Webster v Ashcroft (Rev 1)

An extended civil restraint order can cover an application to set aside a statutory demand where the application concerns the same subject matter. Permission will normally be appropriate, unless the application is bound to fail. A later grant of permission does not retrospectively validate an application made without permission for the purposes of Insolvency Act 1986, section 267(2)(d). A petition presented in breach of that provision is not thereby void. The court may instead control the petition under section 266(3), including by adjourning it until the application to set aside is determined. Where that application is dismissed on its merits and no prejudice results, a costs decision based on the petition remains within the lower court’s discretion.

The appellant appealed from a decision of District Judge Corrigan in the County Court at Yeovil concerning the costs of a bankruptcy petition. The petition had been dismissed because the appellant paid the statutory demand debt, but he was ordered to pay the respondent’s costs.

The appellant had applied to set aside the statutory demand without first obtaining permission required by an extended civil restraint order. Permission was later granted, and the application was subsequently dismissed. The appeal concerned whether that permission retrospectively validated the earlier application so that, when the bankruptcy petition was presented, there was an outstanding application within Insolvency Act 1986, section 267(2)(d), invalidating the petition.

1. The appeal was dismissed. The district judge had made no error of law or in the exercise of discretion.

2. An extended civil restraint order covering applications concerning matters involving or relating to the restrained proceedings applies in principle to an application to set aside a statutory demand arising from the same subject matter. Although such an application is defensive in substance, it engages the court process for the first time. Permission will normally be granted, but may properly be refused where the application is bound to fail. The court therefore rejected the appellant’s argument on the scope of the order.

3. Section 267(2)(d) requires a valid application to set aside the statutory demand to be outstanding when the petition is presented. Following Times Newspapers Ltd v Chohan (Limitation Periods) [2001] 1 WLR 184, a later procedural step does not retrospectively make an application valid at the earlier time. There was no basis for treating a later grant of permission under the civil restraint order differently.

4. The court followed Regis Direct Ltd v Hakeem [2012] EWHC 4328 (Ch). Non-compliance with section 267(2)(d) does not make a bankruptcy petition void or a nullity. The proper course is ordinarily to adjourn the petition until the application to set aside is determined, after which the petition can be decided in the light of the result.

5. That course had effectively been followed. The application to set aside had been dismissed on its merits before the costs decision. There was therefore no prejudice, and the district judge was entitled to order the appellant to pay the respondent’s petition costs.

• High Court (Chancery Division): Appeal from the County Court at Yeovil dismissed. The decision of District Judge Corrigan on the petition costs was upheld.
• County Court at Yeovil: The bankruptcy petition was dismissed after payment of the statutory demand debt, but the appellant was ordered to pay the respondent’s costs.