Hunt v Peasegood

A bankrupt has no locus standi to challenge the judgment or order forming the basis of the bankruptcy. Any such challenge belongs to the trustee in bankruptcy. The statutory powers to review or annul a bankruptcy order must be exercised judicially, with regard to finality, costs, res judicata and abuse of process. Review is exceptional and requires a compelling fresh case together with manifest injustice if relief is refused. An unsuccessful challenge to a statutory demand cannot ordinarily be repeated against the bankruptcy order without a material change of circumstances.

Mrs Peasegood was made bankrupt on 16 March 1998 following an unsatisfied statutory demand based on an order taxing costs at £10,375.47. She applied to the High Court to quash the bankruptcy order, set aside the statutory demand and set aside the costs order, alleging that the taxation had not been properly completed.

His Honour Judge Boggis accepted those criticisms and treated the costs order as a nullity. He consequently quashed the bankruptcy order and set aside the statutory demand. The trustee in bankruptcy appealed. The central issues were whether Mrs Peasegood had standing to challenge the underlying order and whether the judge had lawfully exercised any statutory or inherent discretion.

1. Appeal allowed. The order made on 10 February 2000 was set aside. The costs order of 24 February 1997 and the bankruptcy order of 16 March 1998 were restored.
2. Per Mummery LJ, with Ward LJ agreeing and Otton LJ agreeing, a bankrupt is divested of interest in property and liability for debts. The right to challenge a judgment affecting the bankrupt estate therefore vests in the trustee. Mrs Peasegood had no locus standi to attack the taxation order or the steps founded on it.
3. The review power under section 375 of the Insolvency Act 1986 must be exercised judicially. It is not a means of bringing a late appeal. It should be used sparingly, only where a compelling fresh case is shown and refusal would cause manifest injustice.
4. The annulment power under section 282 is also subject to res judicata and abuse of process. A debtor who has unsuccessfully challenged a statutory demand should not normally re-run the same arguments against the bankruptcy order. A change of circumstances is required to justify a further challenge.
5. Judge Boggis failed to identify the jurisdiction being exercised and failed to take account of the extensive history of previous challenges. His order was therefore made without a proper judicial exercise of discretion.

• Court of Appeal (Civil Division): Allowed the trustee’s appeal, set aside the order of 10 February 2000, restored the costs order of 24 February 1997 and restored the bankruptcy order of 16 March 1998.
• High Court, Chancery Division, Birmingham District Registry: His Honour Judge Boggis quashed the bankruptcy order and set aside the statutory demand and costs order.
• Stoke-on-Trent County Court: A bankruptcy order was made on 16 March 1998 following an unsatisfied statutory demand dated 22 May 1997.