Pathania v Adedeji & Ors

Judgment

Lord Justice Floyd:

Introduction

This is an appeal from the judgment of Mr J. Bowers QC sitting as a deputy judge of the Queen’s Bench Division dated 17 December 2010, and from his consequential order. The claim before him was for repayment of sums of money lent by the claimant and respondent, Mr Rajesh Pathania, at the time a solicitor in the firm of Newland Solicitors, to the first appellant and first defendant, Dr Adedeji, for the purposes of enabling Dr Adedeji to discharge his mortgage liability in respect of a property at 99 Winsor Terrace, London E6. The judge ordered Dr Adedeji to pay to Mr Pathania the sum of £230,558.98 together with interest to the date of judgment of £55,132.02.

Unknown to the judge, a bankruptcy order was made against Mr Pathania on 29 June 2010, at a time when the proceedings against Dr Adedeji had been pending for nearly two years, but some six months before judgment. The issue in the appeal is concerned with the effect, if any, which Mr Pathania’s bankruptcy has on the judgment which he went on to obtain. There is now no challenge to the judge’s judgment on the issues which were before him. Dr Adedeji contends that we should nevertheless set the judgment aside because of what he contends to be the effect of the bankruptcy on the subsequent judgment.

The Bank of Scotland (“the Bank”) has been given permission by an earlier order to intervene in the proceedings. The Bank contends that it loaned money to Mr Pathania with which he made good the depletion of the Newland Solicitors client account from which Mr Pathania had taken or borrowed the money which he used to effect the loan to Dr Adedeji. The Bank claims to be entitled to recover this money from Mr Pathania and also to be subrogated to charges on the property. The only relief which the Bank asks for on this appeal is that any money recovered by Mr Pathania is paid into court to await the outcome of the Bank’s pending claims. Mr Pathania did not oppose that relief. The Bank is neutral as to the outcome of the appeal.

The statutory framework

On the making of a bankruptcy order the official receiver is appointed receiver and manager of the bankrupt’s estate. His estate does not thereupon vest immediately in the official receiver. This reflects the terms of section 287(1) of the Insolvency Act 1986 (“the 1986 Act”):

“Between the making of a bankruptcy order and the time at which the bankrupt’s estate vests in a trustee under Chapter IV of this Part, the offi