In the matter of George Davidson

Permission to appeal from a High Court order made on appeal from a county-court bankruptcy decision requires an important point of principle or practice, or another compelling reason for the Court of Appeal to entertain the appeal.

Annulment under the Insolvency Act 1986 is available only on the statutory grounds existing when the bankruptcy order was made, or where the bankruptcy debts and expenses have since been paid or secured. An unappealed judgment debt cannot ordinarily be reopened in annulment proceedings.

The applicant was adjudicated bankrupt after a statutory demand based on an unsatisfied judgment debt obtained in the High Court. He applied under section 282(1) of the Insolvency Act 1986 to annul the bankruptcy order, contending that it ought not to have been made.

The Carlisle County Court dismissed the application. His Honour Judge Behrens, sitting in the High Court, dismissed the appeal on 17 August 2000. The applicant then sought permission to appeal to the Court of Appeal. The central issues were whether the statutory permission threshold was met and whether the proposed appeal had any realistic basis in the law governing annulment.

Application refused. Lord Justice Chadwick concluded that the proposed appeal raised neither an important point of principle or practice nor any other compelling reason for the Court of Appeal to entertain it.

1. Under section 55(1) of the Access to Justice Act 1999 and CPR 52.13, permission was required because the proposed appeal was from a High Court order made on an appeal from the county court. Parliament had imposed a statutory hurdle which the applicant had to surmount.
2. Section 282(1) of the Insolvency Act 1986 permits annulment only where, on grounds existing when the bankruptcy order was made, the order ought not to have been made, or where the bankruptcy debts and expenses have since been paid or secured. The application was advanced only on the first ground.
3. The bankruptcy petition was founded on a High Court judgment debt which had never been successfully appealed. For practical purposes that judgment had to be treated as unchallengeable in the present proceedings. The bankruptcy court therefore had no basis for treating the judgment debt as unavailable to support the bankruptcy order.
4. The matters raised in the notice of opposition did not justify an adjournment or refusal of the bankruptcy order. Any substantive challenge to the debt, including the alleged partnership and bare-trust arrangements, should have been raised in the original action.
5. The High Court judge had also been entitled to conclude that a trustee who permits his name to be used as a partner becomes personally liable on contracts made by the partnership, subject to a right of indemnity against the beneficiary. Annulment was distinct from rescission; the creditor had not sought rescission under section 275 of the Insolvency Act 1986.

Lord Justice Chadwick dismissed the application. The formal order was: Application refused.

• Court of Appeal (Civil Division): In [2001] EWCA Civ 298, Lord Justice Chadwick refused permission to appeal.
• High Court, Chancery Division: His Honour Judge Behrens dismissed the appeal from the county-court decision on 17 August 2000.
• Carlisle County Court: Deputy District Judge Molyneux dismissed the application to annul the bankruptcy order on 24 June 1999.