Brake & Ors v Lowes & Ors

Brake & Ors v Lowes & Ors

The Brakes, in their capacity as former bankrupts, have standing under section 303(1) Insolvency Act 1986 to challenge acts of the trustee in bankruptcy where they can show a legitimate and substantial interest affected by the conduct complained of, even absent a likely surplus. However, as trustees of the Settlement and as mere bidders, they are outsiders to the bankruptcy and liquidation and lack standing under section 303(1) and section 168(5) respectively. The Unsecured Creditors, though creditors, were found to be acting solely to advance the Brakes' interests and not their own, and thus also lack standing under section 168(5).

Parties
1st Appellant (bankruptcy and Liquidation Applications); 1st Appellant (bankruptcy Application, as Trustee of the Brake Family Settlement): Nihal Mohammed Kamal Brake; 2nd Appellant (bankruptcy and Liquidation Applications); 2nd Appellant (bankruptcy Application, as Trustee of the Brake Family Settlement): Andrew Young Brake; 3rd Appellant (bankruptcy Application): Brake Family Settlement (as trustees); 3rd Appellant (liquidation Application): Ritchie Phillips LLP; 4th Appellant (liquidation Application): Rebecca Holt; 5th Appellant (liquidation Application): Slade Associates; 6th Appellant (liquidation Application): Tomasz Wegrzyn; 7th Appellant (liquidation Application): Katarzyna Wegrzyn; 1st Respondent (liquidation Application, Joint Liquidator of Stay in Style): Simon Lowes; 2nd Respondent (liquidation Application, Joint Liquidator of Stay in Style): Richard Toone; 3rd Respondent (liquidation Application); 1st Respondent (bankruptcy Application, Trustee of the Bankruptcy Estates of Nihal and Andrew Brake): Duncan Kenric Swift; 4th Respondent (liquidation Application); 2nd Respondent (bankruptcy Application): The Chedington Court Estate Limited
Jurisdiction
England and Wales
Judgment Date
13 November 2020
Procedural Posture
Civil Appeal (bankruptcy and Liquidation) / Appeal From High Court (chancery Division) on Standing to Challenge Acts of Trustee in Bankruptcy and Liquidator
Outcome
Appeal allowed in part, dismissed in part
Legal Topics
Standing to Challenge Trustee/liquidator Decisions, Section 303(1) Insolvency Act 1986, Section 168(5) Insolvency Act 1986, Supervisory Jurisdiction Over Insolvency Practitioners, Rights of Former Bankrupts, Rights of Bidders in Insolvency Sales
Insolvency Law Bankruptcy Law Company Law Standing to Challenge Trustee/liquidator Decisions Section 303(1) Insolvency Act 1986 Section 168(5) Insolvency Act 1986 Supervisory Jurisdiction Over Insolvency Practitioners Rights of Former Bankrupts +1 more

Case Brief

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Parties

Nihal Mohammed Kamal Brake

1st Appellant (bankruptcy and Liquidation Applications); 1st Appellant (bankruptcy Application, as Trustee of the Brake Family Settlement)

Andrew Young Brake

2nd Appellant (bankruptcy and Liquidation Applications); 2nd Appellant (bankruptcy Application, as Trustee of the Brake Family Settlement)

Brake Family Settlement (as trustees)

3rd Appellant (bankruptcy Application)

Ritchie Phillips LLP

3rd Appellant (liquidation Application)

Rebecca Holt

4th Appellant (liquidation Application)

Slade Associates

5th Appellant (liquidation Application)

Tomasz Wegrzyn

6th Appellant (liquidation Application)

Katarzyna Wegrzyn

7th Appellant (liquidation Application)

Simon Lowes

1st Respondent (liquidation Application, Joint Liquidator of Stay in Style)

Richard Toone

2nd Respondent (liquidation Application, Joint Liquidator of Stay in Style)

Duncan Kenric Swift

3rd Respondent (liquidation Application); 1st Respondent (bankruptcy Application, Trustee of the Bankruptcy Estates of Nihal and Andrew Brake)

The Chedington Court Estate Limited

4th Respondent (liquidation Application); 2nd Respondent (bankruptcy Application)

Procedural Posture

Civil Appeal (bankruptcy and Liquidation) / Appeal From High Court (chancery Division) on Standing to Challenge Acts of Trustee in Bankruptcy and Liquidator

Legal Issues

  1. 1 Whether discharged bankrupts (personally or as trustees) have standing under section 303(1) Insolvency Act 1986 to challenge acts of a former trustee in bankruptcy
  2. 2 Whether discharged bankrupts as trustees or unsecured creditors have standing under section 168(5) Insolvency Act 1986 to challenge conduct of a liquidator
  3. 3 Whether mere bidders for assets in insolvency have standing to challenge the process

Ratio Decidendi

The Brakes, in their capacity as former bankrupts, have standing under section 303(1) Insolvency Act 1986 to challenge acts of the trustee in bankruptcy where they can show a legitimate and substantial interest affected by the conduct complained of, even absent a likely surplus. However, as trustees of the Settlement and as mere bidders, they are outsiders to the bankruptcy and liquidation and lack standing under section 303(1) and section 168(5) respectively. The Unsecured Creditors, though creditors, were found to be acting solely to advance the Brakes' interests and not their own, and thus also lack standing under section 168(5).

Court Disposition

Appeal allowed in part, dismissed in part

Orders

  • Bankruptcy Appeal allowed for the Brakes in their capacity as former bankrupts: they have standing under section 303(1) to challenge the trustee's acts.
  • Bankruptcy Appeal dismissed for the Brakes as trustees of the Settlement: no standing under section 303(1).