Kerry Underwood

BANKRUPTS AND CIVIL AND PERSONAL INJURY PROCEEDINGS

with 3 comments


A solicitor cannot act for a bankrupt without the agreement of the Trustee in Bankruptcy; there are some limited exceptions which I deal with below. Note that the discharge of the bankruptcy does not change the position. As soon as a person is made bankrupt virtually everything vests in the trustee. The discharging of the bankruptcy does not affect the property, including a chose in action, all of which remains vested in the trustee.

Annulment does change the situation; it is as though the bankruptcy had never taken place. An analogy may be made with a marriage; a divorce ends the marriage but does not mean that the marriage never took place. That is akin to the discharge of a bankruptcy. In each case an annulment means that in law the event never took place.

Note that neither the Pre-Action Protocol for low value personal injury claims and road traffic accidents (the RTA Portal), nor the Pre-Action Protocol for low value personal injury (Employers’ Liability and Public Liability) Claims (the EL/PL Portal) applies where the claimant is a bankrupt. (RTA 4.5(5)), EL/PL 4.3(4).

In an RTA case the financial position of the defendant is irrelevant but in the EL/PL Portal cases are excluded “where the defendant is insolvent and there is no identifiable insurer;” (EL/PL 4.3(5)).

It makes no difference if the Trustee in Bankruptcy has adopted the case or assigned it. If the claimant is bankrupt it cannot go into either portal.

It appears that where a claimant is a discharged bankrupt the matter does go into the appropriate portal even though the claimant has no right to bring the claim if it has vested in the trustee.

In practice always ask a client if s/he is bankrupt and insist that the client informs you if s/he becomes bankrupt after instructing you. Mention this at the first interview and include it in the Client Care Letter.

You can also carry out a free search through the Government website of the Individual Insolvency Register (IIR) at https://www.insolvencydirect.bis.gov.uk/eiir/

This gives details of all people in England and Wales who have become bankrupt or signed an agreement to deal with debts.

The IIR is an amalgamation of the Individual Insolvency, Bankruptcy Restrictions and Debt Relief Restrictions Registers. The Insolvency Service is required by statute to maintain these registers, keep them up to date and make them available for public inspection.

The register can be searched by name or by trading name for sole traders.

Records are usually removed three months after insolvency ends.

The IIR contains details of:-

  • Bankruptcies that are current or have ended in the last three months
  • Debt Relief Orders that are current or have ended in the last three months
  • Current Individual Voluntary Arrangements (IVAs) and Fast-Track Voluntary Arrangements (FTVAs), including those that have ended in the last three months
  • Current Bankruptcy Restrictions Orders or Undertakings (BROs/BRUs) and interim Bankruptcy Restriction Orders (iBROs)
  • Current Debt Relief Restrictions Orders or Undertakings (DRROs/DRRUs) and interim Debt Relief Restrictions Orders (iDRROs)

I advise that this be part of the file opening procedure. Otherwise you risk doing a huge amount of work and receiving no payment and even being ordered to pay the other side’s costs when you inevitably have to discontinue.

THIS SERVICE IS FREE

Section 306 of the Insolvency Act 1986 provides:

“(1)        The bankrupt’s estate shall vest in the trustee immediately on his appointment taking effect or, in the case of the official receiver, on his becoming trustee.

(2)          Where any property which is, or is to be , comprised in the bankrupt’s estate vests in the trustee (whether under this section or under any other provision of this Part), it shall so vest without any conveyance, assignment or transfer.”

Section 283 reads:

“(1)        Subject as follows, a bankrupt’s estate for the purposes of any of this Group of Parts comprises –

(a) all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, and

(b) any property which by virtue of any of the following provisions of this Part is comprised in that estate or is treated as falling within the preceding paragraph.

(2)          Subsection (1) does not apply to:

(a) such tools, books, vehicles and other items of equipment as are necessary to the bankrupt for use personally by him in his employment, business or vocation;

(b) such clothing, bedding, furniture, household equipment and provisions as are necessary for satisfying basic domestic needs of the bankrupt and his family”.

