[1] The language is no longer of a debtor's petition - it is now the debtor's application.

Prior to 6 April 2016, a debtor could make himself/herself bankrupt by presenting his/her own (debtors') bankruptcy petition. On 6 April 2016, a new scheme was introduced. This new scheme is set out in the Insolvency Act 1986, sections 263H-263O, all contained in Chapter AI entitled 'Adjudicators: Bankruptcy Applications by Debtors and Bankruptcy Orders'

Section 263H is entitled 'Bankruptcy applications to an adjudicator' and reads:

'(1) An individual may make an application to an adjudicator in accordance with this Chapter for a bankruptcy order to be made against him or her.

(2) An individual may make a bankruptcy application only on the ground that the individual is unable to pay his or her debts.'

Creditors are not involved in the presentation of the debtors bankruptcy application before the adjudicator.

Registrar Baister in Budniok v Adjudicator, Insolvency Service [2017] EWHC 368 (Ch)('Budniok'), set out an (early) summary of the new regime, at paragraph 14 of Budniok:

'(a) An individual may make an application to the adjudicator for a bankruptcy order to be made against him on the ground that he is unable to pay his debts (see section 263H Insolvency Act and rule 6.38 as to the form of the application). The application must include the information set out in Schedules 2A and 2B Insolvency Rules 1986;

(b) The adjudicator has 28 days in which to decide the application (section 263K and rules 6.42 and 6.43);

(c) Before reaching a decision, the adjudicator may seek further information from the applicant in order to determine the bankruptcy application, and the 28 day period may be extended by 14 days (section 263L and rule 6.42(3));

(d) The adjudicator may also make a number of verification checks on her own initiative, including checking credit reference agencies and the electoral register and contacting the official receiver (rule 6.41);

(e) The adjudicator's decision on the bankruptcy application must be made on the basis of the information provided by the applicant in his application, any further information he has provided upon request and the adjudicator's verification checks (rule 6.42(4) and (5));

(f) The adjudicator must make a bankruptcy order (section 263K(2)) if satisfied that:

(i) the applicant's centre of main interests is in England and Wales (section 263I(1)(a) and (4) and section 263K(1)(a));

(ii) the applicant is unable to pay his debts at the date of the determination (section 263K(1)(b));

(iii) no bankruptcy petition is pending in relation to the debtor at the date of the determination (section 263K(1)(c)); and

(iv) no bankruptcy order has been made in respect of any of the debts which are the subject of the application at the date of the determination (section 263K(1)(d)).

(g) If the adjudicator is not satisfied of these matters, then she must refuse the application and give reasons (section 263K(3), section 263N(1) and rule 6.45;

(h) The applicant may ask the adjudicator to review any refusal within 14 days, but he may not seek to adduce any further information (section 263N(2) and rule 6.46);

(i) The adjudicator, on review, may either uphold the refusal or make a bankruptcy order. If the refusal is upheld, again, the reasons must be given (sections 263N(3)-(4) and rule 6.46);

(j) If the refusal is upheld on review, the applicant may apply to the court to appeal that decision within 28 days (section 263N(5) and rule 6.47).

(k) On the appeal, the court must either dismiss the application or make a bankruptcy order (rule 6.47(4)).'

For those interested in the technical provisions which introduced the new scheme, Registrar Baister in Budniok said, paragraph 13:

'The Enterprise and Regulatory Reform Act 2013 introduced a new regime governing the circumstances in which and method by which a debtor could make himself bankrupt. Section 71, together with Schedules 18 and 19, which came into force on 6 April 2016, made amendments to the Insolvency Act 1986 by:

(a) repealing sections 272 – 274A Insolvency Act 1986 (see paragraph 9(1) of Schedule 19 Enterprise and Regulatory Reform Act 2013);

(b) creating the office of adjudicator (see section 398A Insolvency Act 1986);

(c) introducing a new Chapter A1 into Part IX Insolvency Act 1986 in the form of new sections 263H – 263O (see Schedule 18 Enterprise and Regulatory Reform Act 2013); and

(d) changing the jurisdictional basis on which an individual may apply for his own bankruptcy (section 263I Insolvency Act 1986).'

