Bank of Ireland v Gill

This is an application to set aside a stay of an order of District Judge Mullis, of 24^th January 2013. The order imposing the stay was made by me on paper on 27^th February 2013. There was a hearing on 24^th April this year, which was adjourned. On that occasion there was a question about the attendance of the litigant, who was a litigant in person at the time, and eventually he was represented and he is represented today by Mr Khan, there was an issue in relation to whether in fact the application to set aside my order had been made within the seven day period and there was a dispute about the attempt to serve a bankruptcy petition itself, despite the stay.

On that occasion I made a timetable for evidence and I put the matter over, adjourned it, to today. There are various issues which are raised the first of which was the service of a 13 page witness statement with quite lengthy exhibits to it, which was not within the form the directions for the service of evidence, but has been served in final response on 22^nd May, two days before this hearing. In fact, no particular point was taken in this regard and had it been I would not have excluded it, because it seems to me that in fact there had been an opportunity to consider its contents and that the email which was sent to me directly by Mr Gill suggested that he had in fact taken on board of that witness statement.

In any event, I turn back now to the substantive matters here. The first is and was the application to set aside the stay, which was made on paper, made in time and that is a period of seven days. In that regard there were numerous witness statements, which have been filed. That of Mr Persad, the solicitor himself who was dealing with this matter on behalf of the bank the Bank of Ireland and witness statements by Mr Gill and a Mr Jaffrey and a witness statement by a gentleman from the post room at Mishcon de Reya about their practice in relation to Second Class mail, There were also a number of communications by way mostly of email, from members of court staff: a Mr Mills, who actually had carriage of the stay order and Mr McIlroy, who is in control of the general processes in the court office. Overall Mr McIlroy said that it was practice to send out the important orders, such as a stay by First Class mail, but Mr Mills, who had carriage of the order, suggests that in fact he accepts that it seems that this order may have been sent by Second Class post, although that is as high as one can put it.

Mr Khan on behalf of Mr Gill says on the balance of probabilities that it was sent by First Class mail and in effect, that it had been lost in the post room at Mishcon de Reya. He does not suggest that in any way what is said by Mr Persad about his receipt for the first time of that order on 6^th March is incorrect, but he suggests that in fact it must have been sent by First Class post and was lost.

Taking all of that evidence in the round, on the balance of probabilities and given the evidence of Mr Persad and that of Mr Mills and that in fact of the gentleman from the post room at Mishcon de Reya, it seems to me that it is more likely than not, perhaps by mistake, the order was sent out by Second Class and certainly it did not arrive therefore, until 6^th March when Mr Persad became aware of it at least through Mr Gill. In fact I mean that it did not arrive until after that date, which is what, of course, Mr Persad says in his witness statement.

I therefore do not need to go on to deal with the next leg of the story, but if I am wrong about that I do need to go on to determine whether in fact I would have exercised my discretion under CPR Rule 3.12(a) to extend time beyond the seven days in this case in order to allow the application to be made to set aside the stay. That is, as I say, a discretion and the footnotes to the rule in the White Book refer one on to CPR Rule 3.9, which is about relief from sanctions and is obviously therefore, in a slightly different form. But it is not suggested by anybody that in fact, the checklist which one finds in Rule 3.9 is not of relevance when considering whether discretion ought to be exercised under Rule 3.12(a) in order to extend time in this case. Now, I will just read the form of checklist at Rule 3.9. It is that the Court must consider:

“(a)

the interests of the administration of justice;

(b)

whether the application for relief has been made promptly;

(c)

whether the failure to comply was intentional;

(d)

whether there is a good explanation for the failure;

(e)

the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant preaction protocol;

(f)

whether the failure to comply was caused by the party or his legal representative;

(g)

whether the trial date (and this does not apply here) or likely trial date can still be met if relief is granted;

(h)

the effect which the failure to comply had on each party; and

(i)

the effect which the granting of relief would have on each party.”

So all of that is relevant, if it is necessary to determine whether an extension of time should be granted.

Mr Hayward, on behalf of the Bank of Ireland says it would be in the interests of the administration of justice to extend the period in this case, that the matter was dealt with promptly as soon as Mishcon de Reya and Mr Persad were aware of the order and it was dealt with within seven days from that date and that there was a good explanation in the sense that as soon as Mishcon de Reya they dealt with it. The failure, if any, is that of the solicitor and not of the client at the bank and I take that point, despite the authority to which I was referred by Mr Khan, which in other circumstances says, of course, that the action of one’s solicitor and the party should be treated as one and the same. If that authority applied in relation to (f) of the checklist of Rule 3.9, it would make no sense to have it in the checklist at all.

Mr Hayward goes on to say that no prejudice has been caused to Mr Gill by the failure, if there is a failure to apply within the seven day period and there would be a prejudice to creditors if that extension were not granted. Mr Hayward also says in this case that there already was a petition, a bankruptcy petition in this case and that had been issued before the order for the stay had been made and that therefore, in this case the stay in effect is of no assistance whatsoever, because in effect the step has already been taken, if I can put it that way.

