Darbyshire v Turpin & Anor

Where an application to set aside a statutory demand is dismissed, the restriction on presenting a bankruptcy petition falls away automatically. Rule 6.5(6) of the Insolvency Rules does not prohibit immediate presentation where the order specifies no date. Its purpose is to allow the debtor time to pay or seek a compromise.

Before making a bankruptcy order, the court must give proper consideration to substantial cross-claims which, if established, could extinguish the petition debt. Where those claims have a real prospect of success, the matter should ordinarily be adjourned for evidence and a substantive hearing. The debtor’s absence and the absence of a statement of truth are not, without more, proper grounds for summarily rejecting the opposition. An adjournment to pay may be refused where no evidence of ability to pay is provided.

Gareth Darbyshire appealed against a bankruptcy order made by District Judge Matharu in the Manchester County Court on 28 May 2012. The bankruptcy petition followed the dismissal of his application to set aside a statutory demand.

He argued that the petition had been presented prematurely because the earlier order contained no authorisation under rule 6.5(6) of the Insolvency Rules. He also contended that the District Judge should have directed evidence and a later substantive hearing concerning three alleged cross-claims, which he said would extinguish the petition debt. Finally, he argued that he should have received a short adjournment to pay.

1. Appeal allowed and matter remitted. The petition was remitted to the Manchester County Court for directions for the filing of evidence and the appointment of a substantive hearing.
2. Rule 6.5(6) of the Insolvency Rules does not create a continuing prohibition on presenting a petition after an application to set aside a statutory demand has been dismissed. The restriction falls away automatically. The rule enables the debtor to seek time to pay or reach a compromise. In the absence of a justified request for further time, the default position is authorisation to present a petition forthwith. This approach was supported by Re Bezier Acquisitions [2011] EWHC 3299 (Ch), Re Ceart Risk [2012] BCC 592 and Re BXL Services [2012] BCC 656.
3. The District Judge was entitled to consider the lengthy procedural history, but was not entitled summarily to determine the petition without allowing the alleged cross-claims to be substantiated by evidence. The relevant question was whether there was a real prospect of establishing bona fide disputes on substantial grounds in respect of all three claims. Success on only one or two claims would not have been sufficient.
4. The property claim was accepted as arguable. The costs claim required evidence concerning the competing costs orders and the ultimate balance. The trust claim, although shortly stated, could not properly be dismissed without evidence and analysis. The appellant’s absence and the lack of statements of truth were immaterial because there was no requirement under the rules for the notices of opposition to be verified in that way.
5. The request for a short adjournment to pay was properly refused. It was raised only shortly before the hearing and was unsupported by evidence or a properly formulated proposal demonstrating ability to pay.

• High Court (Chancery Division): On 1 March 2013, the appeal from the bankruptcy order was allowed and the matter was remitted to the Manchester County Court.
• Manchester County Court: District Judge Matharu made a bankruptcy order against the appellant on 28 May 2012.
• Manchester County Court: HHJ Cooke dismissed the appellant’s application to set aside the statutory demand on 27 April 2010.