Re Hall

• Jurisdiction: Bermuda
• Judgment Date: 18 April 2008
• Docket Number: Bankruptcy Jurisdiction 1998 Nos. 21 & 423
• Date: 18 April 2008
• Court: Supreme Court (Bermuda)

In The Supreme Court of Bermuda

Ground, CJ

Bankruptcy Jurisdiction 1998 Nos. 21 & 423

Re Hall

Ms L Basden for the Official Receiver

Mr S Froomkin, QC for the Petitioning Creditor

Mr T Marshall for the estate of Charles Vaucrosson

Mr J Hall in person

The following cases were referred to in the judgment:

Ex parte BenwellELR 14 QBD 301

In re ShineELR [1892] 1 QB 522

In re RobertsELR [1900] 1 QB 122

Bankrupcy Act 1989, s. 42

Discharge of bankrupt — Conduct and lack of records

JUDGMENT of Ground, CJ

Introduction

1. This judgment is given on the Official Receiver's application under section 32 of the Bankruptcy Act 1989 (“the Act”)1. That section requires the Official Receiver, who is the government official charged with the administration of the Act2, to bring a bankruptcy that is more than five years old back before the Court for review and so that the Court can consider exercising its powers to discharge the bankrupt either absolutely or on

terms. An absolute discharge releases the bankrupt, with certain exceptions3, from all his debts.

2. The Official Receiver's application was lodged in court on 25^th February 2008, and issued on 28^th February. As Mr. Hall was adjudicated bankrupt on 26^th January 2000, the application is about two years late. Mr. Hall complains of this. His main complaint is that he was precluded from applying for his own discharge in the interim, because his Public Examination has never been concluded. I will return to that below. In the interim between the adjudication of bankruptcy and the filing of the Official Receiver's application, nothing appears to have happened on the court file.

3. Mr. Hall now seeks an absolute discharge from his bankruptcy. Prior to the adjudication, Mr. Hall had been in practice as a Barrister and Attorney. One effect of his bankruptcy is that he is debarred from obtaining a Practicing Certificate, and so cannot practice4. A discharge, whether absolute or conditional, would lift that disqualification.

4. The Official Receiver's application seeks that the discharge of Mr. Hall be suspended either for such period as the Court thinks proper or until—

(i) he ‘complies with section 15’ of the Act and files a Statement of Affairs setting out details of his income etc. since 26^th January 20005;

(ii) a dividend of not less than 50 cents on the dollar has been paid on the ‘proved debts at the time of bankruptcy’; and

(iii) a judgment is entered in favour of the Official Receiver for the balance of the debts plus interest and costs to be paid out of his future earnings or after acquired property in such manner and subject to such conditions as the Court may direct.

5. Two of the creditors appeared at the hearing, both of whom hold judgment debts against Mr. Hall. Mr. Froomkin represented the Petitioning Creditors, who are the Mental Health Act Receivers of Mrs. Betty McMahon, and Mr. Marshall appeared for the Executors of the Estate of Charles Vaucrosson (“the Vaucrosson Estate”). The Vaucrosson estate wants Mr. Hall to be able to resume his profession so that they can be paid, and they ask for—

(i) Judgment in favour of the Official Receiver for the full amount of the proved debts plus interest and costs;

(ii) A full Statement of Affairs with details of income etc. since 26 January 2000;

(iii) A public Examination if the Statement of Affairs is ‘not satisfactory to the Official Receiver’;

(iv) Upon completion of that process, payment of a lump sum of $300,000 to be followed by Mr. Hall's discharge upon the following conditions:

(a) payment of 50% of his income to the Official Receiver;

(b) compliance with the accounting requirements of rule 204 of the Bankruptcy Rules 19906 (“the Rules”);

(c) the Official Receiver or any creditor to have the right to apply for rescission of the discharge order in the event of non-compliance or payment of less than $100,000 in any 12 month period.

6. The Petitioning Creditors seem to support some amalgam of the Official Receiver's proposals and those from the Vaucrosson Estate, both of which were in any event modified somewhat as the hearing progressed. It is clear, however, that everyone who appeared opposes Mr. Hall's absolute discharge.

History of the bankruptcy

7. Mr. Hall's adjudication of bankruptcy was made on two Petitions:

(i) No. 21 of 1998 (“the first Petition”) was issued on 26^th February 1998 in respect of a judgment debt in the sum of $1,609,704 together with interest and costs obtained by the Petitioning Creditors on 23^rd day of June 1997. That was stayed on 1^st May 1998 pending an application to set aside the judgment, and a subsequent appeal, which went nowhere, an application for leave to appeal being dismissed on 23^rd March 1999.

(ii) No. 423 of 1998 (“the second Petition”) was issued on 25^th November 1998 and was founded upon a judgment for costs in the sum of $47,152 in separate proceedings concerning the appointment of the Petitioning Creditors as Mental Health Act Receivers to the estate of Mrs. McMahon.

8. The judgment on which the first Petition was founded was given summarily, under Order 14 of the Rules of the Supreme Court, on 23 June 1997. The Statement of Claim in the action7 alleged that Mr. Hall was the legal advisor of a Mrs. Betty McMahon, and held a power of attorney from her, and that between 1 November 1995 and 14 May 1996, while he was in control of her assets, he received and retained at least $1,609,740 of them for his personal benefit. Mr. Hall was subsequently prosecuted for stealing $551,044 of that money, and he was acquitted of that by a jury on 8^th April 2005.

9. A Receiving Order, which is a prelude to an adjudication of bankruptcy, was made on the first Petition on 30^thMarch 1998, and on the second Petition on 22^nd January 1999. Mr. Hall was eventually adjudicated bankrupt on 26^th January 2000, there being separate adjudications on each Petition.

10. Following the adjudication there were creditors' meetings on 15^thMarch and 22^nd June 2000. Mr. Hall did not attend either, but a telephone proposal for an adjournment to January 2001 pending the presentation of a Scheme of Arrangement was rejected, and the meeting adjourned until 15^th August. On that date Mr. Hall appeared and proposed a payment programme of $250,000 on 1^st January 2001, with six monthly instalments of $375,000, $375,000 and $500,000 thereafter8. On the face of it, compliance with such a schedule was improbable, given that Mr. Hall had no assets, and it was ultimately rejected at a further meeting on 19^th September 2000, and this was communicated to Mr. Hall by letter of 26^th September, the explanation given therein being ‘that it offered no form of security for the proposed payments’.

11. On 23^rd May 2002 there was an informal meeting between the Official Receiver and Mr. Hall to explore the possibility of a discharge. Mr. Hall proposed repayments of $60,000 p.a. over five years for a total of $300,000. In this course of this meeting Mr. Hall disclosed (i) that he had a substantial receivable from a company called Triangle Amusements Ltd. for some $300,000; and (ii) that he had earned “consultancy fees” in some capacity in certain law firms since his adjudication. This meeting was followed up by a formal proposal contained in a letter of letter of 7^th August 2002, which was declined by letter of 13^th September. I have dealt with this further below in the context of the Triangle receivable and alleged consultancy fees.

12. There was a further round of correspondence in 2003, initiated by letter of 4^th June from the Official Receiver's attorneys demanding details of Mr. Hall's employment, earnings and expenses, and threatening a reinstatement of the Public Examination. Mr. Hall's initial response welcomed the proposal to resume the Examination, and contained a promise to endeavour to provide an accounting, but that never came to anything.

13. Following Mr. Hall's acquittal in the criminal proceedings it appears that he proposed the presentation of a further Scheme of Arrangement, but that never materialized. The next round of correspondence began in late 2006, with a letter of 18^th December from Mr. Hall urging the Official Receiver to proceed with his section 32 application, and offering a lump sum of $300,000 from a third party to facilitate his discharge and pay creditors. The response was a further request for details of receipts and expenditure since the adjudication, and that prompted a letter of 15^th February 2007 from Mr. Hall, protesting the impossibility of doing so:

‘You and Mr. Lowe must surely know that it would be quite impossible for me to provide any reliable account of my last seven years of personal financial activity. You might just as well be asking me to clap with one hand.’

There was then a further lull in the correspondence, which ended when Mr. Hall again began pressing for his discharge in January 2008.

The statement of affairs

14. It is the duty of every debtor against whom a receiving order is made to submit a Statement of Affairs within seven days9. The Statement of Affairs has to be in the form prescribed in the Rules, verified by affidavit, and it has to show10—

‘the particulars of the debtor's assets, debts and liabilities, the names, residences and occupations of his creditors, the securities held by them respectively, the dates when the securities were respectively given, and such further or other information as may be prescribed or as the Official Receiver may require.’

15. Mr. Hall was adjudicated bankrupt because of the perceived deficiency of his Statement of Affairs. It came about in this way. Given the passage of time since the Receiving Orders, the Petitioning Creditors applied for an adjudication on the basis that Mr. Hall had not submitted his Statement of Affairs. Mr. Hall then swore an affidavit of 8^th December 1999 seeking a 30 day extension of time, in which he stated:

‘That I...