Donaldson v O'Sullivan

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 no jurisdiction 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.

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 receiving his resignation. In general a trustee may only resign on grounds of ill health or because (a) he intends ceasing to be in practice as an insolvency practitioner or (b) there is some conflict of interest or change of personal circumstances which precludes or makes impracticable his continuing to act as trustee.

The power of the court in section 298(1) to order the removal of a trustee appears to be unfettered. However, it is well settled that an office holder does not in general have a right to cease to act whenever he wishes. The court will require that a sufficient reason be shown why the court should remove him at his request. The test for ascertaining whether removal by court order is justified, is whether a creditors’ meeting would serve any useful purpose. If the creditors would have no real choice but to accept the trustee’s resignation, there is no point in consulting them and it is expedient for the court to remove the trustee without requiring him to follow the statutory resignation procedure. The cases which have developed and applied this principle are also those which have adopted the block-transfer procedure. I shall come back to them presently. Since Mrs Donaldson’s application does not challenge that part of the Order which removed Mr Gilderthorp, it is not necessary to consider them in any detail here.

Mr Gilderthorp planned to retire on 31^st December 2006. All of the liquidations, bankruptcies and administrations in the schedule to the Order were ones which in the opinion of Mr Gilderthorp, were unlikely to be completed before that date. As an illustration of that fact, Mr Gilderthorp retained two trusteeships where the final meeting of creditors had already been scheduled to take place by the end of May 2006. Similarly, he retained his appointment as liquidator in 5 creditors’ voluntary liquidations and 2 members’ voluntary liquidations where the final meetings to conclude the windings up had been convened or were expected to be convened just before or shortly after the application for the transfer Order was made. It is therefore reasonable to infer that Mr Gilderthorp did not consider that the affairs of Mrs Donaldson’s bankruptcy were likely to be resolved before 31^st December 2006. Mr Littman says that his client would have wanted to challenge that conclusion in May 2006. She would have wanted to argue (a) that it was too early to remove Mr Gilderthorp and (b) that it was not appropriate to do so because her bankruptcy was really at an end. However he accepts that it is now too late for those arguments to be raised.

In my judgment it is doubtful whether Mrs Donaldson would have had any standing (i.e. locus) to object to the block-transfer application on either of these grounds. As for their merits, it is true that there was scope for leaving the application for a block-transfer until later in the year, but I am not persuaded that in the case of Mrs Donaldson (I know nothing of the other bankruptcies or of the liquidations and administrations) a date in September or October 2006 would have made a difference. The administration of her bankruptcy was not complete on 18^th May. Even assuming that Mr Gilderthorp and Mrs Donaldson had subsequently reached agreement for payment by instalments of the sum which Mr Gilderthorp was then demanding, the payments would have lasted into 2007 and the administration of the bankruptcy would not have been completed before Mr Gilderthorp retired on 31^st December 2006. On the present evidence it therefore seems to me that the statutory resignation procedure would have served no purpose, whether the Order was made in May 2006 or in the autumn of 2006. Accordingly the removal of Mr Gilderthorp on 18^th May was a proper exercise of the court’s power under section 298.

Paragraph 4.1.2 of the Order purported to appoint Mr O’Sullivan “… pursuant to rule 6.132(5) Insolvency Rules 1986”. However it is important to look first at the provisions of the Act. Sections 292 and 297 expressly govern the appointment of trustees in bankruptcy. Section 292(1) provides:

“The power to appoint a person as trustee of a bankrupt’s estate (whether the first such trustee or a trustee appointed to fill any vacancy) is exercisable –

(a)

by a general meeting of the bankrupt’s creditors;

(b)

under section 295(2), 296(2) or 300(6) below in this Chapter, by the Secretary of State; or

(c)

under section 297, by the court.”

Section 297 is headed “Special cases” and states:

“(1)

Where a bankruptcy order is made on a petition under section 264(1)(d) (criminal bankruptcy), the official receiver shall be trustee of the bankrupt’s estate.

(2)

[repealed]

(3)

[repealed]

(4)

Where a bankruptcy order is made in a case in which an insolvency practitioner’s report has been submitted to the court under section 274 but no certificate for the summary administration of the estate is issued, the court, if it thinks fit, may on making the order appoint the person who made the report as trustee.

(5)

Where a bankruptcy order is made (whether or not on a petition under section 264(1)(c)) at a time when there is a supervisor of a voluntary arrangement approved in relation to the bankrupt under Part VIII, the court, if it thinks fit, may on making the order appoint the supervisor of the arrangement as trustee. …”

The above are the only provisions in the Act which expressly refer to the power of the court to appoint a trustee. But there are other provisions which illustrate that bankruptcy is a process which is under the control of the court and that this control extends to the conduct of a trustee in bankruptcy. Section 303 states:

“(1)

If a bankrupt or any of his creditors or any other person is dissatisfied by any act, omission or decision of a trustee of the bankrupt’s estate, he may apply to the court; and on such application the court may confirm, reverse or modify any act or decision of the trustee, may give him directions or may make such other order as it thinks fit.

(2)

The trustee of a bankrupt’s estate may apply to the court for directions in relation to any particular matter arising under the bankruptcy. …”

Section 363 goes on to provide that:

“(1)

Every bankruptcy is under the general control of the court and, subject to the provisions in this Group of Parts, the court has full power to decide all questions of priorities and all other questions, whether of law or fact, arising in any bankruptcy.

The Order in the present case referred to Rule 6.132(5). Rule 6.132 is one of two Insolvency Rules where reference is made to the appointment of a trustee by the court. The other is Rule 6.121. It is worth quoting the text of both of them. Rule 6.132 is headed “Removal of trustee by the court” and provides:

“6.132(1) This Rule applies where application is made to the court for the removal of the trustee, or for an order directing the trustee to summon a meeting of creditors for the purpose of removing him.

6.132(2) The court may, if it thinks that no sufficient cause is shown for the application, dismiss it; but it shall not do so unless the applicant has had an opportunity to attend the court for an ex parte hearing, of which he has been given at least 7 days’ notice. If the application is not dismissed under this paragraph, the court shall fix a venue for it to be heard.

