Mond v Hyde & Anor [1998] EWCA Civ 1226 (16 July 1998)

IN THE SUPREME COURT OF JUDICATURE CHANI 97/0930/3
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(SIR RICHARD SCOTT V-C )
Royal Courts of Justice
Strand
London WC2
Thursday, 16 July 1998
B e f o r e:
LORD JUSTICE BELDAM
LORD JUSTICE ALDOUS
LORD JUSTICE WARD
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MOND
PLAINTIFF/APPELLANT
– v –
HYDE & ANR
DEFENDANTS/RESPONDENTS
– – – – – –
(Transcript of the handed down judgment of
Smith Bernal Reporting Limited, 180 Fleet Street,
London EC4A 2HD
Tel: 0171 421 4040
Official Shorthand Writers to the Court)
– – – – – –
MR J POWELL QC with MS L HILLIARD (Instructed by Messrs Halliwell Landau, Manchester M2 2JF) appeared on behalf of the Appellant
MR R KAYE QC with MR R RITCHIE (Instructed by the Treasury Solicitor) appeared on behalf of the Respondent
– – – – – –
J U D G M E N T
(As approved by the Court )
– – – – – –
©Crown Copyright
Thursday, 16 July 1998
J U D G M E N T
LORD JUSTICE BELDAM: The principal question raised in this appeal is whether an Official Receiver in Bankruptcy is, on grounds of public policy, immune from an action for damages at the suit of the trustee who has suffered financial loss by relying upon a negligent statement made to him by the Official Receiver in the course of the bankruptcy proceedings.
The Facts.
On 8th October 1993 the appellant, Mr Mond, accepted appointment as trustee in bankruptcy of Mr David Hood who had been adjudicated bankrupt on 12th October 1984. The 1st defendant, Mr Hyde, was an assistant official receiver in bankruptcy, appointed by the 2nd defendant, the Department of Trade and Industry. Until Mr Hood (“the bankrupt”) was automatically discharged from bankruptcy on 29th December 1989 by virtue of the provisions of sch.11 of the Insolvency Act 1986, Mr Hyde (“the O.R.”) continued as trustee of the bankrupt’s estate by virtue of s.93(4) of the Bankruptcy Act 1914 (“the Act”). The estate, however, contained no assets. On 29th July 1989 the bankrupt entered into an agreement with Mr John Walton and Mr Rupert Webb by which they agreed to provide £100,000 for the implementation of a scheme for marketing time shares in property in Tenerife. The bankrupt claimed that he had been misled and that Mr Walton and Mr Webb were in breach of agreement. He wished to take proceedings against them but by virtue of s.38(a) of the Act his right of action vested in the O.R. According to the bankrupt, on 5th February 1990 he spoke to the O.R. on the telephone asking whether he wished to pursue the claim for the benefit of his creditors but, he said, the O.R. disclaimed all right to the claim. There were no funds in the estate with which to finance an action. Having obtained legal aid on 14th September 1990 the bankrupt launched proceedings against Mr Walton and Mr Webb in the Manchester District Registry claiming damages. On 18th July 1993 judgment was given in favour of the bankrupt for damages to be assessed. In the course of subsequent negotiations, on 16th September 1993 Mr Walton and Mr Webb offered to settle the bankrupt’s claim by payment of a sum of £50,000 and his costs of the action on an indemnity basis provided the O.R. confirmed that he disclaimed all right to the £50,000. This led the bankrupt’s solicitors to approach the O.R. to confirm that he made no claim to any part of the £50,000. The O.R.’s reaction was to seek a contribution for the benefit of the estate and at this stage he approached the appellant to act as trustee. The appellant contacted the bankrupt’s solicitor who told him that the O.R. had waived all claims in respect of the action some years earlier. The appellant then telephoned the O.R. who told him that he:
“… knew of no waiver”
and that:
“As far as I am concerned the estate is entitled to the benefit of the proceeds of the judgment.”
On 14th October 1993 the O.R. sent the appellant a copy of a letter written to the bankrupt’s solicitors in which he stated:
“In any event I cannot conceive of any circumstances in which I would have given, on the strength only of information provided by the debtor in a telephone conversation, an assurance that the trustee in bankruptcy would not have a claim in a right of action which vested prior to the discharge.”
To resolve the position, on 3rd December 1993 the bankrupt issued proceedings claiming a declaration that the appellant as trustee in bankruptcy had no interest in the action which Mr Walton and Mr Webb had offered to settle or in any moneys payable arising from the action, that any such moneys were not vested in him as trustee and that he was, by succession to the official receiver as trustee ex officio, estopped from making any such claim. In reliance on the statements made by the O.R., the appellant retained solicitors to defend the proceedings brought by the bankrupt. The O.R. confirmed to the appellant’s solicitors in a letter dated 27th January 1994 that he could not conceive of any circumstances in which he would have given on the strength only of information provided by the bankrupt in a telephone conversation an assurance that the trustee in bankruptcy would not have a claim in a right of action which vested prior to the bankrupt’s discharge. Later, for the purposes of the proceedings, the O.R. in an affidavit said:
“As stated in my letter dated 14th October 1993 I have absolutely no recollection of any conversation with Mr Hood as alleged or at all. Notwithstanding this, under no circumstances would I have given any such assurance that a Trustee in Bankruptcy or the Official Receiver would have no claim to the benefits of the action based upon merely a telephone conversation with the bankrupt.”
