Harrison & Anor v Seggar

A bankruptcy petition should ordinarily result in a bankruptcy order where the petition debt is clearly established. The court may adjourn the petition for payment only where credible evidence shows a reasonable prospect of payment in full within a reasonable time. A general adjournment, particularly for several years, will ordinarily be an improper exercise of discretion unless exceptional circumstances justify it. The appellate court may exercise the discretion afresh where the lower court failed properly to direct itself.

The petitioning creditors appealed against District Judge Bailey’s decision in the Darlington County Court on 3 November 2004. The District Judge accepted that the respondent owed £2,300, arising from a transaction void under section 284 of the Insolvency Act 1986, and that she had no defence to the petition. He nevertheless adjourned the petition generally on the basis that she would pay £50 per month. The central issue was whether that adjournment was a proper exercise of the court’s discretion.

1. The petitioning creditor had a prima facie right to a bankruptcy order because the petition was duly presented and the debtor’s liability for the petition debt was clearly established.
2. The court had a discretion to adjourn a bankruptcy petition for payment, but only where there was a reasonable prospect that the petition debt would be paid in full within a reasonable time. Credible evidence was required to support that prospect. The principle was stated in Re Gilmartin [1989] 1 WLR 513 at 516, and subsequent authority was to similar effect.
3. The debtor’s acceptance of a suggested instalment was not evidence of her ability to pay. Her statement that she had no credit, together with the absence of other evidence, provided no proper basis for the adjournment. An effective adjournment for nearly four years was not a reasonable period. Except in the most unusual circumstances, it was not a proper exercise of discretion simply to adjourn a bankruptcy petition generally.
4. The District Judge had failed properly to direct himself on the law and had failed properly to exercise his discretion. The High Court therefore exercised the discretion afresh. Since the debtor did not attend and there was no proper basis for an adjournment, and the continuing debt was certified, the ordinary course followed.
5. A bankruptcy order was made, allowing the petitioning creditors’ appeal.

• High Court (Chancery Division): allowed the appeal from the order of District Judge Bailey in the Darlington County Court dated 3 November 2004, and made a bankruptcy order.