Canty & Anor, Trustees Of The Estates Of v Canty & Anor

On a second appeal in bankruptcy, permission should be refused where the proposed appeal has no real prospect of success. A general disagreement with the amount of costs does not constitute points of dispute sufficient to prevent a default costs certificate. Unassessed costs orders in favour of bankrupts, disputes about the underlying judgment debt, alleged trustee breaches unsupported by evidence, and claims concerning property disrepair do not by themselves justify annulment of bankruptcy orders. A proved breach of trustee duty may in principle found a challenge, but no such breach was established.

Greenfield Roads Building Company Ltd presented bankruptcy petitions against Mr Richard John Canty and Mrs Rita Grace Canty based on costs orders arising from boundary litigation. Bankruptcy orders were made on 4 July 2000, and a trustee was later appointed. A county court possession order concerning the bankrupts’ home was treated by Neuberger J as a substantive appeal. He upheld the trustee’s right to possession but allowed time for an application to annul the bankruptcies. He dismissed that application on 12 February 2002.

The applicants sought permission for a second appeal. They challenged the default costs certificate, relied on possible set-off, alleged breaches of trustee duties, disputed the amount of mesne profits, and relied on the property’s disrepair. The central issue was whether any proposed ground disclosed a real prospect of successfully challenging the bankruptcy orders.

1. Disposition. Parker LJ dismissed the applications. The formal order was that permission to appeal was refused.
2. Second appeal. Under section 375(2) of the Insolvency Act 1986, permission was required because the proposed appeal was a second appeal in bankruptcy. None of the proposed grounds had a real prospect of success.
3. Default costs certificate. A letter stating that the applicants disagreed entirely with the amount of costs did not constitute points of dispute for the purposes of CPR 47.9(5). The issue of the costs certificate was therefore not shown to have been contrary to the Rules, and the bankruptcy petitions were not thereby invalid.
4. Unassessed costs and set-off. An unquantified costs order obtained by the bankrupts against the Fund did not provide a sufficient basis for annulling bankruptcy orders founded on a separate quantified debt. The existence of possible mutual credit or set-off, together with delays in assessment, did not alter that conclusion. The trustee was also in as good a position to pursue any available claims as the applicants.
5. Trustee duties. Parker LJ observed that a proved breach of duty by a trustee in bankruptcy could found a challenge to bankruptcy orders. That observation was hypothetical, since there was no evidence of breach. The absence of a public examination, an IVA, or a statement of affairs did not establish a sustainable ground of appeal.
6. Other alleged claims. A dispute about whether mesne profits should have been calculated annually might potentially be addressed under the slip rule, but it did not justify annulment. Evidence of disrepair and a possible chose in action likewise did not amount to a ground of appeal.

• Court of Appeal (Civil Division): On 10 July 2002, Parker LJ dismissed the applications for permission to appeal and ordered that permission be refused.
• High Court, Chancery Division, in bankruptcy: Neuberger J treated the application concerning possession as a substantive appeal, upheld the trustee’s right to possession, suspended execution to permit an annulment application, and dismissed that application on 12 February 2002.
• County court: His Honour Judge Weeks made a possession order on 29 November 2001.
• Bankruptcy proceedings: Bankruptcy orders were made on Greenfield Roads Building Company Ltd’s petitions on 4 July 2000.