In this bankruptcy annulment case the claimants had bankruptcy orders against them in force for over 8 years after their former solicitors got a summary judgment against them for alleged unpaid fees. It transpired that their former solicitor was not properly qualified and struck off, the claimants successful argument was that the retainer should be rescinded on the basis of misrepresentation and as such the bankruptcy orders should never have been made and the bankruptcies were annulled.
The underlying facts leading to the original bankruptcy order
The claimants disputed the fees of their former solicitors (Dean & Dean). Their former solicitors issued proceedings and made an application for summary judgment. Judgment was given in their former solicitors’ favour and the claimants were ordered to pay for damages to be assessed, to make an interim payment of £5,000 and to pay their former solicitors’ costs and the former solicitors were required to file and serve a bill of costs suitable for a solicitor-own client detailed assessment.
As a result, the claimants were made bankrupt in 2005 and 2006 respectively.
The successful annulment application
It subsequently transpired in 2012 that their former solicitor was found guilty of serious misconduct, including dishonest misrepresentations as to his professional status, qualifications and experience when he gained admission as a solicitor and did not disclose he had been convicted of fraud in California. The Solicitors Disciplinary Tribunal ordered that the solicitor be struck off the roll of solicitors and ordered to pay costs of £1.4 million.
The Court decided pursuant to CPR 52.11 (2)(b) to admit this fresh evidence in the claimants’ annulment application to appeal out of time. Arguments were put to the Court that because the “solicitor” was not properly qualified, the fees charged by the solicitors firm were not properly payable and the retainer could be rescinded on the basis of misrepresentation .
The original decision which led to the order which bankrupted the claimants was found by the Judge to be a “miscarriage of justice” as such, the Judge found:
In my judgment there was a miscarriage of justice in the present case. There is an even wider power where the judgment is a default judgment and, if it can be demonstrated that the debt upon which the petition is founded did not exist, then there is a ground within the meaning of section 282(1) (a) existing at the time the bankruptcy order was made: Royal Bank of Scotland v Farley  BPIR 638….
Bearing all this in mind, the Appellants have in my judgment established that the bankruptcy orders ought not to have been made
Mr Robert Ham QC, Re Oraki v Dean & Dean & Anor
 EWHC 2885 (Ch)
In what circumstances will a bankruptcy order be cancelled / annulled?
An application can be made to Court on the grounds which are specified in section 282 and section 261 of the Insolvency Act 1986, and a successful application to annul a bankruptcy demonstrates either:
- that on the grounds that exist at the time the bankruptcy order was made the order ought not have been made (see below for more information on the grounds that can be presented); or
- that the bankruptcy debts and expenses that have accrued during the bankruptcy have since the making of the bankruptcy order have been paid or secured to the satisfaction of the court (for example by solicitor’s undertaking); or
- an undischarged debtor has made an Individual Voluntary Arrangement with the creditor(s) in satisfaction of the bankruptcy debt.
However, it must be noted that case law demonstrates that the Court’s power to annul a bankruptcy order under section 282 is entirely discretionary and just because one of the grounds above exists, does not mean that the Court will automatically cancel a bankruptcy (see Gill v Quinn  EWHC 883 (Ch)). Nonetheless, the court is required to automatically cancel a bankruptcy where the bankrupt has entered into an Individual Voluntary Arrangement (pursuant to section 261).
Get your Bankruptcy Cancelled: Instruct Specialist Bankruptcy Annulment Solicitors
We are a specialist City of London law firm made up of Solicitors & Barristers operating from the only law firm based in the Middle Temple Inns of Court adjacent to the Royal Courts of Justice. Generally many solicitors are unfamiliar with the Insolvency Rules and the minutiae of the bankruptcy process, we are experts in dealing with matters surrounding individual insolvency.
Our team have unparalleled experience at cancelling bankruptcy orders, liaising with the Official Receiver, providing a solicitor’s undertaking, representing you at any bankruptcy hearing at the Bankruptcy Court, at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules.