Shierson & Anor v Rastogi (A Bankrupt)

RBG (Resources) plc (“RBG”) was established by the respondent Viren Rastogi (“the Bankrupt”) in May 1996. It traded in metals. By September 2001 it had a turnover of US$1.7bn. Its auditors, PwC, resigned on 30th January 2002 due to a breakdown in trust and confidence between themselves and the directors. On 3rd May 2002 Mr Malcolm Shierson and Mr Jervis, partners in Grant Thornton LLP, were appointed joint liquidators of RBG, a petition for its compulsory winding up having been presented to the High Court by a creditor the day before. On 8th May 2002 such provisional liquidators issued proceedings in the name of RBG against the Bankrupt and another in respect of alleged breaches of their duties as directors of RBG. Their application for summary judgment succeeded. On 27th April 2004 Hart J gave judgment against the Bankrupt for US$307,463,954 in respect of breaches of his fiduciary duties as a director. The basis of his judgment was

On 2nd February 2005 Mrs Registrar Derrett made a bankruptcy order against the Bankrupt on the petition of RBG based on his failure to satisfy the judgment of Hart J. The appellants Mr Malcolm Shierson and Mr Jonathan Birch (“the Trustees”) were appointed joint trustees in bankruptcy. The Bankrupt was due to be discharged at the expiration of one year from the date of the bankruptcy order when, on 23rd December 2005, the Trustees applied for an order under s.279(3) Insolvency Act 1986 to suspend the running of that period. By s.279(4) the court may make such an order

The Trustees contended, so far as still relevant, that the Bankrupt had failed and was continuing to fail to comply with his obligations under that part, specifically ss.291, 311, 312 and 333 Insolvency Act 1986, in three respects. As summarised by Mr Shierson in his witness statement made on 23rd December 2005 they were:

The application was heard by Registrar Jaques on 23rd March and 25th July 2006, an interim order having been made by Chief Registrar Baister on 26th January 2006. On 27th October 2006 he handed down judgment dismissing the application. I shall refer to his reasons in more detail later but, in summary, he concluded that (1) the judgment of Hart J was inadmissible to prove the fraud at the root of the Trustees’ complaints, (2) there was no evidence sufficient to establish that the Bankrupt had ever received any of the proceeds of sale of shares in Allied Deals Inc and (3) the contentions in respect of the trusts and Clipter Holdings Ltd were based on suspicion, not evidence.

This appeal of the Trustees is brought with the permission of Patten J, Registrar Jaques having made a further interim order on 27th October 2006. They contend that the Registrar was wrong on all three grounds on which they rely. I will deal with each in turn but first it is necessary to refer to the relevant statutory provisions and to describe the facts in more detail.

The part referred to in s.279(4) Insolvency Act 1986 is Part IX dealing with Bankruptcy. Chapter I deals with petitions, orders, discharge and annulment. It includes s.279 which deals with the duration of the bankruptcy. By sub-section (1) discharge occurs automatically at the end of the period of one year from the making of the order unless an order to suspend the running of time is made under that section. An application for such an order may be made by the official receiver or the trustee in bankruptcy and the running of time may be suspended until the end of a specified period or the fulfilment of a specified condition, which may include a condition that the court is satisfied as to a specific state of affairs. As prescribed by s.279(4) such an order may only be made if the court is satisfied that the bankrupt has failed or is continuing to fail to comply with an obligation under Part IX.

A discharge from bankruptcy has various consequences. It releases the bankrupt from the debts prescribed in s.281. It removes the disqualification imposed by s.11 Company Directors Disqualification Act 1986 from being concerned in the promotion, formation and management of a company without the leave of the court. Acts or omissions of the bankrupt occurring after discharge cannot constitute a bankruptcy offence under Chapter VI, see s.350(3). Accordingly a bankrupt may, after his discharge, obtain credit or engage in business, see s.360. But discharge from bankruptcy does not affect the continuing obligations of a bankrupt to assist the official receiver or the trustee in bankruptcy with to the provision of information and the recovery of assets. Those are the obligations on which the Trustees rely in this application.