Section 436 says…

“ “property” includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property…”.

Thus, on the face of it a legal action, being a thing in action, is property and vests in the trustee.  However that is not the whole story as the courts have consistently held that certain actions, including personal injury general damages only actions, do not vest in the trustee.

In Heath v Tang [1993] 3 All ER 694 the Court of Appeal said:

“The property which vests in the trustee includes “things in action”: see s.436 of the 1986 Act.  Despite the breadth of this definition, there are certain causes of action personal to the bankrupt which do not vest in his trustee.  These include cases which –

“the damages are to be estimated  by immediate reference to pain felt by the bankrupt in respect of his body, mind, or character, and without immediate reference to his rights of property.”  (See Beckham v Drake [1849] 2 HL Cas S79 at 604, 9 ER 1214 at 122 per Erle J.  See also Wilson v United Counties Bank Ltd [1920] Ac 102, [1918-19] All ER Reg 1035).

“Actions for defamation and assault are obvious examples.  The bankruptcy does not affect his ability to litigate such claims.  But all other causes of action which were vested in the bankrupt at the commencement of the bankruptcy, whether for liquidated sums or unliquidated damages, vest in his trustee.  The bankrupt cannot commence any proceedings based upon such a cause of action and, if the proceedings have already been commenced, he ceases to have sufficient interest to continue them.  Under the old system of pleadings, the defendant was entitled to plead the plaintiff’s supervening bankruptcy as a plea in abatement.  Since the Supreme Court of Judicature Act 1875, the cause of action does not abate but the action will be stayed or dismissed unless the trustee is willing to be substituted as plaintiff: see

Jackson v North Eastern Railway Co (1877) LR 5 Ch D 844.

In  Ord v Upton [2000] 1 All ER 193, Ch 352

the Court of Appeal quoted that passage and said:

“Section 436 is not in truth a definition of the word “property”. It only sets out what is included. As will appear later from the cases that have been decided over many years, actions which relate to a bankrupt’s personal reputation or body have not been considered to be property and therefore they do not vest in anybody other than the bankrupt. They relate solely to his body, mind and character and any damages recovered are compensation for damage to his body, mind and character as opposed to other causes of action which have been considered to be a right of property. Thus causes of action to recover damages for pain and suffering have been held not to vest in the trustee. That has led to a number of oddities. For example, the parties agree that if at the time of the bankruptcy, the bankrupt had in his bank a sum which included money paid as damages for a libel, that sum would vest in his trustee because the right to the money formed part of his estate and therefore was available to pay off the bankrupt’s creditors. That was to be contrasted with an action personal to the bankrupt, such as a libel action, which was not settled before the end of the bankruptcy. In such circumstances the cause of action would remain with the bankrupt as would any damages awarded after discharge. If a cause of action is not personal to the bankrupt, it vests in the trustee and therefore any damages awarded whether before or after the discharge will be available to discharge the bankrupt’s liabilities.”

In Ord the claim was a negligence action for personal injury, including special damages, and the issue was whether the existence of the special damages claim took the case out of the exception, meaning that it vested in the trustee, or remained wholly within the exception, or could be severed so that the general damages claim remained with the bankrupt but the special damages claim vested in the trustee.

The Court of Appeal held that that was a single, indivisible action and therefore it either all remained with the bankrupt or all vested in the trustee, and that it was a hybrid claim, in part personal in part relating to property.

The Court of Appeal held that the action vested in the trustee and to fall within the exception a claim must relation only to a cause of action personal to the bankrupt, adding “All causes of action which seek to recover property vest in the trustee whether or not they contain other heads of damage to which the bankrupt is entitled.”

In Beckham v Drake (1849) 11 HLC 1213 the Court of Exchequer Chamber repeatedly used the term “assignees” in relation to the passing of the action to the trustee, and the terms was also used in Stanton v Collier (1854) 23 LJQB 116  and subsequent cases.

In Ord the Court of Appeal undertook an extensive review of the authorities and concluded that although the whole of the action vested in the trustee the actual general damages belonged to the bankrupt and did not form part of the trustee’s fund, and thus the damages must be split between the trustee and the bankrupt.