[2] Any appeal must be brought within 21 days of the decision challenged, unless an extension of time from the court is obtained. See CPR r.52

As to the destination for any such appeal, section 375, subsections (2) and (3) of the Insolvency Act 1986 provide:

'(2) An appeal from a decision made in the exercise of jurisdiction for the purposes of those Parts by the county court or by an insolvency and companies court judge lies to a single judge of the High Court; and an appeal from a decision of that judge on such an appeal lies to the Court of Appeal.

(3) The county court is not, in the exercise of its jurisdiction for the purposes of those Parts, to be subject to be restrained by the order of any other court, and no appeal lies from its decision in the exercise of that jurisdiction except as provided by this section.'

See Practice Direction (Insolvency Proceedings) [2014] BCC 502 (which came into force on 25 April 2018)

See: (1) Bailey v Dargue [2009] BPIR 1; (2) Raguz v Scottish & Newcastle Ltd [2010] B.P.I.R. 945; (3) Sykes v Shillito [2017] EWHC 3588 (Ch); and (4) Vadher v Weisgard [1997] BCC 219.

For an article that addresses some issues with appealing against a bankruptcy, written by the same author, click here.

[3] Insolvency Act 1986, section 375(1) reads:

'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.'

Section 375 appears in 'The Second Group of Parts: Insolvency of Individuals; Bankruptcy', which consists of sections 251A to 385. So the reference to 'Parts in this Group' in section 375(1) is a reference to any court that has jurisdiction in relation to those sections. In other words, section 375(1) empowers a Court with jurisdiction to make orders under any of those provisions, to also review, rescind or vary any order it has made under any of those sections.

The provisions in the Insolvency Act 1986 on bankruptcy are contained in The Second Group of Parts, in Parts IX, X and XI (containing sections 263H to 385 inclusive), though the main part is Part IX (which contains sections 263H to 371 inclusive). Chapter 1 to Part IX is the main chapter (which contains sections 264 to 282 inclusive) and section 264 is the central provision. Subject to subsection 264(1) - which identifies valid petition categories (usually section 264(1)(a)), section 264(2) empowers '...the court to make a bankruptcy order on any such petition'

Section 375(1) therefore applies to bankruptcy order made under section 264(2).

The authors of Sealy & Milman: Annotated Guide to the Insolvency Legislation 24th Ed. - 2021, in their commentary to section 375, refer to the section as a 'general 'safety value'. There are however, constrains on the use of this apparently wide empowering provision.

See Ross v HMRC [2012] EWHC 1054; [2012] BPIR 843, a decision of Norris J, for a discussion on the section 375(1) of the Insolvency Act 1986 power, and relevance of factors going into determining the exercise of discretion.

As to the divide between when the court will: (1) annul the bankruptcy order, under section 282(1)(a); and (2) rescind the bankruptcy order, under s.375(1), reference should be made to Yang v Official Receiver [2017] EWCA Civ 1465 [2018] 2 W.L.R. 307 ('Yang'). In Yang, the Court of Appeal (Gloster LJ and Sir Patrick Elias) considered the point in particular relation to where the bankruptcy order was made on unpaid council tax liability orders. In paragraphs 48 to 59, Gloster LJ said, under the subheading '...Annulment or rescission - discussion and determination':

48 I turn to the question of whether the subsequent setting aside of the liability orders is a ground for rescission or annulment. We were told that this would be the first appellate decision squarely to address the ambit and interaction of the powers to annul and to rescind a bankruptcy, under sections 282(1)(a) and 375(1) of the IA86, in the situation where the debt upon which the BO was founded had been set aside subsequent to the BO.

49 I have already identified the two principal authorities, which at first blush adopted conflicting approaches. In Royal Bank of Scotland v Farley [1996] BPIR 638 , 640 Hoffmann LJ suggested that the subsequent setting aside of a default judgment was a ground existing at the time of the BO, so as to provide a basis for annulment:

“if it can be demonstrated by evidence subsequent to the bankruptcy order that the debt upon which the petition was founded did not exist, then it would be right to say that there was a ground existing at the time the order was made on which it should not have been made . That could be true, notwithstanding that, at the time of the order there was a default judgment in existence which had not yet been set aside.” (Emphasis supplied.)

