Overview Of How To Change The Decision Of The Trustee In Bankruptcy
How to change the decision of the Trustee in Bankruptcy is an important concept because they can make mistakes like anyone else.
Not only that a Trustee in Bankruptcy can like anyone else be found to act in a perverse manner.
One hopes as experienced professionals neither matter would arise with any frequency but because these things can and do happen Section 303(1) of the Insolvency Act 1986 provides protection for creditors and bankrupts to challenge a decision by the Trustee in Bankruptcy.
Requirements To Change The Decision Of The Trustee In Bankruptcy
The starting point of any challenge to a decision of the Trustee in Bankruptcy is standing. Without standing you cannot challenge any decision of the Trustee in Bankruptcy.
Standing
The ability to have standing is granted in Section 303(1) of the Insolvency Act 1986:
If a bankrupt or any of his creditors or any other person is dissatisfied by any act, omission or decision of a trustee of the bankrupt’s estate, he may apply to the court; and on such an application the court may confirm, reverse or modify any act or decision of the trustee, may give him directions or may make such other order as it thinks fit.
However in order to have standing the person looking to challenge a decision of the Trustee in Bankruptcy must have a legitimate interest in the relief sought and it is not sufficient simply to be a creditor. In order for a creditor to have standing their challenge must not be against the interests of creditors as a whole.
In Re Edengate Homes [2022] 2 BCLC 1 the Court said:
…an applicant will not have standing if the relief sought is contrary to the interests of the creditors as a class, as it will be where that will result in a lesser recovery .. the applicant’s ‘interest in the outcome of the application must also be aligned with the interest of the class as a whole and it must not have a collateral interest which transcends the class interest’. However it is put, the essential point is clear.
When Will The Court Get Involved?
The Court will get involved when the Trustee in Bankruptcy has acted in bad faith or when a decision is so perverse that no trustee properly advised or properly instructing himself could so have acted or when fraudulent conduct has been evidenced.
