Patley Wood Farm LLP & Ors v Kristina Kicks & Anor

An application under section 303 of the Insolvency Act 1986 should not be used to obtain relief inconsistent with an existing direction. The proper routes are an appeal or, where available, review under section 375.

Section 375 confers an exceptional jurisdiction. It is not an alternative to an appeal and ordinarily requires a material change in circumstances justifying reconsideration of the order.

Trustees in bankruptcy are not required to advance arguments for bankrupts in proceedings where the issue will be determined in separate insolvency proceedings. Their duty is not to mislead the court; no wider general duty of candour was established on the application.

The trustees in bankruptcy applied urgently for directions concerning draft submissions which they proposed to make in Court of Appeal proceedings. They sought a declaration that the submissions would not breach an earlier order, or alternatively a variation of that order permitting them to submit them.

The proposed submissions raised doubts about the authority of a former trustee in bankruptcy to enter transactions affecting a cottage. Those issues remained to be determined in connected insolvency proceedings. The court had previously directed the trustees to apply to join the Court of Appeal proceedings and seek possession of the cottage.

The live issues were whether section 303 or section 375 of the Insolvency Act 1986 permitted the requested relief, and whether the trustees’ alleged duty of candour required them to raise the underlying doubts before the Court of Appeal.

1. Application dismissed. The court held that section 303 of the Insolvency Act 1986 could not be used to obtain relief different from directions already given. If the trustees disagreed with the existing order, they should appeal it or seek review under section 375.
2. Section 375 provides an exceptional jurisdiction. It is not an alternative to an appeal. Ordinarily, the jurisdiction becomes available only where there has been a material change in circumstances which justifies reappraising the earlier order. The application identified no such change. The issues relied upon were already awaiting determination in the insolvency proceedings.
3. The Court of Appeal would proceed on the basis that the trustees presently held the beneficial ownership of the cottage unless and until a trial established otherwise. Any trustees joined to the eviction proceedings would also be bound by the existing unchallenged determination concerning the transactions. The court relied on Lord Toulson’s statement in Den Danske Bank v Surinam Shipping Ltd [2014] UKPC 10, [18].
4. The trustees should not argue the validity or invalidity of the transactions in the Court of Appeal. They could identify the existence of the insolvency proceedings and explain that the trustees’ beneficial ownership remained subject to their outcome, but the detailed issue belonged in those proceedings.
5. No general duty required the trustees to assist the bankrupts by advancing arguments which the bankrupts could themselves make. Trustees must not mislead the court, and officers of the court are subject to high ethical standards, but this was not an ex parte application and no broader duty of candour was established.