Berti v Steele Raymond (A Firm)

A bankruptcy petition presented against a debtor does not automatically abate when the debtor dies before the petition is heard. The proceedings may continue under the Administration of Insolvent Estates of Deceased Persons Order 1986.

In insolvency proceedings, rule 19.8 of the Civil Procedure Rules 1998, applied through rule 7.51 of the Insolvency Rules 1986, may permit the court to proceed without a formal grant of representation or appoint a person to represent the deceased’s estate. A discretionary decision requiring a formal grant may be seriously irregular where the court has failed to recognise those alternatives and injustice may result.

A bankruptcy petition was presented and served against Mario Berti before his death, but it had not been heard when he died. The petitioning solicitors claimed costs which the deceased’s family disputed. Several county court hearings followed. The court required a formal grant of letters of administration before Mr Berti could represent the estate, and a bankruptcy order was made when no grant was produced.

His Honour Judge Weeks QC, sitting in the Chancery Division in Bankruptcy, dismissed the first appeal. Mr Berti appealed to the Court of Appeal, principally arguing that the lower courts had failed to use available powers to secure representation of the estate and had thereby prevented the dispute from being properly heard.

1. The appeal was allowed and the bankruptcy order was set aside. A bankruptcy petition does not automatically fail because the debtor dies after presentation and service but before the hearing. Article 5(1) of the Administration of Insolvent Estates of Deceased Persons Order 1986 provides for continuation of the proceedings as if the debtor were alive, unless the court orders otherwise.
2. Article 5(3) of that Order and rule 19.8 of the Civil Procedure Rules 1998, applied through rule 7.51 of the Insolvency Rules 1986, supplied practical alternatives to insisting on a formal grant. The court could order service or re-service of the petition on Mr Berti, or appoint him to represent the deceased’s estate. Rule 19.8 recognises that requiring a formal grant may cause disproportionate delay and expense, particularly where the estate is small.
3. The county court’s decisions on 3 May and 23 June 2000 were flawed because the judges appear not to have appreciated the full extent of their powers. The first decision required a formal grant and excluded any appearance except by a formally appointed personal representative. The later decision made a bankruptcy order without addressing the available representation order or relevant correspondence from the District Probate Registry.
4. The Court of Appeal is slow to interfere with discretionary and case-management decisions. However, the overriding objective is to achieve justice. An unjust course, even if taken inadvertently, is likely to amount to a serious irregularity. The risk of injustice justified appellate intervention.
5. The petition was remitted for a fresh hearing at a different western-circuit trial centre, and Mr Berti was appointed under rule 19.8 to represent the estate. The costs order below was reversed so that there was no order for costs below. The respondent was ordered to pay the trustee in bankruptcy’s costs, subject to agreement or determination in the bankruptcy proceedings.

Laddie J added that the decision did not determine whether the solicitors’ bills were justified or whether Mr Berti would succeed in disputing the debt. Pill LJ agreed with Robert Walker LJ.

• Court of Appeal (Civil Division) allowed the appeal, set aside the bankruptcy order, appointed Mr Berti to represent the estate, directed a fresh hearing at a different western-circuit trial centre, and varied the costs orders.
• Chancery Division in Bankruptcy, His Honour Judge Weeks QC sitting as a judge of the High Court, dismissed the first appeal.
• Bournemouth County Court made the bankruptcy order on 23 June 2000 after requiring a formal grant of letters of administration.