Sands (as trustee in bankruptcy of the estate of Carlos Layne (a bankrupt)) v Layne and Anr
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice Lewison,Lord Justice McCombe |
| Judgment Date | 29 November 2016 |
| Neutral Citation | [2016] EWCA Civ 1159 |
| Docket Number | Case No: A2/2014/3758 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 November 2016 |
[2016] EWCA Civ 1159
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
Chancery Division in Bankruptcy
Mr D Donaldson QC sitting as a Deputy High Court Judge
53690F2013
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lord Justice Lewison
and
Lord Justice McCombe
Case No: A2/2014/3758
James Couser (instructed by Lewis Onions Solicitors) for the Appellant
Carlos Layne appeared in person
Paul French (instructed by Wycombe District Council) for the Second Respondent
Hearing date: 27 July 2016
Approved Judgment
ISSUE TO BE DETERMINED
This is an insolvency case. In a nutshell the issue is whether the Insolvency Act 1986 (" IA 86"), section 375(1) (set out in the appendix to this judgment) enables a court to review, rescind or vary an order which was previously made by that court in exercise of its jurisdiction to hear an appeal from a lower court. The order sought to be reviewed is an order for the discharge of an earlier bankruptcy order made against the second respondent, Mr Carlos Layne ("Mr Layne"), on terms agreed with the creditor (the second respondent ("Wycombe")) which had made him bankrupt. I will call this "the Subject Order".
Section 375 is a relatively unusual statutory provision because it enables a court to review an order that it previously made, and it may do so irrespective of whether there is or has been an appeal. The section goes back at least to the Bankruptcy Act 1869. It enables a court to rehear a case, for example, if new evidence has come to light and to review, rescind or vary its earlier order. The application in this case sought rescission of the court's earlier order. What I say below about rescission of an order under section 375(1) will also apply to the review and variation of an order under that section.
It was common ground before the judge that the courts have interpreted the power as applying only where there has been a change in the circumstances or there is fresh evidence (see, for example, Re a Debtor (no 1) [1993] 1 WLR 314).
The question that falls to be determined on this appeal has only arisen recently because, until the IA 1986, insolvency appeals from the county court went to the Divisional Court. They now go to a single High Court judge. So the High Court now has an appellate jurisdiction as well as a first instance jurisdiction in insolvency matters of its own.
I shall explain the facts and the judge's judgment briefly and then the arguments. Finally, I will set out my conclusions.
BANKRUPTCY ORDER, APPEAL AND DISCHARGE OF BANKRUPTCY ORDER
In 2011, Mr Layne owed Wycombe some £57,361.09 for rent, business rates and council tax. He did not pay and so Wycombe applied for, and obtained, a bankruptcy order against Mr Layne. The order was made on 7 July 2011 by District Judge Perusko in the Aylesbury County Court. No other creditors were present or represented.
Mr Layne made an offer of security and payment by instalments but the creditor rejected the offer. On 30 August 2011 (some weeks out of time) Mr Layne applied for permission to appeal to the High Court in London on the basis that he had made a reasonable offer of security and payment.
On 22 September 2011, the first trustee was appointed.
On 9 March 2012, Peter Smith J ordered that the permission application should be heard with the appeal to follow if permission was given.
In about April 2012, the appellant ("the Trustee") became the trustee in bankruptcy in place of the first trustee.
The permission application and appeal were due to be heard on 29 June 2012 before Mr David Donaldson QC, sitting as a deputy Judge of the High Court of Justice, Chancery Division. In the event, the High Court did not hear either the permission application or an appeal as Mr Layne and Wycombe came to an agreement compromising the appeal before the hearing began. The judge was instead asked to, and did, make the Subject Order with the consent of Mr Layne and Wycombe on 29 June 2012.
The Subject Order discharged the bankruptcy order and ordered Mr Layne to pay the amount he owed to Wycombe by agreed instalments. The amount was charged on Mr Layne's home. Mr Layne has performed his obligations under the Subject Order.
The first trustee was informed of the progress of the permission application, including the hearing date for 29 June 2012 but Mr Layne and Wycombe did not tell the Trustee that the parties proposed to ask the court to approve the Subject Order. There have been several changes of trustee. The appellant is the current trustee.
