Can a trustee in bankruptcy be paid for dealing with trust property? (Bell v Birchall and Ors)

Can a trustee in bankruptcy be paid for dealing with trust property? (Bell v Birchall and Ors)

In Bell v Birchall & Ors, the Chancery Division was asked whether a trustee in bankruptcy appointed over the bankruptcy estate of a solicitor was entitled to recover his costs and expenses incurred—and to be incurred—in connection with storing the solicitor’s practice’s files and the reconciliation of sums held in the practice’s client accounts.

Original news

Bell v Birchall & Ors [2015] EWHC 1541 (Ch)

The applicant acted as trustee of the bankruptcy estate of the first respondent, a solicitor. Following his appointment, the trustee preserved the files and records of the first respondent’s practice as well as sums held in separate client accounts, and sought an order permitting him to deduct his time costs and disbursements pro rata from those sums in respect of the storage of the files and the reconciliation of the client accounts that the trustee considered were necessary for the protection of clients.

The Chancery Division dismissed the application. The first respondent’s bankruptcy did not absolve him of his obligation to conduct an orderly winding up of his practice—including the reconciliation of the client accounts—at no cost to clients. In the event of an intervention by the Solicitors Regulation Authority (SRA), that obligation would pass to the SRA—again at no cost to clients. The client account monies did not form part of the first respondent’s bankruptcy estate, and the facts of the case did not allow the trustee to recover his costs for dealing with this trust property.

Briefly, what were the facts of the case?

The first respondent carried on a solicitor’s practice (the practice) as sole principal as at the date he was made bankrupt in August 2013. The trustee was appointed a little over a week later.

The practice held sums totalling about £250,000 in 12 separate client accounts, and possessed a large number of files that were largely related to non-current instructions.

The SRA did not

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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.