In England and Wales, in personal insolvency, there is section 285 of the Insolvency Act 1986 ('IA 1986'), which is entitled 'Restriction on proceedings and remedies'. Subsection (1) of s.285 IA 1986 provides:

'At any time when proceedings on a bankruptcy application are ongoing or proceedings on a bankruptcy petition are pending or an individual has been made bankrupt the court may stay any action, execution or other legal process against the property or person of the debtor or, as the case may be, of the bankrupt.'

As will be apparent, this subsection empowers the court, where one of three circumstances exist, to, in its discretion, stay 'any action, execution or other legal process' (which I shall label, a 'Qualifying Process') against the property or person of the debtor/bankrupt. Accordingly, these Qualifying Processes are, if the criteria is met and circumstances warrant it, susceptible / liable / vulnerable to being made subject to a s.285(1) IA 1986 stay order (this susceptibility, I shall label 's.285(1) Stayable'). This article will consider this provision and the power it grants to the court, in light of:

(1) Re Smith (A Bankrupt) [1990] 2 AC 215 [1989] 3 WLR 1317 ('Smith'), House of Lords (Lord Keith; Lord Griffiths; Lord Ackner; Lord Jauncey; Lord Lowry) on 30.11.89;

(2) In re Edgcome [1902] 2 K.B. 403, Court of Appeal (Vaughan Williams LJ; Romer LJ; Stirling LJ) on 11.7.11 (note this case has been held to be wrongly decided);

(3) Hellard v Chadwick [2014] BPIR 162 ('Hellard 162'), High Court (Registrar Barber (equivalent to ICC Judge)) on 22.11.13;

(4) Hellard v Chadwick [2014] BPIR 1234 ('Hellard 1234'), High Court (Charles Hollander QC (sitting as a Deputy Judge of the High Court)) on 1.7.14.

(5) Cook v Mortgage Debenture Ltd (also known as Mortgage Debenture Ltd (in Administration) v Chapman) [2016] EWCA Civ 103 [2016] 1 WLR 3048 ('Cook'), Court of Appeal (Lord Dyson MR; McCombe LJ; David Richards LJ) on 25.2.16.

(6) Ratten v Natural Resource Body for Wales (also known as Re Paperback Collection and Recycling Limited) [2019] EWHC 2904 (Ch) ('Ratten'), High Court (HHJ Halliwell sitting as a Judge of the High Court) on 30.10.19;

(7) The Financial Conduct Authority v Carillion Plc (In Liquidation) (also known as Re Carillion Plc (In Liquidation)) [2020] EWHC 2146 (Ch) ('Carillion 2146'), High Court (ICC Judge Jones) on 7.8.20 (appeal allowed by Michael Green J [2021] EWHC 2871 (Ch) [2022] Ch. 162 on a point about whether the FCA serving a certain statutory notices (a 'warning notice', 'decision notice' and a 'final notice' under FSMA 2000, sections 91, 92, 123, 127 and 390) as part of its regulatory functions, was caught by the s.130(2) IA 1986 moratorium and so, necessitating the FCA obtaining the court's permission).

(8) Michael Wilson and Partners Ltd v Sinclair [2021] EWCA Civ 505 [2021] 4 WLR 63 ('Wilson'), Court of Appeal (David Richards LJ, Simler LJ, Nugee LJ) on 16.4.21;

(9) The Financial Conduct Authority v Carillion Plc (In Liquidation) (also known as Re Carillion Plc (In Liquidation)) [2021] EWHC 2871 (Ch) [2022] Ch. 162 ('Carillion 2871'), High Court (Michael Green J) on 27.10.21.

(10) Hijazi v Yaxley-Lennon [2022] EWHC 635 (QB), [2022] BPIR 1199 ('Hijazi), High Court (Master Dagnall) on 3.2.22;

(11) Punjab National Bank (International) Ltd v Nanda [2023] EWHC 3201 (Ch) ('Punjab'), High Court (Master Kaye) on 15.12.23;

(12) Waypark Commercial Mortgage 1 Limited v Vanguard Number 1 Limited (In Liquidation) [2025] EWHC 1786 (Ch) ('Waypark'), High Court (Deputy ICC Judge Baister) on 14.7.25;

A few other, more minor authorities, are also considered. The other subsections in section 285 IA 1986 are, for completeness, set out in a footnote[0] (s.285(2) empowers courts before which (non-bankruptcy) proceedings are pending, to impose stays if thought fit; s.285(3) to (6) apply after a bankruptcy order is made - Wilson confirmed, at paragraph 36, that s.285(1) and s.285(3)(a) can both apply where the individual is bankrupt).

For bevity, the person/entity against whom an insolvency process (for instance, bankruptcy, liquidation or administration) is sought, or who is already in an insolvency process, will be labelled the 'Insolvent Person')

Predecessors to s.285(1) IA 1986

The provision now contained in section 285(1) IA 1986 has a relatively long history. Its predecessors (or 'ancestors'[1]) are[2]:

(a) section 13 of the Bankruptcy Act 1869;

(b) section 10(2) of the Bankruptcy Act 1883; and

(c) section 9 of the Bankruptcy Act 1914.

For the avoidance of doubt, all the above ((a)(b) and (c)) provisions are now obsolete (and so of historical interest only now).

Similar provisions connected to other insolvency procedures 

There is not an exact match to s.285(1) IA 1986 in corporate insolvency law:

(1) In compulsory winding up, the three circumstances when s.285(1) applies ('when proceedings on a bankruptcy application are ongoing or proceedings on a bankruptcy petition are pending or an individual has been made bankrupt'), is split over 2 different sections (two in s.126(1) IA 1986; one in s.130(2) IA 1986 (see below)). To set these out, these are:

(a) section 126 IA 1986 is entitled 'Power to stay or restrain proceedings against company' and s.126(1) reads:

'(1) At any time after the presentation of a winding-up petition, and before a winding-up order has been made, the company, or any creditor or contributory, may -

(a) where any action or proceeding against the company is pending in the High Court or Court of Appeal in England and Wales or Northern Ireland, apply to the court in which the action or proceeding is pending for a stay of proceedings therein, and

(b) where any other action or proceeding is pending against the company, apply to the court having jurisdiction to wind up the company to restrain further proceedings in the action or proceeding;

and the court to which application is so made may (as the case may be) stay, sist or restrain the proceedings accordingly on such terms as it thinks fit.'

Section 126(b) IA 1986 above can be seen to be the closest match, so to speak, to s.285(1) IA 1986, since it relates to an application to the insolvency court, to restrain (note not 'stay'[2a]) the targeted action or proceeding.