S.291 imposes duties on the bankrupt to deliver possession of his estate to the official receiver and to deliver up to him all books, papers and other records “which relate to his estate and affairs”. When a trustee has been appointed the official receiver is obliged by s.312(2) to pass on to the trustee the property, books and papers obtained by him. Chapter IV then applies and it is the duty of the trustee to get in, realise and distribute the bankrupt’s estate (s.305(2)) and the bankrupt’s estate vests in the trustee on his appointment (s.306). The trustee is required to take possession of all books, papers and other records which relate to the bankrupt’s estate and affairs and which belong to him or are under his control (s.311) and the bankrupt is required to deliver them up to him (s.312).

S.333 provides that the bankrupt:

In that connection I should, for completeness, point out that the remedy of a bankruptcy restriction order, which was introduced by Enterprise Act 2002 to balance the reduction of the period before an automatic discharge to one year, is not available in the circumstances of this case. First, the remedy is not available to a trustee in bankruptcy, see Insolvency Act 1986 Sch.4A para 1(2). Second, the circumstances in which such an order may be made, as prescribed by para 2, are materially different to those of s.279(4). Third, events occurring before 1st April 2004 may not be taken into account, see The Enterprise Act 2002 (Commencement No.4 and Transitional Provisions and Savings) Order 2003 SI 2003/2093 reg.7.

I have already given the factual outline of this appeal and will subsequently deal with the facts in more detail when considering the particular grounds of appeal. Nevertheless it is convenient at this stage to set out the chronology of events occurring after the commencement of the winding up of RBG in more detail. The relevant winding up petition was presented by a substantial creditor on 2nd May 2002. This enabled the appointment of Mr Shierson and Mr Jervis as provisional liquidators of RBG on 3rd May 2002 and the immediate grant, on their application in the name of RBG, of a world-wide freezing order against the Bankrupt. These events coincided with a ‘dawn raid’ carried out by the City of London police, in exercise of powers conferred by the Police and Criminal Evidence Act, on the premises of RBG and the Bankrupt in which all available documents were removed. The Bankrupt did not receive an inventory of the documents removed from his home until 16th December 2005.

On 8th May 2002 the Bankrupt swore the affidavit required by the freezing order made against him on 3rd May 2002 disclosing his personal assets. He pointed out that all documentation relating to his personal affairs had been seized by the police from either his home or the offices of RBG and therefore had nothing from which to refresh or confirm his recollection. In the letter exhibited to his affidavit he disclosed assets under 13 headings. Further details of those assets were given in letters dated 23rd and 24th May 2002. The Bankrupt made a second affidavit dated 7th August 2002 in response to complaints of inadequate disclosure made by the solicitors for RBG in which he disclosed the existence and constitution of Regent Trust and the Portman Trust. The first was set up by him on 27th January 1997, the second by the trustees of the first by a declaration of trust made on 16th July 1999. In each case the trustee was the Caribbean Trust Corporation. This was the only disclosure at that time relevant to any of the matters on which the Trustees now rely.

On 22nd July 2002 Laddie J made an order for the examination of the Bankrupt under s.236 Insolvency Act 1986 in relation to the affairs of RBG. The appeal of the Bankrupt from that order was dismissed by the Court of Appeal on 8th November 2002. The examination so ordered took place over 8 days between 28th January and 5th February 2003. It was then adjourned and remains adjourned sine die. The relevant answers of the Bankrupt to questions put to him are described by the Trustees in evidence on this application as “less than frank”.

The liquidators then applied for summary judgment under CPR Rule 24.2 in respect of their claim issued on 3rd May 2002. The particulars of claim alleging fraudulent breaches of trust and fraudulent conspiracy had been served on or about 24th May 2002. The essence of the claim was described by Hart J, before whom the application came, in paragraphs 2 and 3 of his judgment thereon delivered on 27th April 2004 in these terms:

The material before Hart J consisted of the pleadings, various witness statements and voluminous exhibits. There was no oral evidence or cross-examination of any deponent. None of those documents has been adduced in evidence before me but all of them are in the possession of the Trustees. Hart J then described the various individuals involved (paras 4 to 6). In paragraphs 7 to 9 he considered the counterparties with whom RBG dealt. He said:

Hart J then turned to the defence of the Bankrupt. In paragraph 10 he recorded it in these terms:

