Hayes v Butters & Ors

The court refused an application by the trustee in bankruptcy, Mr Stephen Grant, to strike out a claim brought by the bankrupt, Mr Timothy Hayes, under the Protection from Harassment Act 1997. The judge applied the established insolvency principles in Ord v Upton and related authorities to hold that while damages that are purely personal (for anxiety, distress or injury to the person) do not vest in a trustee, hybrid claims that include financial loss may vest in the trustee. The court held that where a statutory course of conduct straddles a bankruptcy the correct approach is to treat each post‑bankruptcy wrongful act which causes fresh loss as giving rise to a fresh cause of action that remains vested in the bankrupt; pre‑bankruptcy losses that form part of the same campaign and are proprietary in nature may vest in the trustee.

Accordingly the judge concluded that it was not established that the whole damages claim vested in the trustee and that it would be inappropriate to strike out the proceedings at this stage. The application was dismissed and the matter was to be re‑transferred to the county court for trial on liability.

Background and parties: The claimant, Mr Timothy Hayes, sued his ex‑wife Mrs Carol Hayes and her partner Mr Graham Butters under the Protection from Harassment Act 1997 seeking an injunction and damages for a campaign of letters, telephone calls and visits alleged to have taken place from about February 2003 to at least 2011. Mr Hayes had been made bankrupt in March 2005 and discharged in 2006. The trustee in bankruptcy, Mr Stephen Grant, was appointed in June 2013 and applied to be joined and to strike out the action on the basis that the damages claim vested in the trustee.

Nature of the application: Mr Grant applied to strike out the claim on the grounds that the damages claim was a so‑called "hybrid" cause of action vesting in the trustee under insolvency law (principally Ord v Upton) and that it was an abuse of process for Mr Hayes to pursue the claim himself.

Issues framed:

• whether a claim under the Protection from Harassment Act 1997 that includes financial loss can be a hybrid cause of action that vests in a trustee in bankruptcy;
• how to treat a course of conduct under section 1(1) of the 1997 Act that began before and continued after the date of bankruptcy (whether it is a single cause of action or gives rise to separate causes of action); and
• whether, on the material before the court, striking out the claim was appropriate as an abuse of process.

Reasoning and findings: The judge reviewed the statutory provisions of the 1997 Act (notably sections 1, 2, 3 and 7) and the insolvency provisions (sections 283, 306 and 436 of the Insolvency Act 1986), and applied the authorities on "personal" causes of action and hybrid claims. He accepted that an application for an injunction is technically a separate remedy and that the Official Receiver had previously indicated no objection to Mr Hayes seeking an injunction; accordingly an injunction claim was not challenged by the trustee. On damages the court accepted Ord v Upton establishes that where a single cause of action gives rise both to personal heads of damage and to proprietary or financial heads, the cause of action is generally indivisible and vests in the trustee, with any personal element held on trust for the bankrupt. Crucially, the court held that a course of conduct in breach of section 1(1) which continues after bankruptcy and causes fresh loss gives rise to a fresh cause of action for losses arising after bankruptcy; such post‑bankruptcy causes of action remain vested in the bankrupt and do not automatically vest in the trustee. The judge therefore rejected the submission that the whole damages claim vested in Mr Grant and that strike out was justified.

Other findings: The court noted extensive procedural history including several prior unsuccessful strike‑out applications and orders (including a 2007 order striking out a then unpleaded claim for special damages and various refusals to strike out). The judge rejected arguments that Mr Hayes had acted abusively in bringing proceedings, that merger in judgment would prejudice the trustee, or that failure to inform the Official Receiver justified strike out. The judge observed that Mr Grant had been funded and indemnified by Mrs Hayes for these proceedings but declined to infer improper motive, and said that if Mr Grant wished to pursue any proprietary claim he remained free to start or prosecute proceedings himself.

Disposition: The trustee's application to strike out was dismissed and the case was to be re‑transferred to the county court for trial on liability.

The application by the trustee in bankruptcy to strike out the claim was dismissed. The judge held that (1) damages for harassment can be hybrid: purely personal heads (anxiety, distress, injury) do not vest in a trustee but financial loss can render a claim proprietary and vested in the trustee under Ord v Upton; (2) where a course of conduct straddles bankruptcy, acts and loss that occurred before bankruptcy may vest in the trustee but each post‑bankruptcy wrongful act that causes fresh loss gives rise to a fresh cause of action that remains with the bankrupt; and (3) on the material before the court it was not appropriate to strike out the claim as an abuse of process.