Louise Mary Brittain (as trustee in bankruptcy of Jonathan Ferster) v Jonathan Ferster (a bankrupt)

Hearing dates: 6–10 December 2021, 21 January 2022

APPROVED JUDGMENT

This judgment was handed down remotely by circulation to the parties' representative by email and release to the National Archive. The date and time for hand-down is deemed to be Friday 6 May 2022 at 2pm.

His Honour Judge Halliwell

(1) Introduction

These proceedings arise from the bankruptcy of Mr Jonathan Ferster (“ Mr Ferster”). Mr Ferster's trustee in bankruptcy, Ms Louise Brittain (“ the Trustee”), has issued two separate applications for an order suspending Mr Ferster's discharge from bankruptcy under Section 279(3) and the provision of a witness statement and documents under Section 366(1) of the Insolvency Act 1986. These applications are now before me.

As parties to the Section 366 application, the Trustee has joined Mr Jonathan Seeds (“ Mr Seeds”) and Evolution Software (UK) Limited (“ Evolution Software UK”) in addition to Mr Ferster himself. Mr Seeds cohabits with Mr Ferster as his partner and has done so for upwards of twenty years. However, they have not married one another and they are not civil partners. Evolution Software UK provides services for online gaming businesses. Mr Seeds is registered as its majority shareholder.

At the hearing before me, Messrs Jack Watson and Ram Lakshman, of counsel, have appeared on behalf of the Trustee. Mr Richard Chapman QC and Ms Victoria Roberts, of counsel, have appeared on behalf of all three respondents.

(2) Background

Mr Fester was once in business with his brothers, Messrs Warren and Stuart Ferster. In 2004, they formed or acquired Interactive Technology Corporation Limited (“ ITC”) as the vehicle for an online gaming business.

Ten years later, during the Autumn of 2014, their relationship descended into acrimony when Messrs Warren and Stuart Ferster discovered that Mr Ferster had drawn unauthorised remuneration and unlawfully transferred funds from ITC to other companies in which he had an interest. On behalf of ITC, they commenced proceedings against Mr Ferster and a series of companies with which Mr Ferster was alleged to have a connection or transferred funds. In those proceedings, they obtained a freezing and property preservation order. They also brought their own personal claim against Mr Ferster. Mr Ferster himself petitioned for relief in respect of ITC under the provisions of Section 994 of the Companies Act 2006.

In June-July 2016, the proceedings were tried together before Morgan J. Having found Mr Ferster to have acted dishonestly and deliberately given false evidence, Morgan J gave judgment for ITC. He ruled that ITC owned the online gaming business. He also concluded that Mr Ferster had unlawfully transferred ITC's assets to other companies, drawn excessive remuneration and claimed expenses to which he was not entitled. Morgan J's judgment is at [2016] EWHC 2896 (Ch).

On 19 May 2017, ITC presented a bankruptcy petition and, on 10 July 2017, Mr Ferster was adjudged bankrupt. On 19 July 2017, the Trustee was appointed Mr Ferster's trustee in bankruptcy. As at 4 July 2018, Mr Ferster's unsecured creditors had submitted proofs in the bankruptcy amounting to some £14,799,928.90, including ITC's proof for £14,170,933.99.

Under Section 279(1) of the Insolvency Act 1986, Mr Ferster was scheduled to be discharged from bankruptcy on 10 July 2018, one year after commencement of the bankruptcy. However, on 6 July 2018, the Trustee applied to the Court for an order suspending discharge. In support of her application, the Trustee filed a witness statement dated 5 July 2018, alleging that Mr Ferster had failed to respond fully to her enquiries about the amounts secured by a second charge over his house in favour of Fedelta Trustees (IOM) Limited (“ Fedelta Trustees”) and, more generally, his involvement in the business of “CasinoMax” (“ CasinoMax”) and Evolution Software UK. Fedelta Trustees were trustees of the J Ferster 1989 Settlement Trust ( “the 1989 Trust”), an Isle of Man trust set up by Mr Ferster himself in 1989. CasinoMax is used as a trade name by Entertainment Software Group NV (“ Entertainment Software”), a company registered in Curacao. It was at least implicit in the Trustee's enquiries that she had reason to believe Mr Ferster was involved in the formation and management of CasinoMax and had an interest in the assets of Entertainment Software. More generally, the Trustee perceived that Mr Ferster was seeking to conceal assets held or acquired on his behalf before and after he was adjudged bankrupt.

