Trustee's actions not seeking to suspend discharge criticised by Court

The Trustee had refused a bankrupt's request to apply for an order suspending the bankrupt's automatic discharge from bankruptcy. The bankrupt proposed to enter into an individual voluntary arrangement (IVA) with his creditors, but the Trustee did not believe that the bankrupt's proposal fully disclosed his assets. The Trustee's refusal to apply for a suspension of the bankrupt's discharge was, effectively, a means of preventing the IVA proposal from being put to creditors.

The Court held that the Trustee's refusal to apply for a suspension of discharge was an improper use of his powers. The Trustee's power to apply for a suspension of discharge was designed to assist him to compel the bankrupt to comply with his obligations under the IA 1986, rather than to prevent the bankrupt from exercising his right to agree a compromise with his creditors. The Trustee’s own evidence was that the debtor was not co-operating with him, and the Court suggested that this non co-operation was, in itself, a valid reason why the Trustee ought perhaps to have sought the suspension of discharge.  Accordingly, the Court found that the Trustee's actions were sufficiently unreasonable for it to make an order, under section 303(1) of the IA 1986, suspending the bankrupt's discharge from bankruptcy until the creditors had considered the IVA proposal.  It is up to the creditors to decide if a proposed Voluntary Arrangement is acceptable to them, even if the proposal appears not to fully disclose the debtor’s circumstances.  The Trustee should not block the proposal, but if approved, could seek to challenge the approval.