Standing to challenge a trustee’s decision

The Brakes issued their application under section 303(1) IA1986, both in their personal capacities as bankrupts (in possession of the cottage) and in their capacities as trustees of the Brake Trust (as unsuccessful bidder for the cottage). It was alleged that their Trustee had wrongfully enabled Chedington to interfere with their right of possession of the cottage. Chedington applied to strike out the relevant parts of the application on the ground that the Brakes lacked standing. At first instance, the High Court struck out the Brakes’ application.

On appeal, the Court of Appeal: i) dismissed the appeal brought by the Brakes in their capacities as trustees of the Brake Trust finding that they were third-parties, and their only interest was that of disappointed under-bidders; and ii) held that the Brakes had standing in their personal capacities given their interests were substantially affected by the conduct of the trustee and because they had a direct interest in the relief sought. Chedington appealed to the Supreme Court.

The Supreme Court found that to have standing to bring an application, an applicant must fall into one of three categories:

  1. Creditors where the insolvent estate is administered under the terms of the statutory trust for their benefit as creditors
  2. Where there is or there is likely to be a surplus, the bankrupt or contributories are also persons for whose benefit the estate or assets are being administered and they have standing in respect of their interests in the surplus.
  3. Creditors, bankrupts, contributories or others in relation to matters directly affecting their rights or interests and arising from powers conferred on office holder(s) and which are specific to the relevant insolvency process. This will be a limited class.

The Brakes did not fall within any of these categories and do not therefore have standing to bring their application. Chedington’s appeal was allowed.

Helpfully, the Supreme Court has confirmed that these principles also apply to creditors (and others) trying to challenge the decision of a liquidator in a winding up (s.168 of the IA1986).

Brake v Chedington Court Estate Ltd  [2023] UKSC 29

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