Annulment of Bankruptcy ordered by Local Government Ombudsman

Dear Wolverhampton City Council,

On the 31 March 2008 the LGO published a decision in complaint no
06/B/16600 against you, in which he found that maladministration
had occurred because of a lack of proportionality in its decision
making. In paragraph 93 he said "The Council cannot, it seems to
me, turn a blind eye to the consequences to the debtor of any
recovery option it pursues" and later on "But in selecting those
options the impact on the debtor should be weighed in the balance.
The dire and punitive consequences of bankruptcy, involving a
multiplication of the original debt many times over and
frequently incurring the loss of the debtor’s home, must be a
factor to be taken into account in deciding that the “last resort”
is indeed appropriate. I have seen no evidence that this relevant
consideration was taken into account. And that too was
maladministration".

He then went on to state that this should be rectified by the
council "In the first instance this should involve Mr Ford’s
bankruptcy being annulled, something which I consider the Council
should pay for by arrangement with the trustee".

Please therefore confirm that this was done, and under which
section of the Insolvency Act was the annulment applied for? Did
the Council have to pay all the costs, or did it argue that the
Court had failed in its duty to protect this man from dire;
punitive and adverse consequences too by failing to give him a fair
hearing?

After all, it states in section 271(3) of the Insolvency Act that
"The court may dismiss the petition if it is satisfied that the
debtor is able to pay all his debts ...and, in determining for the
purposes of this subsection whether the debtor is able to pay all
his debts, the court shall take into account his contingent and
prospective liabilities". and in section 363(1) that"Every
bankruptcy is under the general control of the court and, subject
to the provisions in this Group of Parts, the court has full power
to decide all questions of priorities and all other questions,
whether of law or fact, arising in any bankruptcy".

So why should Council taxpayers have to pay any costs associated
with bankruptcies ordered by the Courts, if as it seems, they are
not doing their job properly and fairly either? The Regional
Director North West for the Insolvency Service, has told me that
'solvency or otherwise' is irrelevant to the making of any
bankruptcy order, stating "I should point out that the Court's
ability to dismiss a petition under S271(3)is discretionary ("the
Court may dismiss the petition....") rather than mandatory. There
is no requirement in the rules for the Official Receiver to verify
solvency or otherwise, neither is there any internal guidance that
this should be done".

This seems to me to be wrong as the 'discretion' exercised by the
LGO was clearly rational, whereas the Courts seem to act
arbitrarily and grant every application without considering all of
the facts of every case as the law implies they ought to. They have
legal obligations too, which they are not exercising in accordance
with section 3 of the Human Rights Act, based on the claims of the
Insolvency Service above.

Has the Council changed its policy on applications like this and is
it aware that in Scotland the 'bankruptcy level' was £1500 in
1999/2000 and it is now £3000. Why do you not complain to
Government about the Insolvency Services failure to increase the
'level' in England & Wales for 24 years, which only encourages
'creditors' to engage in these applications? They are responsible
for these injustices, just as much as the 'creditors' are.

Yours faithfully,

J Wilson

Dear Rita Rich,

Thank you for the detailed reply to my enquiry and for confirming
that Section 375 of the Insolvency Act was used to 'rescind' the
bankruptcy order in this case rather than the annulment section 282
which requires an application. Can you confirm that when saying
that "The above Order was made by way of consent" exactly how this
was achieved? Did the Court demand an 'application' be made by the
Council or the 'debtor'?

I also appreciate that your Council has changed its policy however
that is not a Universal Policy adopted Nationally by every Local
Council, hence my reasons for asking if you made a complaint to the
Government.

The 'bankruptcy level' is, as you confirm, a national law, however
it doesn't apply in Scotland where a separate Act set that 'level'
at £1500 in the first year of devolution and where it is now £3000.
So although I am not trying to criticise Wolverhampton's improved
policy, I believe that you rate payers should have the right for
you to complain on their behalf.

