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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Barclays Bank Plc v Marsden [2019] EWHC 3741 (Comm) (28 May 2019) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2019/3741.html Cite as: [2019] EWHC 3741 (Comm) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
LONDON CIRCUIT COMMERCIAL COURT (QBD)
Newcastle upon Tyne, NE1 1RQ |
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B e f o r e :
____________________
BARCLAYS BANK PLC |
Claimant |
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- and - | ||
MR JONATHAN EDWARD MARSDEN |
Defendant |
____________________
Mr Justin Fenwick QC for the Defendant
Hearing date: 15 March 2019
____________________
Crown Copyright ©
HH Judge Kramer
Overview
a. The defendant is entitled to ask the court to adjudicate on the set-off issue at all or whether the bank's withholding of the award under a bankruptcy set-off is a matter for the decision of the Financial Conduct Authority.
b. The bank is entitled to a set-off against the bankruptcy debt.
c. It is an abuse of the process for the defendant now to make a claim that the award is not subject to bankruptcy set-off when he could have raised it in the first set of proceedings.
The court's task
The background facts
"Interest rate swaps entered into by Barclays Bank PLC ("Barclay") and Mr Jon Marsden ("the Counterparty") (together the "Parties" both dated 10 September 2007 (the "Swaps")
By signing this letter, the Counterparty acknowledges and agrees that the entry by the Parties into the facility letter dated 27th January 2011 with a loan amount of £3,671,374.00 is in full and final settlement of all complaints, claims and causes of action which arise directly or indirectly, or may arise out of or are in any way connected with the Swaps.
The Counterparty acknowledges and agrees to waive irrevocably any such complaints, claims and causes of action (the "Complaints"). Neither Barclays not any companies in the Barclays Group make any admission as to liability in relation to the Complaints."
In his judgment in the first proceedings Phillips J held that the settlement agreement fully and effectively compromised all of Mr Marsden's valid causes of action in relation to the sale of the swaps.
- "carrying out file reviews for all Customers who indicate they would like their sale reviewed to assess compliance with Regulatory Requirements:…
- if a breach of the Regulatory Requirements has occurred, determining and, if relevant, providing appropriate redress on the basis of what is fair and reasonable in the circumstances."
'Regulatory Requirements' are defined in the agreement as "the principles, rules and guidance contained in the FSA's Handbook" This definition has the result that redress may be given on a review for losses arising from behaviour which would not necessarily constitute a traditional cause of action, or indeed, where the customer is not a "private person", a claim for a contravention of the regulatory rules under s 138D of the Financial Services & Markets Act 2000.
"More broadly, I consider that the overall regulatory regime is a clear pointer against the imposition of a duty of care, and suggests that to recognise a common law duty of care in the present case would circumvent the intention of Parliament. The FCA has a wide range of powers as regulator, including to make or require a section 404 scheme or restitution under section 384. It was the deliberate intention of Parliament that only the FCA was to have the power to require the banks to comply with these schemes, and that no individual customer could enforce them or sue for breach. Accordingly, the effect of the regime is that a non-private customer cannot sue in relation to a complaint or a complaint handling issue. Nor can a non-private customer complain about a redress determination if a bank proactively sets up a redress scheme. If a bank fails to comply with the terms of the Review agreement, it is the responsibility of the FCA to bring enforcement proceedings." per Beaston LJ at [87].
The law to relation to bankruptcy set-off
'323. Mutual credit and set-off
(1) This section applies where before the commencement of the bankruptcy there have been mutual credits, mutual debts or other mutual dealings between the bankrupt and any creditor of the bankrupt proving or claiming to prove for a bankruptcy debt.
(2) An account shall be taken of what is due from each party to the other in respect of the mutual dealings and the sums due from one party shall be set off against the sums due from the other.
(3) Sums due from the bankrupt to another party shall not be included in the account taken under subsection (2) if that other party had notice at the time they became due that a bankruptcy petition relating to the bankrupt was pending.
(4) Only the balance (if any) of the account taken under subsection (2) is provable as a bankruptcy debt or, as the case may be, to be paid to the trustee as part of the bankrupt's estate.'
