Home Information Cases Docker v Rose (2013)

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Docker v Rose (2013)

Summary

Where the conduct of the sale of a property pursuant to a consent order had passed from the wife of a bankrupt to his trustee in bankruptcy, the trustee was entitled, on the correct interpretation of the consent order, to a smaller amount from the proceeds of sale.

Facts

The appellant (D) appealed against a decision dismissing her application for a declaration that she was entitled to 30 per cent of the net proceeds of sale of a property.

The proceedings arose out of the bankruptcy of D's husband. The respondent (R) was his trustee in bankruptcy. R brought proceedings in relation to the property which D had purchased in her own name, alleging that that had involved a transaction at an undervalue. The proceedings were compromised by a consent order. The schedule to the order provided that D agreed to pay R under para.1.1 the sum of £200,000, and under para.1.2 whichever was the greater of either (para.1.2.1) 70 per cent of the net proceeds of sale after certain deductions or (para.1.2.2) £425,000 from the proceeds of sale without deduction. The order gave D six months to sell the property, failing which the conduct of the sale would pass to R under para.6.4 "provided that the provisions under paragraph 1.2.1 shall apply". The sum of £200,000 was paid by D in accordance with para.1.1. The property was not sold by D within six months and the conduct of the sale passed to R who sold the property. He transferred £33,283 to D on the basis that he was entitled to £425,000 from the proceeds of sale. D claimed the further sum of £95,000 on the basis that the provisions of para.1.2.1 applied so that R was only entitled to 70 per cent of the net proceeds of sale under para.1.2.1 and not the larger sum of £425,000 under para.1.2.2. The district judge held that para.1.1 provided that R would receive a minimum of £625,000 and, looking at the terms and effect of the agreement as a whole, para.6.4 was not sufficiently clear to make such a significant change in the amount R was to receive.

Held

The district judge's decision flew in the face of the clear wording of para.6.4.1. That provided that on a sale by R the provisions of para.1.2.1 applied. That was not difficult to understand or to apply. The plain and obvious effect was to remove the preamble to para.1.2.1 and the minimum payment guaranteed by para.1.2.2. What was not clear was why that agreement had been made since it had the odd result that R got more when D sold and D got more when R sold. That was surprising but was not so absurd as to displace the obvious meaning and drive the court to find another meaning, Investors Compensation Scheme Ltd v West Bromwich Building Society (No.1) [1998] 1 W.L.R. 896 and Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 W.L.R. 2900 followed. In fact R could not put forward any different wording except by importing the whole of para.1.2, which on the plain wording was not to apply. It could be said that paragraph 6.4 was silent as to the other provisions of para.1, but on the other hand it provided expressly that para.1.2.1 was to apply on a sale by R. The court was not concerned on the instant appeal with issues of mistake and rectification.

Appeal allowed

Chancery Division
Peter Smith J
Judgment date
31 October 2013
References

LTL 1/11/2013

Practice areas