Brook v Reed

The appeal concerned the proper approach to fixing and challenging the costs and remuneration of a trustee in bankruptcy. The court reaffirmed that the trustee is a fiduciary with no entitlement to remuneration except as permitted by the Insolvency Rules and that the onus lies on the trustee to justify any claim for remuneration. The Practice Statement: The Fixing and Approval of the Remuneration of Appointees (2004) provides authoritative guiding principles (including proportionality, the requirement to reward value not merely cost, and the duty to provide proportionate particulars) and should be applied unless it would be wrong in principle to do so.

The Court of Appeal held that, although the courts below had not expressly referred to the Practice Statement, Judge Behrens had applied the relevant criteria (value of services, proportionality, fiduciary duties and scrutiny of time claimed) and reached a result not materially different from that which would have followed had the Practice Statement been expressly applied. The appeal was therefore dismissed.

This was an appeal by the bankrupt, Helen Brook, against a decision reducing the trustee in bankruptcy's claimed costs and the trustee's solicitors' costs. The trustee, Nicholas Reed, had been appointed after the bankrupt was made bankrupt by HM Revenue & Customs. The estate comprised a small retail business sold as a going concern for £10,000 and the bankrupt's half-share in the matrimonial home; there were few creditors and a substantial surplus was likely. The creditors' meeting had fixed the trustee's basis of remuneration as a time basis.

The proceedings traversed: an initial county court hearing before District Judge Barraclough which allowed the trustee's and solicitors' claimed costs in full; an appeal to His Honour Judge Behrens sitting with two assessors who concluded the claimed sums were disproportionate and reduced the trustee's remuneration (excluding disbursements) and the solicitors' costs substantially; and a second appeal to the Court of Appeal, with permission limited to the ground that the trustee’s remuneration as assessed by Judge Behrens remained disproportionately high in relation to the circumstances of the bankruptcy and had not had proper regard to the Practice Statement (2004).

The issues framed were whether the Practice Statement applied and, if so, whether Judge Behrens had erred in principle in his approach to the assessment of the trustee's remuneration and in allowing the sums he did. The Court of Appeal reviewed the statutory and judicial framework (Insolvency Rules, relevant authorities including Mirror Group Newspapers plc v Maxwell (No 2) and subsequent guidance) and held that the Practice Statement embodies the correct guiding principles. The court nevertheless concluded that Judge Behrens had in substance applied those principles—examining proportionality, the value of services rendered, the trustee's fiduciary duty and the relevance of time spent (as cost rather than measure of value)—and that the reductions he made were justified on the facts, including the bankrupt's conduct which had increased costs. The omission to cite the Practice Statement expressly below was not fatal and would not have produced a materially different result. The appeal was therefore dismissed.

The appeal is dismissed. The Court held that the Practice Statement (2004) represents the correct guiding principles for fixing or challenging the remuneration of office-holders, but that Judge Behrens had in substance applied those principles (value of service, proportionality, fiduciary duties and appropriate scrutiny of time claimed). The reductions he made were justified on the facts and the omission below to refer expressly to the Practice Statement did not render his decision wrong in law.

County Court (Huddersfield) before District Judge Barraclough: trustee's and solicitors' claimed costs were allowed in full (29 December 2008). Appeal to the High Court (Chancery Division, Leeds District Registry) before HH Judge Behrens with two assessors: trustee's remuneration reduced to £9,929.75 (excluding disbursements) and solicitors' costs reduced to £10,038.50 (30 April 2009). Permission to appeal to the Court of Appeal was given by Lloyd LJ limited to the proportionality ground; appeal to the Court of Appeal disposed of by this judgment [2011] EWCA Civ 331 (25 March 2011).