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

The Trustee applied under section 279(3) of the Insolvency Act 1986 for an order suspending the automatic discharge of the bankrupt, and under section 366(1) for disclosure of documents and witness statements. The court applied the two-stage approach to section 279(3): (i) a threshold question whether the bankrupt has failed or is failing to comply with obligations under Part IX (in particular section 333), and (ii) the exercise of the court’s discretion.

The judge found that the Trustee had reasonable grounds to conclude that the bankrupt had not provided all information reasonably required about four continuing areas of inquiry: (1) involvement in Evolution Software UK, Entertainment Software and the CasinoMax business; (2) the source of funding for his lifestyle; (3) the assets and payments related to the 1989 Trust (Fedelta Trustees); and (4) certain pre-bankruptcy assets (number plates and watches). The court accepted expert evidence that the bankrupt had suffered depression since April 2017 but concluded that the observed defects in evidence could not be explained solely by that impairment.

Accordingly the court suspended discharge until 10 July 2022 and ordered specified disclosure and deliverables (including production of emails from the designated account and a witness statement and documents from Mr Seeds) by 4pm on 10 June 2022. The court balanced the Trustee’s legitimate investigatory needs under section 366 against privacy/confidentiality concerns and limited use of disclosed material to the bankruptcy proceedings.

Background and parties. These applications arise from the bankruptcy of Mr Jonathan Ferster. The Trustee, Ms Louise Brittain, sought (a) suspension of Mr Ferster’s automatic discharge under section 279(3) of the Insolvency Act 1986 and (b) disclosure and witness statements under section 366(1). The Trustee joined Mr Jonathan Seeds (partner of Mr Ferster) and Evolution Software (UK) Limited as parties to the section 366 application.

Procedural history and prior findings. The bankruptcy arose after earlier High Court proceedings ([2016] EWHC 2896 (Ch)) in which misconduct by Mr Ferster was found. Interim and subsequent orders had earlier suspended discharge (July and August 2018 and later orders), recording failures to provide information to the Trustee. The Trustee continued to make extensive requisitions about company ownership, the 1989 Trust and other assets. Repeated interim suspensions followed pending the present contested hearing.

Relief sought. The Trustee sought (i) suspension of the one-year automatic discharge under section 279(3) and (ii) an order under section 366(1) requiring disclosure of all emails to and from a designated email address (Jonathan@evosoft.io) and a full joint income and expenditure account for Mr Ferster and Mr Seeds, plus supporting documents.

Issues for decision. The court framed the issues as (i) whether the threshold in section 279(4) is met (has the bankrupt failed or is failing to comply with obligations under Part IX, in particular section 333), and (ii) whether, in the exercise of the court’s discretion, suspension is appropriate and proportionate; and (iii) whether disclosure under section 366(1) should be granted and on what terms (balancing investigatory need and oppressiveness/confidentiality).

Evidence and findings. The Trustee relied on voluminous written material and the parties gave oral evidence. The court admitted expert psychiatric evidence from Dr Ruth Anne Jarman that Mr Ferster has suffered mixed anxiety and depressive disorder since about April 2017 with some short-term memory/recall impairment. The judge accepted that impairment but held that credibility defects in the bankrupt’s evidence were not wholly explained thereby. The evidence established significant lacunae and withheld communications (notably WhatsApp/text messages and emails) and inadequate particulars of income/expenditure and trust-related assets.

Reasoning and outcome on section 279. Applying the two-stage approach (threshold and discretion), the court concluded the threshold was satisfied by earlier orders and the continuing failures to provide material information in the four identified areas. On discretion, the court emphasised that suspension is not to be used lightly, must be reasonable and proportionate, and should not routinely be made indefinite or left to the trustee’s satisfaction. The judge declined to make an open-ended Mawer v Bland style order that would leave discharge dependent on the trustee’s report, preferring defined directions and a fixed limited suspension. The court therefore suspended discharge until 10 July 2022, made detailed directions for production of information and documents by 4pm on 10 June 2022, and left open further applications if the Trustee considered compliance unsatisfactory.

Reasoning and outcome on section 366. The court held the Trustee had shown a reasonable need for the emails and for a witness statement and documents from Mr Seeds. Balancing investigatory need against potential oppressiveness and confidentiality, the judge ordered production of the emails except privileged material and emails plainly between third parties, required a disclosure certificate and a statement identifying the material and process, and limited the Trustee’s use to the bankruptcy proceedings (with a specific undertaking not to disclose to third parties such as ITC without leave).

Further directions. The order required specified disclosures (corporate structure, source of funds for CasinoMax, communications, 1989 Trust documentation, the specified personal assets) and witness statements/disclosure certificates by 4pm on 10 June 2022. The court will hear further submissions on consequential directions and costs.

This was a first instance disposal. The court suspended Mr Ferster’s discharge from bankruptcy until 10 July 2022 and made directed disclosure orders under section 366(1). The judge concluded the statutory threshold in section 279(4) was met because Mr Ferster had failed, in material respects, to comply with his obligations under Part IX (section 333), and in the exercise of the court’s discretion a finite suspension coupled with specific directions was reasonable and proportionate. The court ordered production of emails (subject to privilege and limitations) and required Mr Seeds to provide a witness statement and documents, with deadlines and a restriction on further use of disclosed material.