IP Briefing: Appeal against AiB’s fixing of a Trustee’s Remuneration

The Background

Sheriff Philip Mann has issued an opinion in the Appeal by Blair Carnegie Nimmo as Former Trustee in the Sequestrated Estate of Mrs NAH against the Accountant in Bankruptcy, in which Mr ABH appeared as creditor [2019] SC ABE 21.

The Facts

The Former Trustee appealed in terms of s.134(1) of the Bankruptcy (Scotland) Act 2016 (“the Act”) against the AiB’s determination of his remuneration. The creditor who was the former husband of the debtor was entitled to payment from the debtor in terms of their divorce. The creditor alleged in the appeal that the Former Trustee had acted fraudulently with the debtor’s estate and therefore should have his remuneration reduced to nil. He simultaneously appealed the AiB’s decision in relation to the Former Trustee’s remuneration but that appeal was dismissed on the creditor’s own unopposed motion and the creditor did not seek to conjoin the two appeals. Earlier the parties, including the creditor, had agreed to remit the question of the Former Trustee’s remuneration to a reporter. The reporter’s opinion was that such remuneration should be fixed at a level higher than that determined by the AiB but less than that originally claimed by the Former Trustee. The creditor stated to the Sheriff that the remuneration should be fixed at nil on the grounds of the Former Trustee’s alleged fraudulent behaviour but if the Sheriff did not accept these allegations the creditor would accept that the remuneration should be as set out by the reporter. The AiB accepted the reporter’s recommendation and therefore withdrew from the appeal. The question before the Sheriff therefore was whether or not the creditor’s answers (relating to fraud) were relevant to this appeal and this was determined by the Sheriff at a diet of debate on 21st February 2018.

The Decision

The Sheriff was faced with a stark choice He either upheld the appeal, in which case the Former Trustee would receive remuneration as per the reporter’s recommendation or the appeal could be refused and the Former Trustee would receive remuneration as per the AiB’s determination (the creditor having dismissed his own appeal against the AiB). The agent for the creditor argued that the court had a wide discretion to review matters as a whole and could fix remuneration at nil and consider the conduct of the trustee including alleged fraudulent conduct. The Former Trustee’s agent argued that the creditor had had the opportunity to challenge the AiB decision by appealing and by his appeal being dismissed he could not maintain the same position in this appeal. The Sheriff concluded that what was being appealed was the AiB’s determination of his remuneration, not the Former Trustee’s conduct. It was therefore not possible to award remuneration at a level less than that awarded by the AiB (although it may have been had the creditor conjoined his appeal against the AiB; but he was now restricted to aligning himself with either the appellant or respondent). S.134(3) of the Act was clear that the Sheriff’s determination in such an appeal is final. The Sheriff was therefore clear that if he were to find someone to be fraudulent in an appeal under s.134 such a person would have no recourse to appeal and such a finding would therefore be unjust and catastrophic for that individual. The Sheriff therefore found that the creditor’s answers in the appeal were not relevant and allowed remuneration as recommended by the reporter.

Advice

This is a helpful decision, which if followed by other judges and Sheriffs, decides that a s134 appeal cannot see fixed remuneration decrease. It of course does not mean that a trustee is not left open to other proceedings regarding his conduct and the position here may have been different should the creditor have conjoined his appeal (in terms of allowing enquiry into the wider issues, even if ultimately without merit).