Zurich Insurance v John Clarke

A bankruptcy order founded on an unchallengeable judgment debt will not be undermined by speculative or unavailable cross-claims. A later action which seeks to reopen an issue already determined, particularly by collateral attack on an earlier costs order, is not a viable cross-claim. Where causes of action vest in a trustee in bankruptcy, the bankrupt cannot pursue related appeals in his own name without the trustee’s involvement.

John Clarke was adjudged bankrupt in the Bristol County Court on 31 January 2001 on a petition presented by Zurich Insurance. The petition debt was a final costs certificate for £25,184.80 arising from earlier litigation. Clarke appealed to the High Court, where His Honour Judge Weeks QC dismissed the appeal on 8 March 2001.

Clarke sought permission to appeal out of time. He relied on other proceedings concerning Zurich, Mr Craven and the Lord Chancellor’s Department, alleging counterclaims, set-offs and human-rights issues. The central question was whether those matters provided an answer to the bankruptcy petition or justified a further appeal.

1. Permission refused. The bankruptcy order was made on an unchallengeable judgment debt. Permission to appeal against the underlying costs order had already been refused, and no further appeal was available.
2. The supporting creditor’s unsatisfied costs debt did not affect the result. Even if that debt were set aside, the petition would still stand on Zurich’s judgment debt.
3. There was no pending or viable cross-claim against Zurich. The later Zurich action had been struck out, permission to appeal had been refused, and a further appeal was barred by Access to Justice Act 1999, section 54(4).
4. The later Zurich action was, in substance, a collateral attack on the earlier costs order. The issue concerning payment into court had already been before the court when the costs order was made and had been considered when permission to appeal was refused. Relitigation of that issue could not provide a basis for resisting bankruptcy.
5. Any declaration of incompatibility concerning section 54(4) would not affect the operation of that provision in the later Zurich action, by virtue of section 4(6) of the Human Rights Act 1998. In any event, there was no realistic prospect of permission being granted on the merits.
6. Because the relevant causes of action had vested in the Official Receiver as trustee in bankruptcy under section 306 of the Insolvency Act 1986, directions were given for the pending Court of Appeal matters to be listed before a single Lord Justice. Clarke and the Official Receiver were to show cause why those matters should not be struck out.

• Court of Appeal (Civil Division) — Permission to appeal was refused. Directions were given concerning three related pending matters.
• High Court, Chancery Division — His Honour Judge Weeks QC dismissed Clarke’s bankruptcy appeal on 8 March 2001.
• Bristol County Court — Clarke was adjudged bankrupt on 31 January 2001.