing costs.

While some of the evidence to which I just referred became available only after the hearing before Chief Registrar Baister he, nevertheless, again in a detailed and careful judgment, refused to grant Mrs Ludlam the relief she had sought in her application of 17 July 2008. The Chief Registrar pointed out that he did not sit in an appellate capacity from the order of Mr Registrar Simmonds. Further, he held that there was no evidence to support Mrs Ludlam’s contention that the Property was being sold at an undervalue. It is also clear that the Chief Registrar considered that the Trustee was acting in accordance with professional advice and had acted properly in seeking to obtain the best price. Accordingly, the Chief Registrar had “no hesitation” in accepting that the course being followed by the Trustee was appropriate. The Chief Registrar ordered that the Trustee should be entitled to sign on behalf of Mrs Ludlam any further documents necessary to facilitate the sale of the Property and without any further recourse to Mrs Ludlam. The Order recorded that the contract for the sale of the Property had already been executed by a Registrar on behalf of Mrs Ludlam.

I have no difficulties whatsoever in concluding that not merely was Mrs Ludlam’s application of 17 July 2008 to the Chief Registrar totally without merit but that the Chief Registrar so regarded it.

However, still Mr and Mrs Ludlam would not take “no” for an answer. Mrs Ludlam applied for a stay of the Chief Registrar’s order pending an appeal. Morgan J granted that stay (in the absence of the Trustee) on 25 September 2008 and the Trustee then applied to Morgan J for removal of the stay. The Trustee’s application was heard by Morgan J on 13 October 2008. He lifted the stay and dismissed Mrs Ludlam’s application for permission to appeal. Morgan J was expressly asked by the Trustee’s counsel to rule that the application for a stay and the application for permission to appeal the Chief Registrar’s order were totally without merit. Morgan J declined to do so. According to the Note before me of the hearing, Morgan J was concerned about certain comments which the Chief Registrar was said by Mr Ludlam (who represented Mrs Ludlam at the hearing on 13 October 2008) to have made during the course of submissions on 4 September 2008. According to the Note Morgan J was of the view that if those comments were made (and no Transcript of what had occurred was before Morgan J) then those comments might cause concern to an appellate court even though the actual decision of the Chief Registrar was undoubtedly correct. Mr Sims now urges me to go behind what Morgan J said and to find that the stay application and the application for permission to appeal were totally without merit. I do not see, on the authority of Kumar, how I can do so. Morgan J has made an express decision not to declare that the stay application and the application for permission to appeal were totally without merit. The justification for Mr Sims’ submission is that I have the benefit of the Transcript of what occurred before the Chief Registrar, which Morgan J did not. That Transcript reveals that at one point the Chief Registrar said to Mrs Ludlam “Am I supposed to take your word on that with your history? Let us be blunt about this”. Shortly thereafter the Chief Registrar said to Mrs Ludlam “Frankly, I have to balance the professional opinion of a firm of estate agents and a trustee who is independent against somebody who has been convicted of criminal offences”. I should say, immediately, that the general tenor of the Transcript is that the Chief Registrar gave Mrs Ludlam a careful, courteous and sympathetic hearing. And, no doubt, these remarks look somewhat different on a cold transcript than they would have sounded when said. The general context for these remarks was that the Chief Registrar was trying to explain, carefully, to Mrs Ludlam just what the issues were and how he had to balance her application (supported only by her assertions) against the professional opinion of an independent Trustee and a well known firm of estate agents. But, as I understand the position, it was remarks broadly similar to those which I have identified which caused Mr Ludlam to complain to Morgan J and which persuaded Morgan J that he should not rule that the stay application and the application for permission to appeal were totally without merit. The Transcript, therefore, supports what occurred in front of Morgan J. If, therefore, I were entitled because I had the benefit of the Transcript to go behind what Morgan J decided (which I am not) I can see no reason whatsoever for so doing. The stay application and the application for permission to appeal from the order of the Chief Registrar were not therefore, and on the express decision of Morgan J, totally without merit.

On 13 October 2008 Morgan J ordered that the Trustee was to be entitled to apply to him for a CRO on 10 days’ written notice to Mr and Mrs Ludlam, such application to be determined in writing. He also ordered that all further matters in the bankruptcy proceedings were to be reserved to him. However on 16 February 2009 Morgan J, having considered matters on paper, ordered that there was to be an oral hearing of the Trustee’s application for a CRO against Mr and Mrs Ludlam. That is the hearing which has taken place before me, Morgan J having expressly released this matter to me.