The effect of this provision is that in cases where there are mutual claims between the bankrupt and a creditor, the only chose in action which continues to exist is the net balance between the parties. The individual claim continues to exist only to the extent that it can play its part in ascertaining the underlying balance; see Stein v Blake [1996] 1 AC 243 per Lord Hoffmann p. 255 A to G and, most recently, Bresco Electrical Services Limited (in liquidation) v Michael J Lonsdale (Electrical) Limited [2019] EWCA Civ 27 per Coulson LJ at [28] and [29]. I shall look at how the section applies in this case when considering the bank's claim to set-off.
"On the making of a bankruptcy order, a statutory moratorium on proceedings against the debtor or his property comes into force under section 285(3). The bankrupt is not thereby released from his debts. That occurs on his discharge. Unless extended, a bankrupt is automatically discharged from bankruptcy after one year. Section 281(1) provides that "where a bankrupt is discharged, the discharge releases him from all the bankruptcy debts but has no effect" on the trustee's functions or the operation of the Act as regards those functions, including in particular the right of any creditor to prove in the bankruptcy. The debts continue to exist for the purposes of proof in the bankruptcy and payment out of the realisation proceeds of the assets subject to the bankruptcy. The effect is to separate the debtor from his bankruptcy estate which continues to be administered for the benefit of his creditors as at the date of bankruptcy. The debts continue to exist as the means of defining the rights and interests of creditors in the bankruptcy but they cease to be the debtor's personal obligations." See per David Richards LJ at [32]
I have referred to this passage because at paragraph 3L of the proposed amended counterclaim and paragraph 38 of the statement of Steven Hopkins, Mr Marsden's solicitor, upon which reliance continues to be placed, both assert that the debt to the bank was discharged upon Mr Marsden's discharge from bankruptcy. Both are wrong, as is apparent from the extract from Green, above.
The claimant's case
Is the complaint about the application of the insolvency set-off of itself an abuse of the process?
Is the redress award subject to the insolvency set-off?
Discussion
a. If there have been mutual dealings which have given rise to cross-claims before the bankruptcy/winding up order ("the order") neither party can sue for his full claim but is limited to an account of the balance due ("the mandatory principle").
b. The account must be taken as at the date of the order ("the retroactivity principle");
c. In taking the account the court has regards to events which have occurred since the date of the order ("the hindsight principle"): see M.S. Fashions (above) per Hoffmann LJ at p.432 F-H.
d. The hindsight principle can be applied in the case of a contingent liability in cases where the contingency has not occurred at the date of the order. In the case of a creditor's contingent claim, where the estate needs to be wound up before the contingency has occurred an estimated value is placed on the contingency for the purposes of proof. There is no similar mechanism for valuing contingent claims by the insolvent so that the liquidator or trustee will not be able to rely upon the claim as a cause of action or set-off and the creditor can prove for the full amount. See M.S. Fashions (above) per Hoffmann LJ at p.435 D-G and Stein (above) per Lord Hoffmann p.252 E-253 B. This point answers Mr Fenwick's argument that the bank did not give credit for the review amount when it proved in the bankruptcy.
e. Debts whose existence and amount are contingent at the date of the order are capable of proof and can be set off provided they arise from mutual dealing but they must have resulted in a quantified money claim by the time of set-off; Frid (above) per Lord Hoffmann at [9] to [11].
f. Mutual dealings which give rise to the mandatory set-off under s.323 are dealings which give rise to commensurable cross-claims between the same parties acting in the same capacity but they do not need to be exclusively referable to a contract or transaction between the parties to the set-off; see Frid per Lord Hoffmann at [24]-[26].
"property includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property".
"In any event, Jessel MR's analysis in Huggins does not appear to have depended on the existence of a contract. He stressed that "property" "goes far beyond choses in action" and that the "mere fact that you cannot sue for the thing does not make it not 'property'". Annuities on tonnage and poundage dues were "property" even though "you would not sue the Crown for them, and they could not even be made the subject of a petition of right, because they were granted out of the voluntary bounty of the Crown". For good measure, it must be doubtful whether Mr Huggins was, or would have been considered to be, a party to an actual contract. In Gilham v Ministry of Justice [2017] EWCA Civ 2220, [2018] ICR 827, the Court of Appeal concluded that a District Judge's relationship with the Ministry of Justice was non-contractual. More relevantly, perhaps, when in 1956 Lord Goddard CJ said in Inland Revenue Commissioners v Hambrook [1956] 2 QB 641, at 654, that he considered that the employment of a civil servant "depends not on a contract with the Crown but on appointment by the Crown", he was reflecting a view that had had currency for many years (see e.g. Dunn v The Queen [1896] 1 QB 116)."
