Cassanova v Cockerton [2021] EWHC 1688 (Ch) was an unsuccessful attempt by the former bankrupt to obtain the permission of the court to bring proceedings against her trustee. The administration of the bankruptcy had not been straightforward by the time the application came before Deputy ICC Judge Addy QC: the former bankrupt had not disclosed a property but had tried to sell it, she could not provide the registration number of a motor vehicle nor the number of the leasing agreement relating to it, she had re-entered a property in respect of which the trustee had an order for possession and sale; and she had previously made three applications in the bankruptcy which had been found to be totally without merit.
The permission sought was "to bring a claim against the Respondent as the trustee of the bankruptcy estate on the basis that she has misapplied or retained or become accountable for some money or other property comprised in the bankrupt's estate, and/or that the bankrupt's estate has suffered loss in consequence of the misfeasance or breach of fiduciary or other duty by the trustee in the carrying out of her functions," and relied on ss 303(1) and 304(1)(a)(b) Insolvency Act 1986. More particularly, the applicant claimed that:
(a) the trustee should have obtained £7,500.00 more than she did for the sale of a property and should have sold it more quickly than she did;
(b) the proceeds of sale of and the rental income from the property should have been sufficient to discharge all the debts and expenses of the bankruptcy, such that the trustee has therefore misapplied them;
(c) the trustee's fees and expenses were exorbitant;
(d) the trustee had allowed the estate to "accumulate debts;" and
(e) the trustee had included four false claims in the list of creditors.
The deputy judge, in line with the judgment of Hart J in Brown v Beat [2002] BPIR 421, found that s 304 Insolvency Act with its prescriptive gateway was what she had to consider; s 303 was not the appropriate jurisdiction in the context of the relief sought.
Having regard to Brown v Beat, Borodzicz v Horton [2016] BPIR 24 and McGuire v Rose [2013] EWCA Civ 429 she found the following principles to be applicable:
(a) The Applicant has a high hurdle to overcome to obtain permission to challenge decisions of the Respondent;
(b) The Court must be satisfied that the Applicant has a reasonably meritorious cause of action and that the proposed Substantive Application is reasonably likely to result in a benefit to the estate.
(c) Whilst such central factors must be taken into account, they are not exclusive criteria by reference to which the Permission Application must be judged. The Court should take into account the policy behind the leave requirement, which is to apply a filter because of the risk of vexatious litigation;
(d) Regard must be had to the costs and potential benefits of the desired litigation before authorising its institution;
(e) Whilst the likelihood of any surplus is a relevant factor, it is not determinative; and
(f) The decision to accept claims in the bankruptcy is quintessentially a matter for an officeholder's discretion, which should only be impugned in circumstances where such decision goes beyond the generous scope of such discretion (Borodzicz v Horton at [51]).
Her application of those principles to the facts of the case led her to conclude that permission should not be given to make the claim against the trustee: on the figures, the applicant could have no interest in the outcome as there was not going to be a surplus in the bankruptcy; having regard to the conduct of the bankruptcy, the trustee's fees could not be described as exorbitant; there had been no improper accumulation of debts in the bankruptcy; and there was no evidence of the four creditors' claims being false (the amounts of which were in any event not significant). The proposed action was thus not "reasonably meritorious." The deputy judge ended her judgment with an indictment of the applicant herself and her motives in seeking to bring the proposed claim:
"In refusing to grant permission I also take into account that the real purpose of the Applicant's desire to pursue the presently proposed litigation plainly appears to be a desire to stifle the Respondent's attempts to realise the value of the Billet Road property for the benefit of the estate. That is evident from the litigation history I have already referred to (including the Applicant's unlawful re-entry to the property which will no doubt put the estate to yet further costs), the terms of the Claim Form itself (which seeks an order restraining the Defendant from selling the property until its final determination), the content of the Applicant's witness statement (which avers that sufficient funds have already been realised to pay off her debts and therefore it is no longer necessary to sell the Billet Road property) and was further highlighted by a submission made by [counsel for the Applicant] in reply that the Applicant wishes to stay in such property "at all costs." Accordingly, in my judgment, the proposed Substantive Application is the very type of proceedings for which the filter in section 304(2) was deliberately provided by the legislature and the Respondent and the creditors of the Applicant's estate in bankruptcy should be duly protected from having to incur the costs of the same."
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