The bankrupt’s claim for a declaration was heard by Mr Recorder Leeming Q.C. On 22nd November 1994 he made the declaration he sought, stating he was quite satisfied that the O.R. in his capacity of trustee had disclaimed all right to the proceeds of the bankrupt’s claim. He also held that the evidence he had heard satisfied him that the O.R. was at the time very much overburdened with his general caseload of insolvency work and that his overriding attitude to the bankrupt’s particular administration was that it was a very old one with no funds in hand and scant prospect of creditors wishing to contribute to the cost of fighting to pursue the claim asserted by the bankrupt.
Accordingly he gave judgment against the appellant who was ordered to pay the bankrupt’s costs of the proceedings. As trustee, the appellant was personally liable for the costs he had incurred on behalf of the estate subject to the valueless right of indemnity from the estate.
The bankrupt’s costs came to the very considerable sum of £113,855. The estate’s costs amounted to £79,880. When in reliance on the O.R.’s assurances the appellant undertook to defend the proceedings brought against him by the bankrupt, he did not expect that the costs of deciding this simple issue would escalate to these levels. The explanation, we were told, was that the bankrupt instructed specialist leading counsel, resulting in an extended hearing lasting seven days.
In these proceedings the appellant in his personal capacity as trustee claims that the statements made to him by the O.R. were negligent, misleading and wrong and that he has suffered loss in consequence. He measures the loss in the amount of the costs he has had to pay both to his own solicitors and to the bankrupt. In his capacity as trustee for the estate of the bankrupt he claims damages equivalent to the value of the claim against Mr Walton and Mr Webb on the ground that the official receiver ought not to have disclaimed the trustee’s right to the benefit of that chose in action. On receipt of the appellant’s statement of claim and before serving a defence, the 2nd defendant, the Department of Trade and Industry (“the D.T.I.”) on its own and the O.R.’s behalf applied to the court by summons for an order under O.18, r.19 of the Rules of the Supreme Court that the claims be struck out as disclosing no reasonable cause of action or as being frivolous and vexatious and an abuse of the process of the court; further that they were brought without the leave of the Bankruptcy Court.
The defendants’ applications were heard by the Vice-Chancellor who on 22nd January 1997 ordered that the appellant’s actions be dismissed and that he should pay the costs.
The Vice-Chancellor’s Decision.
The respondents argued that the appellant’s personal claim for damages should be dismissed on several grounds. In the forefront of the application they argued that the statements made by the O.R. were made in his capacity as a potential witness and as a witness in the legal proceedings brought by the bankrupt against the appellant. The O.R. was entitled to immunity from suit in respect of such statements. The Vice-Chancellor held that the O.R. was only entitled to such immunity in respect of the statement he supplied to the appellant’s solicitors and the statement he had made in his affidavit. He was not entitled to immunity in respect of the first two statements made to the appellant before the bankrupt’s proceedings began or were contemplated for they were not made as a witness or potential witness in the proceedings.
The respondents also argued that the O.R. owed no duty to the appellant in respect of the statements. They were made in the performance of a public duty which could not give rise to a private law cause of action. The O.R. was under a public duty under the Bankruptcy Rules 1952 (“the rules”) to supply information in respect of the bankrupt, his estate and affairs and any statements made by him were made pursuant to those rules. In the context of the statutory framework, it would be unfair to hold that any duty of care arose which could give rise to an action at common law. The Vice-Chancellor held that there was nothing unfair in imposing such a duty. A retiring trustee of a private trust handing over to his successor would be expected to answer the successor’s requests for information about the trust and its affairs and would be expected to exercise due care in doing so. If through negligence he misled his successor and loss resulted to the trust’s estate, there could be no defence to a common law action in negligence. The Vice-Chancellor also rejected an argument based on r.330(1) of the rules that because the O.R. was entitled to recover any damages, costs and expenses to which he might be put in proceedings, it would merely result in circularity to hold the O.R. liable at common law in an action brought against him by the trustee for a negligent mis-statement. The Vice-Chancellor held that it did not follow that rule 330 relieved the O.R. from liability to third parties. On the contrary it was implicit in the rule that there could be such a liability. Thus the Vice-Chancellor held that the statutory framework taken as a whole was not inconsistent with the imposition on the O.R. of a common law duty of care when supplying information to a trustee pursuant to r.351(4).
It was then argued that the statements relied upon by the appellant were not negligent. The Vice-Chancellor agreed. He considered that the statement made by the O.R. to the appellant on 13th October that he knew of no waiver and that as far as he was concerned the estate was entitled to the benefit of the proceeds of the judgment and the statements in the letter of 14th October that he had no recollection of any telephone conversation with the bankrupt on 5th February 1990, and that:
“In any event I cannot conceive of any circumstances in which I would have given, on the strength only of information provided by the debtor in a telephone conversation, an assurance that the trustee in bankruptcy would not have a claim in a right of action which vested prior to the discharge”,
amounted in effect to no more than a statement by the O.R. that he had no recollection of the telephone conversation. Further he held that the particulars of negligence pleaded did not sufficiently support a claim that the statements were negligently made.
