Barker v Baxendale-Walker

The court has wide powers to control a bankruptcy and may appoint or replace trustees where that is just, convenient and beneficial to creditors. The automatic appointment of the Official Receiver under the Insolvency Act 1986 does not exclude the court’s power under section 363 or its inherent jurisdiction to appoint other qualified trustees. The court may appoint former interim receivers where their prior investigations, independence and knowledge will protect the estate and save time and costs. The power should be exercised cautiously, but urgency, non-cooperation, threatened dissipation of assets and the interests of creditors may justify immediate appointment. An adjournment should be refused where no useful evidence or proper reason is identified and delay would prejudice the administration of the bankruptcy.

The applicant had petitioned for the respondent’s bankruptcy and had previously obtained the appointment of joint interim receivers because of concerns about asset dissipation, concealed assets, non-cooperation and abusive litigation. The bankruptcy order subsequently appointed the Official Receiver automatically under section 291A of the Insolvency Act 1986. An expected Secretary of State appointment of the interim receivers did not occur.

The applicant therefore applied under section 375 to vary the bankruptcy order and appoint the interim receivers as joint trustees in bankruptcy, replacing the Official Receiver. Certain creditors sought an adjournment and challenged the court’s jurisdiction. The central issues were whether the court could make the appointment under section 363 or its inherent jurisdiction, and whether the application should be adjourned.

1. Adjournment. The application to adjourn was refused. The opposing creditors identified no specific evidence that would assist determination of the appointment issue. Delay would create uncertainty and would not serve the interests of the creditors as a class.
2. Statutory jurisdiction. Section 291A automatically appoints the Official Receiver on the making of a bankruptcy order unless the court appoints another person in the specified circumstances. It does not make the statutory powers of appointment exhaustive or remove the court’s powers under sections 292 and 363. The reasoning in Donaldson v O’Sullivan remained applicable.
3. Control of bankruptcy. Section 363 gives the court very wide powers over a bankruptcy, including power to make orders which are just and convenient in controlling the bankruptcy process. The court may appoint trustees where the statutory requirements are satisfied and the appointment benefits the estate and creditors as a class.
4. Inherent jurisdiction. Alternatively, the court had inherent jurisdiction to appoint the interim receivers. The detailed insolvency legislation was not a complete code, and nothing in it prohibited the appointment of former interim receivers as trustees. The caution expressed in Re Lehman Bros International (Europe) (in administration)(No 4) did not prevent the exercise of that jurisdiction.
5. Application of discretion. The relevant circumstances included the interim receivers’ qualifications and consent, their prior investigations and useful knowledge, the risk of asset dissipation, the bankrupt’s non-cooperation with HMRC, evidence of deleted or inaccessible electronic evidence, and the need to protect the estate. Appointment was proportionate, urgent and in the interests of justice.
6. The court appointed the interim receivers as trustees in bankruptcy and ordered the removal of the Official Receiver. Time for service was abridged. Permission to appeal was refused because there was no real prospect of success and no other compelling reason for an appeal.

The judgment records the earlier bankruptcy proceedings and the automatic appointment of the Official Receiver on 11 July 2018. This was a first-instance decision on the application to vary that bankruptcy order and appoint replacement trustees.