Ashworth v Newnote Ltd.

Permission for a second appeal may be granted under CPR 52.13(b) where there is another compelling reason for hearing it, even without an important point of principle or practice. Where the High Court has reheard the matter afresh, the proposed appeal may in substance be a first appeal from that decision. A serious allegation that a director’s conduct justified summary dismissal should ordinarily not be resolved in a summary process unless the case is very clear. Statutory demands should not be used to enforce genuinely disputed debts or debts opposed by a genuine counterclaim meeting the applicable threshold under the Insolvency Rules 1986.

Newnote Ltd served a statutory demand on Mr Ashworth for £23,119.43. The County Court application to set it aside succeeded. On appeal, HHJ Pelling QC, sitting in the High Court, reheard the matter afresh and permitted Newnote to proceed on a reduced debt of £6,976.07. He also ordered costs and permitted a bankruptcy petition after 21 days. Initial permission to appeal was refused on the papers. The renewed application concerned whether a second appeal could properly be heard and whether the High Court judge had been entitled summarily to treat disputed payments as breaches of fiduciary duty justifying summary dismissal.

1. Application granted. Lord Justice Chadwick granted permission for the second appeal. Payment of £11,462.50 ordered on account of costs was stayed, and no bankruptcy petition based on the statutory demand could be issued until the appeal or further order.
2. Although the proposed appeal was formally a second appeal, the usual justification for the restriction in CPR 52.13 was substantially absent. HHJ Pelling QC had treated the matter as a rehearing and had started afresh, rather than reviewing the County Court decision. The proposed appeal therefore concerned points decided for the first time by the High Court and would, in substance, provide the first appeal on those points.
3. There was a real prospect that the High Court’s approach required correction. Whether payments from the company’s account were unauthorised receipts in breach of fiduciary duty, or repayments of loans made by Mr Ashworth, was a genuinely disputed issue. A finding that the conduct justified summary dismissal should not ordinarily be made against a person in a summary process unless the case was very clear.
4. The court noted the established statutory-demand approach under the Insolvency Rules 1986: demands are not to be used to enforce disputed debts or where a debtor has a genuine counterclaim meeting the statutory threshold. The High Court had referred to the low hurdle under rule 6.5(4)(a), but its final figure was difficult to reconcile with its finding of an arguable counterclaim of £4,683.17 and the company’s concession of a set-off of £3,093.41.
5. The appeal was to be listed before two Lord Justices, with a three-hour estimate, as soon as convenient.

1. Court of Appeal (Civil Division) — On 7 March 2007, the renewed application for permission to appeal was granted in [2007] EWCA Civ 253. Stays were imposed on the costs payment and proposed bankruptcy petition.
2. Court of Appeal (Civil Division) — On 9 February 2007, Lawrence Collins LJ refused permission on the papers.
3. High Court, Chancery Division — On 12 September 2006, HHJ Pelling QC allowed Newnote’s appeal in part, permitting pursuit of a reduced statutory demand and making costs and bankruptcy-petition orders.
4. Thameside County Court — On 27 February 2006, Deputy District Judge Masheder allowed Mr Ashworth’s application to set aside the statutory demand.