Gooch v Basildon DC & HM Customs & Excise
- Date: 20/04/2007
Related Barristers
The Applicant ran a plumbing business in the 1980s. Customs and Excise petitioned for the Applicant’s bankruptcy in 1991 and the Applicant, who did not attend at Court, was made bankrupt in February 1992 (Case no. 368 of 1991). The Applicant was summoned to attend a public examination, which he did not attend, and the Court then suspended discharge of his bankruptcy. Subsequently, Basildon District Council petitioned for a second bankruptcy order (Case no. 361 of 1999), which was made on non-attendance by the Applicant in July 2000. In 2004 it was learnt that the Applicant had been severely mentally ill for many years and had lived alone in his house since the death of his parents as a virtual recluse. After months recovering in hospital he attempted to sort out his affairs. The Applicant applied to annul the bankruptcies and or to have them rescinded. The petitioning creditors were Respondents to the two conjoined applications, and the Trustee in Bankruptcy was also represented.
Held:
1. The Court accepted the evidence that the Applicant was not capable of managing his own affairs from around 1988 to 2004 because of severe mental and even psychotic illness. Neither the Court considering whether to make the bankruptcy orders nor the petitioning creditors were aware of the Applicant’s lack of capacity. However, the Court had the power under section 282 (1) (a) of the Insolvency Act 1986 to consider facts and submissions to determine whether the bankruptcy order would have been made had those facts and submissions been before the Court at the time of the hearing of the bankruptcy petitions (Hoare v Inland Revenue Commissioners [2002] BPIR 986). The District Judge said he had no doubt that, had the Courts considering whether to make the bankruptcy orders in question known about the Applicant’s mental impairment, they would not have made the orders, but would have made directions which may have included the appointment of a litigation friend. The Applications to annul were therefore granted.
2. When considering the costs incurred in the bankruptcies by the Trustee, the District Judge said this was a difficult question, because on the face of it no-one did anything wrong. However, following the case of Butterworth v Soutter [2000] B.P.I.R. 582 he held that the ‘least unjust’ result was for the petitioning creditors to meet those costs. Creditors choose how to recover their debts and some prefer bankruptcy, even though it is known to be expensive, because the chances of recovery seem to be better. The creditors took the risk, by using this procedure, and on this occasion it went wrong for everyone.