Amy Mehers (Trustee in Bankruptcy of Scherzade Khilji) v Scherzade Khilji
| Jurisdiction | England & Wales |
| Judge | Curl |
| Judgment Date | 17 February 2023 |
| Neutral Citation | [2023] EWHC 298 (Ch) |
| Docket Number | Case No: BR-2018-000493 |
| Court | Chancery Division |
[2023] EWHC 298 (Ch)
DEPUTY ICC JUDGE Curl KC
Case No: BR-2018-000493
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF SCHERZADE KHILJI (IN BANKRUPTCY)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice, Rolls Building,
Fetter Lane, London, EC4A 1NL
Paul French (instructed by DAC Beachcroft LLP) for the Applicant
Peter Wareing (instructed under the Public Access Scheme) for the First Respondent
Nicholas Evans (instructed by Harrison Clark Rickerbys) for the Second Respondent
Hearing dates: 8 December 2022
Deputy ICC Judge Curl KC:
This case is about the statutory revesting provision in s.283A of the Insolvency Act 1986 (“IA 1986”), which is sometimes known as the “use it or lose it” provision. In summary terms, the section gives a trustee in bankruptcy three years to decide what, if anything, to do about an interest in a property which is the home of the bankrupt, the bankrupt's spouse or civil partner, or a former spouse or civil partner of the bankrupt. If the trustee does not take certain specified action within that three-year period, then the bankrupt's former interest ceases to be part of the bankrupt's estate and revests in the bankrupt. This judgment concerns, in particular, what it means for a bankrupt to “inform” their trustee in bankruptcy of such an interest in a property, or for that trustee otherwise to “become… aware” of one, within the meaning of s.283A(5) of the IA 1986.
Background
Although the underlying facts of this case are reasonably straightforward, it has a complex procedural history. I shall summarise both as concisely as possible, omitting mention of a number of previous applications and appeals where these have no direct bearing on the single issue before me.
The Applicant is the trustee in bankruptcy (“the Trustee”) of Ms Scherzade Khilji (“Ms Khilji”). Ms Khilji is the first respondent to the Trustee's application. The second respondent is the personal representative of the estate of Ms Khilji's late husband (“the Administrator”). On the face of it, the Trustee's application seeks various declaratory and other relief in relation to a property at 49 Slough Lane, London NW9 8YB (“the Property”), including a declaration of the extent of the respective beneficial interests in it and an order for possession, as well as a declaration that the Property has not revested in Ms Khilji under s.283A(2) of the IA 1986. For reasons I shall come on to, most of that relief has been overtaken by developments in proceedings elsewhere.
Ms Khilji's husband (“the Deceased”) died intestate on 23 August 2014. The Property was registered in his sole name at that time. On 15 October 2015, the Administrator was appointed by the Bristol District Registry as personal representative of the Deceased's estate and on 3 April 2017 the District Probate Registry at Oxford made a grant of letters of administration to him. It appears to be common ground that the sole significant asset in the Deceased's estate is the Property and that the estate is held on the statutory trusts arising on intestacy. Under those trusts, the estate will devolve in the following order: a statutory legacy to Ms Khilji of £250,000; a one-half interest in the remainder of the balance of the net estate to Ms Khilji absolutely; and the other one-half interest upon trust for the Deceased's children in equal shares.
A bankruptcy order was made against Ms Khilji on 2 July 2018 on a petition presented on 23 April 2018. The Trustee was appointed on 7 August 2018. It appears to be accepted on all sides that the bankruptcy estate included Ms Khilji's rights under the unadministered intestate estate of the Deceased. During the early stages of the bankruptcy, two letters were written by the Administrator's solicitors to the solicitors then acting for the Trustee, which were respectively dated 17 September and 27 September 2018. Both sides have sought to rely on those letters in their submissions to me.
On 28 September 2018, Ms Khilji attended an interview with an examiner for the official receiver (“OR”), as she was required to do under s.291 of the IA 1986. A statement was taken on that occasion in the usual way and signed by Ms Khilji (“the OR Statement”).
Under cover of letters dated 13 January 2019, Ms Khilji returned to the Trustee a completed copy of the Trustee's standard bankruptcy questionnaire (“the Questionnaire”) and to the OR a completed copy of the standard Preliminary Information Questionnaire in form PIQB (“the PIQB”).
