Insolvency: AiB’s powers under review again

The ability of parties to request a review of certain decisions made by the Accountant in Bankruptcy (AiB) has been considered in previous briefings (Journal, July 2019, 34 and Journal, July 2022, 29). In each of the cases considered in those columns, the sheriff ruled that the AiB’s role in a review was to consider matters ab initio, meaning that they can consider the full materials that were before the original decision maker, and any fresh material put before them.

Both of those cases were decided in the context of the provisions in the Bankruptcy (Scotland) Act 2016, namely ss 139 (debtor discharge) and 127 (adjudication of claims). In both cases the sheriff held that any appeal from the AiB was an appeal against a discretionary decision. Therefore, it required to be either on a point of law or on the very limited grounds that an appellate court might interfere with a discretionary decision, such as procedural irregularity or irrelevant considerations.

On 11 August 2022 the judgment of the sheriff in Crawford v Accountant in Bankruptcy [2022] SC EDIN 20 was published. It considers the AiB’s powers of review in the context of the Debt Arrangement Scheme (Scotland) Regulations 2011.

Challenged revocation

The case was an appeal by the debtor from the AiB’s decision to revoke a debt payment programme (“DPP”) set up under the 2011 Regulations. A creditor (HMRC) requested revocation on the basis that the debtor was not meeting his ongoing liabilities, which is a condition of a DPP. The AiB agreed. The debtor sought a review, following which the AiB adhered to their original decision to revoke the DPP. In the course of the review, HMRC submitted further representations to the AiB. Those representations were not shared with the debtor. 

The questions for the court were threefold:

• What is the nature of a review?
• What information can the AiB consider on review?; and 
• Do representations made by one party require to be intimated to other parties?

Whereas the provisions of the 2016 Act do not set out any restrictions on the grounds of review, the sheriff in Crawford identified that the 2011 Regulations contain a potentially important qualification. Regulation 47 provides that the specified parties may “on any ground which may be raised in an appeal” apply for a review of the determination of the AiB. As the only ground of appeal contained in the 2011 Regulations is an appeal on a point of law, a strict interpretation of this provision would severely restrict the right of review.

The sheriff determined that the restrictive interpretation could not have been intended by the Parliament. He held that the nature of a review in the context of the 2011 Regulations is broadly the same as that under the 2016 Act – i.e. for the AiB to consider the matter anew. It follows from this that the AiB is entitled to consider all material put before them on review.

Unfairness

However, it is the third question that is significant. The sheriff in Crawford identified that there is a lacuna in the 2011 Regulations, in that they do not deal with the process that the AiB must follow on receipt of representations and other materials from parties as part of the review. The 2016 Act similarly has no such guidance. The question therefore arose as to the correct process where the AiB is provided with additional material in the course of the review.

It was common ground that any procedure adopted by the AiB must be fair. In the absence of any statutory provision or guidance, the sheriff held that the common law must step in. Fairness in the context of a review requires that where a party lodges material with the AiB, the other parties to that review should see that material and have the opportunity to comment before any decision is made. In reaching this conclusion, the sheriff recognised that there are statutory timescales within which the AiB must determine a review. He considered that this may be overcome by the AiB setting out clear timescales for representations at the outset and for any comments thereon.

In this particular case the AiB had not passed HMRC’s representations to the debtor, but had referred to them in their decision. This was not considered to be a fair process. Consequently the sheriff allowed the appeal, quashed the decision and sent the matter back to the AiB to reconsider.