6.132(3) The applicant shall, at least 14 days before the hearing, send to the trustee and the official receiver notice stating the venue so fixed; and the notice shall be accompanied by a copy of the application, and of any evidence which the applicant intends to adduce in support of it.

6.132(4) Subject to any contrary order of the court, the costs of the application do not fall on the estate.

Rule 6.121 (“Appointment by the court”) is in these terms:

“6.121(1) This Rule applies where the court under section 297(4) or (5) appoints the trustee.

6.121(2) The court’s order shall not issue unless and until the person appointed has filed in court a statement to the effect that he is an insolvency practitioner, duly qualified under the Act to be the trustee, and that he consents so to act.

6.121(3) Thereafter, the court shall send 2 copies of the order to the official receiver. One of the copies shall be sealed, and this shall be sent by him to the person appointed as trustee.

6.121(4) The trustee’s appointment takes effect from the date of the order.”

Mr Littman contends that the Order was mistaken where it stated that Mr O’Sullivan was appointed “… pursuant to rule 6.132(5)” if by doing so it intended to imply that Rule 6.132(5) conferred the power to appoint Mr O’Sullivan. The Rules have been made “for the purpose of giving effect to Parts I to VII” of the Act (section 412). If there was power to make the appointment, it must be found in the Act itself. I agree with this submission, but only because of the wording of Rule 6.132(5). I do not accept Mr Littman’s wider argument that all of the Insolvency Rules are procedural in character and confer no powers which affect the substantive framework of insolvency proceedings. Mwanza v Home Secretary (Court of Appeal, 3^rd November 2000, unreported) was cited by Mr Littman in support of this proposition: but the context of that case (the application of the Asylum Appeals (Procedure) Rules 1996) was very different.

The sections of the Act which govern the power of the court to appoint a liquidator are sections 100, 108, 139 and 140. It is worth referring to them for the sake of comparison, and because they feature in a number of the authorities which have been cited on the present application. Section 100(3) and section 139(4) of the Act confer power on the court in, respectively, a creditors’ voluntary winding-up and a members’ voluntary winding-up, to choose who shall be appointed liquidator where different persons are nominated by the company on the one hand and by the creditors or contributories on the other. Section 140 applies to the appointment of a liquidator where the court makes a winding-up order immediately upon the appointment of an administrator or supervisor of a voluntary arrangement ceasing to have effect. These powers of appointment are tailored to particular circumstances. However section 108, which is headed “Appointment or removal of liquidator by the court”, appears to be of general application. It is included in Chapter V of the Act, which contains provisions applying to both kinds of voluntary winding-up, and provides:

“(1)

If from any cause whatever there is no liquidator acting, the court may appoint a liquidator.

(2)

The court may, on cause shown, remove a liquidator and appoint another.”

There is no equivalent provision to section 108 in the case of a winding-up by the court. There are, however, two sections in Chapter VII (sections 171 and 172) which complement section 108, and one section (section 168) which confers supplementary powers on liquidators of companies in compulsory liquidation. Sections 171 and 172 specify how a liquidator may be removed from office, the circumstances in which he shall be treated as having vacated his office, and the circumstances in which he may resign. Section 171 applies to voluntary winding-up. Section 172 applies to winding-up by the court. Sections 171(2) and 172(2) stipulate that a liquidator is removed from office only by an order of the court or by a meeting of the company (in the case of a members’ voluntary liquidation) or of creditors. Sections 171(5) and 172(6) deal with resignation. They must be read in conjunction with Rules 4.108 to 4.112 and 4.142 which contain the statutory resignation procedures. These are similar to those which apply in the case of resignation of a trustee in bankruptcy (Rules 6.126-6.131). They involve the calling of a meeting of the company (rule 4.142) or of creditors (rule 4.108) for the purpose of receiving the resignation.

Section 168 provides in sub-section (3) as follows:

“The liquidator may apply to the court (in the prescribed manner) for directions in relation to any particular matter arising in the winding up”.

The block-transfer procedure provides a shortcut. It dispenses with the statutory resignation procedure in cases where the court is satisfied that no useful purpose would be served by calling a meeting of creditors or of the company. The justification is one of administrative convenience. The procedure avoids expense and delay in cases where an office-holder wishes to relinquish a number of posts.

Block-transfers are now so well established that they are the subject of a Practice Direction. The Practice Direction (first issued in 1999 and reported in [2000] BCC 927) provides as follows:

Block-transfers seem to have originated in the late 1980’s or early 1990’s. Whilst not exactly a judicial invention, the practice gained currency through judicial approval of block-transfer Orders. Its development can be traced through a number of cases. Mr Littman and Mr Brockman (counsel for Mr O’Sullivan) have cited to me most of the reported judgments which consider the jurisdiction to make a block-transfer Order. But the decision which is believed to have started this line of authority is an unreported one. It is the judgment of Harman J in Re Parkdawn Limited (15^th June 1993). I have seen no transcript of it: but it is referred to, and quoted from, in the judgments of Blackburne J in Re Bridgend Goldsmiths Limited [1995] 2 BCLC 208, Chadwick J in Re Sankey Furniture Limited [1995] 2 BCLC 594 and Knox J in Re Bullard & Taplin Limited [1996] BCC 973.

The applicant in Re Parkdawn Limited was liquidator or trustee in a considerable number of voluntary liquidations, compulsory liquidations and bankruptcies. He was also supervisor of a number of IVAs. He had fallen ill and had resigned as a partner of Ernst & Young in their Manchester office. He applied to be removed as office-holder and replaced by two of his former partners in the same office. Harman J dealt with the voluntary liquidations first. He held that “cause shown” in section 108(2) of the Act did not mean “adverse cause”: it could simply mean that there has been “… an unavoidable interruption of the ability of the relevant office holder to continue his activities”. He then turned to the requirement in Rule 4.108 that there be a meeting of creditors. Harman J observed of this requirement that:

“There would be an expensive and, so far as I can see in this case, useless meeting, since one office holder from a distinguished firm, properly qualified, is being replaced for reasons of ill health by another office holder from the same distinguished firm as a suitable office holder. It seems to me that the meeting could serve no useful purpose in considering the matter. Therefore I am content to make the appointments which are sought and to require that the various persons whom counsel had mentioned should be notified.”

