Success in the Face of a Heavily Contested Insolvency Litigation Resulting in Bankruptcy and Then Annulment of the Bankruptcy Order.
This recent case study details how we, as insolvency litigation specialists, were able to succeed in annulling a Bankruptcy Order that had been made against our client in what was a difficult and heavily contested case. We often act for clients who want to annul Bankruptcy Orders, and this case demonstrates our approach to the legal problems we are regularly presented with, which is that ‘no hole is too deep for us to make a difference’ and that sometimes ‘Who you Know’ can be just as valuable as ‘What you Know’ when it comes to getting the result you want.
The Details of This Insolvency Litigation Case
We were instructed by a client who had had Judgment entered against him by creditors that they were threatening to enforce regarding repayment of debt. This Judgment had been entered some 13 months previously, and our client had been making payments towards the debt in the meantime.
Our client wanted us to help set aside the Judgement, but an immediate complication was that any application to set aside Judgment usually has to be made swiftly after Judgment is entered and certainly before the passage of 13 months
Settlement negotiations were commenced. However, the terms of a settlement could not be agreed in spite of the client clearly having the financial means to pay the Judgement over a period of time. As a result, a Statutory Demand was eventually served on our client, as a precursor to a bankruptcy petition.
What Advice did we Offer?
On our advice the client made two applications:
- To set aside the Statutory Demand; and
- To set aside the Judgment.
In spite of the 13 months that had passed since the Judgement had been made, the High Court Master ordered that the Judgment be set aside with our client awarded some of his costs in circumstances where the Creditors had not given credit for all of the payments they had received when they originally applied for Judgment.
As a consequence the Statutory Demand was also set aside with the client again awarded some of his costs.
The eventual ‘correct’ Judgment number was then agreed by consent to be a much lower sum. However, settlement negotiations continued to no avail, even though our client still had the ability to pay in full over time. As a result, a further Statutory Demand was presented. An unsuccessful application was made to set that demand aside. An unsuccessful appeal was then made. Settlement negotiations continued throughout.
A bankruptcy petition was then presented. Our advice was for a fully supported security offer to be made in opposition to the petition as envisaged by Section 271(3) of the Insolvency Act 1986 which states:
“(3) The court may dismiss the petition if it is satisfied that the debtor is able to pay all his debts or is satisfied—
(a) that the debtor has made an offer to secure or compound for a debt in respect of which the petition is presented,
(b) that the acceptance of that offer would have required the dismissal of the petition, and
(c) that the offer has been unreasonably refused”
That offer was also rejected and a Bankruptcy Order was made against our client. As can be seen, this insolvency litigation case was fiercely contested, and indeed many might feel that getting a positive result for our client was now unlikely.
What did we go on to Advise our Client to do? This is Where ‘Who we Knew’ Helped
Our aim is to always provide solutions to a business’s problems. In this case it was clear that our client needed to renew his efforts to refinance his business so the creditors could be paid off in full. We put the client in touch with a number of specialist funders with whom we regularly work, with a view to raising the funds required to pay off the client’s creditors in full and, therefore, annulling the Bankruptcy Order.
We made an immediate application on behalf of our client to stay the bankruptcy (under Insolvency Rule 6.207A of the Insolvency Rules 1986 to control the fees and costs incurred by the client’s Joint Trustees. That application was successful.
At the same time, the funder agreed to advance monies to our client on suitable terms, which enabled the bankruptcy annulment application to be made. Funds were advanced. All the creditors, costs and expenses of the bankruptcy were paid in full. The Bankruptcy Order was annulled.
Had the order not been annulled Trustees costs and expenses running into a six figure sum would also likely have become payable out of assets to be realised in the bankruptcy.
If you Need a Bankruptcy Order Anulled, Talk to us. We can help.
This case demonstrates our absolute commitment to the cause of our clients. NDP will go beyond the point at which other firms would stop to achieve a result. No hole is too deep for us to help. In this case, our contacts in the finance world stepped up and allowed us to achieve the result for our client.
Why, you may ask, did the creditors not appear to want to get paid when the offer of a fully supported security offer was rejected? We don’t know, but the Judgment debt was over £400,000 and our client’s property portfolio was worth several million pounds. Perhaps the creditors wished to purchase a distressed portfolio of properties from their appointed Trustees in Bankruptcy and get paid more than £400,000 ultimately? We may never know!
If you have need a bankruptcy annulment, or need help if you have another type of Insolvency Litigation problem (including Misfeasance Claims, Wrongful and Fraudulent Trading and Transactions at an Undervalue), call us on 0121 200 7040 or contact us today. It is always the case that the earlier that you speak to us the more likely it is that we can help.