B e f o r e :
MR JUSTICE ROTH
||- and -
||THE OFFICIAL RECEIVER
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The Appellant appeared in person.
MR LEWIS appeared on behalf of the Respondent.
HTML VERSION OF JUDGMENT
Crown Copyright ©
Tuesday, 31 July 2012
MR JUSTICE ROTH:
- This judgment follows the oral hearing of an application for permission to appeal against the order of Chief Registrar Baister made on 13 December 2011 imposing a bankruptcy restriction order ("BRO") on the appellant, Mr Spencer Michael, for a period of 8 years. The matter has come on for oral hearing pursuant to my order of 23 May 2012. The hearing has been delayed through issues concerning the transcript, first, of the supplementary judgment of the Chief Registrar delivered on 13 December dealing with the duration of the order and, secondly, a request for a transcript of the hearing below (a matter to which I shall return).
- This is the later stage in long-running proceedings arising out of Mr Michael's bankruptcy. The bankruptcy order against him was made on 29 March 2007 on the petition of the judgment creditor presented, he told me, in late 2006. The Official Receiver estimated the deficiency in the bankruptcy at over £1.5 million. This is, therefore, a substantial personal bankruptcy.
- The events following the bankruptcy, in very brief summary, were as follows. On 28 June 2007, a trustee was appointed. On 8 February 2008, Registrar Derrett suspended the discharge period to 29 June 2008. On 13 June 2008, a BRO was applied for. On 6 July 2008, Registrar Derrett made an interim BRO. There were then delays while Mr Michael brought proceedings challenging the BRO provisions in Schedule 4A of the Insolvency Act 1986 Act and also the disqualification provisions in the Company Directors Disqualification Act 1986 ("the CDDA") under the Human Rights Act 1998. Those challenges were unsuccessful. On 17 February 2011, Registrar Jacques made a BRO. Mr Michael appealed, and on 10 August 2011 I set aside the BRO and ordered a rehearing. Mr Michael sought to appeal my order, but permission to appeal was denied on the papers by Patten LJ in the Court of Appeal. The rehearing therefore took place, which led to the Chief Registrar's imposition of a BRO, as I said, on 13 December 2011.
- It is also relevant to note that Mr Michael had been a director of seven limited companies, which were wound up on public interest petitions presented by the Secretary of State by order on 29 April 2009. There were, I believe, also other appeals that he brought in the bankruptcy proceedings which it is unnecessary to go into.
- Mr Michael appeared before me in person, as he has throughout, but it is right to say that he is no ordinary litigant in person. He served grounds of appeal comprising 295 paragraphs, many of which have sub-paragraphs and which stretch to 119 closely typed pages. He apologises at the outset of those grounds for their length, but says that is due to the number of issues that he wishes to raise. He then served a skeleton argument of 63 paragraphs. Both the grounds of appeal and the skeleton argument are replete with reference to statutory provisions, the Insolvency Rules and the Civil Procedure Rules, and to decided cases, including cases which are unreported. He presented the court below with two lever arch files of authorities and supplemented them in this court with a third file of authorities, to which he added some 20 further cases handed up at the outset of the appeal hearing. Those include unreported cases. In short, Mr Michael is an individual who, although not a lawyer, carries out extensive legal research and is not in the least inhibited in advancing legal arguments supported by copious references to decided cases and legislative provisions. Further, although my order directing this hearing said that it would be for half a day, I allowed Mr Michael to address the court for some 4½ hours and, therefore, the proceedings on his application lasted all day. He added brief submissions before I commenced delivery of this judgment today. He has therefore been afforded as a litigant in person very considerable leeway in advancing his arguments, which would never have been granted to a professional advocate.
Permission to appeal.
- As a preliminary point, Mr Michael submits that permission to appeal is not required for his appeal to this court. I told him at the outset that I regarded it as clear that permission to appeal is required under the rules. Those rules are set out clearly in the brief skeleton argument served by counsel for the respondent. They are the Insolvency Rules, rule 7.49A(1), coupled with the Insolvency Proceedings Practice Direction, paragraph 17.6. Undeterred by this, Mr Michael pursued the point, taking me to the case of Secretary of State for Trade and Industry v Paulin  EWHC 888 (Ch). There, the Vice-Chancellor held that permission to appeal was not required against a registrar's decision in CDDA proceedings, but it is clear from his judgment that this conclusion was based on paragraph 17.6 of the Practice Direction: Insolvency Proceedings 2000, which states in terms that a first appeal does not require the permission of any court see paragraph 16 of the judgment. That provision is no longer to be found in the practice direction, as it was in force when this appeal notice was filed (the 2007 Practice Direction); nor, for that matter, is it in the current Practice Direction of 2012. It has been replaced by the provision in paragraph 17.6 (to which counsel refers in his skeleton argument) and which states in terms as follows:
"A first appeal is subject to the permission requirement in CPR Part 52, rule 3."
Moreover, the principal provision in rule 7.49A was introduced in 2010, long after the judgment in Paulin and, of course, long before the Chief Registrar's judgment which Mr Michael is seeking to appeal. This is, therefore, a thoroughly bad point.
- Being an appeal and not a rehearing, the facts found by the court below are binding unless they can be said to be against the weight of the evidence. The court was entitled to draw any inferences from the facts, as is the appeal court, and the questions on appeal are whether those facts justified the decision to impose a BRO and whether its duration is excessive and then, as a separate matter, if the BRO is upheld at all, the exercise of the court's discretion as to costs. The judgment and order can also be challenged, of course, on grounds that they are wrong on the law.
- I turn, therefore, to the grounds of appeal which Mr Michael seeks to advance. In his Statement of Grounds he sets out seven grounds. They are numbered 1-6, but there are two grounds labelled "Ground 6" and so I shall refer to them as Ground 6A and 6B. Ground 6A concerns the duration of the BRO and ground 6B concerns costs. I shall therefore return to those at the end. Mr Michael realistically conceded that there is considerable overlap between the other five grounds, especially grounds 1 and 2, which are more wide-ranging, and then 3, 4 and 5 which relate to the three distinct allegations which were the basis of the application made by the respondent for the BRO.
- I hope Mr Michael will understand if, with all the detail and copious authorities that he has put before the court, I do not refer to every point that he has taken or every authority relied on. If I were to do so, this would be a very much longer judgment which it would have been impossible to deliver until after the long vacation. Mr Michael expressed the particular wish to avoid further delay in a decision in his case.
- One point in this case goes to the essence of a fair hearing. The Chief Registrar's decision was handed down on 13 December 2011 (as I have mentioned). It bears the date 2 December, but that is clearly an error. It followed a hearing held over three days on 3, 4 and 7 November. Thus, it is a reserved judgment. Mr Michael complains that the judge below frequently interrupted him in "an inconvenient, abrupt and aggressive manner" and that the judge was "hostile". He also says that in the course of the hearing the judge told him that he did not accept that Mr Michael was being honest. That, he says, has two consequences. First, it discloses bias on the part of the judge who, he submits, approached the application with a closed mind. Second, it caused Mr Michael "a distressing sense of panic", so that he was not able to put his case properly. Essentially, this submission amounts to saying that he was not being given a fair hearing before an independent tribunal, and indeed he relies on article 6 of the European Convention on Human Rights.
- Faced with that allegation, the respondent contended in his counsel's skeleton argument that it was necessary to have a transcript, and Mr Michael also sought an order for a transcript of the 3-day hearing at public expense. In the light of those applications, I ordered that initially a transcript should be provided of one of the three days, that day to be of Mr Michael's choosing. He made his choice, but it then emerged, after the request for the transcript was passed on, that the tape had not been running in court throughout the hearing. Unknown to the Chief Registrar, the staff, who were new to the Rolls Building, had not turned it on as required. Thus it emerged that there were no tape recordings of any hearings held in that hearing room before 9 November, after the move of the Bankruptcy Registrars to the Rolls Building on 16 October. That covers, of course, not just this particular case below but other cases as well. Obviously, that is unfortunate. But does it mean that it is impossible to determine this ground of appeal and that the order must therefore be set aside? I do not think so. The rule against bias is of course much older than the introduction of tape recordings of court hearings and, as I understand it, some court hearings, unlike judgments, are still not recorded. In any event, I told Mr Michael that I am prepared to proceed on the basis that there were many interruptions by the Chief Registrar and that he was told, at least once, that his answers in evidence were not regarded as honest. I should make clear that I cannot determine if that indeed was the case, but I shall accept, for the purpose of this appeal, that this occurred.
- The test for bias is clearly set out in the decisions of the House of Lords, and Mr Michael referred me to Lawal v Northern Spirit Ltd  UKHL 35, where the appellate committee followed the previous formulation of the House of Lords in Porter v Magill see in the judgment of Lawal at paragraph 14:
whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased."
The judgment in Lawal continues:
"Public perception of the possibility of unconscious bias is the key. It is unnecessary to delve into the characteristics to be attributed to the fair-minded and informed observer. What can confidently be said is that one is entitled to conclude that such an observer will adopt a balanced approach. This idea was succinctly expressed in Johnson v Johnson (2000) 200 CLR 488, 509, at para 53, by Kirby J when he stated that 'a reasonable member of the public is neither complacent nor unduly sensitive or suspicious.'"
The test is the same, as the House of Lords concluded, under the European Convention.
- The further authorities cited by Mr Michael in the course of the hearing (none of which, I believe, are to be found in his written submissions) do not really take this further. The case of El-Farargy v El-Farargy  EWCA (Civ) 1149 concerned apparently racist comments, or comments with racist overtones, made by the judge. There is no such suggestion here. The cases of Sengupta and London Borough of Ealing v Jan addressed the question whether the comments or position expressed by a judge at one hearing meant that it was not appropriate for him or her to be on the tribunal for a subsequent and distinct hearing. That is a very different issue from the issue in the present case. Closer to the present case is the criminal appeal in R v Lashley , where the judge demonstrated by frankly offensive comments his personal animosity to the defence counsel, and the Court of Appeal found that the judge's conduct was unfair. But each case is an example, on its own particular facts, of the application of the basic test as expressed in Lawal and Porter v Magill.
- In the present case, making the allowance I have to Mr Michael, I do not consider that the matters complained of, as they would be perceived by a fair-minded and informed observer, amount to unfairness to the extent to suggest a real possibility of bias. Some judges interrupt more than others and some litigants provoke more interruptions than others. The Chief Registrar refers expressly to the situation in his judgment at paragraphs 11 and 12. He says at paragraph 11:
"The respondent's written evidence is lengthy and frequently irrelevant, dealing with a range of issues that have no bearing on the allegations."
He then gives some examples. In paragraph 12 he says:
"The respondent [Mr Michael] took a similar approach to cross-examination. In spite of my pleas, he often sought to answer questions by going off on a tangent and dealing with something quite irrelevant. I pointed out to him at an early stage in his cross-examination that this would damage his credibility and that he should concentrate on giving short answer directed to the question which he could then amplify as he wished. Sometimes that worked and sometimes it did not. The position was further exacerbated by the respondent's tendency to try to deflect questions dealing with facts by giving answers in the form of legal propositions, and sometimes misunderstood. Furthermore, a number of the respondent's answer to straightforward questions were simply unsustainable or self-contradictory."
Having myself now heard Mr Michael on two occasions (the previous appeal against the order made by Registrar Jacques and the present application), I have to say that I can understand what the Chief Registrar was referring to. When in the course of a party giving evidence as a witness he does not answer the question asked, or he does not focus on the point at issue in making his submissions, it may be necessary to interrupt him to direct him to the relevant matter and to seek to ensure that he answers the question.
- The remark that I accept, for the purposes of this application, the Chief Registrar made that Mr Michael was dishonest or that the Chief Registrar could not believe him is of a different nature. Here, the Chief Registrar had to form a view as to whether to believe much of Mr Michael's evidence. That, it seems to me, is indisputable. Apparently, he chose to tell Mr Michael in the course of argument or evidence that, at least on a certain point, he did not believe him, instead of keeping silent and reserving this for his ultimate written judgment. However, for a judge to indicate in the course of argument his view of the evidence or of the credibility of a witness does not amount to a lack of a fair trial. Although it may be distressing to a witness or a party to tell them that the judge considers they are being dishonest, it is not impermissible. Indeed, it can sometimes be helpful for a judge to indicate his or her thinking so that submissions can be made accordingly to try to change it. Here, in applying the test, I think it is very relevant that the Chief Registrar did accept Mr Michael's points in a number of respects. Hence, in paragraph 31 of his judgment he accepts Mr Michael's point that it was not necessary for him to keep records in relation to clients and their money. In paragraph 76, he accepts Mr Michael's argument that it is not permissible for the Official Referee, through his counsel, to introduce in evidence the allegation of concealment. Previously, in paragraph 72 he accepts Mr Michael's statement that he did not receive a copy of the bankruptcy order after it was made.
