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Judge overturns bankruptcy order that serves "no useful purpose"

The High Court has overturned a bankruptcy order made against a woman who owed Aylesbury Vale District Council £8,067 in council tax arrears.

HHJ Hodge QC said the district judge who made the order had failed to consider whether it served any useful purpose.

Harriet Lock had a bankruptcy order made against her by District Judge Sweeney in January 2017 under a petition presented by Aylesbury Vale for a statutory demand for the council tax served in October 2015.

In his judgment, HHJ Hodge said a debtor bore a heavy burden in demonstrating that there are, and will be, no assets available for distribution for the benefit of the bankrupt's creditors, and that no useful investigation of the bankrupt's assets and affairs can be undertaken.

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But the judge said: “In bankruptcy petitions of the present kind, however, founded upon unpaid council tax, it does seem to me that there is a burden upon a public authority, petitioning for a debtor's bankruptcy, to at least raise a prima facie case that a bankruptcy order will achieve some useful purpose.”

He added: “The bankruptcy petition itself said nothing about what purpose a bankruptcy order might achieve”, and noted that Aylesbury’s own checklist had recognised Ms Lock had no clear assets.

The judge said he could “well understand that the district judge was highly critical of [Ms Lock] for having failed to comply…with the requirement to have filed a skeleton argument” and to have then been sent a skeleton of 18 pages on the day of the hearing.

But the district judge “should at least have skim-read the skeleton argument and identified one of the points that was made there, and made in a bold typed heading, which was whether a bankruptcy order would serve any purpose or benefit to the petitioning creditor”.

HHJ Hodge concluded: “It does seem to me that the bankruptcy order was unjust because the district judge did not consider whether any useful purpose would be served by making a bankruptcy order.

“In my judgement, he was wrong to make the bankruptcy order that he did...there was no proper evidence before the court that there were any assets, whether present or prospective, which could be realised, or were likely to be realised, in any bankruptcy.”

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