Harman J went on to find that there was similar power to make substitute appointments in relation to the compulsory liquidations, bankruptcies and IVAs.

I shall leave IVAs to one side since they raise particular jurisdictional problems which do not arise in respect of bankruptcies and liquidations. The basis on which Harman J held that he was authorised to make substitute appointments in compulsory liquidations and bankruptcies emerges from the judgment of Knox J in Re Bullard & Taplin Limited [1996] BCC 973 (at 974D-975E). As to compulsory liquidations he noted that there was a power in section 172(2) of the Act to remove a liquidator from office by order of the court, but there was no express reference in section 172 to the appointment of a liquidator to fill the vacancy caused by the removal. He pointed out that section 563(3) of the Companies Act 1985 had originally provided that a vacancy in the office of liquidator appointed by the court should be filled by the court, but that this provision had not been retained when sections 501-650 of the 1985 Act were repealed and replaced by the Insolvency Act. Harman J considered that there should be such a power. He held that section 168(3) was wide enough to include it. He held that:

“The removal from office of a liquidator and a need to fill the vacancy appears to me plainly to be ‘a matter arising in the winding up’ and I propose to express the view, which I now do, that the jurisdiction of the court under section 168(3) of the Act of 1986 is wide enough to allow the court to appoint a new liquidator when a liquidator for cause shown has been removed, and I will so order.”

As to bankruptcies, Harman J simply said this:

“There are also trustees in bankruptcy. Those arise under section 298(1) and section 303(2) of the Act of 1986, which is to the same effect as section 168(3)”.

In other words, Harman J accorded to section 303(2) (“The trustee of a bankrupt’s estate may apply to the court for directions in relation to any particular matter arising under the bankruptcy. …”) a similar ambit to that of section 168(3) (“The liquidator may apply to the court (in the prescribed manner) for directions in relation to any particular matter arising in the winding up”).

The jurisdiction to appoint a replacement liquidator in voluntary liquidations of both types is the most straightforward case. Warner J had already concluded in July 1990 that section 108 could be used for this purpose even on the application of a former liquidator whose offices had been vacated because his authorisation to act as an insolvency practitioner had been suspended by the appropriate professional body (see Re AJ Adams (Builders) Limited [1991] BCLC 359 at 364b-g). In similar circumstances, Blackburne J relied on section 108 to appoint a replacement liquidator in relation to four companies in creditors’ voluntary liquidation in Re Bridgend Goldsmiths Limited [1995] 2 BCLC 208 (at 209d-i).

The jurisdiction to appoint a replacement office-holder in cases of compulsory liquidation or bankruptcy is less obvious; but the approach of Harman J in Re ParkdawnLimited was followed by Chadwick J in Re Sankey Furniture Limited [1995] 2 BCLC 594 (at 602d-603g). Before the Court were block-transfer applications by two office-holders, Mr Harding and Mr Betts. Mr Betts had been a partner in the firm of Grant Thornton working in the Nottingham office. He was retiring from practice as an insolvency practitioner due to ill-health. Mr Harding was not retiring. He wanted to be replaced because he was moving from the firm of Pannell Kerr Forster in Nottingham to the firm of Grant Thornton. In fact Mr Betts had nominated Mr Harding to be his successor. Chadwick J refused Mr Harding’s application because he was not satisfied that Mr Harding was unable continue in office merely by virtue of moving firms and he considered that the creditors, if there was a meeting, might have a meaningful choice as to whether they agreed to accept Mr Harding’s resignation. Chadwick J allowed Mr Betts’ application on these grounds:-

“The circumstances in which application is made on behalf of Mr Betts appear to me indistinguishable from those in the application before Harman J in Re Parkdawn Ltd. I am satisfied that I should follow the approach adopted by Harman J in Re Parkdawn Ltd and by Warner J in Re Adams (Builders) Ltd and recognise that where the applicant liquidator and trustee is unable, through ill health or for some other cause, to continue in office – so that an application for leave to resign could not be refused – the appointment in his place of a member or employee of the same firm – who is himself an authorised insolvency practitioner and whose suitability for appointment is unimpeachable – is so obviously in the interests of the creditors in each individual liquidation or bankruptcy that meetings of creditors and contributories will serve no useful purpose. Accordingly, I should not put the creditors and contributories to inconvenience and expense by insisting that the applicant follows the procedure for resignation prescribed by the 1986 Act and under the 1986 rules.”

In May 1996 Knox J followed Harman J’s reasoning in respect of voluntary liquidations, compulsory liquidations and bankruptcies in Re Bullard & Taplin Limited [1996] BCC 973 (at 974D-975E). Two months later he held, in Re Stella Metals Limited [1997] BCC 626 (at 629G-H), that the Insolvency Practitioners Association Ltd was a proper person to apply under section 108(2) of the Act for the appointment of a new liquidator in a creditors’ voluntary liquidation, where the previous office-holder had lost his license to practice.

The next case to which I was referred was the decision of Carnwath J in Re a Licence-holder, Abbot & Others [1997] BCC 666. The case involved a block-transfer order relating to nearly 400 insolvencies where the office-holder had been deprived of his authority to act as a licensed insolvency practitioner. The case is mainly of interest for what Carnwath J had to say about the power to appoint a new supervisor of company voluntary arrangements and individual voluntary arrangements. Carnwath J relied upon section 108 to justify appointing a replacement liquidator in a number of creditors’ voluntary liquidations. There were no bankruptcies involved.

