Dadourian Group International Inc & Ors v Simms & Ors

A bankrupt generally has no standing to pursue an appeal concerning a provable debt where the bankruptcy legislation makes enforcement against the bankrupt’s assets unavailable. That conclusion applies even before a trustee in bankruptcy has been appointed. The court may nevertheless permit limited protective steps, such as preserving an appeal before time expires, but such steps do not confer a right to conduct the appeal. A possible future annulment of the bankruptcy does not itself create a present interest or justify a stay. Annulment requires payment or adequate security for all relevant bankruptcy debts and expenses. A court cannot stay costs orders made by another court; any such application must be made to the court that made the order.

The defendants sought clarification or variation of a limited stay previously granted in the proceedings. They also sought a stay of costs orders made by Laddie J and by the Court of Appeal. Meanwhile, the Law Society had obtained a bankruptcy order against Mr Simms for unpaid disciplinary costs. No trustee in bankruptcy had yet been appointed, although the official receiver was receiver of the estate.

The Court of Appeal had directed that the application concerning the stay be made to the present court. The central issues were whether Mr Simms had standing to pursue the related appeal, whether a stay could assist a possible annulment of the bankruptcy, and whether this court had jurisdiction to stay orders made by other courts.

1. Application dismissed. Mr Simms had no locus standi to pursue the application or the appeal. Under Insolvency Act 1986, section 285(3), no creditor may enforce a provable debt against the bankrupt’s assets. The costs orders were provable debts and were therefore unenforceable against Mr Simms personally. He consequently had no interest sufficient to challenge them.
2. The reasoning in Heath v Tang [1993] 1 WLR 1421 applied even though no trustee had yet been appointed. The inevitable appointment of a trustee meant that granting a stay would be pointless, since the trustee would decide whether the appeal should continue. The court qualified the apparent absolute nature of the rule only to recognise that exceptional protective steps might sometimes be required, for example to preserve an appeal before the time limit expired.
3. The decision in Boyd & Hutchinson (a firm) v Foenander [2003] EWCA Civ 1516 demonstrated that a bankrupt is not wholly prohibited from applying to the court. It did not, however, give the bankrupt standing to conduct the appeal itself. The possibility of annulment therefore did not alter the present conclusion.
4. Alternatively, a stay would not realistically enable annulment. Under section 282(1)(b), read with Rule 6.211 of the Insolvency Rules 1986, all bankruptcy debts and expenses had to be paid or secured to the court’s satisfaction. If a debt was disputed, Rule 6.211(3) required adequate security for the full sum that might ultimately be proved. Mr Simms had produced no evidence that such security could be provided.
5. The court had no jurisdiction to stay the earlier orders made by Laddie J or the Court of Appeal. Any application concerning those orders had to be made to the Court of Appeal. The court also confirmed that DGI was entitled to support the bankruptcy petition and prove in the bankruptcy.

The judgment concerned a first-instance application following related proceedings and appeals.

• Court of Appeal: extended permission to appeal against the earlier freezing-order decision and directed that the application to clarify or vary the stay be made to the present court.
• High Court (Chancery Division): dismissed Mr Simms’s applications.