Marya v Southall Properties Ltd

Under Insolvency Act 1986, section 282, annulment of a bankruptcy order may be sought on distinct grounds. A debtor must show either that an existing ground meant the order ought not to have been made, or that the bankruptcy debts and expenses have been paid or secured to the court’s satisfaction. Assets exceeding liabilities alone do not satisfy the latter ground. Proper evidence and payment or security of debts properly due are required. Permission to appeal should be refused where the proposed grounds have no realistic prospect of success.

The bankruptcy order was made on 18 October 1999. Mr Marya applied to the Kingston County Court for annulment, but District Judge Sturdy refused the application. He appealed to the High Court, relying on pending or proposed claims against the petitioning creditor and asserting that his assets exceeded his liabilities. Mr Lewison QC treated the further counterclaim as extremely speculative and made an order on 31 March 2000. The present proceedings concerned a further submission in an application to reinstate permission to appeal against that order, rather than a direct appeal against the bankruptcy order. The central issue was whether any proposed ground had a realistic prospect of success.

Lady Justice Arden held that Mr Marya had shown no ground on which the Court of Appeal could grant permission to appeal against the order of Mr Lewison QC.

1. The application before Mr Lewison concerned the refusal to annul the bankruptcy order, not a direct appeal against the original bankruptcy order. The original cross-claim against the creditor had been dismissed, and the further counterclaim had been struck out by the time of the High Court hearing. The judge was entitled to regard that counterclaim as extremely speculative. There was no evidence supporting the asserted assets or liabilities. The proposed appeal therefore had no realistic prospect of success.
2. Insolvency Act 1986, section 282 gives the court two grounds for annulment. The first concerns grounds existing when the order was made which show that it ought not to have been made. The second concerns payment or security, to the court’s satisfaction and to the extent required by the rules, of the bankruptcy debts and expenses after the order.
3. The second ground had not been raised before Mr Lewison and had not been considered by Rix LJ. In any event, merely asserting that assets exceeded liabilities would not have been sufficient. The applicant would have needed to show that debts properly regarded as due, including at least the debt to the petitioning creditor, had been paid or secured in a manner satisfactory to the court, supported by proper evidence.
4. A fresh application under the second ground remained open in the lower court, provided appropriate evidence was available and the applicant complied with the prior permission requirement in paragraph (2) of Mr Lewison’s order.

The further submission was refused. This conclusion was additional to the earlier dismissal of the application to reinstate permission to appeal.

• Court of Appeal (Civil Division): Lady Justice Arden refused to grant permission to appeal against the order of Mr Lewison QC and found no realistic prospect of success.
• High Court of Justice, Chancery Division: Mr Lewison QC considered the appeal from the refusal of annulment and treated the further counterclaim as extremely speculative.
• Kingston County Court: District Judge Sturdy refused the application to annul the bankruptcy order made on 18 October 1999.