Thus if the claim is for general damages only then the claim does not vest in the trustee at all and thus the original Conditional Fee Agreement continues in place and the base costs, together with a recoverable success fee in a pre 1 April 2013, can be recovered in the usual way.

If the claim includes any element of special damages then the whole claim passes to the trustee, although any general damages recovered will belong to the bankrupt.

If the claim passes to the trustee then the issue arises as to the validity of the original Conditional Fee Agreement, that is can it be validly assigned?

As set out above the courts frequently referred to the trustee as being an assignee of the action, which lends support to the idea of the Conditional Fee Agreement being assignable.

Clearly if the special damages form only a small part of the claim a policy decision needs to be made as to whether to jettison that part of the claim, leaving a general damages claim only which undoubtedly remains with the bankrupt personally and thus no issue arises as to the validity of the original CFA.

If that is not an option, then the Trustee should be strongly advised to have the original CFA assigned to him or her.

There is no authority in relation to assigning the Conditional Fee Agreement in such cases. However it seems to me that if the chose in action can be assigned, then the retainer, which is inevitably parasitic upon the chose, must also be capable of assignment.

It will virtually always by in the interests of the creditors for this to happen as it represents the best opportunity of maximising the recovery of assets and if the success fee remains recoverable from the other side, rather than being payable out of damages, then that represents significant extra assets for the creditors.

Section 304(1) of the Insolvency Act 1986 reads as follows:-

“(1)        Where on an application under this section the court is satisfied—

(a) that the trustee of a bankrupt’s estate has misapplied or retained, or become accountable for, any money or other property comprised in the bankrupt’s estate, or

(b) that a bankrupt’s estate has suffered any loss in consequence of any misfeasance or breach of fiduciary or other duty by a trustee of the estate in the carrying out of his functions,

the court may order the trustee, for the benefit of the estate, to repay, restore or account for money or other property (together with interest at such rate as the court thinks just)or, as the case may require, to pay such sum by way of compensation in respect of the misfeasance or breach of fiduciary or other duty as the court thinks just.”

It is clearly arguable that a failure by the Trustee to agree to the assignment of a Conditional Fee Agreement, especially a pre 1 April 2013 one, could result in a liability under section 304(1)(b).

Insolvency Direct Guidance

The Insolvency Direct Technical Manual gives guidance on some of the matters dealt with above.

31.9.41 Special damages and general damages

Often, in correspondence or papers relating to a claim, the official receiver will see reference to ‘special damages’ and ‘general damages’.

Generally speaking, for the purposes of deciding who owns which part of any claim,  special damages are ‘property’ which vest as part of a bankruptcy estate and general damages are ‘personal’ and thus remain in the ownership of the bankrupt.

31.9.42 Actions which involve damage to both the bankrupt’s person and property (amended July 2012)

Many events lead to damage to the bankrupt’s property and their person.  For example, a typical road accident may lead to an injury to the bankrupt’s body (for example, whiplash) and, also, damage to the bankrupt’s property (damage to the car) and/or the need to incur additional (and otherwise unnecessary) expenses (damage to the financial position – which is a property damage).  Following the relevant case law (see paragraph 31.9.37), this may cause a problem in deciding whether the action vests in the official receiver, as trustee, or not.

It used to be the case that such an action would be, effectively, ‘split’ between the personal damage and the property damage, and each claim pursued separately (one by the bankrupt and the other by his/her trustee) [note 11].  This way of deciding matters is not, however, considered good law any longer (see paragraph 31.9.43).

31.9.43 Current approach to actions which involve damage to both the bankrupt’s person and property – a ‘hybrid’ claim

It has been held that where a right of action involves damage to both the person and property of the bankrupt, there is only one cause of action, with different ‘heads’ of damage.  The right cannot be split –Stock v London Underground 30 July 1999 CA, Times August 13 1999 (see paragraph 31.9.44 for a limited exception to this principle).