(b) section 130 IA 1986 is entitled 'Consequences of winding-up order' and s.130(2) IA 1986 reads:

'When a winding-up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be be proceeded with or commenced against the company or its property, except by or against the company or its property, by leave of the court and subject to such terms as the court may impose.'[2b]

s.130(2) IA 1986's predecessors were: (a) s.87 of the Companies Act 1862[3]; and (b) s.231 of the Companies Act 1948[3a]. Michael Green J in Carillion considered the history to s.126 and 130(2) IA 1986[4].

There are some specific provisions in relation to contributories of unregistered companies[4a]. For voluntary liquidations, Ratten determined that the Court has a power equivalent to s.126(1) IA 1986, when s.112(1) and 112(2) IA 1986 are read together[4b].

(2) In administration, there is paragraph 43 of Schedule B1 to the IA 1986, which, by virtue of paragraph 44[5a], applies from the time that: (a) administration application in respect of a company has been made; and (b) a company or its directors file (whether under paragraph 14 or 27(1) of Schedule B1) with the court a copy of the notice of intention to appoint an administrator. Paragraph 43(6) provides:

'No legal process (including legal proceedings, execution, distress and diligence) may be instituted or continued against the company or property of the company except

(a) with the consent of the administrator, or

(b) with the permission of the court.'

Michael Green J in Carillion considered the history to paragraph 43 of Schedule B1 to the IA 1986[5b].

Interestingly, in the former (now obsolete) version of administration (then contained in Part II of the 1986 Act), s.10 (period between the presentation of the petition and the making of the administration order) and s.11 (period after the making of the order) operated; where s.11 imposed a prohibition (without leave of the court or insolvency practitioner consent) with probably the closest wording to (the more difficult last part to the wording in) s.285(1), namely: 'no other proceedings and no execution or other legal process may be commenced or continued...against the company or its property...'.

Stepping back, a core difficulty in this area, is that the wording of the key phrases within these various provisions, are different, making the drawing of analogies between the various authorities on the various provisions, difficult[5c]. 

Purpose of s.285(1) IA 1986 

The purpose of s.285(1) IA 1986 was set out by Lord Jauncey in Smith, while speaking of all the s.285 IA 1986 provisions. At p 229-230, Lord Jauncey (with whom Lord Keith, Lord Griffiths, Lord Ackner and Lord Lowry agreed) in Smith said (perhaps a little inelegantly[6]):

'The purpose of section 285 is to protect the estate for the whole body of creditors and to prevent unsecured creditors, after the initiation of bankruptcy proceedings, from taking steps by putting pressure on the debtor to obtain advantages over other creditors.' 

and later, described the '...the underlying purpose of section 285...' (at p 230) as: 

'...the protection of the bankrupt's estate for all his creditors.' and that 'It follows that proceedings by one creditor to enforce payment to himself are the sort of proceedings contemplated by the section.' (at p 230)

Similarly, though in relation to s.285(1) IA 1986's predecessor, s.10(2) of the Bankruptcy Act 1883, Lord Jauncey said, at p237:

'The purpose of section 10(2) of the Act of 1883 was to prevent one creditor obtaining advantage at the expense of others.'

This description of the purpose of s.285, is incomplete[6a], as more recently, David Richards LJ (with whom Lord Dyson MR and McCombe LJ agreed) in Cook gave a fuller description of the purpose behind providing a Insolvent Person with an (insolvency) moratorium. The reason why David Richards LJ's description of a moratorium's purpose is relevant here, is because, the section 285(1) IA 1986 power to stay can be seen as an aspect of the general concept of the (insolvency) moratorium - aspects being the existence of a:

(a) prohibition on commencing / continuing proceedings (with consent/permission obtainable, whereupon proceedings may be commenced or continued); with the inverse being,

(b) permitting proceeding to continue but making the proceedings liable/vulnerable to a stay (s.285(1) IA 1986 power, being one example of this[6b]).

At one level these can be viewed as two sides of the same coin. That is, a default position of: (i) permitted or (ii) prohibited; with ability for the Court to switch it to the other (respectively): (i) stayed or (ii) consented to/permitted.

Furthermore, they are both engaged to cover the same transition/anticipated transition from one legal environment (an unconstrained claim legal environment, with a ‘first come, first served’ or ‘race goes to the swiftest’ enforcement legal environment[7]) to another legal environment (an IA 1986 governed legal environment, dominated by the statutory 'waterfall'[8]). Consequently, one would anticipate that the purpose of s.285(1) IA 1986 and (insolvency) moratorium are the same.

In Cook, an administration interim moratorium case under IA 1986, Schedule B1, paragraphs 43 and 44, David Richards LJ said, at paragraph 11:

'Administration as an insolvency procedure was introduced by the Insolvency Act 1986, but a moratorium has long been a feature of a compulsory liquidation. Section 130(2) of the Insolvency Act 1986, reflecting similar provisions in earlier legislation, provides:

“When a winding up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company or its property, except by leave of the court and subject to such terms as the court may impose.”

A similar provision exists as regards bankruptcy of individuals: see section 285 of the Insolvency Act 1986. There is no automatic moratorium in the case of a creditors' voluntary winding up but the liquidator may obtain a stay of any action or proceeding against the company by an application to the court under section 112.'

Then, David Richards LJ, at paragraph 12, said:

'In the case of liquidation and bankruptcy, the purpose of these provisions is essentially twofold. First, given that the property of the company or individual stands under the statute to be realised and distributed, subject to any existing interests, among the creditors on a pari passu basis, the moratorium prevents any creditor from obtaining priority and thereby undermining the pari passu basis of distribution. Secondly, given that both a liquidation and bankruptcy contain provisions for the adjudication of claims by persons claiming to be creditors, the moratorium protects those procedures and prevents unnecessary and potentially expensive litigation. In circumstances where the potential liability of the company or bankrupt is best determined in ordinary legal proceedings, as for example is often the case with a personal injuries claim, the court will give permission for proceedings to be commenced or continued, but usually on terms that no judgment against the company or individual can be enforced against the assets of the estate.'

This could be summarised as the protection of: (a) the pari passu basis of distribution; and (b) the integrity and utility of the adjudication process for claims in the insolvency procedure (bankruptcy, liquidation etc).

Strictly speaking, in relation to s.285 IA 1986, this will be obiter, but it is of course highly persuasive. It identifies 2 purposes for why Parliament has imposed statutory controls/provided statutory powers to control, ordinary legal proceedings from being commenced (instituted) and/or continued against the Insolvent Person.

After describing the purposes of administration[9], David Richards LJ in Cook said, at paragraph 13:

'The purpose of the moratorium is to assist in the achievement of those purposes. The moratorium on legal process against the property of the company best preserves the opportunity to save the company or its business by preventing the dismemberment of its assets through execution or distress. The moratorium on legal proceedings serves the same purpose by preventing the company from being distracted by unnecessary claims. As Nicholls LJ put it in In re Atlantic Computer Systems plc [1992] Ch 505, 528, the moratorium provides “a breathing space”.'