50 By contrast, in Revenue and Customs Comrs v Cassells [2009] STC 1047, para 29, Sir Andrew Morritt C considered that the setting aside of a tax liability was not a ground existing at the time of the BO, and therefore could only be grounds for rescission, not annulment:

“[An application to annul] could not have succeeded under section 282(1)(a), because there is no doubt that the assessments under section 28C of the Taxes Management Act 1970 gave rise to legally enforceable debts. Accordingly, the [bankruptcy] order was rightly made when made.”

51 There are additional authorities supporting each approach. Hoare v Inland Revenue Comrs [2002] BPIR 986 , which preceded the Cassells case, relied upon and applied Farley's case. There, Peter Smith J suggested at paras 8–9 that:

“8. … any application to rescind or annul is necessarily retrospective in nature and requires the court, on the case of an annulment, to look at the facts and submissions placed before the court on the annulment application to see whether, had those matters taken place, or those submissions in this case been made at the hearing of the bankruptcy petition and then ask the question whether the bankruptcy order [would] have then been made.

“9. It must necessarily be retrospective, because otherwise if the matter had been presented at the time of the hearing of the petition, then there would be no material ever upon which an application to annul could have been made. All that could be done would be to follow the appeal procedure against the decision which had been made, fully argued.”

52 However, most recently, in JSC Bank of Moscow v Kekhman [2015] 1 WLR 3737 , paras 68–70, Morgan J inclined towards the view that in relation to annulment the court should consider the factual position as it stood at the time the BO was made:

“68. There will necessarily be a period of time between the date of the bankruptcy order and the date of the hearing of the annulment application. As section 282(1)(a) makes clear, the court is required to consider the grounds existing at the earlier, and not the later, point in time. Thus, if the facts change between these two dates, the court must consider the facts as they stood before the change. This does not mean that the court will leave entirely out of account events which occurred between the two dates. For example, events which occur after the bankruptcy order may throw reliable light on ‘the grounds existing at the time the [bankruptcy] order was made’. An example would be where there was a dispute about the value of an asset at that time and, following the bankruptcy order, that asset is sold in the open market in such a way as to provide reliable evidence as to the value of the asset at the date of the bankruptcy order …

“69. What sometimes happens when a court is asked to make a bankruptcy order is that the court has to make an assessment of certain possibilities. It might be said that the bankruptcy order will provide an opportunity for the trustee in bankruptcy to investigate certain matters. It might also be said that a bankruptcy order will carry with it the risk of certain adverse consequences. These matters involve an assessment of future possibilities. The court has to do its best to judge those matters as at the time the order is made. On an annulment application, it will be open to a party to lead evidence as to further facts which existed at the date of the bankruptcy order, even though those further facts were not provided to the court at the date of the order. But is it open to a party to inform the court, perhaps some considerable time later, of what actually happened in relation to the various possibilities and then to submit that because things turned out differently, that the court's initial assessment was wrong and that the order ‘ought not to have been made’? The chief registrar directed himself that, when matters are uncertain at the date of the order, but the uncertainty was resolved before the date of the hearing of a later annulment application, he should have regard to the later events. He relied on the decision in Watts v Newham London Borough Council [2009] BPIR 718 …

“70. … The chief registrar did take into account a number of matters which had occurred after the making of the bankruptcy order. He was clearly right to take account of subsequent events in so far as they provided evidence of what the facts were on 5

October 2012. However, I am less convinced that it was appropriate to entertain a submission that because a possibility which was assessed in a particular way on 5 October 2012 turned out differently from the assessment that the bankruptcy order ‘ought not to have been made’ . In view of the absence of any challenge to his judgment on this ground, this matter was not argued in any detail before me … I have therefore considered whether the approach in the Watts case was correct. In the end, I have decided that it is not necessary for me to rule on that point. If it had been necessary to give such a ruling, then I would have wished to consider whether that approach goes too far and whether a case where the court's assessment in relation to future events does not prove to be accurate should be dealt with by rescission under section 375 , rather than by annulment under section 282 . This question of the court's approach to the assessment of a contingency, and the relevance of later events is a difficult one, and a court asked to consider the meaning of ‘on the grounds existing at the time the order is made’ in section 282 might wish to consider whether it derives benefit from the citation of authorities in other areas of the law such as Bwllfa and Merthyr Dare Steam Collieries(1891) Ltd v Pontypridd Water Works Co [1903] AC 426 (a case which might have influenced the deputy judge in the Watts case), Stein v Blake [1996] AC 243 , 252 and Golden Strait Corpn v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] 2 AC 353 or whether such authorities should be distinguished.” (Emphasis supplied.)

