Howell v Hughes & Ors

A stay of a bankruptcy order pending appeal is an exceptional remedy and will not usually be granted. The court must weigh the debtor’s interests against the risks to existing creditors, the Official Receiver or trustee, and persons who may deal with the bankrupt without knowledge of the bankruptcy. A limited order restricting notification or publication may be available, but it must not impede the protection and realisation of estate assets. The court may instead fashion targeted protective arrangements where a particular claim or proceeding could otherwise be prejudiced.

The applicant had been adjudged bankrupt after a creditors’ petition was restored and finally determined. He appealed against the bankruptcy order and an earlier order refusing to dismiss the petition. He also applied to annul or rescind the bankruptcy order.

Pending those matters, he sought a general stay of the bankruptcy order, restrictions on notification or publication of the bankruptcy, and protection for a disputed County Court claim which he wished to continue. He relied on the alleged disclosure of the petition, possible loss of commercial work, and the risk that the claim would not be pursued for his benefit. The issue was whether the circumstances justified a general or limited stay and, if not, whether targeted protection was appropriate.

1. General stay. The application for a general stay of the bankruptcy order was dismissed. Such a stay will not usually be granted because it may prevent the Official Receiver or trustee from securing estate assets, identifying creditors and obtaining information. The Court of Appeal’s decision in Re: A Debtor (No. 644) [1969]; [2001] BPIR 901 described the circumstances justifying such relief as exceptionally rare.
2. Following the approach stated in Floyd Foster v Davenport Lyons, the court must consider the apparent merits of the challenge, the prejudice to creditors, the risk to persons dealing with the bankrupt, and whether a less extensive order can fairly balance the competing interests. Notice to the Official Receiver or trustee is ordinarily essential before any modified regime is imposed.
3. Limited notification or publication stay. Rule 10.32(5) of the Insolvency Rules 2016 gives the court power to restrict notification to the Land Registry or publication in the Gazette. That power should not be exercised where it would impede enquiries or other steps needed to protect estate assets. The evidence of likely permanent commercial or reputational harm was vague, whereas the risk of prejudice to persons dealing with the applicant was real.
4. Targeted protection. The court could nevertheless make specific provision for the disputed County Court proceedings. Consistently with the approach illustrated by Emap Active Ltd v Hill, the appropriate course was to preserve the proceedings pending a decision by the Official Receiver or trustee whether to pursue them for the estate, or assign them to the applicant, and pending determination of the annulment, rescission and appeal proceedings. The application for a stay of the bankruptcy order and for confidentiality was dismissed.