On this area:

(1) Nugee LJ in Wilson, at paragraph 35, agreed with the submission that:

'...the overall objective of section 285 IA 1986 is to ensure the orderly administration of the bankrupt's estate by the official receiver or an appointed trustee, and to protect unsecured creditors: Harlow District Council v Hall [2006] EWCA Civ 156; [2006] 1 WLR 2116, para 17, citing In re Smith (A Bankrupt), Ex parte Braintree District Council [1990] 2 AC 215, 230, per Lord Jauncey.'

(2) in Carillion, ICC Judge Jones:

(a) spoke of the need for an (newly appointed) office-holder to be given time to acquaint himself with the estate before him[9a].

(b) said, at paragraph 53, the following, in respect to the analogous situation of a company in liquidation and litigation costs draining money from the liquidation, money which could (otherwise) be distribution to creditors:

'The introduction of an independent office holder combined with the machinery of a liquidation concerning proof of debts should usually (but not necessarily) lead to a quicker and less expensive route for determining matters in issue. It is not in the interests of creditors to have the company's assets used for the costs and expenses of the liquidation when they could otherwise be distributed.'

After quoting paragraph 12 from David Richards LJ's judgement in Cook, ICC Judge Jones said, at paragraph 52:

'It is in that overall context and bearing in mind that liquidators need time to assess the position of a company following their appointment (sometimes a considerable period in the absence of required books and records) that legislation has provided for stays in compulsory liquidations since section 87 of the Companies Act 1862...That language has since remained unchanged for over a century.'

In Hellard 162, Registrar Barber said, at paragraph 56, that she considered a purpose of s 285(1) of the Act was to '...ensure that the bankruptcy court supervises and controls any proceedings that may have a bearing on the bankruptcy'

Distilling the above, it can be seen that the general purpose of an (insolvency) moratorium (and so, also IA 1986 s.285(1) power), is to:

(a) assist the insolvency procedure which exists or is sought, to achieve its purposes, inc. a pari passu distribution of the available debtor assets;

(b) avoid the distraction and expense of unnecessary litigation - that is litigation which may serve to bring additional benefit, over an office-holder, in time, determining the issue (taking into account, the nature of the determination in question (the degree to which it would be convenient, or 'better detemined' by a court), and the fact it is likely to be much cheaper, and quicker, to have it determined by the office-holder within the insolvency process itself)

(c) provide a 'breathing space' to the debtor generally, or the (appointed) office-holder, in order to become acquainted with the insolvent estate details;

(d) ensure that the bankruptcy court supervises and controls any proceedings that may have a bearing on the bankruptcy.

Form of Statutory Controls 

Continuing with considering moratoriums generally, these imposed statutory controls/provided statutory powers to control, come in many forms:

(a) against commencing proceedings, they will take the form of a bar (unless suitable permission is obtained, typically from the Court and, depending on the circumstances, an in office, office-holder).

(b) against existing proceedings, they can be in the form of a bar (again, unless suitable permission is obtained, typically from the Court and, depending on the circumstances, an in office, office-holder)), or a stays (automatic or court imposed stays).

Turning back to s.285(1) IA 1986 again, the control, is in the form of a statutory power to stay existing ordinary legal proceedings. 

SECTION 285(1) COMPONENTS

Component 1: Pre-condition: one of three circumstances exist 

It is a pre-condition of section 285(1), that one of the following circumstances must exist:

(1) 'proceedings on a bankruptcy application are ongoing'; or 

(2) 'proceedings on a bankruptcy petition are pending'; or 

(3) 'an individual has been made bankrupt'.

As to circumstance (1): a bankruptcy application is commenced by the debtor/would-be bankrupt;

As to circumstance (2): a bankruptcy petition is commenced by others (typically, a creditor of the debtor/would-be bankrupt). 

Only one of these three circumstances need be established, for this pre-condition to be established (as is perhaps obvious). These circumstances are not cumulative (indeed, it would not be possible for these to be cumulative). 

Component 2: 'the court'

In IA 1986, in 'The Second Group of Parts: Insolvency of Individuals; Bankruptcy' (section 251A to section 385 inclusive), within 'Part XI Interpretation for Second Group of Parts', there is section 385, entitled 'Miscellaneous definitions'. Section 385(1) contains (so far as relevant):

'The following definitions have effect

...

“the court”, in relation to any matter, means the court to which, in accordance with section 373 in Part X and the rules, proceedings with respect to that matter are allocated or transferred;'

So, the court that has the power under s.285(1), is the court to which proceedings with respect to that matter are allocated or transferred (in accordance with section 373 in Part X and the rules). Section 373 of IA 1986 (in Part X) is entitled 'Jurisdiction in relation to insolvent individuals' and deals (amongst other things) with the exercise by the High Court/County Court is jurisdiction[10]. 

Consequently, the court to which the petition proceedings/bankruptcy application proceedings (or individual's bankruptcy) have been allocated/transferred to, is the court that is empowered, under s.285(1) of the IA 1986, to make an order staying a Qualifying Process. Confirming this:

(1) in Wilson, Nugee LJ said '...section 285(1) and section 285(2) ... confer on the court (that is the insolvency court, and the court in which proceedings are pending, respectively) a discretionary power to stay proceedings...' (paragraph 24)[10a];

(2) is what happened in Smith (discussed below), where the outcome of the decision in the House of Lords in Smith, on the (second) appeal, was that a county court registrar's (i.e. a (then) judicial officer in the County Court) order was restored (Smith, p 238) - an order which had stayed proceedings (in relation to the collection of business rates) in the Magistrates Court;

Component 3: Discretion 

By use of the word 'may', Parliament has bestowed on the court a discretion, whether or not to make stay order. There is no obligation[10b] upon the court to determine to make a stay order. 

Component 4: Power 

The court is empowered, in its discretion, to:

'...stay any action, execution or other legal process against the property or person of the debtor or, as the case may be, of the bankrupt'

This can be broken down into:

(a) stay; and 

(b) 'any action, execution or other legal process

(c) 'against the property or person of the debtor or, as the case may be, of the bankrupt'

((b) and (c) were earlier, of course, labelled the 'Qualifying Process')

Stay - the concept

What exactly is a 'stay' of an order?

(1) There is nothing in the Insolvency (England and Wales) Rule 2016 ('IR 2016') on what a 'stay' is;

(2) The IR 2016 provide that, 'except so far as disapplied by or inconsistent with [the IR 2016]' (IR 2016, r.12.1(1)), the rules contained in the Civil Procedure Rules (the 'CPR') govern insolvency proceedings[11] (and there is, seemingly, nothing in the IR 2016 which the following in the CPR, would run inconsistent with)

(3) CPR r.2.2(1) introduces a Glossary that appears at the end of the CPR; this (descriptive only[11a]) Glossary contains '...a guide to the meaning of certain legal expressions used in the [CPR]' (CPR r.2.2(1)). Appearing in the Glossary is the word 'stay', with the guide for that word being:

'A stay imposes a halt on proceedings, apart from taking any steps allowed by the Rules or the terms of the stay. Proceedings can be continued if a stay is lifted.'

