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MoJ cannot be sued for administrative error

27 April 2010

The MoJ cannot be sued by a trustee in bankruptcy after an administrative error by court staff led to land being sold after a bankruptcy petition was issued.

Lord Justice Lloyd said that Guildford County Court should have sent notice of the petition to the Chief Land Registrar, under rule 6.13 of the Insolvency Rules 1986, so it could be entered on the register of pending actions.

He said the land was later sold for £45,000. “It is accepted for the purposes of this appeal that, if the bankruptcy petition had been the subject of an entry in the register of pending actions and in the registered title of the particular estate, this transaction would not have taken place.”

Giving judgment in Poulton v Ministry of Justice [2010] EWCA Civ 392, Lloyd LJ said that, in principle, the bankrupt’s property should be available at the start “for realisation by the trustee in bankruptcy for the benefit of the general body of creditors”.

He described the claim as “novel” but said that other claims were waiting for the Court of Appeal’s decision.

He said the question raised by the case was whether the insolvency rules were intended to give trustees in bankruptcy a cause of action if a failure to comply with a duty led to losses.

“I do not consider that the obligation laid on the court by the rule can be considered no more than a ‘pious aspiration’ in the absence of a sanction.”

Lord Justice Lloyd said he was unable to agree with the judge at first instance that, when the insolvency rules were first introduced in 1925, it was intended that failure to comply could lead to a private claim for damages.

“I am unable to agree with her conclusion. In my judgment the rule, seen in its proper context of the other bankruptcy rules and the changes made at the same time by way of the Land Charges Act 1925 and the Land Registration Act 1925, does not disclose any such intention.

“No such sanction is necessary to make the rule more than a ‘pious aspiration’, because, on the part of relevant court officers and staff, the obligation would be performed as a matter of course.”

He went on: “The fact that occasionally there may be a failure due to oversight does not seem to me to be a sufficient reason to find a private remedy for breach of the obligation created by this rule.

“That is supported by the fact that the petitioning creditor can, if he or it wishes, make the request to the Chief Land Registrar itself, albeit incurring a modest fee in so doing.”

Lloyd LJ allowed the MoJ’s appeal against the finding that the trustee in bankruptcy could sue for breach of statutory duty.

He agreed with the judge that the failure to give notice of the bankruptcy petition did not give rise to a common law claim for damages.

Lord Justice Pitchford agreed, as did Lord Justice Pill, for different reasons.

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