Charging order refused in respect of bankruptcy debt

A money claim was made against a defendant, which was settled in May 2014. The settlement required the defendant to transfer its interest in properties to the claimant.

The defendant was then made bankrupt in October 2014 and discharged from bankruptcy 12 months later. The defendant had failed to transfer the properties in accordance with the settlement, and the claimant applied to court in April 2016 to enforce the terms of the settlement. 

The enforcement application was heard in May 2016, and the defendant was ordered to pay damages for breach of the settlement agreement, along with costs.  He was given liberty to apply to set aside or vary the order on the grounds that it was a claim provable in his bankruptcy.

The claimant obtained an interim charging order against the defendant’s interest in a property in August 2022. Thed efendant applied to set it aside on the basis that the debts had been extinguished by the bankruptcy.

The judge held that the obligation to pay damages and costs arose because of an obligation that was incurred before the bankruptcy, being the settlement agreement reached in May 2014. The debts were therefore provable in the bankruptcy and could not be enforced against the defendant. Although the court in May 2016 had been aware of the bankruptcy, it had not been invited to decide whether the liability was a debt that was provable in the bankruptcy.

The decision again confirms the legal position regarding bankruptcy and contingent liabilities. Contingent and future liabilities will be ‘bankruptcy debts’ under s.382 Insolvency Act 1986.

Little Miracles Ltd v Oliver, [2022] EWHC 2553 (Ch)

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