Salliss v Hunt & Ors

For annulment of a bankruptcy under section 282(1)(b) of the Insolvency Act 1986, an unproved creditor’s debt need not be paid or secured where the creditor, fully informed of the proposed annulment, has made an informed decision not to prove. The court must assess a trustee’s remuneration by applying the relevant guiding principles, including the value of the service, fairness, proportionality and timing. A change from a creditors-approved remuneration basis should ordinarily be sought prospectively when the need becomes apparent. A retrospective application made after the work is complete requires proper justification.

The bankrupt appealed against an order of Deputy Registrar Garwood which dismissed his application to annul his bankruptcy, changed the trustee’s remuneration basis from a percentage of realisations to time properly spent, and granted an application concerning two pension plans. The bankruptcy dated from 1993. The proved creditors had been paid, while Barclays, the petitioning creditor, had never proved and had informed the trustee that it would not make a claim. The dispute concerned whether Barclays’ unproved debt and the trustee’s claimed fees and expenses prevented annulment under section 282(1)(b) of the Insolvency Act 1986, and whether the remuneration basis could be changed retrospectively.

1. Appeal partly allowed. The order granting the Pensions Application was upheld. The decisions on annulment and remuneration were set aside and remitted to a different Registrar, with annulment to be considered after remuneration.
2. Barclays’ debt was irrelevant to the annulment application. Barclays had always been aware of the bankruptcy, had been specifically asked about proving, and had made an informed commercial decision not to prove then or in the future. The court therefore had no policy or principled reason to require payment of that debt as a condition of annulment. Gill v Quinn [2004] EWHC 883 (Ch) was distinguishable because it concerned numerous unpaid and untraceable creditors. The approach was supported by analogy with Official Receiver v McKay [2009] EWCA Civ 467.
3. An application under rule 6.141 to change a trustee’s remuneration basis is subject to Part Five of the 2012 Practice Direction. The court must consider each guiding principle and all relevant circumstances. Remuneration should reflect the value of the service, be fair and reasonable, and be proportionate to the work and the assets and liabilities involved. Time spent is not, by itself, determinative.
4. The starting question is what has changed since the creditors selected the original basis and whether the change was unforeseen. The limited nature of the assets was known when the percentage basis was adopted. The court also had to consider the trustees’ prior acceptance of that basis, the value of the pension assets, the reasonableness of work undertaken in the litigation, and the absence of evidence explaining the delay in seeking a change.
5. An application to change remuneration should, so far as practicable, be prospective. A trustee should not ordinarily wait until the work is complete and then seek a retrospective change as a fait accompli without a good reason. The reasonableness and proportionality of the parties’ positions and the expenses of the applications required fresh determination.

• High Court (Chancery Division): On appeal from Deputy Registrar Garwood’s order dated 25 March 2013, the court upheld the Pensions Application, set aside the decisions on annulment and remuneration, and remitted those applications to another Registrar.