Confidential

 

Website note: this transcript is still in draft; it is not official until it has been fully checked against the tape recording and approved by the Court. It is expected that many of the ijnaudible passages will be perfected, and this transcript will be continually updated.


Neutral Citation Number: [2002] EWHC 1387 (Ch)

IN THE HIGH COURT OF JUSTICE

No: 257/2002

CHANCERY DIVISION

 

Royal Courts of Justice

The Strand

London WC2A 2LL

Tuesday, 21st May 2002

 

 

B e f o r e:

 

MR JUSTICE PETER SMITH

 

 

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DAVID JOHN CAWDELL IRVING

APPELLANT

 

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PENGUIN BOOKS LIMITED
NIGEL ADAMS & CO

RESPONDENTS

 

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(Tape transcription by Smith Bernal Reporting Limited,
190 Fleet Street, London EC4A 2AG,
Tel: 020 7421 4000
Official Court Reporters)

 

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MR A DAVIES appeared on behalf of the Appellant

 

MR A ZACAROLI appeared on behalf of the Respondents

 

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J U D G M E N T

(As Approved by the Court)

 

 

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Tuesday, 21st May 2002

J U D G M E N T

MR JUSTICE PETER SMITH: This is an appeal by David John Cawdell Irving ("Mr Irving") against the bankruptcy order made by Deputy Registrar Derrit on 4th March of this year when she made him bankrupt. The petition arose out of his failure to pay an interim order for costs in the sum of £150,000 being so ordered by an order of Gray J in the Queen's Bench Division as long ago as 5th May 2000.

That order arose out of a well-known libel action brought by Mr Irving against two defendants, including Penguin Books Ltd. His action was unsuccessful. At the conclusion of the action on 11th April 2000 he was ordered to pay the defendants' costs of the action to be the subject matter of a detailed assessment if not agreed. The hearing on 5th May 2000 was an application by Penguin Books Ltd for the interim payment in respect of the costs.

Mr Davies, who appears before me also appeared before Gray J on that hearing having been, shortly before the hearing, briefed to appear. He raised a matter which forms the major basis of the appeal, and that concerns a statement appearing in an article published in The Bookseller n 21st April 2000. That date is partly significant in that it followed the judgment in the action and before the interim payment application was heard by Gray J. I refer to paragraph 14 of the judgment which sets it out as follows:

"Mr Davies further relies on quotations contained in article published in the issue for 21st April 2000 of the magazine The Bookseller where the legal director o the first defendant is quoted as saying, 'There is no reason at all for us to turn our backs on our author.' The article continues, "nor was Penguin's parent company, Pearson, prepared to turn its back, as all Penguin personnel involved from Managing Director to Watson down will testify. Nick Shinick from Pearsons Insurance department sat in on the case conferences and at no point did he flinch at the amounting bill for the defences, and I sometimes winced on Pearsons' behalf Miss Peacock Jones'. That was used as the basis for Mr Davies to suggest that Penguin was not actually exposed to any liability for costs as the costs were going to be paid by the parent company, or the insurers or a third party and that therefore Mr Davies' submission was that if that was correct, there would properly be no order to be made for the costs against his client at the behest of Penguin, because Penguin had no costs exposure."

Gray J rejected that submission on this basis (paragraph 15 of his judgment) where he says:

"That appears to me to be a very slender basis for the submission that the presumption to which I have referred has been rebutted in supposing there the presumption is that the presumption that solicitors are properly instructed by a client and that a client prima facie will be liable for the solicitor's costs and not a third party."

Gray J continued:

"But the matter was, in my judgment, put beyond doubt when Miss Rogers, appearing for the first defendant, told me on instructions that the liability for the costs incurred by the first defendant is that of Penguin Books Ltd, in other words she is instructed that the primary liability for costs of the expert accountants all attaches in this case to Penguin Books Ltd."

Accordingly, in paragraph 17 of the judgment, Gray J said this:

"I therefore in these circumstances conclude that I must reject the submission of Mr Davies that a payment on account in this case should be refused on the basis that the first defendant did not come under and has not come under a primary liability for the cost incurred on its behalf."

Mr Irving did not appeal against that decision. He did appeal on the merits and that appeal ultimately was unsuccessful. At that stage, Mr Davies raised again the same point before the Court of Appeal based solely on that same evidence categorised by Gray J as slender. There was an exchange between the Court of Appeal and Mr Davies. Paragraph 33 of the transcript of that exchange says this:

"MANTELL LJ: These are matters which are the same matters raised by Mr Davies, are they not, for assessment, nothing to do with the application for costs made now."