The respondents also argued, and the Vice-Chancellor accepted, that there was no sufficient causal relationship between the statements made by the O.R. and the loss which the appellant had suffered by reason of the defence of the proceedings and becoming personally liable for the costs of them. The decision to defend the proceedings was taken by the appellant with full knowledge that the issue in the proceedings depended on the reliability of the evidence and of the risks involved. Accordingly his financial loss did not result from any negligent default on the O.R.’s part in making the two statements but from the appellant’s own decision to contest the proceedings and on the judge’s view of the relative credibility of the two crucial witnesses.
In a further submission the respondents alleged that an undertaking by the appellant in a letter of 14th July 1994 to be personally liable for any costs ordered to be paid, should bar his claim because he thereby waived his right to claim any reimbursement from the O.R.. Though the Vice-Chancellor said he did not need to deal with this argument, nevertheless he was not persuaded that the letter prevented the appellant from bringing his claim.
In summary, therefore, the Vice-Chancellor held that the O.R. was immune from action in respect of the statements he had made as a potential witness in the proceedings brought by the bankrupt and that the pleadings in this action did not disclose grounds on which the court could hold that the earlier statements made by the O.R. were negligent; further that the loss claimed by the appellant was not caused by reliance on the negligent statements.
The claim brought on behalf of the estate was also dismissed. It was based on the assertion that the O.R., in breach of a duty of care owed to the creditors of the bankrupt’s estate, had failed to take reasonable care to preserve the assets. He had negligently waived the right to the proceeds of the bankrupt’s action and so deprived the estate of this asset. The Vice-Chancellor pointed out that at the time of the waiver there were no assets in the bankrupt’s estate to fund an action and the refusal by the O.R. to prosecute the speculative action could not be criticised. A further objection to this claim was that if it succeeded damages would constitute an asset of the estate and since under r.330(1) of the Rules the O.R. would be entitled to any damages and costs out of the estate, the benefit to the estate would be nil. The claim would simply be circular.
The appellant had also argued that the Department of Trade and Industry was vicariously responsible for the actions of Mr Hyde and would not be entitled to the benefit of r.330(1). Accordingly the appellant should at least be allowed to pursue the claim against that defendant. The Vice-Chancellor rejected this argument on the ground that the rule of public policy which required employers to be responsible for wrongs done by their employees in the course of their employment would not justify the result. Further he considered that no benefit could accrue to the creditors from the proceedings even if the claim succeeded because any benefit would be swallowed up by the appellant’s right in these circumstances to be indemnified from the estate.
Thus the Vice-Chancellor struck out both actions and from his decision the appellant appeals.
By respondent’s notice the O.R. and the D.T.I. seek to uphold the Vice-Chancellor’s decision on the additional grounds:
(i) That all the statements made by the 1st defendant relied on by the plaintiff were covered by the rule known as witness immunity from suit.
(ii) The Vice-Chancellor should have held that the 1st defendant did not owe the plaintiff any duty of care at common law in supplying information to the plaintiff in the circumstances of this case.
(iii) That the judge should have held that by reason of the letter of 14th July 1994 the plaintiff had waived any right he might otherwise have had to claim in the action against the defendants and
(iv) That the leave of the Bankruptcy Court had not been obtained by Mr Mond before bringing the action on behalf of the estate.
The last ground was argued before, but not decided by, the Vice-Chancellor. In any event Mr Roger Kaye Q.C. for the respondents accepted that at most the court would have stayed the proceedings until such consent could be obtained and that it was not a ground on which the court would have struck out the action.
Conclusion
As indicated at the outset of this judgment, the principal question raised in the case is whether the O.R. is entitled to immunity from suit in respect of the statements made to the appellant. But since the existence of a cause of action depends upon proof that the statements were negligent and were relied upon by the appellant and that he has suffered loss by doing so, I should first deal with those aspects of the case.
Were the allegations of negligence sufficiently pleaded in the Statement of Claim ?
There were two grounds on which the Vice-Chancellor held that they were not. First he construed the statements as amounting to no more than an assertion by the O.R. that he had no recollection of any such telephone conversation as the bankrupt alleged and said that there was no material on which the court could find that this statement was negligent. Secondly the particulars of negligence did no more than state that the O.R. had not taken sufficient care in making the statement. The question for the court seems to me to be whether, assuming that he had waived all right to the claim against Mr Walton and Mr Webb but had no recollection whether he had done so or not, a responsible and careful official receiver could have said that he knew of no waiver, that as far as he was concerned the estate was entitled to the benefit of the proceeds of the judgment and that he could not conceive of any circumstances in which he would have given an assurance that the trustee in bankruptcy did not have a claim to the right of action. In the course of argument Mr Kaye repeatedly emphasised that at one stage in the course of the appellant’s enquiries the O.R. had said he had no recollection of the telephone conversation and that the statements relied on by the appellant amounted to no more than this. The Vice-Chancellor accepted this submission. If this was all that the O.R. had said, I agree there would be no ground for holding that statement to be negligent. In my view the statements made were far more emphatic. Their import and the meaning intended to be conveyed was that the official receiver had not waived any right to the proceeds of the cause of action. In the context in which the statements were made they were obviously intended to be relied upon by the appellant and, if the true position was as Mr Kaye asserted that the O.R. had no recollection whether he had waived his right or not, he ought not to have made such positive and unqualified statements. The true position seems to have been that at the material time he had a very heavy work load and if there was a basis for the findings of Mr Recorder Leeming Q.C. set out in para. 22 of the amended statement of claim, such categorical assertions were not statements to be expected of the reasonably careful official receiver in circumstances in which he must have known they would be relied upon by the trustee when he accepted appointment. Other features of the case apart, I would have held that the statement of claim did disclose a cause of action for negligent mis-statement.