(Notwithstanding those remarks by Morgan J, none of the parties suggested that any other authorities outside the insolvency context assisted in construing the specific wording in section 282 of the IA86 .)

53 Whilst it does not directly relate to the construction of section 282 of the IA86 , the general ambit of the power to rescind might be thought to inform the scope of the power to annul—in particular, if it were thought that these powers should dovetail rather than overlap. The salient point is that it is “well established” that section 375 of the IA86 requires “new material and/or a material change of circumstances”: Crammer v West Bromwich Building Society [2012] BPIR 963 , paras 7–8. However, a change in circumstances in this sense will include where facts which did exist at the time a BO was made have subsequently come to light: Papanicola (Trustee in Bankruptcy for Mak) v Humphreys [2005] 2 All ER 418.

54 Finally, in considering the interaction between the powers to rescind and to annul a bankruptcy, it is also appropriate to understand why the difference might matter to the bankrupt. In essence, rescission terminates the bankruptcy whereas annulment treats the BO as having never been made. There are a variety of reasons why this might be significant: see Muir Hunter on Personal Insolvency looseleaf ed, vol 1, paras 3-600 to 3–603 and 3–2614 (references as at 29 March 2017) (“ Muir Hunter “). Two reasons might be thought to be of general significance. First, the Insolvency Rules require the bankruptcy details to be removed from the individual insolvency register in the event of annulment, but not rescission. Thus a credit agency may not become aware of the making of a rescission order, which would have implications in relation to the ex-bankrupt's credit rating. Second, certain contractual terms may be triggered when a BO has been made but rescinded, whereas the terms will not be triggered if the BO has been annulled (this was, for example, the case in Hoare v Inland Revenue Comrs [2002] BPIR 986 ).

55 In my judgment, the only sensible interpretation of section 282(1)(a) of the IA86 is that contended for by the local authority: namely that regulation 49(1) of the CTR deems the liability orders to constitute a legally enforceable debt, regardless of the underlying factual position relating to the relevant property, unless and until the liability order is set aside under the specific statutory procedure laid down for doing so. Dictates of certainty and expediency require that a bankruptcy court should not go behind the liability orders, except in the event of fraud or some miscarriage of justice. At the date that the BO was made, the liability orders remained in place and had not been set aside; the effect of regulation 49(1) of the CTR was therefore statutorily to deem them as constituting a legally enforceable debt from the time they were made until the time they were set aside. The fact that the liability orders were subsequently set aside was not a ground “existing at the time the [BO] was made”, as required by section 282(1)(a) of the IA86 . It was only later, in August 2012, when the liability orders were in fact set aside, that the debt ceased to exist. Thus, even if all the underlying facts in relation to the property had been known at the time that the BO was made, the court would none the less have been entitled to make a bankruptcy order. (Of course, whether it would have done so, as opposed to adjourning the petition to enable the applicant to have obtained an order setting aside the liability orders, is irrelevant.)

56 The logic of Sir Andrew Morritt C in Revenue and Customs Comrs v Cassells [2009] STC 1047

and of Morgan J in JSC Bank of Moscow v Kekhman [2015] 1 WLR 3737 appears to me to be compelling and to be preferred to that of Peter Smith J in Hoare v Inland Revenue Comrs [2002] BPIR 986 . Nor do I consider that this court is bound by the obiter suggestion of Hoffmann LJ in Royal Bank of Scotland v Farley [1996] BPIR 636 , 640 which was, in any event, dealing with the position in relation to a default judgment, as opposed to a debt imposed by a specific statutory provision. The fact is that the words “at the time the order was made” in section 282(1)(a) must have some significance and if read as widely as Hoffmann LJ's dictum might seem to suggest, such words would seem to have no significance at all.

57 The contrast in section 282(1) between sub-paragraphs (a) and (b) is perhaps of some relevance. The latter envisages something happening i e the payment of debts, since the making of the order. The fact that the order was properly made because the debts could not properly have been paid at the time is irrelevant. By contrast, the language in (a) is different. It envisages that if all material facts existing at the time the order was made had been known to the court, the order would not have been made. In this case, as I have said, it would have been made.