Later on, however, the issue in respect of when the costs issue could can be raised arose, and at paragraph 54 Pill LJ said this:

"But you have not confronted my Lord, Buxton LJ's point, that there was no application for permission to appeal against the costs order of Gray J."

And that was right. So the position is that the order for the substantive costs and the order for the interim payment was not appealed. The order for the interim payment was stayed pending the substantive appeal, but the court of appeal lifted that stay. They did, however, give Mr Irving a limited right to raise this indemnification issue on the detailed assessment of the costs in the Court of Appeal only. However, it is implicit from the fact that the Court of Appeal lifted the stay in respect of the interim payment that they were not expecting nor permitting Mr Irving to raise this issue on the interim payment. The position, therefore, in the main action is that when the costs come to be assessed, in my judgment, Gray J has ruled against raising this issue on the evidence before him on that detailed assessment and the Court of Appeal have only given Mr Irving a limited remit, namely he can only raise it in respect of the costs in the Court of Appeal. I have already observed that they lifted the stay in respect of the interim payment at the same time.

That, of course, does not prevent Mr Irving revisiting the issues, provided he has grounds for doing so, and that will follow the normal requirements of fresh evidence or some other basis such as a failure to reveal matters which might have influenced the decision that was made.

Mr Davies before me does not adduce any fresh evidence. He maintains this appeal on the same evidence, that of the statement in The Bookseller magazine.

I come now to the decision of the learned Deputy Registrar. It is regrettable, in my view, that the decision of the learned Deputy Registrar is flawed because she made, it seems to me, two errors of law. First she suggested that the matters raised by Mr Davies should have been raised on an application to set aside a statutory demand. That, with respect to her, is wrong. The matters can be raised at the statutory demand stage, but it is open to a debtor to raise them separately and independently at the petition stage. Second, she refused to hear any submissions based upon the decision of Etherton J in Dawodu v. American Express [2001] BPIR 983. That case confirmed a long-established principle that the bankruptcy court is not bound by any order in other decisions and it can, if it is appropriate to do so, investigate the matters which have led to the judgment, and come, if it is appropriate, to a conclusion differing from the result of the judgment. It is unfortunate that she refused to hear that, because she deprived herself of a jurisdiction which she undoubtedly had to reconsider it.

In those circumstances, it seems to me that the appeal should be allowed to that extent and I should therefore reconsider the hearing de novo as opposed to the more limited jurisdiction which I have ordinarily, that is to say, to review or consider the decision as to whether it was wrong in principle, and I propose to consider the evidence afresh and to see whether there is anything in Mr Irving's case based on the submissions made by Mr Davies.

The ability to review is essential to this case, because, as I have said, Mr Davies relies entirely on the matters placed before Gray J unsuccessfully, and partially unsuccessfully put before the Court of Appeal. I have already observed that even if the appeal is allowed, the victory in Mr Irving's hands will be pyrrhic because absent any other evidence he is not in a position to raise these matters on a substantive detailed assessment. In point of fact that does not make any difference, because the order for the interim payment can form the subject matter of the bankruptcy petition, whether or not on the subsequent detailed assessment the order would be reversed. That is quite clear it was quite clear that was in the Court of Appeal's mind when they lifted the stay. There is no basis for Mr Davies' suggestion in this skeleton argument that the only methods of execution available are those such as writs of execution or attachment of earnings. It is perfectly open to a judgment creditor in respect of an interim payment to enforce that (if that is the right word) by way of bankruptcy proceedings.

I should say what Etherton J said in the Dawodu case. He said this at page 990, having reviewed all the authorities, and in particular the decision of Warner J in McCourt v. Baron Neats Ltd and Official Receiver [1997] BPIR 114, Everton J said:

"My only qualification to the summary by Warner J is that the case established that what is required before the court is prepared to investigate a judgment debt in the absence of an outstanding appeal or an application to set aside, is some fraud, collusion or miscarriage of justice."

It seems to me that, contrary to what Mr Davies said, that view expressed by Everton J was no different to the view expressed by the Court of Appeal in Re Hawkins [1895] 1 QB 404 and in particular page 4112 were Lopes LJ said:

"In my judgment, both an ordinary judgment and one obtained by compromise may be enquired into directly but not before it is made out that either one or the other has been improperly or unfairly obtained. I do not go the length of saying that it must have been made fraudulently, it is sufficient in my opinion if it is made out that judgment was improperly or unfairly obtained."

