Gotham v Doodes
| Jurisdiction | England & Wales |
| Judge | Lord Justice Carnwath,Lord Justice Moses,The Chancellor |
| Judgment Date | 25 July 2006 |
| Neutral Citation | [2006] EWCA Civ 1080 |
| Docket Number | Case No: A2/2005/2759 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 July 2006 |
[2006] EWCA Civ 1080
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
CHANCERY DIVISION (IN BANKRUPTCY)
MR JUSTICE LINDSAY
Royal Courts of Justice
Strand, London, WC2A 2LL
The Chancellor of The High Court
Lord Justice Carnwath and
Lord Justice Moses
Case No: A2/2005/2759
CH/2005/APP/0438
Mr Alexander Stewart and Mr Alexander Learmonth (instructed by BTMK Solicitors LLP) for the Appellant
Mr Dan Stacey and Mr Timothy Akkouh (instructed by Budd Martin Burrett) for the Respondent
The Chancellor:
The issue on this appeal is whether the application of Mr Gotham ("the Trustee") , the Trustee in Bankruptcy of Mr Doodes ("the Bankrupt") , to enforce by orders for possession and sale of 22 Basildon Drive, Laindon, Basildon, Essex ("the Property") the charge thereon imposed by an order made under s.313 Insolvency Act 1986 on 29th May 1992 is barred by s.20(1) Limitation Act 1980. Chief Registrar Baister thought that it was not. Lindsay J considered that it was.
The relevant facts may be shortly stated. In March 1988 Mr Doodes and Cheryl Barbara Perry bought the Property in their joint names, with the assistance of a mortgage, for £60,000. On 12th October 1988 a bankruptcy order was made in the Chelmsford County Court against the Bankrupt on the petition of a judgment creditor. On 12th May 1989 the Trustee was appointed and remains the trustee in Bankruptcy of the Bankrupt notwithstanding the discharge of the latter on 12th October 1991.
On 18th December 1990 the Trustee applied to the Chelmsford County Court for an order for possession of the Property so that he might sell the same with vacant possession. On 27th February 1992, instead of making the order for which the Trustee had applied, Mr Recorder Storr ordered that:
"a Charge be imposed upon the Bankrupt's property known as and situate at 22 Basildon Drive, Laindon, Essex in favour of the Trustee and that the said property be removed from the Bankrupt's Estate pursuant to Section 313(1) and (3) of the Insolvency Act 1986"
By a further order, purporting to be a charging order absolute, made by some unidentified individual in the Chelmsford County Court on 29th May 1992 it was ordered that:
"the interest of the Bankrupt, Kevin Leonard Doodes, in the asset specified in the schedule hereto, stand charged in favour of the Trustee of the Estate of Kevin Leonard Doodes, Peter Gotham."
The schedule contained the address of the Property and its title number in HM Land Registry, EX 362308.
On 16th June 2004, being apparently unaware of these orders, the Trustee applied to the Chelmsford County Court for orders for possession and sale of the Property pursuant to s. 335A Insolvency Act 1986 and s.14 Trusts of Land and Appointment of Trustees Act 1996. The ground of the application was that it appeared to the Trustee from a valuation of the Property made in February 2003 that after repayment of the mortgage on the Property there was now an equity of at least £50,000 available for the benefit of the creditors of the Bankrupt. The District Judge before whom this application came, having read the file and discovered the orders made in 1992, adjourned the Trustee's application and transferred it to the High Court.
On 2nd March 2005 the Trustee applied to amend his application. The application was opposed by the Bankrupt on the grounds that s.20(1) Limitation Act applied and barred the claim the Trustee sought to advance. That sub-section provides as follows:
"20. (1) No action shall be brought to recover—
(a) any principal sum of money secured by a mortgage or other charge on property (whether real or personal) ; or
(b) proceeds of the sale of land;
after the expiration of twelve years from the date on which the right to receive the money accrued."
The resolution of the issue before us depends on the proper application of that provision to the rights conferred on the Trustee by the two orders to which I have referred.
The Report of the Review Committee on Insolvency Law and Practice ("the Cork Committee") (Cmnd.8558) recognised (paragraphs 1114–1123) that the residual value of a debtor's house after repayment of the mortgage debt is frequently the major asset in the estate of a consumer debtor and that its sale to enforce the creditors' rights should be deferred so as to avoid the considerable personal hardship to the debtor and his family which may otherwise be inflicted. They considered that any new Insolvency Act should confer on the court specific power to postpone a trustee's rights of possession and sale of the family home and that in exercising that jurisdiction the court should have a wide discretion to do what is just in the great variety of circumstances which may arise. Effect was given to these recommendations by ss. 336 and 337 Insolvency Act 1986, which conferred rights of occupation on a bankrupt and his spouse, and s.313.
At the time the Insolvency Act 1986 was passed sales of jointly held property were ordered under s.30 Law of Property Act 1925. In Re Citro [1991] Ch.142 the Court of Appeal held the interests of a bankrupt spouse's creditors would, absent exceptional circumstances, usually prevail over those of the other spouse and children. Accordingly it reduced to six months the period of postponement of the order for sale of the property made by the judge below.
8. The Trusts of Land and Appointment of Trustees Act 1996 repealed, inter alia, ss. 28 to 30 Law of Property Act 1925 and substituted the regime for the sale of property in which more than one person is interested to be found in ss. 14 and 15. At the same time it inserted into the Insolvency Act 1986 a new s.335A to deal with cases where one of the persons interested is a bankrupt. Further amendments were made to relevant provisions of the Insolvency Act 1986 by the Enterprise Act 2002. I will now set out the relevant legislation as amended by the various stages to which I have referred. Where relevant I indicate the nature of the amendment.
S.313 Insolvency Act 1986 , as amended by Enterprise Act 2002 and Civil Partnership Act 2004, is in the following terms (the amendments being shown in square brackets) :
"(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.
(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.
[(2A) In subsection (2) the charged value means—
(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
(b) interest on that amount from the date of the charging order at the prescribed rate.
(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.]
(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.
(4) Subsections (1) and (2) and (4) to (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.
[(5) But an order under section 3(5) of that Act may not vary a charged value.]
The provisions in the Charging Orders Act 1979 applied by sub-section (4) are, so far as relevant, as follows:
"(1) A charging order may be made either absolutely or subject to conditions as to notifying the debtor or as to the time when the charge is to become enforceable, or as to other matters.
[(2)
(3) ]
(4) Subject to the provisions of this Act, a charge imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor by writing under his hand.
[(5) -(8) ]"
By CPR Rule 73.10 subject to the provisions of any enactment the court may, upon a claim made by a person who has obtained a charging order over an interest in property, order a sale of the property to enforce the charging order.
S.335A Insolvency Act 1986 inserted by Trusts of Land and Appointment of Trustees Act 1996 and as amended by the Civil Partnership Act 2004 provides:
(1) Any application by a trustee of a bankrupt's estate under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 (powers of court in relation to trusts of land) for an order under that section for the sale of land shall be made to the court having jurisdiction in relation to the bankruptcy.
(2) On such an application the court shall make such order as it thinks just and reasonable having regard to—
(a) the interests of the bankrupt's creditors;
(b) where the application is made in respect of land which includes a dwelling house which is or has been the home of the bankrupt or the...
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