Ongoing litigation and bankruptcy proceedings

Ongoing litigation and bankruptcy proceedings
The Court of Appeal decision in Pathania v Adedeji offers a timely reminder of the effect that bankruptcy proceedings can have on ongoing litigation, especially where the bankrupt is the claimant, as well as giving an overview of what constitutes an abuse of process.

Original news

Pathania v Adedeji and others [2014] EWCA Civ 681

The Court of Appeal dismissed an appeal by a defendant who was seeking to have an order made against him struck out on the basis that the claimant had been made bankrupt during the course of the litigation, had not disclosed the bankruptcy order and it was therefore questionable whether he had standing to continue with the claim.

What happened in the case?

The appellant, Dr Adedeji, was a defendant in proceedings issued by Mr Pathania. The proceedings were (broadly speaking) issued as Dr Adedeji owed money to Mr Pathania advanced to him under a loan agreement and the repayment of the loan had become due. The proceedings were contested as Dr Adedeji asserted he had been induced by Mr Pathania to sign the loan documents. Eventually judgment was given in favour of Mr Pathania—albeit a separate claim to the monies had arisen from Barclays Bank, this was not part of the appeal, nor is it strictly relevant to this analysis.

During the course of the proceedings, but six months before Mr Pathania obtained judgment against Dr Adedeji, Mr Pathania was made bankrupt. This was not disclosed to the court or to the other parties to the proceedings.

After judgment was made against Dr Adedeji, he made an application to appeal the order. The grounds for the appeal were not on the basis of any merits in his defence, but on the basis that a bankrupt claimant cannot maintain legal proceedings under his own name and must appoint a trustee in bankruptcy to do so. Dr Adedeji asserted that Mr Pathania lacked capacity to continue with the claim which would vitiate the outcome of the proceedings.

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