Blackburne J returned to the topic in October 1997 in his judgment in Re A & C Supplies Limited [1998] 1 BCLC 603. The case involved a proposed block-transfer covering (amongst others) the office of joint liquidator of 77 companies creditors’ voluntary liquidations, sole liquidator of two other such companies, liquidator of 9 companies in compulsory liquidation and trustee in respect of 27 bankruptcies. The outgoing office-holder had resigned from his partnership in Baker Tilly and had also been served by Baker Tilly with a notice of expulsion from the partnership. Blackburne J held that Baker Tilly had demonstrated a sufficient interest to be entitled, through one of its remaining partners, to make the application. In so deciding he followed the approach in Re Stella Metals Limited. He then made a block-transfer order, removing the incumbent and replacing him by the appointment of a new office-holder in all of the liquidations and bankruptcies. He expressed his reasons in the following terms:

“First, the question of jurisdiction. There is no doubt that this court has jurisdiction to remove a liquidator, whether of a company in creditors’ voluntary liquidation or of a company in compulsory liquidation, at any rate for cause shown: see s. 108(2) and s. 172(2) of the Insolvency Act 1986 (the 1986 Act).

By “cause shown”, which is the expression appearing in s. 108(2) and which must I think be implicit in the court’s power under s. 172(2), I mean where, for whatever reason, the office-holder is no longer able satisfactorily to discharge the functions of his appointment. Similarly in the case of a trustee in bankruptcy: see s. 298(1) of the Insolvency Act. Equally, there is no doubt that, having removed a liquidator or trustee, the court has power to appoint a replacement. The power exists expressly in the case of voluntary liquidators: see s. 108(2); and exists impliedly in the case of compulsory liquidations and bankruptcies: see s. 168(3) and s. 303(2), considered adequate for the purpose by Harman J in Re Parkdawn Ltd (15 June 1993, unreported) and by Knox J in Re Bullard & Taplin Ltd [1996] BCC 973. Although, as Harman J in Re Parkdawn Ltd observed, there appears to be no express power under the Insolvency Act conferred upon the courts to make an appointment inn these circumstances, interestingly, the Insolvency Rules 1986, SI 1986/1925 (the 1986 rules) seem to assume that such a power exists: see r. 4.116(6), in the case of compulsory liquidations and r. 6.132(5), for its bankruptcy equivalent. I should add that I cannot think that the court’s jurisdiction under these provisions is dependent on the application for its exercise being made by the liquidator or trustee in question. The material question is whether the matter is properly before the court on the application of someone with a sufficient interest to invoke the court’s jurisdiction, an issue to which I will return later. If it is, the court, in my view, has jurisdiction to make the order appointing a new liquidator of a company in compulsory liquidation in place of another that the court has removed or to appoint a new trustee in bankruptcy in place of the trustee whom the court has removed.”

The issue came before Neuberger J in Re Equity Nominees Limited [1999] 2 BCLC 19, where he was invited to make a block-transfer order in relation to 18 bankruptcies, one compulsory liquidation and 24 IVAs because the outgoing office-holder was relinquishing his partnership in a major form of accountants and no longer had the facilities to discharge his duties. Neuberger J made the Order on certain terms. On the question of jurisdiction, he said this (at 21h-22a):

The issue was revisited in two cases decided in December 1998 - Supperstone v Auger [1999] BPIR 152 and Re Alt Landscapes Limited [1999] BPIR 459. Both were primarily concerned with the block-transfer of appointments to the office of trustee in bankruptcy. The unusual feature in Supperstone v Auger was that Mr Auger (the outgoing office-holder) was trustee of five bankruptcies which pre-dated the 1986 Act and were governed by the Bankruptcy Act 1914. Had it not been for that feature, it is plain that Park J would not have delivered a reasoned judgment because, as he said, “Applications for block orders of this kind are convenient and have, I believe, become common over recent years”. He referred to the judgment of Harman J in Re Parkdawn Ltd as “the trend-setting decision”.

There had in fact been one pre-1986 bankruptcy included in the application in Re Parkdawn Ltd. Harman J had simply observed in his judgment that counsel had not said anything to persuade him that he could make an order to transfer the appointment in that case, and he had not done so. However counsel for the applicants in Supperstone v Auger argued that there was power to make the transfer even in a pre-1986 bankruptcy. Park J accepted that submission. He held that the Court did have the necessary power:

Park J went on to say this:

“There are two important points which arise from decisions under s. 303(2). First, it empowers the court to appoint a person to be a new trustee in a bankruptcy, in succession to a former trustee who has been removed from office: so held by Harman J in Re Parkdawn Ltd (above), followed by Knox J in Bullard & Taplin Ltd [1996] BPIR 526 at p528G, and Blackburne J in Re A & C Supplies Ltd [1998] 1 BCLC 603 at p.608e. Therefore the appointment of a new trustee is a ‘particular matter arising under the bankruptcy’, so that the court can make an order about it. In my judgment it must follow that the removal of an existing trustee is also a ‘particular matter arising under the bankruptcy’, and the court could, under s. 303(2), make an order about that as well. The judges in the cases which I have cited did not rely on s. 303(2) as the source of their power to remove an existing trustee under a post-1986 bankruptcy, because s. 298(1) conferred an express power and they relied on that. In my judgment, however, they could have relied on s. 303(2) as well. So I am satisfied that the court, upon an application to it, has power under the indistinguishable s. 79(3) of the Bankruptcy Act 1914 both to remove Mr Auger from his existing trusteeships under that Act and to appoint other persons in his place.

The second matter which arises from decisions on s. 303(2) of the 1986 Act is this: although the section begins ‘The trustee of a bankrupt’s estate may apply …’, the court still has jurisdiction to proceed and exercise its powers under the subsection even if the matter is before it otherwise than upon an application by the existing trustee, provided only that it is properly before it in some other way. In Re A & C Supplies Ltd (above) Blackburne J said (at p.608G):

‘… I cannot think that the court’s jurisdiction under these provisions is dependent on the application for its exercise being made by … the trustee in question. The question is whether the matter is properly before the court on the application of someone with a sufficient interest to invoke the court’s jurisdiction …’

He proceeded to hold that the proposed new trustee, or someone acting on behalf of the firm of which the proposed new trustee was a partner, had sufficient interest to invoke the court’s jurisdiction. The position under s. 79(3) of the Bankruptcy Act must in my view be the same, and it follows that in this matter, where the application has been brought by the proposed successors of Mr Auger, I have jurisdiction to make the order requested.”

Park J added a Table to his judgment illustrating the statutory provisions which, according to the authorities, justified removal of the present office-holder and appointment of a successor, in the various individual and company insolvency procedures.

