Wave Lending Ltd v Parmar & Anor

A bankruptcy petition based on a partly secured debt must comply with section 269(1)(b) of the Insolvency Act 1986 if the creditor retains its security. It must exclude the secured part and state the security’s estimated value at the petition date. A shortfall calculated by deducting approximate property values is not a liquidated sum under section 267. Defective petitions require amendment before bankruptcy orders can properly be made. An incorrect court address in a statutory demand does not require it to be set aside where no prejudice is suffered.

Wave Lending Ltd petitioned for bankruptcy orders against Thakorbhai Parmar and Rama Parmar. The creditor held judgment debts secured in part by charging orders over unsold properties. Its statutory demands identified estimated security values and anticipated unsecured shortfalls, but the subsequent petitions claimed only the shortfalls and did not state the gross debts or estimated security values.

The Wakefield County Court made bankruptcy orders on 24 May 2016. On appeal, the debtors challenged the petitions and the statutory demands. The issues were whether the petitions complied with sections 267 to 269 of the Insolvency Act 1986, and whether the incorrect court address in the demands caused prejudice.

1. Appeals allowed. The bankruptcy orders were discharged and the petitions were remitted to the County Court for consideration of amendment applications and consequential directions.
2. Section 267(2)(b) of the Insolvency Act 1986 requires a petition debt to be unsecured, subject to section 269. Where a creditor retains security, section 269(1)(b) requires the petition to exclude the secured part and state the security’s estimated value at the petition date. The petitions contained no such statement and were defective.
3. The petitions also failed under section 267 independently. The claimed shortfalls depended on approximate and unadjudicated property values. They were therefore not liquidated sums. The judgment debts, interest and prescribed costs were pre-ascertained, but the security values were not. The court followed the Court of Appeal’s formulation in McGuinness v Norwich and Peterborough Building Society that a liquidated debt must be a pre-ascertained liability.
4. The creditor accepted that the petitions required amendment before bankruptcy orders could stand, whether under rule 7.55 of the Insolvency Rules 1986 or otherwise.
5. The statutory demands were not set aside. Although they identified the wrong court, the debtors suffered no prejudice. The court affirmed the District Judge’s discretionary approach, applying Agilo Ltd v William Henry and referring to Re Portsmouth City Football Club Ltd (In Liquidation).

• High Court (Chancery Division): Appeals allowed against the bankruptcy orders. The orders were discharged and the petitions remitted to the County Court.
• Wakefield County Court: Bankruptcy orders were made against both appellants on 24 May 2016.