Dear v Reeves
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MUMMERY,LORD JUSTICE MAY |
| Judgment Date | 01 March 2001 |
| Neutral Citation | [2001] EWCA Civ 277 |
| Docket Number | Case No: B2/2000/5898 |
| Court | Court of Appeal (Civil Division) |
| Date | 01 March 2001 |
[2001] EWCA Civ 277
Lord Justice Mummery
Lord Justice May
Case No: B2/2000/5898
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIS HONOUR JUDGE RUDD
SOUTHAMPTON COUNTY COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Paul McCormick (instructed by Page Gulliford & Gregory, 9 Cumberland Place, Southampton, SO15 2WL for the Appellant)
Mr Anthony Higgins (instructed by Stokes, 108 Victoria Road North, Portsmouth, PO5 1QQ for the Respondent)
The issue on this appeal is whether, on the true construction of sections 283 and 436 of the Insolvency Act 1986 Act (the 1986 Act), a right of pre-emption belonging to or vested in a bankrupt at the commencement of the bankruptcy is "property." If it is property, the right forms part of the bankrupt's estate; it vests in the trustee in bankruptcy immediately on his appointment taking effect; and it is available to meet the claims of the creditors. If it is not property, it remains vested in the bankrupt.
The interpretation provisions contained in section 436 state that
"property" includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of , or incidental to, property."
As Sir Nicolas Browne-Wilkinson V-C said in British Airport PLC v. Powdrill [1990] Ch 744 at 759D
" It is hard to think of a wider definition of property."
The Facts
The point of construction arises in an unusual factual and procedural context.
"Melville", Addison Road, Sarisbury Green, Southampton (the Property) consists of a bungalow and some backland with possible development value. It was acquired in 1988 by Ms Karen Robinson and Mr Geoffrey Dear as their home. They had been in a relationship since 1986. The contract to purchase at the price of £187,500 was originally made by Karen Robinson's then employer, Mr Reeves, on 26 February 1988. The completion date was in August 1988. Mr Reeves assigned the contract to Ms Robinson and Mr Dear, subject, however, to the terms of a Deed of Pre-emption dated 1 August 1988.
By the Deed Ms Robinson and Mr Dear ("the Grantor") gave an undertaking to Mr Reeves ("the Grantee")
" for a period of Twenty years from 1st day of August 1988 not to sell the [Property] .or agree or offer to do so to any person without first offering to sell the same by notice (" the Offer Notice") in writing to the Grantee at a price to be determined in manner hereinafter provided "
The Deed then contained provisions spelling out the consequences of giving an offer notice.
It was agreed in clause (4) that-
"The right of pre-emption hereby granted is capable of assignment by the Grantee and is binding on the personal representatives and successors in title of the Grantor."
Provision was made for the Grantee to register the right against the title to the Property at HM Land Registry.
The provisions as to the determination of the sale price included the following
" (11) (a) The price of the Property shall be the value of the Property in the open market and with vacant possession as between a willing vendor and a willing purchaser regard being had to all the circumstances at the time of the service of the pre-emption notice save that the price of the property shall exclude any value attributed to the land shown hatched on the plan annexed."
The hatched land at the back of the bungalow is the part of the Property having possible development value.
Finally it was agreed that-
"This deed shall cease to be of any effect following the marriage according to the laws of England of the said Karen Denise Robinson to the said Geoffrey John Dear."
The Property was transferred to them as beneficial joint tenants, but a further deed was executed on the same date declaring that the Property was held as to 50% for Ms Robinson's infant son, Aaron, and 25% each for her and Mr Dear. Mr Dear challenges the validity of that deed in pending proceedings.
Mr Dear and Ms Robinson never did marry each other. Instead, Ms Robinson married a US citizen. She went to live in the USA for several years. The marriage ended in divorce.
Mr Dear also left the Property for a while, but he continued to pay the mortgage and outgoings. He later returned to live in part of the Property. He still lives there. Ms Robinson (with Aaron, who reached the age of 18 on 19 May 2000) returned to live in the Property in 1996, but they have since left. Ms Robinson started proceedings for the sale of the Property under section 14 of the Trusts of Land and Appointment of Trustees Act 1996. It is in those proceedings that Mr Dear has made a Part 20 Claim that the Trust Deed is not binding on him and that he and Ms Robinson hold the Property in equal shares.
