Sands & Anor v Monem & Ors

Where a bankrupt seeks permission to appeal an order restoring property to the bankruptcy estate, the court may consider whether the applicant has any real economic interest in the outcome. A person with no economic interest in the English bankruptcy will generally lack a real prospect of successfully challenging the order, particularly where the economically interested parties accept it. Permission to appeal may be refused even though a technical issue concerning security remains unresolved. An agreed costs order cannot ordinarily be challenged by a freestanding appeal.

The trustees in the bankruptcy of Hassam Mohammed Monem obtained orders in the Brighton County Court setting aside transfers of a property to his wife as unlawful preferences. The bankrupt sought an extension of time and permission to appeal. He argued that his wife was a secured creditor because an equitable charge had been transferred to her, relying on Morley v Morley (1858) 25 Beav. 253.

The appeal concerned the extension of time, the bankrupt’s standing and prospects of appeal, and whether a separate appeal lay against the agreed costs order.

1. The time for appealing was extended under CPR 3.9. The delay was short, promptly remedied, caused by the solicitor’s research mistake rather than the bankrupt, and caused no identified procedural inconvenience or prejudice.

2. Permission to appeal was refused. The appeal arose in an English bankruptcy. The recipient, whose property interest was directly affected, did not wish to appeal, and no other person with a real economic interest in the estate sought to challenge the substance of the order.

3. The essential question was whether the bankrupt had a real prospect of establishing standing to challenge an order accepted as correct by those with a real economic interest in the bankruptcy. On the facts, a person with no economic interest in the outcome could not do so merely because foreign proceedings against him might continue regardless of the English bankruptcy’s result.

4. The technical issue concerning the effect of the Instrument of Donation and the correctness of Morley v Morley was therefore not determinative. The unresolved undervalue issue was likewise immaterial to permission.

5. Permission to appeal the costs order alone was also refused. The order had been agreed and could not be the subject of a freestanding appeal. In any event, requiring the bankrupt to bear the bulk of the costs was just because the proceedings had been caused by his repeated misstatements of the true position.

Brighton County Court: District Judge Gamba ordered that the 2006 and 2007 transfers be set aside as unlawful preferences.

High Court (Chancery Division): Time for appealing extended under CPR 3.9, but permission to appeal and permission to appeal the agreed costs order refused.