Re Parkins
[2014] Lexis Citation 47
Bankruptcy High Court
Mr Registrar Baister
8 April 2014
Ms Janet Hallamore (Assistant Official Receiver) appeared for the Applicant
The Respondent did not appear and was not represented
Hearing date: 8 April 2014
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Approved Judgment
I direct pursuant to CPR PD 39A para 6.1 that no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.
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Mr Registrar Baister
Mr Registrar Baister:
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1. On 13 October 2010 a bankruptcy order was made against Claudette Parkins on a petition presented on 26 January 2010 by the Commissioners for Her Majesty’s Revenue and Customs claiming to be creditors in the sum of £112,000-odd.
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2. On 26 October 2010 Ms Parkins applied to annul the bankruptcy order on the ground that it ought not to have been made. That application came on for final hearing before Mr Deputy Registrar Middleton on 7 June 2011 who by a reserved judgment dated 5 July 2011 dismissed the application and refused permission to appeal.
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3. On 10 October 2013 the Applicant, who became the trustee in bankruptcy of Ms Parkins’s estate on 20 January 2011, filed an application seeking a charge on a property, 1624 Great Cambridge Road, Enfield, said to have vested in the estate. That application came on for hearing before me on 3 February 2014. I adjourned it for better evidence of the Applicant’s inability to realise the property and for fuller argument than time on that date allowed.
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4. Section 313 Insolvency Act 1986 provides:
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“(1) Where any property consisting of an interest in a dwelling house which is occupied by the bankrupt or by his spouse or former spouse or by his civil partner or former civil partner is comprised in the bankrupt’s estate and the trustee is, for any reason, unable for the time being to realise that property, the trustee may apply to the court for an order imposing a charge on the property for the benefit of the bankrupt’s estate.
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(2) If on an application under this section the court imposes a charge on any property, the benefit of that charge shall be comprised in the bankrupt’s estate and is enforceable, up to the charged value from time to time, for the payment of any amount which is payable otherwise than to the bankrupt out of the estate and of interest on that amount at the prescribed rate.
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(2A) In subsection (2) the charged value means—
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(a) the amount specified in the charging order as the value of the bankrupt’s interest in the property at the date of the order, plus
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(b) interest on that amount from the date of the charging order at the prescribed rate.
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(2B) In determining the value of an interest for the purposes of this section the court shall disregard any matter which it is required to disregard by the rules.
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(3) An order under this section made in respect of property vested in the trustee shall provide, in accordance with the rules, for the property to cease to be comprised in the bankrupt’s estate and, subject to the charge (and any prior charge), to vest in the bankrupt.
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(4) Subsection (1), (2), (4), (5) and (6) of section 3 of the Charging Orders Act 1979 (supplemental provisions with respect to charging orders) have effect in relation to orders under this section as in relation to charging orders under that Act.
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(5) But an order under section 3(5) of that Act may not vary a charged value”.
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5. Further provisions are made by rules 6.237-6.237E Insolvency Rules 1986.
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6. The Applicant’s first report in support of his application said that Ms Parkins had an interest in the property which was valued at £60,000, there were unsecured creditors with claims amounting to £113,516.71 and, “I have been unable to dispose of the bankrupt’s interest in the property”. No information as to why the Applicant had been unable to dispose of it was given. That was the main reason why the application was adjourned.
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7. In a second report the Applicant explains his position in greater detail and relies on two reasons for being unable to dispose of the property. The first is that in 2013 Ms Parkins made a complaint to the petitioners’ adjudicator, and, although the Applicant has made inquiries about its progress, no information has been forthcoming; he believes, however, that “[i]n the event that Ms Parkins’s complaint is upheld in whole or in part, this may have a bearing on the extent of HMRC’s claim in her bankruptcy”. The second is that in January 2014 Ms Parkins lodged an appeal (presumably out of time) either against the bankruptcy order or against the dismissal of her application to annul which appears to be pending. The Applicant is of the opinion that any application for possession and sale of the property would be contested and would be disproportionate in the present circumstances: “[T]he Official Receiver tends not to apply for the appointment of an insolvency practitioner as trustee [to realise property] in cases where there is a live appeal,” he says.
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8. The question that arises is whether the reasons put forward by the Applicant are sufficient to constitute inability for the time being to realise the property within the meaning of section 313(1) of the Act.
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9. Neither Ms Hallamore nor I are aware of any authority on the point. The notes to the section in Sealy & Milman: Annotated Guide to the Insolvency Legislation (sixteenth edition) refer to none and provide no further source of guidance. The learned authors of Muir Hunter on Personal Insolvency offer the following:
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“Purpose of section
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It is envisaged that an application under this section may be made where either the trustee has not the funds to litigate a contested application for possession and sale of the matrimonial home, or alternatively such an application would be likely to fail, because the circumstances of the case are ‘exceptional’ (see ss.336(5) and 337(6), below). Thus, in this latter case, an application under this section could be made as an alternative to an application for possession and sale.
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Effect of the non-realisation of the bankrupt’s home
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The importance given to this section, as a means of protecting the interests of creditors in the family home, can be seen in the provisions of s. 332, below. Under that section, in the event of the bankrupt’s interest in the property not being realised for any reason, the final meeting of creditors under s.331 cannot be summoned, unless the court has considered an application under this section for a charge on the bankrupt’s home, or alternatively, unless the Secretary of State has issued a certificate to the trustee, under s.332(2)(c), below, stating that it would be “inappropriate or inexpedient” for such an application to be made in the case in question. Accordingly, failure by the trustee to make an application under this section, or to obtain such a certificate from the Secretary of State, would prevent the summoning of a final meeting and the subsequent vacation of office by the trustee, pursuant to s.298(8), above. Note also that where a trustee intends to vacate office the notice to be given to the official receiver before the creditors’ meeting is held to receive his resignation must include details of any property in the bankrupt’s estate which has not been fully realised, applied, distributed or otherwise fully dealt with in the bankruptcy: IR r.6.145(2)” (paragraphs 3-1037 and 3-1038).
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10. Ms Hallamore, relying on paragraph 3-1037, argues that lack of funds is a factor in this case, that any application would be likely to be contested in the circumstances of this case and that an application of this kind is expressed to be an alternative to an application for possession and sale. It is not necessary, she contends, to demonstrate that it would be impossible to realise the property: inability contemplates something that falls short of that.
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11. I agree with Ms Hallamore and with the authors of Muir Hunter. Furthermore, I do not think that the possibility of an application failing need be limited to a case in which exceptional circumstances might be argued or demonstrated. I am strengthened in my general view by the use of the phrases “for any reason” and “for the time being” in section 313(1) itself. The first phrase implies a range of possible matters that might give rise to inability to realise property; the second phrase implies that that range of possible matters might include temporary impediments to realisation.
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12. The matters on which the Applicant relies seem to me to fall within the ample range of impediments, whether permanent or temporary, implied by the wording of section 313(1), especially when read in the light of the commentary to which I have referred. Accordingly I shall impose a charge on the property for the benefit of the bankrupt’s estate in the sum sought.