And later it was said:
"Non-contractual barristers' fees were unique in nature. A barrister had more than a mere moral claim to such fees and more than just a hope (or "spes") that he would receive them. If needs be, the barrister could invoke the Bar Council's "Withdrawal of Credit Scheme", and a solicitor's failure to pay a fee could potentially amount to professional misconduct. The highly unusual character of a barrister's fee is also manifest in the client's inability to revoke his solicitor's authority to pay counsel and the solicitor's right to reimbursement. The law recognised that, notwithstanding the absence of a contract, payment of an outstanding fee was not to be regarded as voluntary. In practice, a barrister would normally be paid". See per Newey LJ at [17] and [28]
"In the first place, the general rule does not require that at the moment when the winding up commences there shall be two enforceable debts, a debt provable in the liquidation and a debt enforceable by the liquidator against the creditor claiming to prove. It is enough that at the commencement of the winding up mutual dealings exist which involve rights and obligations whether absolute or contingent of such a nature that afterwards in the events that happen they mature or develop into pecuniary demands capable of set off."
"I agree that the amount which ultimately became payable by [Mant] could not be ascertained until some time later than the date of the receiving order, and it was possible that the amount might be very small; but, whatever sum eventually became payable, became payable to Daintrey by virtue of this agreement ... and of nothing else."
"Looking at this agreement, I fail to see that at the date of the receiving order there was nothing payable under the agreement. Under the circumstances it is clear that when this agreement was executed very considerable sums would become payable under it."
Millet J said, at p.572:
"It was submitted before me that the reason why Lindley M.R. and Romer L.J. seemingly discounted the possibility that no profits at all would be earned from the business was that this eventuality was too remote to be considered; but in my judgment it was rightly discounted because it was irrelevant. If no profits were earned, cadit quaestio; Mant would owe nothing; and there would be nothing against which the £86 could be set off. In every case the claim to set off requires that any contingency to which the liability was still subject at the date of the receiving order has since occurred. In my view, the emphasis in the passages I have cited is not in the degree of probability that a sum would become due from Mant, but in the source of that potential liability. What was both necessary and sufficient was that any liability of Mant to Daintrey which did mature should be exclusively referable to the agreement between them already existing at the date of the receiving order, and not to any subsequent transaction."
"It is "legitimate and necessary to bear in mind the statutory objective" when interpreting the 1986 Act, albeit that "however desirable it may be to construe the Act in a way calculated to carry out the parliamentary purpose, it is not legitimate to distort the meaning of the words Parliament has chosen to use in order to achieve that result" (see Bristol Airport plc v Powdrill [1990] Ch 744, at 758-759, per Browne-Wilkinson V-C)"
Henderson v Henderson abuse of process
The law
a. The underlying public interest is that there should be finality in litigation and a party should not be vexed in the same matter twice.
b. Both the bringing of a claim and the raising of a defence in later proceedings may without more amount to abuse if the court is satisfied that it should have been raised in earlier proceedings but is not necessarily abusive.
c. There is no need to identify an additional element such as a collateral attack on a previous decision or dishonesty although where they exist abuse will be more obvious.
d. There will rarely be a finding of abuse unless the latter claim involves unjust harassment of a party.
e. The onus is on the party alleging abuse.
f. A lack of funds would not ordinarily excuse a failure to raise in earlier proceedings that which is subsequently raised but is not irrelevant, particularly where this appears to have been caused by the party against whom the claim is made.
g. The question to ask is whether given all the circumstances a party's conduct is an abuse.
h. In answering that question the court must make a broad merits based judgment taking into account the public and private interests involved, all the facts of the case and focussing on whether, in all the circumstances, a party is misusing or abusing the process of the court by raising before it an issue which could have been raised before.
Discussion
Conclusion