Rescission of a Bankruptcy Order (Collatory Case)

Author: Simon Hill
In: Bulletin Published: Tuesday 14 January 2025

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Section 375(1) of the Insolvency Act 1980 provides:

‘Every court having jurisdiction for the purposes of the Parts in this Group may review, rescind or vary any order made by it in the exercise of that jurisdiction.’

Parliament’s decision to enact s.375(1), and the jurisdiction it creates, is inconsistent with the normal approach to the finality of litigation. In Papanicola v Humphreys [2005] EWHC 335 (Ch); [2005] 2 All ER 418 ('Papanicola'), Laddie J formulated the following propositions in relation to the jurisdiction it creates, at paragraph 25:

‘(1) The section gives the court a wide discretion to review vary or rescind any order made in the exercise of the bankruptcy jurisdiction.

(2) The onus is on the applicant to demonstrate the existence of circumstances which justify exercise of the discretion in his favour.

(3) Those circumstances must be exceptional.

(4) The circumstances relied on must involve a material difference to what was before the court which made the original order. In other words there must be something new to justify the overturning of the original order.

(5) There is no limit to the factors which may be taken into account. They can include, for example, changes which have occurred since the making of the original order and significant facts which, although in existence at the time of the original order, were not brought to the court's attention at that time.

(6) Where the new circumstances relied on consist of or include new evidence which could have been made available at the original hearing, that, and any explanation by the applicant gives for the failure to produce it then or any lack of such explanation, are factors which can be taken into account in the exercise of the discretion.’

Laddie J elaborated on propositions (2) and (6), at paragraphs 26 to 28 of Papanicola:

'26. The second and fourth of these propositions merit some expansion. Inherent in s 375 is the concept that something has changed so that it is appropriate for the court to reconsider its own earlier order. If there is no change in circumstances, the only way to challenge the order is by appeal. The court is not to review its order simply on the basis that the applicant wants to present essentially the same facts and the same arguments but more forcefully or attractively. This is apparent from the following passage in [Fitch v Official Receiver [1996] 1 WLR 242]:

“[A]n appellate court can quash a bankruptcy order only if it is satisfied that, on the evidence which was before the court which made the order or on new evidence which is admitted in accordance with the rule in Ladd v. Marshall [1954] 1 W.L.R. 1489, the order should not have been made. An application under section 375(1) is essentially different. It must be based on a change in circumstances since the order was made or, more rarely, on the discovery of further evidence which could not be adduced on appeal.” (p 246)

27. The same requirement that there should be something new appears to be inherent in Millett J's judgment in In re A Debtor (32/SD/1991)[[1993] 1 WLR 314]:

“Where an application is made to the original tribunal to review, rescind or vary an order of its own, however, the question is not whether the original order ought to have been made upon the material then before it but whether that order ought to remain in force in the light either of changed circumstances or in the light of fresh evidence, whether or not such evidence might have been obtained at the time of the original hearing. The matter is one of discretion, and where the evidence might and should have been obtained at the original hearing that will be a factor for the court to take into account; but the rationale of the rule in Ladd v. Marshall, that there should be an end to litigation and that a litigant is not to be deprived of the fruits of a judgment except on substantial grounds, has no bearing in the bankruptcy jurisdiction. The very existence of section 375 is inconsistent with such a rationale.” (p 318–9)

28. This passage supports the sixth proposition set out in paragraph 25 above.'

Collatory Case Series

The Collatory Case Series, is an series of bulletins, designed to report that one case which collates the essential principles/propositions of law, for a particular doctrine/area of law. It is not designed as a deep and comprehensive review of an area of law, but to provide that quick 'go to' case.

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