Islandsbanki HF v Standford

Adjournments in bankruptcy proceedings should be exercised sparingly. Where a court has heard full argument on a petition’s merits, postponing its determination and listing it with later petitions is not merely routine case management. Departure from earlier orders that the first petition should be heard first requires a reasoned justification. The first-in-time petition should ordinarily be disposed of before later petitions where the order may affect the bankruptcy look-back date, the scope of recoverable transactions and the efficient use of court and parties’ resources.

Islandsbanki HF appealed from an order made by ICC Judge Jones on 20 December 2018. Islandsbanki’s first-in-time bankruptcy petition had been heard on its merits but was adjourned and listed with later petitions presented by HMRC and Shineclear Holdings Limited. The appeal concerned whether the adjournment was properly made and whether the first petition should be heard separately and before the later petitions, particularly in light of earlier orders requiring that sequence.

1. Appeal allowed. The court ordered that Islandsbanki’s petition be disposed of before the later petitions at the hearing listed for 22 February 2019.
2. Adjournments in a bankruptcy context should be exercised sparingly, as stated by Lewison LJ in Sekhon v Edginton [2015] EWCA Civ 816. Although ICC Judge Jones was entitled to adjourn after hearing full argument in order to obtain further submissions on unclear legal points, the decision went beyond a simple case-management order.
3. Having heard the merits, Judge Jones needed to give reasons if he was to depart from two earlier orders that the Islandsbanki petition should be heard first. No such reasons were given, and the parties did not support the adjournment.
4. The first-in-time sequence had substantial practical importance. Under sections 284 and 339 to 341 of the Insolvency Act 1986, the bankruptcy petition may affect the relevant date for dispositions, transactions at an undervalue and preferences. Hearing a later petition first could therefore prejudice creditors and reduce the scope of potential recovery. It could also render the substantial hearing already undertaken on the first petition unnecessary and cause disproportionate expense.
5. The court did not determine whether the later petitions should themselves be heard on 22 February 2019. The operative direction was limited to requiring disposal of the Islandsbanki petition before the others.

• High Court (Chancery Division): On appeal from the order of ICC Judge Jones dated 20 December 2018, the court ordered that the first-in-time Islandsbanki petition be disposed of before the later petitions.