Were the particulars of negligence adequate?
This was not a case in which the respondents could have sought particulars before defence on the ground that they could not plead to the statement of claim or were embarrassed in doing so. In my judgment the claim should not have been struck out on the grounds of inadequate particulars without giving the appellant the opportunity to remedy any deficiency in the pleadings.
Did the O.R.’s statements cause the appellant’s loss?
The Vice-Chancellor concluded that the claim should be struck out because it was clear that the appellant had not relied upon the negligent statements in reaching a decision to defend the claim brought by the bankrupt against him but upon his own judgment. It is a feature of almost every claim for damages for loss suffered by reliance upon a negligent mis-statement that the plaintiff will have reached a decision to take a particular course of action and in doing so will have relied in part upon his own judgment. That judgment, however, will clearly be founded upon the statement on which he relies and the fact that his decision to adopt the course of action he did could be regarded as a concurrent cause of his loss does not absolve the negligent statement from its effect in producing the result. As Lord Shaw of Dunfermline pointed out in Leyland Shipping Co. -v- Norwich Union Fire Insurance Society [1918] AC 350:
“The chain of causation is a handy expression, but the figure is inadequate. Causation is not a chain, but a net. At each point influences, forces, events, precedent and simultaneous, meet; and the radiation from each point extends infinitely. At the point where these various influences meet it is for the judgment as upon a matter of fact to declare which of the causes thus joined at the point of effect was the proximate and which was the remote cause.
What does “proximate” here mean? To treat proximate cause as if it was the cause which is proximate in time is, as I have said, out of the question. The cause which is truly proximate is that which is proximate in efficiency. That efficiency may have been preserved although other causes may meantime have sprung up which have yet not destroyed it, or truly impaired it, and it may culminate in a result of which it still remains the real efficient cause to which the event can be ascribed.”
In any event I would not regard this ground as justifying the dismissal of the appellant’s claim in limine. He ought in my opinion to be allowed to prove the influence which the O.R.’s statements had upon his decision and to establish that they were an effective cause of his loss. I would for these reasons have allowed the appellant’s appeal on those issues.
Did the O.R. owe a duty at law to take care in statements which he made to the trustee in bankruptcy?
The Vice-Chancellor on the arguments advanced to him held that he did. On those arguments I would have reached the same conclusion; but the question is intimately connected with the question whether the O.R. is entitled to immunity from action.
In support of his cross-appeal Mr Kaye argued that the Vice-Chancellor was wrong to distinguish between the statements made by the O.R. before the bankrupt’s proceedings were contemplated, and the statements made by him as a potential witness in those proceedings.
In the course of argument the thrust of the O.R.’s claim to immunity changed from reliance purely upon the rule that a witness is immune from suit for statements made in preparation for and in giving evidence in court to a wider claim for immunity based upon the public policy that all those who take part in the administration of justice should be immune from suit in respect of their actions and statements in the course of such proceedings or in preparation for them. The wider claim arises from the O.R.’s position as the official receiver and the appellant’s as trustee in the bankruptcy.
It seems to me convenient to consider the question of immunity first for, if on either ground the O.R. is exempt from suit, there would be no duty enforceable at law on which the appellant could found his claim.
Immunity from Action
Proceedings in bankruptcy are proceedings in a court of law, see s.96-105 and s.108-124 of the Bankruptcy Act 1914 (now replaced by the provisions of the Insolvency Act 1986).
The position of the O.R.
The official receiver is a key figure in the bankruptcy proceedings. By s.7 of the Bankruptcy Act 1914, the official receiver is constituted receiver of the property of the debtor on the making of a receiving order. By s.70 official receivers of debtors’ estates are appointed and removable by, and act under the general authority and directions of, the D.T.I. but they are also declared to be officers of the courts to which they are respectively attached. Further under s.72 the official receiver’s duties relate both to the conduct of the debtor and to the administration of his estate. When acting as trustee he can exercise all the powers of a trustee and can administer oaths to those who swear affidavits in proceedings under the Act. Under s.73 it is the official receiver’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 D.T.I. to do so. Under s.74 his duty is to act as interim receiver of the debtor’s estate pending the appointment of a trustee and to act as trustee during any vacancy in the office. By s.74(3) he is accountable to the D.T.I.. It is further to be noted that in his capacity as trustee the official receiver is empowered to do any acts necessary or expedient to be done in the execution of the office of trustee but by s.79 he has to have regard to any directions that may be given by resolution of the creditors or by the Committee of Inspection. On the hearing of an application by the bankrupt for discharge, the official receiver plays a significant role. By s.26(2) the court is bound to take into account a report by the official receiver as to the bankrupt’s conduct and affairs, including his conduct during the proceedings. Under r.320, 321 and 323 of the Rules, he can apply to the court for directions in relation to any specific matters arising under the bankruptcy and by r.322 his reports are taken as prima facie evidence of “matters contained therein”. Throughout 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.
The duties of the trustee.
The powers and duties of official receivers and trustees are further expanded by Part IV of the Rules. From r.317 it is clear that an assistant official receiver is an officer of the court and similarly subject to the directions of the D.T.I.:
“… may represent the official receiver in all matters including proceedings in court.”