As a result of the order of Morgan J on 13 October 2008 the Property was sold to Mr Taylor and the sale completed. This was not, however, the end of the saga. On 28 April 2009 Mr Ludlam issued an Application Notice in the present bankruptcy proceedings claiming that Mediaeval Cottage (but not the Property as a whole) had been sold at an undervalue and seeking relief in respect of this. The context is that Mr Taylor, for his own purposes, had sought to apportion the total purchase price as between Montgomery House and Mediaeval Cottage (one being purchased by Mr Taylor the other by a company controlled by him). Concentrating only on Mediaeval Cottage itself and not on the total purchase price Mr Ludlam said that the price obtained for Mediaeval Cottage was an undervalue. This Application Notice seems to me (and it is a matter for me) to be totally without merit – both as there is no proper evidential basis therefor and, also, because what Mr Ludlam is complaining about is the sale of an asset belonging not to him but to his Trustee.

Further, Mr Ludlam has issued another Application Notice seeking to set aside the order of Morgan J of 13 October 2008. Again, on its express terms, that application seems to me (and it is a matter for me) to be totally without merit. It was, after all, Mrs Ludlam who applied to Morgan J for permission to appeal the order of the Chief Registrar. And yet this application is made not by her but by Mr Ludlam – who therefore has no standing to seek to set aside the order of Morgan J. Nor are any valid grounds advanced to set aside the order of Morgan J. It would be necessary for someone with locus to make the application to show that the order of Morgan J had been procured by fraud. Nothing which Mr Ludlam says in support of his application (and what he says is a matter of contention not evidence) goes remotely near establishing that Morgan J was misled, let alone fraudulently misled, by the Trustee. At its most charitable this is an attempt by Mr Ludlam to re-litigate an issue already finally decided by Morgan J.

To conclude on Mr Ludlam’s bankruptcy, evidence has now come to light which establishes a prima facie case (and at this stage it is no more than that) that Mr Ludlam possessed other assets which he did not disclose to his Trustee (namely joint ownership of a property known as Hill Top Lodge, Matlock, Derbyshire). I make this point not because it influences in any way my decision whether or not to make a CRO against Mr and Mrs Ludlam but solely because this new allegation means that Mr Ludlam’s bankruptcy will not be soon closed as had once been anticipated. It is likely to continue for some time. Therefore, and because the bankruptcy will continue, there would indeed be purpose in making only a limited CRO against either or both of Mr and Mrs Ludlam.

Mr Ludlam has also claimed in a number of e-mails to the Trustee’s solicitors that he has made an “appeal to Strasbourg” in respect of Mr Registrar Simmonds’ order. Nothing appears to be known about this and no further information is before me. This claim, whether right or wrong, does however illustrate how Mr Ludlam is wholly unable to take “no” for an answer.

I turn now to a wholly separate issue – namely the application which Mr Ludlam made in the Bristol County Court. It is necessary to set out, briefly, the background history. Mr Ludlam, long before his bankruptcy, had been represented in substantial proceedings by the firm of Bevan Ashford (which is a predecessor of the firm of solicitors now acting for the Trustee). On 22 May 2001 judgment was given in favour of Bevan Ashford against Mr Ludlam for unpaid fees in the sum of £118,534. Mr Ludlam did not attend the hearing. Mr Ludlam then made application to set aside the judgment and that application ultimately came before Mr Recorder Goodchild on 19 September 2002 (on appeal from the District Judge). Mr Recorder Goodchild allowed Mr Ludlam’s appeal in part. He gave Mr Ludlam until 3 October 2002 to itemise each and every point on Bevan Ashford’s bill which Mr Ludlam said was disputed. Thereafter, the bill was to be taxed by a District Judge. If Mr Ludlam itemised his objections by 3 October 2002 then the earlier judgment was stayed pending outcome of the taxation process. If, however, Mr Ludlam did not itemise his objections by 3 October 2002 then the earlier judgment was to stand. Quite what happened thereafter remains a matter for speculation. Mr Ludlam told me that he did, indeed, itemise his objections by 3 October 2002 and so the earlier judgment should have been stayed, pending taxation of Bevan Ashford’s bill. However, on 21 January 2003 DJ Exton made an order lifting the stay imposed by Mr Recorder Goodchild on the basis that 12 months had expired since delivery of the bills in question and, accordingly, Mr Ludlam was not entitled to have his costs taxed pursuant to section 70 of the Solicitors Act 1974. That order was made at a hearing at which Bevan Ashford were represented by counsel but Mr Ludlam did not attend. Thereafter, on 21 January 2004 a statutory demand was served by Bevan Ashford on Mr Ludlam for the sum of £148,741 and the issue of bankruptcy proceedings was considered. However, matters were overtaken by Mr Ludlam’s bankruptcy on 2 March 2004.

