How to challenge Trustee in Bankruptcy’s Fees and avoid appeal being refused

It is possible to challenge the fees of an Insolvency Practitioner.

How To Challenge Fees

How to challenge Trustee in Bankruptcy’s Fees and avoid appeal being refused is one of the points arising from the matter of Oyesanya v Jackson [2020] EWHC 542 (Ch).

This was a bankrupt’s application for permission to appeal against a District Judge’s decision ordering him to give up possession of his property.

The basis for the Trustee seeking an order for possession is highlighted by the position set out in Holtham v Kelmanson [2006] BPIR 1422 “… A trustee in Bankruptcy, although called a trustee, is not a trustee of the assets comprised in the estate for the creditors or the bankrupt. He holds the assets subject to statutory duties to liquidate them and distribute their proceeds in satisfaction of the debts pari passu and any surplus to the bankrupt. In my view the application fell to be made under Section 363(2) of the Insolvency Act 1986…“.

There were various grounds put forward in respect of the application. It was a not uncommon situation in which another property in Harrow, being sold by the mortgagee, was thought to release sufficient funds to discharge the bankruptcy.

This optimism did not seem to stand the test of time and in due course, an order was made for the bankrupt’s property in Altrincham to be sold.

Possession Proceedings

Three of the grounds put forward by the bankrupt to challenge the initial judge’s decision and to seek to stop the possession order proceeding were 1) the level of the Trustee in Bankruptcy’s fees and expenses 2) interest of the wife in the property in Altrincham 3) undervalue sale of the Harrow property.

Dealing with these issues the application appears to have reasonably comprehensively failed. It seems that arose because of the way in which the appeal was pursued. It seems doubtful that it was going to succeed but the matter of the Trustee in Bankruptcy’s fees was notable.

Submissions Instead Of Application

Instead of issuing an application under Rule 18.35 of the Insolvency (England and Wales) Rules 2016, the bankrupt made submissions at the hearing of permission to appeal, yet seemingly conspicuously appears to have overlooked that he needed to have such made an application to challenge these costs before he could raise it as an issue on a permission to appeal application. He had not done so.

The judge said: ” The application may be made at any time. If such an application had already been made by the applicant, and determined by the court, by the time the possession application was finally decided the position would have been clear as to whether there was any reduction, and if so how much, in the respondent’s fees and expenses. But it appears that on this point the applicant has been willing to wound and yet afraid to strike, and has not challenged those fees and expenses. It hardly, therefore, lies in his mouth to complain that the district judge did not consider the possibility that the respondent’s fees and expenses might be reduced so far as to render it unnecessary to sell the Altrincham property, when the applicant already had a remedy available to him in respect of his complaint, but nevertheless did not take it. “

Declare An Interest

The bankrupt’s wife asserted no interest in the Altrincham property so that seems to have knocked that ground for appeal out.

Finally, the suggestion of the undervalue sale allegation as to the Harrow property was dealt with as follows given it had not been sold by the Trustee in Bankruptcy but by the mortgagee:

” The applicant’s complaint about a possible sale at an undervalue of the Harrow property by the mortgagee (Barclays Bank) does not bear directly on the decision of the district judge, because the actions of the mortgagee are not the actions of the trustee in bankruptcy. But, if there is any substance in the complaint, that may represent a potential claim for the bankruptcy estate as against the mortgagee. The question is whether the district judge should have stayed his hand in relation to the possession application and first investigated the possibility of a claim being made in respect of the Harrow property. In my judgment, it is a matter for the exercise of discretion by the court. On the one hand, there is the undoubted value of the Altrincham property as an asset of the estate. It can be realised relatively easily and (very importantly) at modest and known expense. On the other hand there is speculative litigation for which a great deal of cost will have to be invested before it is even known whether it is worth pursuing. In my judgment, on the facts of this case, the district judge cannot be criticised for acceding to the application of the respondent and preferring the former to the latter. “

The lesson seems to be; get your applications right the first time and do not introduce fresh applications on appeal that have not already been brought, as the Court is unlikely to be willing to in effect re-write history or allow them in after the event.

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