Allied Irish Bank v Rayne

A bankrupt is generally divested of any interest in property and liability connected with the bankruptcy estate. Accordingly, the bankrupt lacks standing to appeal a judgment affecting that estate, including the judgment on which the bankruptcy order was based. Any challenge to that judgment must be pursued in the bankruptcy by the trustee or Official Receiver. The bankruptcy court operates as a screen against hopeless appeals and vexatious challenges to creditors’ claims. An application to reinstate permission to appeal will therefore fail where the proposed grounds are matters which only the trustee may pursue.

Allied Irish Bank obtained possession of a public house and later judgments against Lilian Rayne for damages and interest. A statutory demand was served, and a bankruptcy order was made on 4 May 2000. The bankruptcy order was upheld on appeal by His Honour Judge Behrens on 25 January 2001.

Rayne applied to reinstate an application for permission to appeal against the bankruptcy decision. She also sought permission to appeal against a county court judgment dated 9 March 1999, alleging fraud, want of locus, procedural breaches, limitation and invalidity. The central issue was whether a bankrupt could pursue appeals challenging judgments affecting the bankruptcy estate.

1. Applications refused. The court refused both the application to reinstate the application for permission to appeal in the bankruptcy proceedings and the application for permission to appeal against the county court judgment.
2. Lord Justice Mummery, with whom Lord Justice Buxton agreed, applied the principle reaffirmed in Heath v Tang [1993] 1 WLR 1421. On adjudication of bankruptcy, the bankrupt is divested of the relevant interest in property and liability for debts forming part of the estate. The bankrupt therefore has no standing to appeal a judgment affecting that estate.
3. The principle applies even where the bankrupt alleges that the judgment was obtained by fraud, was made against the wrong party, followed essential procedural defects, or was statute-barred. If such grounds have merit, they must be advanced in the bankruptcy by the trustee or, where applicable, the Official Receiver.
4. The absence of an appointed trustee did not give Rayne standing. The Official Receiver was receiver of the estate, and any appeal by Rayne would in any event be liable to be stayed when a trustee was appointed.
5. Since the proposed grounds were matters Rayne was not entitled to pursue personally, reinstating the bankruptcy permission application would serve no useful purpose. The same bankruptcy deprived her of the benefit of the county court judgment and prevented her from pursuing that appeal.

• County court: Judgment for damages dated 9 March 1999.
• Bankruptcy court: Bankruptcy order made on 4 May 2000.
• Chancery Division, Newcastle District Registry: His Honour Judge Behrens dismissed Rayne’s appeal against the bankruptcy order on 25 January 2001.
• Court of Appeal (Civil Division): Applications to reinstate permission in the bankruptcy proceedings and for permission to appeal the county court judgment were refused.