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H was engaged in a partnership dispute with M, asserting that certain shares in M's name were in fact partnership assets. A bankruptcy order was made against M. Despite the ongoing partnership litigation, M's trustee in bankruptcy, R, sold the shares and used the proceeds to discharge bankruptcy expenses and make an interim dividend to M's creditors. In the partnership dispute, it was later held that the shares were partnership assets. On H's application, the court held R liable for disposing of the proceeds of sale of the shares as a constructive trustee, and R was unsuccessful in his argument that he could rely on the statutory defence under s 304(3) of the Insolvency Act 1986 in that at all times he honestly believed that he was entitled to dispose of the share sale proceeds as he did (see Horler v Rubin  EWHC 453 (Ch);  BPIR 718). The Court of Appeal allowed R's appeal. H's proxy had attended a creditors' meeting and voted in favour of (the unanimously carried) resolutions approving R's disposal of the share proceeds in such manner. The proxy had had actual authority to use his discretion to vote in the manner he did, which was binding on H. H had thus consented to the disposal.
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