The sentencing of errant bankrupts is far from common, but in the last month there have been two such cases. One you might not be so familiar with, but the other relates to a beloved retired tennis star and actually hit the news. The stories, although rare, demonstrate that bankruptcy cases are dealt with very seriously and it’s incredibly difficult to conceal assets, no matter how hard you might try.
Earlier this month, the Insolvency Service published details of a dishonest bankrupt who had been handed down a 16 month sentence (suspended for 12 months). The debtor, William Haynes of Bath, who was made bankrupt in March 2018, had a legal obligation to disclose all his assets to his trustee in bankruptcy.
However, Mr Haynes, who owned a property in Mallorca, decided that he would omit to tell the Official Receiver about the property. Acting on information, the Official Receiver gave the bankrupt ample opportunity to declare his interest in the property, but he continued to deliberately conceal it (and the details of a Spanish bank account that he held).
Mr Haynes then went on to sell the property and transferred €97,000 from the sale into the Spanish bank account, and then on to another account controlled by him.
The bankrupt appeared in Bristol Crown Court on 13 April 2022. He was handed down the suspended sentence and also ordered to complete 100 hours unpaid work, and pay the costs of £4,960 within 12 months.
In addition, the bankrupt was subject to a 9 year Bankruptcy Restriction Undertaking after the Official Receiver considered him as a risk to future creditors. The effect of the undertaking is that Mr Haynes won’t be able to obtain credit and will be restricted from acting as a director of a limited company.
Despite the fact that sentencing of errant bankrupts is rare, as if by magic there was another slightly more well-known bankrupt in the news last month, who also owned property in Mallorca.
Boris Becker, now aged 54 and a six time grand slam champion, was made bankrupt in June 2017 on the petition of a private bank – Arbuthnot Latham & Co – for an outstanding loan on his Mallorca property, for approximately €4.5million.
According to some pundits, Mr Becker had earned over $50 million during his playing career. Where had it all gone? Becker blamed an expensive divorce, ongoing child maintenance payments and a champagne lifestyle for his downfall.
The Legal Bit
Under the Insolvency Act 1986 a bankrupt must disclose all of their assets, and also tell any lender of their bankruptcy when seeking to borrow in excess of £500. As noted above, being a bankrupt also means that you cannot act as a director of a limited company until such time as they are discharged from bankruptcy.
In Mr Becker’s case, the trustee in bankruptcy discovered that various transactions were performed by the debtor either shortly before or following his bankruptcy in the region of £4.5 million.
Although Mr Becker was charged with 24 contraventions under the Insolvency Act, he was ultimately only found guilty on 4 of those charges:
- Non-disclosure of shares in Breaking Data Corp (75,000 shares)
- Hiding a loan from Bank of Alpinum of Lichtenstein in the sum of €825,000
- Not disclosing ownership of a property in Germany
- Removal of property from his bankruptcy estate valued at €427,000
Under sections 353 to 359 of the Insolvency Act 1986 it is a criminal offence for a bankrupt to conceal, fail to offer up, not disclose any property, or to make a false statement concerning the value of their estate.
Clearly Mr Becker decided that he was above the law, but he has paid the price, being sentenced for two and a half years in prison. In addition, Mr Becker is subject to a Bankruptcy Undertaking which means he will be subject to the usual bankruptcy restrictions until October 2031.
The message is loud and clear: bankruptcy is not to be considered a soft option and the Insolvency Act 1986 is very powerful and far reaching. If you find yourself in the unfortunate situation where you become bankrupt, you must cooperate with your trustee and disclose all of your assets. These two recent cases show that if you deliberately flout the rules, then the full force of the law will be applied.
As a codicil Mr Becker has complained that the conditions in prison are appalling…