Insolvency practitioners’ bonds are held on trust for insolvent estates

This case concerned whether the Insolvency Practitioners Association (IPA) held the benefit of insolvency practitioner bonds (IP Bonds) on trust for insolvent estates, and whether liquidators could compel the transfer of those rights.

The claimants, as liquidators of three companies, alleged that former office holders and their staff had dishonestly inflated their time costs. They sought to recover losses under IP Bonds issued by Intact Insurance, arguing that the IPA, named as beneficiary, held the relevant claim rights on trust for the companies’ insolvency estates.

The court first considered whether the IPA’s role in relation to IP Bonds involved the exercise of public functions or powers. If it did, the claimants would have been limited to public law remedies and could not rely on private law trust principles. The court rejected this argument, finding that the IPA’s involvement arose from voluntary contractual arrangements rather than statute and was not governmental in nature, and lacked sufficient public law characteristics. As such, the claimants were not confined to public law remedies.

Turning to the trust issue, the court held that the IP Bonds, properly construed, did create a trust. Although the IPA was named as beneficiary, the structure and purpose of the bonds made clear that it was not intended to benefit itself, but to hold the claim rights on trust for the benefit of insolvency estates suffering loss as a result of fraud or dishonesty. 

Accordingly, the court declared that the claim rights were held on trust for the companies’ insolvency estates and, as property of those estates, ordered that they be transferred to the liquidators pursuant to section 234 of the Insolvency Act 1986. 

Nicholson and another v Insolvency Practitioners Association and others [2026] EWHC 686 (Ch)

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