When a Trustee in Bankruptcy (‘TIB’) ceases to hold office, whether by virtue of vacating due to voluntarily resignation or natural causes, or removal, pursuant to s.298 of the Insolvency Act 1986, an issue will arise as to whether the TIB also obtains his/her release, and what the effect of that release is.
Section 299 of the Insolvency Act 1986 is the key statutory provision. The first part, subsections (1) to (4) dictates the point in time when the TIB obtains his release(when that will be will depend on various factors, including whether the TIB is the official receiver or an insolvency practitioner, how they ceased to hold office, amongst others – the section provides for many permutations). Subsection (5) then provides the important provision.
Effect of Trustee in Bankruptcy’s Release
Section 299(5)  sets down the effect of the release; that subsection reads:
‘Where the official receiver or the trustee has his release under this section, he shall, with effect from the time specified in the preceding provisions of this section, be discharged from all liability both in respect of acts or omissions of his in the administration of the estate and otherwise in relation to his conduct as trustee.
But nothing in this section prevents the exercise, in relation to a person who has had his release under this section, of the court’s powers under section 304.’
As stated by as Chief Registrar Baister in Re Borodzicz  BPIR 24 (‘Borodzicz’), at paragraph 43, the consequences of subsection (5) are ‘far reaching’.
In Re Munro and Another ex parte Singer v Trustee in Bankruptcy  1 WLR 1358, Walton J had to consider the proper construction of s.93(3) of the Bankruptcy Act 1914, s.299(5)'s predecessor statutory provision governing TIB release. As to the difference between the two, Chief Registrar Baister in Borodzicz stated, at paragraph 43, that s.93(3) ‘…differs from s 299(5) in wording, but its thrust and effect are the same….’ .
On the effect of the release and discharge, Walton J stated in Munro, at 1362G:
‘What is in my judgment crystal clear is that upon a true construction of section 93(3)…it appears to me that the intention of that subsection, and it is a very right, proper and wholesome intention, is to wipe the slate completely clean so far as the trustee is concerned, so that he may thereafter pay no thought to the previous course of his actions as the trustee in bankruptcy.’
That approach and construction is to be applied s.299(5). Chief Registrar Baister in Borodzicz quoted Walton J in Munro, and stated, at paragraph 55:
‘Whilst Walton J was concerned with a different section of a different Act, his judgment is nonetheless a clear expression of the purpose of release that must be as good today and in the present context as it was when he made it in the context of the Bankruptcy Act.’
Availability of s.304 Claims Notwithstanding TIB’s Release
Formerly, a TIB was liable, before release, to an order charging the TIB with the consequences of any act or default he may have committed in breach of his obligations, where release was withheld (see s.93(2) Bankruptcy Act 1914) but following release, by virtue of s.93(3) and (4), he was not so vulnerable. An example of this can be seen in Munro and the facts in that case. The bankruptcy order had been made 1970 and the respondent TIB had only admitted the applicant creditor’s proof of debt in 1978. The applicant creditor felt aggrieved by the delay to 1978, and wished to sue the respondent TIB for it. The issue was whether the ‘order’ of the Board granting the TIB release prevented it. Walton J said, at 1362:
‘The situation, therefore, is that if the order stands it would be, in my judgment, quite impossible for the applicant to sue the trustee in respect of his conduct between the time when the order of adjudication was made in 1970 and the date in 1978 when the trustee threw in his hand quoad the applicant.’
Later Walton J in Munro stated, at 1362:
‘Of course, that means that if the release is now allowed to stand, the applicant would be deprived completely of any redress whatsoever against the trustee in bankruptcy in respect of the whole of the conduct of the trustee in bankruptcy in relation to the applicant's own proofs of debt. Having regard to many factors which I need not go into, the attitude of the trustee to the applicant's proofs may very well have been, so far as the applicant was concerned, most material in a large number of respects.’
