Sands v Layne

An appeal court has power to review, rescind or vary an order it made on appeal.

Bankruptcy – appeals – power to review, rescind or vary orders – s.375 Insolvency Act 1986

The bankrupt applied to the High Court for permission to appeal against a bankruptcy order made in the County Court.  Before the hearing, the bankrupt and the petitioning creditor agreed to compromise the appeal, and the High Court made a consent order discharging the bankruptcy order and ordering the bankrupt to make payments to the petitioning creditor.

The trustee in bankruptcy, who was not a party to the appeal, applied to rescind the consent order under section 375(1) of the Insolvency Act 1986 because his own fees remained outstanding and because the consent order could prejudice other creditors.  The High Court dismissed the trustee’s application on the ground, inter alia, that section 375(1) did not enable a court to rescind an order that it had made on appeal from a lower court.  The trustee appealed to the Court of Appeal.

The Court of Appeal allowed the appeal.  When the purpose of section 375(1) was considered in the context of other provisions of the Act, as well as the clear language of that section, the statutory power under section 375(1) enabled a court to review, rescind or vary an order whether the court was sitting as a first instance court or as an appellate court, provided that the order had been made by it.  Of the conflicting High Court decisions on this issue, the court preferred the reasoning in National Asset Loan Management Ltd v Cahillane [2016] 1 WLR 45 over the obiter remarks on Appleyard v Wewelwa [2013] 1 WLR 752.

The court also held that the trustee should have been joined to the appeal so that provisions for his costs could be made. The case was therefore remitted back to the High Court to determine how the trustee’s proper costs should be paid.

The Court of Appeal has provided welcome clarity on this issue, confirming the wide jurisdiction that a court enjoys under section 375(1) to vary orders including those which it has made on appeal. This will be of considerable practical significance.