July 2008

Part 2 Annulment order on grounds “ought not to have been made”

6A.12 Examples of grounds where bankruptcy order ought not to have been made

Examples or circumstances where the bankruptcy order may be annulled on the ‘ought not to have been made’ grounds are:

1. where it seems that the bankruptcy proceedings may have been an abuse of the process of the court, the official receiver may report the facts to the court with a view to having the bankruptcy order annulled, but before doing so should consult with Technical Section (in practice, the bankrupt will be concerned by these events and will make this application himself/herself).
2. a bankruptcy order made against a minor (i.e. someone under the age of eighteen - section 1(1) Family Law Reform Act 1969) in respect of a debt or debts not legally enforceable against him/her (i.e. for a non "necessary" item) must be annulled (re Davenport [1963] 1 WLR 817 CA). Where a minor owes legally enforceable debts, a bankruptcy order can be made against him/her either on his/her own petition or that of a creditor; 
3. if the official receiver finds that there are no debts provable in the bankruptcy, he/she should draw this to the attention of the bankrupt and the petitioning creditor with a view to an application being set down for annulment. Where neither the bankrupt nor the petitioner sets down an application, the official receiver might seek the court’s directions on the matter[Note 1].
4. where service was defective prior to the making of the bankruptcy order. 
5. where an earlier bankruptcy order was made in another court, unknown to the petitioner in the later case (see also paragraphs 6A.9 to 6A.11).

6A.13 Court requirements for ‘ought not to have been made’ applications

Except in genuine cases (e.g. double bankruptcy orders against the same person see paragraphs 6A.9 to 6A.11), in agreeing to hear an application  for annulment on the grounds the order ought not to have been made, the court considers that it is granting the bankrupt an indulgence, in return for which it looks to see if there has been full co-operation with the official receiver, and it takes into consideration the extent of the bankrupt’s assets and liabilities.

6A.14 High Court practice on ‘‘ought not to have been made’ applications

The High Court is prepared to consider applications to annul bankruptcy orders on the grounds that the order ought not to have been made even where there are no formal defects in the proceedings. This is an expedient practice which has developed since the Insolvency Act 1986 came into force to enable bankruptcy proceedings to be brought to an end with the consent of the petitioner without going through the more cumbersome ‘payment in full’ process. (This process might be viewed as being a development of the procedure for rescission on the grounds of late payment which has been used for many years in the Companies Court.)

An ought not to have been made application for annulment is essentially a dispute between the debtor and the creditor. If the official receiver is asked by the bankrupt to advise on the annulment, he/she should keep his/her comments to procedural issues and should not include encouragement to the bankrupt to apply for an annulment.

The bankrupt should be referred to the leaflet produced by The Insolvency Service entitled; ‘Can my bankruptcy be cancelled?’  which is available from all official receivers’ offices and online at the Insolvency Service website at http://www.insolvency.gov.uk./guidanceleaflets/guides.htm#1.

The bankrupt or his/her advisors should not be given the impression that the official receiver will either support or oppose an application. At such hearings the High Court Registrars and District Judges form their own views from the information available to them before deciding whether or not to grant an annulment (see also paragraph 6A.85 regarding the discretion of the District Judge).

6A.16 Notice period where application is on ‘ought not to have been made’ grounds

Where the annulment application is made on the grounds that the bankruptcy order ought not to have been made [Note 2], the applicant is only required to give sufficient notice to enable the official receiver and any trustee to be present at the hearing [Note 3].  In such cases the applicant must also give notice etc. to the petitioning creditor. In these cases the ‘contest’ is between the bankrupt and the petitioner. The official receiver should not take sides but should assist the court and seek to protect his/her costs position.

6A.17 Official receiver’s attendance at ‘ought not to have been made’ annulment hearings

(Amended February 2014)

The official receiver may attend the hearing in cases where he/she can assist the court but should bear in mind that the matter is essentially between the bankrupt and the petitioner (see paragraph 6A.15).  By attending the hearing the official receiver can seek to ensure payment of his/her costs of the bankruptcy proceedings to date.   Where a regional official receiver requires representation at an annulment hearing in the High Court, these are now dealt with via a monthly rota system shared between London A and B. The official receiver should contact London A or B providing as much information as possible, including whether or not the bankrupt has co-operated with the official receiver, total amount of unsecured liabilities the total expected value of the assets, and the costs incurred to date in the proceedings. The costs incurred will include any insurance premiums paid or cancellation charges incurred (see paragraph 49.19).  

[Back to Part 1 Information applicable to annulment generally] [On to Part 3 Annulment order on grounds “debts and expenses paid in full”]