Insolvency Service is chasing down bankrupts using other people’s bank accounts to hide income which should be disclosed. When demanded, banks are required to disclose bankrupt’s transactions through these third-party accounts while not disclosing any information about the account holder, the High Court ruled.
Acting on tip-offs from the public, Insolvency Service is learning of bankrupts prohibited from running a business doing so on the sly, banking income into a ‘friend’s’ bank account over which they have no signing authority. Access to the account is gained through a debit card held by the bankrupt. This flouts bankruptcy law; income earned whilst bankrupt and before discharge from bankruptcy must be declared to Insolvency Service. After making an allowance for living expenses, any surplus income earned during bankruptcy goes to repay bankruptcy creditors.
The High Court was told Gordon Bayne was bankrupted in 2016. Insolvency Service followed up on tip-offs from a supplier who alleged Mr Bayne was operating a concrete-laying business whilst bankrupt. Payments were funnelled through an ASB bank account. ASB claimed client confidentiality, refusing to disclose details of the account, other than to say Mr Bayne was not the named account holder and had no signing authority.
Justice Wylie ruled banks must respond to Insolvency Service demands for information. Insolvency Service has extensive Insolvency Act powers to demand information about bankrupt’s ‘property, conduct or dealings.’ Money banked to a third-party account on behalf of a bankrupt is the bankrupt’s ‘property.’ Banks must not only disclose money paid into the account at the bankrupt’s direction, but also disclose funds withdrawn for the bankrupt’s benefit, Justice Wylie ruled. Details of the account holder do not have to be disclosed. Any practical difficulties for banks seeking to isolate the bankrupt’s transactions from the account holder’s transactions are for the banks to sort out, he said. Robust discussions with the account holder were suggested.
Official Assignee v. ASB Bank Ltd – High Court (23.07.19)
15.135