Trustees in bankruptcy’s discretion upheld

This case is the latest in a long line involving the Brakes, their bankruptcy and eviction from a property. The Court of Appeal estimated that the matter had generated 42 decisions at the time of this judgment and a Supreme Court decision has subsequently been handed down.

The Appellants are trustees in bankruptcy of the Brakes, having taken over from previous incumbents.  Parties who had evicted the Brakes from a property requested that the Appellants involve themselves in those proceedings.

The Appellants refused, claiming that such involvement would lead to substantial time and costs and would be of no benefit to the bankruptcy estate. The judge, at first instance, disagreed, finding the Appellants’ conduct perverse and ordered accordingly.

The Appellants appealed to the Court of Appeal, who disagreed with the judge and upheld the appeal.

The Court of Appeal held that there were four flaws in the judge’s reasoning. Firstly, the judge failed to recognise that the Appellants’ duty is not to act in the interests of the creditors at all costs. Secondly, the judge disregarded the Appellants’ key reason for their decision not to apply to join the eviction proceedings, that it was unlikely that this would result in any benefit to the bankruptcy estate. Thirdly, the judge wrongly decided that it was difficult to see the downside to the trustees applying to join the eviction proceedings when downsides were obvious, ie the Appellants becoming embroiled in protracted, complex, time-consuming and hostile proceedings. Fourthly, the judge dismissed the trustees’ concerns as to their independence as “absurd”, which the Court of Appeal wholeheartedly disagreed with.

Patley Food Wood Farm LLP and others v Kristina Kicks and others [2023] EWCA Civ 901

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