Shepherd v Official Receiver

A challenge to a trustee in bankruptcy’s refusal to investigate or pursue an alleged claim is properly made under section 303 of the Insolvency Act 1986. Rule 7.60 of the Insolvency Rules 1986 and CPR 18.1 do not apply where no proceedings are on foot. In any event, a court will not require information that would serve no useful purpose.

Delay is material. A decision cannot ordinarily be reopened years later by presenting the same points as a fresh decision. After closure of the file and the trustee’s release, intervention would require an exceptional new or surprising development. Where the trustee acts on advice that the underlying claim has no prospect of success, the stringent threshold for intervention is not met without evidence that the advice is inadequate or unsatisfactory.

Mr Shepherd was adjudged bankrupt in 2002 following costs orders made in litigation against the Legal Services Commission. The Official Receiver, acting as trustee in bankruptcy, declined to pursue an alleged claim against the Commission and later reaffirmed that decision.

Mr Shepherd applied to the High Court under section 303 of the Insolvency Act 1986, together with requests under rule 7.60 of the Insolvency Rules 1986 and CPR 18.1 for further reasons and information. Mr Gabriel Moss QC dismissed the application, relying on delay, the absence of new developments and the lack of evidence satisfying the stringent test for intervention. The central issue was whether the application disclosed any real prospect of a different result.

1. Outcome. Lord Justice Chadwick refused the renewed application for permission to appeal. The appeal would be hopeless and the judge could not reasonably have reached any other decision.
2. Proper procedural route. Although the High Court had not expressly addressed rule 7.60 of the Insolvency Rules 1986 or CPR 18.1, the application was properly treated as a challenge under section 303 of the Insolvency Act 1986 to the Official Receiver’s refusal to investigate further or provide further reasons. There were no insolvency or other proceedings on foot to which rule 7.60 or CPR 18.1 could apply.
3. Delay and fresh material. It was unreasonable to wait until 2006 to challenge the 2002 decision, particularly after the trustee had closed his file and obtained his release. The later correspondence did not identify any new or surprising fact or development. It merely sought to rerun matters available in 2002 and 2003. The 2006 resistance could be treated as a fresh decision, but it did not provide a proper basis for intervention.
4. Merits and trustee’s discretion. The Official Receiver had acted on advice that the alleged claim against the Legal Services Commission had no prospect of success. That advice could not be disregarded as inadequate or unsatisfactory. Mr Shepherd had produced no evidence capable of satisfying the stringent test for judicial interference with the trustee’s decision.
5. Alternative conclusion. Even if rule 7.60 or CPR 18.1 applied, the court would not order information whose provision would serve no useful purpose. The application was therefore refused.

1. Court of Appeal (Civil Division). On 7 June 2007, Lord Justice Chadwick refused the renewed application for permission to appeal. [2007] EWCA Civ 606
2. High Court, Chancery Division. On 7 November 2006, Mr Gabriel Moss QC dismissed the application challenging the Official Receiver’s decision under section 303 of the Insolvency Act 1986.