As you also confirmed, it has always been possible for this
'bankruptcy level' to be amended by the Secretary of State under
section 267(4) of the Insolvency Act 1986, which only required a
simple Statutory Instrument to be put to both Houses of Parliament.

The fact that this has never been done since 1986 is a disgrace as
the Insolvency Service has benefited annually by the increased
number of bankruptcy petitions, whereas individuals in particular,
like Mr Ford, are not protected by the law of this land.

Article 7 of the Universal Declaration of Human Rights in 1948
stated, "All are equal before the law and are entitled without any
discrimination to equal protection of the law. All are entitled to
equal protection against any discrimination in violation of this
Declaration and against any incitement to such discrimination".

Yet the only reflection of this right in the European Convention is
in Article 14, which states "The enjoyment of the rights and
freedoms set forth in this Convention shall be secured without
discrimination on any ground such as sex, race, colour, language,
religion, political or other opinion, national or social origin,
association with a national minority, property, birth or other
status".

Therefore I believe it can be argued that the current 'bankruptcy
level' of £750, or any figure under £3000, is, and has been, a
discrimination based on Nationality so is not compatible with human
rights, as we are all entitled to equal treatment before the law,
wherever we live in this so called United Kingdom. It is also true
that this right derives directly from Article 2 of the Universal
Declaration of 1948, which was amended by the UK's proposal, to
include these words "Furthermore, no distinction shall be made on
the basis of the political, jurisdictional or international status
of the country or territory to which a person belongs, whether it
be independent, trust, non-self-governing or under any other
limitation of sovereignty".

I believe that applies directly to the situation in the UK,
especially under devolution of power. It is still the
responsibility of the Government to ensure that no individual is
worse off in any part of the UK than they would be, if living in
another part of it by birth or choice. We can't all simply move to
Scotland to get better protection of our rights, can we?

As for the Courts part in this, they too have, at least since the
Human Rights Act was 'effected' in 2000, an obligation to respect
human rights and the limited Convention rights, which would include
Article 14 above. It is they who are also bound to apply sections 3
& 6 of it, and it seems clear to me that they did not do so, before
making the bankruptcy order against Mr Ford, nor thousands of
others including me.

Section 3 states "3. - (1) So far as it is possible to do so,
primary legislation and subordinate legislation must be read and
given effect in a way which is compatible with the Convention
rights". and section 6 "6. - (1) It is unlawful for a public
authority to act in a way which is incompatible with a Convention
right".

The Court is a Public Authority under this Act, so it is their
prime responsibility to 'give effect' to primary legislation such
as the Insolvency Act 1998 and secondary legislation, such as
Statutory Instruments, in a way which is compatible with human
rights.

Any decent court would have ruled years ago that the discrimination
over the 'bankruptcy level' is contrary to human rights under
Article 14 of the Convention and also possibly, Article 1 of the
First Protocol. The failure of them to do so, in my opinion, makes
it their responsibility to make good any damages for their 'acts'
or 'orders' against the individuals concerned, not the Councils who
have simply followed the law, albeit a corrupt law.

That should apply to every bankruptcy order granted in any case
Nationally, where the 'bankruptcy level' is all that has been
relied on to grant any petition. As I've said before, I also
believe that section 271(3) imposed a requirement on the Court to
determine if the 'debtor' named in the petition was actually
'insolvent' before declaring them bankrupt. But that is not how
they've operated since 1986 and that is again entirely their fault.

I trust your Council and any others who may read this, will
reconsider their acceptance of liability and may instead demand
'just satisfaction' for your rate payers, who should not have to
foot the bill, for any of these costs, in this or any other cases.

Yours sincerely,

J Wilson

Dear Wolverhampton City Council,

Regarding this FOI request and my last contact with you.

Can you please advise if the City Council is doing anything about
my suggestions, that they should seek compensation from the Courts
or, failing that, Central Government who should control them, for
the costs they were ordered to pay in this case?

Alternatively can you explain why you will not seek 'just
satisfaction' from the State on behalf of your other Council
Tax/Rate payers?

Yours faithfully,

J Wilson