Harrison & Anor v Seggar

This is the petitioning creditor's appeal against the decision of District Judge Bailey on 3 November, 2004 in the Darlington County Court, adjourning generally the petitioning creditor's petition for the making of a bankruptcy order against the debtor, Gillian Anne Seggar.

The circumstances are these: on 17 January, 2001 a bankruptcy petition was presented against the debtor's husband, Neill Seggar, on which, on 15 May, 2001 at 10.00 a.m. in the morning a bankruptcy order was made. On the very day that the bankruptcy order was made, but shortly before the making of the order, a £2,300 payment was made to the debtor out of Mr. Seggar's account with Abbey National plc. The payment was, by Section 284 of the Insolvency Act 1986, a void transaction as it had been made after the presentation of the bankruptcy petition against Mr. Seggar on which, as I have mentioned, the bankruptcy order was subsequently made, and without the consent, or subsequent consent, of the Court.

On 28 June, 2004, following a letter to the debtor, dated 21 April, 2004, from the joint trustees in bankruptcy of Mr. Seggar, calling for the £2,300 to be repaid, the joint trustees caused a statutory demand, dated 24 June, 2004, to be served on the debtor for the £2,300. Following non-compliance with the statutory demand, and in the absence of any application by the debtor to have the demand set aside, the joint trustees on 13 September, 2004 presented a bankruptcy petition against the debtor based on the unpaid £2,300.

The petition, which was served on the debtor on 22 September, 2004 came before District Judge Bailey on 3 November, 2004. At the hearing the joint petitioning creditors - who are, of course, Mr. Seggar's joint trustees, were represented by a solicitor. The debtor appeared In Person. At the hearing the District Judge accepted that the £2,000 was repayable to Mr. Seggar's estate. It was repayable, as I have mentioned, by reason of Section 284. There had been lodged with the Court a notice of opposition by the debtor to the effect that the sum which had been paid to her was a sum which her husband had owed. But, as the debtor accepted at the hearing before the District Judge, the payment which had been made to her, was, insofar as it had been made to her as a creditor, a clear preference.

The District Judge, as I have mentioned, accepted that the £2,300 was repayable to Mr. Seggar's estate, and that the debtor's correct remedy, assuming that the money was owed to her as she claimed, was to prove in her husband's bankruptcy. In short, the District Judge accepted that there was no defence to the petition. But, instead of making a bankruptcy order the District Judge, at his own initiative, inquired of the debtor whether she could repay the sum by instalments and was told "I don't know. I've never done this before. I don't know anybody. With my hand on my heart, I don't anybody a penny. You know, I've got no credit or anything. I don't know what's a reasonable amount. I get £6,000 a year as a classroom assistant for children with special needs. I don't know what's a reasonable amount". On being asked by the District Judge, "£50 a month?" and on being told by the debtor, "That will be fine", the District Judge made an order adjourning the petition generally on payment of £50 per month. His order did not specify when the instalments were to be paid; what was to happen if there was a default; and how the petitioning creditor's costs of the petition were to be dealt with.

But, the main criticism of the District Judge's order is that in adjourning in generally for payment, effectively for nearly four years, since that is how long it will take the debtor to discharge the £2,300 liability if she chooses to avail herself of the liberty to pay no more than £50 per month, the District Judge, so it is said, was failing properly to exercise his discretion.

A petitioning creditor has a prima facie right to obtain a bankruptcy order on, as this was, a duly presented petition where the liability of the debtor for the petition debt is, as it is here, clearly established. Equally, the Court hearing the petition has a discretion to adjourn the petition for payment if, but only if, there is a reasonable prospect of the petition debt being paid in full within a reasonable time. See Re. Gilmartin [1989] 1 WLR, 513 at 516, and much subsequent authority to a similar effect. There must be credible evidence to support such a prospect if the Court is to grant an adjournment for payment.

Here, there was no evidence of the debtor's ability to pay this very small debt, beyond her acceptance of the District Judge's suggestion of repayment by £50 per month instalments. On the contrary, the debtor had told the District Judge, "I've got no credit or anything". More seriously, the adjournment is not for a reasonable time. An adjournment, effectively for four years, is a wholly unreasonable period of time. Except in the most unusual circumstances, absent in the present case, it can never be a correct exercise of discretion simply to adjourn a bankruptcy petition generally.

In my judgment, properly directing himself on the law, the District Judge could not have made the order he did. In my judgment, he failed properly to exercise his discretion. It follows that it falls to me, sitting on appeal from that decision, to exercise the discretion afresh.

The debtor, although, as I am satisfied, duly informed of this appeal, has failed to appear. There is therefore no reason for me to adjourn the petition for payment, there being no basis upon which that course can properly be followed. I am satisfied, having been furnished with a certificate of continuing debt, that the £2,300 reduced only by four monthly payments of £50 each received towards reduction of the petition debt is still owing. There is, so far as I am aware, no reason why the ordinary course should not follow. I propose therefore, on the petitioning creditor's application, to make a bankruptcy order. It is 10.54.