CPR r.3.1 is entitled 'The court’s general powers of management' and CPR r.3.1(2) provides 

'Except where these Rules provide otherwise, the court may-

...

stay(GL) the whole or part of any proceedings or judgment either generally or until a specified date or event;'

(the 'GL' simple means that there is a definition of the word in the Glossary, which of course, has just been discussed)

The Qualifying Process - Types of legal processes 

The provision refers to 'action, execution or other legal process' as those which may be s.285(1) Stayable.

Type 1: Action

In Carillion 2871, Michael Green J recorded, at paragraph 38, in a s.130(2) IA 1986 case, that the Insolvent Person accepted that 'action' in s.130(2) IA 1986 (which reads '...no action or proceeding shall be be proceeded with or commenced against the company or its property...') '...must refer to court proceedings against the company' (Waypark, at paragraph 5, noted this from Carillion 2871). In the author's view, action here is court proceedings through which a claim or other similar assertion is made, seeking a judgment/finding of an entitlement to a remedy, against the Insolvent Person on a claim.

As David Richards LJ stated, normal legal proceedings can cause the Insolvent Person'...unnecessary and potentially expensive..' (Cook, paragraph 12) without corresponding benefit (unless the nature of the claim would best be determined by a court rather than an insolvency practitioner, if it comes to needing to be determined)

Type 2: Execution 

In the author's view, 'execution' means 'execution' of a judgment (not, for instance, execution of a document). The more modern word for 'execution' is 'enforcement' - so, what is s.285(1) Stayable are forms of enforcement.

Enforcement involves enforcement against assets of the debtor/bankrupt. Consequently, forms of enforcement being s.285(1) Stayable, is consistent with, and likely will further the identified purposes of s.285(1). This is because, enforcement against a debtor/bankrupt's asset, by one (or more) individual creditor(s), removes this asset from being available for distribution to the Insolvent Person's general body of unsecured creditors, undermining the pari passu basis of distribution inherent in insolvency law. 

Enforcement does not extend to CPR r.71 applications for debtor questioning orders. CPR r.71 applications for debtor questioning orders are anterior to (any) enforcement:

'Part 71 is not the seeking of any remedy against the property or person of the bankrupt. It is simply an information gathering procedure.' (Hijazi, paragraph 31);

'...a [debtor questioning order] is an aid to enforcement but not a method of enforcement in itself.' (Punjab, paragraph 80) [11b]

Type 3: other legal process

The exact meaning of this ejusdem generis (i.e. of the same kind), residual category, phrase in s.285(1) of IA 1986 came up for consideration in Smith. In Smith, Lord Jauncey, at p 230, said:

'My Lords, the words "or other legal process" must be construed in the context of the underlying purpose of section 285, namely, the protection of the bankrupt's estate for all his creditors. It follows that proceedings by one creditor to enforce payment to himself are the sort of proceedings contemplated by the section.'

The context in which 'other legal process' is construed, is in light of the underlying purposes to s.285 - of moratoriums. These purposes have been discussed above. What is s.285 trying to achieve, and would it further that, if the relevant proceedings were caught within the meaning of 'other legal process'. Accordingly, in the author's view, any type of proceedings (not already within 'action' or 'execution') which seeks or does: (a) impugn the bankrupt estate (existing or might exist) and/or (b) undermine the protection (protection from dismemberment / protection from unnecessarily expense in litigation etc) being afforded to the bankrupt estate (existing or might exist), should be s.285(a) Stayable.

In Hijazi, it was conceded that a CPR r.71 Applications for a debtor questioning order, was within the phrase 'other legal process' (Hijazi, paragraph 13). Such proceedings are s.285(1) Stayable (paragraph 18)[12]. 

Punitive proceedings, coercive proceedings, and those which are a blend of both

One attribute of the moratorium is to be protect the Insolvent Person against coercive proceedings. That is, proeedings which encourage/pressurize the Insolvent Person (debtor) to pay an individual creditor's debt, since to bow to (inc. to pay out to) that encouragement/pressurize, would be potentially the detriment of the general body of creditors of the debtor. There is therefore a distinction/dichotomy to be drawn, between coercive proceedings and (as I shall label them) non-coercive proceedings (though noting that 'non-coercive proceedings' might be caught by the moratorium for other reasons). In order to determine whether the proceedings are coercive proceedings or non-coercive proceedings, requires an analysis into the correct characterisation of the proceedings in question. Characterisation therefore is an important aspect to understanding the meaning of 'other legal process'.

There is a form of proceedings characterised as 'punitive proceedings' (i.e. proceedings that are purely criminal). Such proceedings come with non-coercive proceedings rather than 'coercive proceedings'. In other words, there is a distinction/dichotomy between:

(a) coercive proceedings - which are subject to the moratorium (i.e. are within the scope of the power); and

(b) punitive proceedings - which are not subject to the moratorium (i.e. are not within the scope of the power).

In Smith[12a], it was a matter of agreement (i.e. common ground) that the moratorium '...does not apply to proceedings which are purely criminal' (p 230). Romer LJ in Edgcome, at p 412: said 'If the order is punitive, the Court of Bankruptcy has no power to interfere.' (note Edgcome was held to be wrongly decided (in Smith), but on the characterisation of proceedings, not on the principle here)[12b].

In Smith, a nuanced question arose as to what was position if the proceedings in question (i.e. the proceedings said to come within the meaning of 'other legal process') were, in nature, both (i.e. a blend of both):

(i) punitive; and 

(ii) coercive.

what then was the position? 

On this issue, Lord Jauncey found, in essence, that if there is a coercive purpose to the legal proceedings in question, that is sufficient to bring the legal proceedings in question, within the remit of s.285(1) IA 1986. It does not matter that there is also another purposes that is punitive. The logic being that the coercive element needs to be curtailable by the bankruptcy court. Lord Jauncey said, at 237:

'...if a purpose of the commitment was coercive, it did not cease to be a "remedy against the property or person of the bankrupt" because another purpose was punitive. Indeed, to hold otherwise would seem to me to undermine the purpose of section 9 of the Act of 1883.'

Consequently, provided the proceedings have a coercive purpose, it remains liable to be stayed under s.285(1), even though it also has a punitive purpose. 