Bankruptcy proceedings begin with the issue of the petition. Thereafter under the provisions of the Act and the Rules the official receiver and trustee on appointment act as officers of the court both in connection with proceedings “in court” and in their powers, duties and functions in the bankruptcy proceedings generally.
The question for consideration is whether the O.R. in making the statements relied on by the appellant in the present case is liable to be sued in negligence.
The general rule.
It is now well settled that in a court of law solicitors, counsel, witnesses and judges are immune from action for statements made in the course of the proceedings, even if made maliciously. In Munster -v- Lamb [1883] 11 QBD 588, Brett M.R. at 604 referred to the reason for the rule stated by Pigott C.B. in Kennedy -v- Hilliard 10 IR C.L. Rep. 195 at 209 who had said:
“I take this to be a rule of law, not founded (as is the protection in other cases of privileged statements) on the absence of malice in the party sued, but founded on public policy, which requires that a judge, in dealing with the matter before him, a party in preferring or resisting a legal proceeding, and a witness in giving evidence, oral or written, in a court of justice, shall do so with his mind uninfluenced by the fear of an action for defamation or a prosecution for libel.”
The Master of the Rolls continued:
“Into the rule thus stated the word “counsel” must be introduced, and the rule may be taken to be the rule of the common law. That rule is founded upon public policy. With regard to counsel, the questions of malice, bona fides, and relevancy, cannot be raised; the only question is, whether what is complained of has been said in the course of the administration of the law. If that be so, the case against a counsel must be stopped at once. No action of any kind, no criminal prosecution, can be maintained against a defendant, when it is established that the words complained of were uttered by him as counsel in the course of a judicial inquiry, that is, an inquiry before any court of justice into any matter concerning the administration of law.”
Lord Justice Fry cited from the judgment of the Court of Exchequer Chamber in Dawkins -v- Lord Rokeby 8 QB 255 at 263 in which the court said:
“The authorities are clear, uniform and conclusive, that no action of libel or slander lies, whether against judges, counsel, witnesses or parties, for words written or spoken in the ordinary course of any proceeding before any court or tribunal recognized by law.”
And later to a passage at 268 in the same judgment in which the court said:
“But another ground on which this action must fail, and which embraces the great variety of cases in which statements are made, whether orally or in writing, are privileged and protected, is that by reason of the occasion on which they are made, the making of them is not such a publication as will support an action for libel or slander. On this ground, whatever is said, however false or injurious to the character or interests of a complainant, by judges upon the bench, whether in the superior courts of law or equity or in county courts, or sessions of the peace, by counsel at the bar in pleading causes, or by witnesses in giving evidence, or by members of the legislature in either House of Parliament, or by ministers of the Crown in advising the sovereign, is absolutely privileged, and cannot be inquired into in an action at law for defamation.”
At page 607 Lord Justice Fry said:
“It is not a desire to prevent actions being brought in cases where they ought to be maintained that has led to the adoption of the present rule of law; but it is the fear that if the rule were otherwise, numerous actions would be brought against persons who were merely discharging their duty. It must always be borne in mind that it is not intended to protect malicious and untruthful persons, but that it is intended to protect persons acting bona fide, who under a different rule would be liable, not perhaps to verdicts or judgments against them, but to the vexation of defending actions … Nothing could be more inconvenient than to allow actions of this description to be brought. 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. Every consideration of convenience is against the action being brought …”
In Watson -v- M’Ewan [1905] AC 480 the privilege which protected a witness from actions founded on statements made in his evidence was extended to cover statements made to a client and solicitor in preparing a proof for trial. At 486 Lord Halsbury L.C. said:
“… as to the immunity of a witness for evidence given in a Court of justice, it is too late to argue that as if it were doubtful. By complete authority, including authority of this House, it has been decided that the privilege of a witness, the immunity from responsibility in an action when evidence has been given by him in a Court of justice, is too well established now to be shaken. Practically I may say that in my view it is absolutely unarguable – it is settled law and cannot be doubted.”
At 487 he said:
“It appears to me that the privilege which surrounds the evidence actually given in a Court of justice necessarily involves the same privilege in the case of making a statement to a solicitor and other persons who are engaged in the conduct of proceedings in Courts of justice when what is intended to be stated in a Court of justice is narrated to them – that is, to the solicitor or writer to the Signet.”
And at 488 he said:
“Under those circumstances it seems to me that it comes within the whole mischief of the supposed liability of a witness for what he had stated. I do not care whether he is what is called a volunteer or not; if he is a person engaged in the administration of justice, on whichever side he is called his duty is to tell the truth and the whole truth. If he tells the truth and the whole truth, it matters not on whose behalf he is called as a witness; in respect of what he swears as a witness he is protected – that cannot be denied – and when he is being examined for the purpose of being a witness he is bound to tell the whole truth according to his views otherwise the precognition, the examination to ascertain what he will prove in the witness-box, would be worth nothing.”
