The High Court of Justice in Bankruptcy deals with proceedings in two categories:
- Interim order proceedings leading to, and dealing with, individual voluntary arrangements under Part VIII of the Insolvency (NI) Order 1989 (“the Order”); and
- Bankruptcy proceedings under Part IX of the Order.
All bankruptcy proceedings in Northern Ireland are dealt with in the High Court only.
Jurisdiction may also be affected by the E C Regulation on Insolvency Proceedings. The UK courts may not have jurisdiction over a debtor who has his centre of main interests in another EU member state other than Denmark.
Proceedings in the Bankruptcy Court are started either by originating application (7.01 of the Insolvency Rules (NI) 1991 (the Rules)) or by petition (using one of Forms 6.07 to 6.10 inclusive) available from the Bankruptcy Office of the Chancery Division of the Royal Courts of Justice.
Two types of proceedings are started by originating application and one by petition:
- Applications for Interim Orders for an individual voluntary arrangement are made by originating application if no bankruptcy petition has been presented. (If there is an existing petition, or if a bankruptcy order has been made and the applicant has not been discharged, the application is made by ordinary application in Form 7.02).
- Applications to set aside statutory demands are made by application using Form 6.04.
- Applications for Bankruptcy Orders are made by petition.
Care should be taken that the proposal complies with Rule 5.04.
If no petition has been presented and no Bankruptcy Order has been made, and provided that the nominee waives notice of the hearing, the Interim Order may be made without attendance. The consideration of the nominee’s report, leading to a direction for a creditors’ meeting and an extension of the Interim Order, may also be dealt with without attendance if there is no petition or Bankruptcy Order. If a petition has been presented or a Bankruptcy Order made there must be a hearing and notice given to the petitioner, the Official Receiver and any trustee appointed (Rule 5.06(4)).
In any case, with or without attendance and whether or not there is a petition or Bankruptcy Order, these two stages may be combined in a “concertina” order if the nominee’s report has already been submitted when the Interim Order is made.
The final stage (consideration of the chairman’s report) may also be dealt with without attendance if everything is in order. The usual order at that stage will be to discharge the Interim Order.
The Practice Direction – Insolvency Proceedings (PDIP) gives further information as to the court’s practice on the making of Interim Orders without attendance (see paragraph 16).
Individual Voluntary Arrangements without Interim Order
This procedure enables the debtor to agree a voluntary arrangement with his creditors without the need for an interim order. While this procedure does not involve a court hearing, it leaves the debtor vulnerable to legal action.
The debtor must submit to the nominee a document setting out the terms of the proposed voluntary arrangement and a statement of affairs.
The nominee is required within 14 days (or such longer period as the court may allow) of receiving the proposal and statement of affairs, to file two copies of his report to the court with the following documents:
- a copy of the debtor’s proposals;
- a copy or summary of any statement of affairs provided by the debtor;
- a copy of the notice of the proposal endorsed with the date received by the nominee;
- two copies of the nominees consent to act under Rule 5.05.
The court does not consider the nominee’s or chairman’s report unless a subsequent application is made under the Order or Rules.
back to the top of the page
Applications to Set Aside Statutory Demands
The application should be in Form 6.04. No fee is payable provided the application is made on time (see below). The written evidence in support should exhibit the demand, state the date on which it came into the applicant’s hands and state the grounds on which it should be set aside (see Rule 6.005).
The application must be made within 18 days after service of the demand or (if the court is not open on the 18th day) on the next day on which the court is open. If made later an application for extension of time should be included in the application to set aside the demand, and the written evidence in support should include evidence in support of the extension. If an extension of time is applied for a fee is payable.
If the debt is a judgment debt the court will not normally go behind the judgment and will therefore not set aside the demand unless the applicant can demonstrate that he has a claim against the creditor who has made the demand which equals or exceeds the amount in the demand (Rule 6.005(4)(a)). Ground (4) in side-note (c) to Rule 6.005 should not be relied on: it is not a proper ground for setting aside a demand.
If the Master is of the opinion that the written evidence in support shows no sufficient cause the application will normally be dismissed summarily under Rule 6.005(1) without a hearing.
If that is not done the first hearing will normally be used to give directions for the parties to file and serve written evidence. If the application is disputed it will normally be adjourned for a full hearing at a later date when all the evidence has been completed and any other directions given have been complied with. Generally, the court will not fix a hearing date for final determination of the application unless the parties have filed a certificate confirming that the directions have been complied with and estimating the length of the hearing.
If the application is on the ground that the debt is disputed on substantial grounds the court will set aside the demand if it appears that there is a triable issue. If the evidence in support shows a prima facie issue the burden will be on the respondent creditor to satisfy the court that there is no triable issue.
If the application is on the ground that the debt is secured the security must be shown to belong to the debtor (not, for example, to a company for which the debtor is surety). If it is on the ground that the value of the security equals or exceeds the amount of the debt, the burden to prove that will be on the debtor and will require proper expert valuation evidence, and cross-examination, if appropriate.
The PDIP gives further information about the practice on statutory demand applications (see paragraph 12).
back to the top of the page
A petition may be presented by one or more creditors, by the debtor, or by the supervisor of, or a person bound by, an individual voluntary arrangement.
A creditor’s petition may be based only on:
- non-compliance with a statutory demand which has not been set aside
The petition debt must be a liquidated sum not less than £750, though it may be the sum of two or more debts and there may be different petitioning creditors on the same petition in respect of different debts.
A petition may not be presented in respect of a debt which is secured unless Article 243(1)(A) of the Order is complied with.
