A barrister's non-contractual fees vest with their trustee in the event of bankruptcy, the Court of Appeal has ruled, in a decision considering the meaning of ‘property’ under the Insolvency Act 1986.
In Gwinnutt v George & Anor, Lord Justice Newey’s lead judgment overturned a lower court ruling which said a barrister's fees, even when non-contractual, were not ‘property’ for the purposes of the 1986 Act. The act stipulates that a 'bankrupt’s estate for the purposes of any of this group of parts comprises—(a)all property belonging to or vested in the bankrupt at the commencement of the bankruptcy.’
The decision concerns barrister Nicholas George, who was declared bankrupt in 2012. Simon Gwinnutt, George’s trustee in bankruptcy, claimed that sums owed to George when he became bankrupt vested in him (the trustee) under section 306 of the act.
Although the High Court initially ruled in favour of George – it said if fees arose on a non-contractual basis then they do not rest with the trustee - the Court of Appeal disagreed.
The Court of Appeal’s ruling, handed down on 12 April, backs a January 2017 decision by the bar’s disciplinary tribunal, the Bar Tribunal & Adjudication Service (BTAS).
The BTAS said that in July 2013 George received approximately £44,000 representing certain pre-bankruptcy professional fees owed which he ‘should have paid Gwinnutt but did not’. Further, George thereafter refused and/or failed to pay over all of the fees (being the balance payable after George had paid £6,349.25 from a total of £44,651.60) to Gwinnutt despite having acknowledged that he was obliged to do so. He was fined £1,500.
In the latest judgment Newey J ruled: ‘Were any other professional to become bankrupt, his aged debt would vest in his trustee, and so should a barrister’s.’
He added: ‘Unpaid fees, regardless of whether they are contractual, are capable of realisation. The fact that something can be realised or turned to account does not invariably make it “property”, but it seems to me to point in that direction and, here, the expectation of payment is not founded on mere hope or morality but reflects the unique nature of non-contractual barristers’ fees.’
Lord Justice Singh and Lord Justice Baker agreed.