June 2008
Part 3 Bankruptcy - Rescission
6.50 Rescission as a possible alternative to annulment
If the conditions for the annulment of the bankruptcy order (see Chapter 6A) do not exist, the bankrupt can still apply for rescission of the order under section 375(1) which gives a court with jurisdiction in personal insolvency the power to ‘review, rescind or vary’ any order it has made in exercise of that jurisdiction. The discretion to rescind is exercised by the court with caution and only in exceptional circumstances.
6.51 Change in circumstances required for rescission (Fitch)
An application for rescission under section 375(1) was considered by the Court of Appeal in Fitch v Official Receiver [1996] 1 WLR 242. The Court of Appeal held that a rescission of the bankruptcy order would only occur where there had been a change in circumstances since the bankruptcy order or, more rarely, where there was the discovery of further evidence. In this case most of the creditors, including the petitioning creditor, supported the applications to rescind the bankruptcy orders made against a husband and wife and none opposed them. The reason for their change of attitude was the belief that the bankruptcy orders would prejudice the recovery of a substantial asset. The court held that the fact that the underlying circumstances which led to the creditors supporting the rescission of the bankruptcy orders had been known at the time the orders were made did not prevent their change of attitude from being both new and relevant as required for an application under section 375(1) which must be based on a change of circumstances.
6.52 Source of payment to petitioner
Where a payment has been made to a petitioning creditor in connection with an application to rescind the bankruptcy order, the official receiver should establish the source of the funds (as far as he/she is able to in the available time). If this is not possible, the court should be informed that this has not been possible. If a payment represents the disposal of an asset which would have comprised part of the bankruptcy estate, this should be drawn to the court’s attention as it operates to defeat the principle of the distribution of assets pari passu (unless there are no other creditors).
6.53 Respondent where petitioner supports rescission application
The official receiver should note that where the petitioning creditor ‘changes sides’, only the official receiver can (logically) be made the respondent to the rescission application. The official receiver should apply for his/her costs in the usual way and this point may be pleaded as an argument against an award of costs if the application is successful.
6.54 Application to rescind v application to annul
Where the official receiver is informed that such an application is likely to be made, he/she might wish to suggest that an annulment application may be more appropriate, but, in practice, it is likely that a rescission application is only being made because the grounds for an annulment application are not available in the circumstances. If the application is for rescission, the official receiver should deal with it in broadly the same way as an annulment application (see Chapter 6A).
If a rescission application is successful, the official receiver should ensure that the court makes provision in respect of the official receiver’s costs. The LOLA handbook on the intranet provides information on which fees should be charged in calculating the official receiver’s costs See Chapter 36 Part 1 for further details of the fees to be charged and also paragraph 6A.69.
6.56 Leave to attend bankruptcy petition rehearing (official receiver’s costs)
In the Fitch case referred to at paragraph 6.51 the petitions were sent back to the county court for rehearing, after the bankruptcy orders had been rescinded by the Court of Appeal. As Mr Fitch was unable to pay the official receiver’s costs there and then, the Court of Appeal gave the official receiver leave to appear on the new hearing of the petition if his costs had not been paid at that time. This is a useful ‘weapon’ to have if a debtor delays in the payment of costs.
If the official receiver’s costs have not been paid, the official receiver may request that the rescission order is not drawn until such time as they have been paid. If the petition is relisted for hearing and the official receiver’s costs have not been paid, the official receiver should make a report to the court to that effect and consider attending the rehearing of the petition to reinforce this point.
6.57 Deposit repayment following rescission
Where the bankruptcy order is rescinded, the deposit shall be repaid to the extent that it is not required for payment of the relevant administration fee (unless a fee has become payable to an insolvency practitioner appointed under section 273) or unless the court orders otherwise, perhaps following an agreement between the parties.
6.58 Removal of information from the Individual Insolvency Register (IIR)
(Amended December 2010)
Where a bankruptcy order is rescinded by the court under section 375 and the Secretary of State (in practice the official receiver) has received a copy of the order made by the court, all information concerning that bankruptcy shall be deleted from the IIR [Note 1].
The official receiver should ensure that details of the rescission are entered onto ISCIS as soon as possible after receiving notification, as the IIR is updated automatically from information entered onto ISCIS.
Pre 6 April 2010 petition cases
In rescission cases where the petition was presented before 6 April 2010 the (former) bankrupt’s details will automatically cease to appear on the Register 48 hours after the ISCIS entry is made.
Post 6 April 2010 petition cases:
In rescission cases where the petition was presented on or after 6 April 2010 the amended rules provide that information regarding a bankruptcy is only deleted from the IIR once 28 days have elapsed since receipt of the copy of the order of rescission by the Secretary of State (the official receiver in practice) [Note 1]. ISCIS should continue to be updated as soon as possible following receipt of notification of a rescission.
6.59 Section 122 pension scheme notice to be issued irrespective of rescission or annulment (Pension Act 2004)
If the official receiver's appointment as trustee comes to an end before he/she is able to form a view as to whether support for the pension scheme will continue, for example if the bankruptcy order is rescinded or annulled, he/she is still required under section 122(4) of the PA2004 to issue a pension scheme notice.
Section 122(6) of the PA2004, requires the official receiver to send the scheme notice to:
A proforma for the section 122 (4) Pension Scheme Notice can be accessed at: www.pensionprotectionfund.org.uk/.../ceasing_to_act_form.pdf
For further information regarding the official receiver's obligations under PA 2004 see Chapter 61 Part 4.
6.60 Effect of BRO/BRU on rescission application
Rescission has the effect of bringing the debtor's bankruptcy to an end, as at the date of the rescission, but does not treat the bankruptcy order as never having been made. If the bankruptcy order was properly made and the court under section 375(1) rescinds rather than annuls the order (see paragraph 6.51), Enforcement Technical has confirmed that in principle, BRU/BRO proceedings should still be capable of being pursued. However, the court would take into account the circumstances giving rise to the rescission of the bankruptcy order in deciding whether it was appropriate to make the BRU/BRO. If BRU/BRO proceedings have been taken or threatened prior to the rescission of the bankruptcy order, the official receiver might object to the rescission on account of the pending BRU/BRO proceedings and/or bring to the attention of the court to take into account when deciding whether to rescind the bankruptcy order.
Where a BRU/BRO is already in existence, restrictions imposed continue to apply notwithstanding the rescission of the bankruptcy order, although the circumstances in which the bankruptcy order was rescinded might provide grounds for a BRU to be annulled or BRO rescinded [Note 2].
[Back to Part 2 Bankruptcy - Stay of advertisement and stay of proceedings] [On to Part 4 Companies - Appeals]