APPLICATION TO RESCIND
The Trustee considered that the Subject Order ought not to have been made because there were other creditors of Mr Layne who stood to be prejudiced by it. On 25 June 2013, the Trustee made an application to the Aylesbury County Court to rescind the Subject Order. It is not necessary for the purposes of this summary of events to explain why the Trustee did not make an application until this date.
On 7 November 2013 District Judge Rand ruled that the Aylesbury County Court had no jurisdiction to rescind the Subject Order and transferred the application to the High Court.
That matter came before Mr Donaldson QC again. He heard that application on 23 October 2013, and he refused it for the reasons summarised in the next section of this judgment.
At the date of his application, the Trustee had fees of some £6,000 outstanding and there were other debts owed in the bankruptcy.
If the Subject Order had not been made, or if it is now rescinded, the Trustee's fees and expenses will be paid out of the assets which under the Subject Order were charged to the creditor. In that event, all Mr Layne's creditors, not just Wycombe, will share in Mr Layne's assets on an equal footing.
WHY THE JUDGE DISMISSED THE TRUSTEE'S RESCISSION APPLICATION
The judge's reasoning may be summarised briefly as follows. The High Court had power to rescind an order in the circumstances set out in section 375(1) of the 1986 Act, but section 375 (1), provides that an order must be made "by it". Here the order had been made on appeal, albeit by the High Court. The judge followed, with diffidence, a passage from the judgment of Briggs J (as he then was) in Appleyard v Wewelwa [2012] EWHC 3302 (Ch), [2013] 1 W.L.R. 752 holding that the language of section 375(1) only contemplated rescission by a court at first instance of its orders made at first instance. Therefore a court could not under that section rescind an order made in the course of an appeal from an order of a lower court.
The judge further held that, even if he had jurisdiction to make an order, the application would fail because the court could dismiss an application (which would be by way of petition) for a bankruptcy order where there was a reasonable offer of security. That was so even if the debtor had other creditors. The judge considered it arguable that under section 271(3) of the 1986 Act the court had a discretion to dismiss an application for a bankruptcy order if there was a reasonable offer of security to the creditor applying for the order. Any other creditor who was prejudiced by the exercise of this discretion in favour of dismissal could make another application later which, if successful, might lead to a bankruptcy order. In the bankruptcy, the court could make a further order setting aside the security given earlier as a preference under sections 340 and 341 of the IA 86. In fact, the judge held that there was no detailed evidence that any other creditor would have been prejudiced.
Furthermore, in the judge's judgment, the Trustee could not show that he had standing to apply for a rescission order. To show standing, he had to show that he was entitled to be a party to the application for the Subject Order. He was not so entitled because no trustee had been appointed at the time when the bankruptcy order was made.
In any event, the application would fail because the Trustee should have brought the application more quickly.
The Trustee appeals from the order of the judge.
SUBMISSIONS AND CONCLUSIONS
As I see it, there are five issues, which I will address in turn.
) To which courts and to which orders does section 375(apply?
Mr James Couser, for the Trustee, submits that the judge was wrong on this point and that section 375(1) permits a court to review an order made by a court of the same level, whether sitting on appeal or at first instance. Mr Couser submits that the judge was wrong to consider himself in any sense bound to follow Appleyard as the holding of Briggs J was only an obiter dictum, which the judge was not bound to follow. The judge should have come to the same conclusion as Mr Kevin Prosser QC, sitting as a deputy judge of the High Court of Justice, Chancery Division, in National Asset Loan Management Ltd v Cahillane [2015] EWHC 62 (Ch), [2016] 1 WLR 45 that a High Court judge sitting at first instance could exercise the Court's powers under section 375(1) in relation to an order previously made by the High Court on appeal. Mr Couser points out that, if this is not the position, an application has to be dismissed and made again in another court, causing extra costs and delay.
Mr Paul French, for Wycombe, seeks to uphold the decision of the judge. He submits that Briggs J was correct to say that section 375(1) applies only to the review at first instance of orders made at first instance.
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