In Royal Aquarium and Summer and Winter Garden Society -v- Parkinson [1892] 1 QB 431 at 442, Lord Esher M.R. in speaking of the absolute privilege applying to statements made in judicial proceedings said:
“It is applicable to all kinds of Courts of justice; but the doctrine has been carried further; and it seems that this immunity applies wherever there is an authorised inquiry which, though not before a Court of justice, is before a tribunal which has similar attributes. In the case of Dawkins -v- Lord Rokeby the doctrine was extended to a military Court of inquiry. It was so extended on the ground that the case was one of authorized inquiry before a tribunal acting judicially, that is to say, in a manner as nearly as possible similar to that in which a Court of justice acts in respect of an inquiry before it. This doctrine has never been extended further than to Courts of justice and tribunals acting in a manner similar to that in which such Courts act.”
The question whether an official receiver acting in the course of the liquidation of a company is similarly entitled to immunity from suit was considered in Burr -v- Smith & Ors . [1909] 2 KB 306
The court held that an action could not be brought against an official receiver for a statement made in his capacity as official receiver and contained in a report made under the Companies (Winding-up) Act 1890. After setting out the relevant statutory provisions, Fletcher Moulton L.J. said:
“I have no doubt that official receivers are officers of the Court which has to deal with the liquidation of companies, that is to say, of this Court and that, in cases of the compulsory liquidation of a company, as these were, the official receiver is acting as an officer of the Court in performing the statutory duty imposed on him by s.3 of the First Schedule. It would be a perilous duty, if the contention for the plaintiff were well founded, because it necessitates his stating with the greatest frankness all the matters which he may have ascertained of the kind referred to by the section. In doing that he is performing his duty as an officer of the Court in connection with an inquiry which may, in my opinion, rightly be termed a judicial inquiry for the purposes of the law of libel. I have no doubt that the performance of such a duty is a matter which is absolutely privileged.”
Farwell L.J. at page 315 said:
“It seems to me that the officers so appointed, and by whom these reports have to be prepared, are treated by the Act as performing their duty as officers of the Court. Until I heard the suggestion of counsel for the defendants during the argument, I was not aware that it had ever been doubted that officers appointed under s.27 are officers of the Court though they are appointed by the Board of Trade. They are appointed to assist the Court in the execution of the Act, and in my opinion the defendant Smith, in making the report which he did was acting as an officer of the Court, and was as such entitled to absolute protection from any action for libel.”
Should the immunity there recognised extend to the statements made by the O.R. in the circumstances of this case ?
By their nature bankruptcy proceedings tend to be protracted with substantial parts of the procedure being carried out under the control and direction of the court rather than at a formal hearing or proceeding. Moreover, in carrying out his functions as an officer of the court, the official receiver will have to embark on many enquiries and make many statements which are not formally part of the proceedings. In Burr -v- Smith & Ors . (supra) the statement made by the official receiver in the report made under the Companies (Winding-Up) Act 1890 was clearly a statement made not only in the course of, but for the purpose of, the proceedings. So in bankruptcy proceedings if a statement is made by an official receiver not only in the course of, but for the purpose of, court proceedings it must prima facie come within the absolute protection from action. The rule, being a rule of public policy, requires proper justification and I bear fully in mind the recent observations of this court in the case of Waple -v- Surrey County Council [1998] 1 WLR 860 that the court should be slow to extend the scope of absolute privilege given to statements made in the course of judicial or quasi-judicial proceedings. Whenever the court denies a right of redress to a citizen who has suffered substantial loss on the grounds of public policy, it must be recognised that it is 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 can only be justified on strong rational grounds. Arguments of policy expressed in apprehension that to permit a particular action might give rise to a flood of such actions or that the denial of a particular action is necessary to uphold the integrity and efficiency of courts of law need more detailed analysis.
In Spring -v- Guardian Assurance Plc [1995] 2 AC 296 Lord Lowry at p.326 said of a claim to immunity by an employer who had given a negligent reference:
“This argument falls to be considered on the assumption that, but for the overriding effect of public policy, the plaintiff who is in the necessary proximate relation to a defendant will be entitled to succeed in negligence if he proves his case. To assess the validity of the argument entails not the resolution of a point of law but a balancing of moral and practical arguments. This exercise could no doubt produce different answers but, for my own part, I come down decisively on the side of the plaintiff.
On the one hand looms the probability, often amounting to certainty, of damage to the individual, which in some cases will be serious and may indeed be irreparable … Against this prospect is set the possibility that some referees will be deterred from giving frank references or indeed any references … I … believe that the courts in general and your Lordships’ House in particular ought to think very carefully before resorting to public policy considerations which will defeat a claim that ex hypothesi is a perfectly good cause of action. It has been said that public policy should be invoked only in clear cases in which the potential harm to the public is incontestable, that whether the anticipated harm to the public will be likely to occur must be determined on tangible grounds instead of on mere generalities and the burden of proof lies on those who assert that the court should not enforce a liability which prima facie exists.”
The reasons given in Burr -v- Smith (supra) were:
(1) That the duty exercised by the official receiver necessitated him stating with the greatest frankness all the matters that he may have ascertained referred to in the section and
(2) That he is performing a duty as an officer of the court in connection with an enquiry which might rightly be termed a judicial enquiry.