Post Execution Processes 

'other legal process' can extend to a legal process coming after an attempt at execution (enforcement) fails. In Smith, the underlying issue was[13] whether or not the procedure for obtaining a 'warrant of commitment against a person who has failed to pay rates' (for which the person could be sent to prison) came within the remit of s.285(1) IA 1986. Lord Jauncey reasoned that such proceedings had a coercive element to it (in that, 'payment in full would have terminated the period of imprisonment imposed' (p. 237) - an obvious encourage to pay that individual creditor (the local authority collecting the rates), which would have a corresponding detriment to the general body of creditors of that debtor). Consequently, it was a procedure that was caught (in keeping with the above, the additional punitive element to the proceedings, were irrelevant, to that analysis). Lord Jauncey in Smith said, at p 237:

'The proceedings under the Act of 1849 were directed to recovery of rates and were undoubtedly coercive to the extent that payment in full would have terminated the period of imprisonment imposed. The purpose of section 10(2) of the Act of 1883 was to prevent one creditor obtaining advantage at the expense of others. Coercive proceedings could achieve this end, and no less so because they contained a punitive element. I can therefore see no justification for construing the words "or other legal process" in section 285(1) of the Act of 1986 so as to exclude such proceedings. Indeed, to do so would seem to run contrary to the primary purpose of the subsection.'

and later, at p 238:

'I feel justified in construing section 285 of the Act of 1986 as a piece of new legislation without regard to 19th century authorities or similar provisions of repealed Bankruptcy Acts: an approach which was, in my view, correctly adopted by the Court of Appeal in In re A Debtor (No. 1 of 1987) [1989] 1 WLR 271. So construed, I have no doubt that, for reasons which I have already given, the words "or other legal process" in section 285(1) covered the proceedings in the magistrates' court for the issue of a warrant of committal, and that accordingly the registrar had jurisdiction to stay those proceedings.'

As a result, the county court registrar's original stay order, was restored.

Generally 

Cook also considered the meaning of the phrase 'legal process', but, given the difference in context (administration) and language (particularly the words in paragraph 43(6) parentheses), it is hard to draw parallels[13a]. In the old (Part II IA 1986) administration regime, the prohibition (as stated above) was 'no other proceedings and no execution or other legal process may be commenced or continued...against the company or its property...' but in Bristol Airport Plc v Powdrill [1990] 1 Ch 744, the Court of Appeal was not asked to determine the meaning of 'other legal process' - but rather, the meaning of the word 'proceedings' - which was held to mean proceedings which are 'either legal proceedings or quasi-legal proceedings such as arbitration.' (p.765)[13b]. Parallels are hard to draw.

It is possible to say that, by analogy with Waypark on s.130(2) IA 1986 and the meaning of 'proceedings', a proposed sale of a property: (a) held by the Insolvent Person; but (b) subject to a charge in favour of a secured creditor, the sale being pursuant to a power of sale held by the secured creditor, would not be s.285(1) Stayable[13c]. 

As to the outer boundaries of 'other legal process', consider, by analogy, from Carillion 2871:

(a) the discussion, from paragraph 51;

(b) the instruction Michael Green J said, at paragraph 52:

'When considering whether a novel, non-core case such as the present is within the meaning of “proceeding” in section 130(2) "proceeding", in my view it is important to test it against the statutory purposes of the section.'

(c) just because dealing with the process (in Carillion 2871, a regulatory action by the FCA) would incur costs for the insolvent estate, which would deplete the funds in the insolvent estate, otherwise available for pari passu distribution - does not mean the process must be within the scope/ambit of s.285(1) (i.e. must be s.285(1) Stayable). Though Lord Jauney in Smith spoke of the 'protect the estate for the whole body of creditors' - being a statutory purpose - that would too wide an approach (see paragraph 51-56 of Carillion 2871). Michael Green J, in essence, thought the first instance judge had been wrong to '...include any proposed action that might diminish the assets in the the estate available to to creditors.' (paragraph 80) within the ambit of s.130(2) IA 1986.

Somewhat oddly, in Wilson, Nugee LJ said 'I agree that these words are wide enough.' (paragraph 26) in response to the submission that '...the words of section 285(1) (“or other legal process”) being wide enough to include the process of seeking a TPDO.' (paragraph 36). While it can be that the process of seeking a third party debt order (TPDO) is a form of 'other legal process', such a process would, it might be thought, more naturally fit within the word 'execution' appearing earlier in the phrase 'action, execution or other legal process'. Still, Nugee LJ was simply responding to the (slightly odd) submission made.

The Qualifying Process - against the property or person of the debtor or, as the case may be, of the bankrupt

The action, execution or other legal process must be 'against the property or person of the' debtor/bankrupt to be potentially s.285(1) Stayable.

This phrase, or words equivalent to it, appear in:

(a) s.130(2) of IA 1986, where it states 'against the company or its property...'

(b) paragraph 43(6) of Schedule B1 of IA 1986, where it states 'against the company or property of the company'[14].

Some observations can be made about this part of s.285(1) IA 1986:

(a) the action, execution or other legal process, must be directed against the debtor/bankrupt (as the case maybe) (perhaps an obvious point, and an obvious requirement for the moratorium to apply (IA 1986, s.285(1) to be engaged);

(b) property and person are alternatives;

Returning to the word 'against' - it must be 'against' the company at the right level of generality/particularity. It is wrong to view the relevant procedure on its own, in an unduly granular way. 

In order to explain this, it is helpful here to pause to consider a dichotomy that exists in relation to types of legal procedures. Perhaps this is somewhat 'old' language, but legal procedures can be either:

(a) originating; or 

(b) ordinary.

To illuminate what these mean, I shall borrow from the Cross-Border Insolvency Regulations 2006[15], which contains the following definitions (in relation to applications, but of wider relevance): 

'“originating application” means an application to the court which is not an application in pending proceedings before the court;

“ordinary application” means any application to the court other than an originating application;'

What type of procedures fall into which of these two categories, will be returned to below. 

It is convenient here to quote from David Richard LJ in Cook again. At paragraphs 16 and 17 he explained:

'The essential feature of legal proceedings falling within the moratorium is that they must be “against the company”. A claimant who wishes to commence proceedings against a company in administration, or to continue proceedings against a company which has gone into administration since the commencement of the proceedings, must obtain the consent of the administrator or the permission of the court. No such consent or permission is required in the case of proceedings brought by a company which is in administration or which goes into administration after the commencement of the proceedings.

It follows, as a matter of basic fairness, that defendants to proceedings where the claimant is a company in administration should be able to defend themselves without restriction. This causes no difficulty in taking steps such as serving a defence or witness statements or participating in a trial. However, an issue could be said to arise where defence takes the form of an active step against the claimant company. It is established that essentially defensive steps are not within the statutory moratorium.'

In other words, the moratorium (here, s.285(1) IA 1986 remit) will catch originating proceedings against the Insolvent Person. Ordinary applications issued by the defendant within originating proceedings brought the Insolvent Person, will not be caught. That is because, they are essentially, defensive steps. They are defensive steps internal to the wider originating proceedings:

(1) It is the nature of the wider originating proceedings, that defines the correct characterisation of the ordinary applications; and

(2) the rationale being, that it would be unfair to reduce the normal rights of the non-Insolvent Person in the litigation, whilst leaving the Insolvent Person's rights intact.

