Scottish & Newcastle Ltd. v Raguz

On an appeal from a bankruptcy order, the High Court must decide whether the lower court was wrong in principle or materially failed to consider relevant matters. It must not substitute its own discretionary assessment merely because it might have reached a different conclusion.

An adjournment should be granted only where credible evidence shows a reasonable prospect that the petition debt will be paid in full within a reasonable period. A review under section 375(1) of the Insolvency Act 1986 is exceptional and requires something new amounting to a material change in circumstances. Fresh evidence which merely presents the same case more forcefully does not engage that jurisdiction.

Scottish & Newcastle Limited petitioned for the bankruptcy of Zeljko Stephen Raguz in respect of an undisputed debt of £211,275. The debt arose from sums paid by the petitioner under a lease indemnity and had been finally established in Scottish & Newcastle plc v Raguz [2008] UKHL 65.

District Judge Nield made a bankruptcy order on 12 February 2010. Mr Raguz sought permission to appeal and a review under section 375 of the Insolvency Act 1986. He relied on proposed security and on a prospective sale of shares and property which he said would enable payment of the debt.

1. Disposition. Permission to appeal was granted, but the appeal was dismissed on its merits. The application to review the bankruptcy order was refused.
2. On the appeal, the court applied the limited appellate jurisdiction described in Vadher v Weisgard [1997] BCC 219. The question was whether the District Judge exercised his discretion on a wrong principle, considered irrelevant matters, or failed to consider relevant matters. The judge had applied the correct principles and reached a conclusion open to him on the evidence.
3. Under section 271(3) of the Insolvency Act 1986, the security offered did not require dismissal of the petition. The independent valuations showed a substantial shortfall. The District Judge was entitled to prefer professional valuation evidence to an unexplained offer and to reject speculative additional value attributed to a hotel purchaser.
4. The approach to adjournment in Ross and Holmes v Revenue and Customs Commissioners [2010] 2 All ER 126 was applied. An adjournment required credible evidence of a reasonable prospect of payment in full within a reasonable period. The evidence concerning the proposed transaction was sparse, unsupported by funding evidence, and uncertain as to timing.
5. A review under section 375(1) is exceptional. Under Papanicola v Humphreys [2005] EWHC 335 (Ch), the applicant must show something new producing a material difference from the circumstances before the original court. The later non-binding heads of terms did not establish a material change. They left funding and completion uncertain and revealed continuing difficulties outside Mr Raguz’s control.
6. Fresh valuations and further evidence from the prospective purchaser were inadmissible for appeal purposes because they could have been obtained earlier, lacked sufficient cogency, or related to developments after the original decision. Later evidence could be relevant to review only if it demonstrated a genuine change of circumstances.

• Worcester County Court: District Judge Nield made a bankruptcy order against Mr Raguz on 12 February 2010.
• High Court (Chancery Division): Permission to appeal was granted, but the appeal was dismissed. The application for review under section 375(1) of the Insolvency Act 1986 was refused.