Ramsden v The Official Receiver

On an application to annul a bankruptcy order, the court must consider the grounds existing when the order was made, whether the order ought not to have been made, and, if so, whether annulment should be granted in the court’s discretion. Lack of service may establish that the order ought not to have been made, but does not make annulment automatic.

The bankruptcy court ordinarily must leave challenges to tax assessments to the statutory tax procedure. It may go behind an assessment only in exceptional cases involving fraud, collusion or a miscarriage of justice. Arguments already available to, or considered by, the tax tribunal will not ordinarily establish such a case. Delay, the position of other creditors and unresolved bankruptcy expenses may also weigh against annulment.

Terence Philip Ramsden applied to annul a bankruptcy order made on 5 March 1992 under section 282(1)(a) of the Insolvency Act 1986. The application was based on the assumed non-service of the statutory demand and bankruptcy petition.

The preliminary issue was whether the court would grant annulment on that assumption, having regard to the prospects of challenging two HMRC tax assessments forming the petition debt, challenging the value attributed to security, and dealing with other bankruptcy debts and expenses. The court also considered the exceptional age of the bankruptcy and the unexplained delay.

1. The court adopted the three-stage approach summarised in JSC Bank v Kekhman [2015] 1 WLR 3737: identify the grounds existing when the order was made; decide whether the order ought not to have been made; and, if so, decide whether to annul it in the exercise of discretion.

2. Assuming that the statutory demand and petition had not been served, the bankruptcy order ought not to have been made. That answered the second question, but left the discretionary question whether annulment should be granted.

3. The petition debt consisted of two tax assessments which had not been set aside. Under the principles discussed in Chamberlin v Revenue and Customs Commissioners [2011] EWHC 271 and Lam v Inland Revenue [2005] BPIR 301, the bankruptcy court should not investigate the merits of tax assessments where Parliament has provided an exclusive statutory appeal process. An exception may arise for fraud, collusion or a glaring miscarriage of justice, as also reflected in Yang v the Official Receiver [2017] EWCA Civ 1465.

4. The alleged tax losses, missing documents, conduct of Mr Alcock, limitation arguments and legitimate-expectation case either had been, or could have been, pursued before the tax commissioners or by judicial review. They did not provide reasonable prospects of challenging the petition debt as a miscarriage of justice. Annulment would not set aside the assessments and HMRC could present a fresh petition.

5. There was no reliable evidence that the security was worth the sum asserted by the Debtor. The evidence did not establish that other creditors’ claims had been adjudicated, and the position concerning expenses remained unresolved. The 24-year delay was unexplained and was a further significant discretionary factor, consistent with Taylor v The Macdonald Partnership [2015] EWCA Civ 921.

The answer to the preliminary issue was no. The annulment application was refused, with HMRC succeeding. Costs and the precise order were to be dealt with subsequently.