Having regard to the extensive enquiries which an official receiver would be required to make for example on reporting to the court under s.26(2) of the Act as to the bankrupt’s conduct and affairs, including his conduct during the proceedings, and having regard to the facts referred to in s.26(3), it seems to me that the need for the official receiver to be able to state with the greatest frankness all the matters he may have ascertained is of itself a sufficient justification for holding that statements made in the course of such a report should be entitled to absolute privilege and the official receiver immune from action in respect of them. The administration of justice would be as seriously impeded if this were not the case as in the case of statements made which form part of an investigation carried out by the Serious Fraud Office, see Taylor & Anr. -v- The Serious Fraud Office & Ors . [1997] 4 AER 887. In that case a letter written by an investigating lawyer employed by the Serious Fraud Office and a file note made by her came into the hands of the plaintiff who alleged that they were defamatory. The court dismissed the plaintiff’s action. Kennedy L.J. stated that the plea of absolute immunity was entitled to succeed since the documents were prepared by a person as part of the process of investigating a crime or possible crime and the administration of justice would be seriously impeded if investigators could not operate freely without fear of becoming involved in litigation. It is to be noted that by r.322 of the Rules reports filed when the applications referred to in that rule are made to the court by the official receiver in accordance with his powers or duties under the Act are stated to be prima facie evidence of the matters contained in the report.
In the present case Mr Powell Q.C. for the appellant argued that it could not be a rule of public policy in the interests of the administration of justice that an officer such as the official receiver should be immune from suit if he made a careless statement since the policy of the law must surely be to encourage the use of all due care in such statements.
The answer to this submission is, I think, to be found in the observation of Fry L.J. in Munster -v- Lamb (supra) who said at 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 official receiver 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, counterbalances any suggestion that to grant immunity from action might encourage laxity or carelessness.
Mr Powell argued that while the Bankruptcy Act regime provided for control over an official receiver, that means of control would not have availed the appellant because he was at no material time aware of the inaccuracy of the relevant statements. Thus the court should discount the ability of the court to control the actions of the official receiver in deciding whether public policy required immunity in respect of such statements. Further the court should also distinguish between rules established to protect witnesses and others from action for defamatory statements from rules necessary to protect against negligent statements. Mr Powell pointed to the distinction between such statements given by Lord Woolf in Spring -v- Guardian Assurance plc [1995] 2 AC 296 at 346 where he said:
“… while both in negligence and defamation it is the untrue statement which causes the damage, there is a fundamental difference between the torts. An action for defamation is founded upon the inaccurate terms of the reference itself. An action for negligence is based on the lack of care of the author of the reference.”
The context from which this passage is taken is Lord Woolf’s examination of the suggestion that the availability of a remedy without having to prove malice would or might open the floodgates to actions against employers who give references:
“To make an employer liable for an inaccurate reference, but only if he is careless, is, I would suggest, wholly fair. It would balance the respective interests of the employer and employee. It would amount to a development of the law of negligence which accords with the principles which should control its development …It would also recognise that while both in negligence and defamation it is the untrue statement which causes the damage, there is a fundamental difference between the torts. An action for defamation is founded upon the inaccurate terms of the reference itself. An action for negligence is based on the lack of care of the author of the reference.”
I do not find this undoubted distinction a sufficient justification to reject a claim to absolute immunity from action. The essential quality of each statement is that it is incorrect and in many instances will be made as a result of a failure to take reasonable care to establish the true facts. The rule according immunity from action in respect of statements made by judges, officers of the court, witnesses, counsel, etc., which are defamatory does not depend on the cause of action to which they might give rise. It ought not, in my view, to be circumvented by seeking to rely on a different cause of action and if that is so the rule would apply whether the negligent statement was defamatory or not.
There are, as it seems to me, essential differences between a claim for absolute privilege and a claim for qualified privilege. In the first place the public interest served is wider and more extensive. In the second the statements made in the course of legal proceedings are made pursuant to a duty to assist in the administration of justice. This does not mean that there is less need to exercise care in the making of statements. On the contrary, in general the maker of the statement may be expected from the nature of his duty to feel the pressing need to exercise care. Next, as has been pointed out, he is performing a duty under the control of the court and from his office is bound to make the statement. For these reasons I do not think that the nature of the cause of an action to which the statement gives rise is significant in the case of absolute immunity from suit accorded to those who are taking part in the administration of justice.
To be afforded immunity from suit in respect of the statement 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 under r.351(4) of the Rules:
“… 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.
Mr Powell next argued that, even if the O.R. was entitled to immunity from suit, nevertheless such immunity did not extend to the D.T.I. who, it was contended in para. 5 of the amended statement of claim, were as the O.R.’s employer responsible and liable for his conduct and statements made in the course of his employment as assistant official receiver.
Although an assistant official receiver is appointed by the D.T.I. pursuant to r.317 of the Rules, he is declared to be an officer of the court and, subject to the directions of the D.T.I., may represent the official receiver in all matters, including proceedings in court. The official receiver is appointed by the D.T.I. and acts subject to its direction and control. If the D.T.I. was to be regarded in general as the employer of the official receiver and assistant official receiver, the statement in the rules that he is to be subject to the directions and control of the D.T.I. would be unnecessary. I do not think that the relationship between the O.R. and the D.T.I. is that of master and servant or that on this ground the D.T.I. is liable for statements made by an official receiver or assistant official receiver when carrying out their duties under the Act. If, however, an official receiver or assistant official receiver is carrying out actions approved by or under the control of the D.T.I., the question of the vicarious liability of the D.T.I. could depend on different considerations. For example, where there is no committee of inspection (as in the present case) any act or thing or any direction or permission authorised or required to be done under the Act or given by the committee may be done or given by the D.T.I. on the application of the trustee. The trustee’s power to defend any action or other legal proceeding relating to the property of a bankrupt under s.56 of the Act is exercisable with the permission of the committee of inspection and thus in the present case with the permission of the D.T.I.. By r.328 of the Rules, where there is no committee of inspection, any functions of the committee which devolve upon the D.T.I., i.e. by virtue of s.20(10), may subject to the directions of the board be exercised by the official receiver.