Nothing then occurred until November 2008. Mr Ludlam made application to have the original judgment in favour of Bevan Ashcroft “expunged” on the basis, as I understand it, that the same remained stayed by the order of Mr Registrar Goodchild of 19 September 2002. The firm of Bevan Brittan then wrote to the court drawing the court’s attention to the order of DJ Exton of 21 January 2003. The court then, of its own volition, vacated the hearing of Mr Ludlam’s application to have the earlier judgment “expunged” (that hearing being listed for 12 December 2008) and dismissed Mr Ludlam’s application to set aside the earlier judgment. This was effected by order of DJ Exton of 10 December 2003 which recorded that upon reading the letter from Bevan Brittan and the enclosed order of 21 January 2003 it was clear that Mr Ludlam’s application was “entirely without merit”. This order was made, of course, without Mr Ludlam having any opportunity to make representations to the court. Mr Ludlam’s subsequent response has been that he knew nothing about the order of 21 January 2003 (it having been made in his absence) and that as far as he was aware when issuing his application matters were governed by the order of Mr Recorder Goodchild. Mr Ludlam has subsequently sought to appeal, or set aside, the order of DJ Exton of 10 December 2008. On 17 April 2009 Deputy District Judge Schofield dismissed that application on the basis, Mr Ludlam tells me, that he had no jurisdiction to hear the matter. As will be seen below that may not necessarily have been correct. However, Mr Ludlam tells me that on 6 July 2009 he filed some sort of Appeal to the High Court Judge in London.

In Bhamjee (at paragraph 38) the Court of Appeal encouraged courts to be robust in utilising their powers under CPR Rules 3.3 and 3.4 to strike out applications and statements of case of the court’s own initiative, without a hearing, where the application or statement of case was totally devoid of merit. However, the Court of Appeal emphasised that unless a CRO were in place a hearing must be arranged, if the litigant requested it. And CPR Rule 3.3(5) not merely confers on a litigant the right to apply to set aside, vary or stay an order made by the court of its own initiative without a hearing but, also, requires that the order itself must contain a statement of the right to make such an application. The order of DJ Exton of 10 December 2008 did not contain any such statement. I am, therefore, somewhat uneasy about what occurred on 10 December 2008. The court recorded that Mr Ludlam’s application was entirely without merit (thereby potentially triggering the making of a CRO against him) without giving him the opportunity to make representations or drawing to his attention his rights to have a hearing to set aside or vary the order (or at least that part of it which recorded that his application was entirely without merit). Nor, in a wider context, am I wholly easy with what occurred. Assuming that Mr Ludlam complied with the requirements of Mr Recorder Goodchild’s order and did, indeed, itemise his objections to Bevan Ashcroft’s bill by 3 October 2002 (an issue of fact which Mr Ludlam contends should be answered in his favour and which I do not have the material before me to decide) then it is a little difficult to see how DJ Exton’s order of 21 January 2003 properly interrelated with the order as made by Mr Recorder Goodchild. Whatever the position under section 70 of the Solicitors Act 1974 Mr Recorder Goodchild had made an order which took effect according to its terms (which was not appealed and which because Mr Registrar Goodchild was sitting as a Circuit Judge the District Judge could not override). And if Mr Ludlam were not present on 21 January 2003 he may not have known, as he claims, about the making of this order. Accordingly, it seems to me that there could (I put it no higher than that) have been validity in the contention that Mr Registrar Goodchild’s order survived unscathed the subsequent order of 21 January 2003 so that Mr Ludlam’s application in November 2008 was not “entirely without merit” simply because matters were governed by the order of 21 January 2003.

However, Kumar would clearly indicate that, as I am not sitting in any appellate capacity from the Bristol County Court, I am bound by what appears on the face of the order of 10 December 2008. Nevertheless, the point may not matter since if I were not bound by what appears on the face of the order of 10 December 2008 I would have reached the same conclusion as DJ Exton but by a different route. Even if the order of 21 January 2003 were open to valid challenge, nevertheless Mr Ludlam had no locus to seek to have the earlier judgment “expunged”. Bevan Ashford’s debt (whether the subject matter of a stayed, or unstayed, judgment) was a debt provable in the bankruptcy. It was for the Trustee to deal with that debt, or claim to a debt, as he thought appropriate in accordance with his statutory powers and duties. Mr Ludlam’s bankruptcy protected him from having Bevan Ashford’s debt enforced against him. By the same principle, he had no personal interest, or locus, in seeking to have the original judgment “expunged”. Therefore, in my view, the application to have the original judgment “expunged” was, indeed, totally without merit.

