ADRIAN HYDE & Anor v MYCK DJURBERG

A warrant under Insolvency Act 1986, s 365 is draconian, but its purpose is to enforce duties which a bankrupt should ordinarily perform voluntarily. Relief may be granted where there is cause to believe that estate property or relevant books, papers and records are concealed, and the evidence establishes a real risk of further dissipation, disposal or destruction. The court must exercise its discretion proportionately. Relevant considerations include delay, the possibility that assets have already been removed, third-party occupation or ownership, the presence of others, and mental-health risks. Mental-health evidence ordinarily calls for safeguards rather than refusal where the statutory purpose remains pressing. Appropriate safeguards may include supervised execution, independent legal advice, limits on personnel and prompt return of seized material.

The joint trustees in bankruptcy applied without notice for a warrant under Insolvency Act 1986, s 365, authorising the seizure of bankruptcy-estate property and books, papers and records at the respondent bankrupt’s current residence. They relied on alleged failures to disclose information and deliver up property, suspected dissipation and sale of assets, and destruction of records. The court had previously directed that the application be heard privately and without notice, transferred the bankruptcy to the High Court, and concluded that the capacity evidence did not prevent the hearing.

The central issues were whether the statutory threshold was met and whether, having regard to the draconian nature of the relief, delay, mental-health evidence and practical safeguards, the warrant was a proportionate exercise of the discretion.

1. Relief granted. The court concluded that the evidence established cause to believe that valuable assets and relevant books, papers and records might remain at the premises. The bankrupt’s failures to provide information and deliver up property, together with evidence of asset dissipation and document destruction, established a real risk of continuing concealment, disposal or destruction.
2. The purpose of Insolvency Act 1986, s 365 is to enforce the bankrupt’s existing duties under ss 305, 312 and 333. Those duties include delivering up property and records and providing information reasonably required for the trustees’ functions. The warrant is therefore draconian, but it implements obligations which should ordinarily have been fulfilled through cooperation.
3. The discretion had to be exercised proportionately. The court considered six matters: the possibility that assets had already been removed, delay, mental-health risks, the scale of the proposed operation, third-party ownership of the premises and houseboats, and the possible presence of other persons. None outweighed the established need for relief.
4. Mental-health evidence did not require the application to be refused. It required caution and safeguards. The court preferred supervised enforcement by the High Court Tipstaff under applicable guidance, with an opportunity for advice and discussion before forced entry, rather than leaving the trustees to pursue a potentially more harmful contempt route.
5. The order was to begin with injunctions for delivery up and restraints on destruction and dissipation, while retaining a warrant permitting seizure and, if necessary, forced entry. The draft order was to be revised to include safeguards concerning supervision, independent legal advice, personnel, reporting and return of material.