Rely on the most comprehensive, up-to-date legal content designed and curated by lawyers for lawyers
Work faster and smarter to improve your drafting productivity without increasing risk
Accelerate the creation and use of high quality and trusted legal documents and forms
Streamline how you manage your legal business with proven tools and processes
Manage risk and compliance in your organisation to reduce your risk profile
Stay up to date and informed with insights from our trusted experts, news and information sources
Access the best content in the industry, effortlessly — confident that your news is trustworthy and up to date.
With over 30 practice areas, we have all bases covered. Find out how we can help
Our trusted tax intelligence solutions, highly-regarded exam training and education materials help guide and tutor Tax professionals
Regulatory, business information and analytics solutions that help professionals make better decisions
A leading provider of software platforms for professional services firms
In-depth analysis, commentary and practical information to help you protect your business
LexisNexis Blogs shed light on topics affecting the legal profession and the issues you're facing
Legal professionals trust us to help navigate change. Find out how we help ensure they exceed expectations
Lex Chat is a LexisNexis current affairs podcast sharing insights on topics for the legal profession
Printer Friendly Version
Why did the High Court decide to allow the annulment of a bankruptcy order in Mowbray v Sanders? Nick Brown, barrister at St Philip's Chambers, discusses the reasoning behind the ruling and the practical lessons the decision offers for insolvency office-holders.
Re Julie Ann Mowbray (A Bankrupt); Mowbray v Sanders (Trustee in Bankruptcy of the Estate of Julie Ann Mowbray) and another  EWHC 296 (Ch),  All ER (D) 161 (Feb)
The appellant debtor appealed against an order of a deputy district judge dismissing her application for the annulment of a bankruptcy order. In her grounds of appeal, the appellant had raised a limitation defence. Mr Justice Hildyard, in allowing the appeal, held that the belated revelation of the second respondent's only real answer to the appellant's limitation defence after the bankruptcy order had been made, without any explanation why it had not previously been put forward, materially altered the legal landscape and was an exceptional circumstance justifying review of the validity and enforceability of the petition debt.
The case was an appeal to the High Court against an order of a deputy district judge who had dismissed the appellant's application, pursuant to section 282(1)(a) of the Insolvency Act 1986, for the annulment of her bankruptcy, such application having been made on the grounds that the debt upon which the petition was founded was in dispute and that the bankruptcy order should, therefore, never have been made.
Whether the deputy district judge had been in error to conclude, on the annulment application, that there had been no 'exceptional circumstances' permitting the court to reconsider the validity of the petition debt, such issue having been aired at the original bankruptcy hearing. In addition, whether the deputy district judge had been in error to conclude that the petition debt was valid.
One of the bases upon which the appellant had always disputed the petition debt was that the claim that led to the default judgment against her (and ultimately the petition) had, for the purposes of the Limitation Act 1980, been time-barred. Hildyard J remarked that such a defence 'was plainly a good one unless something had happened to extend the limitation period'. He then further noted that the 'central curiosity of this unusual case' was that it was not actually until the appellant applied to annul the bankruptcy order that it was advanced by the second respondent (the assignee of the debt) that the appellant had, in fact, repaid a small part of the debt at a point which 'acted as an acknowledgment of the debt so as to reset the Limitation Act clock' and so as to make the original claim within time (para ).
That the deputy district judge had, by limiting her consideration of 'exceptional circumstances' to the appellant's personal difficulties, paid insufficient regard to the significant change in the legal landscape which had arisen in consequence of the second respondent's factual assertions (only made belatedly within the annulment proceedings) as to the appellant's part-payment of the debt (para ). Further, that the deputy district judge ought not, as she did, to have concluded as a matter of fact that the appellant did make such payment, given that this was contested and the evidence had not been tested under cross-examination (paras  and ).
That the appeal should be allowed because there had never been a 'plain and obvious' answer to the appellant's limitation defence that could have warranted the making of a bankruptcy order (para ). Although, exceptionally, this involved permitting annulment with reference to matters raised before the bankruptcy order was made, it appeared to the Judge that the petition debt had, at all times, been disputed on substantial grounds and that the error in allowing proceedings to continue as far as bankruptcy had, 'in all justice', to be corrected (para ).
The case represents a useful summary of and reminder as to the (ultimately discretionary) nature of the annulment power and the nature of an appeal from a refusal to annul.
In respect of the former, the Judge noted, following Turner v Royal Bank of Scotland  BPIR 683, that 'only in exceptional circumstances' can a court allow points which were considered when the bankruptcy order was made to be re-litigated on an annulment application (para ).
As to the latter, the Judge noted, following Cozens v HM Commissioners of Customs & Excise  BPIR 252, that an appeal from a refusal of annulment is 'in the nature of a true appeal: it is not a rehearing or review' (para ).
The judgment ends with a set of useful observations as to the determination of a trustee's costs in annulment cases (paras -). The Judge was content, as determined at first instance, that the first respondent trustee should be entitled to recover his proper costs and expenses, even though the bankruptcy order should never have been made—the question then being whether these should be met by the appellant or the second respondent. Having given consideration to the full history of the matter (which included factoring in a number of procedural failures on the appellant's part such as her failure to make an application to set aside the default judgment) the judge concluded:
'The balance is an unusually fine one. I have provisionally concluded that the costs and expenses should be allocated for payment between them, and that, as a matter of broad fairness, the Appellant should pay the costs and expenses up to the date of the annulment application, but the Second Respondent should pay the costs and expenses from then on' ([para ).
Interviewed by Nicola Laver.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
If you are a LexisPSL Subscriber, click the link below for further information:
What steps are available if it transpires that the bankruptcy order should not have been made and what are the usual grounds for the court annulling the bankruptcy order?
How do you annul a bankruptcy order and who can make the application?
Disputed bankruptcy petitions
Not a subscriber? Find out more about how LexisPSL can help you and click here for a free trial of LexisPSL Restructuring and Insolvency.
First published on LexisPSL Restructuring and Insolvency
0330 161 1234