This position was confirmed, and somewhat advanced upon, in Ord v Upton [2000] Ch 352 , where such an action (referred to in the judgment as a ‘hybrid’ claim) was held to be an action that would vest in a bankrupt’s estate, with any damages awarded for the personal element of the claim being held on a constructive trust (see paragraph 31.9.200) for the benefit of the bankrupt by his/her trustee.”

Hybrid Claims

Most personal injury claims will be hybrid claims. The Insolvency Direct Manual gives examples.

31.9.46 Examples of hybrid actions (amended July 2012)

Examples of hybrid actions are as follows:

  • An assault causing a bodily injury (personal) and damage to spectacles or clothing (property).
  • A car crash causing a broken ankle (personal) and the resultant need to pay a third party to carry out household tasks such as shopping/cleaning/gardening (property)
  • A car crash causing whiplash (personal), damage to a vehicle (property) and the need to use public transport at additional cost whilst the car was being repaired (property).
  • A fall causing a strained back (personal), the need to spend money travelling to the hospital (property) and to pay for a private physiotherapist (property).
  • Medical negligence leading to an arm injury (personal) and loss of earnings (property).
  • An assault on a taxi driver causing a bodily injury (personal), post-traumatic stress (personal), damage to the taxi (property) and an inability to work (loss of earnings – property).
  • A fall in the street leading to a broken arm (personal) and damage to a laptop computer (property).
  • A wrongful arrest (personal) where the bankrupt’s front door was destroyed in the arrest (property).

An action would be a hybrid action even if the property damages were directly connected to the personal damages – as in the second and fourth examples above.

31.9.47 Getting the bankrupt’s advisors to agree to the position in a hybrid claim

Where the official receiver is dealing with a ‘hybrid’ claim he/she should, as a first step, write to the bankrupt’s advisors, setting out the position outlined in paragraphs 31.9.42 to 31.9.45, asking them to form a view on whether the claim vests in the trustee of the bankruptcy estate, or not. Ideally, the position should be agreed.

The official receiver may use the letter attached at Annex C to this chapter for this purpose.

It is likely that, having read the cases referred to in the letter, the advisors will form the view that the actions vests in him/her as trustee.  If they do not, the matter should be referred to Technical Section.”

Fatal Accidents Act 1976

These are also covered and may be hybrid claims.

“31.9.67 Claims under the Fatal Accidents Act 1976

Where a death is caused by a wrongful act or neglect such as would (if death had not ensued) have entitled the deceased to bring an action for damages, the person liable shall still be liable to an action for damages despite the death of the person [note 30].  Such an action is for the benefit of the dependants of the person whose death was caused [note 31].

An action may include (or consist entirely) of a claim for damages for bereavement [note 32].  A claim which is entirely for bereavement is personal to the bankrupt and would not form part of the bankruptcy estate.  Where a claim is partly in respect of bereavement and partly in respect of a claim for financial losses resulting from the death, it would be a hybrid claim (see paragraph 31.9.43) and would vest in the official receiver, as trustee.”

Carers

Where a carer is made bankrupt the trustee may claim that part of the damages which is technically held on trust of the carer, even where the carer does not want the damages.

Consequently it is important to identify precisely what the care element of what any settlement is.

Rectifying the Situation

In Eaton v Mitchells and Butler plc [2015] EW Misc B26 (CC) 30 April 2015, Wrexham County Court, Judge Keyser QC

held than an action started or continued whilst the claimant was a bankrupt was not a nullity but would require immediate rectification.

If the claimant had known that something was amiss then bringing or continuing with the action may have been an abuse of process.

The action was adjourned with the judge declaring that the continued conduct of the proceedings would be an abuse of process, leading to the claim being struck out, unless the irregularity was remedied within three months.

The irregularity was that the cause of action was not vested in the person pursuing the claim. This could be remedied in one of three ways:-

  • the claimant’s bankruptcy shall have been annulled and the cause of action against the defendant re-vested in him; or
  • the claimant’s trustee in bankruptcy shall have filed an application notice for an order substituting him as claimant; or
  • the claimant shall have taken an assignment of the cause of action and shall have filed an application notice for an order giving him permission to amend the claim form and/or particulars of claim to plead his right by assignment.

