Paratus AMC Ltd & Ors v Lewis

MR JUSTICE MORGAN: On 24 October 2014, HHJ Pelling QC, sitting as a judge of the High Court, made an extended civil restraint order against Mr Anselm Lewis. Questions have now arisen as to the scope of the restraint imposed by that civil restraint order.

On 1 December 2014, Mr Lewis made an application, naming as the respondents to his application, a Mr Hall and a Miss Abrey. In his application notice, he asked for permission to seek to set aside an order made in certain county court proceedings. In that paragraph of the application, he said that his application was not caught by the civil restraint order of 24 October 2014. He then made in paragraph 2 of his application notice a further application, which was that, if permission was needed then it should be given. Finally, he sought, "Clearer directions from the court as to the scope of the extended civil restraint order…", and he referred to certain matters where clarity was required. I had been named in the extended civil restraint order as one of the two judges who should deal with applications for permission pursuant to the extended civil restraint order.

Accordingly, the application of 1 December 2014 was placed before me. It seemed to me that it would be in the interests of all concerned if the scope of the order were clarified and, accordingly, on 5 December 2014, dealing with the application of 1 December 2014, I directed that the application be listed for an inter partes hearing before me at which the court would determine the meaning and effect of the extended civil restraint order, and in particular its effect as between Mr Lewis and Mr Hall and Miss Abrey.

Not long after that, Mr Lewis made a further application. On the material before me today, that application appears to have been made by an application notice dated 15 December 2014. The respondent at the application was another entity, Swift Advances plc. Having received that application in relation to Swift Advances plc, I made an order on 16 December 2014 that, if Swift Advances plc wished to contend that Mr Lewis' application of 15 December 2014 was subject to the extended civil restraint order, then the meaning and effect of it, and in particular its effect as between Mr Lewis and Swift Advances plc should be considered at the same hearing that was fixed pursuant to my earlier direction of 5 December 2014. Accordingly, the application of 1 December 2014 and the application of 15 December 2014 are before me today.

At this hearing, Mr Lewis has appeared in person. Mr Hall has appeared in person on behalf of himself, and he has also appeared on behalf of Miss Abrey. Mr Palfrey has appeared on behalf of Swift Advances plc. As a result of the helpful submissions which have been made by all parties, I believe I am now able to satisfy Mr Lewis' request for clarification of the scope of the extended civil restraint order in this case. Before expressing my conclusion as to the order, it is necessary to summarise some of the procedural history prior to the making of the civil restraint order.

The parties have rightly placed before me many extensive bundles of papers showing the procedural history in the three actions involving Mr Lewis. Having looked at the number of applications and the outcome of those applications, one can well understand why HHJ Pelling thought that this was a case of a litigant who had persistently made applications which were totally without merit, justifying the making of the extended civil restraint order.

I am going to summarise to a great extent the lengthy procedural history in the three sets of proceedings. There are proceedings in the county court. They started in the Barnet County Court, but there came a time when they were transferred to the Chancery list in the Central London County Court. The Central London County Court then gave the three sets of proceedings three new action numbers. They all have as part of the action number the following, A10CL, and then following that prefix, the action numbers are 158, 160 and 161. I will refer to the action numbers without including the prefix on each occasion.

158 was a mortgagee possession action against Mr Lewis. The mortgagee was Paratus, and they brought proceedings for possession. 160 was a mortgagee possession action by Swift Advances plc, who brought proceedings for possession against Mr Lewis. 161 arose out of a claim by Mr Hall and Miss Abrey, suing in the name of their firm (a firm of solicitors) for fees said to be due from Mr Lewis.

When the civil restraint order was made in this case on 24 October 2014, matters in the Paratus proceedings, 158, had gone some considerable way. Paratus had obtained an order for possession of the mortgaged property. The mortgaged property was a house in which Mr Lewis resided. The house was sold and the proceeds of sale exceeded the debt owing to Paratus secured by the mortgage. Paratus as first mortgagee paid itself the debt due to it, and I think it retained a further sum by way of a retention to deal with matters which it contemplated Mr Lewis might assert against it, which would then be the subject of the retention.

