PROCEEDINGS BROUGHT BY BANKRUPT WERE “DOOMED TO FAIL”: AN IMPORTANT REMINDER

Part of the judgment of Mr Justice Griffiths in Lambert v Forest of Dean District Council [2020] EWHC 2854 (Admin) provides an important reminder that someone who has been declared bankrupt may have no standing at all to bring subsequent proceedings.

 

“A person who conducts proceedings without standing is doomed to fail and the proceedings themselves are an abuse of process. That does not mean they are a nullity. But lack of standing is fatal to the success of the proceedings and they will not be allowed to continue once the point has been taken and decided.”

THE CASE

The appellant brought an appeal by way of case stated from a decision of the Magistrates’ court that he was liable to pay rates.  The appeal was unsuccessful on its merits. The judge also found that the appellant had no right to bring the proceedings having been declared bankrupt.

THE JUDGMENT ON THIS ISSUE

Having determined the appeal on its merits the judge also accepted that the appellant had no right to bring the proceedings.

    1. The Council also objects to Mr Lambert bringing the proceedings at all, on the basis that the right to challenge the Liability Orders vested in Mr Lambert’s trustee in bankruptcy, and so he was not at liberty to make the 2019 Application in his personal capacity, or to pursue it subsequently in this appeal by way of case stated. The Council argues that he does not have standing to pursue this appeal.
    2. Since the appeal was fully argued on all points, I have decided the appeal (against Mr Lambert on Q1) on its merits before considering the threshold objection to his standing. However, the objection to standing is a substantive point and I will deal with that too.
    3. This question is not the same as the nullity issue I have already discussed, but there is an overlap. The provisions considered by Nugee J in Munday v Hilburn [2014] EWHC 4496 apply. A person who conducts proceedings without standing is doomed to fail and the proceedings themselves are an abuse of process. That does not mean they are a nullity. But lack of standing is fatal to the success of the proceedings and they will not be allowed to continue once the point has been taken and decided.
    4. Section 306 of the Insolvency Act 1986 provides:
“(1) The bankrupt’s estate shall vest in the trustee immediately on his appointment taking effect or, in the case of the official receiver, on his becoming trustee.
(2) Where any property which is, or is to be, comprised in the bankrupt’s estate vests in the trustee (whether under this section or under any other provision of this Part), it shall so vest without any conveyance, assignment or transfer.”
    1. The bankrupt’s estate is, for these purposes, defined by section 283(1) to include “all property belonging to or vested in the bankrupt at the commencement of the bankruptcy”.
    2. Property, for these purposes, is defined in section 436 to include
“…things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property”.
  1. The right to bring proceedings challenging the Liability Orders (assuming it to exist) would be a thing in action. It is, moreover, an interest arising out of, or incidental to, property. It is a right based on the Liability Orders, and therefore existed at the date of Mr Lambert’s bankruptcy. Therefore, it vested in Mr Lambert’s trustee in bankruptcy as soon as he was appointed. It follows that it does not vest in Mr Lambert and proceedings brought upon it by Mr Lambert are doomed to fail and an abuse of process, following Munday v Hilburn [2014] EWHC 4496 at paras 16-20 and 45.
  2. Mr Lambert’s attempts to annul his bankruptcy order have failed, and so annulment is not a route now open to him in order to remedy the position. The final refusal by Trower J on 2 October 2020 of his renewed application for permission to appeal closes that off definitively.
  3. The discussion of Warren J in R (Singh, a bankrupt) v Rose (trustee in bankruptcy) at paras 15-49 to which I was referred by Mr Waller seems to me to confirm rather than refute that conclusion. It also cites the observation of Hoffmann LJ in Heath v Tang [1993] 1 WLR 1421 at 1427B: “The bankruptcy court acts as a screen which both prevents the bankrupt’s substance from being wasted in hopeless appeals and protects creditors from vexatious challenges to their claims.”
  4. The cause of action claimed by Mr Lambert in the present case does not fall within the exceptions in section 283(2), (3), (3A) and (5) of the Insolvency Act 1986. Nor is it within the category of personal causes of action referred to by Hoffmann LJ in Heath v Tang [1993] 1 WLR 1421 at 1423A-C.
  5. Consequently, Mr Lambert does not have standing to pursue this appeal.