Stonham v Ramrattan and Another
Jurisdiction | England & Wales |
Judge | Lord Justice Lloyd,Lord Justice Longmore,Lord Justice Rix |
Judgment Date | 16 February 2011 |
Neutral Citation | [2011] EWCA Civ 119 |
Docket Number | Case No: A2/2010/1402 |
Court | Court of Appeal (Civil Division) |
Date | 16 February 2011 |
[2011] EWCA Civ 119
[2010] EWHC 1033 and 1059 (Ch)
Mr Justice Mann
ON APPEAL FROM MR REGISTRAR SIMMONDS
Before: Lord Justice Rix
Lord Justice Longmore
and
Lord Justice Lloyd
Case No: A2/2010/1402
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
IN BANKRUPTCY
James Mather (instructed under the Bar Pro Bono Scheme) for the Appellants
Stephen Davies Q.C. and Richard Ascroft (instructed by Ashfords LLP) for the Respondent
Hearing date: 3 February 2011
Lord Justice Lloyd:
Introduction
This appeal, brought by Mr Ramrattan and his wife Ms Bortolussi, is against an order of Mr Justice Mann made on 7 May 2010 by which he allowed an appeal by Mr Stonham, the respondent before us, who is the trustee in bankruptcy of Mr Ramrattan. That appeal was brought against an order of Mr Registrar Simmonds made on 26 January 2010.
The proceedings concern property called 76 Rosendale Road, London SE22 which is and has since 1987 been the matrimonial home of Mr Ramrattan and his wife. The issue on the appeal is whether, and if so how, the provisions of section 283A of the Insolvency Act 1986 apply to the facts of the case, which are in some respects unusual. Permission to appeal was given by Lord Justice Mummery explicitly on the basis that the point was of importance.
The appellants are represented, as they were before Mr Justice Mann, by Mr Mather, who acts pro bono. They had acted in person before the registrar. The trustee in bankruptcy is represented by Mr Ascroft, as below, but he is now led by Mr Stephen Davies Q.C.
The property was bought on 13 August 1987 and was then transferred to and registered in the name of Mr Ramrattan. On 28 September 1990, on the face of it, Mr Ramrattan transferred the property into the sole name of his wife by way of gift. She became registered as the sole proprietor on 14 November 1990. The transfer is not in the appeal bundle but it appears that it was stated as being made in consideration of natural love and affection. It later became clear that this document was not all that it appeared to be, but it was at least effective in securing that Ms Bortolussi became the legal owner of the property.
On 16 October 1995 a bankruptcy order was made in relation to Mr Ramrattan, on a petition which had been presented on 15 September 1995. Mr Stonham was appointed as the trustee in bankruptcy on 28 December 1995. At that point Mr Ramrattan's assets vested in Mr Stonham under section 306 of the Insolvency Act. What it was that so vested is defined by section 283 and I will need to refer to that later.
On 23 April 1997 Ms Bortolussi attended for a private examination by the trustee. After that, on 4 June 1997, the trustee's then solicitors, Burstows, wrote to her to say that the trustee intended to apply to set the transfer to her aside, to seek a declaration that Mr Ramrattan had least a half interest in the property and an order for sale. She was invited to make an offer to buy out his share. She ignored the letter and the trustee did not follow it up by any proceedings or otherwise for long time. There is no explanation in the papers for that delay. On 17 December 2004 new solicitors acting for the trustee, Messrs Ashfords, who still act for him, wrote to Mr Ramrattan saying that the trustee was considering applying to set aside the transfer as having been made at an undervalue or as a preference. He was invited either to apply to annul the bankruptcy or to offer to buy the trustee's interest in the property out. By then Mr Ramrattan would have been long since discharged from his bankruptcy, but the assets that had vested in the trustee remained so vested and the trustee still had all relevant powers that he needed in order to secure the payment of the debts.
In the meantime the Enterprise Act 2002 had amended the Insolvency Act in a number of relevant respects with effect from 1 April 2004. I will refer to those provisions later.