Hart J then considered a submission made on behalf of the Bankrupt that the claim was inappropriate for summary judgment because it raised “allegations of a massive fraud involving over 250 companies and relies on nine voluminous witness statements and thousands of exhibited documents”. Hart J rejected that submission. He considered that (paragraphs 13 and 14):

Hart J then considered the evidence before him in that context. He referred in particular (paragraph 16) to evidence as to the discovery in a warehouse in Sha Tin, Hong Kong of a cache of documentation and described the documents so found. He observed in paragraph 17:

Hart J then referred (paragraphs 18 to 31) to the documentation which demonstrated these conclusions and to further contentions advanced on behalf of the Bankrupt before concluding in paragraphs 31 to 33:

Hart J then considered issues arising on quantum. RBG had claimed that the measure of liability was, in the alternative, the amounts due from the counterparties if the transactions were genuine or the amounts due by RBG to the financiers. Hart J held that the latter was the appropriate measure. In paragraphs 36 to 39 he explained why in the following terms:

In the light of that further argument Hart J gave summary judgment to RBG in the sum of US$307,463,954 with interest and costs. As I have already indicated, the Court of Appeal (Longmore and Jacob LJJ) refused permission to appeal. In doing so Jacob LJ, with whom Longmore LJ agreed, having dealt with the specific points raised by leading counsel for the Bankrupt said (paragraphs 19 and 20):

Bankruptcy proceedings quickly followed and a bankruptcy order was made against the Bankrupt on 2nd February 2005 and the Trustees were appointed on 5th February 2005. On or about 15th March 2005 the Bankrupt answered the routine questionnaire submitted by the Official Receiver. In his answers the Bankrupt stated that he did not own the house in which he lived with his family but that it was a jointly owned family home. He said that he paid no rent or mortgage repayments in respect of it. He estimated his monthly outgoings to be £9,900 which were being discharged out of his wife’s savings and investments. On 6th June 2005 and as and when asked to do so thereafter the Bankrupt provided the Trustees with a letter of authority enabling them to obtain information relating to him from financial advisors, trust companies, banks and other similar institutions.

On 27th September 2005 the Bankrupt was interviewed by the Trustees in accordance with his obligations under s.333 Insolvency Act 1986. I shall hereafter refer to various passages in connection with the specific matters on which the Trustees now rely. In their evidence on this application the Trustees described the Bankrupt’s answers as vague and non-committal.

On 28th October 2005 the Bankrupt was charged, with others, with conspiracy to defraud

On 15th November 2005 the solicitors acting for the Bankrupt wrote to the Trustees with explanations, originally promised in the course of the interview on 27th September 2005, concerning the Regent and Portman Trusts. I shall refer to that in greater detail when considering the Trustees concerns regarding the alleged failure of the Bankrupt to disclose a beneficial interest in Regent Trust, Portman Trust or Clipter Holdings Ltd.

The application of the Trustees which came before Registrar Jaques was issued on 23rd December 2005. The original relief sought was the suspension of the running of time for the purposes of s.279(1) for a period of 18 months from 2nd February 2006 to 2nd August 2007 or until the Trustees were satisfied that the Bankrupt had properly accounted for the application of the sum of US$307,463,954 set out in the order of Hart J. It specified the grounds on which such an order was sought as those set out in the witness statement of Mr Shierson made on the same day. The notice of opposition required by IR 6.215 was given by the Bankrupt on 20th January 2006 and was verified by his witness statement made on 30th January 2006.

Witness statements were duly exchanged and the hearing before the Registrar commenced on 23rd March 2006 and was adjourned part heard, in the event, until 25th July 2006. In the meantime, on 8th May 2006, the Zurich District Court determined applications of RBG against Clipter Holdings Ltd and the Bankrupt, originally made on 7th June 2005, for the attachment of three bank accounts in the name of Clipter Holdings at Cantrade Privatbank AG of which RBG alleged that the Bankrupt was the beneficial owner. RBG relied on the judgment of Hart J, the facts it revealed and certain other documents. The judge in the Zurich District Court considered the attachment claims to be sufficiently substantiated and made the orders sought by RBG. These judgments were introduced into the evidence before the Registrar by a witness statement made by a solicitor employed by the solicitors acting for the Trustees. Appeals from these judgments were dismissed by the Civil Division of the Higher Court of the Canton of Zurich on 6th February 2007. I was informed at the hearing of the appeal before me that an application for permission for a further appeal had been rejected by the relevant court.

