Watts v London Borough of Newham

A bankruptcy court is not required automatically to adjourn a petition founded on a judgment debt merely because the debtor has issued an appeal, review application or application to set aside the judgment. It may consider all the circumstances, including whether the challenge has a reasonable prospect of success. On an application to annul a bankruptcy order, the court may consider information unavailable when the order was made and must exercise the statutory discretion afresh. A failure to consider material proceedings challenging the underlying liability may justify appellate intervention, but will not necessarily require annulment where the bankruptcy conditions remain satisfied.

Ms Watts appealed against a bankruptcy order made on 30 June 2008 and against decisions refusing to annul it. The petition arose from council tax liability orders concerning properties owned by her. She challenged those liabilities in various proceedings, including applications to the Valuation Tribunal and for judicial review.

The bankruptcy order was made after a short hearing. The first application to annul was determined on paper without regard to the significance of the Valuation Tribunal proceedings. By the time of the appeal, those proceedings had substantially reduced the debt, but £1,385 remained outstanding. The court considered whether the bankruptcy order should have been adjourned, whether the hearing involved a serious procedural irregularity, and whether the order should be annulled under section 282(1)(a) of the Insolvency Act 1986.

1. The appeals were dismissed. Time was extended where necessary and permission to appeal was granted, but the bankruptcy order and the decisions refusing annulment were upheld.

2. A debtor resisting a bankruptcy petition based on a judgment debt does not obtain an adjournment merely by issuing an appeal, judicial review application or application to set aside the judgment. The Bankruptcy Court may consider all the circumstances, including whether the proposed challenge has a reasonable prospect of success. The observations of Ouseley J gave Registrar Jaques a proper basis for concluding that the judicial review application was unlikely to succeed.

3. The existence of an application to the Valuation Tribunal had not been brought to Registrar Jaques’s attention. That omission could support an application to annul, but could not establish that the petition ought to have been adjourned on information unavailable to the Registrar.

4. Under section 282(1)(a) of the Insolvency Act 1986, the court may annul a bankruptcy order where, on grounds existing when it was made, the order ought not to have been made. On appeal from the exercise of that discretion, intervention is justified for an error of principle, failure to consider a material matter, consideration of an irrelevant matter, or a decision which is wholly wrong. If intervention is justified, the appellate court must exercise the discretion afresh.

5. Deputy Registrar Brettle had failed to consider the Valuation Tribunal proceedings and should have directed an oral hearing. However, the discretion was re-exercised on the material available at the appeal hearing. The Valuation Tribunal proceedings had left £1,385 outstanding, exceeding the statutory threshold. The statutory demand’s overstatement did not invalidate the petition because no timely notice disputing it on that ground had been given, and there was no evidence that Ms Watts could pay the remaining debt.

6. The criticisms of Registrar Jaques’s conduct did not amount to the serious procedural or other irregularity required by CPR 52.11(3)(b). The appeal against Deputy Registrar Briggs’s decision was not pursued once time was extended for the appeal against Deputy Registrar Brettle’s decision.

• High Court (Chancery Division): appeals against the bankruptcy order and refusals to annul it dismissed. Time was extended and permission to appeal granted where necessary.