Official Receiver -v- Brown [2018] EWCA Civ 303

The Facts

Mr Brown was declared bankrupt on 12 May 2016, following possession proceedings and costs order against him which had not been paid. Mr Brown did not accept that the original litigation leading to his bankruptcy was valid, and as a result did not accept that the bankruptcy proceedings were valid either. Mr Brown represented himself at all hearings and refused legal representation or assistance.

Mr Brown refused to provide information to the Official Receiver ("OR") under s.288 and s.291 of the Insolvency Act 1986 ("IA") and refused to provide information to his Trustees in Bankruptcy under s.312 and s.333 of the IA. Mr Brown had also gone further and made accusations against the OR, Trustees, legal representatives and the judiciary of fraudulently conspiring against him. Mr Brown also served Statutory Demands on the OR, Trustees, legal representatives and members of the judiciary, including HHJ Barker QC during a hearing. Mr Brown's automatic discharge from bankruptcy was suspended on 20 January 2017 until he complied with his obligations, but he failed to do so. On 1 November 2017 the High Court found that Mr Brown was in contempt of court by virtue of his non-compliance with both the OR and his Trustees.

Mr Brown refused to attend the judgment hearing on 1 November 2017, but was given the opportunity to purge his contempt by answering questions from the OR and Trustees at a hearing on 7 November 2017 which Mr Brown only attended after being arrested pursuant to a warrant. At this hearing, Mr Brown's responses to questions were misleading, inaccurate and clearly indicated that he did not have a true intention to purge his contempt. The High Court therefore stopped the questioning and proceeded to decide an appropriate sanction for Mr Brown's contempt.

The High Court concluded that the OR and Trustees had been prejudiced by Mr Brown's refusal to comply with his obligations under the IA and that Mr Brown's behaviour was serious and deliberate and he had no reasonable excuse for his actions. The High Court concluded that an immediate custodial sentence of 8 months was appropriate (although by virtue of s.258(2) Criminal Justice Act 2003 Mr Brown would need to serve 4 months before being released) and an arrest warrant was issued on 8 November 2017.

Mr Brown appealed against the Order of 1 November 2017 and the sentence imposed on 7 November 2017. A stay of the arrest warrant was granted on 15 December 2017 as Mr Brown was entitled to appeal against the custodial sentence as a right, and he had done so.

The Verdict

The Court of Appeal dismissed Mr Brown's appeal on 25 January 2018. At the appeal hearing, Mr Brown submitted that the underlying litigation which led to his bankruptcy were invalid and therefore the bankruptcy proceedings were void, which subsequently meant that he was not required to comply with his obligations under the IA. The Court of Appeal said that the original orders of the court existed, they had not been set aside and therefore they correctly formed the basis for the bankruptcy proceedings and the obligations under the IA must therefore be complied with by Mr Brown.

The Court of Appeal found that there was no error in law by the High Court, in relation to both the judgment of contempt and the sentence imposed, and therefore the appeal was dismissed and the stay of the arrest warrant was lifted.

Our Comment

Although not commonly used, where a bankrupt persistently refuses to comply and this results in significant prejudice to the OR and/or Trustee in Bankruptcy, a custodial sentence may still be imposed by the Court. This case serves as a useful reminder that contempt of court proceedings are available for non-compliance by a bankrupt with the statutory provisions in the IA in extreme circumstances.

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