The legal landscape is now different under Insolvency Act 1986. Although Walton J spoke in absolute terms, the new statutory provision framework in the Insolvency Act 1986, particularly s.299(5) makes clear that the TIB will remain vulnerable to s.304 of the Insolvency Act 1986claims notwithstanding the TIB’s discharge under s.299(5). As Chief Registrar Baister in Borodzicz stated, at paragraph 55:
‘The proviso contained in the last sentence of s 299(5) militates against the absolute terms in which Walton J spoke…’
A similar situation exists in respect to liquidators and administrators. Upon obtaining his release and discharge, a liquidator is shielded by s.173(4) (for voluntary winding up) or s.174(6) (for compulsory winding up), save in respect to s.212 claims. Upon cessation and discharge, an administrator under the new regime, is shielded by paragraph 98 of Schedule B1 to the Insolvency Act 1986, save in respect to paragraph 75 to Schedule B1 claims; same for an administrator under the original regime, by s.20 of the Insolvency Act 1986, save for s.212 claims (see Parkinson Engineering Services Plc (In Liquidation) v Swan  Bus. L.R. 857).
Section 304 Misfeasance, Misappropriation or Breach of Fiduciary or other Obligation
A further effect of release of the TIB, is on whether or not an applicant under s.304(1) must obtain leave (i.e. permission) to make that application, pursuant to s.304(2). As readers will be aware, section 304 allows the Court to impose liability on a TIB to repay, restore or account or otherwise pay compensation to the bankrupt estate, where the Court is satisfied, on application, that the TIB has committed misfeasance, misapplication of money belonging to the bankrupt estate, or other breach of fiduciary or other obligation/duty. The relevant subsection is s.304(1), which reads:
‘Where on an application under this section the court is satisfied–
(a) that the trustee of a bankrupt’s estate has misapplied or retained, or become accountable for, any money or other property comprised in the bankrupt’s estate, or
(b) that a bankrupt’s estate has suffered any loss in consequence of any misfeasance or breach of fiduciary or other duty by a trustee of the estate in the carrying out of his functions,
the court may order the trustee, for the benefit of the estate, to repay, restore or account for money or other property (together with interest at such rate as the court thinks just) or, as the case may require, to pay such sum by way of compensation in respect of the misfeasance or breach of fiduciary or other duty as the court thinks just. This is without prejudice to any liability arising apart from this section.’
Section 304(2) prescribes who has standing to apply under s.304(1), and, importantly, when leave must first be obtained. That provision reads:
‘An application under this section may be made by the official receiver, the Secretary of State, a creditor of the bankrupt or (whether or not there is, or is likely to be, a surplus for the purposes of section 330(5) (final distribution)) the bankrupt himself. But the leave of the court is required for the making of an application if it is to be made by the bankrupt or if it is to be made after the trustee has had his release under section 299.’Crucially therefore, leave/permission is required from the Court, that is, the Bankruptcy Court (see Proudman J in Oraki v Bramston  1 WLR, at paragraph 164; not doubted on appeal Oraki v Bramston  BPIR 1021), if the application is made ‘…after the trustee has had his release under section 299.’ As to how the Court approaches whether or not to grant leave/permission, Hart J set down the applicable test in Brown v Beat  BPIR 421, where at 424, he said:
‘The factors which the court must bear in mind in deciding whether or not to grant permission, are first, whether or not a reasonably meritorious cause of action has been shown, and secondly whether giving permission for its prosecution is reasonably likely to result in a benefit to the estate.
Hart J continued, at 424:
‘Of course, in considering whether or not to authorise any litigation, except in the rarest of cases, it is impossible to be certain of what the outcome of litigation will be. Litigation always, to a greater or lesser extent involves a degree of speculation, and regard must therefore be had to the costs and potential benefits of litigation before authorising its institution.
A test has been described by Blackburne J in Re Hellyer (A Bankrupt)  BPIR 695 as being whether the application is one which a reasonable litigant would make. That criterion of reasonableness has, of course, to be stretched to include the factors which I have mentioned, that is to say, the likelihood of success, and the risks as to costs of the estate in the event of failure.’