In Re Alt Landscapes Limited [1999] BPIR 459, Lloyd J disagreed with the view taken by Chadwick J in Re Sankey Furniture Ltd that a trustee in bankruptcy could resign his office if it was undesirable or inconvenient that he should continue to discharge his duties. The wording of rule 6.123(3) requires the court to be satisfied that it is “impracticable” for the trustee to continue. Lloyd J construed that term as connoting “something which is not far short of complete impossibility”. However he made the block-transfer Order. As to the jurisdiction to appoint a replacement trustee, he said (at p. 462):

“I should mention that in the absence of any express provision in the Act or the rules it has been held in the analogous situation of liquidation … that the court can appoint a new office-holder in replacement of one who has been removed by virtue of the provision for applications for directions. In the bankruptcy regime the relevant section is s. 303(2).”

An application for a block-transfer Order in respect of 240 appointments came before Neuberger J in Clements v Udal [2002] 2 BCLC 606 in June 2000. The only unusual aspect of the case was that the application was made by co-partners of the outgoing office-holder without notice to him. A temporary order was made, appointing the applicants as additional office-holders on a temporary basis. The matter was then adjourned to allow Mr Udal to make his views known to the court. The case is only of significance in the present context for two passages which appear in the judgment. As to the block-transfer procedure, Neuberger J said this (at 607i-608a):

“The power of the court to make such an order has been considered in a number of cases, including Re A & C Supplies Ltd [1998] 1 BCLC 603. As the evidence in that case shows, and, indeed, the evidence in this case, shows, it is highly desirable that, where an accountant dies or retires, or is for some other reason unable to act, a blanket application is made in relation to all his appointments to have him replaced by an appropriate replacement.”

Later (at 609h), on the question of jurisdiction to appoint additional trustees in bankruptcy, he said:

“So far as bankruptcies are concerned, s. 363(1) of the 1986 Act provides that: ‘Every bankruptcy is under the general control of the court …”. To my mind those very wide words do give power in appropriate cases to the court to appoint temporary additional trustees in bankruptcy.”

The last case to which I was referred by counsel is a Scottish one. In Geddes and Birch, Re AGM Casualwear Limited [2006] CSOH 75, Lord Drummond Young was concerned, in May 2006, with an application by joint liquidators of a company which had been wound-up by the court in November 2001 that they be replaced by new joint liquidators following the takeover of their firm by BDO Stoy Hayward LLP. The judge referred to the provisions in the Act and in the Scottish Insolvency Rules governing resignation in a compulsory liquidation (section 172 and rules 4.28 and 4.29). He noted that there was no provision in the Scottish Rules for a new liquidator to be appointed where the creditors’ meeting was not quorate and the default provision in rule 4.29(6) took effect, whereby the meeting was to be deemed to have taken place and the resignation accepted. He agreed that the statutory resignation procedure in rules 4.28 and 4.29 was expensive and cumbersome in cases where the outgoing office-holder held multiple appointments. He then referred to the block-transfer procedure followed in England and recited the justification for that procedure in the judgment of Neuberger J in Re Equity Nominees Ltd [2000] BCC 84 at 87B-H ([1999] 2 BCLC at 22d-23b).

Lord Drummond Young continued:

“In my opinion the policy considerations that underlie the English cases are equally applicable in Scotland; … . For that reason I consider that it would be desirable, if possible, to adopt a similar procedure in Scotland. The basis of the English jurisdiction is found in section 168(3) and 172920 of the Insolvency Act. Section 172(2), which applies in Scottish liquidations, is in the following terms:

‘Subject as follows, the liquidator may be removed from office only by an order of the court or by a general meeting of the company’s creditors summoned specially for that purpose in accordance with the rules.’

Sufficient cause must obviously be shown if the court is to exercise the power conferred by that subsection. Nevertheless, where a liquidator cannot effectively perform the duties of his office, that is manifestly sufficient cause for his removal …

The second statutory provision founded on in the English cases is section 168(3) of the Insolvency Act. That subsection cannot be founded on in Scotland, because section 168 is only applicable to companies that are being wound up by the court in England and Wales. Subsection (3) provides that the liquidator may apply to the court for directions in relation to any particular matter arising in the winding up. There is no corresponding statutory provision in Scotland. Nevertheless, a liquidator is an officer of the court: Millar, 1890 18R 179. As such he has an inherent power to apply to the court for directions as to the performance of his functions, or for authority to follow a particular course of action. The court has a corresponding common law power to regulate the conduct of the liquidator, and to pronounce such orders as are necessary to ensure that the winding up, which is under its control, is carried out properly and efficiently. Those common law powers are at least as wide as the English statutory power, and their existence may well explain the absence of any statutory provision in Scotland.

In my opinion the foregoing common law powers can be used in an appropriate case to replace a liquidator who has been removed from office; it is obvious that the conduct of the winding up requires a liquidator, and any failure in the office must be remedied. Indeed, if the procedure in rule 4.29(6) were followed, with the result that the liquidator’s resignation was deemed to have been accepted by the creditors, the only procedure available for appointing a new liquidator would appear to be an application to the court, presumably by the resigning liquidator. On this basis I am of opinion that the procedure that has been adopted in English cases such as Re Equity Nominees Ltd can competently be followed in Scotland; the court has statutory power to remove a liquidator and a common law power to appoint a replacement. …”

It is to be noted that there is an exact equivalent in the English Insolvency Rules to Rule 4.29(6) in the Scottish Rules. It is Rule 4.108(6). The corresponding provision in bankruptcy is Rule 6.126(5). These English Rules provide:

“If there is no quorum present at the meeting summoned to receive the [liquidator’s][trustee’s] resignation, the meeting is deemed to have been held, a resolution is deemed to have been passed that the [liquidator’s][trustee’s] resignation be accepted and the creditors are deemed not to have resolved against the [liquidator][trustee] having his release.”