- As to the other alleged consequence of the Chief Registrar's conduct of the hearing, i.e. that Mr Michael felt intimidated, I can only say that, having heard him at length on two occasions, and although he is a litigant in person, I have found him to be an extremely articulate and confident individual who is, certainly by the stage of the hearing before the Chief Registrar, very experienced in litigation. I do not accept that he would have been intimidated in putting forward his case. Accordingly, I dismiss this ground of the application.
- Secondly, under the head of procedural impropriety, Mr Michael complains of corrections that the Chief Registrar made to the draft judgment that had been sent out to the parties. That is, of course, a quite separate matter from the conduct of the hearing. What happened, as I understand it, is that the Chief Registrar sent out his judgment in draft sometime before 2 December with a request for comments by 4.30 on 2 December and "any list of typing corrections and other obvious errors". Mr Michael submitted some minor corrections himself, and the respondent's counsel sent a return on 2 December by email. A copy of that email is before the court. Mr Lewis said at the end:
"I will ask my instructing solicitors to send a copy of this email to the respondent."
However, it was not in fact forwarded to Mr Michael by the Official Receiver's solicitors until 6 December. That is very unfortunate. Apparently, on 5 December the Chief Registrar sent out the corrected version of his judgment, which he was going to hand down, presumably so that the parties could prepare submissions as to the duration of the BRO which he had decided should be imposed and which was to be a matter argued before the court at the handing down on 13 December.
- Mr Michael, on receiving this, assumed that this was the final definitive judgment and I think that was a reasonable assumption on his behalf. Mr Michael does not complain about the respondent's counsel's minor corrections regarding a missing full stop or the misspelling of a name, but he takes strong issue with the final comment or correction that was submitted on the draft judgment as follows:
"In paragraphs 50(e) and 59 reference is made to Rosan & Co as the Official Receiver's agents. Mr Amat's evidence was that the Official Receiver knew about their practice because they were often agents for the Official Receiver. On this occasion Rosan & Co were acting for Big Yellow Self-Storage Company Limited. I think this may have been misunderstood by the respondent during his cross-examination of Mr Ammat so that paragraph 50(e) is a fair reflection of what the respondent said but is not strictly correct."
The Chief Registrar reflected that in correcting the references in his draft to Rosan & Co as being the agents of the Official Receiver. I have his draft judgment before the court as well as, of course, the final judgment, and paragraph 62 of the final judgment reads as follows;
"Mr Amat said in cross-examination that Rosan & Co had acted as agent for the Official Receiver for 18 years (although they were not so acting on this occasion, as I understand it) were very experienced, would have appreciated the importance of books and records and would therefore have properly described them as such if they were among the items they collected. I see no reason to doubt that evidence."
The phrase in brackets "although they were not so acting on this occasion, as I understand it" was added into the judgment before it was finalised and had not appeared in the draft, and it seems clear is an insertion as a result of the comment submitted by the respondent's counsel.
- Mr Michael submitted that such a correction, and indeed two other instances where Rosan & Co were referred to where it is made clear that they were not on this occasion the agents of the Official Receiver, or where a statement to the contrary, was removed, is not a correction permitted under the so-called "slip rule". I explained to him that the slip rule has no application to changes made before the handing down of the judgment. The principle is that any changes or indeed amendments may be made by the judge to his draft judgment see, for example, Prudential v McBains Cooper in the Court of Appeal at page 2008. Accordingly, there is nothing impermissible in what the Chief Registrar did.
- However, there is also a separate principle that communications by one party with a court should be disclosed to the other, save in exceptional circumstances. That is so basic a proposition that no authority in support is needed. And there were no exceptional circumstances that applied here. As I said, the email from counsel to the court on 2 December should have been forwarded promptly, and I am unimpressed by the Official Receiver's failure to do so for four days. Although Mr Michael could still have made representations to the Chief Registrar after he received it, I accept that he felt it was too late as he had by then received what he thought was the finalised version of the judgment.
- Nevertheless, it is necessary to look at the substance of what was involved. The Chief Registrar said in his draft judgment that Rosan & Co were the agents of the Official Receiver on this occasion. That was corrected through his being told that that was not the case. That fact is not in dispute. It was clearly right to make the correction and there is nothing that Mr Michael could conceivably have said on that point. When I asked him directly what he would have done if he had got a copy of this email on 2 December, he said in response that whether Rosan & Co were the agents on this occasion or not "would have made a difference to the weight the judge gave to the evidence". In other words, Mr Michael does not disagree with the correction, but he would have wished to make submissions on its implications. But, in the first place, substantive submissions are not generally permissible and, in any event, the Chief Registrar, having received the correction, clearly took the view that it did not make any difference to the substantive point which he had to decide, since he did not choose to make, as he clearly could have done, any further change to the text of his draft judgment. That is hardly surprising. The question, as set out clearly in paragraph 62, is whether Rosan & Co would have failed to recognise the importance of financial records and books, and thus whether they would in their inventory of goods that they collected from Big Yellow Storage Company have included such documents in the general description "Very large amounts of rubbish all NCV" a reference to "No commercial value". On that point, the Chief Registrar made his finding as set out in paragraph 62, which I have quoted. He clearly took the view that it made not the slightest difference whether or not Rosan & Co were acting for the Official Receiver on this occasion. What was important in his mind was that they had acted as agents for the Official Receiver for 18 years and therefore were very experienced as regards these sorts of documents. That indeed seems to me obvious, so that whether or not they were so acting on this occasion clearly would have made no substantive difference. Accordingly, the substance of the complaint, in my judgment, falls away.
- In Mr Michael's written grounds he complains of other small corrections that were made to the draft judgment, but they were manifestly immaterial and he did not particularly pursue those in oral argument.
- Hence, on close examination, I conclude that there is nothing in the fact that Mr Michael received a copy of the corrections submitted by the respondent's counsel to the Chief Registrar only on 6 December and not on 2 December. Permission to appeal on that ground is, therefore, refused.
- In his written grounds of appeal, Mr Michael takes a point regarding the burden of proof. He alleges that the Chief Registrar mistakenly proceeded on the basis that the burden of proof rested on him, Mr Michael, and not on the Official Receiver. As to that, I consider that the Chief Registrar directed himself correctly as to the approach to be adopted see paragraph 26 of his judgment, where he quotes from the relevant passage in the Randhawa case and then continues:
"The court is therefore required (a) to consider, on the balance of probabilities, whether the alleged misconduct has been established; (b) to determine whether that misconduct, viewed individually and cumulatively and taking into account any extenuating circumstances, is such as to establish that the respondent has so seriously failed to meet the proper standards of probity and competence that it is appropriate to make a bankruptcy restrictions order."