Paratus paid the surplus proceeds of sale into court. Paratus' attitude no doubt was that it was no longer interested in those surplus proceeds of sale, but others might be. The persons who were certainly interested in surplus proceeds of sale included Swift Advances plc, Mr Hall and Miss Abrey. Swift Advances plc had a security interest in the property which had been sold by Paratus and their security interest now attached to the proceeds of sale which had been paid into court. Mr Hall and Miss Abrey had an interest in the proceeds of sale because they had obtained a judgment against Mr Lewis, followed by a charging order over the mortgaged property in relation to the amount of the judgment debt.

As I indicated, by the time the civil restraint order was made on 24 October 2014, the surplus proceeds of sale were paid into the county court in the Paratus action, namely 158. Further, on 16 April 2014, Mr Hall and Miss Abrey, who were not originally parties to 158, were joined as interveners in order to assert their interest in the proceeds of sale in court. Swift Advances plc did not technically intervene in 158; however, they made an application in their own action, 160, and that was ordered by the county court to be treated as an application made in 158. That too was done prior to the making of the civil restraint order.

The other matter I should refer to is that Mr Lewis was the subject of a bankruptcy order on 10 March 2011. The official receiver was in due course constituted trustee in bankruptcy and Mr Lewis' bankrupt estate vested in the official receiver as such trustee.

Against that background, I now go in some more detail to the civil restraint order itself. The civil restraint order was made on the application of Paratus. The application was made in 158. The civil restraint order is expressed in these terms:

That order referred to "any court specified below". The courts specified below were the High Court and any county court. The first thing to note is that the order I have read refers to the proceedings in which this order was made. It is quite clear that the proceedings in which the order was made were the proceedings in the county court under action number 158. The order was not made in the proceedings under action number 160 or action number 161. The order refers to applications in the High Court or in the county court. The order is not confined to applications being made in action number 158. It can apply to applications made in new proceedings in the High Court or in the county court, or in existing proceedings in the High Court or in the county court. By "existing proceedings" I mean any existing proceedings, such as 160 or 161. The order is not confined to applications made against Paratus. It can apply to applications made by Mr Lewis against anyone, and therefore anyone can include Mr Hall, Miss Abrey and Swift Advances.

The scope of the order is, however, qualified by the reference to:

Accordingly, the question will arise in relation to any claim or application sought to be issued by Mr Lewis, whether the claim or application which he wishes to issue is one "involving, or relating to, or touching upon, or leading to" the proceedings in action number 158. That may or may not be an easy question to answer, but it is unmistakably the question posed when applying the civil restraint order to any given claim or application.

Having given that explanation of the civil restraint order, I now return to the application before me of 1 December 2014. The first part of the application is basically a statement or an assertion that the application which was before District Judge Langley, and which was the subject of her order on that day, was not restrained by the civil restraint order. If Mr Lewis is wrong about that, he asks for permission from this court to bring such an application.

Before I deal with the relief Mr Lewis seeks, I ought to mention one other matter. Before 1 December 2014, Mr Lewis had issued an application on 29 October 2014. That was issued in the Central London County Court. It was issued by reference to action number 160 rather than by reference to 158, and it named as respondents Mr Hall and Miss Abrey. In fact, the claim in which they were claimants was 161 rather than 160, but I think nothing turns on that.

What Mr Lewis sought was that a Tomlin order made on 20 November 2008 be set aside. It was said that Mr Hall and Miss Abrey, who had the benefit of that Tomlin order, had failed to disclose certain payments Mr Lewis had made prior to the signing of the Tomlin order. It was then suggested that certain orders made by District Judge Langley be set aside, consequential on this non-disclosure.