58 My conclusion is supported by various authorities: see Muir Hunter , vol 1, para 3-310.1 (references as at 29 March 2017). The finality of liability orders is a point also made by Mummery LJ in Bolsover District Council v Dennis Rye Ltd [2009] 4 All ER 1140 , at para 5:

“liability orders are orders of the court like ordinary civil judgments. If a winding up petition is based on such orders the court will seldom look into them, or go behind them , in the absence of fraud, or in the absence of jurisdiction in the court that made the orders, or ‘some other truly compelling circumstance’.” (Emphasis supplied.)

59 In the circumstances, the question of discretion does not arise since the power to annul under section 282(1)(a) was not engaged.'

[4] In JSC Bank of Moscow v Kekhman [2015] 1 WLR 3737, Morgan J gave a non-exhaustive summary of the effects of a bankruptcy order. Under the heading 'The effect of a bankruptcy order', Morgan J said, at paragraphs 77 to 83:

'77. It is relevant in this case to consider the general effect of a bankruptcy order. What follows is a brief summary only of the general position and does not deal with the many qualifications of, and exceptions to, the general position if they are not of particular relevance in the present case.

78. A bankruptcy order may be made on a debtor's or a creditor's petition: section 264(1)(a)(b)(2) of the 1986 Act. The bankruptcy of the debtor commences with the day on which the order is made and continues until the debtor is discharged from bankruptcy: section 278 . The bankrupt is discharged from bankruptcy at the end of the period of one year beginning with the date on which the bankruptcy commenced: section 279 . Where a bankrupt is discharged, the discharge releases him from all the bankruptcy debts ( section 281(1) ) but he is not released from a bankruptcy debt which he incurred in respect of any fraud or any fraudulent breach of trust to which he was a party: section 281(3) . “Bankruptcy debt” is defined by section 382 . A court may annul a bankruptcy order: section 282.

79. The bankrupt's estate comprises all property belonging to or vested in the bankrupt at the commencement of the bankruptcy: section 283(1) . After the making of a bankruptcy order, no creditor of the bankrupt, in respect of a debt provable in the bankruptcy, has any remedy against the property or person of the bankrupt in respect of that debt nor may such a creditor commence any action or other legal proceedings against the bankrupt, except with the leave of the court: section 285.

80. The 1986 Act provides for the appointment of a trustee in bankruptcy. The function of the trustee is to get in, realise and distribute the bankrupt's estate: section 305 . The bankrupt's estate vests in the trustee on his appointment: section 306 . The trustee may claim for the bankrupt's estate any property which has been acquired by, or has devolved upon, the bankrupt since the commencement of the bankruptcy: section 307. Section 322 provides that the proof of a bankruptcy debt is to take place in accordance with the Insolvency Rules 1986 . Whenever the trustee has sufficient funds in hand of the purpose, he shall declare and distribute dividends among the creditors in respect of the bankruptcy debts which they have respectively proved: section 324(1).

81. The bankrupt is obliged to co-operate with the trustee, in particular, by providing relevant information as to his affairs: section 333 . Every bankruptcy is under the general control of the court: section 363(1).

82. As explained above, the bankruptcy legislation refers to a bankrupt's creditors. The relevant creditors can be anywhere in the world. They can include creditors whose debts are governed by foreign law as well as debts governed by English law. Such creditors can prove in the bankruptcy and, if proving, are eligible to receive any dividend. Similarly, the references in the legislation to the bankrupt's debts include all such debts. Further, the references to the bankrupt's property extends to his property anywhere in the world.

83. In theory, therefore, a bankruptcy order has worldwide effect. However, there can be a disparity between theory and practice. For example, if a bankruptcy order is made in relation to a Russian citizen, and if the Russian courts would not recognise the bankruptcy order or the title of the trustee in relation to the bankrupt's property in Russia, then in practice the order may have limited, or no, effect in relation to Russian creditors and no effect in relation to assets in Russia. Those creditors will be able to sue the bankrupt in the Russian courts in relation to his debts, to obtain judgment for the full amount of the debt and to proceed to execute any such judgment in relation to the bankrupt's assets in Russia.'

