THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTSOMS v DAVID GERALD VIVIAN FITZWILLIAM DE FREITAS

In bankruptcy proceedings involving a disabled debtor, the public sector equality duty and the duty to make reasonable adjustments are distinct. A breach of the public sector equality duty does not automatically invalidate proceedings; the court must consider whether proper consideration could have affected the decision. Reasonable adjustments depend on the facts and available evidence. A debtor seeking dismissal under Insolvency Act 1986, s 271(3), must establish the relevant statutory ground and satisfy the court that dismissal is appropriate. An adjournment may instead be granted where credible evidence shows a reasonable prospect that the petition debt will be paid within a reasonable time.

HM Revenue and Customs presented a bankruptcy petition for unpaid self-assessment tax, penalties and interest. The debtor opposed it on grounds including an allegedly ongoing complaints process, ability to pay, errors in the petition, and breaches of the public sector equality duty and the duty to make reasonable adjustments under the Equality Act 2010.

The court rejected the grounds for dismissal. It found that the complaints process did not provide a sufficient basis for disputing the debt, the petition errors caused no material prejudice, and HMRC had complied with the public sector equality duty. The evidence did not establish that further delay would serve a useful purpose, but there was a reasonable prospect that an equity release would pay the debt within 42 days.

1. Dismissal grounds. The debtor’s complaint had been rejected through the relevant complaint stages, and there was insufficient evidence that it had a real prospect of success or would reduce the petition debt below the bankruptcy threshold. The first ground therefore failed.
2. Ability to pay. Section 271(3) of the Insolvency Act 1986 addresses two distinct situations: ability to pay all debts, including contingent and prospective liabilities, and unreasonable refusal of an offer to secure or compound the petition debt. Even if the debtor was balance-sheet or cash-flow solvent, dismissal was not appropriate because HMRC lacked sufficient assurance that the debt would actually be paid.
3. Errors in the petition. Incorrect statements about the timing of the appeal and compliance with a court order did not justify dismissal. The errors caused no material prejudice, and dismissal would make the order permitting amendment ineffective while leaving HMRC able to present a fresh petition.
4. Equality duties. The public sector equality duty under s 149 of the Equality Act 2010 required HMRC to make an open-minded and conscientious assessment of the potential effect of bankruptcy proceedings on the disabled debtor. HMRC had done so. A breach would not automatically make the petition unlawful; the court would need to consider whether proper assessment could have led to a different decision.
5. The duty to make reasonable adjustments under ss 20, 29(7) and 31(3) of the Equality Act 2010 was separate. HMRC had sufficient medical information to assess possible adjustments, and the absence of a completed Debt and Mental Health Evidence Form did not prevent that assessment. However, the evidence did not show that postponing the petition to enable a further Ombudsman review would have served a useful purpose or avoided bankruptcy proceedings.
6. Adjournment. Applying Edginton v Sekhon [2015] EWCA Civ 816, the court required credible evidence of a reasonable prospect that the petition debt would be paid within a reasonable time. Despite deficiencies in the valuation and lending evidence, the court accepted that prospect and adjourned the petition. The adjournment was later extended to 90 days, with no expectation of any further adjournment.