[CHANCERY DIVISION]

In re GILMARTIN (A BANKRUPT)

Bankruptcy - Appellate court - Single judge, appeal to - Appeal from bankruptcy registrar to single High Court judge - Whether re-hearing de novo or true appeal - Insolvency Rules 1986 (S.I. 1986 No. 1925), r. 7.48(2)

An appeal under rule 7.48(2) of the Insolvency Rules 1986¹ from a county court or from a registrar of the High Court to a single judge of the High Court was a true appeal, and not a complete re-hearing de novo.

Where, therefore, the debtor appealed against a bankruptcy order made against him by the bankruptcy registrar on the ground that the registrar had erred in law in concluding that the petitioner and supporting creditors had unreasonably refused an offer made by the debtor within section 271(3) of the Insolvency Act 1986: -

Held, dismissing the appeal, that in deciding that there were no prospects of the debt being repaid within a reasonable time the registrar had neither erred in law nor in principle in the exercise of his discretion and that accordingly his decision must stand (post, pp. 515E - 516D, G-H).

Rolls Razor (No. 2), In re [1970] Ch. 576 distinguished.

The following cases are referred to in the judgment:

Debtor (No. 59 of 1987), In re A (unreported), 25 January 1988, Knox J.

Evans v. Bartlam [1937] A.C. 473, H.L.(E.)

Ladd v. Marshall [1954] 1 W.L.R. 1489; [1954] 3 All E.R. 745, C.A.

Rolls Razor Ltd. (No. 2), In re [1970] Ch. 576; [1970] 2 W.L.R. 100; [1969] 3 All E.R. 1386

The following additional cases were cited in argument:

Cooper v. Cooper (1936) W.N. 205

A Debtor, In re A (1920) 5 B. & C.R. 1

Debtor (No. 452 of 1948), In re A [1949] 1 All E.R. 652, C.A.

Field (A Debtor), In re [1978] Ch. 371; [1977] 3 W.L.R. 937; [1978] 2 All E.R. 981, D.C.

APPEAL from Mr. Registrar Dewhurst.

On 6 July 1988 Mr. Registrar Dewhurst made a bankruptcy order against the debtor, Patrick Joseph Gilmartin, of and carrying on business at 123, Sydney Street, Chelsea, London SW3 6NR, investment and insurance consultant, on the application of the petitioning creditor, International Agency and Supply Ltd. of 31, Southampton Row, London WC1 5HJ.

By a notice of appeal dated 19 July 1988 the debtor sought an order for the bankruptcy order to be set aside on the ground, inter alia, that the registrar erred in law in concluding that there was no unreasonable refusal by the petitioner and supporting creditors within section 271(3) of the Insolvency Act 1986.

The facts are stated in the judgment.

1 Insolvency Rules 1986, r. 7.48(2): "In the case of an order made by a county court or by a registrar of the High Court, the appeal lies to a single judge of the High Court; and an appeal from a decision of that judge on such an appeal lies, with the leave of that judge or the Court of Appeal, to the Court of Appeal."

Edward Evans-Lombe Q.C. and Barry Stancombe for the debtor.

Martin Keenan for the petitioner.

HARMAN J. I have before me an appeal against the decision of Mr. Registrar Dewhurst given on 6 July 1988 when he made a bankruptcy order against the appellant debtor, Patrick Joseph Gilmartin. The grounds of the appeal were that the registrar had erred in law in concluding that there was no unreasonable refusal by the petitioner and supporting creditors within section 271(3) of the Insolvency Act 1986.

The appeal was opened to me on the basis that there was to be a complete re-hearing of the matter without regard to the decision of the registrar. I expressed doubt about that and the matter was rather intermittently argued as to the nature of an appeal against the making of a bankruptcy order under the new Insolvency Rules 1986. Such an appeal by rule 7.48(2) lies from a registrar to a single judge of the High Court. That rule also applies to appeals from orders made by a county court, that is either by a circuit judge or by a registrar of the county court, on bankruptcy petitions. The rule is immediately following and closely analogous to rule 7.47 which provides for appeals in the exercise of the winding up jurisdiction over companies. Both in winding up and in bankruptcy, appeals from a county court or a registrar of the High Court lie to a single judge of the High Court. These rules were made pursuant to section 375 of the Insolvency Act 1986 itself and they replace the old proceedings in bankruptcy whereby appeals from county courts, whether the decision was of the registrar or judge, went to a Divisional Court of the Chancery Division with two judges sitting together and appeals from the bankruptcy registrars in the High Court went direct to the Court of Appeal.

The question raised was very neatly expressed by Mr. Keenan for the creditors in this matter as being whether the alteration had merely been an alteration as to the tribunal which heard the appeal or whether it had been an alteration as to the nature of the appeal. Mr. Evans-Lombe for the debtor has submitted that as on appeal from masters to a High Court judge, whether in the Queen's Bench Division or in the Chancery Division, the judge has the whole jurisdiction, hears the matter entirely de novo and concludes by exercising his own discretion without regard to the discretion exercised below, so here the registrar of the High Court was in an equivalent position to a master of the High Court. He pointed out, correctly, that in the Queen's Bench Division the qualifications for the office of master are much the same as the qualifications for the registrar in bankruptcy or companies registrar. That fact supported the conclusion that the judge was to hear the matter wholly de novo as he would an appeal from a master and to proceed to exercise his own discretion.

