MOND v. THE UNITED KINGDOM
Inadmissible
Matti Pellonpää;Nicolas Bratza
The applicant, David Mond, is a United Kingdom national, born in 1945 and living in Cheshire. He is represented before the Court by Mr Andrew Livesey, a lawyer practising in Manchester. The facts of the case, as submitted by the parties, may be summarised as follows. The applicant is a chartered accountant and a licensed insolvency practitioner. Having accepted an appointment as trustee in bankruptcy of the estate of a bankrupt on 8 October 1993, his appointment was confirmed by the Secretary of State on 13 October 1993. The purpose of his appointment was to ensure that substantial court damages due to the bankrupt were transferred to him as trustee for the benefit of the bankrupt’s creditors. He claims that on accepting the appointment the Assistant Official Receiver (“AOR”) had led him to believe, in a conversation on 13 October and in a letter of 14 October 1993 addressed to the bankrupt’s solicitors, a copy of which was sent to the applicant, that he (the AOR) had not waived the interest of the creditors in the award. However, the bankrupt was of the view that the AOR had in fact waived all claims over the award of damages and therefore commenced proceedings in December 1993 against the applicant, as trustee, seeking a declaration that the applicant had no interest in the award. The applicant defended the proceedings because of the AOR’s assurances of October 1993. During the proceedings, the AOR confirmed the statements made in October 1993 in a letter to the applicant’s solicitors dated 27 January 1994 and in an affidavit filed for the purposes of the proceedings. The bankrupt was successful. The judge held that he was satisfied that the AOR had disclaimed all right to the proceeds of the bankrupt’s claims and that the evidence satisfied him that the AOR was at the time very much overburdened with his general caseload of insolvency work. The bankrupt’s costs (approximately 114,000 pounds sterling (“GBP”)) were awarded against the applicant. The applicant’s own costs were in the region of GBP 80,000. The applicant was personally liable for the costs and, though he had a claim against the estate, this did not assist him as there were no other assets in the bankrupt’s estate. The applicant commenced proceedings in his own name for negligent misstatement against the AOR and against the Department of Trade and Industry (“DTI”) as allegedly vicariously liable for the tort of the AOR. The defendants applied to the High Court to have the proceedings struck out as disclosing no cause of action or as being frivolous and vexatious and an abuse of process. They mainly argued that the statements of the AOR were made in his capacity as a potential witness and as a witness in proceedings (those of the bankrupt against the applicant) and that the AOR was entitled to immunity in that respect. On 22 January 1997, the High Court found that the AOR was entitled to “immunity from suit” as a witness in respect of statements he had made as a potential witness in the bankrupt’s proceedings against the applicant. While that immunity did not apply to the statements of October 1993 as they were made prior to those proceedings even being contemplated, the pleadings did not disclose that those statements were negligent and there was, in any event, no causal link between those statements and the applicant’s loss. On 16 July 1998, the Court of Appeal rejected the applicant’s appeal. Giving the principal judgment of the court, Beldam LJ. identified the main question as being whether the AOR was entitled to immunity from suit in respect of the statements made to the applicant. However, since the existence of a cause of action depended on proof that the statements were negligent and were relied upon by the applicant and that he had suffered loss by doing so, Beldam LJ examined those matters first. He found that the statement of claim did disclose a cause of action for negligent misstatement and that the claim should not have been struck out on the basis of a lack of a causal link between the statements and the applicant’s loss. The next question identified by Beldam L.J. was whether the AOR owed a duty at law to take care in statements which he made to the trustee in bankruptcy. He noted that the High Court judge had found that the AOR owed such a duty and stated that, if the same arguments had been advanced to him, he would have similarly concluded. However, he considered the question to be “intimately connected with the question whether the [AOR] is entitled to immunity from action”. It therefore seemed convenient to consider the question of immunity first because if the AOR was exempt from suit (either as a witness as argued in the High Court or as an officer of the court as argued before the Court of Appeal), “there would be no duty enforceable at law on which the appellant could found his claim”. Beldam LJ noted that bankruptcy proceedings were proceedings in a court of law, that throughout those proceedings the Official Receiver (“OR”), and consequently an AOR, was an officer of the court both in connection with the proceedings “in court” and as regards his powers, duties and functions in the bankruptcy generally. The question was whether the AOR in making the statements relied on in the present case was “liable to be sued in negligence”. It was considered “well settled” that in a court of law, solicitors, counsel, witnesses and judges were “immune from action for statements made in the course of the proceedings, even if made maliciously”. As to whether an OR acting in the course of the liquidation of a company was similarly entitled to immunity from suit, reference was made to the case of Burr v. Smith ([1909] 1 K.B. 306) where the court held that a libel action could not be brought against an OR for a statement made in his capacity as OR and contained in the official report submitted under the companies’ legislation for the purpose of company liquidation proceedings, the performance of such a duty being absolutely privileged. As to whether that immunity should extend to the statements in the present case (the statements made by an AOR to