The equivalent English rule in a members’ voluntary winding-up (where it is not required that the liquidator’s resignation should be accepted by the meeting of contributories) is Rule 4.142(4A). In voluntary liquidations these “deeming” provisions cause no problem. Although no, or an insufficient number, of creditors or contributories may have turned up to the meeting, so no replacement office-holder will have been chosen, the Court can exercise its power of appointment under section 108(1). But there is no equivalent section to section 108 which applies to winding-up by the Court or to bankruptcy. Unless section 168(3), in the case of compulsory liquidation, or sections 303(2) or 363(1), in the case of bankruptcy, fill the gap an English court would be likely to face precisely the lacuna faced in Geddes and Birch, Re AGM Casualwear Limited. As Lord Drummond Young observed, it is a lacuna which may arise wherever the creditors have lost interest e.g. through passage of time or where the dividend is likely to be negligible. Mr Littman’s contention is that there is no lacuna. The gap is filled by section 300, under which the Official Receiver becomes the trustee.

Reference was made in the course of argument to the unreported judgment of Rimer J in Re Crickhowell Construction Ltd (31 July 1998). It was another case of retirement, where the outgoing office-holder was replaced in a block-transfer Order. No doubt there are other unreported judgments applying the block-transfer procedure. As far as I am aware, the only reported judgment on this topic which was not cited by counsel was the judgment of Judge Gilliland QC in HM Customs & Excise v Allen [2003] BPIR 830. In that case Judge Gilliland was asked to review two block-transfer Orders. The application was made by a creditor in many (but not all) of the estates affected. The transfers related to most kinds of insolvency procedure. The outgoing office-holder, Mr Bennett, had held appointments as the administrator of companies and of company voluntary arrangements, as the liquidator of companies in creditors’ voluntary liquidation and in compulsory liquidation, as the supervisor of IVAs, as the trustee in bankruptcy in a number of cases, and as the liquidator in a partnership winding-up, the administrator in a partnership administration and the supervisor in a partnership voluntary arrangement. Three insolvency practitioners had been appointed to replace him. Each of these successors was represented by counsel, as was the creditor making the application. Unusually, therefore, it was a contested case. The creditor was objecting to the transfers on a number of grounds, including whether Mr Bennett had made full disclosure of the reasons why he wished to resign and whether the successors were fit and proper persons to be appointed in his place. The judgment examines the scope of the review of a block-transfer Order and the principles to be applied in deciding whether to grant relief. No challenge was made to the jurisdiction to make a block-transfer Order and, not surprisingly in the circumstances, Judge Gilliland approached the matter on the footing that the jurisdiction was well-settled. He accepted (at the end of paragraph 5 of the judgment) that “The Court … has jurisdiction to remove a liquidator or trustee in bankruptcy and to appoint a replacement under sections 108(2), 172, 298 and 303 of the Act”.

Against the background of such a consistent line of authority, which has been given the imprimatur of a Practice Direction setting out how the jurisdiction should be invoked, it would be tempting to conclude that the time has long passed when it was possible to argue that the block-transfer procedure is ultra vires and without foundation in law. To his credit, Mr Littman, in his concise but carefully reasoned argument, has demonstrated otherwise.

He is of course right that no jurisdiction can be derived from the Practice Direction. The Practice Direction cannot override the Rules and the Rules cannot override the Act (see Re C (Legal Aid: Preparation of Bill of Costs) [2001] 1 FLR 602). He is also right to point out that all of the cases to which I have referred were decisions at first instance. There is no decision of the Court of Appeal which approves their reasoning or binds me to hold that there was jurisdiction to make the block-transfer Order in the present case. In these circumstances, whilst the judicial lineage represented by the cases makes them powerfully persuasive, it does not absolve me from having to determine whether the jurisdiction which was assumed in each of them rests on a sound footing.

Mr Littman submits that it does not. Strictly, I am only concerned with whether the court has jurisdiction to appoint a new trustee in bankruptcy in place of a trustee whom the Court has removed from office under section 298(1). But many of the matters raised similarly affect the jurisdiction of the court to appoint a liquidator in a compulsory winding-up.

Mr Littman’s arguments on behalf of Mrs Donaldson may be summarised thus:

In none of the cases where a trustee in bankruptcy has been replaced in a block-transfer has any consideration been given to the limitations imposed by section 297 of the Act on the power of the court to appoint trustees in section 292(1)(c). The issue appears never to have been addressed. The explanation may be that in the vast majority of cases (Re A & C Supplies Ltd and HM Customs & Excise v Allen appear to be the sole exceptions) the respondent did not appear or was not legally represented. Whatever the reason, the failure to focus on the power conferred by section 292(1) and its restricted ambit means that all of the decided cases are of doubtful authority. The adoption of the block-transfer procedure was driven by a pragmatism which overtook proper analysis of the statutory framework. The Act expressly permits the court to appoint a replacement trustee only in the special cases referred to in section 297(1), (4) and (5). These do not include cases of bankruptcy which fall outside those sub-sections, where the previous trustee has been removed by the court or where he has resigned or retired for one of the reasons set out in Rule 6.126(3). The Act should be interpreted in accordance with the “expressio unius” principle “– in this instance the express mention of a particular power excludes by implication any other power. Accordingly the Act confers no authority to appoint a trustee or replacement trustee outside the 3 categories in section 297(1), 297(4) and 297(5).

Rule 6.132(5) is of no assistance. It assumes there is a power of appointment but does not purport to confer one. In any event Rule 6.132(5)(c) provides that where the court appoints a new trustee, Rule 6.121 applies. Rule 6.121 is expressly confined in its application to appointments under section 297(4) and 297(5) of the Act. This limitation means that Rule 6.132(b) (“the order [removing the trustee] may include such provision as the court thinks fit with respect to matters arising in connection with the removal”) does not help either.

Section 303(2) does not provide the solution. It is artificial and unnecessary to interpret the liberty given to a trustee to apply for “directions” as encompassing a power in the court to remove him and appoint a replacement. There is provision in section 300 of the Act for what is to happen whenever a vacancy arises in the office of trustee. By that section, the Official Receiver assumes the role of trustee until the vacancy is filled by one of the processes referred to in section 300(3) and section 300(4) (appointment by meeting of creditors or by the Secretary of State). The different views taken of the ambit of section 79(3) of the Bankruptcy Act 1914 by Harman J in Re Parkdawn Ltd and by Park J in Supperstone v Auger also cast doubt on the true ambit of section 303(2). Park J found the similarity between the two sections was such that there was jurisdiction to order the transfer of an appointment in a pre-1986 bankruptcy as well. Harman J, whilst content to rely on section 303(2), was not willing to appoint a new trustee in the one pre-1986 bankruptcy included in the application before him.

