Louise Mary Brittain v Jonathan Ferster (a bankrupt) & Ors.

An application to suspend discharge from bankruptcy involves two stages under Insolvency Act 1986, section 279. The court must first find that the bankrupt has failed, or is failing, to comply with an obligation. It must then decide whether suspension is justified, reasonable and proportionate having regard to the statutory purposes of bankruptcy administration.

Suspension principally enforces compliance and assists the trustee’s functions. It is not automatically required until complete compliance, and indefinite suspension until the trustee is satisfied should not be routine. The court should ordinarily specify a finite period and clear conditions, particularly where the trustee’s inquiries have evolved over time.

The applicant trustee in bankruptcy sought further suspension of the bankrupt’s discharge under section 279(3) of the Insolvency Act 1986. She also applied under section 366(1) for disclosure of emails and information from the bankrupt’s partner and a company involved in the relevant business.

The bankrupt had repeatedly supplied information, but the trustee maintained that important material remained outstanding concerning business interests, lifestyle funding, trust assets and pre-bankruptcy assets. The central issues were whether the statutory threshold was met, what form and duration of suspension was appropriate, and whether the section 366 disclosure orders were reasonable and proportionate.

1. Suspension of discharge. The court held that section 279(3) and (4) impose a two-stage test. First, the court must be satisfied that the bankrupt has failed or is failing to comply with an obligation under Part IX of the Insolvency Act 1986. Secondly, it must exercise its discretion consistently with the statutory purposes of bankruptcy, including efficient realisation and distribution of assets and the integrity of the system.
2. The threshold was satisfied by earlier orders recording non-compliance, and independently by continuing failures to provide material information. The outstanding matters concerned the bankrupt’s involvement in the businesses, funding of his lifestyle, assets of the 1989 Trust, and missing number plates and watches. A bankrupt need not provide information beyond what could reasonably be done, but the evidence showed that important information and communications had not been disclosed.
3. Discharge should not be suspended lightly. Full compliance is not an automatic precondition to discharge. The court must consider reasonableness and proportionality, the extent of cooperation, the importance of the information sought and the statutory expectation of a known and finite discharge date. An order continuing bankruptcy until the trustee filed a satisfactory report was inappropriate in the circumstances. The discharge was instead suspended only until 10 July 2022, with detailed directions for disclosure by 4pm on 10 June 2022.
4. Section 366 application. The jurisdiction permits orders requiring persons able to give information concerning the bankrupt’s affairs to provide witness statements and documents. It is not confined to reconstructing the bankrupt’s own knowledge. The trustee’s reasonable requirements had to be balanced against oppression and privacy concerns. Disclosure of relevant emails was proportionate, subject to privilege, an apparent exclusion for communications solely between other persons, and restrictions on use.
5. Mr Seeds fell within section 366(1)(c), and potentially section 366(1)(b), because of his relationship with the bankrupt and his apparent role in funding the bankrupt’s lifestyle. He was ordered to provide an account of his dealings with the bankrupt and supporting documents. The court declined to require a joint statement from both men because section 366(1) made no specific provision for that form of order.

First-instance decision. No prior appellate decision is stated in the judgment.