Boyd & Hutchinson (a firm) v Foenander

A bankrupt appellant who has no present interest in a provable debt or in property vested in the trustee ordinarily lacks standing to continue an appeal. Where annulment of the bankruptcy remains possible, the court may assess the appeal’s prospects when deciding whether an adjournment accords with the overriding objective.

A compromise is construed objectively, by reference to the relevant factual background rather than negotiations or subjective intentions. General words releasing liabilities will not extend to a substantial, separately quantified liability where the agreement is expressly based on a specified charging order and the context confines it to enforcement proceedings under that order.

The respondent solicitors sought to enforce costs of £5,333.57 taxed on 7 September 1998. The appellant contended that those costs had been discharged by a compromise agreement of 22 November 1999, under which he paid £6,900 in settlement of sums secured by a charging order.

He appealed from an order of Buckley J dated 12 April 2002. Permission limited the appeal to the construction of that compromise. After permission was granted, the appellant was adjudicated bankrupt. His trustee did not adopt the appeal, and his application to annul the bankruptcy had been refused by a Registrar, although an appeal remained possible.

The central questions were whether the appeal should be adjourned pending the bankruptcy proceedings and whether the compromise included the separately taxed costs.

1. Appeal dismissed. Lord Justice Chadwick, with whom Lord Justice Auld agreed, refused an adjournment and held that the appellant had no standing to pursue the appeal while bankrupt. The costs debt was provable in bankruptcy, and property against which enforcement was sought had vested in the trustee under the Insolvency Act 1986. The trustee had not elected to continue the appeal.

2. The possibility that the bankruptcy might later be annulled did not require an adjournment. Applying the overriding objective in the Civil Procedure Rules, the court was entitled to hear the short construction point and assess the appeal’s prospects. An adjournment would serve no purpose if the appeal would fail on its merits.

3. The court construed the compromise objectively, applying the principles stated in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, Prenn v Simmonds [1971] 1 WLR 1381 and Bank of Credit and Commerce International SA v Ali and others [2001] UKHL 8. The relevant background was admissible, but previous negotiations and subjective intentions were not.

4. The agreement was expressly based on the sum due under the charging order of 17 December 1997. The references to discharging “all liabilities” and to costs in the “above-mentioned proceedings” therefore concerned the County Court enforcement proceedings and the charged debt, including any further enforcement costs. They did not include the separate £5,333.57 costs order, which was already quantified but unsecured. Had the parties intended to compromise that substantial sum, they would have referred to it expressly.

5. The court also held that it lacked power to reopen issues for which permission on the first appeal had been refused. The appeal was dismissed with costs on the indemnity basis, and permission to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): dismissed the appellant’s appeal and refused an adjournment: [2003] EWCA Civ 1516.
• High Court, Queen’s Bench Division (Buckley J): made the order appealed from on 12 April 2002. On 20 March 2002, Buckley J had refused permission to appeal on issues other than the compromise issue.