Chief Registrar Baister in Borodzicz seemed to indicate that there is a strong presumption against granting leave/permission, where a release had occured. When granting leave/permission on one point, he said at paragraph 58:
'I regard the point as sufficiently important to be capable of being litigated notwithstanding the strong presumption to which release gives rise...'
Earlier, Chief Registrar Baister in Borodzicz said, paragraph 55:
‘I reach the foregoing conclusions for the reasons given in relation to each head of claim, but I also take into account, as I think I must, Ms Stayning’s submission as to the effect of and policy underpinning the respondent’s release.’
Though rather ambiguous, it is arguably possible to read this as apparently encompassing a favourable reference to counsel for the respondent TIB Ms Stayning’s submission, made in her skeleton argument and quoted in Borodzicz, at paragraph 43:
‘…[T]here are good policy reasons why the court should be particularly cautious about granting leave to bring a claim under s. 304 post-release. A trustee who is facing a challenge under s. 303 of the Act or before s/he has been released will normally have the benefit of still administering the estate, along with costs protection (in the form of recourse to the estate) in defending legal proceedings brought by the bankrupt. A trustee who is facing a claim under s. 304, particularly post-release, may be asked to account for decisions taken some years previously. Post-release, a trustee has no control over the estate and must incur personal costs to defend proceedings in circumstances where there is no costs protection for what could be a very expensive and time-consuming process before trial of the issues. It is therefore submitted that, if permission is sought under s. 304(2) post-release, the court should attach particular weight to its assessment of the value of the claim compared to the potential cost of proceedings.’
Oraki v Bramston - Court of Appeal
Richard LJ in Oraki v Bramston  BPIR 1021 (endorsed by McCombe LJ but not by Etherton MR), made some tentative and expressly obiter comments about the effect of s.299(5). Richard LJ said at paragraphs 219 to 221 (the respondents were the former TIBs (Mr Defty being one)(represented by Mr Briggs); the appellants were former bankrupts):
'...the judge held, that the effect of section 299(5) was that the appellants could not maintain their personal claims against the respondents. All the claims were "in respect of acts or omissions of his in the administration of the estate and otherwise in relation to his conduct as trustee". She held that the saving for claims under section 304 did not assist the appellants because, apart from one or two claims for which they had permission, none of their claims involved the exercise of the court's powers under section 304.
I agree with the judge as regards the inapplicability of the saving for claims under section 304 for the reason she gave, but I am unable to endorse her conclusion that therefore no other claim arising out of the trustee's conduct as trustee can be brought. It gives rise to some difficult and as yet untested questions. Suppose that in the course of realising an asset a trustee makes a negligent or even fraudulent misstatement, is the third party who relied on it deprived of any remedy against the trustee? Mr Briggs submitted that he was. Mr Briggs further submitted that because Mr Defty had his release from 17 October 2014, the appellants' personal claims could no longer been maintained against him, even though the action had been commenced some 20 months earlier. This seems a surprising result.
Again, I do not consider it valuable to express obiter views on what seem to me to be difficult questions on the effect of section 299 on claims such as these in this case but should await a case in which the answer will have an effect on the outcome.'
The orthodox view is that, save for s.304 claims, the effect of a TIB’s release and discharge '…is to wipe the slate completely clean so far as the trustee is concerned, so that he may thereafter pay no thought to the previous course of his actions as the trustee in bankruptcy.’ (Walton J in Munro). Some doubt has now been cast on this by obiter comments in Oraki v Bramston. For s.304 claims, the release of the TIB, introduces a preliminary requirement to obtain leave/permission, before a s.304 claim can be brought. In determining whether to accede to an application for leave/permission, the Court will consider the Brown v Beat criteria, as well as potentially the factors raised in Borodzicz.
SIMON HILL © 2018
33 BEDFORD ROW
NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.
