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The Bankrupt as Contemnor: The Importance of Compliance

Decision: On 1 November 2017 HHJ Simon Barker QC (sitting as a Judge of the High Court in the Business and Property Courts in Birmingham) handed down judgment in the application of the Official Receiver (“OR”) to commit Mr. Brown to prison for contempt of court for failing to comply with his obligations under ss.288, 291, 312 and 333 of the Insolvency Act 1986 (“IA 1986”). Judgment on sentence was handed down on 7 November 2017 [[2017] EWHC 2762 (Ch)].

Mr. Brown was found guilty of contempt on all grounds put forward by the OR and there being no meaningful attempt to purge the contempt and only nominal mitigation, which the Judge referred to as being “nothing other than very late…and marred by untruth and persistence in denying the validity of court order”, Mr. Brown was given an immediate custodial sentence of 8 months. A warrant was issued for his arrest.

After a failed appeal to the Court of Appeal on 25 January 2018, where Mr. Brown once again represented himself despite being entitled to legal aid, the judgment of the lower court was upheld and the stay on the warrant of arrest was lifted.

Overview: Mr. Brown was adjudged bankrupt on 12 May 2016. In accordance with its powers and duties under the IA 1986 the OR (and the Trustee in Bankruptcy) required Mr. Brown to provide information and documentation as to his assets and liabilities.

After a dogged refusal to comply with any of the said requests and failure to answer any of the OR’s questions when he was called for public examination on 20 January 2017, DJ Shorthose suspended Mr. Brown’s automatic discharge from bankruptcy until such as the OR reported that he had satisfactorily complied. The OR was granted permission to bring committal proceedings against Mr. Brown. After a slight false-start, the committal application proceeded by way of the certification procedure under CPR 81.15.

There is much to be said about the voluminous representations made against the committal, which included allegations of fraudulent conspiracy against the Birmingham judiciary, bar, legal profession and the OR’s office. There was also a mildly comical moment when Mr. Brown served a statutory demand on HHJ Barker QC during the course of the hearing. Ultimately however, nothing Mr. Brown said against the application had any basis in law - the bankruptcy order was valid, the application(s) to set it aside and/or annul had failed, and the appeal(s) against it had been dismissed. The writing was very clearly on the wall, albeit unseen by Mr. Brown.

Unlike some applicants the OR had no vested interest in securing Mr. Brown’s committal to prison and only sought his compliance with his statutory obligations; the committal application was a measure of “last resort”.

The Court afforded ample opportunity to Mr. Brown at the hearing on 25 October 2017 to make representations against the application and/or otherwise argue why he had a reasonable excuse for failing to comply. Mr. Brown made no representations as to “reasonable excuse” and in fact left the Court before the hearing had concluded.

Judgment was handed down on 1 November. When the Court re-convened for judgment on sentence on 6 November 2017 Mr. Brown, whom had attended late, interrupted judgment part-way through to submit that he had not refused to purge his contempt and that he was prepared to answer the OR’s and Trustee’s questions. The hearing was adjourned to 7 November 2017 for such questioning. However, it became patently clear a short way into cross-examination that Mr. Brown was not prepared to be candid or compliant.

Sentence: In his judgment HHJ Barker QC acknowledged that the “modern approach” to sentence was to take a fine as the “starting point” and that for the purpose of sentence the Court is concerned with three elements: (i) punishment; (ii) deterrence; and (iii) coercion.

Taking Proudman J’s checklist of sentencing factors as set out in JSC BTA Bank v. Solodchenko (No.2) [2010] EWHC 2843 (Ch), HHJ Barker QC found that “In all the circumstances, it is impossible to view (Mr Brown’s) contempt as anything other or less than serious and deliberate... (he) has made clear that he has no intention of admitting contempt or apologising for his contempts. He refuses to acknowledge that he is in contempt if that means, as it must, recognising court orders which he regards as invalid”.

Having maintained his position that the bankruptcy order itself was “null and void”, Mr. Brown was sentenced to 8 months (the maximum sentence for contempt being 2 years under s.14(1) of the Contempt of Court Act 1981). He is entitled to immediate release after 4 months (pursuant to s.258 (2) of the Criminal Justice Act 2003) and at any point during that tenure can apply to the court for immediate release if he is willing to comply.

Comment: The function of the contempt process is to protect and promote the integrity of court orders and the administration of justice, in this case embodied as statutory provisions within the IA 1986. Whilst the committal procedure is rarely used against bankrupts, mainly because such patent disregard by a bankrupt to his/her statutory obligations is relatively unheard of, it remains a powerful weapon in the OR’s/TIB’s arsenal.

The case stands as a reminder that these statutory obligations must be taken seriously and, if they are not, a committal application may be deployed.

It is unknown whether Mr. Brown remains “at large”.

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