Eaton is a long and helpful judgment which examines the authorities in relation to bankruptcy and personal injury cases, as well as the situation where a potential personal injury claimant dies without making a will.

This claim for personal injury and consequential loss proceeded to trial on liability. The claimant won and interim payments on account of damages were made, both voluntarily and pursuant to court orders, and directions were given for the trial on quantum of damages.

Both sides knew of the bankruptcy.

Only then did it occur to anyone that there might be a problem: between the date of the accident and proceedings being issued the claim had been made bankrupt and discharged from that bankruptcy, but that meant that the cause of action had vested in his trustee in bankruptcy. As the judge here said:-

“It is remarkable that the case had proceeded all the way to a two-day trial, conducted (as I am told) by leading counsel for the claimant, without the point ever being noticed.”

The claim was brought by the claimant and the trustee was never joined as a party and did not assign the cause of action to the claimant.

The defendant claimed that the proceedings were a nullity, a concept rejected by the judge.

The claimant said that the proceedings could be saved by an annulment of the bankruptcy, for which he had applied, or by the assignment of the cause of action, or by the joinder of the trustee in bankruptcy as a claimant in substitution for the present claimant.

At paragraph 4 the judge set out the background to the case, which is also a helpful summary of the law:-

“4.          On 18 August 2007 the claimant suffered serious injuries in an accident that occurred, as has been found and as I shall suppose, by reason of the negligence of the defendant’s servants or agents. On 7 November 2007 the claimant was made bankrupt upon his own petition; the order recites that the petition was presented that same day (cf. rule 6.42 of the Insolvency Rules 1986). On 19 December 2007 the Official Receiver was appointed as trustee in bankruptcy upon the filing of the decision not to call a creditors’ meeting (see section 293(3) of the Insolvency Act 1986). Accordingly, the claimant’s estate then vested in the Official Receiver as trustee (see section 306). By section 283(1) the estate comprised all property belonging to or vested in the claimant at the commencement of the bankruptcy. That property included his right of action against the defendant, even though that is a so-called hybrid right, because that part of the right of action that related to physical injury was personal to the claimant and would be held by the trustee for the benefit of the claimant: see section 436 of the Act; see also Heath v. Tang [1993] 1 W.L.R. 1421 (CA), Ord v. Upton [2000] Ch. 352 (CA), and Hayes v. Butters [2014] E.W.H.C. 4557 Ch. On 25 April 2008 the claimant was discharged from his bankruptcy pursuant to section 279(2), now repealed, which provided for discharge before the standard 12-month period had elapsed.”

Proceedings were commenced on 12 August 2010.

The judge rejected the concept that the proceedings were a nullity holding that the decision by the Court of Appeal in

Ingall v Moran [1944] 1 KB 160,

relating to administrators acting without power, followed by the Court Appeal in

Millburn-Snell and others v Evans [2011] EWCA Civ 577

on virtually identical facts to Ingall v Moran was per incuriam, that is wrongly decided. The judge examined the principles upon which a court may find a decision to be per incuriam, as set out in Morelle Ltd v Wakeling [1955] 2 QB 379

subsequently cited with approval by the Court of Appeal in

Lloyd v London Borough of Lewisham [2013] EWCA Civ 1923.

In Smith v Henniker-Major & Co [2000] Ch 182

the Chancery Division of the High Court held that Ingall v Moran “described (while still extant) as a blot on English jurisprudence”, had been overturned by section 35(7) of the Limitation Act 1980 and CPR 17.4(4) and “so far as it embodied any larger principle it has been overtaken by the modern approach as described by Evans LJ in Hendry v Chartsearch Ltd [1998] CLC 1382, para 23. In that case this court disapproved the more rigid approach adopted in Eshelby v Federated European Bank Ltd [1932] 1 KB 254.”

This modern line was also adopted by the Court of Appeal in

Nelson v Nelson [1997] 1 WRL 233 and in

Pickthall v Hill Dickinson LLP [2009] EWCA Civ 543

the Court of Appeal also found a potential abuse of process, not a nullity, when a discharged bankrupt brought a professional negligence claim against solicitors.