See also Insolvency Rules 2016, r.10.77 to 10.82.
Section 299 Insolvency Act 1986 deals with the release of a trustee:
‘(1) Where the official receiver has ceased to be the trustee of a bankrupt’s estate and a person is appointed in his stead, the official receiver shall have his release with effect from the following time, that is to say—
(a) where that person is appointed by a general meeting of the bankrupt’s creditors or by the Secretary of State, the time at which the official receiver gives notice to the court that he has been replaced, and
(b) where that person is appointed by the court, such time as the court may determine.
(2) If the official receiver while he is the trustee gives notice to the
Secretary of State that the administration of the bankrupt’s estate in accordance with Chapter IV of this Part is for practical purposes complete, he shall have his release with effect from such time as the Secretary of State may determine.
(3) A person other than the official receiver who has ceased to be the trustee shall have his release with effect from the following time, that is to say—
(a) in the case of a person who has been removed from office by a general meeting of the bankrupt’s creditors that has not resolved against his release or who has died, the time at which notice is given to the court in accordance with the rules that that person has ceased to hold office;
(b) in the case of a person who has been removed from office by a general meeting of the bankrupt’s creditors that has resolved against his release, or by the court, or by the Secretary of State, or who has vacated office under section 298(6), such time as the Secretary of State may, on an application by that person, determine;
(c) in the case of a person who has resigned, such time as may be prescribed;
(d) in the case of a person who has vacated office under section 298(8)—
(i) if the final meeting referred to in that subsection has resolved against that person’s release, such time as the Secretary of State may, on an application by that person, determine; and
(ii) if that meeting has not so resolved, the time at which the person vacated office.
(4) Where a bankruptcy order is annulled, the trustee at the time of the annulment has his release with effect from such time as the court may determine.
 Section 299 governs TIBs. For liquidators obtaining their discharge upon release, see s.173 and s.174 of the Insolvency Act 1986; for administrators obtaining their discharge upon 'ceasing' to be an administrator, see in paragraph 98 to Schedule B1 of the Insolvency Act 1986 (s.20 of the insolvency Act 1986 for the original administration regime).
Also, Insolvency Rules 2016, r.10.83, which is entitled ‘Release of removed trustee (section 299) and reads:
‘(1) Certificate of removal to state if trustee released Where the trustee is removed by a creditors’ decision procedure the certificate of removal must state whether or not the creditors decided against the trustee’s release.
(2) Content of application for release Where the creditors decided against release, the trustee’s application to the Secretary of State for release under subsection 299(3)(b) must–
(a) identify the proceedings;
(b) identify the bankrupt;
(c) identify and provide contact details for the trustee;
(d) provide details of the circumstances under which the trustee has ceased to act as trustee;
(e) state that the trustee is applying to the Secretary of State for a certificate of the trustee’s release as a trustee as a result of the circumstances specified in the application; and
(f) be authenticated and dated by the trustee.
(3) Certification and filing of release When the Secretary of State gives the release, the Secretary of State must certify it accordingly and file the certificate with the court in a bankruptcy based on a creditor’s petition.
(4) Delivery of certificate to official receiver and trustee The Secretary of State must deliver a copy of the certificate to the official receiver and former trustee whose release is effective from the date of the certificate or such other date as the certificate specifies.’
As originally enacted, s.93 of the Bankruptcy Act 1914 was entitled ‘Release of Trustee’ and read:
‘(1) When the trustee has realised all the property of the bankrupt, or so much thereof as can, in his opinion, be realised without needlessly protracting the trusteeship, and distributed a final dividend, if any, or has ceased to act by reason of a composition having been approved, or has resigned, or has been removed from his office, the Board of Trade shall, on his application, cause a report on his accounts to be prepared, and, on his complying with all the requirements of the Board, shall take into consideration the report, and any objection which, may be urged by any creditor or person interested against the release of the trustee, and shall either grant or withhold the release accordingly, subject nevertheless to an appeal to the High Court.
