Court of Appeal Clarifies Trustee Remuneration and Cost Recovery in Landmark Bankruptcy Case

On 5 June 2025, the Court of Appeal of England and Wales issued a critical ruling in the case of Servis-Terminal LLC v Valeriy Ernestovich Drelle, a decision that stemmed from a bankruptcy appeal previously considered on 31 January 2025. At that time, the court allowed the appeal and set aside both the bankruptcy order and petition against Drelle, providing pivotal relief from his bankruptcy status. The intricacies surrounding insolvency and the rights of financially distressed individuals came to the forefront as Drelle navigated this legal battle.

The latest judgement arose following a hearing set for 9 May 2025, which aimed to address matters consequential to the earlier ruling. Typically, such matters are resolved through paperwork; however, due to significant points raised by trustees Mr Robert Starkins, Mr Nicholas Nicholson, and Mr Russell Parkin, an in-person hearing was warranted. These trustees, appointed by the Secretary of State in May 2023, presented substantial concerns requiring judicial consideration.

Judges Lord Justice Newey, Lord Justice Popplewell, and Lord Justice Snowden evaluated various issues associated with the appeal. In their decision, they reaffirmed the removal of the bankruptcy trustees from their roles, returning control of the estate to Drelle. The ruling displayed the court’s determination to prevent a protracted process from delaying much-needed relief for individuals wrongfully declared bankrupt.

Several important conclusions emerged from this hearing. Notably, the court determined there would be no costs incurred for the application to set aside the statutory demand or the bankruptcy petition. However, it mandated that Servis-Terminal LLC would be responsible for covering Drelle’s appeal costs, acknowledging his successful outcome in the proceedings.

The court also addressed the management of funds held in court, instructing that these should be allocated to cover Drelle's appeal-related costs while any remaining amount would revert to Servis-Terminal LLC, contingent upon approval from the Office of Financial Sanctions Implementation. This stipulation underscored the importance of adherence to legal frameworks in financial matters.

A more complex facet of the discussion centred on the trustees and their remuneration. The trustees expressed concerns regarding the implications of the bankruptcy order being set aside on recovering their expenses. They requested a High Court hearing to assess potential remuneration and expenses, emphasising the challenge of cost recovery without some resolution related to the bankruptcy.

In response to the trustees' concerns, Drelle provided an undertaking to limit his ability to dispose of specific properties until the issue of the trustees’ remuneration was resolved. This undertaking proved essential in reassuring the trustees they would not be left without a means to recover reasonable costs amidst the complexities of insolvency law.

In conclusion, the court declined to grant permission for an appeal to the Supreme Court, expressing confidence in their judgement while allowing for a stay on any such application by Servis-Terminal. This case epitomises the nuanced dynamics of bankruptcy law, illustrating the balance that courts must strike in upholding legal traditions while fostering fair outcomes for individuals facing financial hardship. The resolution provides important insight into the judiciary's approach to financial disputes and their broader implications for all parties concerned