To comply with the E C Regulation on insolvency Proceedings, the following statements must be made and verified in the petition:-
- the whereabouts of the debtor’s centre of main interests (Art. 3(1)) and, if the latter is not in the UK, his establishment (Art. 3(2));
- whether or not the E C Regulation applies; and
- whether the proceedings will be main, secondary or territorial proceedings as defined in Article 3 of the E C Regulation.
If a petition is based on a statutory demand (Rule 6.001, 6.002 or 6.003 and Forms 6.02, 6.03) the creditor must do all that is reasonable to bring the demand to the debtor’s attention and must serve it personally if reasonably practical (Rule 6.003(2)) and paragraphs 11 and 13 of the PDIP). The demand is not a court document, and if it needs to be served out of the jurisdiction permission to serve out is not required, but in that case the 18 and 21 day time limits in the demand must be amended in accordance with the PDIP (see paragraph 10).
If the demand is not served personally the creditor should make such attempts to serve as would justify an order for substituted service of a petition (as to which see paragraph 11 of the PDIP). The evidence of service must be made by a person or the persons having personal knowledge of the attempts made to effect personal service.
If the petition is based on one or more statutory demands the debt or debts on which it is based must be limited to those claimed in the demand or demands (less any credit given for payments or reductions between service of the demand and presentation of the petition).
A petition (other than a debtor’s petition) must be served personally unless an order for substituted service has been obtained. Paragraph 11 of the PDIP sets out the normal requirements for orders for substituted service. Personal knowledge by the witness(es) giving written evidence is required.
The petition must be served at least 14 clear days before the hearing date. If this is not done a prompt application for extension of the hearing date (not for adjournment) should be made (this is known as an application for a new date and venue (Rule 6.025)); no affidavit in support is normally required. However, if repeated applications are made, written evidence may be required setting out the attempts which have been made to serve the debtor and why they have been unsuccessful. If an application is made less than two clear working days before the hearing date the costs of the application will not be allowed. Paragraph 14 of the PDIP gives further information about extensions of hearing dates. A copy of the extension order must be served with the service copy of the petition and should be referred to in the written evidence of service and exhibited to it along with the petition.
The written evidence of service of the petition must be filed promptly after service.
On each hearing of the petition a Certificate of Continuing Debt (Rule 6.022, Form 6.22) should be produced to the court. On the first hearing a list (negative if appropriate) of supporting and opposing creditors, in Form 6.21, should also be produced. If the hearing is an adjourned hearing you will also be required to certify that notice of the adjournment has been given in accordance with Rule 6.026.
A petition against two or more members of a partnership is governed by the Insolvent Partnerships Order (Northern Ireland) 1995. The provisions are complex and do not lend themselves to treatment in a brief guide such as this.
back to the top of the page
A Bankruptcy Order may be annulled if:
- on grounds existing when the order was made, it ought not to have been made (Art 256(1)(a));
- the bankruptcy debts and expenses have been paid or secured for to the satisfaction of the court (Art 256(1)(b);
- an individual voluntary order has been approved by the bankrupt’s creditors (Art 235).
The court will entertain an application on the first ground only in exceptional circumstances. However, if the debtor failed to attend or be represented at the hearing when the Bankruptcy Order was made, and the circumstances at that time were such that if he had attended or been represented he might have secured an adjournment or dismissal of the petition, the court may consider rescinding the Bankruptcy Order and reinstating the petition under Article 371 of the Order.
An application on the second ground should only be made if the undisputed bankruptcy debts and expenses have been paid in full. Only debts which are disputed or which relate to a creditor who cannot be traced may be secured for.
Where the application is made on the ground that an individual voluntary order has been approved the court may wish to be satisfied that the applicant is complying with the terms of his individual voluntary order before it makes the order.
Applications after Bankruptcy Order
Many different types of application and proceedings may follow a Bankruptcy Order, usually initiated by the Official Receiver (“OR”) or a trustee in bankruptcy. They include public examinations, applications to suspend automatic discharge, applications for permission to act as a director, and private examinations, applications by trustees for orders for possession and sale of property, applications for income payment orders and various applications by trustees for directions.
Applications for committal and for injunctions and for the modification or discharge of injunctions must be made direct to a judge, as must applications in a matter which has been adjourned to a judge.
All other applications are made to the Master, who will determine them after giving the necessary directions or adjourn them to be heard by a judge.
In suitable cases orders may be made without attendance. Examples are given in paragraph 16 of the PDIP.
Urgent applications (e.g. to stay advertisement or to suspend an arrest warrant) can usually be arranged at very short notice. It will be very rarely that an order to stay advertisement or suspend a warrant will be made without giving the OR, or the trustee if appropriate, an opportunity to be heard.
Appeals from the Master in bankruptcy matters are to the Chancery Judge.
Appeals should generally be made within 28 days of the date of the decision which the Appellant wishes to appeal.
Under Article 371 the court has power at any time to review, rescind or vary any order which it has made. It is sometimes worthwhile to consider whether to resort to this unusual jurisdiction (or the annulment jurisdiction in the case of Bankruptcy Orders) is the appropriate course, rather than an appeal. But Article 371 jurisdiction can only be invoked if there are fresh matters before the court, whether or not such material could have been put before the court at the original hearing.
back to the top of the page
Insolvency proceedings are governed primarily by the Order and the Insolvency Rules. The Rules of the Supreme Court and the practice of the High Court apply except so far as inconsistent with the Insolvency Rules or the practice of the Bankruptcy Court, whereby the Insolvency Order and Rules prevail.
Written evidence may generally be given in the form of an affidavit or written statement.
See Section 1.
The court offices and Master’s chambers are in the Royal Courts of Justice, Chichester St, Belfast.
The following telephone number may be used for enquiries:-
028 9072 4704/4707
back to the top of the page