McGuire v Rose & Ors

On an application for permission to appeal, the claimant must show a real prospect of persuading the appellate court that the lower court was wrong. The court should not conduct a mini-trial, but it must analyse whether the claim is realistic and consider evidence reasonably expected to be available at trial. A claim should not be finally determined summarily where fuller factual investigation may affect the result.

A bankrupt cannot use separate proceedings to mount a collateral challenge to the bankruptcy order or to pursue claims vested in the trustee. Such claims must be brought through the bankruptcy court’s supervisory jurisdiction. Permission may nevertheless be granted where the evidence discloses a real prospect that asset realisations, fee scrutiny and related claims could alter the bankruptcy estate’s financial outcome.

Mr McGuire sought permission to appeal against eight judgments. Seven judgments of Master Teverson struck out or dismissed claims concerning his bankruptcy, the administration of his sister’s estate, professional fees, property sales and alleged misconduct. A judgment of District Judge Sparrow concerned applications for scrutiny of fees and restoration of property.

The applications were affected by an earlier refusal by the Court of Appeal to permit an out-of-time appeal against the bankruptcy order. The central issues were whether Mr McGuire could reopen the validity of that order, whether his claims had vested in the trustee, and whether he had a real prospect of showing that property was sold at an undervalue and that the bankruptcy shortfall could become a surplus.

1. Applicable principles. The court applied the summary judgment principles in Swain v Hillman [2001] 2AER 91, E D & F Mann Liquid Products v Patel [2003] EWCA Civ 472, Royal Bolton Hospital NHS Trust v Hammond No. 5 [2001] EWCA Civ 550 and Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63. Permission required a real prospect of persuading the appeal court that the lower decision was wrong. The court had to avoid a mini-trial, but could reject assertions lacking substance and had to consider evidence reasonably expected at trial.
2. Bankruptcy and collateral challenge. The earlier Court of Appeal decision had conclusively established, for the purposes of these applications, that Mr McGuire was validly made bankrupt. The High Court could not reopen that issue. Claims and causes of action had vested in the trustee under s.436 of the Insolvency Act 1986. Following Heath v Tan [1003] 1WLR 1421, the appropriate route for complaints concerning the trustee and the bankruptcy estate was an application to the bankruptcy court under ss.303, 304 or 360, not separate proceedings in this court.
3. Claims against professionals. The challenges to the bankruptcy creditor, the Insolvency Service, the Secretary of State, Mills & Reeve, Burges Salmon and G A Keys had no real prospect of success. They were barred by collateral challenge, vesting, delay, lack of duty, lack of evidence, limitation or the absence of retrospective effect under the Human Rights Act. The approach in Mulkerrins v Price Waterhouse Coopers [2003] 1WLR 1937 confirmed the court’s unwillingness to permit collateral challenges.
4. Undervalue and fee issues. Mr McGuire had a real prospect of establishing that the Sea Cliff properties were sold at an undervalue. The relationship between that claim, scrutiny of professional fees and the possibility of turning the bankruptcy shortfall into a surplus required fuller investigation. The procedural route through the bankruptcy court nevertheless prevented permission to appeal against Master Teverson’s orders.
5. District Judge Sparrow. There was a real prospect that District Judge Sparrow had misunderstood Master Teverson’s conclusion and had failed to consider the material independently. The possibility of a credit to the sister’s estate and recovery or disallowance of fees meant that the financial outcome could not yet be treated as incapable of changing. Permission to appeal was therefore granted against that order alone.
6. Permission to appeal was refused against all seven of Master Teverson’s orders and granted in appeal CH/2008/PTA/0045 against District Judge Sparrow’s order. The permitted appeal had to address undervalue, crediting of the remuneration difference, excessive trustee remuneration and the prospect of converting the shortfall into a surplus.

The judgment records earlier proceedings concerning the bankruptcy order. Permission to appeal out of time was refused by Registrar Simmonds, affirmed by Lloyd J, and the Court of Appeal refused permission on 19 March 2002. Those decisions were treated as binding for the present applications.

This judgment granted permission to appeal against District Judge Sparrow’s order but refused permission against Master Teverson’s seven orders.