INSOLVENCY — Winding up — Distribution of assets — Partners each petitioning for own bankruptcy —Neither debtors nor official receiver having power to deal with assets of dissolved partnership — Whether court empowered to direct winding up of affairs of partnership and administration of its property as if debtors had themselves presented joint petition — Insolvency Act 1986, ss 303(2A)–(2C) (as inserted by Insolvent Partnerships Order 1994)

Official Receiver v Hollens [2007] EWHC 753 (Ch)

Ch D: Blackburne J: 4 April 2007

Subsections 303(2A) to (2C) of the Insolvency Act 1986 conferred upon the court the power to direct that the affairs of a partnership be wound up and its property administered as if the debtors had themselves presented a joint petition, even though they had not, so long as the partnership was insolvent and the order sought was one that could have been made had the individual members presented the joint petition.

Blackburne J so held in the Chancery Division when allowing an appeal by the official receiver against the refusal by District Judge Ashton of his application for directions under s 303(2A) to (2C) of the Insolvency Act 1986.
The debtors, who traded in partnership, had each petitioned for their own bankruptcy. Bankruptcy orders had been made against each debtor and their respective estates vested in the official receiver. As a result the partnership had been dissolved but neither the debtors nor the official receiver, as trustee of their estates, had any right or authority to wind up the partnership's affairs thus leaving the partnership assets in abeyance. The official receiver applied under s 303(2A) to (2C) of the Act for the partnership to be administered as if the individual members had presented a joint bankruptcy petition even though they had not.

BLACKBURNE J said that s 303(2A) to (2C) empowered the court, in the circumstances mentioned in s 303(2A), to regulate "the future conduct of insolvency proceedings", namely any proceedings under the 1986 Act, the Insolvent Partnerships Order1994 or the Insolvency Rules 1986. In doing so, the court could apply the provisions of the 1994 Order with any necessary modifications. The preconditions for the exercise of that power were that the partnership was insolvent and that the court had to be satisfied that the order sought was one which it could have made if the individual members had presented a joint bankruptcy petition.

Appearances: Rebecca Stubbs (Treasury Solicitor) for the official receiver; the debtors in person.

Reported by: Nicola Berridge, solicitor.