Mohammed Kamal Ahmed v Elias Hussain & Anor

A bankruptcy order may be rescinded only where the statutory discretion is justified by exceptional circumstances or there is a material difference from the position known when the order was made. The court may consider new material, but an innocent omission will not justify rescission where it did not materially affect the outcome. A continuing shortfall exceeding the bankruptcy minimum, together with the history of prior adjournments, may justify refusing a further adjournment and making the bankruptcy order. An application lacking a material basis may be dismissed as totally without merit.

The applicant sought rescission of a bankruptcy order made on 24 May 2021 on the petition of the first respondent. The petition debt was £391,629.39 and arose from judgment debts secured in part over properties jointly owned by the applicant and his brother.

The applicant alleged that the petitioner's solicitor and counsel had failed to place before the bankruptcy court updated charge forms offered by his brother, and had thereby concealed security which might have avoided the bankruptcy order. He also relied on additional charging orders over other properties. The applicant sought an adjournment to obtain the transcript of an earlier judgment concerning similar grounds.

The central issues were whether the alleged omissions materially affected the original decision, whether exceptional circumstances justified rescission under Insolvency Act 1986, s375(1), and whether the rescission application should be adjourned.

1. Application dismissed. The application to rescind the bankruptcy order was dismissed as totally without merit. The application for an adjournment was also refused.
2. Section 375(1) of the Insolvency Act 1986 confers a discretionary power to review, rescind or vary a bankruptcy order. Rescission requires exceptional circumstances justifying the exercise of the discretion and/or a material difference from the position known to the court when the order was made. The court may consider new material not considered at the original hearing. (See paras [12]-[13].)
3. The court was neither deliberately nor materially misled at the original bankruptcy hearing. The failure to include the updated charge forms was an innocent error. The petitioner's counsel had referred in his skeleton argument to the asserted existence and possible effect of the forms, and the applicant himself raised the issue at the hearing. (See paras [16]-[18], [22]-[24].)
4. The omission did not materially affect the result. Even if all net sale proceeds from the two properties had been applied against the petition debt, a shortfall of £51,474.89 remained. The additional charging orders also left a substantial shortfall, and the petitioner was not entitled to double recovery. (See paras [19]-[27].)
5. The applicant had already received numerous adjournments. In those circumstances, refusal of a further adjournment and the making of the bankruptcy order were unsurprising. No exceptional circumstances justified rescission. The proposed adjournment to await an earlier judgment transcript would serve no useful purpose and would cause further expense and court time. (See paras [27], [29]-[31].)