- It is, therefore, for the Official Receiver to put forward the grounds of making an order, and he bore the burden of proof. But when the respondent to his application puts forward extenuating circumstances to excuse the conduct alleged against him, then it is manifestly the respondent who bears the evidential burden of showing that those circumstances existed. As to the question whether to believe Mr Michael's explanations and assertions, that was clearly a matter for the court that heard Mr Michael give evidence and the detailed cross-examination.
- I turn now to the grounds of appeal put forward regarding the specific allegations put forward by the Official Receiver.
The "Records allegation".
- This is expressed as follows in paragraph 2(a) of the Deputy Official Receiver's report:
"Mr Michael has failed to maintain, preserve and/or deliver up adequate accounting records relating to his sole trader activities. Such records as have been recovered or obtained by the Official Receiver do not contain adequate information relating to receipts and payments across bank accounts."
Then four examples are given of the consequences of the alleged failure. The fourth of those was not accepted by the Chief Registrar as being made out, and so one can ignore it. Mr Michael contends that the Chief Registrar reversed the burden of proof as he was using Mr Michael's explanations to support the charge, but that misunderstands, whether deliberately or not, the process in which the court was engaged. The Chief Registrar found, first, that Mr Michael was under an obligation to keep records, in other words the Official Receiver had established that; secondly, that Mr Michael was a sole trader at the material time; and, thirdly, that no adequate records had been produced. Mr Michael, as I understand it, does not dispute the third of those three points, but he strongly disputes the first two. However, the fact that a failure to keep proper accounting records is no longer a criminal offence a matter he strongly relies on is irrelevant. He has not been charged with a criminal offence. The fact that section 361 of the Insolvency Act has been repealed does not mean that this is not conduct which can be prayed in aid in justification of a BRO. Schedule 4A, para 2(2)(a), to the contrary, expressly specifies failure to keep records which account for a loss by a business carried on by the bankrupt within a period beginning two years before a petition as one of the grounds to be taken into account as behaviour that may support the making of a BRO.
- As regards the accounting records charge, again Mr Michael misrepresents the argument of the Official Receiver based on the Taxes Management Act. Mr Michael argued that he was not obliged to keep records of the kind which the Official Receiver was complaining were absent. In response to that allegation, the Official Receiver relied on the Taxes Management Act to show that Mr Michael was so obliged as a matter of revenue law. Of course, that obligation was not one owed to the Official Receiver. Mr Michael was not bankrupt at the time in question, and the Chief Registrar expressly recognised this see his judgment at paragraph 35. But it was a legal obligation on Mr Michael nonetheless, and the absence of those records, of course, can cause serious difficulties in ascertaining a true and complete picture of Mr Michael's trading and financial affairs. As to the fact that Mr Michael was a sole trader, the finding to that effect was based on his own evidence given in his public examination, and the Chief Registrar was plainly entitled on the evidence to reach that view. As to the existence of such records, that also was based on evidence from Mr Michael and on the inference drawn from the records that were produced for the previous, 2004, year.
- An example of the sort of criticisms that Mr Michael makes of the Chief Registrar can be found in his grounds of appeal at paragraph 121. He there says:
"The judge in paragraphs 58 and 63 referred to a said 'computer entries' in paragraph 16 of the bankrupt's witness statement reply to the BRO dated 5 January 2009 and implied that, from the bankrupt's case, that the bankrupt said there were computer entries which will or may explain the individual and personal bank account statements sought by the Official Receiver. It is incorrect, because that paragraph 16 does not state computer entries, and neither can that paragraph 16 be reasonably deduced to have implied that the bankrupt said that there were computer entries which will or may explain the individual and personal bank account statements sought by the OR. The bankrupt was simply stating in that paragraph 16 that there was a desktop computer in that particular purpose-built shelf in that particular room in the matrimonial residence. That statement to this contention that the judge is incorrect are bolstered by the further statement by the bankrupt in paragraph 18 of that same witness reply."
In fact, what the judgment says in paragraph 63, about which Mr Michael is there complaining, was:
"In the first passage of his witness statement cited in paragraph 50 above, I note a reference to computer entries which implies that at some stage the respondent kept records on a computer."
As can readily be seen by looking at paragraph 50, to which the Chief Registrar expressly cross-refers, he was there referring not to paragraph 16 of Mr Michael's witness statement but to paragraph 68. Indeed, the Chief Registrar quotes paragraph 68 in paragraph 50 of his judgment:
"Mr Michael said, 'In light of the loss and theft through no fault of mine of all the necessary and helpful financial records, relevant data, books and statements, including explanative notes and computer entries to either prepare or assist the OR in tax filings/documentation.'"
Since the fact that the Chief Registrar is referring to paragraph 68 of Mr Michael's witness statement is indisputable, I have to say that this point as taken in the grounds of appeal is thoroughly misleading. I regret to say that is not the only instance of that kind.
- The real issue became the question of what happened to the records which Mr Michael said he had kept. Since he was under an obligation to produce them on the basis found that he was a sole trader, he put forward various extenuating circumstances, including that they had been lost or stolen. It was on that basis that the court was then entitled to explore the veracity of that explanation. This is not a reversal of the burden of proof. The court is entitled, indeed it is virtually bound, to make factual findings on the explanations which Mr Michael himself put forward. That is the context in which the disposal of rubbish by Big Yellow Storage and Rosan & Co became relevant. The court below listened to the evidence of Mr Michael under prolonged cross-examination and was entitled to disbelieve him. And it was equally entitled, in my judgment, to draw an inference from the fact that Rosan & Co had acted for the Official Receiver for 18 years and thus would have been familiar with the significance of business records, irrespective of whether they were acting for the Official Receiver on this particular occasion. There is no discernible error under this ground, and permission to appeal upon it is refused.
The "CDDA ground": acting in the capacity of a director
- That is dealt with in paragraph 2(c) of the Deputy Official Receiver's report:
"Notwithstanding the making of the bankruptcy order against him on 29 March 2007 and contrary to section 11 of the Company Directors Disqualification Act 1986, Mr Michael continued to act in the capacity of director of seven limited liability companies by pursuing the defence, both directly and through the faηade of a third party purportedly appointed as director instead, of public interest winding-up petitions brought against those companies by the Secretary of State for Trade and Industry."
