Edwards & Ors v Hammersley

The insolvency review jurisdiction is distinct from the appellate jurisdiction. Although broad in wording, it is exercised sparingly and only in special or exceptional circumstances. It is generally confined to cases involving a change in circumstances since the original decision, including genuinely new material. It cannot be used to re-run arguments that failed at the original hearing or to advance arguments that could have been made then. A point alleging that the original decision was legally or factually wrong is ordinarily an appellate point. Where an application is plainly an attempt to re-run the original case, the court may dismiss it summarily. A stay intended to prevent proceedings from being stifled requires, among other matters, a real prospect of success and evidence of inability to pay.

The applicants were the former administrators of Paragon Offshore plc. They had obtained an order discharging them and requiring the respondent, Michael Hammersley, to pay their costs. Mr Hammersley applied under rule 12.59 of the Insolvency Rules to review, rescind or vary that order. He also sought a wasted costs order and a stay of the proceedings and costs order.

The review grounds principally repeated arguments concerning Paragon’s insolvency, the availability of its assets, the treatment of intercompany liabilities under the Fifth Plan, and an alleged claim against the former administrators. The central issue was whether those matters disclosed a sufficient change of circumstances or otherwise justified exercise of the exceptional review jurisdiction.

1. The review and wasted costs applications were dismissed. The court treated the application as relating to the order made on 20 July 2020, notwithstanding that it had initially been framed by reference to a draft judgment.
2. Rule 12.59 confers a wide discretion, but the jurisdiction is separate from and cannot be used as a substitute for an appeal. It is exercised cautiously and only in special or exceptional circumstances. A review normally requires a change in circumstances since the original decision, including genuinely new material. It does not permit an unsuccessful party to have a second attempt at arguments already rejected.
3. The arguments concerning solvency and the Prospector Group merely re-ran issues decided at the earlier hearings. The unappealed administration order, and the evidence considered in the earlier judgment, established that Paragon was insolvent. The court was not entitled to go behind that order. The Prospector Group remained an asset of Paragon available to meet creditors’ claims.
4. The reliance on section 1141(d) of the US Bankruptcy Code and related material did not disclose a change of circumstances. The Fifth Plan treated the intercompany claims as unimpaired. The documents relied upon had existed at the time of the original hearings and did not justify review.
5. A filing referring to possible indemnity claims did not amount to an admission that Mr Hammersley had a valid claim. No misfeasance claim had been issued. Any such claim after discharge would require the court’s permission under paragraph 75 of Schedule B1 to the Insolvency Act 1986.
6. The alternative stay application was adjourned generally, with permission for the former administrators to restore it. The limited stay of the costs-on-account order ended on the date fixed for hand-down.

Not an appeal. The judgment concerned applications to review and vary an order made by the same court on 20 July 2020.