Struggling to Collect a Debt? Bankruptcy Proceedings Are Often Effective!

October 3, 2018

Collecting debts can be a long and arduous process, but bankruptcy proceedings are often an effective means of bringing matters to a head. That was certainly the case where one businessman tried, but failed, to avoid bankruptcy in respect of a judgment debt totalling more than £16 million.

He ran a professional firm and had been sued by a client in respect of advice given in respect of a tax mitigation scheme. After the effectiveness of the scheme was challenged, the client incurred substantial losses on entering into a settlement with HM Revenue and Customs (HMRC).

After lengthy litigation, the Court of Appeal found that the businessman and his firm had been negligent in failing to give the client a specific warning that the scheme might well be successfully challenged. Judgment was entered in the client’s favour for £16,067,313. A further £565,000 was owed to HMRC in respect of unpaid stamp duty land tax.

Statutory demands were raised against the businessman in respect of both sums. The businessman did not make an application to set aside. At the point the client applied for a bankruptcy order against the businessman he argued he had a substantial cross claim against the client. He also pointed out that he had an application for permission to appeal before the Supreme Court and still had hopes of reversing the Court of Appeal’s decision.

In granting the bankruptcy order the High Court found that the cross-claim was an abuse of process. The judgement debt had not been suspended pending the Supreme Court’s decision on the businessman’s application to appeal, and the Court of Appeal’s order was therefore binding. An adjournment of the bankruptcy order had not been sought and the businessman had admitted that there was no reasonable prospect of him paying the judgment debt within a reasonable time.

Contact Tayntons Litigation department in Gloucester on 0800 158 4147 to book an initial consultation with one of our Solicitors.

Barker v Baxendale-Walker. Case Number: BR-2018-000528