By a claim form issued on 12 April 2019, the Administrator commenced proceedings in the County Court at Willesden for possession of the Property against, among others, Ms Khilji and the Trustee (“the Possession Claim”). The Trustee supported the Possession Claim.
By a professionally drafted defence and counterclaim in the Possession Claim dated 6 September 2019 (“the Defence and Counterclaim”), Ms Khilji claimed a one-third beneficial interest in the Property arising under a common intention constructive trust. Ms Khilji subsequently sought permission from the court to continue with the Defence and Counterclaim, despite her bankruptcy. At a hearing of the Possession Claim on 10 December 2021, Ms Khilji applied to amend the Defence and Counterclaim to introduce a further line of defence, being an argument that the period of three years from the date of the bankruptcy order had expired and, accordingly, her beneficial interest in the Property had revested in her by operation of s.283A(2) of the IA 1986. The County Court at Willesden transferred the Possession Claim to the County Court at Central London in order that the revesting point might be determined by a specialist Chancery district judge.
On 11 January 2022, the Trustee issued the application that is before the court today (“the Bankruptcy Application”), supported by a witness statement dated 28 February 2022. I summarised the relief sought in the Bankruptcy Application at §5 above. At a first hearing of the Bankruptcy Application before ICC Judge Jones on 18 March 2022, Ms Khilji was granted permission to put in evidence to support her contention that she had told the OR and/or the Trustee of any interest she might have in the Property. A witness statement addressing that point was filed by Ms Khilji dated 16 May 2022.
Meanwhile, the Possession Claim came before Deputy District Judge Lightman in the County Court at Central London on 27 May 2022. As a consequence of Ms Khilji's concession that she had no defence to the Administrator's claim to possession other than her revesting argument under s.283A, the deputy judge made an order for possession, but stayed enforcement of it pending determination of that argument by an ICC judge hearing the Bankruptcy Application. I am told that an application for permission to appeal the possession order was refused by HHJ Dight in early November 2022.
The hearing
Shortly before the hearing before me, the Trustee and the Administrator agreed between themselves that the extent of Ms Khilji's beneficial interest in the Property at the date of the bankruptcy order on 2 July 2018 was 5 per cent and that such interest vested in the Trustee on her appointment on 7 August 2018 as part of Ms Khilji's estate under s.306 of the IA 1986.
As a consequence of the order made in the Possession Claim and the agreement between the Trustee and the Administrator as to the extent of the relevant interest in the Property, all that remains outstanding under the Bankruptcy Application is Ms Khilji's revesting argument under s.283A of the IA 1986. All parties confirmed that to be their understanding at the start of the hearing before me. The Trustee and the Administrator accept, however, that their bilateral agreement as to the extent of the relevant interest in the Property will not bind Ms Khilji in the event that the bankruptcy estate's interest has revested in her. If the revesting question is decided in favour of Ms Khilji, then the extent of her interest will remain outstanding after today.
Although at the outset of his submissions Mr Wareing briefly canvassed the possibility of seeking a direction for cross-examination of the Trustee, he ultimately did not pursue that suggestion.
Relevant statutory provisions
Section 306 of the IA 1986 provides for a bankrupt's estate to vest in their trustee in bankruptcy as follows:
“306 Vesting of bankrupt's estate in trustee
(1) The bankrupt's estate shall vest in the trustee immediately on his appointment taking effect or, in the case of the official receiver, on his becoming trustee.
(2) Where any property which is, or is to be, comprised in the bankrupt's estate vests in the trustee (whether under this section or under any other provision of this Part), it shall so vest without any conveyance, assignment or transfer.”
The definition of the bankrupt's estate in s.283, read together with the definition of “property” in s.436 of the IA 1986, is cast in wide terms. It is common ground between the parties that a beneficial interest arising under a common intention constructive trust held by a person made bankrupt will vest in their bankruptcy estate.
Section 283A was inserted into the IA 1986 by the Enterprise Act 2002. The problem at which it was directed was identified by Lawrence Collins J (as he then was) in In re Byford, decd [2003] EWHC 1267 (Ch), [2004] 1 P & CR 159, 163, subsequently cited with approval by the Court of Appeal in Lewis v Metropolitan Properties Realisations Ltd [2009] EWCA Civ 448, [2010] Ch 148, at [18] as follows:
“…it is...
To continue reading
Request your trial