The solicitors acting for Mr Hall and Miss Abrey, Wilson Barca & Co, drew my attention to the application of 29 October 2014. The solicitor pointed out that permission had not been sought by Mr Lewis to issue that application, and it was shortly after the civil restraint order had been made. It was suggested by Wilson Barca & Co that the application was in breach of, or contrary to, the civil restraint order.

The matter was put before me on the papers. I looked at the civil restraint order referring to action number 158, referring to the claimant as Paratus, and I looked at the application in question referring to the claimants, Mr Hall and Miss Abrey, and using a different claim number. I pointed out that I could not tell from the material placed before me whether Mr Lewis' application was or was not contrary to the civil restraint order. Mr Barca of Wilson Barca & Co then asked for a hearing at which he could explain the matter, and a hearing took place. It took place in the absence of Mr Lewis. At that hearing, Mr Barca did show me something of the procedural history, and I was satisfied at that hearing that contrary to appearances, the application of 29 October 2014 was indeed contrary to the civil restraint order.

Accordingly, on 28 November 2014, I made an order striking out the application of 29 October 2014. Mr Lewis told me today that he did not receive a copy of my order of 28 November 2014, although I have been shown a letter which enclosed a copy which was sent to him. In any event, Mr Lewis was not present on 28 November 2014, and it seemed to me it was therefore appropriate to recall my order and to review it at this hearing, which has turned out to be an inter partes hearing, where Mr Lewis is present, and Mr Hall and Miss Abrey are present or represented.

The question then is the question I posed earlier: having clarified the meaning of the civil restraint order, did Mr Lewis' application of 29 October 2014 infringe the restriction in the civil restraint order? Putting it another way: did that application concern any matter involving, or relating to, or touching upon, or leading to the proceedings in action number 158?

I can deal with this I hope relatively succinctly, although the procedural history is a long and tangled one. Mr Hall and Miss Abrey were solicitors in a firm of solicitors formally trading as Norman Saville & Co. Mr Lewis was a client of the firm. Norman Saville & Co, Mr Hall and Miss Abrey contended that Mr Lewis owed them fees. They brought proceedings in the Barnet County Court. They set out the sum alleged to be due. Then Mr Hall and Miss Abrey and Mr Lewis came to a settlement. The settlement was recorded in a Tomlin order in November 2008.

The Tomlin order recited a letter from the claimant and the fact that it had been signed by Mr Lewis. There was a stay of the claim for fees on the terms set out in the schedule. The terms in the schedule contain an important provision, which was that the defendant, Mr Lewis, agreed that the sum due from him to Mr Hall and Miss Abrey, pursuant to the claims in the action including interest costs and court fees to date, was £18,860. The schedule provided for payments by instalment. The schedule also provided that in default of any one instalment, the claimant was to be at liberty to enter judgment for the balance of the sum due. There was default in relation to a payment of an instalment, and on 27 January 2009, Barnet County Court made an order giving judgment for the payment for £18,460.

Although Mr Lewis applies to set aside the Tomlin order, the Tomlin order has in effect merged into the later judgment, and setting aside the Tomlin order on its own will be of no effect. What needs to be set aside is the judgment of 27 January 2009. I will therefore proceed on the basis that what Mr Lewis wants to achieve is that the judgment is set aside.

The potential relevance of this to Mr Lewis, ignoring for a moment the fact that there isa bankruptcy, is that Mr Hall and Miss Abrey obtained a charging order for the amount of the judgment debt, the charging order being granted over the property mortgaged to Paratus. So Mr Hall and Miss Abrey would say today that their security was initially the mortgaged property, and their security is now the proceeds of sale which were paid into court in action number 158.

The reason that Mr Lewis is now applying to set aside the Tomlin order, or, as I think he needs to, apply to set aside the judgment of 27 January 2009, is that the county court in action 158 has made orders in favour of Mr Hall and Miss Abrey for payment out to them of the proceeds of sale, or a part of them in court, and Mr Lewis wishes to change the effect of those orders by undermining the sums the subject of the charging orders, for which purpose he wishes to undermine the Tomlin order and the judgment of 27 January 2009.

