It is a sad fact that some bankrupts fail to cooperate with official attempts to recover and realise their assets for the benefit of their creditors. However, as a High Court ruling showed, judges have a panoply of sometimes draconian powers designed to bring recalcitrant debtors to heel.
The case concerned a bankrupt whose potential liability to creditors stood at over £4 million. His trustees in bankruptcy asserted that he had been uncooperative with their lawful attempts to trace, recover and sell his assets. In response, they sought an order under Section 365 of the Insolvency Act 1986 authorising a thorough search of his home by up to 10 people and the seizure of any assets and relevant books, papers and records found there.
Ruling on the matter, the Court noted evidence of past shredding of documents and the movement of goods out of the man’s home. There was reason to believe that he had sold or otherwise dissipated assets without accounting to the trustees for their proceeds. There was a real risk that he might be hiding assets in his home and, overall, the evidence currently before the Court indicated that he could not be trusted.
There was evidence that he suffered from mental health problems and might present a risk of self-harm. However, his written correspondence suggested that he was very capable of managing his day-to-day affairs. The Court noted that his least stressful course would have been to show the trustees around his home and to agree the delivery up of any assets or relevant documents it contained.
The Court found that, in the absence of a search and seizure order, there would be a real risk of further dissipation or disposal of assets and destruction of relevant paperwork. Emphasising the need for caution, the Court granted such an order subject to a number of safeguards to take account of the bankrupt’s vulnerabilities. He would, amongst other things, receive independent legal advice and be given a further opportunity to cooperate before the order was executed.