Trustee in bankruptcy – Realisation of property – Deferral of consideration – Husband and wife seeking declaration that husband’s interest in matrimonial home reverting to him following discharge from bankruptcy – Whether joint trustees realising interest by assigning to defendant – Application dismissed
The claimant married couple were joint owners of the matrimonial home. A bankruptcy order was made against the first claimant, whereupon his interest in the property vested in his joint trustees in bankruptcy. The defendant was a judgment creditor of the first claimant.
It appeared that, on severance of the beneficial joint tenancy by the bankruptcy, the estate was entitled to a beneficial half-share of the property. However, the second claimant claimed an equity of exoneration (as explained in Re Pittortou [1985] 1 WLR 58), which she claimed had exhausted the first claimant’s share of the equity.
The joint trustees consequently entered into a deed with the defendant whereby they assigned the estate’s interest in the property to the defendant for the sum of £1, subject to an undertaking that should the defendant effect a sale of the property, 25% of the net proceeds after deduction of all costs and expenses would be paid to the trustees.
Section 283A of the Insolvency Act 1986 provided that where property comprised in the bankrupt’s estate consisted of an interest in a dwelling-house that was, at the date of the bankruptcy, the sole or principal residence of the bankrupt or his spouse (section 283A(1)), the interest should at the end of three years from the date of the bankruptcy cease to be comprised in the estate and automatically vest in the bankrupt: section 283A(2). However, under section 283A(3)(a), that provision did not apply if within the three-year period the trustee realised the interest.
After the first claimant was discharged from bankruptcy, the claimants applied to the court for a declaration that the first claimant’s interest in the property had reverted to him by virtue of section 283A(2). The defendant maintained that the joint trustees in bankruptcy had successfully realised the interest for the purposes of section 283A(3)(a) by assigning it to the defendant.
Held: The application was dismissed.
Section 283 did not require any realisation for the purposes of that section to be on terms that were more restrictive than those available to the trustee generally under the 1986 Act. When selling the estate’s interest for deferred contingent consideration, the trustee would “realise” the interest within the meaning of section 283A(3)(a) provided that the interest had been assigned absolutely: Ramsey v Hartley [1977] 1 WLR 686 considered.
Section 283A provided an exhaustive list of the steps available to the trustee during the three-year period in respect of the bankrupt’s interest in the dwelling-house. If the trustee failed to take such steps or to obtain an extension of the three-year period from the court under section 283A(6) the interest would revert to the bankrupt: Byford v Butler [2003] EWHC 1267 (Ch); [2004] 1 P&CR 12 considered; Re Oxford Benefit Building & Investment Society (1887) LR 35 Ch D 502 and Board of Trade v Block (1888) LR 13 App Cas 570 distinguished.
Section 283A(3)(a) required only the estate’s interest in the property to be realised, not (where there were co-owners) the underlying property. The joint trustees had assigned all the estate’s interest in return for the assignee’s obligation to pay consideration to them at some future time and on a contingent event. Therefore, they had realised the interest by a sale, notwithstanding that the consideration was deferred, and the tenure of the bankrupt and his family in the property remained precarious.
Stephen Schaw Miller (instructed by Edwin Coe LLP) appeared for the claimants; John Briggs (instructed by Mishcon de Reya) appeared for the defendant.
Eileen O’Grady, barrister