(2) Where the release of a trustee is withheld, the court may, on the application of any creditor or person interested, make such order as it thinks just, charging the trustee with the consequences of any act or default he may have done or made contrary to his duty.
(3) An order of the Board releasing the trustee shall discharge him from all liability in respect of any act done or default made by him in the administration of the affairs of the bankrupt, or otherwise in relation to his conduct as trustee, but any such order may be revoked on proof that it was obtained by fraud or by suppression or concealment of any material fact.
(4) The foregoing provisions of this section shall apply to an official receiver when he is, or is acting as, trustee, and when an official receiver has been released under this section, or any previous similar enactment, he shall continue to act as trustee for any subsequent purposes of the administration of the debtor's estate, but no liability shall attach to him personally by reason of his so continuing in respect of any act done, default made, or liability incurred before his release.
(5) Where the trustee has not previously resigned or been removed, his release shall operate as a removal of him from his office, and thereupon the official receiver shall be the trustee.
(6) Where, on the release of a trustee, an official receiver is, or is acting as, trustee, no liability shall attach to him personally in respect of any act done or default made, or liability incurred, by any prior trustee.’
Later ‘The Board of Trade’ was amended to ‘Department of Trade’.
For completeness, Chief Registrar Baister quoted the whole of Walton J at 1362G, which in full read:
‘’What is in my judgment crystal clear is that upon a true construction of section 93(3), which interestingly does not ever appear to have been previously construed, although the proviso thereto was construed in In Re Harris, Ex parte Hasluck  2 QB 97, it appears to me that the intention of that subsection, and it is a very right, proper and wholesome intention, is to wipe the slate completely clean so far as the trustee is concerned, so that he may thereafter pay no thought to the previous course of his actions as the trustee in bankruptcy.’
Section 304 of the Insolvency Act 1986 is entitled ‘Liability of trustee’ and reads:
‘(1) Where on an application under this section the court is satisfied–
(a) that the trustee of a bankrupt’s estate has misapplied or retained, or become accountable for, any money or other property comprised in the bankrupt’s estate, or
(b) that a bankrupt’s estate has suffered any loss in consequence of any misfeasance or breach of fiduciary or other duty by a trustee of the estate in the carrying out of his functions, the court may order the trustee, for the benefit of the estate, to repay, restore or account for money or other property (together with interest at such rate as the court thinks just) or, as the case may require, to pay such sum by way of compensation in respect of the misfeasance or breach of fiduciary or other duty as the court thinks just. This is without prejudice to any liability arising apart from this section.
(2) An application under this section may be made by the official receiver, the Secretary of State, a creditor of the bankrupt or (whether or not there is, or is likely to be, a surplus for the purposes of section 330(5) (final distribution)) the bankrupt himself. But the leave of the court is required for the making of an application if it is to be made by the bankrupt or if it is to be made after the trustee has had his release under section 299.
(a) the trustee seizes or disposes of any property which is not comprised in the bankrupt’s estate, and
(b) at the time of the seizure or disposal the trustee believes, and has reasonable grounds for believing, that he is entitled (whether in pursuance of an order of the court or otherwise) to seize or dispose of that property, the trustee is not liable to any person (whether under this section or otherwise) in respect of any loss or damage resulting from the seizure or disposal except in so far as that loss or damage is caused by the negligence of the trustee; and he has a lien on the property, or the proceeds of its sale, for such of the expenses of the bankruptcy as were incurred in connection with the seizure or disposal.’
Leave and permission are synonymous. In Katz v Oldham  BPIR 83, Registrar Derrett was construing paragraph 75(6) of Schedule B1 to the Insolvency Act 1986 – which provides for permission being required to bring a misfeasance etc. claim against former administrators. She said, at paragraph 11‘I agree that nothing turns on the use of the word permission in para 75(6) as opposed to leave of the court in s 212(4) and 304(2).’
