Donaldson v O'Sullivan
| Jurisdiction | England & Wales |
| Judge | HIS HONOUR JUDGE HAVELOCK-ALLAN Q.C. |
| Judgment Date | 29 February 2008 |
| Neutral Citation | [2008] EWHC 387 (Ch) |
| Docket Number | Case No 71c of 2006 |
| Court | Chancery Division |
| Date | 29 February 2008 |
[2008] EWHC 387 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION BRISTOL DISTRICT REGISTRY
His Honour Judge Havelock-allan Q.c.
Case No 71c of 2006
Jeffrey Littman (instructed by Morgans) for the Applicant.
Christopher Brockman (instructed by Meade King) for the Respondent.
Hearing date : 17 th January 2008
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is an application by a discharged bankrupt, Angela Mary Donaldson, to set aside an Order of this court made on 18 th May 2006 whereby the Respondent, Mr Jeremiah O'Sullivan, was appointed as her trustee in bankruptcy in place of Mr Robert Gilderthorp.
The Order was what is commonly termed a “block-transfer” Order. Mr Gilderthorp, who was a sole practitioner, was planning to retire from practice as a licensed insolvency practitioner on or before 31 st December 2006. He held a large number of appointments as a trustee in bankruptcy, and as the liquidator of companies in creditors' voluntary liquidation, as administrator of individual voluntary arrangements (IVAs) and as the liquidator of companies in members' voluntary liquidation or in winding-up by the Court. The Order had the effect of replacing Mr Gilderthorp with Mr O'Sullivan in 87 bankruptcies (one of which was that of the applicant), 19 creditors' voluntary liquidations, 12 administrations of IVAs, 3 members' voluntary liquidations and 2 compulsory liquidations. Mr O'Sullivan is, of course, also a licensed insolvency practitioner. He is a partner in the well-known firm of Bishop Fleming. It is not suggested on behalf of Mrs Donaldson that Mr O'Sullivan is other than a fit and proper person to replace Mr Gilderthorp in these various offices.
The part of the Order which is the focus of challenge on the present application stated as follows:
“4.1 in each bankruptcy referred to in the attached schedule A and pursuant to section 298(1) Insolvency Act 1986
4.1.1 the Applicant [Mr Gilderthorp] be removed from the office of trustee in bankruptcy of the relevant individual; and
4.1.2 the Respondent [Mr O'Sullivan] pursuant to rule 6.132(5) Insolvency Rules 1986 be appointed as trustee in bankruptcy in place of the Applicant.”
The contention of Mr Littman, who appears for Mrs Donaldson, is that the court had no jurisdiction to make the Order substituting Mr O'Sullivan for Mr Gilderthorp as her trustee in bankruptcy. Logically this argument extends to saying that the court had nojurisdiction to make any of the transfers. But Mr Littman has confined his attack to the bankruptcies in Schedule A to the Order. The primary objection is not to the removal of Mr Gilderthorp from office: but to the appointment of Mr O'Sullivan in his place. Mr Littman questioned whether it was appropriate for the court to have permitted Mr Gilderthorp to resign so far in advance of the date of his intended retirement: but the application notice does not ask for paragraph 4.1.1 of the block-transfer Order to be varied or set aside. It asks only that paragraph 4.1.2 of the Order be set aside, not just in the case of Mrs Donaldson but in respect of the other 86 bankruptcies listed in Schedule A as well. If the applicant's argument is right, the consequences are far-reaching. Mr Sullivan's appointment as trustee in bankruptcy in all 87 bankruptcies will have been null and void. The Official Receiver will have to assume immediate responsibility for these bankruptcies. The practice of making block-transfer Orders will have to cease, and many such Orders in the recent past may be open to challenge.
The application is made under the liberty to apply contained in paragraph 8 of the Order. There has, however, been considerable delay in making the application. The Order provided in paragraph 5 for creditors to be given notice of the Order by advertisement in the London Gazette and in The Times newspaper. The Order required that the advertisement should:
“5.1 explain the effect of the Order, that the reason for the Order is the Applicant's retirement from practice as a licensed insolvency practitioner on or before 31 st December 2006;
5.2 give notice that any individual creditor may apply to the Court within 28 days for reconsideration of the removal of the Applicant and his replacement by the Respondent.
5.3 record that any application made by any individual creditor in accordance with 5.2 above should only be made on reasonable grounds.”