[5] In JSC Bank of Moscow v Kekhman [2015] 1 WLR 3737 ('Kekhman'), Morgan J commenced his main consideration of section 282(1)(a), under the heading 'The power to annul a bankruptcy order', from paragraph 65:

'65. Section 282 of the 1986 Act confers on the court a power to annul a bankruptcy order. Section 282 is in these terms, so far as material:

“(1) The court may annul a bankruptcy order if it at any time appears to the court— (a) that, on any grounds existing at the time the order was made, the order ought not to have been made, or (b) that, to the extent required by the rules, the bankruptcy debts and the expenses of the bankruptcy have all, since the making of the order, been either paid or secured for to the satisfaction of the court.”

“(3) The court may annul a bankruptcy order whether or not the bankrupt has been discharged from the bankruptcy.

“(4) Where the court annuls a bankruptcy order (whether under this section or under section 261 or 263D in Part VIII )—

(a) any sale or other disposition of property, payment made or other thing duly done, under any provision in this Group of Parts, by or under the authority of the official receiver or a trustee of the bankrupt's estate or by the court is valid, but

(b) if any of the bankrupt's estate is then vested, under any such provision, in such a trustee, it shall vest in such person as the court may appoint or, in default of any such appointment, revert to the bankrupt on such terms (if any) as the court may direct; and the court may include in its order such supplemental provisions as may be authorised by the rules.”

66. Section 282 does not specify who has sufficient standing to make an application to annul a bankruptcy order. In the present case, it was accepted that Bank of Moscow had sufficient standing for that purpose.

67. The power to annul may, in principle, be exercised “at any time”. As section 282(1)(a) expressly provides, when asked to annul a bankruptcy order, the court will consider “any grounds existing at the time that the order was made”. This wording makes it clear that the court, when considering an annulment application, is not confined to the facts and matters which were drawn to the court's attention at the time when the bankruptcy order was made. It is open to the parties concerned in relation to an annulment application to put forward further evidence of fact, and to make further submissions, as to the grounds which existed at the time the bankruptcy order was made.

68. There will necessarily be a period of time between the date of the bankruptcy order and the date of the hearing of the annulment application. As section 282(1)(a) makes clear, the court is required to consider the grounds existing at the earlier, and not the later, point in time. Thus, if the facts change between these two dates, the court must consider the facts as they stood before the change. This does not mean that the court will leave entirely out of account events which occurred between the two dates. For example, events which occur after the bankruptcy order may throw reliable light on “the grounds existing at the time the [bankruptcy] order was made”. An example would be where there was a dispute about the value of an asset at that time and, following the bankruptcy order, that asset is sold in the open market in such a way as to provide reliable evidence as to the value of the asset at the date of the bankruptcy order; see, for example, the approach in Phillips v Brewin Dolphin Bell Lawrie Ltd [2001] 1 WLR 143 , para 26 (a case on section 238 ), appliedin In re Thoars; Reid v Ramlort [2003] 1 BCLC 499 and Stanley v TMK Finance Ltd [2011] BPIR 876 . Conversely, other events will not be relevant in that way and must be left out of account when considering the grounds existing at the date of the bankruptcy order. An example would be where an asset owned by the bankrupt is destroyed by fire after the bankruptcy order.

69. What sometimes happens when a court is asked to make a bankruptcy order is that the court has to make an assessment of certain possibilities. It might be said that the bankruptcy order will provide an opportunity for the trustee in bankruptcy to investigate certain matters. It might also be said that a bankruptcy order will carry with it the risk of certain adverse consequences. These matters involve an assessment of future possibilities. The court has to do its best to judge those matters as at the time the order is made. On an annulment application, it will be open to a party to lead evidence as to further facts which existed at the date of the bankruptcy order, even though those further facts were not provided to the court at the date of the order. But is it open to a party to inform the court, perhaps some considerable time later, of what actually happened in relation to the various possibilities and then to submit that because things turned out differently, that the court's initial assessment was wrong and that

the order “ought not to have been made”? The chief registrar directed himself that, when matters are uncertain at the date of the order, but the uncertainty was resolved before the date of the hearing of a later annulment application, he should have regard to the later events. He relied on the decision in Watts v Newham London Borough Council [2009] BPIR 718 , paras 76-77, where the deputy judge said: “why should I speculate about what might eventually happen, when I now know what did happen?”

