Claim against bankrupt — Defence that entitled to beneficial interest in property — Judge finding no beneficial interest — Whether bankrupt having standing to appeal against that decision — Appeal dismissed
The respondent was the appellant’s ex-wife and the registered proprietor of their former matrimonial home, where the appellant lived with his new wife. The respondent brought a claim for possession, which the appellant defended on the ground that he owned at least part of the beneficial interest in the property as a result of his contributions to the purchase price. Since the appellant was bankrupt, his trustee in bankruptcy was also joined as a party to those proceedings. The judge made an order for possession and directed that the property be sold forthwith. He did not find that the appellant had any beneficial interest, but he did hold that certain sums were owed and should be paid to the trustee in bankruptcy out of the proceeds of sale. He ruled that the trustee should, in the meantime, have a lien over the property to secure those sums.
The appellant accepted that he should give up possession. However, he appealed against the finding that he had no beneficial interest in the property, and he claimed entitlement to a 65% share. The trustee did not support that appeal, and was content with the lien. An issue arose as to whether, in those circumstances, the appellant had standing to bring the appeal.
Held: The appeal was dismissed.
Since the appellant was bankrupt, any interest that he might have had in the property had transferred to the trustee in bankruptcy. The appellant’s sole interest was in having the estate administered in accordance with the bankruptcy code and in receiving a share in the final distribution if any funds remained once his creditors had been paid. He was not entitled to pursue litigation against a third party in respect of property or assets that vested in the trustee in bankruptcy. There was no justification for departing from the general principle that a bankrupt could not appeal in his or her own name against a judgment that was enforceable only against the estate held by his or her trustee in bankruptcy. The appellant could not bring an appeal in his own name even on the basis that were the original judgment to be overturned, he would have sufficient funds to pay his creditors and annul the bankruptcy: Heath v Tang [1993] 1 WLR 1421 applied. The policy was to protect the substance of the estate against hopeless and vexatious appeals. The sole remedy of a bankrupt in cases where a trustee refused to pursue litigation to recover an asset would be to seek an order under section 303(1) of the Insolvency Act 1986, in which case the court would have to have regard to the interests of the creditors. Nor was it possible for the trustee to assign any claim that he or she might have to the appellant. In any event, the judge’s decision was correct on the merits.
Max Thorowgood (instructed by Law, Hurst & Taylor, of Westcliff-on-Sea) appeared for the appellant; Victoria Jones (instructed by BTMK Solicitors, of Southend-on-Sea) appeared for the trustee on bankruptcy; the respondent appeared in person.
Sally Dobson, barrister