Mr. Keenan observed that the old forms of appeal in these matters were what one would call true appeals, that is that the decision below stood unless the appellate tribunal was persuaded it was wrong, and in so far as the decision was discretionary it could only be upset either for error of law or by the appellate court, whether the Divisional Court in Chancery or the Court of Appeal, being satisfied that the tribunal below had wholly misconceived the matter or wholly failed to exercise a proper discretion. Such tests are of course substantially more severe than a matter of simply the exercise of the court's own discretion. The true appeal can lead to the court saying, well we would not have exercised

our discretion in the same manner but the proper matters were taken into account, no error of principle or law can be seen and therefore we cannot and should not upset the decision below.

Mr. Evans-Lombe pressed me with such decisions as that of Megarry J. in In re Rolls Razor Ltd. (No. 2) [1970] Ch. 576 and particularly the passages of the judgment at p. 591. As one would expect from that extremely learned judge the judgment is exhaustive and deals in great detail with every possible view of the matter. Megarry J. in his judgment referred, at p. 590, to the decision in Evans v. Bartlam [1937] A.C. 473 which established that the appeal in Queen's Bench chambers to the judge in chambers is one where the judge in chambers has the discretion and the master's discretion is, as it were, ignored. The judge went on to consider the position in Chancery and the history of the Chancery masters and further considered the position under a footnote reference to Practice Note [1905] W.N. 128. He referred to various other matters and then observed, at p. 591, that in his view the difference in machinery between the Chancery and the Queen's Bench and, as it then was, Probate, Divorce and Admiralty divisions was not something that affected the matter and observed, at p. 590:

"what is made is an order of the High Court; and in that court the judge and the registrar both hold office. A litigant who moves from one to the other remains within the court. He is not moving to a different court, as he would be if he went to the Court of Appeal. What the order of the High Court is to be in any case is to be determined by the officer of the court who exercises the jurisdiction of the court. If the matter stays with the registrar, he is that officer; if it is brought before the judge, it is he; and if it is the judge, then it should be his discretion."

Those observations I should treat with great care and weight because they are the observations of a judge of great learning in the history of the courts and the procedures of the courts. However, I have come to the conclusion that they are not applicable today in the new situation created by the Insolvency Act 1986. Here one has, contrary to those points which Megarry J. made in In re Rolls Razor Ltd. (No. 2) [1970] Ch. 576, appeals to the single judge of the High Court from both the county court, a completely different court, and the registrar, either the companies registrar in a winding up or the bankruptcy registrar in bankruptcy matters. In bankruptcy both are substitutes for procedures that were from different courts to a different court - in the old days from the county court to the Divisional Court in Chancery or from the bankruptcy registrar to the Court of Appeal. The combination nowadays in the single High Court judge of jurisdiction to hear appeals from a different court and from an officer of his own court in a very closely related matter persuade me that I should look more carefully at the matter than to simply say, what is the court that is deciding it?

There cannot in my view be different bases of approach for bankruptcy appeals from county courts to the single judge from the bases of approach applicable to appeals from bankruptcy registrars to the single judge, or I would add though it is not directly before me, from the companies registrar in winding up to the single judge. Further, I notice that the whole of this new machinery has been designed to make the single judge the determining judge for these matters since any appeal from him lies only with his leave or perhaps the leave of the

Court of Appeal. That introduces a limitation upon appeals and that in my view makes it the more likely that the appeal to the single judge is to be a true appeal, trying to consider whether the jurisdiction below has been properly exercised rather than a complete hearing de novo which would in effect mean there would be but one hearing and without leave there would be no appeal in the true sense at all.

I also bear in mind the observations of Knox J. reported only, so far as I am aware, as a note in "The Independent", of 1 February 1988, in a matter called In re A Debtor (No. 59 of 1987) decided on 25 January 1988. There Knox J. decided that a bankruptcy appeal to the single judge, in that case from a county court registrar, was a true appeal. It followed that evidence on the appeal could only be admitted on what are commonly called Ladd v. Marshall [1954] 1 W.L.R. 1489 grounds. Those grounds are that on appeal the only proper evidence is the evidence below and that special reasons have to be shown to justify the admission of fresh evidence.

That is quite unlike an appeal by way of complete rehearing. That decision to my mind supports the proposition that this is a true appeal and accords with my own impression of the whole matter. I therefore conclude that it is for the appellant to show in these appeals that the bankruptcy registrar or county court judge (or in winding up the companies registrar) has erred in principle or erred in law in the way in which he has applied or exercised his discretion. Having so said I consider Mr. Registrar Dewhurst's decision and I find that his quite short judgment held that there was a series of offers - Mr. Keenan for the petitioner before me analysed them as being six different offers - over a period during which the bankruptcy petition was before the court on six different occasions between April and July 1988; that the circumstances were such that the offer which was before the court was one which required 40 months for the debt which was claimed in the bankruptcy petition to be settled; that the security offered had been agreed in principle and according to the debtor was to be executed by him but no steps whatever had been taken by the debtor to prepare and execute and tender the securities which he said he was willing to offer; and that the whole conduct of the debtor was one which the registrar thought, and for my part I would have come to the same conclusion but anyhow it cannot be said he erred in so thinking, showed a course of conduct of constantly postponing the evil day. The registrar observed that a petitioning creditor is entitled to be paid his debt in full on the hearing of a petition unless it is adjourned on the ground that there is a reasonable prospect of him being paid within a reasonable time. In the circumstances of this case I think he was correct to take that as the basic test and to say that the prospects of the debt being paid within a reasonable time were not such as anybody could say were reasonable prospects.

I therefore conclude that there is no error of law nor one of principle in the exercise of the discretion which the registrar had and I for my own part would have come to precisely the same conclusion. For those reasons I shall dismiss the appeal.

Solicitors: Jon Snelling & Co; Rayner de Wolfe.

[Reported by IAN SAXTON, ESQ., Barrister-at-Law]