McGuire v Hayes & Storr

An appellate court should interfere with a lower court’s exercise of discretion only where it erred in principle or was plainly wrong. An application to extend time for an appeal requires consideration of both the prospects of success and the nature and circumstances of the delay. A very substantial delay may make an appeal unacceptable where the necessary evidence for a fair hearing is no longer available. A bankruptcy order remains valid unless successfully appealed. A properly served statutory demand that is neither complied with nor set aside may establish inability to pay, regardless of claimed assets. Annulment is confined to the statutory grounds in section 282(1) of the Insolvency Act 1986.

Hayes & Storr obtained a county court judgment against Mr McGuire for unpaid solicitors’ bills. A statutory demand was served, followed by a bankruptcy order on 14 November 1996. Mr McGuire did not appeal the judgment or bankruptcy order within the prescribed time.

Several years later, he sought an extension of time to appeal. The Registrar refused the application. Lloyd J refused the extension, varied the costs order and ordered further costs. Mr McGuire applied for permission to appeal. The central issues were the prospects of challenging the bankruptcy order, the effect of the delay and the relevance of his complaints about the hearing, the debt and annulment.

Application dismissed. The Court of Appeal could interfere with Lloyd J’s exercise of discretion only if he had erred in principle or was plainly wrong. Lloyd J had correctly considered the prospects of successfully appealing the bankruptcy order and the nature and circumstances of the delay.

1. The unappealed county court judgment and the statutory demand, which had not been set aside, made the bankruptcy order very difficult to challenge. Under sections 267(2)(c), 268(1) and 268(2) of the Insolvency Act 1986, a debtor may be treated as unable to pay where a properly served statutory demand remains unpaid, unsecured or uncompounded for the required period and has not been set aside. The debtor’s assertion that he had other assets did not remove the power to make the order.
2. The allegation that the bankruptcy hearing had been unfair might have been arguable on a prompt appeal. After four or five years, however, there was no contemporaneous note of the hearing and no witness statement from Mr McGuire. A fair trial of that issue could no longer be secured. The delay was therefore unacceptable, even allowing for his personal difficulties.
3. Section 282(1) of the Insolvency Act 1986 permitted annulment only where the bankruptcy order ought not to have been made on grounds existing at the time, or where the bankruptcy debts and expenses had since been paid or secured to the court’s satisfaction. Neither ground was established.
4. The proposed appeal had no prospect of success and no other sufficient reason justified extending time. The application was dismissed.

1. Court of Appeal (Civil Division): Application for permission to appeal dismissed.
2. Chancery Division: On 2 October 2001 Lloyd J refused an extension of time to appeal the bankruptcy order, varied the Registrar’s costs order from £599.25 to £500, and ordered Mr McGuire to pay £800 costs.
3. Norwich County Court: District Judge Watkins made the bankruptcy order on 14 November 1996. No appeal was brought within 28 days.