s.375 and 271(3) of the Insolvency Act 1986 considered - Scottish & Newcastle Ltd. v Raguz [2010] EWHC 1384 (Ch) (10 June 2010)

Mrs Justice Proudman (pictured) has handed down her judgment in Scottish & Newcastle Ltd. v Raguz [2010] EWHC 1384 (Ch) (10 June 2010). The cases concerns a judicial use of sections 271(3) and 375 of the Insolvency Act 1986 (IA86) and an appeal against a bankruptcy order made by District Judge Nield against Mr Raguz which had been presented on 30 September 2009. The petitioners were Scottish & Newcastle Limited and the petition debt of £211,275 was undisputed. Mr Raguz appealed to Mrs Justice Proudman on two grounds. First, at first instance Mr Raguz contended that he was offering adequate security for the debt. Alternatively at first instance, he asked for the petition to be adjourned on the ground that as a result of a contemplated sale of the 55% shareholding in Impney Group Ltd he would soon receive funds sufficient to settle the debt. Impney owns and runs a large hotel ("the hotel") in Worcestershire called Chateau Impney.

There are a number of relevant provisions which the learned judge cites in her judgment. First, s.271 IA86 which notes:
"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."

    "(1) Every court having jurisdiction for the purposes of the Parts in this Group may review, rescind or vary any order made by it in the exercise of that jurisdiction.
    (2) An appeal from a decision made in the exercise of jurisdiction by a county court…lies to a single judge of the High Court…"

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Anonymous said…
The Judge seems to have overlooked the fact that Section 271(3) doesn't end with the words she is quoted as relying on. After (c) it also states that:-
"and, in determining for the purposes of this subsection whether the debtor is able to pay all his debts, the court shall take into account his contingent and prospective liabilities".

To be absolutely fair it should also take into account, assets to be set against such liabilities, but they and she clearly hasn't done so.

Parliament has said in the past that the definition of Insolvency is when any Company or Individual is unable to pay their debts because their liabilities exceed their assets, so why does the Insolvency Service and the Courts seem to think that 'solvency or otherwise' is not relevant to the making of any Bankruptcy Order.

They also forget that under Article 17(2) of the 1948 Universal Declaration of Human Rights "No one shall be arbitrarily deprived of his (or her) property".

What can be more 'arbitrary' than declaring someone bankrupt for a single debt of £750 or more. Even though these debts far exceeded that, it seems possible that the debtor would have been able to pay the debts and Bankruptcy was not really in the interest of the creditor. So why was it ever made? Since when has common sense been abandoned for reason in the UK Courts?

Did the 'creditors' get their money, or was it all 'absorbed' by Trustees fees and Court Costs? In which case I'd say Human Rights have been clearly violated and the Bankruptcy should be annulled.