In that regard Mr Khan says this is something in which there is serious prejudice to Mr Gill, because there is the stigma of having a bankruptcy petition presented against one and that in relation to prejudice to creditors which might be caused in the meantime that in fact in any event there was a freezing order over Mr Gill’s assets and accordingly no harm will come of that. Mr Hayward says, of course, that is not sufficient, because in fact bankruptcy is a class remedy and therefore, there may be other creditors who are also at risk and the risk is that in the meantime there may be any disposition of assets, which then could not be set aside in the way that it can be in particular circumstances otherwise under the Insolvency Act.

It seems to me that I must take all of those matters into account, including something that Mr Khan stresses and that is that in fact there have been inappropriate steps to seek to serve bankruptcy petitions, which was on foot before the stay order was made. There were attempts to serve that order, continued attempts and those attempts were made in the face of the fact that, the bank was aware that a stay was going to be applied for and thereafter, even after the stay had itself come to the attention of Mishcon de Reya on 6^th March and even as late as something like 21^st March. It is said that those were in order to harass Mr Gill and members of his household and that those are matters which should be taken into account in the checklist and, of course, they do fall within one of the limbs of the checklist to Rule 3.9, which is:

“(e)

the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant preaction protocol;

And it is said this is a flouting of the stay or alternatively in any event it is wanton disregard of the orders of the Court.

In that regard, it seems to me that although proceeding to seek to serve a bankruptcy order, which had already been presented and was not therefore within the four corners of the order of District Judge Mullis, which was the subject of the stay, may not of itself be a breach of that order, is at least a breach of the spirit of that order. Therefore, it seems to me that the attempts to serve were not appropriate and it was appropriate to cease to attempt to serve that earlier bankruptcy petition.

Nevertheless, taking all of the matters, as I say, in the round, including the administration of justice and the short amount of time, if any, that there was delay in this matter and the explanation and the circumstances in which it arises and taking into account the prejudice to creditors, I have to say given the fact that this is a procedure where there are proceedings in relation to the statutory demand and appeal, which is outstanding in regard to the order of District Judge Mullis, I do not put a great deal of weight beside prejudice to Mr Gill.

Nevertheless, taking all of these matters in the round and that is not a factor that I take into account in fact to any great extent, either for or against, but taking all of these matters in the round it seems to me that if the application was out of time it would have been appropriate in my discretion to exercise my discretion in order to extend that time.

I should have mentioned that Mr Khan referred me to a number of authorities and he took me to first of all Training and Compliance Limited v. Data Research Company [2001] CPR page 46. That was the authority for the proposition that the action of a party and that of the solicitors should be taken into being synonymous and as I have already explained, I do not consider that that can apply in relation to the checklist in Rule 3.9.

In relation to the exercise of the discretion and of whether there has been a flouting of the order and the extent to which that is relevant when determining one’s exercise of discretion under Rule 3.9, I should have also said that Mr Khan took me to the case of Giggs v. Newsgroup Newspapers for which the neutral citation is in fact [2012] EWHC 431. That was a case in relation to Rule 3.9. It was a case heard by Tugendhat J and he took account in that case of the fact that Mr Giggs was in breach of an undertaking when refusing to extend time and that I fully accept.

He also referred me to the case of Fred Perry Holdings Limited v. Brian’s Plaza Limited [2012] 6^th Volume of Costs Law Reports page 1007. It is also a case concerning Rule 3.9 in which there is discussion and consideration amongst the Lords Justices in that case about the general culture of delay and both Lewison LJ and Jackson LJ state that a culture of delay and not paying attention to the time limits within court rules should not be allowed to continue. But that was a case where there was a deliberate disregard of the period and in this case consider that the circumstances are different, because there is no deliberate disregard of the seven day period in this case. Mr Persad had not had sight of the order; I do not think anyone suggests anything else, until 6^th March and dealt with it then within the seven day period.

In relation to the actual service or attempt to serve the bankruptcy order, one can see that Mr Khan would characterise that as a deliberate disregard, but that is not in relation specifically to delay or in relation to periods of delay and that is what the Fred Perry decision, in my judgment, is about and accordingly, I do not think that it bites directly on the circumstances with which I am concerned.

Mr Khan also referred to me to Stolzenberg & Ors v. CIBC Mellon Trust Co Ltd & Ors [2004] EWCA Civ 827 and accordingly is binding on me. There is a judgment Lady Justice Arden in that case. It was about unless orders and she made clear that those who do not comply should receive no mercy from the court in relation to further extensions of time. Once again in this case, in my judgment, the circumstances are different and one is not looking at the circumstances of an unless order where a party has already been given an opportunity to comply and has failed to comply with court orders. This is a case in which at the very worst if the Rule applies at all, it was a case of dealing with the matter promptly and immediately that it came to the attention of the solicitor concerned. And so overall I take those matters and those authorities into consideration, but my conclusion is that in the round and in this matter and in the interests of the administration of justice and taking account, as I say, of all those other matters to which I have already referred that it is or would be if necessary be appropriate to exercise my discretion under CPR 3.12(a) to extend time.

