The difficulty in removing a trustee in bankruptcy

Three creditors sought an order to remove Mr Birdi’s current Trustee in Bankruptcy. Mr Birdi’s former Trustee was also a Respondent. The Applicants asserted that, as a result of mismanagement of the investigation and inflated costs, they had been denied distributions which they should have received but for the conduct of the Trustees.

Allegations that the costs and expenses of the bankruptcy were inflated were found to be without basis.  Remuneration had been approved and the creditors were regularly updated.  The court ruled that the high costs resulted from the Bankrupt’s failure to co-operate.

Given that there were insufficient funds in the estate to make a distribution, the court took a pragmatic approach.  Removing the current Trustee would not benefit the creditors as it would further increase costs.  Consequently the application was dismissed as there were no grounds to remove the Trustee under section 298(1). 

Further, as the Applicants’ request for a meeting was deficient, the Trustee should not be compelled to convene a meeting under section 298(4) of the Insolvency act 1986.

The suggestion that the former Trustee had been appointed fraudulently, relying on the votes of “bogus” creditors was also dismissed.  The court found whilst the claims in the bankruptcy had not been adjudicated on, there was nothing to suggest that creditors had been fabricated.

The court’s pragmatic approach is worth reflecting on.  Whilst creditors may have the right to try to remove a trustee (or liquidator), applications should be made in a timely fashion, and are only likely to be successful where the removal will have a tangible benefit to the estate.

Miles & Ors v Price & Ors [2019] EWHC 291

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