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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Hayes v Hayes [2017] EWHC 2806 (Ch) (18 October 2017) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2017/2806.html Cite as: [2017] EWHC 2806 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Rolls Building
		18th October 2017

MR JUSTICE MORGAN:

1. This is an appeal by Carol Linda Hayes against an order made by Deputy District Judge Wright, sitting in the County Court at Luton, on 17^th January 2017. By her order, the Deputy District Judge dismissed an application by Mrs Hayes to set aside a statutory demand which had been served upon her by her former husband, Mr Timothy Hayes.
2. This statutory demand has been served following a very long history of litigation between these parties. The history of that litigation has been recited in a number of other judgments because the litigation has continued for a lengthy period, and has resulted in very many, some would say too many, court appearances. I will refrain from making any comment on the conduct of either party. Their conduct has no bearing whatever on the matters which fall to be decided on this appeal. I will concentrate on the relatively few points that are material for the purpose of my decision.
3. The statutory demand recited the particulars of the debt on which it was based. The debt in question was the aggregate of various debts pursuant to a number of court orders. I will refer in a moment to the individual court orders. The amount which is said to be due pursuant to those court orders total some £15,085.38. The statutory demand also claims interest at 8%, which I assume uses the rate under the Judgments Act 1838. Although I have not had separate argument or explanation in relation to that part of the debt claimed in the statutory demand, I will focus on the principal amount and put the question of interest to one side.
4. The first order which created a liability to pay costs was an order dated 3^rd December 2007, made by District Judge Carr sitting in the Watford County Court. That was made in a case with claim number 6CB00392. I have been shown the pleadings in that case, and in that case Mr Hayes sought damages for alleged harassment on the part of his former wife, Mrs Hayes, and Mr Butters.
5. The order made by the District Judge is a lengthy order dealing with a large number of matters, but the part that is relevant for present purposes is para. 12.2 which reads:

"The defendants [that is, as I understand it, Mrs Hayes and Mr Butters] shall pay the costs of the application for security for costs dated 9^th June 2006, assessed summarily at £605.36. The defendants shall pay the costs of the claimant's application for an unless order dated 11^th August 2006, assessed summarily at £756.84."

6. The second order referred to in the statutory demand was an order made by District Judge Carr on 18^th November 2008. It was made in the same proceedings as I have earlier described. Again, the order dealt with a large number of matters, and in para. 10 the District Judge ordered:

"The defendant [I take it that is the defendants] to pay the costs of an application for relief from sanctions, assessed summarily at £6,422.24.

7. The third court order referred to in the statutory demand is an order made in the same proceedings in the Watford County Court, this time by His Honour Judge Wright on 19^th June 2009. Again, the Judge has already dealt with a number of matters, but at para. 6 of the order the Judge ordered that:

"The defendants [that is Mrs Hayes and Mr Butters] do pay the claimant's costs of the appeal, assessed in a sum which together with VAT amounted to £3,047.50".

