Bankruptcy annulment refused

A bankrupt applied to annul the bankruptcy order on the basis that it ought not to have been made. She claimed that she had not been properly served and had not become aware of the bankruptcy order until more than a year after it had been made.

She claimed that she'd been suffering from a severe psychiatric illness and had been undergoing treatment in India at the time it was made, and that, even if she had been aware of the proceedings, she lacked capacity within the meaning of the Mental Capacity Act 2005. 

The court found that the applicant had been properly served with both the statutory demand and the petition. On the issue of lack of capacity, the court accepted the applicant’s evidence regarding her mental illness and found that she lacked capacity to understand or deal with those documents, or to engage with the bankruptcy proceedings at all. The starting point therefore was that a bankruptcy that proceeded during a debtor’s incapacity should, in normal circumstances, be annulled.

However, there were further factors to consider in this case. The applicant’s affairs were very opaque; she'd sought to obfuscate and conceal her affairs so that it wasn't possible to understand the full extent of her assets and liabilities. In addition, she'd waited 18 months after learning of the bankruptcy order before making her application, and there was no good reason for the delay. Those factors were of such significance that there was a real risk of detriment to creditors. Accordingly, the court declined to exercise its discretion to annul the bankruptcy order and dismissed the application.

Sriram (aka Roy), Re [2024] EWHC 853 (Ch)

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