Case Study: Bankruptcy Order Annulment Victory Following HMRC’s Defective Service

We’ve achieved a significant victory for our client, by successfully annulling a bankruptcy order that was made against him. This was due to a critical failure by His Majesty’s Revenue and Customs (HMRC) to properly serve notice of a hearing date.

This triumph underscores our expertise in navigating complex bankruptcy rules and procedures. It highlights our commitment to protecting our clients’ interests against procedural irregularities. The case, detailed in the judgment of Insolvency and Companies Court Judge Burton, demonstrates the importance of due process and the potential for injustice when government agencies fail to adhere to established protocols.

Background

HMRC initially presented a bankruptcy petition against our client for £226,357.65, a debt that Mr. Gaster was actively reducing through consistent payments. The case saw multiple adjournments as Mr. Gaster made good progress in lowering his debt. However, a pivotal error occurred when HMRC failed to serve the order containing the date of an adjourned hearing.

Only HMRC attended the hearing as a result of the failure to serve and a bankruptcy order was made.

The Basis for Annulment

We immediately took action to set aside the bankruptcy order, arguing that the failure to serve the notice of the hearing date constituted a significant procedural irregularity. Had we been aware of the hearing, we would have presented evidence demonstrating his ability to settle the outstanding debt and request a final adjournment.

The application to annul the bankruptcy order was made under rule 12.1(1) of the Insolvency Rules 2016, in conjunction with CPR 3.1(7), and alternatively, under section 282 of the Insolvency Act 1986.

Insolvency and Companies Court’s Decision

The Court’s decision to annul the bankruptcy order hinged on several critical findings:

Failure of Service: HMRC failed to provide sufficient evidence that notice of the adjourned hearing was properly delivered to Mr. Gaster. The judge noted that Mr. Gaster’s evidence that he did not receive the notice was more credible than HMRC’s.

Deprivation of Opportunity: Due to the lack of proper notice, Mr. Gaster was deprived of his right to be heard in court, preventing him from presenting evidence of his ongoing debt reduction and ability to settle the remaining balance.

Solvency and Debt Reduction: The court acknowledged that Mr. Gaster had already made substantial payments towards reducing the debt and appeared solvent on a balance sheet basis.

HMRC’s Conduct: The Court criticised various aspects of HMRC’s conduct, including marking key documents as “confidential” and failing to serve the adjournment order on the Respondent’s solicitors.

Lack of Reliable Evidence from HMRC

The judgment particularly emphasised the lack of reliable evidence from HMRC regarding the delivery of the adjournment order. As stated in the judgment at paragraph 77:

Mr. Gaster’s evidence was unequivocal: he did not receive the notice of the Adjournment Order.

HMRC’s evidence that the notice was delivered to him lacks detail and should not be preferred to Mr Gaster’s evidence.

There is insufficient evidence before the court to persuade me that notice of the Adjournment Order was delivered to Mr Gaster. These points were crucial in the court’s decision to exercise its discretion to annul the bankruptcy order.

The Importance of Proper Notice

This case highlights the critical importance of proper notice in bankruptcy proceedings. Rule 10.23 of the Insolvency (England and Wales) Rules 2016 requires the petitioner (HMRC) to deliver a “notice of the order of adjournment” to the debtor. The Court found that HMRC’s notice was deficient in several respects, and the judgment clarified the distinction between “delivery” and “service” of documents under these Rules.

Implications of the Ruling

The successful annulment of the bankruptcy order has several significant implications:

Restoration of Financial Standing: Our client is no longer bankrupt, allowing him to regain control of his assets and financial affairs.

Opportunity to Settle Debt: Our client will have the opportunity to settle the outstanding amount of the bankruptcy petition.

Cost Recovery: We will seek to have HMRC pay our client’s costs related to the annulment application, as well as the Official Receiver’s costs associated with the administration of the bankruptcy.

Download the Judgment Here

Our Expertise in Bankruptcy Annulments

We are leading experts in bankruptcy petitions and annulment applications. Our experienced insolvency lawyers provide bespoke solutions for individuals facing debt or bankruptcy petitions. We regularly assist with:

• Issuing and defending bankruptcy petitions.
• Setting aside statutory demands.
• Negotiating with creditors and HMRC.
• Representing clients in the High Court and Bankruptcy Court.
• Applying for bankruptcy annulments.

Can My Bankruptcy be Cancelled or Annulled?

Yes, it is possible for a bankruptcy to be cancelled or annulled in the UK. There are a number of reasons why a bankruptcy order may be cancelled, including:

1. Payment of debts: If the debts that led to the bankruptcy order have been paid in full, the bankruptcy can be cancelled.
2. Errors in the bankruptcy process: If there were errors in the bankruptcy process, such as a failure to properly notify all creditors or an incorrect valuation of assets, the bankruptcy can be cancelled.
3. Agreement with creditors: If an agreement can be reached with creditors, the bankruptcy can be cancelled.
4. Change in circumstances: If there has been a significant change in circumstances, such as a change in income or a windfall of funds, the bankruptcy can be cancelled.
5. Application to court: An application can be made to the court to cancel a bankruptcy order.

Expert Bankruptcy Petition Solicitors

If you are facing a bankruptcy petition or seeking to annul a bankruptcy order, we can provide expert legal assistance. We understand the complexities of insolvency law and are dedicated to achieving the best possible outcome for our clients. Contact us today for an initial consultation.