Insolvency

Bankruptcy petition - unusual facts requiring judge's consideration - requirement for exercise of discretionary power to refuse orderIn re Ross (A Bankrupt) (No 2):CA (Nourse and Mantell LJJ):19 April 2000

The case had a long history, the applicant having first been declared bankrupt in 1979.

The applicant's claim to beneficial ownership of 87% of the shares in the petitioning company against J, their legal owner, had vested in his trustee in bankruptcy.

In 1995 the petitioning company obtained a judgment for 40,000 against the applicant that remained outstanding.In 1997 a judge, upholding a district judge's order for the applicant to be declared bankrupt for a second time, rejected the applicant's claim that the petition was an abuse of process, having been presented solely to stifle his outstanding claim against J, and should be dismissed under s.266(3) of the Insolvency Act 1986.

The applicant appealed.Gerald Levy and Felicity Toube (instructed by Dass Jakhu, Birmingham) for the applicant; James Corbett QC and Claire Cunningham (instructed by Wright Hassall & Co, Leamington Spa) for the petitioning company.Held, allowing the appeal, that s.266(3) of the Insolvency Act 1986 gave the court a general power to dismiss a petition if for any good reason it was appropriate to do so; that as the petitioning company had an outstanding judgment against the applicant, the presentation of the petition could not be an abuse of process; that, however, was not conclusive, it being relevant that the facts established that the applicant had a real prospect of succeeding in his claim against J; that the judge erred in principle by failing to consider in any effective way whether the unusual facts of the case required him to exercise his discretionary power under s.266(3) of the Act; and that the only appropriate outcome was for the petition to be dismissed.