Insolvency

Bankruptcy order - secured debt - valuation to exclude estimated costs of realisation

Owo-Samson v Barclays Bank plc and Another: CA (Lords Justice Ward and Carnwath and Mr Justice Newman): 21 May 2003

In 1998, a bankruptcy order was made against the debtor, the creditor having obtained a charging order over his home.

The debtor contended that the valuation figures showed that the debt was always fully secured.

His application for the bankruptcy order to be annulled was rejected on the ground, among other things, that if the creditor's estimated costs, amounting to some 20,000, for obtaining and implementing an order for the sale of an uncooperative debtor's home were included, then the debt was not fully secured.

The debtor appealed.

The debtor in person.

Adam Goodison (instructed by Matthew Arnold & Baldwin, Watford) for the creditor; David Allison (instructed by Boyes Turner, Reading) for the debtor's trustee in bankruptcy.

Held, allowing the appeal, that at the statutory demand stage rule 6(4) of the Insolvency Rules 1986 (SI 1986 1925) posed the question as to 'whether the value of the security equals or exceeds the full amount of the debt'; that section 268(1) of the Insolvency Act 1986 referred to the debt as an existing debt 'payable immediately'; that the Court of Appeal in Platts v Western Trust & Savings Ltd [1996] BPIR 339, citing section 271(a) of the 1986 Act, referred to security for debts payable at the time of the petition or 'having since become payable'; and that, accordingly, estimated future debts and incidental costs of enforcement were to be excluded with the consequence that on a proper valuation of the debtor's home the debt was fully secured.