Death of debtor — Effect of insolvent administration order on devolution of property in which deceased had an interest as joint tenant in equity immediately before death — High Court holding debtor’s estate included undivided moiety of proceeds of sale
P died on November 22 1990. He was a solicitor who practised in partnership with B until it was terminated. B claimed that P had been guilty of serious defalcations which were reported to the Law Society. P died shortly thereafter while the Law Society was pursing inquiries. On August 1 1991 his executors presented a petition for an insolvency administration order. The applicant in this case was appointed trustee of the estate. It was common ground that there where large claims against the estate. In 1989 P and his wife bought 147 Wigton Lane, Alwoodley, Leeds, conveyed to them as joint tenants at law and in equity. The question was whether the effect of the administration order was to sever the joint tenancy with retrospective effect so that an undivided moiety of the beneficial interest in the house devolved as part of P’s estate. His interest in the house (if any) was his only substantial capital asset; if a half-share devolved, it would suffice largely to meet the claims against his estate.
The administration of an insolvent estate was governed by the Administration of Estates Deceased Persons Order 1986 made under the powers conferred by section 421 of the Insolvency Act 1986.
Held The debtor’s estate included an undivided moiety of the proceeds of sale and of the net rents and profits until sale of the property.
1. For the purposes of the definition of the deceased debtor’s estate in section 283 of the 1986 Act, an insolvency administration order had to be treated as having been made on the same day as but before the death of the debtor. The question was whether the relation back of the bankruptcy trustee’s title to the date on which the insolvency administration order was to be treated as having been made for the purposes of the definition of the deceased debtor’s estate had the consequence that the trustee could rely on it as severing the joint tenancy.
2. Under the 1986 Act, the trustee’s title related back to the date of the bankruptcy order and the appointment of a trustee followed automatically after a bankruptcy order had been made. During the interval between the making of a bankruptcy order and the vesting of the debtor’s property in the trustee, the official receiver was constituted manager with power to take steps to preserve the property. The effect of the 1986 Act was to impose on the debtor’s property at the time when the bankruptcy order was made a trust for the benefit of his creditors and to sever any joint tenancy although the severance would operate contingently upon the bankruptcy order not being rescinded or set aside before the appointment of the trustee.
3. The policy of the 1986 Act was to restrict the relation back of the trustee’s title to the making of the bankruptcy order, or, where the debtor died before a petition was presented, the date of his death. Section 284 added to the relation back the avoidance of dispositions after presentation of the petition so far as not protected by subsections (4) and (5). The result was that property of which the debtor was joint tenant accrued to the survivor on his death after the presentation of the petition and before the date of the bankruptcy order. If that was thought to be an undesirable restriction of the extent to which a debtor’s property was subjected to a trust for his creditors that was a matter for the legislature to correct not for the court.
John Briggs (instructed by RC Moorhouse & Co, of Leeds) appeared for the applicant; Lexa Hilliard (instructed by Bury & Walkers, of Leeds) appeared for the wife.
