Success For Insolvency Lawyers In Legal Battle
Insolvency lawyers who successfully represented a Trustee in Bankruptcy in a major loan dispute have described the judgment as an important reminder of the “wide-ranging and effective powers” that Trustees in Bankruptcy hold.
The legal experts acted for insolvency practitioner Timothy Bramston of Griffins in the case, which related to Mr Bramston’s appointment as the Trustee in Bankruptcy of Shazad Riaz.
Prior to becoming bankrupt, Mr Riaz loaned more than £120,000 to his brother with the requirement it would only be repaid if more funds were subsequently loaned and if a speculative property deal in Dubai proved successful. However, following the bankruptcy, the brother argued the money would not be repayable to the bankruptcy estate and invested it into a leisure company with a property portfolio.
With the help of Irwin Mitchell’s specialist Insolvency team, Mr Bramston successfully applied to challenge the loan on the grounds that it was purely gratuitous, and was also transferred the ownership of the leisure company involved so it could be sold to pay off the original loan.
The case – Bramston v Riaz  BPIR (ChD) 43 – is believed to be the first reported instance of a Court using legislation in the Insolvency Act to hand over an asset purchased by a third party with a bankrupt person’s funds to a Trustee in Bankruptcy. Irwin Mitchell subsequently conducted an urgent sale of the company, which itself was in distress by this point, to aid efforts to maximise the value of the Mr Riaz’s estate.
Tom Paton, the solicitor at Irwin Mitchell’s Sheffield office who acted in the case, said the decision was a significant one from which lessons could be learned.
Expert OpinionWhile the decision to approve the challenge to the loan is not uncommon, the decision of the court to go to the extent of transferring ownership of an entire company to a Trustee in Bankruptcy appears to be unprecedented.
"Such a decision highlights the extremely wide-ranging and effective powers that a Trustee in Bankruptcy has, specifically in terms of the capability to undo transactions and trace funds which are paid out by individuals before they do become bankrupt.
"It is undoubtedly a timely reminder to anyone who may fall into financial difficulty, and any indeed creditor considering pursuing bankruptcy proceedings, that Trustees in Bankruptcy have the ability to put finances under significant scrutiny and take steps to acquire any monies possible." Tom Paton - Partner
Joseph Curl, barrister of 9 Stone Buildings, was instructed by Irwin Mitchell to represent Mr Bramston at trial.
Joseph added: "The forms of relief available in the Insolvency Act to remedy antecedent transactions are wide-ranging and not limited to simple money judgments - in this case a money judgment would probably not have been satisfied.
“It is essential that insolvency practitioners and their lawyers are fully appraised of the complete arsenal of weaponry at their disposal so the most effective remedy can be crafted."