Malcolm Cohen & Ors v William Stephen O'Leary (a bankrupt) & Ors

A bankruptcy creditor may obtain permission under section 285(3) of the Insolvency Act 1986 retrospectively where the proposed proceedings do not prejudice the bankruptcy process. A debt survives discharge under section 281(3) where, considering the judgment as a whole, the liability was imposed in respect of fraud or fraudulent breach of trust. The order need not itself use the word fraudulent. Relief enabling enforcement against a private pension should ordinarily follow sufficient evidence of the pension scheme and the bankrupt’s rights under it. Where that information is unavailable, the court may order disclosure and adjourn the substantive relief.

The applicants were judgment creditors of the first respondent under a Jersey judgment awarding equitable compensation for breach of trust. The judgment was registered in the King’s Bench Division, and the first respondent later became bankrupt. Before his anticipated discharge, the applicants sought permission under section 285(3) of the Insolvency Act 1986, information about his private pension, and injunctive relief modelled on Bacci v Green to enforce the surviving judgment debt against that pension.

The issues were whether the debt survived discharge under section 281(3), whether the proposed pension relief could properly be sought, and whether it should be granted without evidence identifying the pension scheme and the respondent’s rights under it.

1. Permission under section 285(3). The purpose of section 285(3) is to keep proceedings affecting the bankruptcy under the supervision and control of the bankruptcy court. Permission may be granted retrospectively. It was appropriate here because the proposed relief concerned an asset said not to form part of the bankruptcy estate, the trustees took no position, and no prejudice to the bankruptcy process was identified. Permission was therefore granted.

2. Survival of the judgment debt. Section 281(3) requires the relevant debt to have been incurred in respect of fraud or fraudulent breach of trust to which the bankrupt was party. That requirement concerns the basis on which the liability was imposed. The court must consider the relevant judgment as a whole. A declaration or registration order describing liability merely as equitable compensation for breach of trust does not prevent the underlying liability being one imposed for fraudulent breach of trust. The Jersey judgment made express findings of dishonest and fraudulent breaches, and the debt accordingly survived discharge.

3. Pension enforcement relief. The court accepted that relief of the kind made in Bacci v Green could in principle be granted where the judgment debt survived bankruptcy. However, the substantive delegation and drawdown orders were not just and convenient at this stage because there was no evidence of the pension scheme, its rules, or the respondent’s rights and benefits. Information was therefore ordered, communication with the pension provider was authorised, and the substantive application was adjourned.

4. The adjourned application was transferred to the Business List. The court declined to transfer the King’s Bench proceedings because no application for transfer had been made and transfer was unnecessary for the orders then made. Permission was granted for service by email under CPR 6.27 because the evidence showed reliable receipt by email and good reason to use that method.