Edginton v Sekhon

The Court of Appeal dismissed the appellant's challenge to the making of a bankruptcy order on a creditor's petition. The court held that where the statutory conditions for a bankruptcy order under section 27(1) of the Insolvency Act 1986 are satisfied the petitioning creditor is prima facie entitled to the order, and the court's discretion to adjourn for payment should be exercised only if there is credible evidence of a reasonable prospect that the petition debt will be paid in full within a reasonable time. The court treated late, unformulated and unsupported oral offers to pay as a relevant consideration and not an irrelevant one, and it was open to the judge to refuse an adjournment in those circumstances.

The judgment considered the relationship between the Insolvency Rules and the Civil Procedure Rules (CPR Part 3.1(2)(b)), the collective and time‑sensitive nature of insolvency proceedings and the automatic professional consequences for a solicitor on adjudication in bankruptcy (Solicitors Act 1974 s.15). The appeal failed because the judge had not misdirected himself in law or acted irrationally in taking into account the very late and unparticularised payment proposal.

This was an appeal from a decision upholding the making of a bankruptcy order against a former solicitor, Mr Edginton, on a creditor's petition presented by Mr and Mrs Sekhon.

• Background: Mr Edginton had acted as solicitor for the Sekhons until 2003. Professional fees were disputed and, because of delay and statutory time limits, some claimed fees were statute barred by the Limitation Act 1980. A costs order against Mr Edginton for £1,236 was made on 20 July 2011. After non‑payment, a statutory demand and unsuccessful challenge, the Sekhons presented a bankruptcy petition on 10 December 2013 for the unpaid costs plus statutory demand costs (aggregate £1,570).
• Procedural history: The petition was heard by Deputy District Judge Caun on 24 July 2014. The judge rejected the substantive defences and, immediately before making the bankruptcy order, refused a belated oral application by Mr Edginton for an adjournment to allow payment by instalments. Newey J in the High Court upheld the judge's exercise of discretion and this Court of Appeal (with permission granted by Gloster LJ) heard a further appeal.
• Issues: (i) Whether the judge was entitled to take into account the extremely late timing of the application to adjourn; (ii) whether in a modest debt case and where the debtor was a solicitor a short adjournment should have been granted without formal evidence; (iii) the correct approach to the court's discretion in adjournment applications in bankruptcy petitions, having regard to the Insolvency Rules, CPR and relevant authorities.
• Reasoning: The court held that insolvency proceedings are collective and delay can prejudice creditors generally (citing section 284 Insolvency Act 1986 and authority). The court confirmed the established practice that an adjournment for payment should be granted only where there is credible evidence of a realistic prospect of payment within a reasonable time. The court accepted that timing and a failure to present a formulated proposal or supporting evidence were relevant considerations. The judge was entitled to consider that the oral, unparticularised, last‑minute offer was too late and unreliable. The possible catastrophic professional consequence to a solicitor from bankruptcy (Solicitors Act 1974 s.15) was a relevant factor but did not require the court to lower the required standard of evidence. The Court of Appeal concluded it was not open to say that the judge had misapplied his discretion.

The appeal was dismissed.

Appeal dismissed. The Court of Appeal held that where the statutory conditions for a creditor's bankruptcy petition are satisfied the court's discretion to adjourn for payment should only be exercised if there is credible evidence of a reasonable prospect that the petition debt will be paid in full within a reasonable time. The judge was entitled to regard a very late, unparticularised oral offer to pay as an appropriate reason to refuse an adjournment and his exercise of discretion was not wrong.

Bankruptcy petition heard by Deputy District Judge Caun (24 July 2014). Appeal to the High Court (Chancery Division, Newey J) which upheld the making of the bankruptcy order. Permission to appeal to the Court of Appeal was granted by Gloster LJ. This Court of Appeal ([2015] EWCA Civ 816) dismissed the appeal.