The Court of Appeal specifically approved the practical approach outlined in Smith v Henniker-Major.

In Haq v Singh [2001] EWCA Civ 957

the claimant, an undischarged bankrupt, commenced a hybrid claim and took an assignment of the cause of action from the trustee to cure her lack of standing, as a discharged bankrupt, to bring the claim. The judge held that that assignment did indeed cure the defect.

The matter went to the Court of Appeal only on a limitation point; it was accepted that the original proceedings were not a nullity. The Court of Appeal also said, obiter, that CPR 17.4(4) had removed the effect of Ingall v Moran.

CPR 17.4, so far as is relevant:-

“(1)        This rule applies where –

(a)          a party applies to amend his statement of case in one of the ways mentioned in this rule; and

(b)          a period of limitation has expired”

“(4)        The court may allow an amendment to alter the capacity in which a party claims if the new capacity is one which that party had when the proceedings started or has since acquired.”

In Pathania v Adedji [2014] EWCA Civ 681

the claimant had the right to commence the proceedings but become bankrupt after they had been commenced and before trial. The Court of Appeal said:-

“15.        Where a bankrupt is commencing or pursuing a claim which he knows he does not have, the abuse of process in commencing or pursuing that claim is obvious. No claimant is entitled to sue on a right which he knows belongs to someone else. The abuse lies in knowingly pursuing a claim which, as presently constituted, is bound to fail. The abuse does, however, depend on actual knowledge of the lack of title to the cause of action, not on what he or she ought to have known.

  1. Nevertheless, where an action is commenced or continued after the cause of action has vested in a trustee in bankruptcy, the action does not abate and the position is capable of being regularised by the joinder of the trustee or by the taking of an assignment from him. Whether the court will permit that to happen will involve an exercise of discretion. It will be necessary to have regard to the interests of those likely to be affected, including the creditors in the bankruptcy. The court would be likely to stay the action until the position in the bankruptcy is clarified.”

In Munday v Hilburn [2014] EWHC 4496 (Ch)

the Chancery Division of the High Court held that the lack of a cause of action on the part of the claimant when the proceedings were commenced did not make the proceedings a nullity or incurably bad.

Having decided that proceedings by a bankrupt are not a nullity the court then considered the issue of whether it was an abuse of process warranting striking out. It quoted from Munday:-

“It follows, in my judgment, that there was in fact no abuse of process established either in the claimants issuing these proceedings or in continuing these proceedings. I think it is important to add that this does not mean that the Court is powerless to stop claims going forward where a claimant in fact has no standing but due to erroneous advice of his lawyers wrongly believes he does. In order to succeed at trial, a claimant must, of course, not only show that there is a good claim vested in someone but that it is vested in him. If, therefore, it can be shown that the claim, whether good or bad, is incontrovertibly not vested in him and for that reason the action is doomed to failure, whatever its merits, the Court must be in a position to stop the claim proceeding to trial. I do not see any procedural difficulty in this. The defendant in an appropriate case can apply to strike the claim out on the basis that the statement of case discloses no reasonable cause of action, see CPR rule 3.4(2)(a), or can apply for what is often called reverse summary judgment, see CPR Part 24, or can apply to have the matter determined as a preliminary issue. All that I have decided is that he cannot strike out on the basis that there is an abuse of the Pickthall type unless he establishes that the claimant either brought or continued the action knowing that the cause of action was not vested in him. Of course, if the Court rules, despite the claimant’s advisers’ best endeavours, that the cause of action is not vested in him, then it would constitute an abuse for the claimant to continue with the action thereafter at any rate if the position could not be cured.” (Italics of the judge in Eaton).

In BPE Solicitors and Another v Gabriel [2015] UKSC 39

the Supreme Court held that a Trustee in Bankruptcy is not personally liable for the costs of the court below merely by virtue of having adopted an appeal as Trustee in Bankruptcy.
The ordinary rule is that a Trustee in Bankruptcy is treated as a party to any legal proceedings which he commences or adopts, and is personally liable for any costs which may be awarded to the other side, subject to a right of indemnity against the insolvent estate to the full extent of the assets.

