Muhammed v Robert & Anor

A bankrupt generally lacks standing to challenge a pre-bankruptcy judgment against her. That challenge belongs to the trustee in bankruptcy, because the bankruptcy order divests the bankrupt of personal liability for the relevant debts. A default judgment is not set aside under CPR 13.2(c) merely because the defendant asserts a complete defence. That provision concerns claims satisfied before judgment. The defendant must instead rely on the discretionary power under CPR 13.3 and show a real prospect of successfully defending the claim, together with prompt action. Where the challenge is made substantially out of time, and the evidence does not establish a realistic defence or explain the delay, permission to appeal should be refused.

Bola Muhammed sought permission to appeal against several county court orders arising from a First Credit debt claim. These included a 2007 default judgment, a 2008 charging order, a 2011 bankruptcy order, a 2013 possession and sale order, and a 2014 warrant for possession of her flat. She also sought permission to appeal out of time.

She alleged that no debt had been owed to Lloyds TSB Bank and therefore no valid assignment to First Credit had occurred. The central issues were whether CPR 13.2(c) required the default judgment to be set aside, whether she had a real prospect of defending the claim and had acted promptly, and whether she had standing to challenge the judgment after the bankruptcy order.

1. Permission to appeal out of time refused. The applicant had to show realistic prospects of setting aside the default judgment and a proper explanation for the delay. She failed on both matters.
2. CPR 13.2(c) inapplicable. CPR 13.2(c) concerns a claim which was wholly satisfied before judgment. An assertion that the defendant had a complete defence because no debt existed is not a case in which the claim had been satisfied. It falls, if anywhere, within the discretionary jurisdiction under CPR 13.3.
3. No realistic prospect of defending the claim. The evidence did not establish that the debts did not exist or that the assignments were invalid. The notices of assignment and repeated communications sent to the applicant’s residential address provided significant contrary evidence.
4. Lack of promptness. The applicant had allowed numerous procedural steps to occur without challenging the underlying debt, the default judgment or the bankruptcy proceedings. This independently justified refusing permission to appeal out of time.
5. Bankrupt’s lack of standing. Following Heath v Tang [1993] 1 WLR 1421, as applied in Royal Bank of Scotland v Farley [2006] BPIR 638 and treated as correct in James v Rutherford Hodge [2005] EWCA Civ 1580, a bankruptcy order removes the bankrupt’s personal interest in challenging a judgment debt. The right to appeal or seek to set aside the judgment rests with the trustee in bankruptcy, including where the judgment founded the bankruptcy petition.
6. The application was dismissed. The court would have refused it even if the standing objection had not applied.

• High Court (Chancery Division): On appeal from orders made by district judges in the Bow County Court and Central London County Court, the court refused permission to appeal and permission to appeal out of time, and dismissed the application.