On 9 July 2018, HHJ Stephen Davies made an order (“ the July Order”) under Rule 12.10 of the Insolvency (England and Wales) Rules 2016, suspending discharge on an interim basis. It was recorded in the July Order that there were reasonable grounds for considering that [Mr Ferster] had failed to give the Trustee such information as she reasonably required to carry out her functions. This was not in the same terms as the formula required by Rule 10.142(9)(e) of the Insolvency (England and Wales) Rules 2016 which requires orders to contain a statement that it appears to the court that the bankrupt has failed to comply with his obligations. No doubt, this is because the order was made on an interim basis, apparently without first notifying Mr Ferster or giving him an opportunity to respond. This was implicitly on the grounds that the Trustee had sought to provide Mr Ferster with the opportunity to provide the information required until the last possible moment but he had ultimately failed to do so. It is not suggested, on behalf of Mr Ferster, that the discrepancy with the statutory formula invalidated the July Order itself. It operated to suspend discharge until after 14 August 2014.

Mr Ferster filed a witness statement dated 8 August 2018 taking issue with the Trustee about the extent to which he had co-operated with the Trustee and the information provided in response to her inquiries. He was unable to state how much was secured by the second charge but confirmed he had already advised the Trustee, at interview, that he was involved with Casinomax and Evolution Software UK. Although he had sought to respond to the Trustee's inquiries about the companies, Mr Ferster was unable to provide all the information requested.

Following a contested hearing on 14 August 2018 (“ the August 2018 Order”), HHJ Stephen Davies made an order suspending discharge until 10 January 2019. Consistently with the requirements of Rule 10.142(9)(e) and (f) of the 2016 Rules, it was recorded in the August 2014 Order that Mr Ferster was “failing to comply with his obligations under Part IX of the Insolvency Act 1986 by failing to give [the Trustee] such information as to his affairs as [the Trustee] reasonably requires for the purpose of carrying out her functions within the meaning of Section 333 of the Insolvency Act 1986 being information in respect of (a) the purported ‘loans’ made to [Mr Ferster from the 1989 Trust] and (b) [Mr Ferster's] involvement with [Entertainment Software, Evolution Software] and related brands (together ‘Casino Max’).” It was also recorded that the Judge expected Mr Ferster to take “positive steps, within the six month suspension period, to provide or procure the provision of (1) information or documents in relation to payments made to or to be made to him from the 1989 Trust and (2) an open account of any interest, direct or indirect, and/or involvement in CasinoMax”.

On 16 December 2018, the Trustee entered into an income payments agreement with Mr Ferster under which he agreed to pay the sum of £43,564 and the sum of £1 per annum until 31 January 2022. It can be seen from the Trustee's Progress Report dated 25 August 2020 that the sum of £43,564.65 was eventually paid, as part of a settlement subsequently reached with Fedelta Trustees together with the sum of £14,470 in respect of a claim for after-acquired property, compendiously described as the sum of £58,034.65 in respect of Mr Ferster's “life interest from Trust”.

However, from 10 January 2019 until the commencement of this hearing, Mr Ferster's bankruptcy was repeatedly suspended by a succession of orders. These included an order dated 16 April 2019 in which District Judge Obodai suspended discharge until 10 January 2020, an order dated 7 January 2020 in which District Judge Richmond suspended discharge until the final hearing of the Trustee's present application dated 19 December 2019 and an order of District Judge Obodai dated 27 April 2020 in the same terms. In each order it was recorded that Mr Ferster had not complied with his obligations under the 1986 Act since he had failed to provide the Trustee with information that she reasonably required.

During this period, Mr Ferster repeatedly responded to the Trustee's requisitions but at no stage was the Trustee satisfied she had been presented with an accurate and comprehensive account. She thus sought to administer additional inquiries in the light of Mr Fester's responses.

The pattern of their correspondence is reflected in an exchange of correspondence dated 12 December 2019 and 3 January 2020 between their respective solicitors at the time, DAC Beachcroft (“ DAC”) and Knox Insolvency (“ Knox...