This case considered the statutory revesting provision in s.238A of the Insolvency Act 1986 ('IA 1986'), and specifically considered the relevance of the point in time when a Trustee in Bankruptcy becomes aware of the Bankrupt's interest in a property.
In this recent case, the claim for revesting of the Bankrupt's home failed due to the Trustees' insufficient level of awareness of the Bankrupt's interest in her home. The judgment concerns what it means for a Bankrupt to 'inform' their Trustee in Bankruptcy of an interest in a property, such that the Trustee will be taken to have become aware of the interest for the purposes of s.283a(5) IA 1986.
Section 238.A IA 1986 gives a Trustee in Bankruptcy three years to decide what to do in respect of an interest in a property which is also the home of the Bankrupt or the Bankrupt's spouse. If certain action is not taken within that 3 year period, the Bankrupt's former interest revests in the Bankrupt and ceases to be part of the Bankrupt's estate available to the Trustee.
In this case, the Trustee sought various declaratory and other reliefs in relation to a property which had been the Bankrupt's marital home, including a declaration as to the extent of respective beneficial interests and a declaration that the property had not revested in the Bankrupt.
By way of brief background as to the facts of the case:
- The Bankrupt's husband died intestate on 23 August 2014, when their marital property was registered in his sole name.
- The Trustee in Bankruptcy was appointed on 7 August 2018.
- On 28 September 2018, the Bankrupt attended an interview with an examiner for the official receiver ('OR') and a statement was taken. The Bankrupt detailed that she had contributed to the mortgage following the death of her husband. The official copy of the Land Registry title to the property also detailed that the Bankrupt had occupational rights in respect of the property, and it was submitted this enabled her to claim the property.
- On 12 April 2019, the Administrator commenced proceedings for possession of the property and this was supported by the Trustee in Bankruptcy.
- The Bankrupt defended the proceedings and claimed a beneficial interest in the property arising under a common intention constructive trust. She later applied for permission to amend her defence to include an argument that as a period of three years from the date of the Bankruptcy Order had expired, her interest in the property had revested under s283(a)(2) of the IA 1986.
The case primarily centred around when the Trustee became 'aware' of the Bankrupt's interest in what had been her matrimonial home.
Counsel for the Bankrupt conceded that she had not "positively asserted" her interest in the property; in fact she had stated to the OR that "I don't think I was ever joint owner of this property".
The Court held that "it is both pragmatically desirable and plainly just that a bankrupt who fails to comply with their duty to notify their trustee either of after-acquired property or of an interest in a property within the meaning of s.283A(1) will face an uphill struggle in persuading a court that the trustee was nonetheless aware of that interest such that the property is no longer available to the estate."
The Court concluded that neither the Trustee nor the OR had been informed that the Bankrupt had an interest in the subject property, either at the date of her bankruptcy or any earlier than receipt of her defence in the possession proceedings. This was found on the basis that she had failed to inform the Trustee or the OR of any such interest.
This case highlights the ongoing duties of a Bankrupt to notify all or any property interests, and that the three year clock will not start ticking without proper notification.
