Trustees’ refusal to litigate was perverse

The Court found, on an application made by a bankrupt’s creditors, that the trustees in bankruptcy decision not to involve themselves in eviction proceedings, in respect of an asset in the bankruptcy's estate, was perverse.

Trustees in bankruptcy attempted to adopt a neutral position in relation to eviction proceedings in the Court of Appeal. The Trustees took the view that it was not in the interests of creditors to join into the proceedings; they were of the view that there was no value in the property due to a charging order. They argued that getting involved in the proceedings would lead to unnecessary costs and risk.

The third applicant had offered funding and indemnities that would have mitigated their fears of the cost implications to the estates if they were to become embroiled in the proceedings. It also offered to put in place commercial terms for their own occupation of the property including the payment of a licence fee to the Trustees, presenting an opportunity to monetise the property for the benefit of the estate.

Despite that, the Trustees continued to refuse to get involved. The applicant creditors therefore applied for an order compelling the Trustees to be joined into the litigation to oppose the bankrupts’ possession, to protect the asset for the interests of creditors.

At the hearing, the judge held that the Trustees’ refusal to join the litigation was perverse, and granted the order sought. 

The trustees' decision not to intervene in the eviction proceedings, even if it had been originally justified, was not justified by the time of the hearing. It had become an absurd decision, which no reasonable trustee could have reached.

The decision reaffirms that an office holder has a statutory duty to positively manage assets in the insolvent estate in the interests of creditors.

Patley Wood Farm LLP, Lorraine Brehme, The Chedington Court Estate Limited v Kristina Kicks, Blair Carnegie Nimmo (as trustees in bankruptcy of Nihal Mohamed Kamel Brake and Andrew Young Brake) [2022] EWHC 2973 (Ch)

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