The other situation for when leave is required, before issuing s.304(1) of the Insolvency Act 1986 application, is where the applicant is the bankrupt. On this, see Brown v Beat BPIR 421, at 424, where Hart J said the following about whether leave should be granted to a bankrupt applicant (the applicant bankrupt also needed permission because of another order amounting to a previous iteration of a civil restraint order):
‘On the question of whether permission should be given, either under the order of 3 August 2001 or under s 304(2), it seems to me that similar criteria apply. Indeed, it seems to me that the requirement of leave under s 304(2) in the case of an application by the bankrupt, has almost certainly been included by Parliament in recognition of the fact that applications by bankrupts against their trustees may well have a tendency to be vexatious and therefore it is appropriate for there to be a filter in the form of permission by the court before the bankrupt is permitted to launch upon them; that also being particularly necessary given the fact that the bankrupt is accorded locus standi notwithstanding the absence of any financial interest to himself in the application being made.’
In McGuire v Rose  EWCA Civ 429, the Court of Appeal, Laws LJ said, at paragraphs 20 to 24:
‘Alleged error of principle – the appropriate test to be applied to an
application by the bankrupt under s 304(2)
 Miss Start says that in addition to the ‘surplus’ point the judge erred by purporting to apply what she said was the right test but going on to decide the case by reference to other factors. This, she said, was another point of principle which made the matter worthy of a second appeal.
 The proper test which Miss Start said should be applied to applications for permission under s 304 is that set out by Hart J in Brown v Beat, and cited by Lewison J at para 18 of his judgment:
‘The factors which the court must bear in mind in deciding whether or not to grant permission are, first, whether or not a reasonably meritorious cause of action has been shown and, secondly, whether giving permission for its prosecution is reasonably likely to result in a benefit to the estate.’
 Miss Start says that that was the test, and the judge should have applied nothing else. In fact he wrongly brought in additional factors, and particularly in his para 49 when, having referred to the absence of a surplus, he added his reference to Mr McGuire’s inability to conduct litigation properly (see above). That, she said, went outside the proper test and was an error of principle.
 We do not agree. Hart J cannot be taken as having laid down any particular test. It would not be appropriate for the court to lay down exclusive criteria by reference to which an application by the bankrupt under s 304(2) had, in all cases, to be judged. He was doing no more than identifying two central factors which have to be taken into account (and obviously so). That is quite apparent from the context of his judgment. In the immediately preceding paragraph to that in which the words cited appear he referred to the policy behind the leave requirement in s 304(2), namely to apply a filter because of the risk of vexatious applications. The risk of vexation in the proceedings is therefore obviously another matter which can, and in our view should, be taken into account, though a favourable answer to Hart J’s two questions may well be sufficient in many cases to demonstrate that the particular course of action proposed by the bankrupt is worthwhile and not driven by vexation.
Furthermore, at 427 Hart J returned to the point and described a different test, or perhaps an umbrella test under which his two more specific questions should be asked. At 427B he said:
‘An application for leave under a Grepe v Loam order or under section 304(2) stands on a somewhat different footing from the normal case of a final decision on a trial inter partes (sic). It is not final in the sense that nothing in practice can prevent an application being renewed. It is also different in that the criteria being applied by the court in deciding whether or not to grant leave are those that I have mentioned, namely is there material produced on the application such as would justify a reasonable litigant pursuing the particular litigations proposed?’
As a sort of umbrella test that must be unobjectionable. It coincides with the description of the test proposed by Blackburn J in Re Hellyer (A Bankrupt)  BPIR 695 at 696C in considering whether or not to allow an application which would otherwise have been barred by a Grepe v Loam order (the precursor of civil restraint orders). We cannot see anything wrong with that as a requirement. Hart J himself referred to the Hellyer test at 424, and added:
‘That criterion of reasonableness has, of course, to be stretched to include the factors which I have mentioned, that is to say, the likelihood of success, and the risks as to costs of the estate in the event of failure.’
