Singh v Hicken

Permission under rule 18.35 of the Insolvency Rules (England and Wales) 2016 involves two distinct questions. First, the bankrupt must show that, leaving the challenged remuneration and expenses out of account, there is or is likely to be a surplus for the bankrupt. Secondly, the court has a broad discretion whether permission is appropriate in all the circumstances. No prescriptive merits test applies.

At the permission stage the court may make a high-level assessment of whether challenging the office-holder’s charges is likely to benefit the bankrupt. It need not conduct a detailed assessment by applying the substantive guiding principles governing remuneration applications. The applicant bears the continuing burden of persuading the court that permission should be granted.

Kulvern Singh, who had been made bankrupt, applied under rule 18.35 of the Insolvency Rules (England and Wales) 2016 for permission to challenge the remuneration and expenses charged by the trustee in bankruptcy and his solicitors. The County Court at Luton, by an order of DDJ Lewis dated 19 March 2018, refused permission.

The estimated liabilities and costs substantially exceeded the available assets. Mr Singh argued that the court had applied the wrong threshold, relied on later payment-in-full statements, and failed to apply the guiding principles governing remuneration applications. The central issues were the construction of rule 18.35(4) and (5), the proper approach to the permission discretion, and whether the first-instance decision was flawed.

1. The appeal was dismissed. The order refusing permission under rule 18.35 was within the generous ambit of the County Court’s discretion. The respondent’s costs were ordered to be costs in the bankruptcy estate.
2. Rule 18.35(4) creates a threshold condition. The bankrupt must show that, excluding the remuneration or expenses challenged, there is or is likely to be a surplus of assets to which the bankrupt would be entitled. This requires comparison of the assets with the unchallenged liabilities, costs and expenses. It does not require the court to predict whether the proposed challenge would succeed.
3. If the threshold is met, rule 18.35(5) confers a broad and open-textured discretion. The court should grant permission only if it is appropriate having regard to all relevant circumstances. The rule does not prescribe a test equivalent to the real prospect of success test for permission to appeal under CPR r 52.6(1)(a).
4. The court may consider whether the proposed challenge is likely to benefit the bankrupt. That assessment is necessarily high-level. The court may consider the likely scale of any reduction, the history and complexity of the bankruptcy, the conduct of the parties, and the resources that a detailed assessment would consume. It is not the only relevant consideration, and the court must not conduct a line-by-line assessment at the permission stage.
5. The guiding principles in Part Six of the Insolvency Practice Direction, including justification, resolving doubt against the appointee and proportionality, govern the substantive remuneration application. They do not require the court to determine the merits of that application when deciding whether to grant permission.
6. The County Court was entitled to use the most up-to-date payment-in-full statement and to take account of the whole history of the bankruptcy. The later figures were supported by itemised timesheets. The court was entitled to conclude that a reduction sufficient to produce a surplus for the bankrupt was unlikely.

• High Court (Chancery Division): The appeal from the order of DDJ Lewis dated 19 March 2018 was dismissed.
• County Court at Luton: Permission to apply under rule 18.35 was refused.