Banking and finance dispute resolution
For the latest news and comment on banking and finance disputes.
For the latest news and comment on banking and finance disputes.
For all the latest news and comment in clinical negligence healthcare law
This collection looks at the latest news and comment on commercial contracting healthcare law. With the health and social care sector under…
For all the latest news and comment in employment and pensions healthcare law
For all the latest legal and regulatory news and comment in health technology
This collection contains DAC B eachcroft's latest report, The Route to Integrated Healthcare , which provides the first practical examples of how…
This collection looks at the latest strategic, commercial, regulatory and negligence legal and advisory news and comment in health and social care. …
For all the latest news and comment on employment and pensions law.
DAC Beachcroft Dublin specialises in insurance, professional indemnity, defendant personal injury, health, commercial litigation and employment work.…
For all the latest new and comment in tax law.
The GC Collective collection offers insight and comment for General Counsels (GCs) and in-house legal teams.
For the latest news and comment on Corporate, M&A and Equity Capital Markets.
Analysis, commentary and checklists on the legal and governance implications of Brexit on businesses operating in, and trading with, the UK
The Accountant's Liability Collection brings you topical news and insight of interest to accountants, actuaries, trustees and other financial…
Events and online training for the health and social care sector.
DAC Beachcroft's LatAm Quarterly Newsletter discusses topical news and issues in Latin America
In response to client suggestions and requests, DAC Beachcroft's insurance sector flagship publication.
For all the latest legal and regulatory news and comment in health and social care integration
For all the latest news and comment in corporate regulatory healthcare law
Find advice, commentary and thought leadership on all aspects of Director's & Officer's Insurance; from contract formation through to complex…
This collection looks at the latest news, comment and development on the law affecting mental health services. The law affecting mental health…
Our market-leading Information Law team regularly publish articles and updates addressing the ever-evolving Information Law landscape.
This collection looks at our Safety, Health and Environment Team and the products and services they can provide. In the climate of increased…
The Insurance Act 2015 comes into force in August 2016 and will represent a significant change to insurance contract law in this country. This…
Legislative changes are bringing major changes to the Insurance landscape. This collection houses DAC Beachcroft's alerts on the pertinent issues.
For all the latest news and comment in clinical regulatory healthcare law
Organisations face ever-increasing expectations from Government, regulators, customers or service users, and other stakeholders, so scrutiny and…
For all the latest legal and regulatory news and comment in healthcare estates and facilities management
This collection addresses the full spectrum of cyber security and data risk management – the zeitgeist of our age.
We have acted for clients in the majority of significant product liability cases that have been decided in the UK over the last 35 years. Our product…
Considering the future landscapes of our cities
The European General Data Protection Regulation (GDPR) came into force on 25 May 2016. A rewrite of European data protection law, the GDPR imposes…
Considering the future of housing
For the latest news and comment on public procurement law.
Welcome to the Construction Risks collection. This space is used to report upon issues of interest to those who seek to allocate, manage and reduce…
Technology, brands and intellectual capital are key assets for any successful business. Our intellectual property (IP) team are experts at helping…
Considering the future of retail
The Insurance Market Conditions and Trends report is DAC Beachcroft's insurance sector flagship publication. Now in its tenth year, the report…
The Solicitors' Risk Collection addresses issues and developments affecting legal practitioners, and the professional indemnity insurers of legal…
Published On: 3 December 2015
The recent case of Oraki v Bramston and Defty  EWHC 2046 (Ch) concerned former bankrupts' claims of professional negligence against their former trustees in bankruptcy (“the Trustees”). In dismissing the claims, the High Court held that the Trustees did not owe a common law duty of care to the bankrupts.
Patrick Hill and Declan Finn of DAC Beachcroft LLP, who acted on behalf of the successful Trustees, discuss the case and consider its implications for trustees in bankruptcy.
Dr Oraki and her husband Mr Oraki (together "the Orakis") were made bankrupt in 2005/2006. The defendants were subsequently appointed as trustees in bankruptcy to the Orakis' bankruptcy estates.
In January 2013 the Orakis were successful in obtaining annulments of their bankruptcies pursuant to section 282(1)(a) of the Insolvency Act 1986 ("the Act”). The annulments were subject to conditions requiring payment of the costs and expenses of the bankruptcies and creditors (other than the petitioning creditor).
In granting the conditional annulments, the High Court found there had been serious irregularities in respect of the judgment debt upon which the bankruptcies had been based. The petitioning creditor was a firm of solicitors which obtained a judgment for damages to be assessed; there was no itemised bill and the court had no power under CPR 24 to order an interim payment. In addition, the solicitor who had obtained the bankruptcy order was subsequently struck off for findings which included dishonest misrepresentations as to his professional status and academic qualifications.
The Orakis were dissatisfied with the conditions attached to their annulments and embarked upon claims of professional negligence against the Trustees. By the time of the trial in the High Court, the Trustees had obtained releases under section 299(5) of the Act.
The Orakis alleged that the Trustees were negligent by failing to: (i) bring their bankruptcies to an end expeditiously; (ii) pursue debts alleged owed to the Orakis; and (iii) maintain and maximise income from properties falling within the Orakis' bankruptcy estates. The Trustees also faced claims that they had mismanaged the Orakis' properties causing personal loss to the Orakis as well as to their bankruptcy estates. The Orakis sought to recover damages of approximately £1.5m including in respect of mental distress.
The Court held that the Trustees did not owe a common law duty of care to the bankrupts. The only duties owed were the statutory duties set out in the Act which provides the Court with powers to control the actions and decisions of a trustee in bankruptcy (section 303) and makes provision for the liability of trustees (section 304).
The Court dismissed the allegation that the Trustees should have looked into the validity of the judgment debt on the basis of which the Trustees were appointed. It was not part of the Trustees' role to review the legitimacy of the judgment and the bankruptcy orders were properly made. In this case there had been numerous unsuccessful applications by the Orakis who in various ways sought to challenge the legitimacy of the judgment both prior to and after the bankruptcy orders.
The Trustees did not have readily available cash assets to enable the bankruptcy debts and costs to be discharged and although the Trustees had sought to realise assets to discharge the bankruptcies this was met by opposition by the Orakis who wanted the bankruptcies concluded on their own terms.
The Court held that on the facts the Trustees could not be faulted for failing to pursue debts or take proceedings to pursue rights of action commenting that: "a trustee could not be criticised unless it could be shown that he had taken or had failed to take some action that a reasonably competent office holder would have taken or not taken in carrying out his functions in the exercise of his discretion".
In any event, the Court held that the Orakis could not recover personal loss due to the Trustees' release pursuant to section 299(5). This operated to discharge the Trustees from liability except under section 304 of the Act which permits the Court to order a trustee to pay compensation where the bankrupt’s estate (as opposed to personal loss such as mental distress) has suffered loss.
This was an unusual case in which the Trustees faced a claim of professional negligence from former bankrupts. Although the claims failed, there are a number of points of wider note for trustees: