Malcolm Cohen v William Stephen O'Leary (A Bankrupt)
| Jurisdiction | England & Wales |
| Judge | Louise Hutton |
| Judgment Date | 26 July 2023 |
| Neutral Citation | [2023] EWHC 1939 (Ch) |
| Year | 2023 |
| Court | Chancery Division |
| Docket Number | Case No: BR-2023-000401 |
[2023] EWHC 1939 (Ch)
Louise Hutton KC
Sitting as a Deputy Judge of the High Court
Case No: BR-2023-000401
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF THE INSOLVENCY ACT 1986
AND IN THE MATTER OF THE BANKRUPTCY OF WILLIAM STEPHEN
O'LEARY
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Saaman Pourghadiri (instructed by Browne Jacobson LLP) for the Applicants
Simon Hill (instructed on a Direct Access basis) for the First Respondent
Hearing date: 18 th July 2023
Approved Judgment
Remote hand-down: This judgment was handed down remotely at 10am on 26 July 2023 by circulation to the parties or their representatives by email and by release to The National Archives.
Louise Hutton KC:
The First and Second Applicants are the Joint Administrators of the estate of the late James Donald Hanson. Together with the Third Applicant they are judgment creditors of William Stephen O'Leary, the First Respondent.
The Applicants obtained judgment against Mr O'Leary in proceedings before the Royal Court in Jersey in Claim No.2019/093. The judgment was handed down on 17 December 2021 (“the Jersey Judgment”) and by order of the same date the Royal Court (among other things) made a declaration that Mr O'Leary was liable to pay equitable compensation for breach of trust to the Applicants in the sum of £32,666,771.
On 16 March 2022 that part of the Jersey Judgment was registered in the King's Bench Division under the Foreign Judgments (Reciprocal Enforcement) Act 1933.
Mr O'Leary subsequently applied for his own bankruptcy and a bankruptcy order was made on 21 July 2022. The Second and Third Respondents to this application are Mr O'Leary's trustees in bankruptcy. They have been served with this application but have taken no part in it. It is anticipated that Mr O'Leary will be discharged from bankruptcy on 21 July 2023.
On 2 June 2023, the Applicants issued an application in Mr O'Leary's bankruptcy seeking:
i) Permission under s.285(3) to bring an application “ for an order seeking an injunction akin to that ordered in Bacci v Green to come into effect on the First Respondent's discharge from bankruptcy”;
ii) An order that Mr O'Leary should provide certain information about his private pension to the Applicants' solicitors;
iii) Orders described as “ Bacci v Green” relief to take effect from 21 July 2023 (the anticipated date of Mr O'Leary's discharge from bankruptcy) ordering Mr O'Leary to delegate to the Applicants' solicitors his powers to elect to withdraw benefits from his private pension; giving the Applicants' solicitors authority to elect that Mr O'Leary draw down on his pension by any means that appear expedient to them and authority to elect that Mr O'Leary's pension is received into their client account; and prohibiting Mr O'Leary from otherwise dealing with the assets within his private pension scheme.
The application stated that it was necessary for it to be heard before Mr O'Leary's discharge from bankruptcy on 21 July 2023 and the application was listed to be heard in the Insolvency and Companies List on 18 July 2023 (three days before the anticipated date of discharge).
At the conclusion of the hearing I informed the parties that the application for permission under s.285(3) would be granted and that orders would be made: (i) requiring Mr O'Leary to provide certain information by way of witness statement, (ii) authorising the Applicants to communicate with Mr O'Leary's pension provider in order to obtain information about Mr O'Leary's pension, and (iii) adjourning the balance of the application with directions for evidence on Mr O'Leary giving an undertaking (which was offered during the hearing in the event that I decided not to dismiss the application entirely but to adjourn it to another hearing). As I made clear at that time, Mr O'Leary's undertaking therefore came into effect immediately. These are my reasons for that decision.