The hearing before the Registrar concluded on 25th July 2006 when he reserved his judgment. Before he gave judgment on 27th October 2006 the examination of the Bankrupt pursuant to s.333 Insolvency Act 1986 resumed on 13th September 2006. Notwithstanding the opposition of counsel for the Bankrupt I admitted the part of the transcript on which the Trustees sought to rely. That included passages in which the Bankrupt continued to assert that the metal trading transactions were genuine and to deny the validity of the judgment of Hart J on the basis that he had not had an opportunity to give his analysis of the documents or to explain the transactions alleged to be fraudulent. That, of course, is quite inconsistent with the suggestion now made by his counsel that he has told the Trustees and the Court all he knows.

The Registrar handed down his written judgment on 27th October 2006. For the reasons he gave he dismissed each of the complaints of the Trustees save for two cases of non-disclosure in the past which, he concluded, were insufficient to justify the relief sought by the Trustees. The Trustees now appeal but only on the more limited basis to which I have referred in paragraph 3 above. I will now consider the three grounds on which this appeal is based.

This point was explained in paragraphs 64 and 65 of Mr Shierson’s first witness statement. It was rejected by the Registrar because he considered that the judgment of Hart J was not admissible on the application against the Bankrupt before him. He dealt with the point at various stages of his judgment. In paragraphs 1 to 6 he set out the nature of the case and the specific matters on which the Trustees relied. In paragraph 5 he said:

The Registrar returned to this point in the context of the allegation that the Bankrupt had failed to disclose his interests in Regent Trust or Clipter Holdings Ltd. In that connection he referred in paragraph 12 of his judgment to the witness statement of the solicitor employed by the solicitors for the Trustees exhibiting the judgment of the District Court of Zurich on the application for attachment orders I have referred to in paragraph 27 above. In addition he accepted the submission of counsel for the Bankrupt “that it is well established that [the Trustees] cannot rely on the findings made in the proceedings which bear on this allegation: Secretary of State for Trade and Industry v Bairstow [2004] Ch.1”. He rejected the submission of counsel for the Trustees that that case was irrelevant to the exercise on which he was engaged. He could see no basis for not applying the principle of that case to the case before him.

In paragraph 15 of his judgment the Registrar referred to the core allegation made against the Bankrupt “namely that he was a party to fraud and had extracted assets from [RBG] which he was hiding”. He pointed out that much of Mr Shierson’s second witness statement was devoted to that topic and that reliance was placed by him on, amongst others, the judgment of Hart J. He concluded:

The Registrar evidently considered that a proper application of the decision of the Court of Appeal in Secretary of State for Trade and Industry v Bairstow [2004] Ch.1 precluded the admission of the judgment of Hart J in evidence on the application before him for any purpose. Thus there was no evidence before him to implicate the Bankrupt in any fraudulent conspiracy or other breach of fiduciary duty. Counsel for the Trustees submits that the Registrar was wrong so to conclude and that his conclusions on the other grounds on which the Trustees rely was infected by that error. The submissions of counsel for the Trustees may be summarised under three heads, namely, the decision of the Court of Appeal in Bairstow is (1) distinguishable, (2) inapplicable to issues arising between privies to the original judgment and (3) cannot be relied on if so to do amounts to an abuse of the process. I will consider these submissions in due course, but, first, it is necessary to understand the principle of Hollington v Hewthorn [1943] 1 KB 587 and the circumstances of Bairstow in which it was applied.

In paragraphs 15 and 16 of my judgment in Bairstow, with which Potter and Hale LJJ agreed, I described the circumstances in Hollington and pointed out that its only relevance was on the first ground of decision in that case, namely “that the opinion of the court exercising the criminal jurisdiction as evidenced by the certificate of conviction was not relevant” to the issues in the second action being a claim for damages for negligence.