- Although Mr Michael felt that this was the most serious ground, I think the Chief Registrar treated all three grounds as being of equal weight. In that regard he differed from the approach that Registrar Jacques had adopted with the previous BRO. That registrar had placed particular emphasis on this aspect. That may explain the way Mr Michael put his case under this ground, as explained in his oral submissions. Registrar Jacques had treated as determinative of this ground the fact that Mr Michael had signed a witness statement stating that he did so in his capacity of director, and failed to have regard to the fact that this mistake was corrected by a later witness statement and could not be regarded as conclusive. That deficiency in reasoning that was one of the grounds on which I had allowed the appeal from Registrar Jacques' order. In my judgment of 10 August 2011, I said this at paragraph 29:
"I reach no view on whether the explanation for what is said in the witness statements and other evidence about it establishes that the witness statement was just a mistake or, as alleged, reflected the reality of the situation, but it seems clear the Registrar mistakenly considered that the mere fact of signing the witness statement was enough. He failed to make any findings as to the explanation which the appellant gave for this and whether he was satisfied that this explanation could not be believed. That is not a matter that this court can resolve without itself conducting a rehearing. That is why a respondent's notice would not have assisted on this point in the circumstances of this appeal."
- Mr Michael now complains that in the judgment below on the rehearing the Chief Registrar did not address this issue. He says that the judgment was flawed, as it did not answer the question which I had said was so important. However, the reason for that is that this hearing took a different course. The evidence before the court was the same, but it is common ground that Mr Michael was originally a director of all seven companies, and in his evidence before the Chief Registrar he said that he had resigned shortly before the bankruptcy. The reference in paragraph 81 of the judgment to his evidence in that regard saying that he had resigned after 20 March 2009 is clearly a mistake for 20 March 2007. The bankruptcy was on 29 March 2007. As that was the positive case advanced by Mr Michael (albeit that he had not stated his resignation in those terms previously), the court was entitled to explore whether it regarded that as correct. Indeed, unless the OR accepted that as beyond question (in which case it would have been a complete answer to the allegation), they were bound to explore it. Accordingly, Mr Michael was asked about it, and it was then for the court to reach its view as to whether to believe his answers. The Chief Registrar did not believe him. Mr Michael emphasises that it was not for him to send a form 288B to the Companies Registry and, in any event, whether or not such a form had been sent is not decisive on the question of whether he had in fact resigned. That is, of course, correct, but the Chief Registrar did not in any way treat it as decisive see paragraph 82.
- Further, Mr Michael contends that the court below committed an error of law in that merely being a director would not violate section 11 of the CDDA. Mr Michael submitted that to offend against that provision the individual must be an active director. He must be "concerned in the promotion, formation or management of a company", and that the approach of the Chief Registrar, as Mr Michael put it, "paid only lip service" to section 11. However, that is a misreading of the statute. Section 11(1) says, insofar as material:
"It is an offence for a person to act as director of a company, or directly or indirectly to take part in or be concerned in the promotion, formation or management of, a company, without the leave of the court at a time when (a) he is an undischarged bankrupt,
" [emphasis added]
- Thus, these various factors are alternatives. There is no requirement to come within all of them. Of course, the more active an individual is in any of those respects, the more serious is the violation, but the very fact of being a director while a bankrupt contravenes the statutory provision. The conclusion of the Chief Registrar at paragraph 84 was therefore correct as a matter of law. Moreover, and in any event, here it is alleged that Mr Michael was acting as a director, and indeed, in the alternative, that he was, if not a de jure director, an acting director. That is, as stated in the allegation which I have quoted, through his defence of the winding-up proceedings. It is alleged, and the Chief Registrar found, that Miss Fronikova, who became a director on 20 March 2007, was a front for Mr Michael. That is indeed part of the specific allegation being made against him in paragraph 2(c) of the report.
- As to that, Mr Michael complains that the evidence relied on in the report was a judgment of Mr John Jarvis QC (sitting as a Deputy High Court Judge) of 25 October 2007. The Chief Registrar held that the judgment of Mr Jarvis is inadmissible, but that the witness statements in the proceedings before Mr Jarvis were admissible see paragraphs 18-23 of the judgment. On this application, Mr Michael does not contest that ruling as a matter of law, but he seek to argue that the witness statements should not have been relied on in the BRO proceedings, as they were not the basis of the report made in support of the application. He referred me to the Insolvency Rules Rule 6.241(2)(b).
- The short answer is that the witness statement of Miss Fronikova and her conduct in the winding-up proceedings are referred to in the report see at paragraphs 64-65. The fact that not everything in the report can be relied on cannot possibly mean that there can be no BRO if those matters in the report which can be relied on are sufficient, by themselves, to justify such an order. Moreover, the Chief Registrar made clear that he relied also on Mr Michael's own evidence under cross-examination when Mr Michael sought to explain the role of Miss Fronikova. That was clearly permissible. Hence the court found that Mr Michael was positively acting as a director of the companies through Miss Fronikova's conduct of the defence to the winding-up proceedings the very matter that was alleged in paragraph 2(c) of the report.
- Mr Michael criticises the way the Chief Registrar evaluated the evidence and drew inferences from it when they were adverse to him, but there is nothing in that point. It is precisely what the judge at first instance, hearing that evidence, is required to do, and I can see no conceivable error in the way the Chief Registrar proceeded. The findings on the evidence were matters for him. There is nothing in this ground of appeal, and permission to appeal is refused.
The Tenancies Allegation
- This is set out in the report at paragraph 2(b):
"Following the making of the bankruptcy order against him on 29 March 2007 Mr Michael entered into tenancy agreements in respect of two premises comprised within his estate and vested in his trustee. He thereafter received a holding deposit from one tenant for the amount of £1,592.31 but has failed to explain the reason why these agreements were entered into by denying their existence and has failed or refused to deliver up the funds so received to his trustee. By dealing in this manner with property no longer vested in him, Mr Michael has caused loss to the individual tenant of £1,592.31."
- The tenancies in question were granted on 29 April 2007 and 31 May 2007. That is not in dispute. But Mr Michael's trustee was appointed (as I said at the outset) only on 28 June 2007. Thus, there is an error in the allegation in contending that the estate had vested in the trustee. That was accepted by the Official Receiver in the court below see paragraph 71 of the judgment. Mr Michael's primary submission is that that is the end of this allegation. The allegation as set out in the report cannot be made out. A BRO is a serious matter, quasi-penal in character, and he submits that it was not right to allow the Official Receiver to change the basis of the allegation.
