Mr Reynard, a bankrupt, made an claim against his Trustee, Mr Fox. Mr Reynard acted in person at all times and issued proceedings at the county court money claims centre for breach of contract and negligence, asserting that his Trustee had failed to assess potential claims properly and had incorrectly valued the claims, and therefore had failed to take action.
Mr Reynard alleged that a contract existed between him and his Trustee under which the Trustee would pay the balance of the bankruptcy estate to Mr Reynard, after payment to the creditors and costs and expenses had been deducted. Mr Reynard claimed that it was an implied term that the Trustee would exercise reasonable care and skill; however Mr Reynard did not detail any particulars of breach. Mr Reynard also alleged that a negligence claim arose on the basis the Trustee owed him a duty of care.
The Trustee applied to strike out Mr Reynard's claim under the following:
- CPR 3.4(2)(c) - failure to comply with a court order, as there was an order in place which stated that if Mr Reynard wished to make any further applications relating to his bankruptcy, he must apply to a specific court and mark it for the attention of two particular Judges, which he did not do
- CPR 3.4(2)(a) - the statement of case disclosed no reasonable grounds for bringing the claim
- CPR 3.4(2)(b) - the statement of case was an abuse of the court's process or was otherwise likely to obstruct the just disposal of proceedings
In a previous application made by Mr Reynard under s.303 of the Insolvency Act 1986 (the "IA 1986"), the court had already made findings in relation to a number of legal and factual issues raised by Mr Reynard. The Trustee submitted that Mr Reynard was abusing the court process by attempting to reopen the issues which had already been decided
In a supplementary skeleton argument, submitted out of time and on the day of the hearing, Mr Reynard also sought permission to bring a claim under s.304 IA 1986 (essentially alleging misfeasance and / or breach of duty) as an alternative to the breach of contract and negligence claims.
The High Court dealt with the contract aspect of the claim very swiftly, concluding that there was simply no contract between Mr Reynard and his Trustee and therefore the claim for breach of contract was struck out.
The Court then went on to consider the negligence claim, and made reference to the decision in Oraki -v- Bramston  EWCA Civ 403 which distinguished the potential liability of a Trustee to the bankruptcy estate, governed by s.304 IA 1986, and the potential liability to the bankrupt personally. The Court concluded that Mr Reynard's claims related to alleged losses to the bankrupt's estate and therefore the negligence claim should be made under s.304 IA 1986. As Mr Reynard had not made his claim under s.304 IA 1986, the Court also struck out the negligence aspects of the claim.
The Court also considered Mr Reynard's late skeleton argument seeking permission to bring the claim under s.304 IA 1986, and concluded that Mr Reynard could not change his claim in the middle of a hearing. Mr Reynard also claimed that because he was a litigant in person, he did not have detailed knowledge of the insolvency regulations and therefore it would be unjust to strike out his application. The Court did not agree that there would be any injustice, stating it was right to strike out because the claim, as it was put forward by Mr Reynard, was not sustainable nor was it fair to proceed with it. The Court told Mr Reynard that he could not "claim that an apple is an orange, on the grounds that you do not know the difference because you are a litigant in person".
This case is reassuring for Trustees and confirms previous case law that there is very little prospect of proving that a contractual relationship exists between a Trustee and bankrupt. The relationship between a Trustee and bankrupt is governed by the Insolvency Act and not by common law or agreements made between parties.
However it is important to note that, in circumstances where a Trustee also takes on an advisory role outside of the Trustee and bankrupt relationship, this may still open up the Trustee or the Trustee's firm to potential breach of contract and /or negligence claims in the same way as with any other client.