In paragraph 17 I quoted the material passage from the judgment of the Court given by Goddard LJ. I need not do so again. It is sufficient to repeat the concluding sentence:

In Bairstow the earlier proceedings had been a claim by Mr Bairstow for damages for wrongful dismissal which had been tried by Nelson J over a substantial period and involved a good deal of oral evidence. The Secretary of State sought to use the extensive judgment of Nelson J as evidence of the facts found by him in proceedings against Mr Bairstow for a disqualification order under the Company Directors Disqualification Act 1986. At a pre-trial review Pumfrey J had directed that both the Secretary of State and Mr Bairstow be bound by the judgment of Nelson J. Mr Bairstow appealed.

The Secretary of State sought to escape from the conclusion indicated by Hollington by contending that Mr Bairstow’s refusal to accept the conclusions of Nelson J in the later disqualification proceedings was an abuse of the process. In that connection I referred to a number of authorities which dealt with the proposition that a decision, otherwise than in rem, only bound the parties thereto and their privies. Thus a refusal by one who was not a party or the privy of a party would only amount to an abuse of the process of the court if (i) it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated or (ii) to permit such relitigation would bring the administration of justice into disrepute (para 38).

Counsel for the Bankrupt contends that the decision of the Court of Appeal in Bairstow is applicable in this case because, he submits, the Trustees are not the privies of the Bankrupt and even if they are they are not bound by a judgment obtained against the Bankrupt before his bankruptcy intervened. In relation to the second proposition counsel relies on the well established principle that in the bankruptcy of a party the court in bankruptcy is entitled to go behind the judgment to ascertain whether the debt it appears to establish is truly due, see per Etherton J in Re:Menastar Finance Ltd [2003] 1 BCLC 338, 346 paras 43 to 51. Thus I accept that in cases of suspected fraud, collusion or miscarriage of justice a trustee or liquidator is entitled to go behind the judgment. But unless and until he does so the judgment is as binding on him as it is on the bankrupt because he is the legal assign of the bankrupt.

In Gleeson v J Wippell & Co Ltd [1977] 1 W.L.R. 510 at 515 (approved by Lord Bingham in Johnson v Gore Wood [2002] 2 AC 1 at 32) Sir Robert Megarry considered that any constraint on a party, whether by way of cause of action estoppel, issue estoppel or abuse of process, applies also to his privy. He considered that the principle to be applied was whether having due regard to the subject matter of the dispute, there is a sufficient degree of identification between the two to make it just to hold that the decision to which one was a party should be binding in proceedings to which the other is a party. Such a principle would evidently apply to proceedings between RBG and the Bankrupt and between RBG and the Trustees, see for example Halsbury’s Laws of England 4th Ed.Reissue Vol.16(2) para.999 and Spencer Bower, Turner & Handley 3rd Ed. para 231. It seems to me to be obvious that in those circumstances the same principle is applicable to proceedings between the Trustees and the Bankrupt. This was the conclusion of Gloster J in Re Struth [2006] 1 BCLC 294, 303 para 31 and of Mr Thomas Ivory QC, sitting as a deputy High Court judge of the Chancery Division in Singla v Brown [2007] EWHC 405 (Ch) para 29. I agree with them.

Accordingly I reject the submissions of counsel for the Bankrupt and accept that of counsel for the Trustees that for the purposes of considering any cause of action estoppel, issue estoppel or abuse of process arising from the judgment of Hart J they are to be considered as the privies of the Bankrupt. They have not asserted, indeed could not assert, that the judgment was in any way suspect as being the product of fraud, collusion or miscarriage of justice. Accordingly they are bound by it to the same extent as any other privy of the Bankrupt would be.

It is in that context that, having accepted the second, it is appropriate to consider the first submission of counsel for the Trustees I summarised in paragraph 33 above. He submits that the principle established in Hollington, as applied in Bairstow, is based on the proposition that the decision of the court in the first of the cases is irrelevant to the resolution of the dispute in the second. No doubt this is true where the parties to the second are not the parties or privies of the parties to the first. But where they are the judgment is relevant to establish the extent of the estoppel arising from the order.

