Bramston v Haut

Under section 279(3) of the Insolvency Act 1986, the court may suspend automatic discharge where the statutory threshold in section 279(4) is met. Where the bankrupt supports suspension to enable consideration of an individual voluntary arrangement, the court may be more readily satisfied that suspension is appropriate. A trustee acts unlawfully under section 303(1) if he refuses to support suspension for the collateral purpose of blocking an arrangement, when any objection to the arrangement should instead be pursued under section 363. The Wednesbury standard is flexible and must reflect the nature of the dispute and the surrounding circumstances.

The respondent was bankrupt and would otherwise have been automatically discharged under section 279(1) of the Insolvency Act 1986. He sought a short suspension of discharge so that creditors could consider a second individual voluntary arrangement. The trustee opposed the suspension and declined to make an application under section 279(3), principally because he opposed the proposed arrangement. The court granted an interim order under section 303(1). The trustee applied to set that order aside, contending that the statutory threshold was not met and that his decision was reasonable.

1. The trustee’s application was dismissed. The court had jurisdiction under section 303(1) to review the trustee’s refusal to apply for suspension under section 279(3).
2. Section 279(3) required a purposive interpretation because automatic discharge could not be reversed after the relevant period. Bagnall v Official Receiver established that an interim suspension could be ordered where there were reasonable grounds for concluding that an order would be made after the substantive hearing.
3. The trustee’s evidence showed that he contended that the bankrupt had failed to comply with obligations under the 1986 Act. The bankrupt accepted that there were reasonable grounds for that contention, positively sought suspension, and was supported by a substantial body of creditors. The jurisdictional threshold in section 279(4) was therefore sufficiently established.
4. The applicable test under section 303(1) was Wednesbury unreasonableness, but its strictness was flexible. It had to depend on the nature of the dispute and the relevant circumstances. Section 303(1) was an important mechanism for protecting bankrupts.
5. The trustee’s true objection was to the proposed IVA, not to suspension itself. His refusal to support suspension was therefore an improper use of his discretion to obstruct the arrangement indirectly. Any objection to the arrangement should have been pursued by an application under section 363. Prima facie, it was for the creditors to decide whether the proposal was in their interests.
6. The procedural defects in the without-notice application and the error concerning the proposed dividend did not justify setting aside the order. The trustee’s separate request for information under section 363 was left for further argument if required.