High Court confirms correct procedure for committal proceedings brought by a trustee in bankruptcy

The High Court has considered and clarified the procedure for a trustee in bankruptcy to apply to commit a bankrupt who has failed to comply with his statutory obligations under the Insolvency Act 1986 (“IA 1986”) following the decision in Simmonds v Pearce [2017] EWHC 35 (QB) (1 December 2017).

Committal proceedings may be a useful tool for office holders when individuals do not comply with their duties to office holders when exercising their investigatory powers. These powers are, of course, critical to the realisation of assets and pursue of claims.

As insolvency practitioners will be aware, the IA 1986 imposes various obligations on an individual following a bankruptcy Order. This includes (but is not limited to) provide information of all of his affairs, deliver up his estate, co-operate with his trustee as necessarily required.

In this particular case, the Respondent was the sole beneficiary under a final will of a woman who died in 2008. The will was contested and the Respondent was ordered in 2014 to repay all that he had received under the will. Following non-payment, the personal representatives of the estate presented a bankruptcy petition, with a bankruptcy Order made in April 2015.

The trustee in bankruptcy claimed that the Respondent bankrupt had failed to comply with sections 333 and 363 of the IA 1986, to which the sanction for failure to comply without reasonable excuse is contempt of court.  The Respondent bankrupt had, inter alia, (a) lied about his financial affairs (b) failed to disclose that the inheritance money he received was passed to his daughter through a chain of transactions; and (c) refused to participate in or answer further questions at public examinations. The Application was granted.

Most significantly in this case is that the court stated that the CPR is unsatisfactory and unclear in relation to contempt of court proceedings under the IA 1986. The Court further stated contempt cases falling under the IA 1986 would benefit from specific consideration by the Rules Committee as soon as was practicable.

The trustee in this case had applied under CPR 81.15 to the Administrative Court in order to determine the sanction. The Court concluded that an application should be made under CPR 81.15 to the Chancery Division of the High Court, and that a trustee in bankruptcy does not ordinarily require permission to make an application. Where the bankrupt’s failure to comply is only discovered after being discharged from liability for his bankruptcy debts and/or the trustee in bankruptcy has completed the administration of his estate, the procedure should be by way of a new application under CPR Part 8.

Following the court’s ruling, it is expected that new guidance will follow shortly.