A New Defence to a Bankruptcy Petition? Our Insolvency Litigation Solicitors Comment
In this personal insolvency case – of Lock Versus Aylesbury Vale District Council – the High Court, on appeal, exercised its discretion to set aside a Bankruptcy Order on the basis that it would serve no useful purpose, or be of any benefit, to the creditor (Aylesbury Vale DC) as the debtor (Ms. Lock) did not have assets to satisfy the liability in bankruptcy. In this article, our insolvency litigation solicitors review and comment on the case, which appears to show a new defence to a bankruptcy petition. Click this link for full details of the case: Lock Vs Aylesbury Vale DC – Case Analysis.
Background to this Personal Insolvency Case
- The local authority, Aylesbury Vale District Council, served a bankruptcy petition on the debtor, based on a statutory demand for unpaid council tax of £8,067.00. Evidence was served, addressing the council tax liability. The evidence of the debtor did not address her financial situation in detail, but made clear she was living in social housing and was dependent on her daughter for financial support.
- The debtor prepared a skeleton argument having been ordered by the Court to do so. The skeleton contained an argument, among many, that a bankruptcy order would serve no purpose and be of no benefit to the local authority creditor as she had no assets to satisfy the liability. The County Court made a bankruptcy order. The debtor appealed that order to the High Court.
- During the appeal hearing, the debtor referred to a bankruptcy checklist used by the respondent local authority. This had not been put in evidence before the district judge. It made clear that, prior to the presentation of the petition, the local authority had been aware that the debtor was unemployed, did not own a home or receive any benefits.
- The report also stated that there were no obvious assets, but the debtor might have received funds from an inheritance. There were no documents to support this assertion and so the debtor argued that this possible inheritance would only be small, and in any case she had not received any funds (or was unlikely to receive any at all).
The Debtor’s Appeal was Upheld by the High Court
On appeal, it was found that there was no proper evidence establishing any present or prospective assets that could be realised, and nothing to indicate that an investigation of the bankrupt’s affairs would bring any further information to light. As a result the bankruptcy order was set aside pursuant to CPR, Rule 52.21(3) which states:
“The appeal court will allow an appeal where the decision of the lower court was: (a) wrong; or (b) unjust because of a serious procedural or other irregularity in the proceedings in the lower court.”
Final Comment by our Insolvency Litigation Solicitors – A New Route to Defend a Bankruptcy Petition?
The approach of His Honour Judge Hodge QC demonstrates there is a new (or at least, an underused) route to defend a bankruptcy petition.
Whilst this case turned on its own particular facts, creditors looking to bankrupt debtors need to recognise that the existence of an undisputed liability will not always be enough to get them home. The Bankruptcy Court will, in an appropriate case, as here, bare its teeth and refuse to make a Bankruptcy Order.
Here at Neil Davies & Partners, our insolvency litigation solicitors are well used to prosecuting and defending bankruptcy petitions. For a FREE, no obligation chat, please contact us or call the team on 0121 200 7040.