Ndyabahika v Hitachi Capital UK Plc

On a first bankruptcy petition, the court retains a discretion to adjourn where there is credible evidence of a reasonable prospect that the petition debt will be paid within a reasonable time. A debtor has no automatic entitlement to an adjournment, but the court must consider relevant personal and financial circumstances, the seriousness of the bankruptcy consequences, and any realistic payment proposal. Failure to consider material matters may amount to an improper exercise of discretion. Where insolvency work should be transferred to a specialist judge under the applicable practice direction, that procedure is also a material consideration. The bankruptcy order was set aside and the petition remitted for a fresh hearing.

The appellant appealed against a bankruptcy order made by District Judge Smith on 30 September 2019. The petition concerned a regulated consumer-credit debt secured by a charging order over the appellant’s home. At the hearing, the appellant’s husband advanced proposals for payment by instalments, said that a family member could pay the debt in full, and explained that the property was being marketed.

The appellant applied out of time for permission to appeal and argued that the district judge should have adjourned the first hearing to allow evidence of the proposed payment and the property sale to be obtained. The central issues were whether the delay should be permitted and whether the bankruptcy order resulted from an improper exercise of discretion or a serious procedural irregularity.

1. Extension of time. The two-week delay in filing the appeal notice was serious but not at the highest level. Applying the three-stage approach in Denton v TH White Ltd [2014] EWCA Civ 906, together with the guidance in R (Hysaf) v Secretary of State for the Home Department [2014] EWCA Civ 1633 and McDonald v Rose [2019] EWCA Civ 4, the court extended time.
2. Adjournment of a bankruptcy petition. Once the statutory conditions for a bankruptcy order are established, the petitioning creditor is prima facie entitled to an order. The court nevertheless has a discretion to adjourn where credible evidence shows a reasonable prospect that the petition debt will be paid in full within a reasonable time. The decision is discretionary and may be challenged on ordinary appellate grounds.
3. The district judge was entitled to require evidence supporting the asserted ability of the appellant’s mother to pay. However, the appellant’s previous illness, recent return to work, serious attempts to negotiate payment, the proposed sale of the home, the modest debt, the potentially severe consequences of bankruptcy, and the fact that this was the first short hearing were relevant considerations. The district judge’s apparent view that personal circumstances were irrelevant meant that material considerations were probably not taken into account.
4. The letter from the appellant’s husband made clear that, although the debt was not disputed, the making of a bankruptcy order was opposed. The procedure for considering transfer to a specialist insolvency judge under the Practice Direction – Insolvency Proceedings July 2018 should therefore have been considered. Failure to consider that procedure supplied a further material consideration and, alternatively, a serious procedural irregularity.
5. Permission to appeal was granted, the appeal was allowed, and the bankruptcy order was set aside. The petition was remitted for a new hearing in the Central London County Court. Updated evidence was to be filed within 28 days. Costs involving the Official Receiver and former trustee were also remitted for consideration after they had an opportunity to participate.

• High Court (Chancery Division): appeal from the bankruptcy order made by District Judge Smith on 30 September 2019. The appeal was allowed and the order was set aside.