8. The fourth order referred to in the statutory demand was in different proceedings. These were proceedings in the County Court at Cambridge, brought by Mr Hayes against various defendants. The principal defendant was Mr Willoughby, but according to the order, Mr Butters and Mrs Hayes were either third parties or were the second defendant. The order was made by His Honour Judge Moloney QC on 20^th September 2015. Paragraph 1 of the order stated that the application by Mr Butters and Mrs Hayes, dated 6^th August 2015, was dismissed as totally without merit. Paragraph 3 of that order was to the effect that Mr Butters and Mrs Hayes should pay the claimant's costs of the application, summarily assessed at £1,000.
9. The fifth and final order referred to in the statutory demand was an order made by Mr Justice Butterfield, sitting in the Queen's Bench Division on appeal from the Cambridge County Court. This order was made in a claim where an application had been made for an extended civil restraint order against Mr Hayes. Mr Hayes appealed against the making of that order and his appeal was successful. The extended civil restraint order was set aside. Mr Justice Butterfield ordered Mrs Hayes and Mr Butters to pay 50% of the costs of the hearing before the Judge in the County Court, and they were summarily assessed in the sum of £3,253.44.
10. Those orders have been made. They have been accurately described in the statutory demand. The total I have stated. For the purposes of the appeal today, and I will describe what are the issues in the appeal in a moment, I proceed on the basis that the sums which were ordered have gone unpaid. The orders have not been set aside so they remain enforceable and have not been complied with.
11. When Mrs Hayes received the statutory demand, she applied to set it aside. She put forward various grounds and put in a witness statement which went in detail into the history of the underlying litigation. That application to set aside the statutory demand came before Deputy District Judge Wright on 17^th January 2017. Mrs Hayes appeared in person, assisted by Mr Butters, and counsel appeared for Mr Hayes.
12. I have a transcript of the judgment given by the Deputy District Judge. Not very much turns today on the detailed reasons given by the Deputy District Judge. She considered a large number of points. There were arguments that the debts were not due because some of them had been paid. There were arguments that Mrs Hayes was herself the beneficiary of a large numbers of orders for costs payable by Mr Hayes, and these were to be set off against the orders for costs to which I have referred. Mrs Hayes also relied upon the existence of a counterclaim which was considered by the Deputy District Judge. All of those points are considered by the Deputy District Judge, and her conclusion is that the application to set aside the statutory demand should be dismissed.
13. Mrs Hayes sought permission to appeal against the dismissal of her application to set aside the statutory demand. Orders were made providing for an oral hearing of her application for permission to appeal. In particular, on 6^th March 2017 Mr Justice Norris directed that the application for permission to appeal, and other applications, would be heard in court.
14. Her application for permission to appeal came before Mr Justice Birss on 24^th May 2017. I have been given a slightly unusual document which is a transcript of the hearing before Mr Justice Birss; it is unusual in that it does not appear to be complete. The transcript, as shown to me, starts with the Judge asking Mr Hayes, in other words not the appellant, what Mr Hayes would like to say. Mr Hayes was in person on that occasion, as was Mrs Hayes.
15. The transcript continues with exchanges between the Judge and Mr Hayes, and the transcript ends with Mr Justice Birss thanking Mr Hayes for his contribution, but it does not record what was said by Mrs Hayes and it does not identify any reasoning why this was a proper case for permission to appeal.
16. What I do have, however, and this is essentially the agenda for today's hearing, is a written order made by Mr Justice Birss on the day of the oral hearing. I need to read out a large part of that order. By para. 1 of the order, the judge ordered that:

"Mrs Hayes should have permission to appeal on the question of the effect, if any, of the settlement between her and the trustee in bankruptcy of Mr Hayes on the costs orders made in case number 6CB00392, which form the bulk of the costs orders, the subject of the statutory demand dated 15^th March 2016."

17. By para. 2 of the order, the judge ordered that:

"The permission granted in para. 1 did not extend to arguing that the judgment of Mr Justice Nugee [2014] EWHC 4557 (Ch) was wrong. It is permission to argue that even on the basis of that judgment, the subsequent settlement means that Mr Hayes cannot claim those costs against Mrs Hayes as a result of the settlement itself, and/or having regard to the fact that the relevant costs orders were made in the proceedings before amendments made to the particulars of claim in 2011."

18. By para. 3 of his order, Mr Justice Birss refused permission to appeal on all other grounds. By para. 6 of his order, he said that:

"Pending the hearing of the appeal or further order in the meantime, the statutory demand would be stayed, as would be a bankruptcy petition dated 17^th May 2017."

That had obviously been presented following the refusal of the Deputy District Judge to set aside the statutory demand.