- Mr Michael referred me to a number of authorities in support of that argument. I shall not refer to them all, but of particular relevance are Re Lo-Line Electric Motors Ltd  Ch 477 and Re Cubelock Ltd  All ER (D)707. In Lo-Line Sir Nicholas Browne-Wilkinson V-C said this at pages 486-487:
"Since the making of a disqualification order involves penal consequences for the director, it is necessary that he should know the substance of the charges that he has to meet. The practice of the Official Receiver is to summarise the allegations of misconduct on which he is going to rely in the affidavit in support. This procedure is plainly both desirable and necessary. The difficulty arises when, as a result of the evidence subsequently filed or for some other reason, the Official Receiver wishes to change the nature of the allegations on which he is going to rely. Thus, in the present case allegation C was the most serious allegation viz reincarnation of a business which had already failed twice in a new corporate structure (SEN) without any substantial change and without any expectation that it would succeed. Mr Browning put in evidence showing that, contrary to those allegations, the scale of the new business was different and he had received favourable accountancy advice that the new business of SEN could be profitable. As a result, during the hearing before me the Official Receiver sought to change his ground by alleging misconduct of a different kind, viz repeated undue reliance by Mr Browning on two customers without paying sufficient regard to his past experience that the level of their orders was extremely volatile. No notice of this change and the nature of the allegation had been given to Mr Browning.
Natural justice plainly requires that a director facing disqualification should know the charges he has to meet. I am far from suggesting that this requirement should lead to the technicalities associated with criminal charges, but prior notice of such a fundamental shift in the Official Receiver's case should have been given so that Mr Browning could direct evidence to the point. I am not differing from the views expressed by Peter Gibson J in Re Churchill Hotel Plymouth Ltd, where he held that the court should not refuse to look at an allegation just because the Official Receiver had not given prior notice of it, provided that by adjournment to file evidence or otherwise, there would be no injustice to the director, but the requirements of natural justice must depend on the circumstances of each case and in my judgment a fundamental change of case from one alleging commercial dishonesty to one alleging crass commercial misjudgment is a change of a nature which requires wholly different evidence and prior notice should have been given."
- Then in Cubelock at paragraph 58, Park J referred to the passage that I have just quoted from Lo-Line and then at paragraph 59 referred to a second case on this issue, Re Sevenoaks Stationers Ltd  Ch 164 and the observations of Dillon LJ:
"I would agree with all that Sir Nicholas Browne-Wilkinson V-C says in this passage of his judgment. The court has a discretion to allow the Official Receiver to rely on the altered or additional allegation provided that can be done without injustice to the accused director. What justice requires must depend on the circumstances of the particular case. In some cases it would be necessary for the Official Receiver to have given prior notice of the new allegation before the effective hearing of the disqualification application and to raise it for the first time in the course of the hearing would be too late. In other cases when a new allegation is raised for the first time in the course of a hearing it may be appropriate to allow an adjournment for further evidence to be obtained. In yet other cases, particularly where the director is represented by experienced counsel, counsel may be able to take a new or altered allegation in his stride without any adjournment. But the paramount requirement on this aspect is that the director facing disqualification must know the charges he has to meet."
Park J continued:
"The third case is Re Continental Assurance Company of London plc. Chadwick J accepted and endorsed the need to ensure that anyone against whom disqualification proceedings were taken knew what the case was that he had to meet, but he deplored any tendency to introduce into the disqualification jurisdiction the inflexibility of a criminal indictment. On the particular facts of the case he considered the director concerned was well aware of what the criticism of him was."
Park J concluded at paragraph 61:
"At the risk of over condensing the matter, I can summarise how I understand the state of the authorities on this issue. The director concerned does need to know what the essence of the case against him is. This should not be overstated and the courts will not be sympathetic to attempts by directors to navigate around disqualification applications by taking fine points on the way in which the DTI's affidavits have formulated the criticisms of the conduct. These criticisms are commonly referred to as the charges, a term borrowed from criminal law and procedure. The analogy of a criminal jurisdiction should not be taken too far, but the underlying principle remains that the courts will not disqualify a director on grounds of which he did not have adequate notice before the trial and which he did not have a fair opportunity to respond to at the trial."
- Here, there has been a change in the allegation, now that it is accepted that Mr Michael's estate was still in him and had not vested in the trustee since there was no trustee at the material time. What is alleged is that although that is the case, it was irresponsible and culpable conduct by Mr Michael to grant the tenancies without the approval of the Official Receiver, since he was not entitled to do so, and it is submitted that this flows from section 287(1) of the Insolvency Act. The question facing the court is whether this is so significant a change that procedural fairness dictates that it should not have been proceeded with and that Mr Michael (who, it is relevant to note, was acting in person and not with legal representation) was embarrassed or disadvantaged in addressing it.
- In that regard, it is relevant to look at how Mr Michael had responded to the allegation that was put against him. In his reply to the report of 5 January 2009 he addressed this aspect at paragraphs 78-80, where he said this:
"I signed tenancy agreements to maintain the estate, avoid repossessions and loss to the estate and further to ensure monthly mortgage payments continued to be made to the mortgage lenders. At this time and appending my signature the trustee had not been appointed and I had an IVA proposal in advanced stages for approval. As indicated, before and after the bankruptcy order I planned an IVA and for which I was in regular communication with the intended nominee, Mr Armstrong, of Turken Baker Armstrong. As aforementioned, the trustee in my bankruptcy estate was appointed at the end of June 2007 and first wrote to me in mid July 2007, before which I had to deal with the Kingston-upon-Thames estate agent request to both renew a tenancy and accept a new tenant with maintenance, furniture and damages holding deposit. All of this was communicated to the associate in charge of my matters in Mr Armstrong's office."
He then goes on to say that there was no intention to conceal. Thus, the primary response of Mr Michael was that what he was doing was motivated by his desire to preserve and maintain the estate.
- Mr Lewis, for the Official Receiver, submitted that the substance of the allegation against Mr Michael was entering into the tenancies when, by reason of his bankruptcy, he was no longer free to deal with the properties as if they were unfettered, albeit that was by reason of the rights of the Official Receiver and not by reason of the vesting of Mr Michael's estate in the trustee. I think this is a more difficult point, and the question of departure from the allegation made in the report is not considered by the Chief Registrar. Accordingly, I grant permission to appeal on this issue.
- However, having heard argument upon this point, I accept the submission of the respondent that this is not such a fundamental change of case from the one originally alleged that it was unfair to Mr Michael. The issue itself was the granting of the tenancies and why he did so. Mr Michael argued strongly that there was nothing wrong in what he was doing and, as I have mentioned, that his motive was to preserve the value of the properties. He also stressed that he derived no personal benefit. The latter point goes to seriousness, but, in my judgment, the essential allegation is still made out, since it is clear that management of the properties in the bankrupt's estate was in the hands of the Official Receiver by reason of section 287(1). Nonetheless, as will appear shortly, I do consider the fact that the estate was still vested in Mr Michael and that the judge accepted as a fact that Mr Michael may not have received at this point a copy of the bankruptcy order, and thus the notice in it informing him that the Official Receiver had become the receiver and manager of his estate, as, in my judgment, relevant when considering to what extent a BRO should be made.
