Latif & Anor v Imaan Inc

A non-party may apply under Civil Procedure Rules 1998, rule 40.9, to set aside a judgment where it has a sufficient legal interest in the matters recorded by that judgment. That interest need not be limited to a proprietary interest in property affected by the order or an insurer’s interest in defending the judgment debtor. It is sufficient that the judgment materially impedes the non-party’s ability to pursue a related claim concerning the truth or legal effect of matters established by the judgment. Where the applicant shows a sufficiently arguable evidential case contrary to the judgment, setting aside may follow. A consequential third-party debt order should also be set aside.

Lexi Holdings plc applied under Civil Procedure Rules 1998, rule 40.9, to set aside a default judgment for approximately £4.9 million obtained by Mohammed Latif and Mohammed Arif, trading as Hamra Financial Associates, against Imaan Inc.

Lexi was pursuing related Chancery proceedings alleging that the supposed loan and a charge over Imaan’s property were devices intended to prejudice Lexi’s interests. Lexi had been joined as a party to the related proceedings. The central issues were whether Lexi had a sufficient interest to challenge the default judgment and whether there was an evidential basis for doing so.

1. Application granted. Lexi Holdings was entitled to apply under rule 40.9 as a person directly affected by the judgment.
2. The authorities did not confine the relevant interest to a proprietary interest in property that was the subject of the judgment or to an insurer’s interest in taking over the defence. Those examples did not exhaust the circumstances in which a non-party may have standing.
3. Lexi had a separate and substantial interest in challenging the alleged loan. The existence or non-existence of that loan was highly material to the validity and priority of the charge which Hamra asserted over Imaan’s property. Lexi could not effectively pursue its related claim that the charge gave Hamra no proprietary interest while the default judgment remained in existence and appeared to recognise the loan.
4. There was a sufficiently arguable prima facie evidential case that no loan had been made, or that the default judgment was otherwise inconsistent with the true position. In those circumstances, setting aside the default judgment followed.
5. The interim third-party debt order, which depended on the judgment, was also set aside.