19. In accordance with Mr Justice Birss' order I will have regard to the matters on which permission to appeal has been granted, but nothing else is before the court by way of challenge to the decision of the Deputy District Judge to refuse to set aside the statutory demand.
20. The grant of permission to appeal refers to a number of matters to which my attention has been drawn in the evidence and in the submissions. First, there is the judgment of Mr Justice Nugee which is reported as Hayes v Butters [2015] Ch.495. It is not necessary, for the purpose of this judgment, to describe the issue which was before Mr Justice Nugee, his analysis in relation to that issue and the result in that respect. The position is quite clear. There can be no dispute before me as to the correctness of the judge's decision.
21. Indeed, there was an application made to the Court of Appeal for permission to appeal against the decision of Mr Justice Nugee. I have a transcript of two judgments, one given by Lord Justice Lewison and the other given by Lord Justice Moore-Bick. Those two Lords Justices comprised the court which dealt with the application for permission to appeal against the decision of Mr Justice Nugee. Again, it is not necessary for me to recite from the judgments which refer to the history of the litigation and the analysis.
22. What does matter is that Mr Hayes was adjudicated bankrupt in March 2005 and he was discharged from his bankruptcy in March 2006, or possibly, there is for some reason a dispute about it, 1^st April 2006. I draw attention to the fact that his discharge from bankruptcy occurred prior to any one of the orders for costs that have been relied on in the statutory demand.
23. The other matter which I need to refer to is an agreement which was made resulting in a consent order in certain proceedings in the County Court at Slough. The parties to the agreement in question were a Mr Grant, who was trustee in bankruptcy of Mr Hayes on the one hand, and three defendants on the other, the three defendants being Mr Butters, Mrs Hayes, and Mr Willoughby. The important thing about that agreement is that Mr Hayes is not a party to it, so on the face of it, this agreement will not have had an effect upon orders for costs made in Mr Hayes' favour. It would be for Mr Hayes to bargain away, if he wished to, the benefit of those orders for costs, but this bargain, this agreement, did not directly involve Mr Hayes as a party.
24. The agreement is a detailed one and I need not refer to everything that appears in it. The agreement recites four harassment claims. The first is the claim brought by Mr Hayes in November 2005, at a time when he had been adjudicated bankrupt and before his discharge. That was a claim for damages for harassment against Mrs Hayes and Mr Butters. The second harassment claim was against Mr Willoughby. The relevance of that is that one of the costs orders, the subject of the statutory demand, was made in the proceedings against Mr Willoughby. Those two claims were brought by Mr Hayes as claimant. The agreement recites a third and a fourth harassment claim being brought by Mr Grant. Mr Grant brought a claim against Mr Butters and Mrs Hayes, and he brought another claim against Mr Willoughby. The reasoning behind Mr Grant bringing those claims is all tied up with Mr Justice Nugee's analysis as to which claims vested in Mr Grant, as trustee in bankruptcy of Mr Hayes, and which did not.
25. The agreement goes on by referring to a notice served by the trustee on Mr Hayes under s.307 of the Insolvency Act 1986. Under that section, subject to certain qualifications and limitations, a trustee may by notice in writing claim from the bankrupt's estate any property which has been acquired by or has devolved upon the bankrupt since the commencement of the bankruptcy.
26. The extent of the after-acquired property claimed by the s.307 notice is described in Recital 13 to the agreement, but Mrs Hayes also showed me that it was described in a pleading in another place, and taking the matter from the pleading what appears to be the situation is that as a result of Mr Justice Nugee's ruling, the cause of action for alleged harassment by Mrs Hayes and Mr Butters prior to the commencement of the bankruptcy vested in the trustee, and by the s.307 notice, the trustee claimed as after-acquired property damages for financial loss in respect of the period of Mr Hayes' bankruptcy until his discharge from bankruptcy on the date which was given, 1^st April 2006. On that basis, the s.307 notice did not claim as after-acquired property, the benefit of the costs orders which were the subject of the statutory demand. So those costs orders did not vest in the trustee and they were not claimed as after acquired property. I am not saying whether they could have been claimed, but they were not claimed under s.307. They therefore remained with Mr Hayes.
27. The agreement goes on by identifying something called the 'Hayes damages', see Recital 14. The Hayes damages were described as damages recovered by Mr Grant for personal loss suffered at any time, or for certain financial losses suffered, as will be held by Mr Grant on trust for Mr Hayes. Without explaining the point in any detail, the concept of the trustee holding damages which are recovered, on trust for the bankrupt, is explained in Hayes v Butters.
28. Then the agreement contains operative terms, and the principal matter I need to refer to is that the trustee in bankruptcy was going to sell the claims that he had to a bidder. The bidders could include Mrs Hayes but could also include Mr Hayes. The agreement set a reserve price. The reserve price for financial losses prior to 2^nd April 2006 was to be £32,000, and the reserve price for the Hayes damages as defined earlier was to be £34,000. That is effectively what matters in the settlement agreement.