It is my understanding that they were so exercised in the present case and that in the conventional way the appellant sought the consent of the official receiver for example for the incurring of costs though any such consent was limited to a sum of £30,000. Does the fact that the official receiver on behalf of the D.T.I. authorised the appellant to defend the proceedings render the Department vicariously liable for loss incurred by the trustee? I do not think it does. The D.T.I. is exercising powers which would otherwise be exercised by the committee of inspection. The general rule is that if a trustee in bankruptcy unsuccessfully brings or defends an action, he is personally liable for costs. Normally where there are assets in the estate the trustee is entitled to payment of his costs and charges out of the estate. There is no provision under the Act or the rules for the D.T.I. to be liable or for the trustee to be entitled to any indemnity other than an indemnity from the estate. In my view to hold the D.T.I. vicariously liable for a tort committed by the official receiver in the execution of his duties is contrary to the scheme of the Act and to the position of the official receiver as an officer of the court.
Accordingly I would reject the submission that the D.T.I. is vicariously liable for statements made by the O.R.. In any event, if the O.R. is immune from action, I cannot see how the appellant could establish a liability which would fall to be met vicariously by the D.T.I.. Notwithstanding my view of the legal position, I find it unattractive that a responsible Department of State should leave an individual to bear a loss of upwards of £200,000 as a result of his having accepted appointment on the faith of the statements made by an officer subject to its directions who has been required to undertake an excessive work load leading to a lack of proper care in the performance of his duties.
Did the plaintiff need the leave of the court to commence the proceedings?
Although Mr Kaye contended that the proceedings brought by the appellant were brought without the consent of the court, he conceded that this would not have been a ground for striking out the proceedings but merely for staying them until consent had been obtained. In view of the decision I have reached on other aspects of the appeal, it is unnecessary to consider Mr Powell’s interesting argument that no leave was required to bring the proceedings in the present case. None of the provisions of the Act require the court to treat proceedings issued without leave as void. On the contrary it is well settled that leave can be given to continue proceedings which have been begun without leave. Equally it is quite clear from the judgments in the case of Ex Parte Reynolds [1885] 15 QBD 169 that any power to restrain the bringing or continuance of proceedings has to be found in the terms of the Act. Those provisions, if applicable, are to be found in s.7 and s.105. In my view, in its natural construction s.7 does not apply. The first part clearly applies to creditors to whom the debtor is indebted and in my view the words “or shall commence any action or other legal proceedings unless with the leave of the court and on such terms as the court may impose” are restricted to actions and proceedings brought by a creditor against a debtor. Section 105 is of wider scope and contains discretionary powers of the kind referred to in the case of Re Reynolds (supra). Had it been necessary to do so, I would have been inclined to accept Mr Powell’s submission that s.105 does not impose a requirement for leave but sets out powers which a court having jurisdiction in bankruptcy can exercise. The principle power where a receiving order has been made in the High Court is to order that an action pending in another division and brought or continued by or against the bankrupt be transferred to the bankruptcy court. Further, until an application to stay the proceedings on the ground that the action should be heard by the court with jurisdiction in bankruptcy, it appears to me that the action would be free to proceed. However, as I have said, it is unnecessary for me to express a concluded view.
Did the plaintiff waive all right of actions against the O.R. by the letter of 14th July 1994?
Finally I would deal with the submission made by Mr Kaye that by writing the letter of 14th July 1994 to the O.R. the appellant was precluded from bringing proceedings in respect of the costs. It will be recalled that in that letter he said:
“I confirm that in the event of an adverse costs order made against me I will be personally responsible in connection therewith.”
At that time he was relying upon the statements made by the O.R. and had no reason to believe that they were other than correct and carefully made. To amount to a waiver of a right of action, any statement relied on must be clear and unequivocal and made with the intention of absolving the opposite party from all liability in respect of the matter referred to. I cannot so read the letter of 14th July and would reject Mr Kaye’s submission based upon it.
The claim made on behalf of the estate.
Finally I turn to the claim made by the appellant on behalf of the estate of the bankrupt that the O.R. was negligent in the decision which he took when on behalf of the estate he waived all right to the chose in action represented by the claim made by the bankrupt against Messrs. Walton & Webb.
The Vice-Chancellor held, in my view correctly, that this claim was bound to fail. At the time of the waiver there were no assets in the estate. The official receiver in the capacity of trustee had a discretion whether to adopt or take-over proceedings and a decision to disclaim was clearly within the range of his discretion. It was a decision which could not possibly be regarded as unreasonable or as taken without due care for the interests of the creditors in the circumstances. Merely because in the result it turned out that the bankrupt could establish a valid claim does not mean that in disclaiming the right to pursue it the official receiver as trustee acted without proper care.
For these reasons I would dismiss this appeal.
LORD JUSTICE ALDOUS: I agree.
LORD JUSTICE WARD: I also agree.
ORDER: Appeal dismissed with costs; leave to appeal to the House of Lords refused. 

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