Law Society v Southall

Permission to appeal should be granted where proposed points of law have a real prospect of success and may be conclusive or decisive. This applies even where the lower court has not determined the legal questions, provided they are fit for appellate argument. The unresolved issues concerned whether Insolvency Act 1986 section 423 required a dominant intention to defraud creditors and whether it applied only to creditors within the debtor’s contemplation. Permission was therefore granted without deciding those issues.

The Law Society sought more than £283,000 in intervention costs from the widow of a solicitor, relying on section 423 of the Insolvency Act 1986 to challenge an alleged transfer of the contents of Grimshaw Hall. Hart J rejected the proposed non-delivery claim, refused summary judgment on the section 423 issue, and declined to make a freezing order. He dismissed the application to strike out the proceedings and refused permission to appeal. On renewal, the central questions were whether section 423 required a dominant intention to defraud creditors and whether the relevant creditors had to be within the debtor’s contemplation.

1. Permission granted. Aldous LJ held that the proposed points of law had a real prospect of success. One point could be conclusive if the court reached a conclusion about the deceased’s dominant purpose. The other could be decisive. May LJ agreed.
2. Section 423 issue. The High Court had rejected the delivery argument but had not determined whether section 423 applies only where the dominant intention is to defraud creditors. It had treated that question as capable of serious argument. Its view that it was possible to infer that the deceased’s principal concern had been to protect assets from possible creditors did not resolve the legal question.
3. Creditors in contemplation. The further question whether section 423 is concerned only with creditors contemplated by the debtor had not, so far as the Court of Appeal was aware, been decided. It was also fit to be argued and might be decisive.
4. Order. Other points raised in the applicant’s skeleton argument could be pursued on the appeal. Permission to appeal was granted, with the costs of the application to be costs in the appeal.

1. High Court (Chancery Division): Hart J’s judgment of 11 December 2000 dismissed the application to strike out the proceedings. He refused summary judgment on the section 423 issue and refused a freezing order because there was no evidence that the applicant would dissipate her assets.
2. Court of Appeal (Civil Division): The initial paper application for permission to appeal was refused. On renewal, Aldous and May LJJ granted permission. [2001] EWCA Civ 756