Donaldson v O'Sullivan

The court has jurisdiction to appoint a replacement trustee in bankruptcy after removing the former trustee, including through a block-transfer order. That jurisdiction arises from the court’s general powers of control under sections 303(2) and 363(1) of the Insolvency Act 1986. Section 292(1) is not an exhaustive code, and section 297 concerns special cases of appointment rather than the filling of vacancies. Rule 6.132(5) assumes, but does not itself confer, the appointment power. A block transfer is justified where the statutory resignation procedure would serve no useful purpose and creditors’ rights to object are protected.

The applicant, a discharged bankrupt, sought to set aside the part of a block-transfer order appointing the respondent as her trustee in bankruptcy in place of the retiring trustee. The order covered 87 bankruptcies and other insolvency appointments. The applicant accepted that the former trustee’s removal was not directly challenged, but argued that the court lacked jurisdiction to appoint a replacement trustee outside the cases specified in sections 292 and 297 of the Insolvency Act 1986. The central issue was whether the appointment could validly be made under the court’s general supervisory powers and the block-transfer procedure.

1. The application was dismissed. The court had jurisdiction to appoint the respondent as replacement trustee in bankruptcy under the block-transfer order.
2. The removal of the former trustee under section 298(1) was valid. The test for removing a trustee at his request is whether a creditors’ meeting would serve any useful purpose. Where creditors would have no real choice but to accept the resignation, the court may remove the trustee without requiring the statutory resignation procedure.
3. Section 292(1) gives a general statement of the usual methods by which a trustee may be appointed. It is not expressed to be exhaustive. Section 297 deals with special cases, mainly involving original appointments, and does not address the filling of a vacancy after removal.
4. Rule 6.132(5) does not confer the appointment power. It assumes that such a power exists and provides for matters connected with removal. Its reference to rule 6.121 imports the appointment procedure and does not restrict the underlying power to appointments under section 297(4) or (5).
5. Section 303(2), headed general control of trustee by court, permits directions concerning any particular matter arising under the bankruptcy. That broad power includes directions for appointing a successor where a trustee relinquishes office. Section 363(1) is a sweeping-up provision giving the court overarching control to ensure that bankruptcies are properly and fairly administered. It likewise supports the appointment of a permanent substitute.
6. The block-transfer procedure is justified by administrative convenience where requiring separate creditors’ meetings would cause expense, delay and disruption without serving a useful purpose. The court must nevertheless safeguard creditors’ opportunity to object.
7. The reference in the order to rule 6.132(5) could, if necessary, be corrected as a formal defect under rule 7.55. The appointment was valid under sections 303(2) and/or 363(1) of the Act.