Housiaux (t/a Harpers Of Weybridge) v HM Customs & Excise

There is no special costs principle for proceedings in which a bankruptcy order is annulled. Costs remain governed by the Civil Procedure Rules 1998.

On a second appeal, permission may be granted where the proposed grounds have a real prospect of success or another compelling reason exists. A consent order stating that a bankruptcy order ought not to have been made may raise an arguable issue about defective service and the weight to be given to the petitioning creditor’s responsibility. Case-management decisions based on proportionality must still produce a just outcome.

Mr Housiaux sought permission for a second appeal against an order of Peter Smith J dated 25 April 2002. The judge had dismissed an appeal from District Judge Fink, who had ordered Mr and Mrs Housiaux to pay HM Customs and Excise’s costs after a bankruptcy order was annulled by consent under section 282(1)(a) of the Insolvency Act 1986.

The proposed appeal concerned the effect of the consent annulment order, the failure to determine whether Customs and Excise had been given a usable address for service, and whether insufficient account had been taken of the petitioning creditor’s responsibility. The central issue was whether the requirements for a second appeal were satisfied.

1. Permission granted. This was a second appeal, so CPR 52.13 required an important point of principle or practice, or another compelling reason.

2. There was no special principle governing costs in annulment proceedings. Costs were to be determined under the ordinary rules in the Civil Procedure Rules 1998.

3. The consent order stated that the bankruptcy order was annulled under section 282(1)(a) of the Insolvency Act 1986 because it ought not to have been made. Although the order contained no admission of liability, it was properly arguable that it reflected defective service of the statutory demand or petition. The first appellate judge may therefore have failed to give proper weight to the order’s terms.

4. The District Judge had declined to determine whether Mr Housiaux had provided Customs and Excise with an address at which he expected to receive communications, relying on proportionality. That was ordinarily within the broad range of case-management discretion, but CPR 1.1 required the court to deal with cases justly. It was arguable that the approach had produced an unjust outcome.

5. It was also properly arguable that the costs discretion had been defective because no sufficient account had been taken of the petitioning creditor’s responsibility. The decision in Christian Leonard v Legal Services Commission (2002) made that issue arguable.

6. The financial consequences for a small businessman, together with the fact that these points had not been addressed on the first appeal, supplied a compelling reason for the second appeal. The costs orders were stayed pending appeal, with liberty to HM Customs and Excise to apply. A further skeleton argument was directed within 14 days.

• Court of Appeal (Civil Division) — Permission to bring a second appeal granted against the order of Peter Smith J dated 25 April 2002. A stay of the costs orders was granted pending appeal.
• High Court, Chancery Division in Bankruptcy — Peter Smith J dismissed the appeal and affirmed the order of District Judge Fink.
• Croydon County Court in Bankruptcy — District Judge Fink ordered Mr and Mrs Housiaux to pay HM Customs and Excise’s costs, assessed at £4,817.