Thus, as explained in Halsbury’s Laws of England 4th Ed. Vol.37 para 1224, a judgment is conclusive between the parties and their privies of its existence, date and legal consequences and precludes relitigation of the same cause of action or issue. To establish what matters were in issue it is permissible to examine the pleadings and the judgment. It must follow that the conclusion of Hart J, and the reasons therefor, that on the pleadings and evidence before him there was no real prospect of the Bankrupt establishing a defence to the claim of the Trustees as formulated in the particulars of claim is relevant in order to ascertain the extent of any issue or cause of action estoppel. Accordingly the judgment must be admissible and conclusive as between the Bankrupt and the Trustees for that purpose. The case is quite unlike either Hollington or Bairstow. In each of them the conclusion of the jury or judge was based on the oral evidence adduced at the first trial which one party in the second had had no opportunity, by himself or his privy, to challenge.

Accordingly, in my judgment, the Registrar was wrong to exclude the judgment of Hart J on the basis that it was not admissible or on any other basis. It established conclusively, as between the Bankrupt and the Trustees, that the Bankrupt had participated in a fraudulent scheme such as Hart J described in paragraph 3 of his judgment, that none of the counterparties to the various metal transactions was independent of RBG and that the Bankrupt had orchestrated their activities in such a manner and to such an extent that he was liable for breach of duty as a director in committing RBG to the transactions with the financiers in the amount of US$307m. In these circumstances it is unnecessary for me to deal with the third point on which counsel for the Trustees relied, namely, abuse of process.

It is true, as the Registrar pointed out in paragraph 5 of his judgment that the issues before him were whether it had been established to his satisfaction that the Bankrupt had failed to perform his obligations under Part IX. Those obligations included the provision to the Trustees of documents, information and explanations relating not only to the estate of the Bankrupt but also his “affairs”, see s.291(1)(b), 311(1) and 333(1)(a) and Haig v Aitken [2000] 3 AER 80, 88h. Further the findings of Hart J entitle the Trustees to investigate whether it is appropriate to pierce the corporate veil shrouding the counterparties, see Trustor AB v Smallbone (No.2) [2001] 1 WLR 1177. In those circumstances it is clear that the Bankrupt has failed to comply with the obligations imposed on him by Part IX. Indeed the contrary was not argued.

For these reasons I accept the submissions of the Trustees that the principal ground on which they relied before the Registrar and before me, namely that the Bankrupt failed to explain or account for the disparity between the amount of the judgment awarded by Hart J and the value of the assets disclosed by him has been made out. But I must also consider the other two grounds and whether on all the grounds made out it is appropriate in my discretion to grant the relief sought.

The Bankrupt once held shares in Allied Deals Inc, a company incorporated in the United States. They were not referred to by the Bankrupt in his disclosure affidavit in answer to the world wide freezing order made against him on 3rd May 2002. In the course of his examination under s.236 Insolvency Act in January and February 2003 he told the liquidators of RBG that he had sold them to his brother Narendra for about US$30m. In his response in February 2005 to the questionnaire submitted by the Official Receiver the Bankrupt did not mention these shares or any proceeds of sale of them. He was questioned about this shareholding during his interview with the Trustees on 27th September 2005. On that occasion he suggested that only US$4m to US$6m had been paid. He explained the absence of any relevant entry in his bank accounts by suggesting that the money had been paid to RBG Holdings or RBG Enterprises. In his witness statement made on 23rd December 2005 Mr Shierson pointed out that there was no relevant entry in the books of those companies either.

Under cover of a letter dated 30th January 2006 the solicitors for the Bankrupt sent to Mr Shierson a copy of an agreement dated 16th November 1998 and made between the Bankrupt (1) and Allied Holdings Ltd (2). It recited that the Bankrupt was “the legal owner of Allied Deals Inc shares” and had agreed to sell 200 to Allied Deals Holding Ltd. The Agreement provided that title to the shares should pass on the signing of the contract. Clause 2 provided:

In his witness statement on this application the Bankrupt claimed that he had never received any part of the proceeds of sale personally. He explained that the shares had been acquired with ‘family money’ and that he had left his father and brothers to decide what should be done with the proceeds of sale. He claimed to have answered all the questions put to him as fully as he was able and could not do more.

In paragraph 11 of his judgment the Registrar rejected the complaint of the Trustees to the effect that the Bankrupt had failed to disclose the proceeds of sale of shares in Allied Deals Inc. He said:

The Trustees contend that the Registrar took too narrow a view of the obligation of the Bankrupt and failed to appreciate the extent of the inconsistency in the Bankrupt’s evidence. Counsel for the Bankrupt supported the conclusion of the Registrar and the reasons he gave.

