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the power to review, rescind or vary orders made in bankruptcy matters

7 December 2016

In the case of Sands v Layne [2016] the Court of Appeal was asked to consider a court’s discretionary power under Section 375(1) of the Insolvency Act 1986 to review, rescind or vary any order made by it in the exercise of its jurisdiction to hear an appeal from a lower court.

Mr Layne appealed to annul a bankruptcy order that had been made against him in the County Court on the basis that he had made a reasonable offer of security and payment which had been refused. Before his appeal was heard, Mr Layne reached an agreement with his petitioning creditor to discharge his bankruptcy order and an order was made by the High Court to that effect. In the meantime, a trustee in bankruptcy had been appointed and had incurred costs in so acting. He applied to rescind the order made by the High Court pursuant to s375(1). The High Court disagreed that it had the power to do that and the trustee appealed.

On appeal the function and language of s375(1) was reconsidered and the court held that orders made by courts could be reviewed, rescinded or varied by a court of the same hierarchy regardless of whether that order was made at first instance or on appeal.

Despite this finding the court was not prepared to rescind the order dismissing Mr Layne’s bankruptcy order. It did, however, allow the trustee’s appeal in part in order to provide for payment of his costs and expenses.

Historically the courts have interpreted the power under s375 to apply only where there has been a change in the circumstances of a case or if they were presented with fresh evidence. This judgment re-examines the use of this power and recognises that the process of bankruptcy administration is an evolving one where circumstances change and events arise the making of orders, even on appeal, that may need to be reconsidered.

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