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Power to annul bankruptcy order part 4

The other ground upon which the court can annul a bankruptcy order under Insolvency Act section 282 (1) (b) is if and to the extent required by the rules, the bankruptcy debts and the expenses of the bankruptcy have all, since the making of the order, been either paid or secured for to the satisfaction of the court.

The rules referred to are the Insolvency Rules 1986, and in particular rules 6.209 and 6.211. Rule 6.209 makes it clear that the definition of creditors for the purpose of the application applies to all creditors at the relevant time, not merely those who proved in the bankruptcy (i.e. those people who formally submitted a proof saying that they were creditors and wanting to share in the realisations in the bankruptcy: those proofs will obviously be scrutinised, but sometimes if it does not look as though there will be any assets, creditors may not bother putting in a proof at all). That is because if the report of the trustee in bankruptcy (or relevant insolvency practitioner) to the court under rule 6.207 states that there are known creditors of the bankrupt who have not proved, then there are certain steps which the court can take. One of those is to direct the trustee in bankruptcy (or if no trustee in bankruptcy has been appointed, the official receiver) to send notice of the application for annulment under Insolvency Act section 282 (1) (b) to such creditors as the court thinks ought to be informed of it. This is with a view to those creditors proving their debts (if they wish to do so) within 21 days of being given notice. The court is also given the power to direct the trustee (or the official receiver in the absence of the trustee) to advertise the fact that the application for annulment under Insolvency Act section 282 (1) (b) has been made, so that creditors who have not proved in the bankruptcy may do so within a specified time. The other specific power given to the court is to adjourn the application for annulment in the interim for any period of not less than 35 days.

Rule 6.211 specifies those matters which are to be proved to the satisfaction of the court under section 282 (1) (b) to invoke the jurisdiction so as to establish the ground upon which the court has power to annul bankruptcy (although as with other grounds, the court has a discretion as to whether actually to annul bankruptcy provided that the jurisdictional ground is satisfied. If it is not then the court has no jurisdiction at all and the application to annul must fail.). The first ground is that all bankruptcy debts which have been proved must have been paid in full. If the debt is disputed, or a creditor who has proved can no longer be traced, the bankrupt has to give such security (which can be money paid into court or a bond entered into with the proved sureties, i.e. a promise to pay in a document which people regarded as acceptable persons by the court have joined in to guarantee) as the court thinks is adequate to satisfy any sum that may subsequently be proved to be due to the particular creditor involved which can (if the court thinks it appropriate to do so) include costs. If the security is given in the case of an untraced creditor, the court can also direct that the particulars of the alleged debt and the security be advertised in such manner as the court thinks fit. However if an advertisement is ordered under rule 6.211 (4) and no claim on the security is made within 12 months from the date of the advertisement (or if there is more than one advertisement, from the date of the first advertisement) then if an application is made to release the security the court is to grant that.

We will look next week at how these rules are given effect to in practice.

Michael J. Booth QC