The Official Receiver v Myck Djurberg

Capacity is decision-specific and functional. The court must ask whether the person is unable to make the relevant decision and, if so, whether that inability results from an impairment or disturbance of the mind or brain. An unwise decision does not establish incapacity. The statutory presumption of capacity remains important, although lack of evidence alone may not safely resolve the issue.

Disclosure in bankruptcy proceedings is unusual. It should be ordered only where there is good reason, ordinarily because the material is necessary to determine a pleaded issue. Requests for further information must be concise, necessary and proportionate. Unsupported allegations of misconduct or conspiracy do not justify disclosure, retraction, or summary disposal of fraud allegations.

The respondent, who had been adjudicated bankrupt, faced an application by the Official Receiver for a bankruptcy restriction order concerning alleged misrepresentations in, and misuse of, Bounce Back Loans. He made three applications: for appointment of an advocate on the ground of incapacity, for disclosure, further information and retraction of statements, and for a stay pending related criminal proceedings.

The respondent did not attend the remote hearing because of difficulties in prison. The court proceeded in his absence after excluding evidence he might not have received and considering the relevant fairness and case-management factors. The criminal proceedings had concluded by the time the stay application was determined.

1. Capacity. The capacity application was dismissed. Under the Mental Capacity Act 2005, capacity is decision-specific and functional. The court must first determine whether the person is unable to make the decision, by reference to understanding, retaining, using or weighing relevant information, and communicating the decision. It must then determine whether the inability is because of an impairment or disturbance in the functioning of the mind or brain. The presumption of capacity, the requirement to take practicable steps to assist decision-making, and the principle that an unwise decision does not establish incapacity were relevant.
2. The evidence did not establish incapacity in relation to the bankruptcy restriction proceedings. The respondent had communicated his views, understood the nature of the proceedings and consequences of a possible order, and produced evidence addressing the allegations. The psychiatric report was historical, concerned fitness to stand trial, and did not establish present incapacity.
3. Disclosure and further information. Application 2 was dismissed and was totally without merit. Under rule 12.27 of the Insolvency Rules (England & Wales) 2016, the court has discretion to order further information or disclosure. The discretion must be exercised by reference to the issues in dispute and the overriding objective in CPR 1.1. Disclosure in bankruptcy proceedings is unusual and requires good reason, ordinarily necessity for determining a pleaded issue. The requests for the Official Receiver’s entire file and communications were directed principally to unparticularised allegations of wrongdoing and conspiracy, and were not necessary or proportionate.
4. Part 18 requests must be confined to information reasonably necessary and proportionate to enable a party to prepare its case or understand the case it must meet. The Official Receiver did not need to provide a motive for seeking a bankruptcy restriction order. The respondent could contest the alleged fraud and misuse of the loans by documentary and witness evidence.
5. The court refused to order retraction. It was not satisfied that it had jurisdiction to make such an order, and there was no particularised or evidenced basis for strike-out or abuse of process. Fraud allegations should not ordinarily be determined summarily unless the case is plain and obvious.
6. Stay. Application 3 was dismissed as otiose. The court had power to stay under CPR 3.1(2)(f) and its inherent jurisdiction, but the related criminal proceedings had concluded and no continuing reason for a stay remained.

The court directed that the bankruptcy restriction order application should proceed, permitting the respondent to attend remotely, while legal representatives of represented parties should attend in person.