29. What Mrs Hayes tells me is that she bid for the two matters, the subject of the reserve prices. She appears to have bid the reserve price in each case. I take it from her that she paid £66,000 for Component A and Component B. She therefore paid £34,000 for the Hayes damages and the agreement operated on the basis that the trustee held the £34,000 on trust for Mr Hayes. Although I do not know, I will assume that the £34,000 was paid to Mr Hayes for those damages, but that £34,000 is not a payment in relation to the orders for costs which had been made and which are the subject of the statutory demand. It cannot have been. The trustee in bankruptcy was not in a position to sell the benefit of the orders for costs because they never vested in the trustee. Secondly, the wording of the settlement agreement is quite clear that what is being sold and what is being settled is the damages claim for personal losses. The costs orders are outwith these terms.
30. The effect of all of that is that orders for costs have been made, a settlement has been reached in relation to the trustee's claims, including the claims which the trustee holds on trust for the bankrupt or former bankrupt, Mr Hayes, but none of that has touched in any way the continued entitlement of Mr Hayes to enforce the costs orders in his favour. Those costs orders have remained vested in Mr Hayes. Nothing that has happened has transferred those cost orders to the trustee or anyone else. I have explained how it is that s.307 of the Insolvency Act 1986 did not have that effect.
31. If I then address myself to the ground of appeal which is before me, I am asked to consider the effect of the settlement on the costs orders. I am asked to consider whether the settlement means that Mr Hayes cannot claim those costs, whether as a result of the settlement itself or another matter. My conclusion is that the costs orders remain vested in Mr Hayes and have not been affected by anything that has subsequently happened, either in the terms of the settlement or in the implementation of the settlement.
32. The second matter that appears to be a ground of appeal in pursuance of Mr Justice Birss' order is whether the fact that the relevant costs orders were made in various proceedings before amendments were made to the particulars of claim in 2011 affects the matter. The short answer is that the orders which were made, and which have not been set aside, continue to be effective and enforceable; the fact that the pleadings are amended does not detract from that fact; the fact, if it is a fact, that the un-amended pleading might have failed, and it is only the amended pleading that might succeed, does not detract from the fact that the orders were made and remain effective. That is unquestionably the position. It is even more clearly the position when one considers that the orders for costs which were made did not turn upon the underlying merits of who was right and who was wrong in the claim, but they turn upon the interlocutory steps which had been taken and which, in the case of Mrs Hayes, had failed, resulting in an order for costs against her. So, there is nothing in the amendment point which has any relevance to today's issue.
33. I have reflected on whether this reasoning is correct. On my reasoning, there was no prospect of success in this appeal, but yet, Mr Justice Birss gave permission to appeal. I have therefore hesitated before giving effect to my own reasoning, but having hesitated, I can see no step in the reasoning which is inappropriate or should be altered. I also say that the permission to appeal appears to have been only about the costs orders made in the harassment proceedings brought by Mr Hayes against Mrs Hayes, whereas, according to the statutory demand, there are substantial sums due in relation to the order made in the proceedings against Mr Willoughby and the order made in the proceedings seeking an extended civil restraint order. I have not been addressed on those matters independently, but I simply make that comment.
34. Having reached those conclusions, it follows in my judgment that the appeal must be dismissed.
35. I want to say something briefly about an order which was made by His Honour Judge Barker QC on 4^th October 2017. That was the date originally fixed for the hearing of this appeal. Mrs Hayes did not attend, she informed the court she was unwell. His Honour Judge Barker made an order which has not been put before me, but which required her to take some action, and if she did not take that action, the appeal would be dismissed by reason of her default. It seems to me that she did not comply with Judge Barker's order and Mr Sims, counsel for Mr Hayes, has invited me to decline to give Mrs Hayes relief from sanctions.
36. My reaction to that was that it was better for the appeal to be disposed of on its merits rather than on procedural grounds, so perhaps it was a matter of indulgence to Mrs Hayes, but I have dealt with the appeal and I have not put her to the trouble of making a formal application for relief from sanctions and justifying the grant of such relief. I will relieve her from sanctions. I will treat the appeal as effective and I will on its merits, or lack of merits, dismiss it.
__________________________

Transcribed by Opus 2 International Ltd. (Incorporating Beverley F. Nunnery & Co.) Official Court Reporters and Audio Transcribers 5 New Street Square, London EC4A 3BF Tel: 020 7831 5627 Fax: 020 7831 7737 [email protected] __________ **This transcript has been approved by the Judge**