Paul Steven Cooper & Ors v Vladimir Dashi (aka Rugova)

Applications under section 366 of the Insolvency Act 1986 require a careful balancing exercise. The office holder must establish a reasonable requirement for the information sought to perform insolvency functions. The court must then weigh the information’s potential importance against the burden and oppressiveness imposed on the respondent.

Orders should remain focused on what is necessary and appropriate. A sworn statement that relevant documents are not within the respondent’s possession, custody or control will generally defeat a disclosure application unless there is evidence undermining it. Dissatisfaction with the respondent’s evidence, or a desire to discover whether it is truthful, does not itself establish a reasonable requirement for disclosure or examination.

The joint trustees in bankruptcy of Edward Wojakovski applied for disclosure orders against Vladimir Dashi and two companies under section 366 of the Insolvency Act 1986. They also sought an order requiring Mr Dashi to attend private examination.

The applications concerned payments made to one respondent for alleged services, payments made towards the bankrupt’s legal fees after the bankruptcy order, and expenditure connected with private-members’ club membership. The trustees said that the respondents’ explanations and disclosure were incomplete and sought further documents and examination to investigate the transactions.

The central issues were whether the trustees had established a reasonable requirement for each category of disclosure and whether examination was reasonably required.

1. Disclosure applications. The court applied the established section 366 principles. The power is extraordinary and potentially oppressive. The trustees had to establish a reasonable requirement for the information needed to carry out their functions, after which the court had to balance its importance against the inconvenience, burden and oppressiveness to the respondents.
2. For documents which Mr Dashi said, in sworn statements, were no longer in his possession, custody or control, the trustees had produced no evidence sufficient to undermine those statements. It would be oppressive and unnecessary to compel the respondents to repeat searches already undertaken merely because the trustees did not accept the evidence. No reasonable requirement was established for documents relating to the hard drive, further invoices, the fixed-fee arrangement, time records, additional payment material, club membership documents, or the two documents raised only in the skeleton argument.
3. The trustees did establish a reasonable requirement for documents concerning communications between the respondents and Candey, Keidan Harrison and Rayden Solicitors. Those documents could clarify whether payments made towards the bankrupt’s legal expenses had been checked and the terms of advances made after bankruptcy while a freezing order was in place. Disclosure was ordered under that heading.
4. Disclosure was also ordered concerning the terms and source of advances made by the respondents towards the bankrupt’s legal fees. The material already provided was insufficient, and the burden of producing the documents appeared limited. No further order was made concerning the £50,000 payment for services or the private-members’ club payments, because the relevant details had already been provided or the documents were said not to exist.
5. Private examination. The trustees’ dissatisfaction with Mr Dashi’s answers and assertion that examination was needed to get to the truth did not establish a reasonable requirement. The documents and witness statements were sufficiently clear for present purposes. Questions arising from the ordered disclosure, or future non-cooperation, could be addressed later. The application for examination was therefore refused.