In my judgment the Registrar did take too narrow a view of the obligations of the Bankrupt. As I have already pointed out in paragraph 44 above the duties of the Bankrupt extend beyond matters relating to his estate to matters relating to his financial affairs generally. At the very least he was obliged to give the Trustees full details of the payment instruction he was entitled to give to the purchaser under clause 2 of the Agreement.

Further the Bankrupt’s evidence is full of inconsistencies, which the Registrar seems to have overlooked, as to the amount of the purchase price and the identity of the recipient. The Agreement, to which the Registrar did not refer, specifies a price of US$53m, in his s.236 examination in January and February 2003 the Bankrupt said it was only US$30m and in his s.333 interview on 27th September 2005 he said only US$4m to US$6m was paid. The contractual purchaser was Allied Deals Holding Ltd. In his s.236 examination on 28th January 2003 the Bankrupt said that the purchaser was his brother Narendra and that he, the Bankrupt, had received at least some of the purchase price. In his witness statement he said that he had left it to his father and brothers to decide who should get the shares and for how much. There is confusion as to who received the purchase price, whatever it was.

In my judgment the Trustees have made good their allegation that the Bankrupt has failed and continues to fail to comply with his obligations under Part IX in respect of the dealings in Allied Deals Inc shares.

The position in relation to these trusts and Clipter Holdings Ltd is no less confusing. Rather than trace the course of the Trustees elucidation of the facts I will start from the position as it now appears to be. 19 Orchard Court, London, W1 is a property of substantial value in which the Bankrupt and his family have lived for ten years or more. It was bought by Clipter Holdings Ltd in February 1997 for £1.5m. £1.125m was obtained by a loan from Bank of Scotland secured on Orchard Court, the balance being provided by Clipter Holdings Ltd and RBG Holdings Ltd. The Trustees have obtained a draft, but unsigned, document dated 12th May 1997 purporting to license the Bankrupt to live in Orchard Court in consideration of a licence fee of £1,750 per month. There is no evidence that such a charge was ever paid. The loan from Bank of Scotland was repaid by three payments of US$500,000 each made between 3rd October 2000 and 10th January 2001. The Trustees believe that these payments were made by RBG Holdings Ltd and were financed by a payment of US$1.725m from Hong Kong by a counterparty to metal transactions undertaken by RBG.

According to the Bankrupt, the Regent Trust was set up by him in 1997 and the Portman Trust by the trustees of the Regent Trust in 1999. In the letter from the Bankrupt’s solicitors dated 15th November 2005 they stated that in October 1999 the Bankrupt and his wife were excluded as beneficiaries under the latter trust and a document dated 12th October 1999 executed by Caribbean Corp. Trust Ltd purporting to achieve that result has been produced. The same letter claims that by the end of 1999 the assets of the Portman Trust included the issued share capital of Clipter Holdings Ltd. But the Trustees have also obtained a letter dated 9th November 2001 signed by the Bankrupt’s father claiming to be the principal beneficiary of the Portman Trust and recording his wishes as to its future administration. These include a wish that the Bankrupt should be consulted concerning any distribution to his children and the investment and management of the Trust Fund.

The only other assets of Clipter Holdings Ltd or the Portman Trust were certain bank balances with Cantrade Privatbank AG, none of which was disclosed by the Bankrupt. These are the accounts over which RBG obtained the attachment orders from the Swiss Courts to which I have referred in paragraph 27 above.

The Registrar rejected the Trustees contention. In paragraph 11 of his judgment, after referring to the relevant paragraphs in the various witness statements, he said:

The Trustees submit that, once again, the Registrar fell into error by taking too narrow a view of the obligations of the Bankrupt under Part IX. As I pointed out in paragraph 44 above the obligation extends to information and documents relating to the Bankrupt’s financial affairs. It is no answer to point to the Bankrupt’s denial of an interest in the Portman Trust when it is clear that he once had one and his continued rent free occupation of 19 Orchard Court suggests that, at least, he is treated by the trustees as if he still did.