David Richards LJ in Cook referred to a number of cases which illuminated this:

(1) Humber & Co v John Griffiths Cycle Co (1901) 85 LT 141 ('Humber'), wherein the Insolvent Person's contention was that the other side's appeal (from the Court of Appeal to the House of Lords) violated a moratorium (not the merits of the appeal, but the very appeal itself). This contention was dismissed. The House of Lords in Humber characterised the appeal to the House of Lords, as '...defending themselves against the consequences of the judgment by the ordinary means of an appeal to this House.'[16]. In Cook, David Richards LJ said the appeal to the House of Lords in Humber had been a 'defensive proceeding' (David Richard LJ, Cook, paragraph 19)

(2) BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857 ('BPM Pty'), a decision of the Supreme Court of Western Australia. In BPM Pty, a plaintiff company brought a claim against a defendant company. Within those proceedings, the defendant made an application for security for costs, which was refused. The defendant appealed. Prior to the appeal coming on for hearing, the plaintiff entered liquidation. At the appeal hearing, the liquidator for the plaintiff, contended that the appeal had been automatically stayed (under a relevant moratorium like section, namely s.471B of the applicable Australian statute). This contention was rejected by the appeal court hearing the defendant's security for costs appeal. David Richards LJ in Cook, records/states the following in relation to the judgment of the appeal court in BPM Pty:

'Anderson J, in a judgment with which the other members of the court agreed, said, at p 859:

“In my opinion, an application for security for costs is not a proceeding in a court against the company within the meaning of section 471B. We were not referred to any authority directly in point but in my view the section is concerned with proceedings initiated against the company, not with procedural applications by defendants in an action initiated by the company. If it was intended that the section should operate to cut down the defensive procedural measures that would otherwise be available to a defendant in an action brought by the company, thereby reducing the defendant's normal rights in the litigation whilst leaving the company's rights intact, much clearer language would have been used in the legislation.”

Anderson J, at p 860, considered and applied the decision in the Humber case, holding that the application for security for costs and the appeal against its refusal “was ‘defensive’ in its essential character … It was one of the defensive measures which the first defendant was entitled to take in response to the appellant's action against it”."

(so both the (a) application for security for costs; and (b) the appeal against the refusal to make a security for costs order, were characterised 'defensive steps' )

(3) Langley Constructions (Brixham) Ltd v Wells [1969] 1 WLR 503 (CA) ('Langley) in relation to counterclaims. David Richard LJ in Cook said, at paragraph 24:

'The distinction between legal proceedings against a company and essentially defensive steps is illustrated by the approach taken by the courts to the application of moratorium provisions to counterclaims. If a counterclaim is pleaded solely to raise a defence by way of set off, it is a defensive measure and no permission of the court is required. If, on the other hand, the counterclaim seeks a net payment from the claimant to the defendant, it does constitute a legal proceeding against the company for which the permission of the court is required: see Langley Constructions (Brixham) Ltd v Wells [1969] 1 WLR 503 (CA).';

Following Humber, in Cook, David Richards LJ said, that the character of an appeal was to be '...judged by reference to the nature of the original application.' (paragraph 26). Further, that this works both ways:

'If the application was a legal proceeding against the company within the terms of the moratorium, then an appeal against the dismissal of the application would also be a proceeding for which permission was required. Its purpose would remain to obtain relief against the company. If, however, the original application was not a proceeding against the company, an appeal against the dismissal of the application cannot sensibly be regarded as such a proceeding.'

Further, where an application has '...has none of the character of legal proceedings against the company' [emphasis in original, in italics], it may be treated the same as if it were 'defensive proceedings' (though it is not, in the strict sense of a step taken to defend himself against a claim brought by an Insolvent Person).

In Cook, the issue was how to treat an application for joinder, wherein a person (Mr Cook) was seeking to be joined as a defendant to an originating application brought by the Insolvent Person.

Cook involved complex facts, but, essentially, a company MDL, on 12.4.13, '...filed a notice of intention to appoint an administrator at the [Court] in accordance with paragraph 27 of Schedule B1 to the Insolvency Act 1986. By virtue of paragraph 44 this had the effect of bringing the moratorium provisions in paragraph 43 into effect.' (paragraph 8). The proposed administrator then instructed counsel to attend an appeal hearing on 18.4.13, where an appeal (before Judge Waksman QC) was due to be heard against a DJ's refusal to accede to an application to join a solicitor (Mr Cook), as a defendant, to MDL's existing application to set aside an agreement between a liquidator of another company Basdring) and some borrowers (the Chapmans). The proposed administrator's counsel argued the appeal could not go ahead, as to do so, without Court permission (for which there was no application), would be a violation of the paragraph 43 moratorium. Judge Waksman QC dismissed this argument, and proceeding to hear the appeal. The proposed administrator appealed the decision to proceeding with the appeal (as distinct, from appealing the (separate) outcome of the appeal itself). The appeal was dismissed (paragraphs 32 to 34). David Richards LJ said, at paragraph 30:

'By making his application to be joined, Mr Cook was not seeking any relief against the company but was seeking to be heard on an issue which affected his firm's interests in possible proceedings that might be brought by a third party, Nationwide. While not a defensive proceeding, in the strict sense of a step taken to defend himself against a claim brought by the company in administration, the application has none of the character of legal proceedings against the company.'

A further, illustrative point arose in Cook. A point that be dealt with shortly. In Cook itself, at first instance, included a (provisional) view, that: an application by the defendant (non-Insolvent Person) for inter parties costs order against the company (i.e. the Insolvent Person) would engage the moratorium (and contravene it, unless consent was obtained). However, this (provisional) view was wrong said David Richards LJ. David Richards LJ said, at paragraph 31:

'Seeking an order for the costs of an application is not a separate application against the company. It is incidental to or consequential upon the application for which permission was not required. The applicant is free to seek, and the court is free to make, an order for costs against the company on such an application without infringing the moratorium.'

In other words, an application for an inter parties costs order, is not a separate application against the Insolvent Person (in Cook, the company), it is parasitic upon / ancillary to, the underlying application it relates to. If that underlying application is properly characterised as a defensive step (for instance, it being a defence of a originating claim brought by the Insolvent Person), the application for costs is defensive in nature also[17] (and so not potentially s.285(1) Stayable).

Hellard 163 + on the appeal Hellard 1234

The meaning of 'against the property or person of the ...bankrupt' came up for consideration in Hellard 163 and on the appeal in the same case, Hellard 1234, where such words were considered 'wide enough to encompass' a claim, based on transaction impugned under s.339 and s.340 IA 1986, but made against a third party subsequent assignee (see Hellard 1234, paragraph 31). Before considering the facts in Hellard 163/Hellard 1234, which are complex (and rather mask the simple point underlying the case), a key element to note is that the cause of action in the Mireskandari Claim (explained below) was against the original recipient (the Insolvent Person) of the impugned transaction (though a remedy was sought against the third party subsequent assignee).

