Weir v Hilsdon

Under Insolvency Act 1986, s. 279, the court may suspend automatic discharge where the bankrupt has failed, or is failing, to comply with a relevant bankruptcy obligation. The jurisdictional threshold is distinct from the discretionary stage. Historic non-compliance may suffice, but the seriousness of the default, whether it continues, the bankrupt’s cooperation and the trustee’s conduct are relevant to discretion.

An order suspending discharge until the trustee reports full compliance is permissible in principle. It is, however, a severe and penal order which should not be treated as routine. The court must consider the full range of available orders and decide whether the facts justify an indefinite or trustee-controlled suspension rather than a fixed period or specified condition.

Mrs Hilsdon was made bankrupt on 20 February 2015. Her trustee, Ms Weir, applied shortly before the expiry of the one-year discharge period for an order under s. 279(3) of the Insolvency Act 1986, alleging failures to provide information and documents concerning payments, bank accounts, invoices, income and expenditure.

The County Court suspended discharge until the trustee confirmed that Mrs Hilsdon had complied with her duties and obligations. Mrs Hilsdon appealed, challenging the court’s treatment of later requests, its consideration of the evidence, the purpose of the application, and the form and proportionality of the order.

1. Appeal allowed. The order suspending discharge until the trustee filed a report confirming compliance was set aside. The court would hear further submissions on the appropriate disposal.
2. The jurisdictional threshold under s. 279(4) is a hard-edged question. The court must be satisfied that the bankrupt has failed or is failing to comply with an obligation under Part IX. Mere suspicion is insufficient. Historic non-compliance is enough, even if the default has since been remedied. Here, the requests for a fuller explanation of the £10,000 payment, missing invoices, incomplete bank statements and supporting financial documents were reasonable, and the threshold was met.
3. The threshold stage is separate from discretion. At the discretionary stage, the court may consider developments since the application, the information still outstanding, the seriousness and duration of the default, the trustee’s diligence and whether the bankrupt has generally cooperated.
4. An application may properly assist a trustee in deciding whether to seek an income payments order. It is impermissible to use s. 279 merely to obtain extra time after the trustee has failed to investigate. It is permissible where the bankrupt’s failure to provide information has prevented the trustee from assessing whether an income payments order should be sought. That is connected with the trustee’s functions in realising and distributing the estate.
5. An order in the form approved in Mawer v Bland [2013] EWHC 3122 (Ch) and Wilson v Williams [2015] EWHC 1841 (Ch) is within s. 279(3)(b), read with s. 279(5), because compliance can be made a condition assessed by the court or reported by the trustee. Such an order may be necessary where the bankrupt is obstructive, misleading or dishonest and the trustee cannot identify the full extent of the missing information.
6. Nevertheless, the order has serious consequences. It may leave a cooperative bankrupt indefinitely subject to the trustee’s assessment and shift the practical burden of seeking discharge onto the bankrupt. The court should therefore be hesitant to make it routinely. It must consider whether a fixed period or specific condition would suffice, and the severity of the order must reflect the seriousness of the default.
7. The District Judge had not considered the range of possible orders or whether Mrs Hilsdon’s relatively limited and non-deliberate failures justified the order made. That failure rendered the exercise of discretion flawed.

• High Court (Chancery Division) — On appeal from the County Court order of DJ Payne dated 9 February 2016, the appeal was allowed under Ground 8 and the suspension order was set aside.