- I therefore come to the making of the bankruptcy order and its duration. The Chief Registrar dealt with the making of the order at paragraphs 89-90 of his judgment:
"(89) Having found the allegations to have been made out on facts I must go on to determine whether the misconduct found is such as to satisfy the second limb of the test posited in Official Receiver v Randwha. I find that that test has been satisfied both in respect of each individual allegation as well as having regard to their cumulative effect. Given the statutory obligations examined above, and having regard to the Respondent's standing as a man of business, the facts of the first allegation evidence at the very least a failure in a significant respect to live up to proper standards of competence. The facts of the second allegation demonstrate a want of probity or at the very least have about them an element of culpability or irresponsibility. The third evidences a high degree of incompetence, and the conduct complained of plainly has about it again an element of culpability.
(90) The exacerbating effects of the first allegation appear from subparagraphs i) iii) (I exclude iv)). This is a substantial bankruptcy, and the inability of the Official Receiver, through lack of books and records, to ascertain the effect of the transactions complained of is significant. That said, when it comes to making any order, I must bear in mind that the period complained about is quite short. Similarly as regards the second allegation I must bear in mind that although a loss was caused as a result of the Respondent's conduct it was not substantial. As to the third allegation, I must bear in mind that the offending activity was restricted in its nature and scope as well as in terms of time. This was not a case of someone running a trading company or companies in the teeth of a bankruptcy order."
- I would only state that I consider that in the circumstances, where no trustee had yet been appointed and Mr Michael had not received the bankruptcy order, it was going too far to suggest that the tenancies allegation demonstrates "want of probity". It should be recalled that the tenancies were granted very soon after the bankruptcy order. But as to the making of a BRO, that was amply justified. Indeed, given the findings by the Chief Registrar, it seems to me inevitable.
- The question of duration was dealt with at a further hearing on 13 December and in a short unreserved judgment delivered by the Chief Registrar that same day, of which the court has a transcript (the staff were by then familiar with the need to switch on the tape). As I stated at the outset, the Chief Registrar fixed a period of 8 years.
- Mr Michael makes three complaints about that decision. First, the Chief Registrar adopted wholesale the notes submitted by the respondent's counsel. The decision ignored Mr Michael's submissions, which are not mentioned at all, i.e. the submissions concerning duration in paragraphs 62-68 of the written arguments presented by Mr Michael dated 1 November 2011. As Mr Michael put it to me, "I was a nobody." Secondly, the Chief Registrar failed to take into account all the relevant circumstances and, in particular, the total period under which Mr Michael was in jeopardy. In that regard, he referred me to the Court of Appeal's judgment in Re Westmid Packing Services Limited (No 3)  2 All ER 124. Thirdly, the Chief Registrar took into account an irrelevant matter, namely the delay in costs caused by Mr Michael's defence of the petitions. Accordingly, he submitted that 8 years is much too long as a restriction period.
- I should say straight away that I give permission to appeal on this point. The question whether the court should have regard to the total period of jeopardy is a real issue, in my view, in the light of Westmid, since, in that regard, what is said there is different from the commonly cited leading authority on a BRO, the decision of Mr Lancelot Henderson QC (as he then was) in Randhawa v Official Receiver  1 All ER 755. The starting point is Re Sevenoaks Stationers Ltd  Ch 164, where the Court of Appeal set out three brackets in the context of directors disqualification, but which have been adopted also for BRO. They are as follows, quoting from the judgment of Dillon LJ at page 174:
"(i) The top bracket of disqualification for periods over 10 years should be reserved for particularly serious cases. These may include cases where a director who has already had one period of disqualification imposed falls to be disqualified yet again.
(ii) The minimum bracket of two to five years' disqualification should be applied where though disqualification is mandatory the case is relatively not very serious.
(iii) The middle bracket of disqualification of six to ten years should apply to serious cases which do not merit the top bracket."
- Westmid was also a CDDA case and there the Court of Appeal in its judgment discussed the issue of the length of disqualification at paragraphs 6-8. They refer to a number of previous cases and at paragraph 7 say this:
"In Re Dawes & Henderson (Agencies) Ltd Blackburne J said (at p.130),
'Matters of mitigation' [the phrase used by Dillon LJ in Sevenoaks at p.177] refers to matters relevant to the conduct that has been established'.
That is no doubt so, but does not provide anything like a precise or exhaustive test. In Barings Sir Richard Scott V-C put it like this,
'But once that conclusion has, on the evidence, been arrived at, and the question is what period of disqualification should be imposed, then the issue, subject to the minimum and maximum limits set by Parliament, is one for the discretion of the court. I do not for my part see how it can be said that the evidence relating to the general ability and conduct as a director of the individual in question is necessarily irrelevant to the exercise of this discretion. I do not believe that discretion can be put into a closet from which general evidence of the sort I have described is excluded. Of course, not all evidence of character would be relevant. It would not be relevant in the least whether the director was a good family man or whether he was kind to animals. But evidence of his general conduct in the discharge of the office of director goes to the question of extent to which the public needs protection against his acting in that office. It seems to me that evidence of that character is relevant to be taken into account by the court in exercising its discretion and cannot be excluded as being inadmissible'.
So far as there is any substantial difference between Dawes and Barings (and it is probably little more than a difference in emphasis), it is the views expressed by the Vice-Chancellor in Barings which should be followed. A wide variety of matters - including the former director's age and state of health, the length of time he has been in jeopardy, whether he has admitted the offence, his general conduct before and after the offence, and the periods of disqualification of his co-directors that may have been ordered by other courts - may be relevant and admissible in determining the appropriate period of disqualification. We disagree with the view (that any period of de facto disqualification is irrelevant) expressed by Chadwick J. in Re Thorncliffe Finance Ltd, Secretary of State for Trade and Industry v Arif  1 BCLC 34, 45. The same matters may be relevant to an application under s. 17, together with particulars of the responsibilities which the disqualified director wishes to be allowed to assume."
That is a reference to the right to apply for permission. It is worth continuing with the quotation from the Westmid judgment, since at paragraphs 8-9 the Court of Appeal said this:
"8. This court was referred to the decision of Nourse J. in Re Civica Investments Ltd  BCLC 456, in which he said at pp 457-8:
"It might be thought that [the appropriate period of disqualification] is something which, like the passing of sentence in a criminal case, ought to be dealt with comparatively briefly and without elaborate reasoning. In general I think that that must be the correct approach.'"
