Liability of trustees and the discretion to manage the estate—Borodzicz v Horton

Liability of trustees and the discretion to manage the estate—Borodzicz v Horton

What are the challenges when bringing a claim under section 304 of the Insolvency Act 1986 (IA 1986)? Giselle McGowan, barrister at 9 Stone Buildings, considers the position following the decision in Borodizicz v Horton.

Original news

Borodzicz v Horton [2015] Lexis Citation 286, [2015] All ER (D) 03 (Dec)

The Bankruptcy High Court granted the applicant discharged bankrupt permission to bring an action against the respondent, the released joint trustee in bankruptcy, under IA 1986, s 304 for an order that he repay, restore or account for money or pay a sum by way of compensation in respect of misfeasance or breach of fiduciary duty in carrying out his functions as trustee. There was evidence to suggest that the applicant had a reasonably meritorious cause of action against the respondent on the basis of his having incurred and paid legal fees in excess of what he had had authority to incur.

What was the background to the case briefly?

The respondent was the applicant’s former trustee in bankruptcy. The applicant applied for permission to bring an application pursuant to IA 1986, s 304 that the respondent had misapplied, retained or become accountable for property in the bankruptcy estate and/or that the estate had suffered a loss in consequence of misfeasance and/or breach of duty by the respondent. The applicant’s complaints related largely to the level of the respondent’s fees, the sums paid to the respondent’s solicitors and sums paid to the sole creditor in respect of costs claimed. Permission was required because the applicant was the bankrupt, the respondent had been released and the applicant was subject to a limited civil restraint order.

What were the issues that the Chief Registrar had to decide?

Whether the applicant had a reasonably meritorious cause of action that the respondent had misapplied, retained or become accountable for property in the bankruptcy estate and/or that

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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.