Counsel for the Bankrupt complains that this goes beyond the complaint made by the Trustees in the original application. I do not agree. Though the heading to this part of Mr Shierson’s first witness statement refers to “Failure to disclose beneficial interest in Regent Trust, Portman Trust and Clipter Holdings” in later paragraphs the Trustees make it plain that their complaint of lack of co-operation is much wider. Thus, in paragraph 56 of his first witness statement Mr Shierson complains that the letter from the Bankrupt’s solicitors dated 15th November 2005 “does not provide detailed disclosure and/or evidence of how the Trusts’ assets were settled and how they were funded”. In paragraph 58 he said:

The transcript of the interview of the Bankrupt conducted by the Trustees on 27th September 2005 indicates the unreliability of the information given by the Bankrupt. The subsequent correspondence hardly allays their concerns.

With regard to the bank balances with Cantrade Privatbank AG the judgment of the Swiss courts is binding on the Bankrupt. There is no suggestion that there is any ground on which the Trustees might seek to go behind it. Accordingly, for the reasons I have already given in paragraph 40 above, in my view it is binding as between the Bankrupt and the Trustees in these proceedings. The translation of the judgment shows that the Court paid close regard to the judgment of Hart J. It found, on all the evidence before it, that the Bankrupt was the beneficial owner of the credit balances. But its conclusions were conclusions on the application of the relevant Swiss law to the facts as proved to it. In those circumstances I do not think that the judgments of the Swiss Courts, albeit admissible, add anything to the complaints made by the Trustees in this application.

Nevertheless I conclude that the complaints of the Trustees are sufficiently made out with regard to the Portman Trust and Clipter Holdings Ltd. It is not necessary to reach any conclusion with regard to the Regent Trust.

Having concluded that there have been and still are substantial failures by the Bankrupt to comply with his obligations under Part IX , in addition to the two past failures which the Registrar found to have been established, the question arises whether to make an order under s.279(3) Insolvency Act 1986 and if so what. The form of order suggested in the original application has been largely overtaken by events. The order the Trustees now seek is that the discharge of the Bankrupt shall be postponed until 12 months after the conclusion of the criminal proceedings to which I have referred in paragraph 24 above. They accept that the Bankrupt cannot be expected to provide much further information on the eve of and during his trial but suggest that the order they propose will provide a period of a year after its conclusion in which the continuation of the disabilities I referred to in paragraph 7 above may provide the necessary incentive to complete co-operation on the part of the Bankrupt.

Counsel for the Bankrupt submits that if I make no order it will not prejudice the Trustees as the obligations of the Bankrupt will continue just the same. He points out that the Bankrupt has co-operated at least to the extent that three of the matters on which the Trustees initially relied but were rejected by the Registrar have not been renewed. He points out that there has already been a suspension for some 15 months and contends that the court should be slow to use its power to suspend discharge lest it is used to compel submission to the Trustees claims rather than the elucidation of information and documents.

It is clear from the terms of s.279 that postponement of discharge is linked to a failure to comply with the obligations imposed on a bankrupt by Part IX. But is the purpose of the power to postpone a discharge to provide an incentive to full compliance? Or is it that the disabilities arising from being an undischarged bankrupt should, in the public interest, continue until there has been full compliance? I doubt whether, on the facts of this case, it is necessary to reach a final conclusion on those questions. But in my view the purpose of the power is the latter, even though its effect may be to achieve the former. Were it otherwise I would have expected Parliament to have made discharge conditional on full compliance.

Given either purpose, in my judgment it is plain that I should make the order now sought. No order has yet been made under the Company Directors Disqualification Act 1986. If the Bankrupt is discharged he will be free, as his counsel told me he wishes to be, to incur credit and carry on business, whether incorporated or not. Given the period in which the relevant events occurred the alternative remedy of a bankruptcy restriction order is not available to the Secretary of State or the Official Receiver. As the three areas I have explored in this judgment show there are many important respects in which there is still a lack of information on matters which ought to be within the knowledge of the Bankrupt. In my judgment it is essential that the Bankrupt is not freed from the disabilities to which an undischarged bankrupt is subject until they have been clarified.

For all these reasons I will allow the Trustees’ appeal and order that the period of one year prescribed by s.279(1) Insolvency Act shall not expire until a period of one year from the conclusion of the trial of the Bankrupt to which I have referred ( including any appeals) shall have elapsed.