Emmanuel v Revenue And Customs

A bankruptcy order should be annulled only where grounds existing when it was made show that it ought not to have been made. A creditor must do all that is reasonable to bring a statutory demand to the debtor’s attention, with personal service where practicable. The test is demanding, but it does not require discovery of an address which the creditor could not reasonably have known. Proper substituted service may therefore suffice even where the debtor probably did not receive the documents.

An appellate court should not interfere with a first-instance assessment of service or with a discretionary annulment decision unless the lower court erred in principle, took irrelevant matters into account, omitted relevant matters, or reached a plainly wrong conclusion.

Mark Emmanuel appealed against the Registrar’s dismissal of his applications to annul a bankruptcy order and to strike out HMRC’s evidence. The bankruptcy order followed HMRC’s unsuccessful attempts to serve a statutory demand and bankruptcy petition at an address supplied by the Metropolitan Police, followed by substituted service of the petition.

The appellant contended that he lived elsewhere, had not received the documents, and that HMRC’s tax debt was substantially overstated. HMRC did not oppose annulment, but the trustees opposed the appeal on costs. The issues were whether service was legally sufficient, whether the Registrar had properly exercised the discretion under section 282(1)(a) of the Insolvency Act 1986, whether oral evidence was required, and whether the costs orders should stand.

1. Appeal dismissed. The appellant could not establish that the Registrar’s determinations were wrong.
2. Under section 282(1)(a) of the Insolvency Act 1986, annulment is discretionary. The court must consider whether, on grounds existing when the bankruptcy order was made, it ought not to have been made, including the position of creditors generally. HMRC’s neutral stance did not determine the application.
3. The statutory demand service obligation required HMRC to do all that was reasonable to bring the demand to the appellant’s attention and, where practicable, to effect personal service. The requirement was demanding, as explained in Regional Collection Services Ltd v Heald [2000] BPIR 661, but HMRC met it. The alternative address was not one HMRC could reasonably have discovered, and the steps taken at the known address, followed by authorised substituted service, complied with the applicable rules and Practice Direction.
4. The distinction between actual receipt and valid service was material. HMRC’s acceptance that the documents probably did not come to the appellant’s attention did not establish defective service. Cross-examination was unnecessary where the documentary evidence was clear.
5. The tax assessments remained legally due and binding under sections 29(1)(a) and 59B(6) of the Taxes Management Act 1970 unless successfully challenged. The additional non-petitioning debt also remained due unless successfully challenged.
6. The Registrar’s costs orders were upheld. The strike-out application had been withdrawn, refusal of a reasonable extension of time was contrary to the overriding objective, and the appellant had failed in the annulment application.

1. High Court (Chancery Division): The appeal from the Registrar’s order dated 11 May 2016 was dismissed. The applications to annul the bankruptcy order and to strike out HMRC’s evidence had been dismissed below, and the costs orders were upheld.