1st Credit Finance v Carr

Under section 282(1)(a) of the Insolvency Act 1986, a bankruptcy order may be annulled at a later stage where grounds existing when the order was made show that it ought not to have been made. Ordinarily, a party cannot reopen an argument that was fully advanced and rejected earlier in the bankruptcy process. A later application requires a new ground or new evidence that was not previously available. However, evidence available at the original hearing but not then produced may establish that the statutory power to annul was available. The court may affirm an annulment on a different lawful ground from that relied on below.

This was an appeal from a bankruptcy order made by District Judge Kesterton in Coventry County Court. The order annulled a bankruptcy order previously made against the respondent on the petition of the appellant, dismissed the petition and vacated its registration.

The petition debt arose from a costs judgment. At the original bankruptcy hearing, the respondent proposed payment but produced no evidence of his ability to pay. The bankruptcy order was made. The debt was later discharged, and the respondent applied to annul the order under section 282(1)(a) of the Insolvency Act 1986. The lower court accepted that he had attempted to offer a lump-sum payment before the bankruptcy order and annulled the order on that basis. The central issues were whether that ground could properly be raised again and whether other evidence showed that the bankruptcy order ought not to have been made.

1. Appeal dismissed. The annulment order was affirmed, although on different grounds from those given by the lower court.
2. Section 282(1)(a) of the Insolvency Act 1986 permits annulment where, on grounds existing when the bankruptcy order was made, the order ought not to have been made. The power can be exercised at a later hearing.
3. Per Mr Justice Roth, the general principle stated in Atherton v Ogunlende [2003] BPIR 21 applies not only where an issue was previously raised on an application to set aside a statutory demand, but also where it was fully argued on the contested bankruptcy petition. A party cannot succeed later on the same contention unless there is a new ground or new evidence that was not previously available.
4. The respondent’s bank statement, produced during the appeal, showed that he had sufficient funds at the time of the bankruptcy hearing to pay the debt. Although the evidence had been available earlier and was produced very late, it established a ground existing when the order was made. Had the evidence been before the original judge, the bankruptcy order probably would not have been made. The statutory power to annul was therefore available.
5. The original making of the bankruptcy order could not be faulted on the evidence then before the court. The costs resulting from that order, including the Official Receiver’s costs and any modest trustee costs, were ordered to be paid by the respondent. The court reserved the costs of the appeal itself.

• High Court (Chancery Division): appeal from District Judge Kesterton’s Coventry County Court order. The appeal was dismissed and the annulment was affirmed on a different ground.