Trustee in bankruptcy – Matrimonial home – Trust for sale – Adjustment order varying trust for sale in matrimonial proceedings – Wife having right to occupy property – Husband becoming bankrupt – Trustee in bankruptcy seeking order for sale of property – Whether court having jurisdiction to make order for sale – Appeal dismissed
The appellant and the second respondent were the registered proprietors of their former matrimonial home. In matrimonial proceedings in 1985, it was ordered by consent that the trusts upon which they held the property be varied so that the proceeds of sale were held as to two-thirds for the appellant and one-third for the second respondent. Paragraph 2 of the 1985 order provided that the trust for sale should be postponed until specified events had happened. Paragraph 5 provided for the appellant to have exclusive occupation.
In 1989, on the appointment of a trustee in bankruptcy to administer the estate of the second respondent, his one-third interest in the proceeds of sale was vested in the trustee with all the powers of an absolute owner under section 6(1) of the Trusts of Land and Appointment of Trustees Act 1996. Those powers were not to be exercised “in contravention of, or of any order made in pursuance of, any other enactment or any rule of law or equity”: see section 6(6). The appellant and the second respondent remained registered owners and trustees of the trust for sale.
In 2005, the present trustee in bankruptcy (the first respondent) applied for an order for sale under the 1996 Act. The appellant and the second respondent opposed the application. They contended that the court had no jurisdiction to make an order for sale, relying upon section 283(5) of the Insolvency Act 1986 to argue that the first respondent had acquired the beneficial share in the property subject to the appellant’s rights under the 1985 order.
The district judge decided, inter alia, that the court had jurisdiction to make the order sought. The High Court dismissed an appeal against that decision but the appellant appealed. The narrow issue on appeal was whether, having regard to para 2 of the 1985 order and section 6(6) of the 1996 Act, it was open to the court, as a matter of jurisdiction, to make an order for sale of the property as sought by the first respondent in the exercise of powers conferred by section 14(2)(a) of the 1996 Act.
Held: The appeal was dismissed.
Where property was held upon trust for sale, as in the present case, a person who had an interest in that property or its proceeds of sale might apply for an order for sale under section 14 of the 1996 Act. Unless the 1985 order had some special force that stretched beyond the agreement between the parties, the rights conferred on the appellant by the 1985 order were always subject to a possible order for sale. The 1985 order did not confer on the appellant an absolute right that the property should remain unsold unless and until any of the events in para 2 occurred. Her right to resist a sale was qualified by the right of the second respondent, or his trustee in bankruptcy, to apply to the court for an order for sale. Accordingly, the argument based upon section 283(5) of the 1986 Act failed.
In the present case, the power conferred by section 14(2)(a) of the 1996 Act was not cut down by the restriction in section 6(6). The property was held upon trust for sale with the power to postpone a sale. If the power to postpone was not expressed in the original conveyance, it was conferred by section 4(1) of the 1996 Act. The restriction in section 6(6) applied only to powers conferred by section 6 and did not apply where the court was exercising its power under section 14(2)(a). In the absence of a statutory restriction, section 14(2)(a) enabled the court to override the need for the consent of any person.
It followed that, notwithstanding para 2 of the 1985 order, it would have been open to the court to make an order for sale on the application of the second respondent under section 14, had he not been adjudged bankrupt. A similar order could be made on the application of the first respondent subject to the mandatory terms of section 335A(3) of the 1986 Act, under which the interests of a bankrupt’s creditors outweighed all other considerations, absent exceptional circumstances.
Paul Chaisty QC and Graham Sellers (instructed by Maxwell Hodge, of Liverpool) appeared for the appellant; Stephen Davies QC and Stefan Ramel (instructed by Eversheds LLP, of Leeds) appeared for the respondents.
Eileen O’Grady, barrister
