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In this section we look the case of Bastholm and others v Peveril Securities (Dalton Park Retail) Ltd [2023] EWHC 438 (Ch) which gives guidance on a number of issues, including civil procedure, limitation and the definition of a "development" in a land transaction. 

We will though be focusing on the role of the trustee in bankruptcy and the extent of their involvement in proceedings on behalf of the bankrupt.

This case related to the sale of land that was to be developed into a retail complex. That land was sold in 2000 pursuant to a payment deed, where the "seller" comprised 5 individuals. The deed included an overage provision which would trigger payment to the seller should a certain stage of development be reached within 15 years of the sale. That payment would be subject to a valuation which would be determined by an independent expert, the parties could either agree to an appointment of the expert or if they could not agree they could jointly apply to RICS to make the appointment.

An application to RICS was indeed made for this purpose in 2014, by which point one of the sellers was a discharged bankrupt whose estate remained vested in his trustee in bankruptcy. The appointment was then challenged by the defendants (who would be liable to make the overage payment) on the basis that the "seller" had not made the application to RICS as not all 5 individuals were party. They said that without the trustee having been a party to the application, it was defective. The Court held that the application was defective on this basis, all 5 sellers needed to apply not just a majority and so the appointment of the expert was invalid.

The estate of the discharged bankrupt remained vested in the trustee. Under s. 283 IA 1986 the estate comprised "all property belonging to or vested in the bankrupt at the commencement of the bankruptcy” as well as certain other property. Property, as widely defined under s. 436 IA 1986, would include rights under the Payment Deed to take part in an application to RICS. The trustee had agreed that the other sellers could proceed on the basis that the trustee would be paid any proceeds which would have originally been for the benefit of the bankrupt, and that the trustee incurred no liability, risk or liability for costs. As the appointment of the expert would have incurred liability in that the "seller" agrees to pay half the costs of the expert, the trustee had clearly not consented to be part of the application to RICS. The Court said an indemnity between the remaining sellers and the trustee could have been a good option, but this was never agreed. It was clear from the evidence that the trustee was never impliedly joined into the application.

Those acting as trustees in bankruptcy should take note of their capacity to act pursuant to the contractual rights which become vested in them. This judgment discussed the potential use of an indemnity, this is something to consider along with taking additional advice.

Case details:

  • Court: High Court, Business & Property Court in Newcastle
  • Judge: Judge of the Chancery Division Davis-White KC
  • Date: 3 March 2023