The case of Hellard 163, and on the appeal Hellard 1234 (appeal dismissed; same result, not same route), considered the narrow question of 'against the property or person of the debtor or, as the case may be, of the bankrupt' meant, but also involved an illustration of a s.285(1) IA 1986 application being made and adjudicated upon. It is looked at here, for both purposes. The Qualifying Process in Hellard 163 and Hellard 1234 was an 'action' (so this is not 'execution' or 'other legal process'). 

As stated, the facts are complex, but, in essence, MT (5.11.09) and separately SM (24.7.12) were adjudged bankrupt. Prior to any bankruptcies:

(1) On 30.6.08, SM had made an assignment ('2008 Assignment') to MT of: (a) the benefit of a debt owed to SM by a company Azadian; (b) some shares in Azadian;

(2) On 9.3.09, MT had made an assignment ('2009' Assignment') to MT's wife (SJT) of what had been assigned to MT under the 2008 Assignment. 

On 19.4.13, SM's Trustees in bankruptcy ('SM TIBs') issued an application (called the 'Mireskandari Claim') against: (a) SJT; and (b) MT, alleging the 2008 Assignment was a transaction contrary to: (i) s.339 IA 1986 Unfair Preference; and (ii) s.340 IA 1986 Transactions at an Undervalue. In the Mireskandari Claim, SM TIBs sought a remedy first against SJT (of all remaining fruits of the 2009 Assignment), and if unsuccessful against SJT, then a remedy against MT (a money judgment against MT's bankupt estate).

On 20.6.13, MT's Trustees in bankruptcy ('MT TIBs') issued an application (called the 'Tehrani Claim') against SJT, alleging the 2009 Assignment was a transaction contrary to: (i) s.339 IA 1986 Unfair Preference; and (ii) s.340 IA 1986 Transactions at an Undervalue.

At first instance, Registar Barber granted a stay order, staying the Mireskandari Claim. She found, amongst other things, that:

(1) the nature of the Mireskandari Claim was 'debt provable in the bankruptcy' of MT, for purposes of s.382 and s.322 of IA 1986 and r.12.3(1) of the Insolvency Rules 1986 ('IR 1986'). She held that 'Both s 382 of the Act and r 12.3(1) are clearly drawn widely enough to encompass contingent liability under s 339 and 340 of the Act.' (paragraph 29) and that '[SM TIBs] are creditors of [MT] in respect of a debt provable in the bankruptcy.' (paragraph 33)

(2) s.285(3)(a) IA 1986 '...of itself, does not operate so as to bar the proceedings up to and including declaratory or money judgment.' (paragraph 42)

She then turned to the question: 'Should the Mireskandari claim be stayed pursuant to s 285(1) of the Act?'

SM TIB's argued that no stay should be imposed, arguing that a stay would be unfairly prejudicial to creditors of SM's bankrupt estate (see paragraphs 43 to 48). MT TIBs and SJT argued that the Mireskandari Claim should be stayed under s.285(1) (paragraph 49). Registrar Barber recorded, at paragraph 50, that MT TIBs' counsel:

'...summarised a series of what he described as trite points of principle. These included the following:

(1) A solvent individual may dispose of his property as he wishes. It is open to him to give it away or to sell it for significantly less than it is worth.

(2) It is only the statutory antecedent transaction regime that bestows on a trustee the ability to impugn such transactions.

(3) Unless and until impugned by the court, settled rights under contract are secure. Where an order is made impugning such rights, they are only impugned with prospective effect: Stonham v Ramrattan at para [37].

(4) The [SM TIBs] preferred outcome on their claims does not affect the nature of the claims themselves: they are transaction at an undervalue and preference claims created by statute.

(5) In the events which have occurred, those claims are provable in [MT's] bankruptcy.

(6) Upon the making of a bankruptcy order, where there are unsatisfied mutual dealings, a debtor to the bankrupt has a mandatory right to set off liabilities owed by the bankrupt to the debtor.'

As to which, Registrar Barber said 'I accept these points of principle.' (paragraph 51)

Registrar Barber then set out some submissions of counsel (see below), before stating: 'Even allowing for the wide range of powers available to the court under ss 339(2), 340(2) and 342(1), and noting in particular the powers set out in s 342(1)(g), I can see the force in these submissions' (paragraph 54). Those submissions were '...the reasons why ... ‘the music has to stop upon the making of a bankruptcy order’.' (paragraph 52) - in relation to 'factors', which '...serve to demonstrate why the music has to stop on the making of a bankruptcy order. It is the reason why s 285 exists.' (paragraph 53). The factors were that:

(i) SM TIB's '...did not intend simply to seek a declaration that the 2008 Assignment was a preference or a transaction at an undervalue; they planned also to seek attendant relief. Even if that relief was primarily aimed at [SJT], it would clearly impact not only upon [SJT] but also upon the property of [MT]' (paragraph 52)

(ii) 'there were liabilities going both ways on the 2008 Assignment, and liabilities going both ways on the 2009 Assignment. One cannot ... simply lift the 2008 Assignment out as if it never happened.' (paragraph 52)

(iii) further, that:

'If the [SM TIBs] were granted the relief they seek, he continued:

(1) it would impact on property rights derived from three contracts, namely, the 2006 Agreement, the 2008 Assignment, and the 2009 Assignment, that are currently settled;

(2) it would force [MT TIBs] to remain embroiled in complex and expensive litigation if the estate was not to be depleted by claims at both ends (by way of counter restitutionary claims and/or adjustments as between [MT's] estate and on the one hand and the [MT] estate and the [SM] estate on the other hand); and

(3) it would hold up administration of [MT's] estate.'

After dealing with some factors[18], Registrar Barber, importantly, affirmed her characterisation of SM TIBs' claim 'against' SJT. Registrar Barber said, at paragraph 69:

'...the Mireskandari claims...lie against [MT] and relate to the 2008 Assignment, and those claims are provable in his bankruptcy. There is no free standing or divisible claim as against [SJT] in respect of the 2009 Assignment; the relief sought against her is simply attendant upon the claim against [MT] in respect of the 2008 Assignment. One could say that the branch should fall with the tree.'

Then, at paragraphs 71 to 73, Registrar Barber in Hellard 163 said:

'In this case I have come to the conclusion that the Mireskandari claim should be stayed, for the following reasons.

First, for the reasons previously given, the Mireskandari claim is in my judgment a provable debt. Secondly, all indications are that a proof, once submitted, will be accepted. There is no need, therefore, for the proceedings to continue in order to determine the quantum of proof to be admitted. Thirdly, having regard to the state of the Mireskandari claim and the relief intended to be pursued in that claim, there would, in my judgment, be significant prejudice to the orderly administration of [MT's] estate should the claim continue. Fourthly, a stay will operate so as to preserve the limited assets of the [MT] estate in the best way for distribution among all the persons who have claims upon them.