So with that explanation, the question is whether Mr Lewis' application of 29 October 2014 concerns a matter involving, or relating to, or touching upon, or leading to the proceedings in 158. In my judgment, it plainly does. The matter is plain because the wording of the civil restraint order is wide, general wording. The application has to concern the matter, and the matter has to have a relationship to the proceedings in which the civil restraint order is made. The relationship is not defined in close and precise terms. For example, if the matter touches upon the proceedings in 158, it is within the civil restraint order. Further, if the matter is something leading to the proceedings in 158, it is again subject to the civil restraint order.

Those were the arguments that persuaded me on 28 November 2014 at the ex parte hearing to strike out Mr Lewis' application of 29 October 2014; and having heard Mr Lewis at this inter partes hearing, I remain of that view. Therefore, the application of 29 October 2014 will remain struck out, those reasons effectively dealing with the first part of the application of 1 December 2014.

The reason I say that is what District Judge Langley declined to deal with in her order of 26 November 2014 was an application to set aside the Tomlin order. She declined to deal with it because, as she understood it, that matter was the subject of the civil restraint order. My reasoning indicates, in my judgment, that the district judge was right about that. Therefore, I will not set aside her order and I will not give permission for an application to be made to set aside her order.

The next matter raised by Mr Lewis is that he seeks permission to bring an application against Mr Hall and Miss Abrey, in effect to set aside the Tomlin order, or possibly to set aside the judgment which followed the Tomlin order. My reasoning so far indicates that he needs the permission of the court to make that application. So I now turn to the question whether I should give him that permission.

The answer to that question is no, I should not give him that permission because he does not have locus standi to apply to set aside the judgment of 27 January 2009 and/or the Tomlin order which preceded it. It seems to me that the judgment is a final judgment. The court can set that judgment aside for fraud. It is necessary, therefore, for a person with locus standi to apply to bring a separate action asserting a cause of action, namely a cause of action in fraud to set aside a final judgment. That cause of action is not vested in Mr Lewis; it is vested in his trustee in bankruptcy, as can be seen from a consideration of, first, section 306 of the Insolvency Act 1986 and then the decision of the Court of Appeal in Heath v Tang [1993] 1 WLR 1421.

I need not describe the facts of Heath v Tang itself, but the judgment of Hoffmann LJ contains a valuable analysis of the position of a bankrupt seeking to litigate following the making of a bankruptcy order against him. Hoffmann LJ described at page 1423 the legal position where the bankrupt was a plaintiff (or today a claimant) and he described at page 1424 the legal position where the bankrupt was a defendant. As will be seen, the more relevant analysis, although both are interesting, is the position of the bankrupt as a claimant where the claim is to set aside a final judgment by reason of alleged fraud.

I need not read the lengthy passage of Hoffmann LJ's judgment at page 1423. I can summarise it by saying that Hoffmann LJ explained that the property which vested in the trustee includes "things in action" -- see section 436 of the Insolvency Act 1986 -- and certain causes of action which are personal to the bankrupt do not vest in the trustee, but all other causes of action do vest in the trustee. Hoffmann LJ explained that the bankrupt is then disabled from bringing proceedings which the bankrupt might earlier have been able to bring. I will read one passage, which is atpage 1423, D to F as follows:

That covers this case. Mr Lewis does not have locus standi to make an application to set aside the judgment of 27 January 2009 or the earlier Tomlin order. For that reason, if no other, I will refuse him permission to make an application for that purpose.

