A bankrupt’s application to annul a bankruptcy order, and the merits of the application.
Summary
When considering a bankrupt’s application to annul a bankruptcy order on the ground that the making of the order was ‘pointless and futile’ due to lack of assets, as well as considering the bankrupt’s witness statement, a court must ascertain that there is a sufficient lack of assets, and act in the best interest of the bankrupt’s creditors.
Background
A bankruptcy order was made against Magan (M) on petition by their creditor Wilton Management Ltd (W).
M applied to have it annulled arguing that the making of the order was ‘pointless and futile’ as they had no assets.
The court's decision
Application dismissed.
The High Court has a power to annul a bankruptcy order under section 282(1)(a) of the Insolvency Act 1986 (IA 1986) when it appears that on any grounds existing at the time the order was made, the order ought not to have been made.
The court followed the guidance given in JSC Bank of Moscow v Kekhman (2015) EWHC 396 (Ch) and Lock v and Harriet Aylesbury Vale District Council (2018) EWHC 2015 (Ch), and explored three questions:
what were the grounds existing at the time the bankruptcy order was made
whether on those grounds the order ought not to have been made
whether the court should now exercise its discretion to annul the order under section 266(3) of IA 1986
The court accepted that the balance demanded may not be correct and that a lesser amount could be due. However, it found that at the hearing M had not sufficiently proved their financial position in order to claim that the making of a bankruptcy order would be pointless and futile as they had no assets. Contrary to what W had evidenced. The debt was owed, and M had not sufficiently proofed that they had no assets which could have settled their liabilities.
Ultimately, the court was not satisfied the bankruptcy order ought not to have been made.