Bankruptcy orders and the mutual assistance regime—Revenue and Customs Commissioners v Smart

Bankruptcy orders and the mutual assistance regime—Revenue and Customs Commissioners v Smart

The decision in Revenue and Customs Commissioners v Smart establishes the principles to be applied when a bankruptcy court is asked to go behind a judgment and when it is alleged that an offer to secure or compound has been unreasonably refused, as Katherine Hallet, barrister at Three Stone explains.

Original news

Revenue and Customs Commissioners v Smart [2016] Lexis Citation 78, [2016] All ER (D) 158 (Jun)

The Bankruptcy High Court made a bankruptcy order against the defendant on a petition of the Revenue and Customs Commissioners based on an unpaid county court judgment debt, entered as enforcement of a German tax debt under the EU mutual assistance regime. The court held that there had been no miscarriage of justice in the county court proceedings and no prospect of the defendant establishing that no debt was due. Further, the defendant’s offer to secure or compound for the judgment debt fell well outside the scope of any that it would be unreasonable for a hypothetical creditor in the position of the Revenue to refuse.

What practical lessons can those advising take away from this case?

When a Member State seeks the assistance of the UK in enforcing a foreign judgment, the UK courts cannot conduct a review under Directive 2010/24/EU concerning the mutual assistance for the recovery of claims relating to taxes, duties and other measures (MARD) of whether that enforcement is contrary to UK public policy. Thus, no questions can be raised before the UK courts as to the liability on the foreign claim.

What was the background to the hearing?

HMRC had issued a bankruptcy petition against Mr Smart, seeking to enforce a judgment of the Taunton County Court which was itself based on a tax liability due pursuant to an order of the German court. In order to enforce its judgment, the German tax authority requested HMRC’s assistance pursuant to MARD, as implemented in the UK by Schedule 25 to the Finance Act 2011 (FA 2011).

What were the legal issues the chief registrar had to decide?

The chief registrar had to decide whether to make a bankruptcy order against Mr Smart.

Mr Smart raised two arguments:

  • first, he said that the hearing in the German court

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.