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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 >> McKinnon v Graham  EWHC 2870 (Ch) (20 September 2013)
Cite as:  EWHC 2870 (Ch)
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NEWCASTLE UPON TYNE DISTRICT REGISTRY
Newcastle Upon Tyne
B e f o r e :
sitting as a Judge of the High Court in Newcastle Upon Tyne
| DONALD McKINNON
(Trustee in Bankruptcy of Richard David Graham)
|- and -
|RICHARD DAVID GRAHAM
The Applicant did not appear and was not represented
Hearing date: 20 September 2013
Crown Copyright ©
2. The facts
3. The issue
Family home means any property in which at the relevant date the debtor had (whether alone or in common with any other person) a right or interest being property which was occupied at that date as a residence by the debtor and his spouse or civil partner or the debtor's spouse or former spouse or civil partner (in any case with or without a child of the family) or by the debtor with the child of the family.
4. Section 426 of the 1986 Act.
426: Co-operation between courts exercising jurisdiction in relation to insolvency
4. Assistance between courts The courts having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in any other part of the United Kingdom or any relevant country or territory.
5. Request under s.426(4) For the purposes of subsection (4) a request made to a court in any part of the United Kingdom by a court in any other part of the United Kingdom or in a relevant country or territory is authority for the court to which the request is made to apply, in relation to any matters specified in the request, the insolvency law which is applicable by either court in relation to comparable matters falling within its jurisdiction. In exercising its discretion under this subsection, a court shall have regard in particular to the rules of private international law.
6. Claim by trustee or assignee Where a person who is a trustee or assignee under the insolvency law of any part of the United Kingdom claims property situated in any other part of the United Kingdom (whether by virtue of an order under subsection (3) or otherwise), the submission of that claim to the court exercising jurisdiction in relation to insolvency law in that other part shall be treated in the same manner as a request made by a court for the purpose of subsection (4).
1. The English courts are required to assist the Scottish courts.
2. The English court has discretion whether to apply Scottish or English law in relation to the request. However it has to have regard to the principles of private international law.
3. The claim by the (Scottish) Trustee to property in England has (under subsection (6)) to be treated by the English Court in the same way as a request under subsection (4).
5. The proceedings before D J Pescod
5.1 The Trustee's submissions before D J Pescod
1. That as the property was vested in the Trustee by the provisions of Scottish law the Trustee should only be divested in accordance with Scottish law.
2. He referred to a passage in Dicey, Collins and Morris, Conflict of Laws (15th Ed paragraph 31-034. In the case of an English trustee making a claim to Scottish property Dicey suggests that a Scottish court should, albeit in its discretion be able to give effect to that claim applying English law under s 426(6).
3. He drew attention to a number of authorities where a trustee's title under one part of the UK to property situated in another part of the UK is recognised in that other jurisdiction.
4. He relied on the principle of modified universalism. Under this principle the courts apply principles of international comity without requiring statutory underpinning. He referred me to the decision of the House of Lords in McMahon v McGrath  3 AER 869 as explained in Rubin v Eurofinance  2 BCLC 682. He referred to paragraph 51 of the speech of Lord Collins where he said:
Lord Hoffmann characterised the principle of universality as a principle of English private international law that, wherever possible there should be a unitary insolvency proceeding in the courts of the insolvent's domicile which receives worldwide recognition and which should apply universally to all the bankrupt's assets.
5.2 Mr Graham's submissions before D J Pescod
5.3 The judgment of D J Pescod
Reasons for not implementing the principle of modified universalism and for not applying foreign law to the administration of property in England … would appear to fall into 2 categories:
i. Something that is manifestly unfair or which offends against insolvency proceedings already taking place in England or against the general principle underlying insolvency law of fair distribution of assets amongst creditors.
ii. Something that is otherwise against public policy.
6. Mr Graham's submissions on the appeal.
Parliament legislated to correct injustice. Parliament legislated to not discriminate against the vulnerable, elderly or individual living in their family home. This can only be for reasons of public policy and to prevent injustice and as such must satisfy those tests set out in paragraph 32 of [McMahon v McGrath].
He also submitted that the principles in McMahon v McGrath did not apply to personal insolvencies. He pointed out that McMahon v McGrath involved a commercial liquidation.
7. Discussion and Conclusion
1. As noted above under section 426(5) D J Pescod had discretion as to whether to apply English or Scottish law having regard to the principles of private international law. An appellate court will only interfere with that discretion on well known grounds such as if it is based on an error of law or if it is a decision that no reasonable tribunal could have reached.
2. D J Pescod analysed the relevant law with considerable care. He correctly concluded that the principle of modified universalism required him to apply Scottish law unless the case fell within one of the exceptions he set out in paragraph 32 of his judgment. In my judgment D J Pescod adopted the correct approach. In particular I do not think that the principles of modified universalism apply only to commercial insolvencies. There is no reason why it should not apply to personal insolvencies and there is nothing in the judgments which suggest it is so limited.
3. In my view D J Pescod was right to conclude that the difference between the Scottish and English law did not offend a fundamental principle of English insolvency law or offend any public policy. Equally it did not give rise to manifest unfairness. The purpose of the legislation was to provide some limited protection to the bankrupt or his family in relation to his home in cases where the trustee had taken no action to enforce his rights for 3 years. The fact that Scottish law chose to do this by reference to "the family home" rather than the English law reference to "the sole or principal residence of the bankrupt, the bankrupt's spouse or civil partner or a former spouse or civil partner of the bankrupt" does not seem to me to come within a measurable distance of offending public policy or a fundamental principle of English insolvency law. As I have indicated the only difference between the 2 sections are the rights afforded to the bankrupt where he alone occupies the family home. Both jurisdictions provide protection where there is occupation by a spouse, civil partner or children. To my mind this difference is not fundamental to English insolvency law, nor does it offend public policy or create manifest unfairness.
4. It follows that this was not an exceptional case so as to exclude the principle of modified universalism and D J Pescod's decision to apply Scottish law is not open to criticism.
5. I also agree with D J Pescod that delay of itself by the trustee adds nothing to the debate. It is because of the delay that the question of revesting arises. If there had been no delay there is no doubt that the property would have vested in the Trustee and there would have been no defence to the possession proceedings. Thus the question is whether the Scottish law's provision for limited relief where such delay occurs offends public policy or a fundamental principle of English insolvency law. For reasons given above it does not.
6. Similarly I agree that the Human Rights Act does not assist Mr Graham.