Little Miracles Limited v Jonathan Nicholas Oliver & Ors.

A liability arising after a bankruptcy order remains a bankruptcy debt where it arises from an obligation incurred before that order. This applies even where the later liability is contingent, unascertained, or crystallises through a subsequent damages or costs order. A later order does not, without deciding the issue, make such a debt enforceable against the discharged bankrupt. The creditor’s remedy is confined to proving in the bankruptcy. A charging order cannot enforce the discharged bankrupt’s personal liability, although the same debt may remain enforceable against another liable party.

The claimant sought a final charging order over the first defendant’s beneficial interest in jointly owned property. The application concerned damages and costs ordered in 2016 following settlement of earlier proceedings, together with applications to set aside the interim charging order and to vary the 2016 order.

The first defendant had been adjudged bankrupt in 2014 and discharged in 2015. The central issue was whether the damages and costs liabilities, although ordered in 2016, were provable debts in the earlier bankruptcy and therefore incapable of personal enforcement after discharge.

1. The charging application was dismissed. The interim charging order was to be discontinued so far as necessary. The court was willing to make a declaration that the liabilities in paragraphs 7 and 9 of the April 2016 Order were provable debts in the first defendant’s 2014 bankruptcy.
2. Section 382 of the Insolvency Act 1986 covers debts or liabilities arising after the commencement of bankruptcy by reason of an obligation incurred before commencement. It is immaterial whether the liability is present or future, certain or contingent, fixed or unliquidated.
3. The first defendant’s liability arose from an obligation entered into before the 2014 Bankruptcy Order. The subsequent breach generated both the damages liability and the liability for costs. Following Bloom v Pensions Regulator; sub nom. Re Nortel GmbH (In Administration); sub nom. Re Lehman Brothers International (Europe) (In Administration) [2013] UKSC 52, the costs liability was also provable.
4. The April 2016 Order did not decide that the liabilities were outside the bankruptcy. Chief Master Marsh expressly recognised the difficulty concerning enforcement of the damages order and made no determination on that issue. The costs order likewise did not determine the effect of the insolvency legislation.
5. It was not too late for the first defendant to rely on the bankruptcy. The liberty to apply in the damages order was permissive and did not impose a shorter time limit. The claimant should instead have proved the anticipated damages and costs liabilities in the bankruptcy. After discharge, they could not be enforced personally against the first defendant.
6. The judgment did not affect enforcement of the costs order against the third defendant.