July 2008
Part 6 Effect of annulment on statements of facts and BRUs/BROs
6A.86 Annulment application where a criminal allegations statement of facts submitted
It is possible that a bankrupt may apply for an annulment of the bankruptcy order after the official receiver has submitted a statement of facts (although he/she will not usually know that this is the case). In these circumstances the official receiver should inform the Authorisations Team (AT) (Enforcement) of the application and report to the court, in broad terms, what has been referred to AT.
6A.87 Report to court following submission of statement of facts
If for example, the official receiver’s statement of facts alleges a credit offence, the official receiver should report to the court along the following lines:
“The official receiver has been informed by four creditors that the bankrupt has obtained credit whilst undischarged/subject to a bankruptcy restrictions order. This matter has been referred by the official receiver to the Secretary of State for Business, Enterprise & Regulatory Reform. The Department’s lawyers are considering whether offences under section 360 of the Insolvency Act 1986 have been committed”
It will then be for the court to decide how to proceed in the light of this information.
Where an annulment on the grounds that the debts and expenses are to be paid or secured has been, or is likely to be, made, [Note 1] it would not be appropriate for the official receiver to submit a statement of facts unless it transpires that a bankruptcy order has been annulled as a direct consequence of false information supplied to the court by the bankrupt, in which case the official receiver should report the facts to the Authorisations Team (before preparing a full report).
Departmental lawyers have advised that where the official receiver becomes aware of possible Theft Act offences (or Fraud Act 2006 where offences committed after 15 January 2007) in cases where the bankruptcy order has been annulled, he/she should report the matter as a citizen direct to the Police because he/she has no statutory powers after the annulment. Where the official receiver receives a complaint that an alleged offence has been committed, he/she should advise the complainant that following annulment the official receiver has no power to investigate and the complainant should consider reporting the matter direct to the police.
6A.89 Annulment application where a bankruptcy restrictions order or undertaking (BRO/BRU) already obtained
It is also possible that the bankrupt may make an annulment application after a BRO has been made or BRU accepted. Where an annulment application is made on the grounds that the order ought not to have been made or under section 282(2) the official receiver should notify AT of the application.
6A.90 Effect of ‘ought not to have been made’ annulment on BRO/BRU
If an order is made annulling the bankruptcy order on the grounds that the order ought not to have been made[Note 2], or as a result of an annulment application under section 282(2) (criminal bankruptcy order) then;
This follows the principle, that as the bankruptcy order ought not to have been made, and is therefore annnulled, the bankrupt should be put back in to the position he/she was in, as if the bankruptcy order had not been made.
6A.91 Publicising annulment of BRO/BRU
Where a BRO/BRU is annulled the official receiver should update LOIS to ensure that the IIR is updated. The press database may also need to be amended, either deleting the entry or adding details of the date of the annulment and its effect. See Chapter 112 of the Enforcement Investigation Guide for further information regarding publicising orders via the disqualification and bankruptcy restrictions databases. The official receiver should also notify AT that the BRO/BRU has been annulled.
6A.92 Effect on BRO/BRU following payment in full or approved IVA or FTVA annulment
If an order is made annulling the bankruptcy order on the grounds of payment in full[Note 1]or following the approval of an IVA[Note 4] or FTVA [Note 5] then;
Where the bankrupt is considering offering a BRU, the official receiver should emphasize to him/her that this must be offered prior to the annulment, otherwise the official receiver will be forced to institute (prior to the annulment hearing) an application for a BRO. This will not be necessary if the BRU is offered prior to the annulment.
6A.93 BRO can still be made where bankruptcy order annulled
In Jenkins v Official Receiver [Note 7] the bankrupt applied for annulment after the institution of BRO proceedings on the grounds that he had paid off his bankruptcy debts and expenses. The registrar annulled the bankruptcy order and dismissed the bankruptcy petition, but went on to make a BRO for a period of 4 years. The bankrupt appealed, stating that the BRO ought not to have been made, since his bankruptcy had been annulled and his status was restored to what it was before bankruptcy. He also stated that his acting as a director was his only source of income; and his company continued to trade with no unsatisfied liabilities. The court held, dismissing the appeal, that although the bankruptcy order had been annulled, the court still had jurisdiction to make the BRO, as the BRO application had been made before the annulment pursuant to section 282(1)(b) of the Insolvency Act 1986.
The reasoning behind this is that a bankrupt should not be able to buy his/her way out of a BRO, interim BRO or BRU or a pending application for the same, by paying off his/her creditors in full or by reaching an accommodation with his/her creditors via an IVA. The only situation where a bankrupt could in effect “buy out” of the bankruptcy restrictions regime would be if he/she applied for an annulment (on grounds of payment in full, or following an IVA or FTVA) and obtained the annulment order prior to the issue of BRU/BRO proceedings by the official receiver. In this way an individual might be the subject of restrictions under a BRO or BRU but not subject to restrictions pursuant to section 11(1)(a) by reason of being bankrupt.
Where an application for a BRO/BRU has been made or is contemplated, and the official receiver receives notice, either that an annulment order has been made, or an application for an annulment (on any grounds) has been submitted, this should prompt a review of the case to consider if making or continuing the BRO/BRU application is still in the public interest. The decision and the reasons behind it should be recorded with the investigation decisions for the case.
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