Re Barcham (a bankrupt)

JurisdictionEngland & Wales
CourtChancery Division
JudgeMR JUSTICE BLACKBURNE,Mr Justice Blackburne
Judgment Date04 Jul 2008
Neutral Citation[2008] EWHC 1505 (Ch)
Docket NumberCase No: CH/2007/APP/0771

[2008] EWHC 1505 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Before:

Mr Justice Blackburne

Case No: CH/2007/APP/0771

In The Matter Of Peter Francis Barcham In Bankruptcy

Between:
Jeremy Stuart French (as Trustee In Bankruptcy Of Peter Francis Barcham)
Appellant
and
(1) Peter Francis Barcham
(2) Bernadette Margaret Barcham (formerly Walsh)
Respondents

Stephen Davies QC and Stefan Ramel (instructed by Moor Beever Solicitors) for the Appellant

Alexander Learmonth (instructed by Tilbrooks) for the SecondRespondent

The First Respondent did not appear and was not represented

Hearing date: 20 th May 2008

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

MR JUSTICE BLACKBURNE Mr Justice Blackburne

Introduction

1

This is an appeal from an order made by District Judge Chandler in the Southend County Court on 19 November 2007. The appeal is brought with the district judge's permission. It is concerned with the extent to which a beneficial tenant in common who continues in occupation of a property following the bankruptcy of the other beneficial tenant in common ought to compensate the bankrupt's estate for that continued occupation.

2

The material facts could scarcely be simpler. On 22 May 1992 No. 3 West Park Hill, Brentwood, in Essex, which is a two-bedroomed, semi-detached bungalow, was transferred to the respondents, Peter Francis Barcham and Bernadette Margaret Walsh (as she then was). They were registered with title absolute on 10 June 199From the outset of their joint ownership, the property was charged to Woolwich Building Society which was subsequently acquired by Barclays Bank. Barclays is now shown as proprietor of the registered charge. From the time of their acquisition of the property the Barchams, who married in May 2001, made it their home. At all material times they have been in joint occupation of it.

3

On 10 June 1994 a bankruptcy order was made against Mr Barcham on his own petition. The Official Receiver became his trustee in bankruptcy. He continued as such until August 2004 when the appellant, Jeremy Stuart French, and one other were appointed by the Secretary of State to be joint trustees in his place. Their appointment took effect from 18 August 2004. The appointment empowered either trustee to act in any matter.

The application to the court

4

On 14 December 2006 Mr French applied to the Southend County Court for orders for the sale of the property, for its possession and for ancillary relief in connection with the sale. He also sought a declaration that the respective interests in the net proceeds of sale should be 50% for himself (as trustee) and 50% for Mrs Barcham. Mr and Mrs Barcham were the respondents to the application.

5

Following adjournments for the purpose of filing evidence and obtaining a joint surveyor's opinion on the rental value of the property, the application eventually came on for hearing on 19 November 2007. The dispute was not over the trustee's entitlement to possession and sale of the property, nor over the beneficial shares in it since it was common ground that the respondents had acquired it as beneficial tenants in common in equal shares, nor over the fact that in consequence of his bankruptcy all those years earlier Mr Barcham's equitable half share had vested in the Official Receiver and, following their appointment as joint trustees of his estate, in Mr French and his colleague. Rather, the dispute was over what deductions should be made from the trustees' half share of the net sale proceeds to compensate Mrs Barcham for various payments that she had made and, correspondingly, what if any deductions should be made from her half share of the net sale proceeds to reflect the fact that since Mr Barcham's bankruptcy she and Mr Barcham had remained in joint occupation of the whole of the property. As the district judge observed:

“2. There is no issue between the parties that this is a case where the trustee is entitled to an order for possession and sale because the interests of the creditors prevail over the interests of anyone else save in exceptional circumstances, and it is not argued by either of the respondents that there are any exceptional circumstances in this case.”

That was a reference to section 335A(3) of the Insolvency Act 1986. Section 335A, inserted by the Trusts of Land and Appointment of Trustees Act 1996 (the 1996 Act), regulates the exercise of the court's powers under section 14 of that Act where application is made by a trustee in bankruptcy. It provides in particular that where an application is made later than one year after the vesting of the bankrupt's estate in his trustee the court must assume “unless the circumstances are exceptional” that the interests of the bankrupt's creditors outweigh all other considerations (and therefore that their interests in respect of the land in question will prevail). There were no such exceptional circumstances.

The district judge's judgment

6

The district judge accepted Mrs Barcham's evidence concerning the extent of the payments which she claimed to have made since Mr Barcham's bankruptcy in respect of the mortgage on the property and on the property itself. He noted that, given that it was accepted that the Barchams had owned the property as tenants in common in equal shares, Mr French conceded that Mrs Barcham was entitled to credit for one-half of those payments. He observed that as a matter of principle Mr French accepted that “subject to a set-off in respect of a charge for use and occupation or an occupation rent” Mrs Barcham should have credit for 50% of those payments against the other half share. He stated that the issue which he had to decide was whether “the trustee” (although there were joint trustees I shall use the singular as did the district judge) “should be entitled to set-off against the claim for payments that had been made by Mrs Barcham a sum for her occupation of the premises”.

