Housiaux (t/a Harpers of Weybridge) v Customs & Excise

A bankruptcy order should not be annulled under section 282(1)(a) of the Insolvency Act 1986 by consent and without factual investigation. The court must satisfy itself that the order ought not to have been made on grounds existing when it was made.

A debtor whose bankruptcy order is removed has no automatic right to costs. The costs court retains a broad discretion. Proportionality may justify deciding disputed costs on written evidence, provided disputed facts are assumed in favour of the party facing the order or no order is made. A trader remains responsible for communications sent to the registered VAT address.

Mr David Housiaux traded as Harpers of Weybridge and was registered for VAT at the business premises. After VAT assessments, Customs & Excise served a statutory demand and presented a bankruptcy petition. A bankruptcy order was made in his absence.

The Croydon County Court later annulled the order by consent under section 282(1)(a) of the Insolvency Act 1986, dismissed the petition and reserved costs. District Judge Fink ordered both Mr and Mrs Housiaux to pay the petition and annulment costs. Peter Smith J dismissed their appeal and affirmed that order. Permission for the second appeal was granted only to Mr Housiaux. The central issues were the effect of the consent annulment, disputed facts about service, and the proper exercise of the costs discretion.

Appeal dismissed unanimously. Chadwick LJ gave the leading judgment, with Morland J and Thorpe LJ agreeing. There was no appeal by Mrs Housiaux before the Court of Appeal.

1. A consent order under section 282(1)(a) of the Insolvency Act 1986 should not be made without the court investigating the facts sufficiently to satisfy itself that the bankruptcy order ought not to have been made. The petitioning creditor may agree not to oppose annulment, but it must make clear that it does not challenge the factual basis, or identified parts of that basis, for the application.
2. The consent order did not amount to an admission by Customs & Excise or a determination of the disputed evidence. Where the creditor was content for the order to be removed because the petition debt would be secured, the proper course was rescission under section 375 rather than consent annulment under section 282(1)(a).
3. The costs jurisdiction remained discretionary. A debtor did not recover costs as of right merely because a bankruptcy order had been annulled or service was arguably defective. The District Judge was entitled, on proportionality grounds, to determine a dispute about less than £5,000 without an adjournment for oral evidence. Having chosen that course, fairness required her either to assume disputed facts in favour of the person against whom costs were sought or to make no order if the dispute prevented a conclusion.
4. The District Judge was entitled to find that service at the registered business address was reasonable and that Mr Housiaux had not indicated that his home address was to replace the registered address for formal communications. A VAT-registered trader must ensure that communications sent to the registered address are brought to his attention or dealt with by someone under his authority. The failure here was an internal communications failure, not the real failure of notice contemplated by the insolvency rules.
5. The Court did not need to decide whether service complied formally with rule 6.3 of the Insolvency Rules 1986. Legal Services Commission v Leonard was distinguishable because it involved a bankruptcy petition presented while execution on the debt was stayed and an abuse of process. The Court endorsed the observations that public bodies must meet the standards expected of other petitioning creditors, but found no comparable criticism of Customs & Excise. The appeal was dismissed with costs assessed at £5,000.

1. Court of Appeal (Civil Division): Appeal by Mr Housiaux dismissed with costs. Mrs Housiaux had no permission to appeal.
2. High Court in Bankruptcy: Peter Smith J dismissed the appeal from District Judge Fink and affirmed the costs order. The citation is not stated in the judgment.
3. Croydon County Court: District Judge Fink ordered Mr and Mrs Housiaux to pay the petition and annulment costs, assessed at £4,817.
4. Croydon County Court: By consent, the bankruptcy order was annulled under section 282(1)(a) of the Insolvency Act 1986, the petition was dismissed and costs were reserved.