Section 363(1) does not provide the answer either. Neuberger J was wrong to rely on that section in Clements v Udal (admittedly only for the temporary appointment of additional trustees) because it is limited by the phrase “subject to the provisions of this Group of Parts” (i.e. the Second Group of Parts covering Insolvency of Individuals and Bankruptcy). The power of control is therefore circumscribed by the express powers in the Group, which include sections 292(1) and section 297(1)-(5).

Attractively though these arguments were put by Mr Littman, I am not persuaded that they show that there is no jurisdiction to appoint a replacement trustee under the block-transfer procedure, or that the cases which have adopted and approved that procedure were wrongly decided.

I see no warrant for reading section 292(1) of the Act as being exhaustive. Unlike section 298 (removal of trustee) it does not state that the power of appointment can only be exercised in the manner and in the circumstances set out in sub-paragraphs (a), (b) and (c). As I read it, section 292(1) contains a general statement of the manner and circumstances in which the power is exercisable, and will usually be exercised. Aside from the wording of the section, Mr Littman was not able to point to any factor which would compel the court to construe it as providing an exhaustive list of the circumstances in which the court may appoint a trustee, and I do not find that the wording alone requires that conclusion.

This view is to my mind reinforced by the fact that section 297 deals only with special cases. If Mr Littman is right, the court only has power to appoint a trustee in bankruptcy in the 3 narrowly defined special cases in sections 297(1), 297(4) and 297(5). These are each cases where an original appointment is to be made, either on the presentation of a petition (in criminal bankruptcy) or on the making of a bankruptcy order in existing insolvency proceedings. The circumstances in sections 297(1), (4) and (5) do not encompass the filling of a vacancy. I am therefore not surprised that section 297 has received no mention in the cases. It is manifestly inapposite to deal with the replacement of an outgoing office-holder. I do not accept for one moment that judges have overlooked section 292(1) and section 297. They could hardly have done so when reference has so frequently been made in the judgments to the power to remove a trustee in section 298. The explanation is that judges have recognised the narrow ambit of the power conferred by those sections and have looked elsewhere for recognition of the court’s power to control the bankruptcy process and the conduct of trustees. They have alighted on section 303(2) and, more recently, on section 363(1).

If, as I think, it is right to construe section 292(1) as providing no more than a general statement of the manner and circumstances in which the power of appointment will usually be exercised, the powers conferred by sections 303(2) and 363(1), if they encompass a power to appoint, are not circumscribed by sections 292 and 297. Whilst, therefore, it is true that this analysis is not spelled out in the cases, I think it is implicit in the judgments where the question of the jurisdiction to appoint has been addressed.

There is also nothing wrong with the fact that the search for a statutory basis for the power to appoint a replacement trustee in block-transfers has been driven by pragmatic considerations. Provided creditors’ rights to object are safeguarded, it is in the interests of all concerned to avoid the time and expense involved in calling a meeting. It would be in the interests of Mrs Donaldson in the present case. She could not have objected to the appointment of Mr O’Sullivan by a meeting of creditors. However the cost of appointing Mr O’Sullivan by that route would have been much greater than those imposed on her estate by paragraph 6 of the block-transfer Order.

I have accepted that Rule 6.132(5) is not worded so as to confer a power to appoint: it simply assumes that there is power. However the reference in Rule 6.132(5)(c) to Rule 6.121 does not in my opinion lead to the conclusion that the power assumed in Rule 6.132(5) is only the power to appoint a trustee under section 297(4) or 297(5). I read the reference in Rule 6.132(5)(c) to Rule 6.121 as importing the procedure in Rule 6.121 rather than the limitation in Rule 6.121(1) that the Rule applies “… where the court under section 297(4) or (5) appoints a trustee”. There is some support for this view in the equivalent Rules governing liquidations. Rule 4.120-CVL(6)(c) refers to the appointment procedure in Rule 4.103-CVL and Rule 4.119(6)(c) refers to the appointment procedure in Rule 4.102. Whereas Rule 4.103-CVL is probably comprehensive in saying that it applies to appointments of liquidators under section 100(3) or section 108, Rule 4.102 (which applies to members’ voluntary liquidations and compulsory liquidations) is not comprehensive where it says that it applies where the liquidator is appointed by the court under section 139(4) or section 140. There is power to appoint a liquidator in a members’ voluntary liquidation under section 108, which could be exercised (and has been exercised in several of the reported cases) following removal of the outgoing office-holder in accordance with the procedure in Rule 4.119. It surely cannot be said that the procedure in Rule 4.102 has no application in such cases because the reference in Rule 4.119(6)(c) to Rule 4.102 confines the power to appoint to the instances specified in Rule 4.102(1). In my judgment, the power to appoint which the Court is assumed to possess in Rule 6.132(5)(c) is not specific. The Rule can perfectly well cover appointment of a trustee under section 303(2) in a block-transfer Order. By the same reasoning Rule 4.119(6)(c) can cover appointment of a liquidator in members’ voluntary liquidation under section 108(1) or (2), or in a compulsory liquidation under section 168(3).

