Bankruptcy

It was settled law that the inquiry into whether on the relevant date a bankrupt was able to pay his debts was an inquiry not into whether his liabilities exceeded his assets but into whether he could meet his liabilities when they were due. It was plain from the authorities that the primary test for an inability to pay debts as they fell due for an individual under s 272 of the Act was the cash flow test in respect of assets and immediate liabilities. However, there was a limited role in respect of future liabilities which came into play when it could be said that the individual’s use of cash or other assets for current purposes could be said to be a fraud on the future creditors. It was further settled law that, save in very exceptional cases, where a debtor was unable to pay his debts at the date of the petition its presentation was not an abuse of the process of the court.