Things have not gone well for Mr Reeves. Once it was thought that he was rich. Then on 22 March 1993 he was made bankrupt on a creditor's petition owing £7m. Mr Barry Knight was appointed trustee on 22 August 1994. Mr Reeves was discharged from his bankruptcy in 1996.
Mr Dear and Mr Reeves have fallen out about the right of pre-emption. Mr Dear started proceedings for a declaration that the right of pre-emption was no longer binding, as "offer notices" had been served and Mr Reeves had failed to exercise them.
The Judgments
All the proceedings came before HHJ Rudd in the Southampton County Court in March 1999 and resulted in judgments on 1 and 3 March 1999 to the following effect: -
The Judge declined to grant the declaration sought by Mr Dear against Mr Reeves, holding that no offer notices had been served. He rejected the submissions of Mr Dear that letters dated 10 July 1992, 11 May 1993 and 10 July 1993 constituted "offer notices."
He granted the order sought by Ms Robinson for the immediate sale of the Property.
The Part 20 claim by Mr Dear challenging the validity of the Trust Deed has not yet been heard. Doubts have arisen as to whether it was procedurally correct for the judge (a) to make an order for the sale of the Property before determining who was entitled to the beneficial interests in it and (b) to decide the claim for a declaration regarding the right of pre-emption in the absence of the trustee in bankruptcy of Mr Reeves. At the hearing the judge himself raised the point whether the trustee should be joined, but, when counsel for Mr Dear made an application for an adjournment for that to be done, he rejected it without deciding whether the right of pre-emption was vested in Mr Reeves or in his trustee.
Permission to Appeal
These questions surfaced on the applications by Mr Dear for permission to appeal against the refusal of the declaration and against the order for the sale of the Property. The renewed applications for permission were heard on 15 June 2000 by Clarke LJ who made the following orders:
i) The application in the pre-emption action was adjourned to be heard inter partes on the basis that argument was to be confined to the limited point whether the right of pre-emption was vested in Mr Reeves or in his trustee in bankruptcy. This point turns on the legal analysis of the nature of the right conferred by the Deed and on the construction of the 1986 Act.
ii) The application in the action for an order for the sale of the Property was adjourned to be heard at the same time as i) above, the respective appeals to follow if permission were granted. The issue on that application is whether there is a real prospect of demonstrating that the judge was wrong not to postpone the sale of the Property, so as to preserve the benefit of the development value of the Property. It is common ground that the sale of the Property on the order of the court would trigger the right of pre-emption.
The Appeal Hearing
Everybody was represented at the adjourned hearing of the applications for permission, except the trustee in bankruptcy. In order to save costs he sent in written submissions asserting that the right of pre-emption is vested in him and that he has never re-assigned it to Mr Reeves. Mr Reeves has now dropped his original contention that if, contrary to primary submission, he was divested of the right on his bankruptcy, the trustee had expressly re-assigned it to him so as to give him the requisite status to contest Mr Dear's claims.
Initially, Mr Higgins, on behalf of Mr Reeves, objected to the court entertaining argument on an issue which the court below had not decided. Although he could not claim that it was a new point, since it had been raised by the judge himself in the court below, he submitted that the appeal should be dismissed without deciding this point and leaving it for decision by another court, possibly in other proceedings, with the prospect of yet more appeals. He submitted that this court's decision on that point would not affect the outcome of Mr Dear's attempt to appeal against the judge's refusal of the declaration, as Clarke LJ had already refused permission to appeal on the offer notice points on which the judge had decided the case against him. A ruling on the bankruptcy point would not produce a different result, as the trustee does not seek to have the decision of the judge reversed and Mr Dear has already failed in his attempts to appeal the decision.
It was pointed out (and Mr Higgins accepted) that the bankruptcy point can be decided without more evidence. Mr Higgins also agreed that the point will have to be decided by a court at some time. After taking further instructions from his client he...
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