Bagnall v Official Receiver

Section 279(3) of the Insolvency Act 1986 permits an interim order suspending a bankrupt’s automatic discharge before the substantive hearing, provided the application was made within the three-year period. The court must be satisfied, on the material then available, that there are reasonable grounds to conclude that a final suspension order is likely.

Insolvency Rules 6.215 and 7.4 must be read together. The usual service requirements may be shortened in an urgent case, but the bankrupt should be given notice and a fair opportunity to respond wherever possible. A without-notice interim order which does not finally determine civil rights does not, without more, breach article 6 of the Convention.

The appellant was due to be automatically discharged from bankruptcy on the third anniversary of the bankruptcy order. Shortly before that date, the Official Receiver applied under section 279(3) of the Insolvency Act 1986 for suspension of the discharge because of alleged non-co-operation with the trustee.

As the usual notice period could not expire before the automatic discharge date, a deputy district judge made a without-notice interim order suspending discharge pending the substantive application. The appellant unsuccessfully sought to strike out the application. Evans-Lombe J dismissed his appeal from that refusal.

The substantive application was later granted and was not appealed. The central issue before the Court of Appeal was whether section 279(3), read with the Insolvency Rules, authorised the interim without-notice suspension order, and whether that procedure infringed article 6 of the European Convention on Human Rights.

1. Permission was granted and the appeal was dismissed. Lady Justice Arden, with whom Lord Justice Latham agreed, held that section 279(3) of the Insolvency Act 1986 authorises an interim order suspending automatic discharge before the substantive hearing. The provision must be construed so that its purpose is not defeated where discharge would otherwise take effect before the application can be finally determined.

2. The statutory requirement that the court be satisfied is iterative. On a final hearing, satisfaction is required on the balance of probabilities. For an interim order, the court must be satisfied that there are reasonable grounds, on the material then before it, for concluding that a final suspension order is likely. The court should take account of any known case for the bankrupt; it should not simply disregard it as unchallenged. The court may properly lean towards preserving the bankruptcy where automatic discharge would otherwise be irreversible.

3. Insolvency Rules 6.215 and 7.4 are to be read together. Rule 6.215 does not exclude the urgent procedures in rule 7.4(6), including the power to shorten service. Rule 7.4(6) does not itself supply the substantive jurisdiction to make an order; that jurisdiction arises from the proper construction of section 279(3). The usual notice requirements nevertheless reflect a strong policy that the bankrupt should receive notice and an adequate opportunity to answer the Official Receiver’s report.

4. On the facts, the deputy district judge had sufficient material to infer reasonable grounds for a final order. The later unappealed substantive suspension reinforced that conclusion. The Court approved the general availability of interim relief recognised in Re Jacobs [1999] 1 WLR 619, but qualified its suggested interim standard.

5. The without-notice order did not determine the appellant’s civil rights finally. He retained both the right to oppose final suspension and the opportunity to apply to set aside the interim order. Accordingly, article 6 was not infringed. The Court nevertheless stressed that, where 21 days’ notice cannot be given, the bankrupt should normally be informed as soon as the decision to make the application is taken. Trustees who delay risk refusal of discretionary relief despite a bankrupt’s non-co-operation.

1. Court of Appeal (Civil Division): Permission to appeal was granted and the appeal was dismissed: [2003] EWCA Civ 1925.
2. High Court: Evans-Lombe J dismissed the appellant’s appeal from District Judge Robinson’s refusal to strike out the Official Receiver’s application under section 279(3).
3. County Court: Deputy District Judge Radcliffe made, and later confirmed, a without-notice interim order suspending automatic discharge. District Judge Robinson refused the strike-out application. A district judge later granted the substantive suspension application; that order was not appealed.