The court has a limited discretion not to make a bankruptcy order where the debt is the subject of a statutory demand which has not been paid and is outstanding at the time of the bankruptcy petition hearing.
The court confirmed this was the position in Adeosum v Revenue and Customs Commissioners (the Revenue). The debtor entered into a contract with the Revenue in relation to his unpaid tax but failed to comply with its terms. The Revenue served a statutory demand and then a bankruptcy petition when the demand was not complied with. The hearing of the petition was adjourned for settlement as the debtor advised he could obtain a £50,000 loan in order to settle the debt. When the petition next came on for hearing, the registrar made the bankruptcy order on the basis that the debt was not disputed, the loan had not been completed and several promises to pay had not been met. The registrar also took into account that if made bankrupt, the debtor (who was a GP), would have his contract with the NHS terminated.
The debtor appealed submitting that the registrar had failed to consider his reasonable offers to pay, the draconian effect of the order on his job, proportionality and that he had not had a fair trial under Article 6 of the European Convention on Human Rights.
The appeal court held that the registrar only had limited discretion in such a case. Although hardship was to be taken into account, it was not determinative where the debt could not be paid. The debtor had had ample opportunity to be heard and to pay the debt and had made numerous promises to pay. It could not be said he had not had a fair trial or that there was a lack of proportionality.
Things to consider
Sympathy with a debtor's plight is not enough to outweigh the exercise of discretion in making a bankruptcy order where a statutory demand has been served, there is no dispute as to the underlying debt and the debtor has had ample opportunity to make payment but has failed to do so. This case will be a useful reminder of that position where it is perceived that a registrar is being "soft" on a debtor.