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In Brister v The Official Receiver, the county court was asked to annul a bankruptcy order on the basis that it would not have been made had the court known of the mental and physical condition of the debtor.
Brister v The Official Receiver  Lexis Citation 161
The applicant personal representative sought to annul a bankruptcy order made against the deceased person (Mr Brister), arguing that the order would not have been made had the court known of Mr Brister’s mental capacity prior to his death.
The county court made the annulment order. The petitioning creditor was aware from its process server that Mr Brister was suffering from dementia. The court was not aware of this background when it made the bankruptcy order—if it had been made aware, the bankruptcy order would not have been made. Further, it was right for the deputy district judge to exercise his discretion in making the annulment order when there was a genuine argument on the evidence before him that the petition debt was disputed. It could not be said there was no point in annulling the bankruptcy order, as it did not automatically follow that a new bankruptcy order would be made.
Mr Brister entered into three fixed-sum loan agreements in 2010 in relation to new windows at his property. Until August 2012, payments were apparently made under the agreements. Following cessation of the payments, the finance company’s solicitors sent a letter before action to Mr Brister, and thereafter served a statutory demand on him. The process server reported back to the finance company’s solicitors that Mr Brister was in his eighties, could hardly see or stand, and looked very unwell.
The finance company subsequently issued a bankruptcy petition against Mr Brister. Following service of the petition, the process server again reported back to the finance company’s solicitors stating that Mr Brister suffered from dementia and that his carer was present upon their arrival. A further letter from the process server essentially restated what was reported back to the finance company’s solicitors following service of the statutory demand.
The finance company’s solicitors sent a letter to the court the day before the bankruptcy petition was due to be heard seeking an adjournment. In that letter, they stated what the process server had reported back to them about Mr Brister’s health, and that they intended to contact Age Concern and social services to help assist Mr Brister with the situation. That letter did not reach the district judge who heard the petition. He therefore dismissed the petition (on the basis of non-attendance), but instructed the court staff not to draw up the order without first checking whether any requests for an adjournment had been received.
Some weeks later, the letter was placed before the district judge, who relisted the petition. Again, the day before the hearing, the finance company’s solicitors wrote to the court seeking an adjournment, which was granted. Sadly, before the adjourned hearing, Mr Brister passed away. A bankruptcy order was made at the adjourned hearing, presumably without the court (or the finance company) being aware of that fact.
The applicant seeking the annulment order was Joseph Brister, Mr Brister’s nephew and personal representative. Joseph Brister was granted letters of administration just over 12 months after his uncle’s death and made the annulment application about a month later.
The deputy district judge had to decide:
The deputy district judge made the annulment order sought. In relation to each of the issues mentioned above:
The threshold issue
It is not apparent from the judgment whether the finance company disputed this issue. Citing the decisions in Hunt v Fylde Borough Council  BPIR 1368 and Haworth v Cartmel  EWHC 36 (Ch),  All ER (D) 23 (Mar), and rules 7.43 and 7.44 of the Insolvency Rules 1986, SI 1986/1925 (IR 1986) in relation to a debtor’s capacity, the deputy district judge was of the opinion that the bankruptcy order would not have been made had the information in the possession of the finance company’s solicitors relating to Mr Brister’s dementia been put before the court.
The discretion issue
The deputy district judge found that the failure by the finance company’s solicitors—whether intentionally or not—to provide to the court all of the relevant information as to Mr Brister’s capacity was of such a serious nature that no court in exercising its discretion should allow an order made in those circumstances to stand.
However, if he was wrong on that point, the deputy district judge considered a further point raised by the finance company.
The finance company argued there was no point in annulling the bankruptcy order because a new bankruptcy order would be made on the relisted petition as there was no genuine or substantial dispute over the petition debt. Joseph Brister, however, argued that the debt was disputed on substantial grounds, namely:
This case serves as a stark reminder that all relevant information as is known by a petitioning creditor at that time must be provided to the court when it is asked to make a bankruptcy order. Indeed, para 14 of the judgment of District Judge Ashton in Hunt is quoted in the judgment in this case (at para ):
It is therefore incumbent upon a Petitioning Creditor to inform the Court of any relevant circumstances when the Petition is heard, and there must be an element of risk if bankruptcy proceeds without any enquiry as to the debtor’s circumstances.
IR 1986, rr 7.43, 7.44 apply where in insolvency proceedings it appears to the court that a person affected by the proceedings lacks capacity within the meaning of the Mental Capacity Act 2005, or due to physical affliction or disability, to manage his property and affairs. Where these provisions apply, the court may appoint such person as it thinks fit to appear for, represent or act for the affected person. Where a petitioning creditor is faced with actual or imputed knowledge that the debtor falls—or may fall—within the scope of these rules (as happened in this case), the need to proceed carefully is clear.
The judgment also refers to the finance company’s solicitors twice writing to the court seeking an adjournment the day before the bankruptcy petition was due to be heard. In relation to the first request, they were perhaps fortunate that the district judge left a note to the court staff not to draw up the order without first checking for any requests for an adjournment—without that note, the bankruptcy petition would have been dismissed, and IR 1986, r 6.26 (non-appearance of creditor) would have been engaged. There will plainly be instances where an adjournment can only be sought shortly before a hearing, but a petitioning creditor must not assume that any request in writing will reach the judge in time. They should therefore check with the court that the request has been received, or otherwise ensure there is attendance at the hearing.
Stephen Leslie, solicitor in the LexisPSL Restructuring & Insolvency team.
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First published on LexisPSL Restructuring and Insolvency
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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.
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