Mr Ramrattan made no response to the letter sent to him and again the trustee failed to follow it up for a considerable period; again the delay is unexplained. Finally on 11 October 2007 the trustee issued these proceedings, against both Mr Ramrattan and Ms Bortolussi, seeking a declaration that the transfer was a transaction at an undervalue and that Ms Bortolussi had no beneficial interest in the property, that the transfer be set aside and that the property be sold and vacant possession be given for the purposes of the sale. Mr Ramrattan defended the proceedings on the ground, so far as relevant, that in fact Ms Bortolussi had paid for the purchase in 1987, that it was only by mistake that it had been transferred into his name rather than hers, and that the purpose of the 1990 transfer was not to make a gift to her but only to correct the mistake and to reflect the correct underlying position that she was the owner of the property. Thus he maintained that it had never been an asset of his and he had not therefore transferred anything other than the bare legal estate to her. Ms Bortolussi adopted the same line of defence. The proceedings took a long time to come to trial for reasons that do not now matter. They came on for trial before Mr Registrar Simmonds on 24 and 25 November 2009.
In the course of the hearing it became clear from the evidence that although the 1990 transfer purported to be executed as a deed by Mr Ramrattan and Ms Bortolussi, in fact Mr Ramrattan had signed for himself and had forged the signatures of Ms Bortolussi and of the two witnesses to the parties' execution. The registrar recorded Mr Ramrattan having admitted this at paragraph 26 of his judgment. The registrar also found that it was not a mistake that Mr Ramrattan was the transferee of and the registered proprietor of the property in the first place, at paragraph 29 of his judgment, and he also held that Ms Bortolussi had no beneficial interest in the property, at paragraph 34. He said that the 1990 transfer was a forged document intended to deceive creditors, among others, and said that it was a sham document. Alternatively, if he was wrong, he held that it was intended as a gift to Ms Bortolussi and therefore was a transfer at an undervalue. In his first judgment, given on 11 December 2009, he did not decide what order should be made and he expressed some concern as to the details of the order sought. It turned out that his concern, which is entirely understandable, was about the delay on the part of the trustee in bringing the proceedings. Following further argument, in a second judgment given on 26 January 2010 he declined to grant any relief to the trustee because of the delay in bringing the proceedings although he did in his order declare that the transfer was a sham or that, if it was not, it was a transaction at an undervalue. He gave permission to appeal and the trustee accordingly appealed.
The appeal came before Mr Justice Mann on 5 May 2010. In his judgment given on that day, [2010] EWHC 1033 (Ch), the judge expressed the view that "sham" was not the most appropriate label for the 1990 transfer. As a forgery it was simply devoid of any legal effect. Taken with the registrar's finding, which was not challenged, that Ms Bortolussi had no beneficial interest in the property, the inevitable conclusion was that, although by virtue of her registration Ms Bortolussi held the legal estate, she held it on trust for Mr Ramrattan absolutely, so that the full beneficial interest in the property was and always had been an asset of Mr Ramrattan, and therefore one which had vested in the trustee under section 306.
He went on to deal, although expressly not necessarily to his decision, with the impact of the court's discretion in relation to section 339, under which an application can be made in effect to set aside or remedy the effect of a transaction at an undervalue. On that too he would have come to a different conclusion to the registrar. After giving judgment, and when turning to consequential matters, he was presented with a new argument by Mr Mather on behalf of the respondents before him. This is the point now taken on appeal. On this he gave a second judgment following a hearing on 7 May 2010, [2010] EWHC 1059 (Ch), in which he ruled against Mr Mather's argument. He therefore went on to allow the appeal and to make orders broadly as sought by the trustee in his application.
The issue on the appeal
The point arises in this way. One of the provisions introduced into the Insolvency Act by the Enterprise Act is section 283A which, speaking generally, gives a trustee in bankruptcy three years from the date of the bankruptcy in which to decide what, if anything, to do about any interest in a house 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 any action of a kind specified in the section within the three year period, then the bankrupt's former interest ceases to be part of the bankrupt's estate and vests in the bankrupt. I will come to the detail of this shortly. Mr Mather's submission to Mr Justice Mann was, as it is to us, that, accepting that the outcome of the trustee's application is that Mr Ramrattan's beneficial interest in the property either was always part of his bankruptcy estate, or became so under section 339, it ceased to be so after a period of...
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