Cowey v Insol Funding Ltd

A bankrupt generally lacks standing to appeal in his own name against a judgment enforceable only against the bankrupt estate vested in the trustee. The bankrupt’s remedy is to challenge the trustee’s decision under section 303(1) of the Insolvency Act 1986 and seek the trustee’s intervention or substitution. A bankrupt may appeal personal orders made against him, including a distinct possession or costs order, but cannot use such an order to reargue the substance of a declaration affecting only the estate. Where no free-standing costs challenge exists, the substantive appeal and consequential costs challenge must both be dismissed.

The claimant obtained a declaration that a 2007 charge created an equitable charge over the defendant’s beneficial interest in property. The defendant was subsequently made bankrupt, and that interest vested in the Official Receiver as trustee in bankruptcy. The Official Receiver took no active part in the proceedings and indicated that he would abide by the result.

The defendant appealed the declaration and its consequential indemnity costs order. The central issue was whether a bankrupt had standing to pursue an appeal concerning property vested in the trustee, and whether the costs order created a separate appealable issue.

1. The appeal was dismissed, including the costs element. The declaration in favour of the claimant remained in force.
2. Applying Heath v Tang [1992] 1 WLR 1421, a bankrupt has no right to appeal in his own name from a judgment enforceable only against the estate vested in the trustee in bankruptcy. The bankrupt’s potential interest in any surplus is protected through the statutory procedure under section 303(1) of the Insolvency Act 1986.
3. James v Rutherford-Hodge [2005] EWCA (Civ) 1580 did not assist the defendant. That decision recognised a distinct right to challenge a personal possession order and its consequential costs, but applied the standing rule to an appeal concerning the bankrupt’s beneficial interest. The present case contained no separate personal order of that kind.
4. The defendant’s grounds challenged only the substance of the declaration. He could not convert the consequential costs order into a free-standing costs appeal when no ground challenged costs independently of the substantive issues. The court therefore declined to examine the merits.
5. The trustee’s willingness to abide by the result did not give the defendant standing. Any objection that the trustee should have been joined should have been taken below. Only the trustee could pursue the substantive appeal.

• High Court (Chancery Division): dismissed the appeal from the order declaring the claimant’s equitable charge, including the consequential indemnity costs order.