Court adds Trustees in Bankruptcy to s. 423 claim

In 2014, a creditor commenced a claim under section 423 of the Insolvency Act 1986 following a judgment in default she obtained against Mr Lemos. In the earlier proceedings, that creditor had obtained an asset restraining order (“ARO”) against Jersey Trustees in respect of Mr Lemos’s matrimonial home.

Mr Lemos petitioned for his own bankruptcy in March 2015 and the Jersey Trustees then sought to set aside the ARO arguing the asset was held on trust for Mr Lemos’s wife.  Eventually the Court of Appeal put a time limit on the ARO remaining in place and ordered it be discharged unless section 423 proceedings were commenced. The Joint Trustees in Bankruptcy were investigating possible claims under this section, but could not meet that deadline as they had no funding and Mr Lemos had not been co-operating with them. 

Eventually, they agreed with the creditor that subject to her obtaining leave she could commence proceedings and would consent to the Joint Trustees in Bankruptcy being joined as co-claimants at a later point. Leave to pursue the section 423 claim was obtained and the claim issued in December 2016. Four years later, the Joint Trustees in Bankruptcy then sought to be added as co-claimants, under CPR Part 19, having by then obtaining the funding they needed. 

The court added the Joint Trustees in Bankruptcy as co-claimants, determining that the test under CPR 19.2(2)(a) was whether it was “desirable” (as opposed to “necessary”) to add the relevant party. The Joint Trustees in Bankruptcy were independent office holders acting in the interest of all creditors in proceedings designed to benefit creditors generally and the judge found that that plainly made it desirable for them to be parties rather than mere witnesses.

This application is a good example of how an office holder was able to preserve a valuable ARO obtained pre-appointment and co-operate with a creditor whilst they were seeking to complete their investigations and secure funding.

Lemos v Church Bay Trust Company Ltd & Ors [2021] EWHC 1173

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