All this points to a test which is wider than the two criteria relied on by Miss Start.'
 Furthermore, in Parkinson Engineering Services plc (In Liquidation) v Swan and Yeldon  EWCA Civ 1366,  BPIR 437,  1 BCLC 163 Lloyd LJ expressly said that the two requirements were not exhaustive, albeit in the context of s 212 of the Insolvency Act:
‘The judge started by considering whether or not it would be appropriate to allow proceedings under section 212. It seems to me that this was the correct starting point. He had seen (as we did) the decision of Hart J in Brown v Beat  BPIR 421, where the judge, considering the corresponding provision as regards bankruptcy, identified two criteria: whether or not a reasonably meritorious cause of action has been shown, and whether giving permission for its prosecution is reasonably likely to result in a benefit to the estate. Those are not exhaustive but they are certainly relevant and likely to be among the most important factors. They are relevant here, together with the question of delay.’
See also, Re Borodzicz  BPIR 24. In Frosdick v Fox  1 WLR 38, Birss J described obtaining permission, at paragraph 65, as a ‘high hurdle’.
In Parkinson Engineering Services Plc (In Liquidation) v Swan Bus. L.R. 857, in the analogous situation with s.212 of the Insolvency Act 1986, Lloyd LJ stated, at paragraph 34:
‘The judge started by considering whether it would be appropriate to allow proceedings under section 212. It seems to me that this was the correct starting point. He had seen (as we did) the decision of Hart J in Brown v Beat  BPIR 421, where the judge, considering the corresponding provision as regards bankruptcy, identified two criteria: whether or not a reasonably meritorious cause of action has been shown, and whether giving permission for its prosecution is reasonably likely to result in a benefit to the estate. Those are not exhaustive but they are certainly relevant and likely to be among the most important factors. They are relevant here, together with the question of delay.’
In Katz v Oldham  BPIR 83, on the analogous situation with paragraph 75(6) of the Schedule B1 to Insolvency Act 1986, in respect to claims against Administrators, Registrar Derrett said, at paragraphs 4 to 9:
‘It is common ground an application for misfeasance under para 75 of Sch B1 in respect of an administrator who has been discharged under para 98 can only be brought with the permission of the court.
It is common ground that there is no authority as to the applicable test to be applied under para 75(6). In such circumstances I accept that the applicable test should be the same as that under s 212(4) IA 86 which requires the leave of the court to be obtained in order to bring a misfeasance claim against a Liquidator who has been released and s 304(2) IA 86 which relates to claims against trustees in bankruptcy.
Applications of this nature are addressed relying upon principles set out in Brown v Beat  BPIR 421, which was approved and applied by the Court of Appeal in Parkinson Engineering Services plc (In Liquidation) v Swan and Another [2010) BCLC 163. I have also drawn counsel’s attention to the case of Maguire v Rose  EWCA Civ 429,  BPIR 650.
In summary, there are two principal criteria: first, whether or not a reasonably meritorious cause of action has been shown; and secondly, whether giving permission for its prosecution is reasonably likely to result in benefit to the estate. These criteria are not exhaustive, but they are the central and most important factors. See the Parkinson decision at para 34.
The parties submitted that the test for permission, whether or not a reasonably meritorious cause of action has been shown, is a lower threshold, that is the cause of action ought to be treated as a lower threshold than that which is required for summary judgment, where it is necessary to show that there is a real prospect of success.
My initial view is that it ought to be the same and that it is necessary to demonstrate that there is a real prospect of success. However, in the circumstances of this case where I accept I only dealing only with the question of permission, and, if granted, as such, it would not preclude the respondent from applying for summary judgment or to strike out the Application. I can see that where an application for permission is faced with a cross-application for summary judgment or strike-out, then the test to be applied would require there to be a reasonable prospect of success. For present purposes, I accept that the test, as such, can be treated as a lower threshold, although counsel for the applicants has submitted that, in any event, the test of reasonable prospect of success has been met.’