Robertson v Wojakovski; Re Wojakovski


Reference:
[2020] EWHC 2737

Date:
14th October 2020

Court:
Chancery Division

Facts:

The case concerned a petition for a bankruptcy order, and in particular the court’s discretion to adjourn the petition hearing to allow the debtor time to pay within a reasonable time. The petition debt was in the sum of £135,244.90 plus interest, however there were several supporting creditors to which the total sum owing was approximately £16 million.

 

Counsel for the debtor accepted that there was no basis on which the petition could be opposed. He relied on the court’s power to adjourn the petition hearing in order to afford time for the debtor to pay. He contended that there was a reasonable prospect of the debtor being able to pay the petition debt within a reasonable time, however, he accepted there was no reasonable prospect of the debtor being able to pay the larger debt of £16 million to the supporting creditors in a reasonable time.

 

Counsel for the supporting creditors argued that, in order to justify an adjournment of the petition hearing, the debtor would have to demonstrate a reasonable prospect of paying the petition debt andany undisputed debt owed to supporting creditors.

 

This was a novel question for the court. As a matter of principle Zacaroli J preferred the argument of counsel for the supporting creditors. He concluded that the debtor needed to provide credible evidenceof his ability to pay within a reasonable time both the petition debt and the debt due to the supporting creditors.


Judge:
Mr Justice Zacaroli

Comment:

The reasoning behind the decision is at paragraph 15 of the judgment. In summary, Zacaroli J considered that allowing an adjournment in circumstances where the supporting creditors would not be paid within a reasonable time would conflict with the class nature of bankruptcy. It would result in payment in full to the petitioning creditor in preference to the supporting creditors. Zacaroli J observed that if a supporting creditor were substituted at the adjourned hearing and a bankruptcy order was made, the payment to the petitioning creditor would constitute a void disposition unless consented to or ratified by the court under s. 284 of the Insolvency Act 1986.

 

In principle the decision of Zacaroli J appears correct and the decision has helpfully clarified which debts must be paid within a reasonable time. However, a practical difficulty arises where the debtor is not aware of the supporting creditors until the petition hearing itself (which can be the effect of 10.19 and 10.20 of the Insolvency Rules 2016). In these circumstances, where there is a reasonable prospect of evidence being adduced, one imagines that the court may exercise its discretion and order a short adjournment for the debtor to adduce credible evidence of their ability to pay the debts of the supporting creditors within a reasonable time. Therefore, it is advisable that those instructed are aware of any potential supporting creditors, and in particular the prospect of the debtor being able to adduce credible evidence of their ability to pay any potential supporting creditors within a reasonable time.

 

The key take away is that, where the debtor is aware of supporting creditors and evidence in support of an adjournment for time to pay is being prepared, that evidence should address the debtor’s ability to pay both the debts of the petitioning creditors and any supporting creditors within a reasonable time.

 

This case is referenced in the Westlaw version of Sealy & Milman in the commentary concerning s. 271(3) of the Insolvency Act 1986.

Associated Members:

Practice Areas:

© New Square Chambers Ltd : Barristers regulated by the Bar Standards Board.