Are bankrupts interested in disclaimed property? (Frosdick v Fox and another)

Are bankrupts interested in disclaimed property? (Frosdick v Fox and another)

Can a bankrupt give notice to their trustee in bankruptcy (trustee) under section 316 of the Insolvency Act 1986 (IA 1986) requiring the trustee to decide whether or not to disclaim property? We review the decision in Frosdick v Fox and another, in which the court had to consider this issue, among others, in connection with an application made by a bankrupt against his trustee.

Original news

Frosdick v Fox and another [2017] EWHC 1737 (Ch), [2017] All ER (D) 35 (Aug)

The Chancery Division struck out the claimant's claim, in which he challenged the first defendant trustee's disclaimer of rights of action against the claimant's former solicitors, following an application by the defendants. On the true construction of IA 1986, s 316, the action had no reasonable prospect of success, and the court would strike it out under CPR 3.4.

What are the practical implications of this case?

This case gives authority to the proposition that a bankrupt cannot give a notice under IA 1986, s 316 requiring a trustee to elect whether to disclaim or not in respect of any property which comprises the bankruptcy estate. That in itself does not appear to be a controversial conclusion, although it does raise a potential issue as to why a bankrupt cannot give a notice pursuant to IA 1986, s 316, but can (following previous authority) apply for a vesting order under IA 1986, s 320 in respect of property that has been disclaimed.

Accordingly, should a trustee receive any notice from the bankrupt purporting to require the trustee to make an election (whether or not IA 1986, s 316 is specifically mentioned), the trustee can disregard it, although they should probably explain to the bankrupt why their notice is inappropriate.

This case also restates previous authority that a cause of action can be onerous property for the purpose of disclaimer.

While it was not a point in issue in this case, where a trustee receives an offer or approach from the bankrupt

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.