That brings me back to the actual application and in that regard Mr Hayward referred me to the merits itself and he said there no merit to the appeal and I should take that into account. On the other hand, Mr Khan says that I should not prejudge that appeal and he certainly took me to one authority in which it was said that one should not in effect, cut away the ground from underneath the appeal itself. Nevertheless, I set out the unusual position which Mr Hayward set out helpfully in his skeleton. He says:

“The normal rule is for no stay unless the Appellant can put forward solid grounds which normally involve some form of irremediable harm if no stay is granted.”

And he refers in that regard to the White Book at 52.7.1. He goes on:

“In the context of applications for a stay of bankruptcy proceedings pending appeal by the debtor from the bankruptcy order, it is well established that it is only in the rarest of circumstances that the Court will grant such a stay, because it is important and effectively being a collective remedy that the appointment of the trustee in bankruptcy is not delayed.”

And there in his skeleton he refers to the Official Receiver v. Turner and to another authority. He referred me to the Official Receiver v. Turner [1998] BBIR at page 636, which is a case which is concerned with a bankruptcy order and he says by analogy that applies here. In fact, Mr Khan says the circumstances are entirely different and the analogy does not hold good.

In addition Mr Hayward referred me to paragraph 13.4.4 of the Practice Direction in relation to insolvency proceedings, which provides as follows:

“Where the debt claimed in the statutory demand is based on a judgment order, liability order, costs certificate or tax assessment or decision of the tribunal, the court will not at this stage (by which it means on the application to set aside a statutory demand) enquire into the validity of the debt, nor as a general rule will it adjourn the application to await the result of an application to set aside the judgment, order, decision, cost certificate or any appeal.”

And he says that that is also because in fact those issues can also once again be considered at the hearing of the bankruptcy petition itself and all of those matters, he says, can be dealt with on that occasion and he says that that is clear from Rule 6.25(2) of the Insolvency Rules 1986. They also, of course, enable that Court on that occasion, should it think fit, to adjourn those proceedings in order to await the outcome of the appeal in relation to the statutory demand itself. So he says all of those matters are relevant.

He also referred me to authority in relation to the other point, which at the moment is live in relation to the set aside of the statutory demand and that authority was White v. Davenham Trust Limited, which is reported in [2011] BPIR at page 1187. In that case in the passages to which I was referred, it makes clear that in fact its only security taken in relation to the assets of the potential bankrupt himself or herself which is relevant and not any security taken from a third party and in this case the security is that of a third party.

In that regard Mr Khan says that at the appeal there will be an argument in relation to the authorities and whether in fact there are other authorities which remain good law and that remains a live issue, he says. Mr Khan also says that it may be that he will amend the appeal notice and that the appeal itself therefore, will take on a wider ambit altogether.

I should just make clear also that Mr Haywood reminded me that the actual underlying debts in this case arise from two court orders, which are both for substantial amounts and that in any event in relation to one of them, which is for £1m in relation to costs, no issue in relation to security arises at all.

Therefore, I think the last thing that I ought to add is that Mr Hayward reminded me again that bankruptcy is a collective remedy, as I called it, a class right and that the Bankruptcy Court is in a position to decide the matter in the round and that difficulty arises or may arise as a result of doubts which might be cast as a result of the stay upon the position which otherwise arises in relation to s.284 of the Insolvency Act, which would otherwise render void dispositions of assets of the bankrupt from the time that the petition is actually issued. Of course, that has already arisen in this case, because it happened, in fact, before the order for the stay was made. So he says one is in an uncertain situation as a result of the stay.

I should also mention that Mr Khan says, of course, that if the stay were lifted, not only is prejudice caused to his client, but also such an act would undermine the appeal in relation to the statutory demand altogether and he referred me to a case of Viz Trading Company Limited v. Avaz and Ors [2013] EWHC 491. It seems to me that the circumstances which arose in that case are materially different from this and that in fact, all of the issues in this case, including those which he might want to ventilate at an appeal can be ventilated at a hearing in relation to a bankruptcy order. In addition, the Rules allow the Court to stay or adjourn those proceedings if necessary, in order to allow the appeal to go ahead. And so the authorities in relation to undermining the very nature of the appeal itself by taking a step such as that that the bank in this case seeks, in my judgment, do not arise.

It seems to me therefore, taking the entirety of the matter in the round that to put it at its highest the appeal itself seems to be relatively weak. If one puts that together with the insolvency regime, of the need to protect creditors in the meantime, the way in which the matter would be dealt with and the discretion in the Bankruptcy Court at any further hearing and its ability in any event to stay the matter or adjourn the matter so that the appeal itself would not be undermined, taking all other relevant considerations into account, it seems to me that overall the appropriate step to take is to set aside the stay, which I ordered in February.