Green v Bramston & Ors

A court may make a Berkeley Applegate allowance where work or expenditure has preserved, realised or administered property beneficially owned by another, and the work has substantially benefited that property. The allowance is discretionary and should be exercised sparingly. It may cover reasonable time reasonably spent and expenses reasonably incurred in obtaining possession of and disposing of trust property. It should not ordinarily compensate work undertaken to advance, or consider advancing, an interest adverse to the beneficiary’s own interest. The allowance creates a proprietary priority over the beneficiary’s equitable interest, rather than a personal debt provable in the beneficiary’s liquidation.

The applicant trustee in bankruptcy had realised three properties which were registered in the bankrupt’s name but beneficially owned by Kingshouse Developments Ltd. The properties were outside the bankruptcy estate, although the trustee’s work had benefited the company.

The company’s liquidator accepted in principle that an allowance could be made under the Berkeley Applegate jurisdiction, but argued that the trustee’s claim had been compromised by a settlement deed, that the allowance should exclude work concerning beneficial ownership, and that any award should rank only as an unsecured claim. The central issues were the effect of the settlement deed, the proper scope and assessment of the allowance, and its priority in the liquidation.

1. Settlement deed. The trustee’s personal claim for a Berkeley Applegate allowance was not compromised. Properly construed, the settlement clause applied to claims subsisting between the identified parties and vested in, or otherwise affecting, the bankruptcy estate. The trustee’s allowance claim arose from his own subsequent work and was never a claim subsisting between the bankrupt and the company.
2. Scope. The jurisdiction is discretionary and is not confined by precise rules. An allowance was appropriate for reasonable time reasonably spent and expenses reasonably incurred in obtaining possession of and disposing of all three properties. The sale of the first property benefited the company by discharging secured liabilities, even though no net proceeds were paid over.
3. The allowance should not include the trustee’s investigation and negotiations concerning whether the bankrupt, rather than the company, beneficially owned the properties. That work pursued, or considered pursuing, an interest adverse to the company. It was not work which would otherwise have fallen to the liquidator.
4. The court declined to impose the realisation scale in Schedule 6 to the Insolvency Rules 1986. The award should reflect the reasonable time and expenses involved, including the additional work required by hostile possession proceedings.
5. Priority. The allowance does not create a personal claim against the beneficiary. It subjects the beneficiary’s equitable interest to an obligation to pay the amount allowed and creates a proprietary interest ranking ahead of that interest. The liquidator therefore receives only the property or proceeds remaining after satisfaction of the award, with no unsecured proof for any shortfall.

First-instance decision. No prior decision or appeal is stated in the judgment.