While the s.285(3) application for permission was properly brought in Mr O'Leary's bankruptcy, it is not clear to me that the balance of the application is properly brought in the bankruptcy proceedings. The balance of the application seeks (essentially) to enforce the judgment which has been registered in the King's Bench Division and the relief sought by this application (save for the s.285(3) relief) would most naturally have been made in those King's Bench Division proceedings. As set out below, the relief other than the s.285(3) permission sought by this application does not relate to Mr O'Leary's bankruptcy or assets which have formed part of his bankruptcy estate. Save for the fact that it was appropriate for the s.285(3) application to be made in the bankruptcy proceedings, no reason for the balance of the relief being pursued in the bankruptcy proceedings was identified by the Applicants at the hearing.
In the interests of dealing with the proceedings in accordance with the overriding objective, and given the urgency of the substance of the application, with Mr O'Leary due to be discharged from bankruptcy on Friday 21 July, I concluded I should in any event hear the entire application so that it could be determined as efficiently as possible. Neither party objected to this course when I raised the issue at the hearing.
The application for permission under s.285(3) Insolvency Act 1986
Section 285(3) of the Insolvency Act 1986 provides:
“ After the making of a bankruptcy order no person who is a creditor of the bankrupt in respect of a debt provable in the bankruptcy shall —
(a) have any remedy against the property or person of the bankrupt in respect of that debt, or
(b) before the discharge of the bankrupt, commence any action or other legal proceedings against the bankrupt except with the leave of the court and on such terms as the court may impose.”
The Applicants seek permission “ to commence their Application” now because of what is said to be a risk of dissipation of Mr O'Leary's personal pension if no relief is granted before his discharge from bankruptcy on 21 July.
Mr Pourghadiri, appearing for the Applicants, relied on what was said by David Richards J (as he then was) in Bank of Ireland v Colliers International UK plc [2013] Ch 422 (considering the equivalent provisions applying to companies in administration). At [32] David Richards J said that the fact that the requirement for permission for the commencement of proceedings applies to insolvency proceedings under the control of the court: bankruptcy, winding up by the court and administration, and not to companies in creditors' voluntary winding up suggests that the real purpose of the provisions is that identified by Black LJ in Boyd v Lee Guinness Ltd [1963] NI 49 at 57, namely to ensure that the whole of the task of supervising the collection and distribution of the company's assets should be committed to the winding up court and, accordingly, that all proceedings having any bearing upon the winding up of the company should remain under the supervision and control of that court.
Mr Pourghadiri submitted that, in light of that purpose, permission should be granted because (as set out below) the balance of the application was concerned with enforcing a debt which would survive Mr O'Leary's discharge from bankruptcy against an asset which the trustees in bankruptcy had stated was not available to them in the bankruptcy. In a letter dated 22 March 2023 to the Applicants' solicitors, the solicitors for the trustees in bankruptcy stated:
“ In the circumstances Mr O'Leary's private pension at present does not fall within his bankruptcy estate and therefore is not available to the Trustee in bankruptcy to use to satisfy bankruptcy debts such being the line consistent with Section 11 of the Welfare Reforms and Pensions Act 1999. That on the basis that Mr O'Leary's private pension comprises uncrystallised pension benefits, there is nothing that the Trustee can do to compel the bankrupt to draw his private pension and the dicta of Court of Appeal in Horton v Henry applies.”
Further, the Bacci v Green relief sought was expressed in the draft order to come into effect after Mr O'Leary's discharge. To permit the application to be commenced would not therefore infringe the purpose of s.285(3).
Mr Hill, appearing for Mr O'Leary, opposed the application on the basis that while he accepted that (as held in Bank of Ireland v Colliers) permission could be given retrospectively, there was no good reason why the Applicants had not applied for permission first and separately, before issuing the substantive part of their application. It followed, he submitted, that permission should be refused because there was no good reason for the application for permission not being made first, as the section envisages.
I decided that permission should be given. For the reasons identified by the Applicants, the relief sought does not affect the assets which are in the bankruptcy estate or the rights of the creditors who are entitled to prove in the bankruptcy. Although permission is typically applied for before commencing proceedings, it is clear that (as Mr Hill accepted) permission can be granted retrospectively and therefore, as here, at the outset of an application. It does not seem to me that in the absence of any suggestion of prejudice to the bankruptcy process (the trustees in bankruptcy having indicated that they take no position on the application), permission should be refused simply because it was not the subject of a separate earlier application.
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