Then a little later on the court said:
"However Nourse J's approach should be adopted in all cases involving disqualification... The principles applicable to the court's jurisdiction under the Act are now reasonably clear. The application of those principles to the facts of the particular case is a matter for the trial judge. The citation of cases as to the period of disqualification will, in the great majority of cases, be unnecessary and inappropriate."
Then at the conclusion of their judgment the Court of Appeal said:
"What is required and what the court should confine the parties to, is sufficient evidence to enable the court to adopt a broad brush approach. This should be regarded, especially in relation to the period of disqualification, as a jurisdiction which the court should exercise in a summary manner and the court should confine the parties to placing before it the material which is needed to enable it to exercise the jurisdiction in that way."
- Finally, in Randhawa, in which be it noted Westmid was not cited, Mr Henderson QC said as regards the period of the BRO, at paragraph 88:
I agree with counsel for the Official Receiver that the district judge erred in principle in starting with a period towards the top of the lowest bracket (5 years) and then reducing it by allowing credit for the time which had elapsed since Mr Randhawa was made bankrupt and also for the fact that the application was made towards the end of the 1-year period stipulated in the statute. In my judgment, the appropriate period for a BRO must be fixed by reference to the gravity of the misconduct that is alleged and is proved against the bankrupt, taken in conjunction with any aggravating or mitigating factors that may properly be taken into account. As in the context of directors disqualification the exercise should be performed with a fairly broad brush and without undue refinement or technicality. That said however, I do not see how the length of time which has elapsed since the making of the bankruptcy order can in itself be a mitigating factor. On any view it must be wrong to allow credit for the period of the bankruptcy itself when the bankrupt is in any event subject to restrictions. Further, Parliament has allowed a period of one year in which an application for a BRO may be made by the Official Receiver without the permission of the court. This is not a long period. In my view, it would normally be wrong to have regard to when the application is made within the period in deciding the length of a BRO."
- Mr Michael submitted that this court is bound by the approach of the Court of Appeal and, therefore, must take into account the period at least since the bankruptcy order. I do not accept that submission, since this is not the same statutory provision or regime as that at issue in Westmid. I accept the submission of Mr Lewis that there are material differences between the CDDA and BRO regimes. First, a BRO, as Mr Henderson noted, can only be applied for within one year of the bankruptcy, save with permission of the court. A disqualification order can be applied for within two years of the company being insolvent see section 7(2). The director may by then have started another company and be doing well, whereas a BRO must be sought, again without permission of the court, during the period of the bankruptcy. I am not saying that it is never appropriate to consider the date at which a BRO is applied for, and if it is sought later with permission of the court then that might be relevant. But in general I consider that Randhawa sets out the approach to be followed on this point.
- However, the matter does not end there. I think it is important to take all the circumstances into account. First, there are the proven allegations of the conduct that gives rise to the imposition of a BRO. I do feel that the Chief Registrar failed to have sufficient regard to the change in the Official Receiver's position regarding the tenancies and the fact that Mr Michael may not have received the bankruptcy order at that point and made no personal profit from the tenancies. I think that the Chief Registrar did, with respect, attribute too great a culpability to that ground, albeit that the ground itself was established.
- I disagree with Mr Michael that it is inappropriate to have regard to his conduct in defence of the bankruptcy. On this point, it seems to me there is no difference between Westmid and Randhawa. All the circumstances are to be taken into account, and Westmid, on which Mr Michael relies, makes clear that the general conduct of the individual, both before and after the offence, is relevant.
- I do not think it is a valid criticism of the Chief Registrar that he failed to refer to Mr Michael's submissions, since he evidently preferred those of counsel for the Official Receiver, and he was entitled to do so. The effect of the bankruptcy and the BRO on Mr Michael in having what he describes in his written submissions as a "life career effect" seem to me to follow in most cases from a bankruptcy and a BRO. And it is the case that here Mr Michael's conduct of the bankruptcy proceedings has drawn them out. I see no basis for suggesting that the Chief Registrar did not recognise that Mr Michael had no previous BRO, or somehow subconsciously proceeded on the basis that this was not a first time case.
- A large element of discretion is to be given to the judge at first instance as regards the length of a BRO, and I am conscious that this was the decision of a very experienced bankruptcy registrar. Nevertheless, in the end, as I say, I think he attributed excessive seriousness to the second ground, the tenancy allegation. For that reason alone, I consider that the middle of the middle bracket was excessive, having regard to the allegations themselves and the surrounding circumstances, and I cannot help feeling that the Chief Registrar may have been unduly influenced by Mr Michael's conduct of the proceedings before him and the irritation that had caused him. Accordingly, as I have said, I grant permission to appeal as to the duration. I will allow the appeal and set aside the period of 8 years. I consider that it is appropriate to impose a period that is still in the middle bracket but at a slightly lower level, and I shall substitute a period of 6½ years.
- Finally, costs. Here the conduct of the proceedings was very relevant. Mr Michael urged that it is, he says, unheard of to make a costs order against a bankrupt in BRO proceedings, and he says it is wholly inappropriate because such proceedings arise as a liability of the bankruptcy or consequence of the bankruptcy, and imposing additional costs on a bankrupt would curtail his right to defend those proceedings, and given that, almost by definition, he will lack financial resources, it can create a situation of a second bankruptcy. He has referred me to two authorities, Haine v Secretary of State for Business Enterprise and Regulatory Reform  EWCA (Civ) 626, and Mahomed v Morris a decision of Jacob J of 17 February 2000. Although Mr Michael addressed me upon those shortly before I commenced this judgment and I asked him on a number of occasions how they assisted on this point, I have to say I find them of no relevance to the question of costs of BRO proceedings.
- I accept that it is unusual to make an order for costs against the bankrupt. However, this is a case where the duration of those proceedings and therefore their expense has been greatly exacerbated by the way in which Mr Michael has conducted them, as set out in the Chief Registrar's judgment at paragraphs 11 and 12, and further at paragraph 14, where he concluded:
"I regret to say that in my view the respondent has at times deliberately sought to be obfuscatory in both his written and oral evidence."
In those circumstances, costs being in the discretion of the court, I can see no error in the way the Chief Registrar exercised his discretion by ordering Mr Michael to bear the costs, and the fact that I have varied his decision as to duration does not lead me to consider that any change should be made to his decision on costs.
- Therefore, I shall grant permission to appeal restricted to the questions of, first, whether there was an unfair hearing; secondly, the Chief Registrar's finding on the tenancy allegation; and thirdly, the duration of the BRO. I dismiss the appeal on the first two of those three grounds, but allow it on the third ground and substitute a period of restriction of 6½ years. In all other respects this application for permission to appeal is dismissed.