What is the trustee’s duty to the bankrupt? (Oraki v Bramston)

What is the trustee’s duty to the bankrupt? (Oraki v Bramston)

Does a trustee have a common law duty of care to the bankrupt? John Briggs, barrister at South Square, clarifies the legal position following the decision in Oraki and another v Bramston and another.

Original news

Oraki and another v Bramston and another [2015] EWHC 2046 (Ch), [2015] All ER (D) 175 (Jul)

The claimant former bankrupts brought a claim alleging that the defendant trustees had failed to do their job properly and that they had mismanaged their estates, thereby causing them loss and damage. The Chancery Division, in dismissing the claim, held that a surplus in the bankrupt’s estate did not give rise to a duty in the tort of negligence on the trustee’s part to the bankrupt. A trustee did not owe a bankrupt a duty at common law outside of section 304 of the Insolvency Act 1986 (IA 1986) and, further, it was not part of the trustee’s role to review the legitimacy of a judgment affecting a bankrupt, which directly or indirectly had been subject to appeals which had been rejected.

What was the background to the hearing?

Dr Oraki and her husband (the Orakis) had been made bankrupt in 2005/06. Many years later, in January 2013, their bankruptcies were annulled pursuant to IA 1986, s 282(1)(a) due to serious irregularities in relation to the judgment and the debt on which they had been made bankrupt.

The judgment in favour of the solicitors whom the Orakis had instructed was for damages to be assessed in what was an action for debt. There was no itemised bill and no power under the Civil Procedure Rules 1998, SI 1998/3132, r 24 to order a payment on account.

The Orakis claimed that the first and second trustees in bankruptcy (the trustee) had failed expeditiously to bring their bankruptcies to an end and had mismanaged their properties causing them and their estates

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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.