McGuire v Rose

This is a renewed application for an extension of time and permission to bring a second appeal under CPR Part 52.13 against Lewison J's order of 28 July 2010 dismissing the appellant's challenge to District Judge Sparrow's order of 7 January 2008. The appellant sought leave to bring a claim under section 304(1) of the Insolvency Act 1986 to require the trustee to restore money to the bankrupt estate. The Court summarised the procedural hurdle for a second appeal under CPR Part 52.13 (an important question of principle or some other compelling reason) and stressed that the appellant must show a real prospect of success.

The judge noted missing documentary evidence from the lower courts, recited the long procedural history including the 1996 bankruptcy order and prior refusals to re-open it, and accepted Lewison J's analysis that the appellant had no realistic prospect of turning any shortfall into a surplus for the estate. The judge expressed concern about the appellant's ability to present the case properly and proportionately. Rather than finally refusing permission, the judge adjourned the application to the full court for hearing, directed that the hearing be before two appellate judges (one with Chancery experience) and warned the appellant about the risk of an adverse costs order.

Background and parties: The appellant, Mr McGuire, previously owned a rental business consisting of eight properties. After non-payment of legal fees he was adjudicated bankrupt in November 1996; the respondent is the trustee in bankruptcy. The appellant maintained the bankruptcy should not have been made but had exhausted prior avenues to re-open it.

Procedural posture: District Judge Sparrow made an order on 7 January 2008 which dismissed the appellant's application for leave to bring a claim under section 304(1) of the Insolvency Act 1986. Lewison J dealt with multiple permission applications, initially gave permission in relation to one of Judge Sparrow's orders but then dismissed that appeal on 28 July 2010 ([2010] EWHC 2835 (Ch)). Arden LJ refused permission on the papers on 29 July 2011. The appellant renewed his application in the Court of Appeal represented in person.

Nature of the application: The appellant sought an extension of time to file an appellant's notice and permission to bring a second appeal under CPR Part 52.13.

Issues framed: (i) whether an extension of time should be granted; (ii) whether permission for a second appeal should be given under CPR Part 52.13, which requires demonstration of an important question of principle or some other compelling reason; (iii) whether the appellant had a real prospect of success on a proposed claim under section 304(1) Insolvency Act 1986 and could convert any deficiency into a surplus to the estate.

Court's reasoning: The judge explained that crucial evidence from the lower courts appeared absent and that the appellant supplied further material only after request. On the merits he accepted Lewison J's careful analysis that, even taking assumptions in the appellant's favour, there was not a real prospect of turning any deficit into a surplus. Lewison J had identified four separate hurdles the appellant would have to overcome, including showing property sales at undervalue, errors by solicitors in accounting to the estate, excessive trustee remuneration, and the ability to turn any shortfall into a surplus. The Court of Appeal judge had no confidence that the appellant could demonstrate Lewison J was materially in error and was concerned at the appellant's capacity to conduct proceedings properly. Because of the volume of material and risk of error if decided without fuller argument, the judge considered it proportionate to adjourn and list the application before a two-judge court (one with Chancery experience) for a one-day hearing on notice to the respondent. The appellant was warned to obtain legal representation and that an adverse costs order was likely if the application failed.

Other observations: The judge observed that it was doubtful the appeal raised an important question of principle or practice but left open that being wrongly deprived of the opportunity to bring a claim could amount to a compelling reason to hear a second appeal.

The application for an extension of time and permission to bring a second appeal was adjourned and remitted to the full court for hearing before two Lords/Lady Justices (one with Chancery experience). Rimer LJ concluded on the material before him that there was little prospect of overturning Lewison J’s careful assessment that the appellant could not show a realistic prospect of converting a shortfall into a surplus, but for reasons of fairness and the volume of material directed a full hearing on notice to the respondent. The order included directions as to listing and a warning about likely adverse costs.

District Judge Sparrow, Norwich County Court (order dated 7 January 2008). Permission and appeals in the High Court before Lewison J (permission given in a judgment dated 10 October 2008; appeal dismissed on 28 July 2010: [2010] EWHC 2835 (Ch)). Arden LJ refused permission on the papers on 29 July 2011. Application to the Court of Appeal (A2/2010/2729) heard 14 December 2011; judgment dated 16 March 2012: [2012] EWCA Civ 288.