Bankruptcy – Disclaimed property – Vesting order – First appellant pier owner being declared bankrupt – Appellant occupying dwelling house on site – Trustee disclaiming whole of property – First appellant seeking vesting order in respect of house occupied by him – Second appellant mother seeking order as a person claiming interest in disclaimed property – Appellants appealing against refusal of applications – Whether court having power to make vesting order where house forming part only of disclaimed property – First appeal allowed – Second appeal dismissed
The first appellant owned the pier at Colwyn Bay. The site included a house in the main pavilion which was occupied by the first appellant. In April 2004, he was registered as proprietor of the pier at HM Land Registry and was shown as the sole proprietor. In October 2007, the respondent local authority made a statutory demand in respect of rates and council tax, followed by the presentation of a bankruptcy petition which resulted in a bankruptcy order being made against the first appellant and a trustee in bankruptcy appointed. The trustee in bankruptcy subsequently disclaimed his interest in the pier, which was transferred to the respondents via the Crown.
The first appellant applied, pursuant section 320(2)(c) of the Insolvency Act 1986, for vesting order under section 320(3)(c) on the ground that the disclaimed property was a dwelling occupied by him at the time the bankruptcy order was made. His mother, the second appellant, made a similar application under section 320(2)(a) as a person who claimed an interest in the disclaimed property. The appellants made a joint application for summary judgment on their respective applications which was dismissed. The judge held that section 320(3)(c) of the 1986 Act contemplated that the whole of the disclaimed property was property in a dwelling house, whereas in this case only a part of the pier was a dwelling house. The section did not enable the court to vest part only of the disclaimed property in an appellant. However, even if that conclusion was wrong, the court would not exercise its power by vesting a part only of the pier in the first appellant. Both appellants appealed.
Held: The first appeal was allowed. The second appeal was dismissed.
The court’s power under section 320(3) was not confined to all of the disclaimed property or to none. It was capable of relating to a part only of the disclaimed property. Equally, it was not the case that to qualify under section 320(2)(c) the whole of the disclaimed property had to comprise a dwelling-house. It was open to the court to entertain an application under section 320(2)(c) notwithstanding that the applicant occupied only a part of the disclaimed property as his dwelling-house. It was open to the court, on such an application, to make an order which, depending on the circumstances of the case, might be of a part only or of all of the disclaimed property.
In the absence of some competing applicant for a vesting order and in the absence of some good reason to the contrary, the court’s discretion under section 320(3) ought ordinarily to be exercised in favour of the qualifying applicant, at any rate where the interest in the property in question was a freehold interest in land. The bankrupt’s estate was no longer interested since, by the disclaimer, the trustee made clear that he had no further wish to exploit the disclaimed property for the benefit of the bankruptcy estate. The interest of the Crown arose, so to speak, by default in that the consequence of the disclaimer had been to cause the property to revert automatically to the Crown. Accordingly, in the circumstances of the present case, the judge’s exercise of his discretion could not stand and to that extent the first appellant’s appeal succeeded.
However, on the evidence, the judge below had been justified in concluding that the second appellant had not discharged the onus on her of showing that, despite the fact that title to the pier had been in her son alone, she had a beneficial interest in it. Accordingly, her appeal against the refusal of her application under section 320(2)(a) would be dismissed.
The appellants appeared in person; Louis Doyle (instructed by Conwy County Borough Council Legal Services) appeared for the respondents.
Eileen O’Grady, barrister
Bankruptcy – Disclaimed property – Vesting order – First appellant pier owner being declared bankrupt – Appellant occupying dwelling house on site – Trustee disclaiming whole of property – First appellant seeking vesting order in respect of house occupied by him – Second appellant mother seeking order as a person claiming interest in disclaimed property – Appellants appealing against refusal of applications – Whether court having power to make vesting order where house forming part only of disclaimed property – First appeal allowed – Second appeal dismissedThe first appellant owned the pier at Colwyn Bay. The site included a house in the main pavilion which was occupied by the first appellant. In April 2004, he was registered as proprietor of the pier at HM Land Registry and was shown as the sole proprietor. In October 2007, the respondent local authority made a statutory demand in respect of rates and council tax, followed by the presentation of a bankruptcy petition which resulted in a bankruptcy order being made against the first appellant and a trustee in bankruptcy appointed. The trustee in bankruptcy subsequently disclaimed his interest in the pier, which was transferred to the respondents via the Crown. The first appellant applied, pursuant section 320(2)(c) of the Insolvency Act 1986, for vesting order under section 320(3)(c) on the ground that the disclaimed property was a dwelling occupied by him at the time the bankruptcy order was made. His mother, the second appellant, made a similar application under section 320(2)(a) as a person who claimed an interest in the disclaimed property. The appellants made a joint application for summary judgment on their respective applications which was dismissed. The judge held that section 320(3)(c) of the 1986 Act contemplated that the whole of the disclaimed property was property in a dwelling house, whereas in this case only a part of the pier was a dwelling house. The section did not enable the court to vest part only of the disclaimed property in an appellant. However, even if that conclusion was wrong, the court would not exercise its power by vesting a part only of the pier in the first appellant. Both appellants appealed.Held: The first appeal was allowed. The second appeal was dismissed. The court’s power under section 320(3) was not confined to all of the disclaimed property or to none. It was capable of relating to a part only of the disclaimed property. Equally, it was not the case that to qualify under section 320(2)(c) the whole of the disclaimed property had to comprise a dwelling-house. It was open to the court to entertain an application under section 320(2)(c) notwithstanding that the applicant occupied only a part of the disclaimed property as his dwelling-house. It was open to the court, on such an application, to make an order which, depending on the circumstances of the case, might be of a part only or of all of the disclaimed property. In the absence of some competing applicant for a vesting order and in the absence of some good reason to the contrary, the court’s discretion under section 320(3) ought ordinarily to be exercised in favour of the qualifying applicant, at any rate where the interest in the property in question was a freehold interest in land. The bankrupt’s estate was no longer interested since, by the disclaimer, the trustee made clear that he had no further wish to exploit the disclaimed property for the benefit of the bankruptcy estate. The interest of the Crown arose, so to speak, by default in that the consequence of the disclaimer had been to cause the property to revert automatically to the Crown. Accordingly, in the circumstances of the present case, the judge’s exercise of his discretion could not stand and to that extent the first appellant’s appeal succeeded. However, on the evidence, the judge below had been justified in concluding that the second appellant had not discharged the onus on her of showing that, despite the fact that title to the pier had been in her son alone, she had a beneficial interest in it. Accordingly, her appeal against the refusal of her application under section 320(2)(a) would be dismissed.The appellants appeared in person; Louis Doyle (instructed by Conwy County Borough Council Legal Services) appeared for the respondents.Eileen O’Grady, barrister