It seems to me that in reality there is no difference between what Etherton J is saying and what the Court of Appeal is saying there.

Mr Davies did not say that the judgment had been obtained fraudulently. His submissions were that it was obtained unfairly because of the circumstances set out earlier in this judgment.

As I have said, it is open to me to reconsider the evidence in the light of the failure of the learned Deputy Registrar properly to apply the legal principles. Having considered the evidence and the submissions of Mr Davies very carefully, I am firmly of the view that she came to the right conclusion and I would propose to dismiss the appeal. I will set out my reasons.

First, on ground one, that is to say I ought to come to a different conclusion to that of Gray J, in my view I can see no basis for coming to a different conclusion from that of Gray J. I too am firmly of the view that the statement I The Bookseller magazine does not provide any credible basis for the submissions made by Mr Davies on behalf of Mr Irving. There is no evidence showing there was any improper arrangement in relation to the costs liability of Penguin Books Ltd.

I am fortified in that by a witness statement provided today by Kevin Bays, the solicitor and partner in the firm of Davenport Lyons. This was prompted by Mr Davies saying, non-rhetorically, if Penguin Books had nothing to hide, why cannot they state that there is nothing to hide and reveal the position. I raised this with Mr Zacaroli who appears for Penguin Books in response to this appeal, and a witness statement was produced which sets out, plainly in my view, that the relationship of Penguin Books and its lawyers was the normal one of solicitor and client, and there was nothing to suggest that there was any question that Penguin Books would not be liable to pay the costs. I should say for completeness that even if Penguin Books had not produced that evidence, my conclusion would have still been the same as Gray J's, namely that on the evidence produced by Mr Irving, both before him, the Court of Appeal and me, there is nothing to suggest that anything improper has arisen in relation to the costs so as to enable Mr Irving to escape the liability for costs ordered as long ago as 11th April 2000.

The second ground now proceeded with by Mr Davies is that Penguin Books refused an offer, unreasonably, to secure or compound this payment. The offer is a security over the only asset Mr Irving appears to have in the jurisdiction, namely his property, 81 Duke Street. The basis for his offer is set out in paragraph 14 and following of his witness statement on 1st March 2002. That property is a long lease at 81 Duke Street. It has a value of approximately £750,000. It is currently lived in by Mr Irving and his partner and their daughter. It is subject to a mortgage of £248,000 in favour of the Bradford & Bingley Building Society. There were at the time of his witness statement arrears and fees of £72,962.38 in respect of which Mr Irving said he was paying £3,000 per month. In fact Mr Irving was not making the payments; third parties were making the payments on his behalf. Mr Irving has not adduced before me any evidence to show he can pay any of the payments, either of those or of the offered payments. He offered to pay the £150,000 at the rate of £2,000 per month. Ignoring interest, that would take over six years to pay off the payment, which is of course only an interim payment.

The building society, Mr Davies told me, has recently obtained an order for possession, however that is not on the basis of him slipping further into arrears, but because the building society has a clause in its mortgage which entitles it to recover possession if the mortgagor goes bankrupt. Nevertheless it does follow that if that is the correct position, the building society will repossess the property and sell it.

There are, however, six further charges in varying amounts identified in paragraph 16 of Mr Irving's witness statement, and a further liability to the landlords of £24,423.43 for arrears of service charges. The total amounts secured on the property as regards capital is a little over £500,000. Mr Davies was unable to assist me, and Mr Irving has chosen not to provide me, with his exposure in interest terms on these six charges. All of the secured indebtedness of those seven charges will have a priority over any charge which Mr Irving could offer to Penguin Books Ltd. It seems to me that it is not unreasonable, given the uncertainties around the ability on Mr Irving to pay the instalments, the uncertainty of the amount owed on the prior charges, that Penguin Books should have accepted this offer. I conclude that they were perfectly justified in refusing the offer, and in my judgment that challenge to the decision of the Deputy Registrar also fails.

Mr Davies raised other issues in his skeleton argument, but he has not pursued those before me. It follows, therefore, that whilst the Deputy Registrar was wrong in law as to her jurisdiction, she came to the right conclusion, and I therefore dismiss Mr Irving's appeal.

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