In Mr Ludlam’s case I have no difficulty whatsoever in finding that he has “persistently issued claims or made applications which are totally without merit”. I have found that

Further, I am satisfied that the “threat level” of further unmeritorious applications from Mr Ludlam is extremely high. It is quite clear that he has no intention whatsoever of co-operating with the Trustee in realising his estate in bankruptcy for the benefit of his creditors generally. Rather, he regards his bankruptcy as something where he is entitled to obstruct the Trustee at any turn and where all that matters to him are the secular interests of himself and his wife and not those of his creditors generally. His past history makes it quite clear that he will not, for the future, take “no” for an answer and he will issue proceedings irrespective of their merits. As he said to me, he “passionately believes” (contrary to all objective evidence presently before the court) that the Property was sold at an undervalue. The evidence records that he has threatened proceedings against Mr Taylor as purchaser of the Property and others (including a private school in respect of a judgment obtained by that school and secured against Mrs Ludlam’s interest in the Property for unpaid school fees). By the terms of his application to set aside the order of Morgan J of 13 October 2008 he is attacking, without any adequate evidence, the professional integrity of the Trustee. Further, the prospects of a monetary recovery order being made against him in the criminal proceedings is propelling him, on his own admission to me, to make unmeritorious applications such as the one made to the Bristol County Court.

I have no difficulties, therefore, as far as Mr Ludlam is concerned in concluding that I should exercise my discretion by making an extended CRO as against him. That extended CRO:-

In my judgment the “threat level” of further unmeritorious litigation or applications from Mrs Ludlam is just as high as for Mr Ludlam, and for the same reasons. Indeed, it could be regarded as higher because she was the person with the equitable interest in the Property (and, hence, the one with the potential cause of action). Equally, her problems with the criminal courts are the more acute in that she is the one presently subject to the order to pay £105,000 by 29 December 2009 (with a sentence of 2 years imprisonment in default). She, in tandem with Mr Ludlam, has made the realisation of the Property as difficult as possible for the Trustee by refusing to take “no” for an answer – hence detrimentally affecting the creditors of her husband for whom, as far as I can see, she has no concern whatsoever. Were such a course open to me, therefore, I would have had no hesitation whatsoever in exercising my discretion by making an extended CRO against her as well.

However, the detailed analysis of the facts in which I have engaged above has identified only two applications by Mrs Ludlam which were totally without merit. The first was her renewed application for permission to appeal the order of Mr Registrar Simmonds to Evans-Lombe J on 9 November 2007. The second is her application to suspend operation of the order of Mr Registrar Simmonds as made in her application of 17 July 2008 to Chief Registrar Baister. And, as I have said, she is entitled to some credit in the exercise of my discretion for the fact that the application to Evans-Lombe J, even though totally without merit, was made by counsel and, therefore, presumably on the basis that counsel, quite wrongly, thought that it had some merit.

Whilst, therefore, the conduct of Mr and Mrs Ludlam, taken together, clearly evidences the persistent issue of claims or applications which are totally without merit, if I consider Mrs Ludlam alone, as in my judgment I must, I am not satisfied that the pre-condition for granting an extended CRO has been met. Only the pre-condition for making a limited CRO is satisfied. But, on this basis, I have no doubt but that the correct exercise of my discretion (even giving Mrs Ludlam credit in that exercise for the fact that the application to Evans-Lombe J was made by counsel) is that I should make a limited CRO. In exercising my discretion, as opposed to when considering whether the pre-condition has been met, I am, I think, entitled to take into account what Mr and Mrs Ludlam have done in tandem in the past so as to assess what Mrs Ludlam is likely to do individually in the future. I am more than satisfied that Mr Ludlam is likely to seek to resurrect his application to set aside the order of Morgan J of 13 October 2008 and his application for relief in respect of the alleged sale at an undervalue of Mediaeval Cottage and to do so in the form of applications to the same effect by Mrs Ludlam. If, of course, I make a limited CRO Mrs Ludlam is not prevented from raising these issues on her own behalf, but she will need to ensure that she establishes a viable case sufficient to obtain permission to proceed from a High Court Judge.

Accordingly, as against Mrs Ludlam I will make a limited CRO that is a CRO:-