Singh v Hicken, Court of Appeal - Chancery Division, November 29, 2018, [2018] WLR(D) 729,[2018] EWHC 3277 (Ch)

Resolution Date:November 29, 2018
Issuing Organization:Chancery Division
Actores:Singh v Hicken
 
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Case No: CH-2018-000098

Neutral Citation Number: [2018] EWHC 3277 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

APPEALS (Ch D)

On appeal from the County Court at Luton

Order of DDJ Lewis dated 19 March 2018

In the Matter of Kulvern Singh (in Bankruptcy)

And in the Matter of the Insolvency Act 1986

Rolls Building, Royal Courts of Justice

Fetter Lane, EC4A 1NL

Date: 29 November 2018

Before :

MR JUSTICE NUGEE

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Between :

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Nigel Woodhouse (instructed by Benchmark Solicitors LLP) for the Appellant

James Davies (instructed by Wright Hassall LLP) for the Respondent

Hearing date: 20 November 2018

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JudgmentMr Justice Nugee:

Introduction

  1. This is an appeal from the County Court in a bankruptcy matter. The Appellant, Mr Kulvern Singh, (``Mr Singh'') was made bankrupt as long ago as 28 July 2009 on the application of the London Borough of Luton, which had obtained liability orders against Mr Singh in respect of Council Tax.

  2. A trustee in bankruptcy, Mr Robert Pick of Grant Thornton, was appointed on 21 September 2009. He was succeeded by two other office-holders from the same firm, first (with effect from 3 February 2011) by Mr Michael Gerrard and then (with effect from 12 November 2012) by the Respondent, Mr Richard Hicken, who is the current trustee. I will use ``the Trustee'' to refer to the successive office-holders, it not being generally necessary to distinguish between them, and ``Mr Hicken'' where it is necessary to refer to the Respondent specifically.

  3. The liabilities of the estate were relatively modest. Luton's claim was for £9,690 (all sums are rounded to ignore pence), and HMRC had a claim for £2,001, making £11,691 in all. To that was later added another claim, from Birmingham Midshires, who had sold a property as mortgagee but was left with a shortfall, of £4,931. But even with this addition the total amount of liabilities (before statutory interest) was only £16,622.

  4. The total amount required to discharge the liabilities and costs in full however was very much larger. The Trustee has produced a number of statements giving the estimated amount required for payment in full as at various dates (referred to as ``payment in full'' statements), and the most recent payment in full statement (that as at 5 December 2017) gives a figure for the estimated amount required to discharge the liabilities and costs in full as £285,089. A substantial amount of this is attributable to the amounts claimed in respect of the Trustee's own time costs, amounting to over £75,000, and the costs of two successive firms of solicitors who have acted for the Trustee (first Wilkin Chapman, and then Wright Hassall), amounting together to over £90,000, and the VAT thereon.

  5. By rule 18.35 of the Insolvency Rules (England and Wales) 2016 (``rule 18.35'') a bankrupt may, with the permission of the Court, make an application on the grounds that the remuneration or expenses charged by a trustee are excessive. In April 2017 Mr Singh made an application under rule 18.35 in which he sought such permission as he wished to challenge the costs charged by the Trustee and the Trustee's solicitors. After being adjourned that ultimately came before Employment Judge Lewis, sitting as a Deputy District Judge (whom I will refer to as ``DDJ Lewis'') in the County Court at Luton on 19 March 2018. By his Order dated 19 March 2018 he refused permission for the reasons given in a brief oral judgment.

  6. Mr Singh now appeals to the High Court. His essential complaint is that DDJ Lewis should not have refused him permission under rule 18.35 but should have granted him permission so as to allow his application to go forward for a full hearing. Permission to appeal was given by me by Order dated 30 July 2018.

    Rule 18.35

  7. It is convenient to set out rule 18.35 at the outset. It provides as follows:

    ``18.35. Remuneration and expenses: application to court by a bankrupt on grounds that remuneration or expenses are excessive

    (1) A bankrupt may, with the permission of the court, make an application on the grounds that--

    (a) the remuneration charged by the office-holder is in all the circumstances excessive;

    (b) the expenses incurred by the office-holder are in all the circumstances excessive.

    (2) The bankrupt may make such an application for one or more of the orders set out in rule 18.36(4).

    (3) The application must be made no later than eight weeks after receipt by the bankrupt of the report under rule 10.87.