Mrs Donaldson's then solicitors were informed by Mr Gilderthorp of the transfer of appointment on 30 th May 2006. Mrs Donaldson saw no reason to object to the appointment of Mr O'Sullivan until, as she says, he began to take a very different view of his responsibilities regarding her estate to that taken by Mr Gilderthorp. I have not received evidence as to what prompted the making of the present application: but I am told by Mr Littman that Mr Gilderthorp had been close to agreeing an arrangement with Mrs Donaldson for the payment of her last remaining debts in instalment payments, when his resignation intervened. Mrs Donaldson obtained her discharge from bankruptcy as long ago as 1993. However the conclusion of her affairs took a long time to settle. I can do no better than repeat here the summary narrative in Mr Littman's skeleton argument (emphasizing that whilst this account is not challenged by Mr O'Sullivan, it has not been proved):
“In November 2004 … Mr Gilderthorp … advised that his Notice of Intended Dividend in the Gazette expired on 20.10.04 and no further creditors had proved. He calculated that, as at 18.1.05 (to allow a further 3 months and for the statutory meeting) he would require £9,628.34 to pay all bankruptcy costs with interest. Correspondence ensued with a view to demonstrating that there were no creditors left other than the petitioning creditor. In October 2005 Mr Gilderthorp wrote that there remained one unproved creditor, to whom he had written, and that if no claim were lodged by 16.11.05, he would exclude their claim and recalculate the amount required to pay all bankruptcy costs. On 17.11.05 he confirmed that no claim had been lodged and the amount to be paid was only £5,371.71. … The applicant and her husband live in reduced circumstances in a house at 15 Camrose Drive, Waunarlwydd, Swansea of which they jointly own the freehold. They were having difficulty raising the money from relatives. There was further correspondence with a view to agreeing instalment arrangements, which Mr Gilderthorp on 16.3.06 stated he may be prepared to accept if made monthly. Before a legally binding agreement was reached, Mr Gilderthorp applied … to be removed as … trustee …. Upon appointment [Mr O'Sullivan] repudiated Mr Gilderthorp's efforts. He demanded substantially larger instalments or a lump sum payment increased by over £2,500, mainly because of his remuneration. The applicant's entreaties for a return to what had nearly been agreed with Mr Gilderthorp were rejected and on 27.11.06 the respondent revealed that he regarded his duties as requiring him proactively to seek out the unproved creditor and enlarge his time for proving. As a result, he now demanded £20,585 to settle all bankruptcy payments, including yet more for his own remuneration. … That sum is beyond the reach of the applicant and her husband. The respondent gave notice to them of his interest in 15 Camrose Drive on 19.1.07, before the deadline under the reform introduced by the Enterprise Act 2002, and has applied to Swansea County Court for an order accordingly. The applicant's chances of keeping the roof over her head depend on the present application.”
It is difficult not to have some sympathy for Mrs Donaldson if these are the circumstances which have provoked her to object to Mr O'Sullivan's appointment. Yet no criticism is made by Mr Littman that Mr O'Sullivan is not taking a proper view of his duties as trustee, even if it is a different view from that of Mr Gilderthorp.
Mr Littman first addressed the delay in bringing the present application. Mrs Donaldson had no notice of the application for the block-transfer: but she would not have had reason to object to the transfer if she had received notice. On her case, she did not have cause to complain about Mr O'Sullivan's appointment until late in 2006 or early in 2007. However the present application was not issued until 30 th November 2007. Although the intervening period is explained by the need to obtain public funding for an opinion from counsel, then an extension of public funding for an application to the court, I consider that the lapse of time in mounting the challenge to Mr O'Sullivan's appointment has extended well beyond the period normally contemplated by the liberty to apply in a block-transfer Order. Nevertheless the argument is one of lack of jurisdiction. That is an argument which (subject to issues of limitation or change of position which do not arise here) can be raised at any time. Moreover the jurisdiction point is too important for this court to dismiss the present application on the ground of delay, and I do not propose to do so.
The resignation of Mr Gilderthorp
Except in the case of a criminal bankruptcy, section 298 of the Insolvency Act 1986 (“the Act”) prescribes the circumstances in which a trustee in bankruptcy may be removed from office. A trustee may only be removed from office by an order of the court or by a general meeting of creditors summoned specially for that purpose. If a trustee wishes to resign, he must follow the procedure in Rules 6.126–6.131 of the Insolvency Rules 1986 (“the Rules”). This involves calling a creditors' meeting for the purpose of...
To continue reading
Request your trial
-
Donaldson v O'Sullivan
...Mary Donaldson Applicant/Appellant and Jeremiah Anthony O'Sullivan Respondent and The Official Receiver Intervener [2008] EWCA Civ 879 [2008] EWHC 387 (Ch) Before: LORD JUSTICE WARD LORD JUSTICE DYSON and LORD JUSTICE LLOYD Case No: A2 2008/0824 IN THE SUPREME COURT OF JUDICATURE COURT OF A......