Bankruptcy – Enforcement of judgment – Limitation – Claimant seeking to enforce judgment debt following defendant’s discharge from bankruptcy – Defendant applying to set aside court order – Claimant applying for order to issue writ of execution – Whether judgment debt surviving discharge from bankruptcy – Whether limitation period for enforcement having run out – Defendant’s application dismissed – Claimant’s application granted
The claimant company purchased a plot of land from the defendant for £138,250 in October 2007, but then became embroiled in a boundary dispute with a neighbour. The claimant accused the defendant of making false representations during the conveyancing process as to the non-existence of any boundary dispute. The claimant settled the boundary dispute with the neighbour and then successfully claimed damages from the defendant in the sum of over £50,000, together with interest and costs. However, the defendant was adjudicated bankrupt on his own petition.
When the defendant was discharged from bankruptcy, the claimant sought to enforce the judgment in its favour. Under section 281(1) of the Insolvency Act 1986, discharge from bankruptcy operated to release debtors from all their bankruptcy debts. However, the claimant argued that the debt had survived the bankruptcy by virtue of section 281(3) which provided that “discharge does not release the bankrupt from any bankruptcy debt… incurred… by means of any fraud…”. Since the judge in the original proceedings had decided that the defendant had knowingly made false representations to the claimant, the defendant’s discharge from bankruptcy did not discharge his liability for the judgment debt. The defendant argued that the judgment debt was statute-barred.
The claimant obtained a court order on 2 October 2020 that the defendant attend court for questioning on his means. The defendant then applied to set side that order. The claimant made a further application on 8 January 2021 for permission to issue a writ of execution in relation to the same judgment debt. The two applications were heard together.
Issues arose: (i) whether the judgment debt survived the defendant’s discharge from bankruptcy; and, if so, (ii) whether the limitation period for enforcement had run out.
Held: The defendant’s application was dismissed. The claimant’s application was granted.
(1) It was clear that “fraud” in section 281(3) of the 1986 Act referred to fraud in the sense of the tort of deceit at common law. The judgment debt in the present case was a debt of the defendant provable in his bankruptcy “which he incurred in respect of … fraud … to which he was a party”, within section 281(3). That meant that the defendant’s discharge from his bankruptcy did not discharge his liability for the disputed debt. It was therefore open to the claimant to seek to enforce it against him thereafter. The former trustee in bankruptcy told the defendant’s wife that “creditors bound by the bankruptcy can take no further action against [the defendant] or the property”. The problem was that this debt survived the bankruptcy, and therefore to that extent this was a creditor not “bound by the bankruptcy”. In principle, therefore, the claimant was entitled to seek to enforce the judgment debt against the defendant.
(2) The limitation period for an action, in the sense of “legal proceedings” brought on the judgment was six years, by virtue of section 24 of the Limitation Act 1980. But an application to enforce an existing judgment debt by some form of execution was not an action bringing “a claim upon any judgment” within section 24. Thus, it was not, strictly speaking, a limitation period which mattered: National Westminster Bank v Powney [1991] Ch 339 followed.
The claimant’s original application, which sought an order for the defendant to be examined on his means, was brought under CPR Part 71 which did not contain any time limit for such an order to be obtained. But in practice no one would ask for such an order unless it would be possible thereafter to issue execution on any assets thereby discovered, which the claimant’s application notice of 8 January 2021 sought to do.
(3) The time limit for issuing execution was contained in CPR rule 83.2(3)(a) which provided that: “(3) A relevant writ or warrant must not be issued without the permission of the court where—(a) six years or more have elapsed since the date of the judgment or order…”. In Patel v Singh [2003] EWCA Civ 1938, the Court of Appeal held that the court had to start from the position that the lapse of six years might, and would ordinarily, in itself justify refusing the judgment creditor permission to issue the writ of execution, unless the judgment creditor could justify the granting of permission by showing that the circumstances of his or her case took it out of the ordinary. That might be done by showing the presence of something in relation to the judgment creditor’s own position or the judgment debtor’s position. For example, for many years the judgment debtor might be thought to have no money and so was not worth powder and shot but, on the judgment debtor winning the lottery or having some other change of financial fortune, it might become worthwhile for the judgment creditor to seek to pursue the judgment debtor.
There were a number of matters which took the present case out of the ordinary. The claimant could not in practice execute the judgment while the defendant was bankrupt from 6 August 2013 until 16 December 2014. The trustee in bankruptcy had to investigate the trust which had purportedly been created which took some time. Once the trustee in bankruptcy was appointed, the claimant was effectively isolated from the bankruptcy process, and did not know what was going on. The defendant knew that the claimant was attempting to collect the judgment debt and simply relied on the discharge from bankruptcy. There were a number of documents in which the defendant acknowledged the existence of the judgment debt during the enforcement period. Furthermore, the defendant was now of an age where he was able to access his pension policies, which did not form part of the bankrupt estate. So, he could potentially pay the outstanding judgment debt.
(4) Drawing the threads together, and considering the matter overall, it was demonstrably just for the court to give permission for the judgment, of which the defendant had been acutely aware ever since it was granted, and which had survived his discharge from bankruptcy, to be enforced against him now.
The claimant appeared by its director. The defendant appeared in person.
Eileen O’Grady, barrister
Click here to read a transcript of Jones & Pyle Developments Ltd v Rymell