This ruling was made at a Directions Hearing pending an appeal and was vital as to the trustee’s decision as to whether to adopt the current appeal.

Here Mr Gabriel recovered £200,000.00 in negligence against BPE Solicitors, plus costs. The Court of Appeal reduced that sum to £2.00 and ordered Mr Gabriel to pay BPE’s costs; BPE put in a bill for £469,170.60.

Mr Gabriel became bankrupt and a Trustee in Bankruptcy was appointed and had to decide whether to adopt Mr Gabriel’s appeal to the Supreme Court against the decision of the Court of Appeal.

If the appeal was not pursued then unsecured creditors were likely to receive between 3p and 5p in the pound; if it was successfully pursued then that figure would rise to between 23p and 25p in the pound.

If the appeal was pursued and failed then the impact on creditors would depend on the trustee’s liability for costs. If the trustee’s liability for BPE’s costs is limited to the costs of the appeal to the Supreme Court then the dividend would be reduced subject to ATE insurance. If the liability extended to the costs of the courts below then they would exceed the entire assets of the estate leaving the creditors with no dividend and the trustee personally liable for the balance of the costs.

Nothing in the decision effects the discretion of the court to make such an order. All the decision means is that the Trustee in Bankruptcy is not liable for the costs below simply by virtue only of having adopted the appeal.

Bidding for cases

The Official Receiver, as liquidator or trustee has the action vested in that office and is free to continue the conduct of the case or to assign the cause of action.

The following are general principles that the Official Receiver should take into account:-

  • assignment should not be made without testing the market and this can include offering settlement to the defendant;

 

  • assignment may be barred by terms contained in the original contract and assignment should not be allowed to open the defendant up to vexatious litigation;

 

  • frivolous claims, that is ones that are unlikely to succeed, should not be assigned;

 

  • assignment should be absolute if the liquidator/trustee is to avoid being made a party to any judgment;

 

  • the liquidator/trustee is not required to assign a right of action when the only offer received from the potential assignee is derisory.

 

Some of these principles require a careful balancing of competing interests and it is likely that legal advice will be required to avoid the risk of an action being brought against the official receiver.

Bizarrely the action can be assigned to the other party, that is the defendant, and that will effectively bring the action to an end – see Official Receiver v Davis [1998] BPIR 771 but the assignment must not be used as a tool to stifle the claim – see Shepherd v Legal Services Commission [2003] BCC 728.

If the offer from the defendant is the best offer then that may be accepted but not before the value of any other offer from any other potential assignee, particularly a bankrupt, have been considered.

I am grateful to Gordon Exall for some of the material in this piece.

 

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Written by kerryunderwood

October 26, 2015 at 9:51 am

Posted in Uncategorized

3 Responses

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  1. […] Bankrupts and Civil and Personal Injury Proceedings […]

    • Please contact me on 01442 430900 or kerry.underwood@lawabroad.co.uk and we can discuss my firm’s fees for advising on this matter. I am sure you realize that the blog is just that and your matter is clearly a complex issue on a specific case. A key issue will be QOCS – my book is now out – £30 including p&p and I am conducting a series of courses on the subject – please visit my blog Kerry’s 60th birthday tour.
      Kind regards
      Kerry

      kerryunderwood

      February 19, 2016 at 1:45 pm

  2. Hi there, I have a case where the cliamant issues proceedings in a pi case and i represent the defendant who instructs me after there is an oral hearing (after default judgement is granted)on quantum. I apply to set aside on basis wrongly served at wrong address. Lost my application in the county court appealed and I have a hearing shortly with leave granted to appeal. I have just been told the claimant is bankrupt after the judgement. The claimant had ate policy which didn’t cover him for an appeal. Not sure about our appeal though. The question is this if we win the appeal its unlikely we can get our costs against the bankrupt then? what happens if the court orders a retrial? It seems the claimant has no risks at all as to paying a costs order or is this an abuse of process?

    stephen samuel

    February 19, 2016 at 1:20 pm


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