Baxendale-Walker v Irwin Mitchell LLP & Ors (Rev 1)

An application under Insolvency Act 1986, section 303, requires a bankrupt to show that the trustee’s act, omission or decision was made in bad faith, fraudulently, or so perversely or unreasonably that no properly advised trustee could have acted in that way. A trustee does not act perversely merely by adopting an arguable, unresolved interpretation of the Act. Section 311 permits the trustee to obtain documents belonging to the bankrupt or under the bankrupt’s possession or control, including privileged documents, where they relate to the bankrupt’s estate or affairs. Personal papers may also be obtained if they bear that relationship. The court’s jurisdiction under section 363 does not circumvent the stringent section 303 test or retrospectively make an earlier request perverse.

The bankrupt applied under section 303 of the Insolvency Act 1986 to challenge requests made by his trustees in bankruptcy to several former solicitors. The requests sought files, ledgers, working papers and other information relating to his dealings, affairs and property. The bankrupt argued that the trustees could not seek privileged documents held by solicitors, documents belonging to third parties, or personal papers unrelated to the bankruptcy estate.

The trustees argued that section 303 was not engaged because their statutory duty under section 311 was mandatory and involved no discretionary act or decision. The court rejected that jurisdictional objection and considered whether the requests were perverse, and whether section 363 provided a separate route to determine the underlying legal issues.

1. Jurisdiction. The trustees’ correspondence and requests were acts or decisions capable of engaging section 303(1). The mandatory nature of the duty in section 311 did not prevent the trustees from making acts and decisions in the manner in which they sought to acquire the relevant material.
2. Applicable test. The bankrupt had to satisfy the high threshold stated in Osborn v Cole and endorsed in Bramston v Haut. Intervention required bad faith, fraud, or conduct so perverse, unreasonable or absurd that no properly advised trustee could have acted in that way.
3. Privilege and solicitors’ papers. Section 311 gives the trustees an absolute entitlement, and imposes an obligation, to obtain documents belonging to the bankrupt or under his possession or control which relate to the estate or affairs, even if they would be privileged in ordinary proceedings. The trustees’ stated intention not to waive privilege was consistent with Shlosberg v Avonwick Holdings Ltd.
4. Personal papers. The relevant question was whether documents related to the bankrupt’s estate or affairs, not whether they were described as personal. Personal correspondence and papers could therefore be disclosed where they were relevant to the trustees’ statutory functions. Documents falling outside that description were not within the requests.
5. Section 366 and section 363. A section 366 application involves a discretionary assessment of whether documents or information are required. The present application challenged the trustees’ requests under section 303 and was not itself a section 366 application. Section 363 gave the court jurisdiction to determine questions of law, but could not circumvent the section 303 test or retrospectively make an August request perverse because of a later legal determination.
6. The application was dismissed. The trustees’ requests were based on an arguable view of the law and did not satisfy the Osborn test.