Clock and Alphabets

This post discusses the principles of challenging an office-holder’s remuneration and obtaining relief from sanction in circumstances where an application is made out of time.

Details

The bankrupt, (M), applied to appeal out of time[1] a decision by the County Court refusing permission to challenge his trustee in bankruptcy’s (T) remuneration and expenses [2], because the Court was not satisfied that there was, or would be likely to be, a surplus of assets to which M would be entitled even disregarding the remuneration or expenses.

The Court’s discretion

The Court has a discretion to permit creditors to challenge the remuneration and expenses of a trustee but that exercise had to be based upon a proper evaluation of the evidence. A bankrupt may also apply for permission to challenge a trustee’s remuneration and expenses and, without prejudice to the general matters that the Court should take into account on such an application, permission should not be given unless the bankrupt shows that there is or is likely to be, or there would be but for the remuneration and expenses, a surplus of assets to which the bankrupt would be entitled[3].

In this case, the Court considered that the District Judge had erred in principle in refusing M permission to challenge T’s remuneration and expenses on the basis that there would not be any surplus to which M was entitled. This was on the basis that inadequate evidence was presented by T as to the level of his remuneration. No breakdown was provided and it appears that T just presented the estimated level of his costs. The Court, therefore, took the view that the District Judge was not in a position to form any reliable view as to whether there would be a surplus of assets.

The Court did not express any view that M should have been given permission to challenge the remuneration and expenses of T but, rather, the District Judge decided the matter on the basis of inadequate evidence and therefore the application should be considered again.

Application out of time

M’s application to appeal the decision of the District Judge was issued a month after the deadline. The Court therefore needed to consider other principles [4]  to assess whether or not the breach was serious or significant, whether there was a “good reason” of the default and finally, “all the circumstances of the case”.  The Court noted that the Court of Appeal[4] had indicated that the most useful measure of whether a breach was significant or serious would be whether the breach jeopardised future hearing dates or otherwise disrupted the conduct of litigation by the parties and other litigants.

M asserted that a third party was willing to provide funding which would allow the bankruptcy debts to be discharged in full and for the bankruptcy to be annulled. The third party would therefore need to ascertain the full extent of the bankruptcy debts and T’s remuneration and expenses that would need to be discharged. Applications to have such matters determined were pending and had been adjourned pending the outcome of the appeal.

On this basis, the Court took the view that a delay of one month in issuing the appeal would not cause the loss of any future hearing date or disrupt the conduct of the bankruptcy. The Court also took the view that the proper determination of whether M should be given permission to challenge T’s remuneration and expenses could be dealt with as a matter of urgency. The breach was not, therefore, substantial or serious.

In applying the other two principles [4], M had no “good reason” for the delay in issuing the appeal, his reason of stress of the litigation was rejected, however, applying the third principle[4], in all the circumstances of the case, relief from sanction should be given. In this regard, the Court referred, amongst other things, to the significant public interest in ensuring that insolvencies are conducted efficiently and that the costs of insolvency are properly monitored in a transparent way and are subject to appropriate scrutiny.

The Court therefore concluded that, given the flawed nature of the District Judge’s decision, it was persuaded to grant permission to appeal out of time and allow the appeal.

This post was edited by Emily Drake. For more information, email blogs@gateleyplc.com.

[1] Bajinder Mattu –v- Richard Toone [2015] EWHC 3506 (Ch)

[2] Insolvency Rules 1986 (as amended) – under rule 6.142

[3] Rule 6.142(2A) Insolvency Rules 1986 (as amended)

[4] Denton –v- TH White Ltd and other appeals [2014] EWCA Civ 906


Leave a Reply

Your email address will not be published. Required fields are marked *

fourteen − twelve =

This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.