    (4) The court must not give the bankrupt permission to make an application unless the bankrupt shows that--

    (a) there is (or would be but for the remuneration or expenses in question); or

    (b) it is likely that there will be (or would be but for the remuneration or expenses in question), a surplus of assets to which the bankrupt would be entitled.

    (5) Paragraph (4) is without prejudice to the generality of the matters which the court may take into account in determining whether to give the bankrupt permission.''

  8. Rule 18.36(4) sets out the orders the Court may make, as follows:

    ``If the court considers the application to be well-founded, it must make one or more of the following orders--

    (a) an order reducing the amount of remuneration which the office-holder is entitled to charge;

    (b) an order reducing any fixed rate or amount;

    (c) an order changing the basis of remuneration;

    (d) an order that some or all of the remuneration or expenses in question is not to be treated as expenses of the administration, winding up or bankruptcy;

    (e) an order for the payment of the amount of the excess of remuneration or expenses or such part of the excess as the court may specify by--

    (i) the administrator or liquidator or the administrator's or liquidator's personal representative to the company, or

    (ii) the trustee or the trustee's personal representative to such person as the court may specify as property comprised in the bankrupt's estate;

    (f) any other order that it thinks just.''

    Facts in more detail

  9. It is common ground that apart from a very small balance in a bank account, the bankruptcy estate consisted of three residential properties in Luton registered in Mr Singh's name. All three were subject to mortgages, but two of them had valuable equity as follows:

    (1) 68 Handcross Road, Luton (``the Handcross Road property''). This was eventually sold in September 2014 for £185,500. The amount required to redeem the mortgage was £142,437, leaving a surplus (before solicitors' costs and disbursements, and agents' commission) of £43,063.

    (2) 32 Elmore Road, Luton (``the Elmore Road property''). This was unsold at the time of the hearing before DDJ Lewis and was valued for that hearing by a jointly-instructed valuer at £255,000. The most recent evidence he had of the amount required to redeem the mortgage was as at 31 December 2016 in the sum of £157,136, which he took at a round figure of £157,000, giving a prospective surplus of some £98,000.

    (3) There was a third property. Somewhat surprisingly, the evidence shows some confusion over which this property was, some of it referring to 38 Farringdon Road, Luton and some to 203 Runley Road, Luton. I need not however attempt to resolve this confusion as it is not disputed that whichever the property was, it was sold by its mortgagee for less than the mortgage amount. This was the sale which gave rise to the claim against the estate by Birmingham Midshires for the shortfall of £4,931.

  10. There were five payment in full statements in evidence before DDJ Lewis:

    (1) The earliest was as at 26 October 2010. This showed estimated figures as follows:

    Included in the costs and expenses were estimated sums for the Trustee's remuneration and his solicitors' costs as follows:

    (2) The next payment in full statement was as at 30 August 2013. The corresponding figures were:

    (The total required was more than the sum of liabilities and costs and expenses because it included a fee payable to the Secretary of State on realisations).

    Included in costs and expenses:

    (3) The next payment in full statement was as at 28 January 2017. The corresponding figures were:

    (The total required now included not only a higher fee payable to the Secretary of State but also a sum in respect of CGT).

    Included in costs and expenses:

    This was the latest payment in full statement at the time that Mr Singh brought his application. Before the hearing however the Trustee produced two further updated statements as follows:

    (4) A payment in full statement as at 28 September 2017. The corresponding figures were:

    Included in costs and expenses:

    (5) The final payment in full statement as at 5 December 2017. The corresponding figures were:

    Included in costs and expenses:

  11. On the basis of the figures in the 5 December 2017 payment in full statement, it could be seen that there would be no surplus for Mr Singh. The realisations to date were £43,130 (almost all being the surplus proceeds of the sale of the Handcross Road property), and the prospective realisation from the Elmore Road property a further £98,000, which together were a very long way short of the £285,089 estimated to be required.

  12. Mr Singh brought his application under rule 18.35 in April 2017 supported by a witness statement of his solicitor, Ms Louise Delgado. She had by that stage been provided with timesheets from the Trustee and the two successive firms of solicitors who acted for the Trustee. By the time of the final hearing she had annotated these line-by-line to produce her own estimate of the costs and expenses that should properly be charged. This resulted in the following figures:

    Her calculation was that if these figures were adopted, the total amount needed to discharge both the liabilities and the costs and...

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