7

He then proceeded to consider that question. In doing so he referred to Byford v Butler [2003] EWHC 1267 (Ch); 1 FLR 56 (a decision of Lawrence Collins J), the decision of the House of Lords in Stack v Dowden [2007] UKHL 17; [2007] 2 WLR 831, Murphy v Gooch [2007] EWCA Civ 603, [2007] BPIR 1123 (a decision of the Court of Appeal), and sections 12 (concerned with the right of beneficiaries to occupy trust land) and 13 (concerned with the exclusion and restriction of such right of occupation) of the 1996 Act, and in particular section 13(6) which enables compensation to be awarded to a beneficiary whose entitlement to occupy land under section 12 has been excluded or restricted. He concluded that, in the light of what was said by Baroness Hale in Stack v Dowden about the operation of the 1996 Act, anyone seeking compensation for a restriction or exclusion of the right to occupy must fall within the statutory regime set out in the 1996 Act, but that a trustee in bankruptcy did not. As he put it:

“A trustee in bankruptcy is not a beneficiary entitled to occupy land under section 12 and therefore is not entitled to any compensation under section 13(6).”

The application for such compensation therefore failed.

8

His order, after directing a sale of the property and setting out how that should be effected, ordered the net sale proceeds to be distributed between Mr French and Mrs Barcham in equal shares subject to Mrs Barcham being credited with half of the mortgage instalments and insurance premiums paid in respect of the property since the date of the bankruptcy order (with liberty to apply to determine the amounts in question) and half of £4,383, being the cost of works which she had carried out to the property. Reflecting his judgment, the order did not provide for any offset against Mrs Barcham's share on account of her occupation of the property. As I have mentioned, he gave Mr French permission to appeal.

The grounds of appeal

9

The grounds of appeal raise two matters: (1) the correctness of the district judge's conclusion that Stack v Dowden provides an exhaustive code for when compensation by a beneficiary in occupation of property under a trust of land is payable in respect of that occupation to another beneficiary under the same trust who is not in occupation and his finding, consequent on that conclusion, that as Mr Barcham's trustee in bankruptcy from time to time never qualified under that code he was not entitled to any compensation and (2) the correctness of the district judge's acceptance of Mrs Barcham's evidence that it was she who had made all the payments for which she was seeking a 50% credit. As to the first matter the district judge, it is said, should have held that the 1996 Act had no application and that, in accordance with well established principles, Mrs Barcham's share of the net proceeds was liable to be debited with an occupation rent in favour of Mr Barcham's bankruptcy estate. As to the second of those matters the district judge, it is said, should have found that Mrs Barcham was only entitled to a credit for one half of those payments that could be evidenced by reference to her bank statements.

10

In the event the appeal was pursued only in respect of the first of those two matters. For her part, Mrs Barcham served a respondent's notice seeking to uphold the district judge's decision for reasons additional to those given by him.

The 1996 Act

11

Sections 12 to 15 provide as follows:

12 The right to occupy

(1) A beneficiary who is beneficially entitled to an interest in possession in land subject to a trust of land is entitled by reason of his interest to occupy the land at any time if at that time -

(a) the purposes of the trust include making the land available for...

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15 cases
  • Amin and Another v Amin & Others
    • United Kingdom
    • Chancery Division
    • 16 March 2010
    ...of occupation at least when that other beneficiary is also a trustee. Blackburne J reached the same conclusion in French v Barcham [2008] EWHC 1505 (Ch), another bankruptcy case. He held that the trustee in bankruptcy had no right to occupy so that section 12 did not apply and thus sections......
  • Paul Michael Davis (as trustee in bankruptcy of Audley Glendon Jackson) v Audley Glendon Jackson and Another
    • United Kingdom
    • Chancery Division
    • 7 April 2017
    ...compensation for her sole occupation of the Property up to the date of Mr. Jackson's bankruptcy. 27 However, relying upon Re Gorman and French v Barcham [2009] 1 WLR 1124, Ms. Brown submitted that the position as regards payments for occupation of the Property fundamentally changed as a res......
  • Alfred George Creasey and Another v June Sole and Others
    • United Kingdom
    • Chancery Division
    • 24 May 2013
    ...land under section 12 of the 1996 Act, I would have ordered him to pay an occupation rent in accordance with the principles discussed in French v Barcham [2009] 1 WLR 1124, in particular, at [34]. The Single Payment Scheme 131 The parties are in dispute as to Michael's entitlement to retain......
  • Simpson v Sax
    • New Zealand
    • High Court
    • 26 June 2015
    ...v McDonald [1981] 2 All ER 632 at 638. The decision was approved on appeal in Dennis v McDonald [1982] 2 WLR 275. 15Re Barcham [2008] EWHC 1505 (Ch), [2009] 1 All ER 145 at 160; Dyas v Elliot HC Auckland CIV-2008-404-1021, 16 April 2010 at 16Re Pavlou (a bankruptcy) [1993] 3 All ER 955 at ......
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