the trustee in bankruptcy in October 1993 about the AOR’s interest in the award), Beldam LJ reiterated that the courts should be slow to extend the scope of absolute privilege. He observed that, whenever a court denied a right of redress to a citizen who had suffered substantial loss on the grounds of public policy, it had to be recognised that the court was making a choice between the common interest and harm to the individual “on political rather than legal grounds”. A denial of the right to seek justice could only be justified on strong rational grounds and any policy arguments (such as a “floodgates” argument) demanded detailed analysis. He noted that the court in the Burr v. Smith case gave two reasons for the application of the immunity in that case: the duty of the OR to report with the greatest frankness all relevant matters ascertained by him and the fact that he was performing his duties as an officer of the court in connection with an inquiry which could be rightly considered judicial. In the present case, Beldam LJ considered that the need for the greatest frankness was, of itself, sufficient justification for holding that statements made in the course of such a report should be entitled to absolute privilege and that the OR should be immune from action in respect of them. He also considered that the administration of justice would be seriously impeded if this were not the case, as in the case of statements which formed part of an investigation carried out by the Serious Fraud Office (Taylor v. Director of the Serious Fraud Office [1997] 4 All. E.R. 887). In this regard, he did not find the undoubted distinction between an action for defamation and an action for negligence sufficient to reject a claim to absolute immunity from action in the latter case. Beldam LJ concluded: “To be afforded immunity from suit in respect of the statements made, the official receiver must be acting in the course of the bankruptcy proceedings and within the scope of his powers and duties. In the preparation of his reports, which are to be accepted as prima facie evidence, statements which he makes are it seems to me as much in need of immunity as statements made by a witness in the preparation of a proof of evidence or in the course of investigating offences of fraud. In the present case the official receiver was acting pursuant to his duty ... “to give [the trustee in bankruptcy] all such information respecting the bankrupt and his estate and affairs as may be necessary or conducive to the true discharge of the duties of the trustee”. The getting in of the assets of the bankrupt’s estate for the purpose of being distributed to the creditors is part of the bankruptcy proceedings and accordingly I would hold that in making the statements on which reliance is placed by the appellant the official receiver is entitled to immunity from suit.” He went on to reject the contention that the DTI (the other defendant in the proceedings) was vicariously liable for statements made by the AOR and held that, in any event, given the AOR’s immunity from suit, the applicant could not establish a liability which would fall to be met vicariously. In so concluding, Beldam LJ specifically responded to the argument that the law should encourage the use of all due care in the making of such statements and that the use of immunities did not have that effect. He replied: “The answer to this submission is, I think, to be found in the observation of Fry L.J. in Munster v. Lamb, 11 Q.B.D. 588, 608: “A court of justice has control over all proceedings before it: it has very great powers, to which I need not particularly refer, with regard to witnesses, solicitors and counsel; the court can always check improper conduct. If such actions were allowed, persons performing their duty would be constantly in fear of actions.” Thus the need to encourage the greatest frankness of expression by the [OR] and the power of the court to control or check breaches of duty by him, for example in failing to take proper care in making statements in the reports, counterbalance any suggestion that to grant immunity from action might encourage laxity or carelessness.” Leave to appeal to the House of Lords was refused on 18 January 1999. The Official Receiver (OR) is appointed by the Secretary of State. Because of his statutory office, the OR is an officer of the courts to which he is attached. He is therefore answerable to the courts for carrying out the courts’ orders and for fulfilling his duties under law. When an individual is declared bankrupt, the OR has initial responsibility for the bankrupt’s estate. He can in turn appoint an Assistant Official Receiver (AOR) who can represent the OR in all matters. The trustee in bankruptcy (the person in whom the bankrupt’s property initially vests) is, generally speaking, the OR or the AOR when there is little property to administer in relation to the bankrupt’s estate. Where a substantial asset does emerge, it is the practice for the OR or the AOR to request a licensed insolvency practitioner to accept an appointment as the trustee in bankruptcy. Once accepted, the appointment of the trustee in bankruptcy will be made by the Secretary of State. As described by Beldam LJ in the present case (judgment cited above), the OR is a key figure in bankruptcy proceedings, which are regarded as proceedings in a court of law. Amongst other functions, under section 73 of the Bankruptcy Act 1914, it is the OR’s duty to investigate and report on the debtor’s conduct, take part in his public examination and, in the case of a fraudulent debtor, to assist in his prosecution if directed by the Department of Trade and Industry to do so. Under rule 351(4) of the 1952 Rules, the OR is also under a duty to give the trustee in bankruptcy all such information respecting the bankrupt and his estate and affairs as may be necessary or conducive to the true discharge of the duties of the trustee. “Throughout the proceedings in bankruptcy, therefore, the official receiver as an officer of the court will be required to make reports and statements on which the court, the trustee, committee of inspection, creditors and others will rely.”