Whilst I accept that granting a stay will cause some prejudice to the [SM TIBs], in that it will deny them the opportunity of pursuing [SJT's] remaining assets, that factor is in my judgment outweighed by the other factors which I have identified. I would add that once one takes account of the office holder time costs and the legal costs which would inevitably be involved in pursuit of the Mireskandari claim to trial, I suspect that the prejudice of proving and being admitted to a dividend in the [MT] bankruptcy is likely to have been somewhat overstated.'

On appeal in Hellard 123, the deputy Judge:

(a) agreed with Registrar Barber that 'the Mireskandari claim against the [MT] estate is a claim within s 382(1).' (paragraph 27) and that 'It follows, therefore, that the claim by the [SM TIBs] against the [MT] estate is a claim which is a provable debt in the [MT] bankruptcy.' (paragraph 28)

He pointed out, inversely, that 'If the Mireskandari claim against the [MT] estate is not a provable claim, it is not a claim which can be proved for in the [MT] bankruptcy and thus no stay can be ordered under s 285.' (paragraph 21)

(b) considered the perhaps unusual feature to the relevant causes of action, that the s.339/s/340 SM TIBs claims were proveable in MT's bankruptcy, but recover was sought (in the first instance) against SJT, at paragraphs 30 and 31:

'...once it is recognised that the claim by the [SM TIBs] against the [MT] estate is a claim provable in the bankruptcy, then it must follow that if any recovery, or restoration, is to be made from [SJT], the benefit of the recovery must enure for the benefit of the [MT] estate. That will indeed indirectly benefit the [SM TIBs], because it will potentially swell the [MT] estate and thus enable them to recover a greater proportion of their proof. But the claim against [SJT] is merely a claim to recover moneys which she has received as a result of the (on this hypothesis) impugned 2008 Assignment and thus it is a claim which is made on behalf of the [MT] estate. If the [SM TIBs] were permitted to make that claim for their own benefit, that would enable one creditor of the [MT] estate to obtain a recovery not available to any other creditors, which cannot be correct or in accordance with the scheme of the bankruptcy legislation. So it cannot be correct to permit a claim by the [SM TIBs] to proceed against [SJT] either.

[SM TIBs counsel] submitted that there was no power to stay the proceedings against [SJT] under s 285 because the claim was not ‘against the property or person of the bankrupt.’ In this regard, I agree with the view of the Registrar. It is true that a claim is technically made by the [SM TIBs] against [SJT], but the basis for the claim against [SJT] is the 2008 Assignment and the benefit of that assignment (through the 2009 Assignment) in the hands of [SJT]. The claim thus depends upon the 2008 Assignment and I would construe the words ‘against the property or person of the bankrupt’ as wide enough to encompass such a claim. If that were not the case, it would in my view be inconsistent with the scheme of the bankruptcy legislation. It cannot be right for the claim against [SJT] to proceed....'

He concluded that '...the stay can be ordered under s 285'[19]:

If necessary, the court might be able to reach the same conclusion by a case management stay or strike out of the claim by the Mireskandari trustees against [SJT]; however in my view such mechanisms are unnecessary as the stay can be ordered under s 285.'

Under the heading 'Discretion to stay', the deputy Judge in Hellard 1234 said, at paragraph 32:

'...although the Registrar considered in detail whether she would exercise her discretion to grant a stay, in my view, once she had reached the conclusions above (as she did, albeit by slightly different routes) she would have erred in principle if she had done otherwise than to grant a stay.'

The deputy Judge in Hellard 1234 continued, at paragraphs 33 and 34:

'Fundamental to the Registrar’s decision was the conclusion, (correct in my view) that the [SM TIBs’] claim against the [MT TIBs] was a debt provable in [MT's] bankruptcy and, as such, the appropriate mechanism for determining its value was that set out in the Act, rather than by adversarial litigation between two bankruptcy estates.

Thus, once the conclusion is reached that the claim against the [MT] estate is a ‘bankruptcy debt’ and once it is appreciated that the claim against [SJT] is a claim in the [MT] bankruptcy, it would need some very particular circumstances before the court would do other than grant a stay of the proceedings both against the [MT] estate and [SJT]. I do not consider there are any such circumstances. The Registrar considered the question of discretion in considerable detail; although I agree with her conclusion, I think, having gone so far, it was a rather simpler matter to reach the same conclusion.'

The important proposition from this, is that once a claim is identified as being a claim for a 'bankruptcy debt' (in the Insolvent Person/defendant's bankruptcy), '...it would need some very particular circumstances before the court would do other than grant a stay of the proceedings' (paragraph 32). Unfortunately, quite what 'some very particular circumstances' are, was not elaborated on. 

What was complex in Hellard 1234 was determining whether SM TIBs' claim under s.339 / s.340 IA 1986 was such a claim (i.e. a claim for a 'bankruptcy debt' - masked by the fact that the relief (in the first instance) was sought against a third party i.e. SJT). Once it was recognised that SM TIBs' claim under s.339 / s.340 IA 1986 against SJT was not a free standing cause of action, but attendant on SM TIBs' claim under s.339 / s.340 IA 1986 against MT, the picture became clearer. Quite why the outcome (a stay of SM TIBs' claims) was then so, in essence, inevitable, was not further set out. 

Unstaying Proceedings

Once a stay order is made under s.285(1) IA 1986, an issue might arise as to whether only that same court can unstay the proceedings, or whether the ordinary civil court before which the Qualifying Process was proceeding, can itself unstay the Qualifying Process:

(1) by analogy with Hall v Van Der Heiden [2010] EWHC 537 (TCC), it would seem that the ordinary civil court could unstay the Qualifying Process (Hall is discussed in the footnote[21]). In Hall, reference was made, at paragraph 16, to Clark v Coutts [2002] EWCA Civ 943, wherein Peter Gibson LJ, at paragraph 50, said:

“In my judgment Parliament was deliberately seeking to avoid points on jurisdiction being taken in bankruptcy proceedings such as used to be the regular practice prior to the 1986 Act coming into force. Jurisdiction is conferred quite widely and, though in practice they will no doubt be powerful reasons why the County Court seised of the bankruptcy proceedings should be the court to consider whether leave should be granted, I do not accept [counsel's] submission that the High Court has no jurisdiction.”'; Or

(2) potentially under s.285(2) IA 1986, in that the ordinary civil court may determine to 'allow them to continue on such terms as it thinks fit.'

SIMON HILL © 2025*

BARRISTER

33 BEDFORD ROW

NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole, or the Copyright holder. No attempt has been made to provide an exhaustive review/account of the law in this area. *Copyright is owned by Barrister Search Limited.