Power v Brown & Ors

A bankrupt has no standing to pursue an appeal concerning property or causes of action vested in the trustee in bankruptcy. A disposition made between presentation of a bankruptcy petition and the bankruptcy order is void under the Insolvency Act 1986, and that voidness may be relied upon by persons other than the trustee. A trustee’s assignment of estate property is a sale where it involves the passing of property for consideration, including mixed cash and non-cash consideration. The statutory requirement concerning future consideration does not apply where there is an immediate cash element. A challenge to an assignment which could and should have been raised during earlier litigation may be an abuse of process.

The appellant appealed from District Judge Beck’s dismissal of his application to set aside an assignment by the trustee in bankruptcy of his wife, Mary Theresa Power, to the third respondent. The assignment concerned causes of action and property rights which enabled the third respondent to pursue earlier proceedings.

The appellant also applied to validate dispositions made to an Irish company shortly before and shortly after his own bankruptcy order. The central issues were whether he had standing, whether the dispositions were void under section 284 of the Insolvency Act 1986, whether validation was appropriate, and whether the trustee’s assignment required consent under Schedule 5.

1. Standing. The appeal was dismissed. Under Heath v Tang [1993] 1 WLR 1421, a bankrupt cannot pursue an appeal relating to assets vested in the trustee in bankruptcy. The appellant’s alleged rights and his right to appeal had passed to his trustee. The purported assignments to Base were a manoeuvre to warehouse those rights and were void under section 284 of the Insolvency Act 1986. The respondents could rely on that voidness.
2. Validation. The application to validate the disposition was rejected. The alleged trust was unsupported, incredible and an abuse of process. It had already been rejected in related proceedings, and the appellant’s attempt to rely on it again was contrary to the approach in Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1. The court also considered that the purported transferee was merely a nominee, so that the beneficial interest had never left the appellant’s estate.
3. Merits. The appeal was a review, not a rehearing. District Judge Beck was entitled to find that the trustee had acted reasonably in accepting the only available offer within the strict timetable imposed by the court. Any challenge to the assignment should have been raised during the earlier five-day trial. Raising it only after losing that trial was an abuse of process.
4. Trustee’s powers. The assignment was a sale within paragraph 9 of Part II of Schedule 5 to the Insolvency Act 1986. The consideration included cash and therefore paragraph 3 of Part I, concerning consideration payable wholly in the future, did not apply. No consent of the creditors’ committee or court was required. Even if consent had been required, the assignment would have been voidable rather than void, following Weddell v Pearce & Major [1988] 1 Ch 26.

The validation application was dismissed and the appeal was dismissed. Consequential matters, including costs and any application for permission to appeal, were to be dealt with by written submissions.

• High Court (Chancery Division): appeal from District Judge Beck’s decision in the Guildford County Court. The appeal was dismissed and the validation application was rejected.