A number of other points were argued, which I will touch on. The first is that the earlier decisions having been arrived at, Mr Lewis has no interest in the subject matter of this dispute, quite apart from him having no technical locus standi. The money in court, which is what is being argued about, will go first to the secured creditors. And after they are paid, any surplus will go to the trustee for him to distribute to the unsecured creditors. It is said there will be a deficiency so that there will be no remaining surplus for the bankrupt. Mr Lewis challenges that although that would be the normal result of the property being vested in the trustee. Mr Lewis says that since the proceeds of sale came from Mr Lewis' home, and since the trustee did not take action to realise that property within three years of the bankruptcy, the property, or in this case the proceeds of sale, revested in Mr Lewis at the end of the three years.

That seems a surprising proposition given that the home was sold, not by the trustee, but by the first mortgagee, well within the three-year period. However, it has to be said that Mr Lewis' argument does derive some apparent support from a letter written by the Insolvency Service on 10 July 2014. Without going into the matter more thoroughly, as I think it is not necessary to do so for today's purposes, the letter appears to be written on the basis of a misunderstanding, which is that the property remained available to the official receiver as trustee and had not been sold by the first mortgagee. Indeed, the letter does not stand alone, because there is subsequent correspondence from the Insolvency Service that points out that since the property was sold by the first mortgagee, there is no question of the property revesting in Mr Lewis. What one is talking about are the proceeds of sale after payment of secured creditors, and the official receiver makes it plain that he does not concede that the proceeds of sale have revested in Mr Lewis.

If it were the case that the proceeds of sale were vested in the trustee, that would be a further reason for Mr Lewis having no commercial or other interest in the subject matter of his claim. It is not necessary for me to make a final ruling on that in view of the somewhat confusing correspondence. I will refer to one other matter because it may have a bearing on other applications which Mr Lewis might wish to bring. I have not yet identified the basis which Mr Lewis would wish to put forward for setting aside a consent order in the form of a Tomlin order and a judgment of the court following that Tomlin order. In fact, Mr Lewis has put in a witness statement intending to indicate the arguments he would wish to put forward on such an application. It is the witness statement of 30 October 2014.

It makes a number of points about the state of the account between Hall and Abrey on the one hand and Lewis on the other. It suggests that the figure which Mr Lewis agreed to pay in the Tomlin order was too high. It says that Mr Hall was negligent in his accounting, and therefore the matter should be undone. I fear that that will simply not do. There was a claim made by Mr Hall and Miss Abrey. It was up to Mr Lewis to defend it. He chose to settle and entered into a contract as to the amount payable. He thereby gave up his ability to challenge the figure which he has agreed and admitted to be the correct figure.

It would, of course, be different if he had been persuaded to agree the settlement by reason of fraud. Negligence, however, will not do. In his witness statement, Mr Lewis does assert fraud. He says at paragraph 14 that it is his, Mr Lewis', opinion that Mr Hall is in breach of the 2006 Fraud Act; therefore, there is a general allegation of fraud. Mr Lewis developed the matter in the course of his oral submissions. He told me that the figures had been wrongly calculated, that credits had not been given, that overcharging had taken place. If all of those matters were proven, they are consistent with something short of fraud. It simply will not do to throw around loose allegations of fraud when the real underlying allegation is that a sum which is claimed is not fairly due on a correct and accurate taking of an account.

I am more ready to take that view here, that proper particulars of fraud have not been shown, because from my reading of the voluminous papers provided to me for today's hearing, Mr Lewis finds fraud everywhere, and all of the persons with whom he has come into contractual relations, according to him, have been guilty of persistent, wilful and continuous long-term fraud. It makes one all the more doubtful that anyone has defrauded Mr Lewis when he asserts that everyone has all the time defrauded him. So I would hesitate long and hard on the merits in giving permission to Mr Lewis to make an allegation of fraud on that material. But as it happens, I do not have to base my decision on that ground, as I have the apparently straightforward legal ground that Mr Lewis, having been made bankrupt, no longer has the cause of action which he would wish to assert.

It follows that apart from this judgment which was designed to give clarity to the intended civil restraint order, I would dismiss Mr Lewis' application of 1 December 2014. I will consider what should now happen to give effect to that judgment and then I will deal with the application I have referred to in relation to Swift Advances.