Mohammad Razi Khan v Arvinder Singh-Sall & Anor
[2023] EWCA Civ 1119
Malathi Latha Sriram v Commissioners for HMRC & Anor
19 April 2024
[2024] EWHC 853 (Ch)
High Court
Someone went bankrupt but argued they were too ill to understand what was happening and that the paperwork wasn't properly delivered. The judge agreed they were ill, but also said they waited too long to complain, hadn't helped the bankruptcy trustee understand their finances, and hid money. Because of this, the bankruptcy wasn't cancelled.
Key Facts
- •Malathi Latha Sriram (Ms Sriram) was adjudged bankrupt on 4 September 2017 due to an HMRC petition.
- •Ms Sriram applied to annul the bankruptcy order under section 282(1)(a) and (1)(b) of the Insolvency Act 1986.
- •Ms Sriram argued improper service of the statutory demand and petition, and lack of capacity during proceedings.
- •HMRC opposed the annulment; the trustee was neutral.
- •Ms Sriram's husband, Mr Gupta, had a related bankruptcy case with the same trustee, Ms Brittain.
- •Multiple properties were transferred between Ms Sriram and her family members shortly before or after her bankruptcy.
- •Ms Sriram suffered from severe psychiatric illness and was undergoing treatment in India during the proceedings.
- •Ms Sriram's friend, Ms Gowda, impersonated her in correspondence with HMRC and the court.
- •Expert psychiatric evidence was presented regarding Ms Sriram's capacity.
Legal Principles
A creditor must take all reasonable steps to bring a statutory demand to a debtor's attention and, if practicable, effect personal service (Insolvency Rules 1986, Rule 6.3(2)).
Insolvency Rules 1986, Rule 6.3(2); Practice Direction on Insolvency Proceedings 2014, paragraph 13.2
The court may annul a bankruptcy order under section 282 of the Insolvency Act 1986, but this is discretionary and considers all relevant matters, including those arising after the order (JSC Bank of Moscow v. Kekhman [2015] EWHC 396 (Ch)).
Insolvency Act 1986, section 282; JSC Bank of Moscow v. Kekhman [2015] EWHC 396 (Ch)
In assessing capacity under the Mental Capacity Act 2005, the court must consider whether the person has an impairment of, or a disturbance in the functioning of, the mind or brain, and whether that renders them incapable of making the relevant decision (MCA 2005, sections 1-3).
Mental Capacity Act 2005, sections 1-3
Hearsay evidence is admissible but its weight depends on factors such as the reasonableness of producing the maker as a witness, contemporaneity, multiple hearsay, motive to misrepresent, and whether it was an edited account (Civil Evidence Act 1995, section 4).
Civil Evidence Act 1995, section 4
Outcomes
The application to annul the bankruptcy order was dismissed.
While Ms Sriram lacked capacity during the proceedings, the court considered the significant delay in bringing the application, lack of cooperation with the trustee, opacity in her affairs, and the likelihood of a new bankruptcy petition if the current one were annulled. These factors outweighed the lack of capacity at the time of the original bankruptcy order.