70. At the hearing of the appeal, it was not suggested that the decision in the Watts case was wrong or that the chief registrar should not have directed himself as he did. The chief registrar did take into account a number of matters which had occurred after the making of the bankruptcy order. He was clearly right to take account of subsequent events in so far as they provided evidence of what the facts were on 5 October 2012. However, I am less convinced that it was appropriate to entertain a submission that because a possibility which was assessed in a particular way on 5 October 2012 turned out differently from the assessment that the bankruptcy order “ought not to have been made”. In view of the absence of any challenge to his judgment on this ground, this matter was not argued in any detail before me. However, as will be seen, I will in this case make my own decision on how the relevant discretion ought to have been exercised. I have therefore considered whether the approach in the Watts case was correct. In the end, I have decided that it is not necessary for me to rule on that point. If it had been necessary to give such a ruling, then I would have wished to consider whether that approach goes too far and whether a case where the court's assessment in relation to future events does not prove to be accurate should be dealt with by rescission under section 375 , rather than by annulment under section 282 . This question of the court's approach to the assessment of a contingency, and the relevance of later events is a difficult one, and a court asked to consider the meaning of “on the grounds existing at the time the order is made” in section 282 might wish to consider whether it derives benefit from the citation of authorities in other areas of the law such as Bwllfa and Merthyr Dare Steam Collieries v Pontypridd Water Works Co [1903] AC 426 (a case which might have influenced the deputy judge in the Watts case), Stein v Blake [1996] AC 243 , 252 and Golden Strait Corpn v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] 2 AC 353 or whether such authorities should be distinguished.

71. Section 282(1)(a) requires the court to consider whether, on the grounds existing when the bankruptcy order was made, the order “ought not to have been made”. There may be various reasons why the court hearing an annulment application is satisfied that the bankruptcy order “ought not to have been made”. For example, it may emerge that the court had no jurisdiction to make the bankruptcy order. An example is where the order was made in relation to a debtor whose centre of main interests, for the purposes of the Insolvency Regulation , was in another member state: see, by way of examples, In re Eichler [2011] BPIR 1293 ; Irish Bank Resolution Corpn Ltd v Quinn [2012] BCC 608 and Sparkasse Hilden Ratingen Velbert v Benk [2012] BPIR 1258 . A court may annul a bankruptcy order where the debt on which the petition was founded did not exist: see Royal Bank of Scotland plc v Farley [1996] BPIR 638 , 638-640. Further, a court may annul a bankruptcy order if the debtor was able to pay his debts when the order was made (so that section 272 was not then satisfied): see Paulin v Paulin [2010] 1 WLR 1057 , para 40; similarly, if the petition involved an abuse of process: see the discussion in Paulin v Paulin , at paras 43-48.

72. In addition, on a petition for a bankruptcy order, the court has a discretion whether to make the order. If on the hearing of an annulment application, the court is satisfied that on the grounds existing at the date of the bankruptcy order, such an order ought not to have been made, as a matter of discretion, then I consider that the court hearing the annulment application is able so to determine and to hold that the bankruptcy order “ought not to have been made” for the purposes of section 282(1)(a) .

73. I wish, however, to comment further on this last possibility. In many cases, the court hearing the annulment application will have different evidence from that which was before the court at the hearing of the petition. This could arise in the case of a debtor's petition where the creditors were not notified of the petition and, following the bankruptcy order, a creditor applies for an annulment of the order relying on matters which were not previously before the court. In such a case, the court hearing the annulment application is not conducting an appeal against the decision made on the petition but is exercising its own original jurisdiction under section 282 . However, in a case where there is no new evidence before the court hearing the annulment application, the court will normally take the view as a matter of discretion (a topic I consider below) not to annul the bankruptcy order.

74. The power to annul under section 282 is discretionary (“the court may annul”). Thus, even if the court is satisfied that on the grounds existing at the date of the bankruptcy order, the order ought not to have been made, the court can still decide not to annul the order. An obvious example would be where the annulment would be pointless, for example, where the circumstances were such that a new bankruptcy order would certainly be made. Another example would be where circumstances had changed following the bankruptcy order making it inappropriate to annul the order. It follows that when considering whether to exercise its discretion to annul an order which it has found ought not to have been made the court will take into account all relevant matters, including matters which have come about after the bankruptcy order was made.

