April 16
The claimant was a judgment creditor with the benefit of a number of judgments against the first and second defendants. The claimant sought to enforce those judgments by way of a third party debt order against the third party, on the basis that he owed monies to the first and/or second defendants. The claimant obtained an interim third party debt order, but the judge dismissed the claimant’s application to make it final on the grounds that the terms on which monies were lent to the third party were that he would repay the first defendant 30 days after demand, and, there having been no such demand, there was no “debt due or accruing due” from him that could form the subject matter of a third party debt order. Permission to appeal was granted on the basis that the argument that both lower courts were wrong not only had a real prospect of success but also raised an important point of principle. However, shortly before the hearing of the appeal the first defendant was made bankrupt, on a petition presented by the claimant itself. In those circumstances an issue arose as to whether the claimant could pursue its appeal, in the light of the terms of sections 285(3)(a) and 346(1) of the Insolvency Act 1986 which provided that (i) after the making of a bankruptcy order no creditor of the bankrupt would have any remedy against the property of the bankrupt in respect of a provable debt and (ii) a creditor could not retain the benefit of an attachment as against the official receiver or trustee unless the attachment was completed before the commencement of the bankruptcy, unless it could establish that it had a reasonable prospect of obtaining an order under section 346(6) of the Act disapplying the general rule under section 346(1).
On the appeal—
Held, substantive appeal not determined. (1) Section 285(3)(a) of the Insolvency Act 1986, which was in mandatory terms, prevented a creditor of the bankrupt having any remedy against the property of the bankrupt in respect of a provable debt. Since, in the present case, (i) A bankruptcy order had been made against the first defendant, (ii) the claimant was a creditor, (iii) there was no reason to think that the judgment debts obtained by the claimant were not provable in the bankruptcy and (iv) the first defendant had a claim for repayment against the third party which was a chose in action and therefore his property, the only question remaining under section 285(3)(a) was whether obtaining a final third party debt order against the third party would be a “remedy against” that property. There was no doubt that a creditor who obtained a final third party debt order obtained a remedy against the property of his debtor in the shape of a charge on the debt. He was therefore prevented from doing so after a bankruptcy order had been made in respect of his debtor by section 285(3)(a). A third party debt order differed to a money judgment in that it created an equitable charge on the debt. That was a proprietary remedy against the property of the bankrupt. Once the third party debt order had been made, the debt was not available to the general body of creditors but was payable in priority to the judgment creditor. It was therefore incorrect to suggest that section 285(3)(a) did not prevent proceedings being continued up to the entry of a judgment, but only barred the enforcement of a judgment. Such a contention related to judgment on a money claim, which was not analogous to a third party debt order: the question was whether section 285(3)(a) permitted a third party debt order to be made final at all, not merely whether the third party debt order should be enforced (paras 3–6, 24, 25, 27–29, 36–40, 44, 46–47).
(2) By obtaining an interim third party debt order, the claimant had attached the debt due from the third party to the first defendant. The claimant was a creditor of a person who was made bankrupt (the first defendant) who had, before the commencement of the bankruptcy, attached a debt due to the first defendant from the third party. The claimant was therefore squarely within section 346(1) and was not entitled to retain the benefit of the attachment as against the official receiver or trustee of the first defendant’s estate, unless the attachment was completed before the commencement of the bankruptcy. By section 346(5)(c), an attachment of a debt was not completed until the debt has been received. When the first defendant was made bankrupt, the claimant had not received the debt. It followed, subject to the court’s power in section 346(6) to set aside the effect of section 346(1) in favour of the creditor who had issued the attachment, that the claimant could not keep the benefit of the interim third party debt order, or obtain an order making the third party debt order final. On analysis, none of the matters relied upon by the claimant gave rise to any realistic prospect that it would be able successfully to invoke section 346(6) of the 1986 Act. Accordingly, there was no prospect of the claimant being able to keep the benefit of the order and hence no substantive purpose would be achieved by hearing the appeal (28–29, 48–57, 70, 71).
Per curiam. The jurisdiction of the Court of Appeal to withdraw its draft judgments and proceed to hear further argument in an appeal is undoubted. But it is not a procedure to be encouraged. It is at the hearing of the appeal that a party is expected to deploy all its arguments. It is not in accordance with the overriding objective for a party to wait until it has seen from the court’s draft judgment(s) why it is about to lose an appeal and then seek to advance further arguments. The hearing of an appeal is not, and should not be allowed to become, an iterative process (para 65).
Brian Doctor QC (instructed directly) for the claimant.
The defendants did not appear and were not represented.
The third party, John Forster Emmott, in person.