In circumstances where a debtor lacks mental capacity to deal with a statutory demand and subsequent bankruptcy petition, the court will rescind or annul a bankruptcy order.

The court confirmed this in Haworth v Cartmel and another, in which the applicant had suffered from a mental illness for several years. The petitioning creditor had been advised on several occasions that the applicant was unable to deal with her affairs and did not open her post. The applicant was then served with a statutory demand, which she did not open. A bankruptcy petition followed as did a bankruptcy order. The applicant's application to annul the bankruptcy order was dismissed. Lack of capacity was not raised and the appeal against that refusal to annul was also dismissed on the basis that as capacity had not been raised at the first hearing it could not be relevant to an appeal. The applicant appealed under the Insolvency Act on the basis she lacked relevant capacity. The medical experts accepted that the applicant had a mental impairment which affected her ability to carry out her daily activities.

The court allowed the application. Where the issue raised was one that could or should have been raised at an earlier hearing, it was at the court's discretion whether to permit the applicant to raise the issue or deploy that evidence in a later application. Capacity had not been an issue that had been deployed at the first hearing, nor dealt with on the first appeal. The court would, however, exercise its discretion in favour of the applicant as the issue had not been previously raised and was of cardinal importance to the applicant. The court found on the evidence that the applicant had not had the mental capacity to deal with the statutory demand or bankruptcy proceedings and hearing. That being the case, the bankruptcy order should be annulled or rescinded.

Things to consider

Generally, the courts will not allow you to raise new issues or bring new evidence following the hearing of a matter if that issue was known, or the evidence could have been available, at the time of the original hearing. The court will, however, exercise its discretion to do so where there are exceptional circumstances. Lack of capacity is one such circumstance. The creditor should have involved the Official Solicitor to represent the debtor.