Webster & Anor v Mackay

A failure to provide contractual accounts is not necessarily repudiatory. Repudiation requires conduct showing an intention to abandon the contract or a breach depriving the innocent party of a substantial part of the contractual benefit. A debt, including a debt payable in the future, remains a debt after any repudiation; it does not become a claim for unliquidated damages merely because the contract is treated as terminated. For rescission under Insolvency Act 1986, section 375(1), the discretion is wide but exceptional. The applicant must identify a material change or new circumstance justifying reconsideration of the original order. The provision is not an alternative appeal where the applicant seeks to advance substantially the same case again.

David and Christina Webster appealed against the Chief Registrar’s refusal to annul or rescind bankruptcy orders made against them on 2 March 2012. The orders arose from creditor’s petitions based on a loan document acknowledging a debt of £200,000, with interest and a repayment mechanism. The Websters argued that the creditor’s acceptance of an alleged repudiatory breach had converted the claim into one for unliquidated damages, so that the statutory requirements for a creditor’s petition were not met. They also relied on the court’s power to rescind its orders under section 375(1) of the Insolvency Act 1986. The issues were whether the petition debt was liquidated and whether the circumstances justified annulment or rescission.

1. Appeal dismissed. The condition for annulment under section 282(1)(a) of the Insolvency Act 1986 was not met because the bankruptcy orders ought not to have been made.
2. The failure to provide trading accounts, even assuming it occurred, was not repudiatory in the circumstances. The obligation could have been remedied or enforced. There was no refusal to pay an admitted profit share, and no formal demand requiring the omission to be remedied within a reasonable time. The approach in Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1979] AC 757 was applied.
3. The loan debt remained a liquidated debt. The notice served on 4 August 2008 triggered a vested right to payment after 12 months. A present right to future payment was not transformed into a damages claim by any subsequent acceptance of repudiation. The claim was for payment of a debt, not compensation for loss. The position was distinguished from Hope v Premierspace (Europe) Ltd [1999] BPIR 695.
4. Section 375(1) conferred a power to review, rescind or vary earlier bankruptcy orders, but the discretion had to be exercised judicially. The applicant bore the burden of showing exceptional circumstances and a material difference from the circumstances before the original court. Delay, changed positions, accrued costs and the absence of an immediate payment proposal were relevant. The Websters’ proposed finance did not amount to a sufficient new circumstance and represented another attempt to advance their case.
5. The Chief Registrar was entitled, and in the circumstances effectively bound, to dismiss the rescission claim. The bankruptcy was more than a year old, substantial indebtedness remained, and the circumstances were not exceptional.

The judgment was an appeal from the Chief Registrar’s refusal to annul or rescind bankruptcy orders made on 2 March 2012. The citation of the Chief Registrar’s decision is not stated in the judgment.