75. The discretionary nature of the jurisdiction to annul is shown by the decisions in Owo-Samson v Barclays Bank plc [2003] BPIR 1373 and Owo-Samson v Barclays Bank plc (No 2) [2004] BPIR 303 . In that case, on an application to annul a bankruptcy order, the Court of Appeal held [2003] BPIR 1373 that, on the grounds existing at the time the order was made, the order ought not to have been made. That meant that the court had a discretion whether or not to annul the bankruptcy order. The Court of Appeal remitted that matter to the registrar who declined to exercise the discretion to annul the order and his decision was upheld on appeal [2004] BPIR 303.

76. It is also relevant to refer to the type of case where nothing has changed between the date of the hearing of the petition and the date of the hearing of the annulment application and the party seeking the annulment is effectively seeking to re-run the original arguments before a different judge, hoping for a different result. Ahmed v Mogul Eastern Foods [2007] BPIR 975 , in particular, at paras 19, 20, 23 and 25, is authority for the proposition that, in such a case, the court will normally take the view that, in the absence of an appeal against the bankruptcy order, the court should not permit an attempt to have a second bite of the cherry before a judge of co-ordinate jurisdiction; this approach is an exercise of the discretion conferred by section 282(1) not to annul a bankruptcy order.'

Then at paragraph 87, Morgan J in Kekhman said 'I will elaborate on what I have already described as the correct approach to an application to annul under section 282...', before stating, at paragraph

'88. Section 282 confers on the court a jurisdiction to annul a bankruptcy order where it appears to the court that “on the grounds existing at the time the order was made, the order ought not to have been made”. If that matter appears to the court, then the court has a discretion whether to annul the order: the section says “may annul”. Accordingly, when dealing with an application to annul the court normally needs to decide: (1) what were the grounds existing at the time the order was made (question 1): whether on those grounds, the order ought not to have been made (question 2); and (2) if the answer to question 2 is: “the order ought not to have been made”, whether it should annul the order: question 3.

89. In relation to question 2, the court may have to consider whether the court had jurisdiction to make the bankruptcy order or it may have to consider whether in its view, the bankruptcy order “ought not to have been made” as a matter of discretion. In a case where the original court had jurisdiction to make the order, the court hearing the annulment application must consider afresh whether the order ought to have been made. The court hearing the annulment application is not conducting an appeal against the exercise of a discretion. Nor is it conducting a process akin to judicial review. Instead, it is exercising an original jurisdiction to annul an earlier order where it is of the view that the order ought not to have been made. In many cases where a court is asked to annul a bankruptcy order, the court will have before it material which was not before the court which made the bankruptcy order. In such a case, it seems obvious that the court hearing the annulment application is not confined to a process of appeal or judicial review against the original order. The court hearing the annulment application must take account of all relevant material and make up its own mind as to whether the bankruptcy order ought to have been made.

90. In a case where the material before the court hearing the annulment application is the same as the material considered when the bankruptcy order was made, then the court will not normally address question 2 in any detail but will proceed direct to question 3 in order to hold that even if the bankruptcy order ought not to have been made, in the absence of an appeal against that order, the court should exercise its discretion not to annul the order.

91. The decision in Owo-Samson v Barclays Bank plc (No 2) [2004] BPIR 303 , referred toby the chief registrar, does not cast doubt on any of this reasoning. In that case, the Court of Appeal held, answering question 2, that the bankruptcy order ought not to have been made and it remitted question 3 to the registrar. The registrar then answered question 3 by holding that it was not appropriate to annul the bankruptcy order. The bankrupt appealed to the judge against the registrar's exercise of his discretion in relation to question 3. That led the judge to apply the conventional test for an appeal court considering a challenge to the exercise of a discretion. The conventional test was correctly stated by the judge in that case but he was not purporting to say anything about the test which is to be applied in relation to question 2, as described above.

92. Mr Swainston submitted to the chief registrar that the test for an appeal court identified in the Owo-Samson case applied to question 2. During the course of the argument, the chief registrar commented that the test in that case was not the right test. However, in his judgment at para 107, he expressed himself differently. As I interpret that paragraph, the chief registrar seems to be saying that if the original court, when exercising its discretion in relation to the making of a bankruptcy order, does not commit an error of principle or act perversely in the Wednesbury sense ( Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223), then the court hearing the annulment application should not annul the order or should at least be reluctant to annul it. I consider that the chief registrar's statement is different from the correct approach as I have described it above. His statement appears to run together questions 2 and 3 and does not amount to an accurate statement as to either step, nor as to the combined operation of the two steps.'