As for the scope of section 303(2), the power to give directions “… in relation to any particular matter arising under the bankruptcy” is, on the face of it, an unfettered power. The sub-section does not say, for example, that the particular matters in respect of which directions may be given are limited to those for which provision has been made elsewhere in this Group of Parts of the Act. The heading to section 303 (“General control of trustee by court”) suggests the broad nature of the powers which the section confers. Sub-section (2) plainly extends to the giving of guidance to a trustee. I do not see why it cannot also extend to giving directions for the appointment of a successor in circumstances where the trustee wishes, or is obliged, to relinquish his office. The fact that there is a default mechanism in section 300 for the Official Receiver to take over whenever there is a vacancy in the office of trustee, is not in my estimation a good ground for confirming the power in section 303(2) so as not to include a power to avoid there being a vacancy. On the contrary, there are powerful policy reasons, summarised by Chadwick J in Re Sankey Furniture Limited [1995] 2 BCLC at 600b-603g, why the court should have that power and should exercise it in an appropriate case. The administrative inconvenience which would arise if the Official Receiver had to assume control every time a trustee retired or resigned would be immense. It would enforce a hiatus in the administration of every bankruptcy even if the Official Receiver did not delegate the choice of a successor to a creditor’s meeting in the exercise of his powers under section 300(3). Were he to do so, the additional expense and time which block-transfer Orders are designed to avoid would be superimposed on the process of replacing the office-holder in every case. It would be a recipe for confusion and delay.

I attach less significance than does Mr Littman to the fact that Harman J in Re Parkdawn Ltd was not prepared to appoint a replacement trustee in the single pre-1986 bankruptcy included in the application in that case. There is no evidence that Harman J was ever referred to section 79(3) of the 1914 Act or asked to focus on the similarity in wording between that section and section 303(2). If he had been, I think that he could not have failed to arrive at the same conclusion as Park J in Supperstone v Auger, given the strength of his view that s. 303(2) and s. 168(3) of the 1986 Act both conferred jurisdiction to appoint replacement office-holders.

The last point to be made about section 303(2) is that it begins by saying that: “The trustee of a bankrupt’s estate may apply …”. It could be argued (although this was not a point taken by Mr Littman) that if section 303(2) does confer power to appoint a replacement trustee, it is a power which can only be exercised on an application by the outgoing office-holder and not by some other interested person. That argument would have caused me to hesitate, were it not for the fact that it has been considered and dismissed by Blackburne J in Re A & C Supplies Ltd (at 608G) and by Park J in Supperstone v Auger (at153H-154C). I am content to follow their decision on this point.

That leaves section 363(1). I am unable to accept Mr Littman’s argument that the power of general control is constrained by the phrase “… subject to the provisions in this Group of Parts”. From where it appears in the sub-section I read that phrase, if it has a qualifying effect, as qualifying the “full power to decide all questions of priorities and all other questions, whether of law or fact, arising in the bankruptcy”. It does not confine the court’s general control of the bankruptcy process. I read section 363(1) as being a sweeping-up provision which emphasises the over-arching power of the court to ensure than bankruptcies are properly and fairly administered. I think that Neuberger J was right to resort to section 363 as the source of the power he needed to make temporary appointments of additional trustees in Clements v Udal. If the section can legitimately be used for that purpose, it can in my judgment equally be used to appoint a permanent substitute for an outgoing trustee.

There is an echo here of Lord Drummond Young’s judgment in Geddes and Birch, Re AGM Casualwear Limited [2006] CSOH 75 where he concluded that in the absence of a statutory provision conferring power to appoint a replacement liquidator, the common law would fill the gap. Mr Littman’s objection to that decision is that the Scottish court did not consider the impact of the statutory code of the Insolvency Act and Scottish Insolvency Rules on the common law. But that argument only has validity if there are good grounds for concluding that the statutory code is comprehensive and exhaustive, and so has displaced the common law and the inherent jurisdiction of the court to control the conduct of its officers. It will be clear from this judgment and from the cases to which I have referred that the provisions of the Act and of the Rules have not been drafted with complete consistency and do not cater expressly for every contingency. In the circumstances I think Mr Littman’s criticism of the decision in Geddes and Birch, Re AGM Casualwear Limited is misplaced. As I read that case, Lord Drummond Young would have relied on s. 168(3) if it had applied to liquidations in Scotland. He would have relied on sections 303(2) and 363(1) as well if had he been asked to appoint a replacement trustee in bankruptcy and those sections applied in Scotland. They do not in fact apply in Scotland. Scotland has its own rules on personal insolvency in the Bankruptcy (Scotland) Act 1985. However, the width of all three sections means that there is no need for an English court to invoke any powers it may have at common law.

At the heart of Mr Littman’s case lies an anomaly. On his argument, the court has less control over the replacement of office-holders who are officers of the court than it does over office-holders who are not. Liquidators in voluntary liquidations are not regarded as officers of the court (see: Re London County Commercial Reinsurance Office [1922] 2 Ch 67 and Re John Bateson & Co. Ltd [1985] BCLC 259). That may be one reason why an express power to replace liquidators in both types of voluntary liquidation was included in section 108 of the Act. However a liquidator in a winding-up by the court is treated, at least in the exercise of many of his functions, as an officer of the court (see: Re Hill’s Waterfall and Estate and Goldmining Company [1896] 1 Ch 947 and section 160 of the 1986 Act). So is a trustee in bankruptcy (see James LJ in Re Condon, ex parte James (1874) 9 Ch App 609 at 614 and In re Tyler, ex parte Official Receiver [1907] 1 KB 865). It would be strange if it was the law that, because the Act contains no equivalent of section 108 which applies to them, the court has no power to make an order to replace these office-holders when the circumstances are appropriate for it to do so.

For the reasons I have given, I reject the argument that the court lacked jurisdiction to appoint Mr O’Sullivan as Mrs Donaldson’s trustee in bankruptcy in place of Mr Gilderthorp under the block-transfer Order of 18^th May 2006.

Insofar as the Order may have given the wrong impression, where it stated in paragraph 4.1.2 that Mr O’Sullivan was being appointed “… pursuant to rule 6.132(5) Insolvency Rules 1986”, it can be corrected under Rule 7.55. Rule 7.55 is designed to cure formal defects and irregularities (see Blackburne J in Re Bridgend Goldsmiths Limited [1995] 2 BCLC 208 at 212g). This is at best a formal defect since my conclusion is that there was jurisdiction to make the Order under section 303(2) and/or section 363(1) of the Act. For my part I do not consider that any amendment of the Order is necessary: but if the Order is to be amended it should read: “… pursuant to section 303(2) and/or 363(1) of the Insolvency Act 1986”.

Subject to the foregoing, the application to have paragraph 4.1.2 of the Order of 18^th May set aside is dismissed.