Trustee in Bankruptcy Removal (Collatory Case)

Author: Simon Hill
In: Bulletin Published: Tuesday 14 January 2025

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Section 298 of the Insolvency Act 1980 is entitled 'Removal of trustee; vacation of office' and subsection 298(1) provides:

'Subject as follows, the trustee of a bankrupt’s estate may be removed from office only by an order of the court or by a decision of the bankrupt’s creditors made by a creditors’ decision procedure instigated specially for that purpose in accordance with the rules.'

In Re Birdi (also known as Miles v Price) [2019] EWHC 291 (Ch) [2019]; [2019] BPIR 498, Adam Johnson QC (sitting as a Deputy High Court Judge) said, at paragraphs 51 to 55:

'51. There is limited direct guidance in the authorities on the operation of this provision. I have been referred to Smedley v. Brittain [2008] BPIR 219, a decision of Registrar Nicholls, and also to Doffman & Isaacs v. Wood & Hellard [2011] EWHC 4008 (Ch) [2012] BPIR 972, a decision of Proudman J. In those cases, inspiration was drawn from cases under ss108(2) and 172(2) IA, dealing with the removal from office of liquidators: see for example Re Keypack Homecare Ltd [1987] BCLC 409; Re Buildhead Ltd (In Liquidation) No. 2 [2004] EWHC 2443 (Ch), [2004] BPIR 1139; Re Edennote Ltd; Tottenham Hotspur plc & Ors v. Ryman & Anor [1996] 2 BCLC 389; and AMP Music Box Enterprises Ltd v. Hoffman [2002] EWHC 1989 (Ch), [2003] 1 BCLC 319.

52. In Doffman & Isaacs v. Wood & Hellard [2011] EWHC 4008 (Ch) [2012] BPIR 972, Proudman J. at [13] summarised the position as follows:

"It is common ground that cause must be shown for removal and that case-law generally on the removal of office-holders is relevant. Section 298 of the 1986 Act uses similar wording to that of s172(2) relating to the removal of a liquidator on a compulsory winding up. The question of whether to remove an insolvency practitioner of any kind must therefore be measured by reference to 'the real substantial, honest interests' of the process, and to the purpose for which the office holder is appointed: see Adam Eyton Ltd, ex parte Charlesworth (1887) 36 Ch D 299, per Bowen LJ at 306, quoted with approval in Re Edennote Ltd Tottenham Hotspur plc & Ors v. Ryman & Anor [1996] 2 BCLC 389 at 398".

53. At [14], Proudman J. went on to say that:

"The primary purpose of the bankruptcy process is the orderly payment of creditors and the principal interest is that of the creditors".

54. At [23], Proudman J. went on to quote the following, taken again from Re Edennote Ltd; Tottenham Hotspur plc & Ors v. Ryman & Anor [1996] 2 BCLC 389, per Nourse LJ at 398:

" … the court does not lightly remove its own officer and will, among other considerations, pay due regard to the impact of a removal on his professional standing and reputation".

55. These passages suggest to me that the power is a broad one; that the conduct of the office holder is of course material; but that ultimately the assessment is whether removal of the office holder is in the interests of the bankruptcy process as a whole. That view is supported by the comments of Neuberger J. (as he then was) in AMP Music Box Enterprises Ltd v. Hoffman [2002] EWHC 1899 (Ch), [2003] 1 BCLC 319, who at [23] spoke of the court having to "carry out a difficult balancing exercise". He went on (at [23] and [27]):

"On the one hand the court expects any liquidator, whether in a compulsory winding up or a voluntary winding up, to be efficient and vigorous and unbiased in his conduct of the liquidation, and it should have no hesitation in removing a liquidator if satisfied that he has failed to live up to those standards at least unless it can be reasonably confident that he will live up to those requirements in future.

On the other hand, if a liquidator has been generally effective and honest, the court must think carefully before deciding to remove him and replace him. It should not be seen to be easy to remove a liquidator merely because it can be shown that in one, or possibly more than one, respect his conduct has fallen short of ideal. Otherwise, it would encourage applications under s 108(2) by creditors who have not had their preferred liquidator appointed, or who are for some other reason disgruntled. … Further, the court has to bear in mind that in almost any case where it orders a liquidator to stand down, and replaces him with another liquidator, there will be undesirable consequences in terms of costs and in terms of delay".'

Collatory Case Series

The Collatory Case Series, is an series of bulletins, designed to report that one case which collates the essential principles/propositions of law, for a particular doctrine/area of law. It is not designed as a deep and comprehensive review of an area of law, but to provide that quick 'go to' case.

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