Case Study: Umbrella Care Ltd (In Liquidation) v Raja [2024] EWHC 1973 (Ch)
When debtors fail to repay their loan, it is possible to make them bankrupt. This requires the debtor to then disclose their asset, with the aim of repaying any qualifying creditors.
When a person has been made bankrupt, they have a duty to disclose all assets and liabilities to the Court. In our experience, debtors who have been made bankrupt tend to have a loose grasp of the truth, and endeavour to hide their assets from the court, by any means necessary, including funneling funds to overseas bank accounts.
In such circumstances, liquidators may be able to apply for what is known as a ‘Passport Order’ (pursuant to Section 37(1) of the Supreme Court Act 1981). This is available due to Section 363 of the Insolvency Act 1986, which covers the Court’s general power to control a bankrupt individual.
There are specific conditions that need to be met, however.
- The Court needs to be satisfied that there is a real risk of the bankrupt leaving the jurisdiction, and
- that the absence of the bankrupt would materially prejudice the bankruptcy.
In the case of Umbrella Care Ltd (in Liquidation), the bankrupt debtor had attempted to flee previously (condition 1), and the trustees in bankruptcy required the bankrupt debtor to answer further enquiries (condition 2).
The bankrupt had proceedings against him for breaching his directors’ duties and alleged misapplication/misappropriation of company funds by the joint liquidators of a company he was formerly a director of, Umbrella Care Ltd. The court clearly did not trust that he would act honestly and attempt to flee again.
This case demonstrates the innovative orders that the court has the powers to make against debtors in insolvency/bankruptcy proceedings, and Griffin Law can assist in obtaining these orders, when recovering debts in insolvency proceedings.
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