Miles & Ors v Price & Ors

The court’s power to remove a bankruptcy trustee is broad, but removal must serve the interests of the bankruptcy process as a whole. The court must weigh the trustee’s conduct, the interests of creditors, the likely utility of replacement, and the resulting delay and cost. A creditors’ request to convene a decision procedure must comply strictly with the Insolvency Rules, including requirements for identifying concurring creditors, their claims and their present concurrence. Even where the formal conditions are met, the court may prevent a meeting where it would serve no practical purpose or waste estate assets.

Creditors in the bankruptcy of Kuldip Singh Birdi applied to remove the trustee, Gary Pettit, or alternatively to require him to convene a creditors’ decision procedure under section 298 of the Insolvency Act 1986. They alleged fraud, mismanagement, improper appointments, excessive remuneration and the existence of bogus creditors. Mrs Birdi separately sought rescission or revocation of a £300,000 payment made to the trustee in connection with possession proceedings concerning the bankrupt’s matrimonial home.

The applications were heard at first instance. The central issues were whether removal was in the interests of the bankruptcy process, whether the statutory and procedural requirements for requisitioning a creditors’ decision had been met, and whether any basis existed for the declaration sought by Mrs Birdi.

1. Removal of trustee. The applications to remove Mr Pettit were dismissed. The governing question under section 298 of the Insolvency Act 1986 was whether removal was in the interests of the bankruptcy process as a whole. The court considered the orderly payment of creditors to be the primary purpose of the process, while recognising that the court should not lightly remove its own officer.

2. The practical focus was on whether removal could improve the position of creditors. The estate was insolvent, no further material assets were identified, and the applicants had established no proper basis for reducing or rescinding the trustees’ costs. Replacing the trustee would therefore create further delay, disruption and expense without producing a dividend.

3. The evidence did not establish fraud, fabricated costs, improper appointments or misconduct. Complaints concerning the seizure and sale of equipment were inconsistent with the findings in the later equipment proceedings. The applicants also failed to show that submitted proofs of debt had been finally adjudicated or that creditors had obtained double recovery.

4. Creditors’ decision procedure. The alternative application also failed. Under section 298(4) of the Insolvency Act 1986 and rules 15.18 and 15.19 of the Insolvency Rules 2016, a requisition had to identify the concurring creditors and their claims and provide confirmation of their actual concurrence. The applicants’ letters did not satisfy those requirements. They also failed to provide the security sought for the expenses of the proposed procedure.

5. Even if a duty to convene the procedure had arisen, the court would have overridden it. A meeting would have had no practical utility, since no suitable replacement trustee was available and changing trustees at that stage would only waste estate assets.

6. Mrs Birdi’s declaration. The claim to rescind or revoke the £300,000 payment was dismissed. No proper legal or evidential basis for the declaration had been provided.

All applications were dismissed, including those against PBC and the Official Receiver.

First-instance decision. No appellate history was stated in the judgment.