National Asset Loan Management Ltd v Cahillane

A court exercising jurisdiction under Insolvency Act 1986, section 375(1), may review, vary or rescind an order made by it on appeal. The jurisdiction is exceptional and concerns whether the order should remain in force in light of changed circumstances or fresh evidence. For a statutory demand challenged under rule 6.5(4)(c), the debtor must prove, on the balance of probabilities, that the security’s forced-sale value at the relevant date equals or exceeds the full debt. The creditor’s identity, statutory status, functions and valuation policies do not alter that test. Evidence concerning possible future increases in value cannot establish the present value required by the rule.

National Asset Loan Management Ltd appealed against orders of Chief Registrar Baister which adjourned its bankruptcy petition and directed evidence and disclosure for Mr Cahillane’s application under section 375(1) of the Insolvency Act 1986. The application sought to review or vary orders made by HH Judge Pelling QC, who had dismissed Mr Cahillane’s appeal against Registrar Jones’s refusal to set aside a statutory demand.

The central issues were whether section 375(1) permitted review of appellate orders, whether further expert evidence and disclosure could realistically establish that the security covered the debt, and whether the Chief Registrar had properly exercised his discretion to adjourn the bankruptcy petition.

1. Jurisdiction under section 375(1). The court held that section 375(1) of the Insolvency Act 1986 empowers a court to review, vary or rescind an appellate order made by it. The jurisdiction is rarely exercised. The relevant question is whether the order should remain in force in light of changed circumstances or fresh evidence, rather than whether the original order was correct on the material then available.
2. Value of security. Under rule 6.5(4)(c) of the Insolvency Rules 1986, the debtor had to prove, on the balance of probabilities, that the security’s value, determined on a forced-sale basis at the date of the statutory demand or possibly the hearing, equalled or exceeded the full debt. That requirement applied irrespective of NALM’s statutory status, functions, objectives or valuation policies. The burden remained on Mr Cahillane; any obscurity in NALM’s valuation did not shift it.
3. Further evidence and disclosure. The proposed supplemental report would address possible future recovery in the Irish property market and a geared increase in development-land values. It could not establish the present value of the security. Historical valuations made when the loans were advanced or transferred likewise could not prove present value, particularly where property values had since fallen. The section 375 application was therefore bound to fail on its merits.
4. Exercise of discretion. The Chief Registrar was wrong to draw an adverse inference from NALM’s decision not to release part of its security. His suspicion that further evidence might fill the evidential gap was unfounded. Disclosure was unnecessary because it was sought only to support a report incapable of proving the required value.
5. NALM’s appeal was allowed. The section 375(1) application and the disclosure application were dismissed, and a bankruptcy order was made.

• High Court (Chancery Division): The appeal was allowed. The orders of Chief Registrar Baister adjourning the bankruptcy petition and directing evidence were set aside; the section 375(1) and disclosure applications were dismissed and a bankruptcy order made.
• High Court: HH Judge Pelling QC dismissed Mr Cahillane’s appeal against Registrar Jones’s refusal to set aside the statutory demand.
• Bankruptcy jurisdiction: Chief Registrar Baister had adjourned NALM’s bankruptcy petition pending determination of the section 375(1) application.