Longmint Ltd v Azad & Ors

Property held by a bankrupt as trustee does not form part of the bankrupt’s estate under section 306 of the Insolvency Act 1986. The bankrupt may therefore continue appellate proceedings in the capacity of trustee, although the beneficial interest in the sale proceeds vests in the trustee in bankruptcy.

A stay under section 285(2) is directed to claims which are bankruptcy debts and should be proved in the bankruptcy. A landlord’s claim to forfeit a lease held on trust for sale is not such a claim.

The landlord sought possession of a long leasehold flat for alleged covenant breaches and unpaid rent and service charges. Earlier High Court proceedings for arrears had resulted in a default judgment.

In the Brentford County Court, the Recorder determined a preliminary issue for the landlord concerning section 81 of the Housing Act 1996. Permission to appeal was limited to whether, in light of section 95, a court determination for section 81 purposes had to be made in the county court.

The appeal was delayed after the appellant’s bankruptcy. This directions hearing concerned whether the appeal should now proceed and whether further grounds should receive permission to be argued.

1. Directions given. Chadwick LJ directed that the appeal be listed for hearing on the first available date on or after 7 May 2002, with a one-day estimate. The application for permission to appeal on additional grounds was to be heard with the appeal, and any appeal on those grounds was to follow if permission were granted. The costs of the directions hearing were costs in the appeal.

2. The bankruptcy did not prevent the appellant from pursuing the appeal. The leasehold legal interest was held by the surviving joint tenants as trustees for sale. Property held by a bankrupt as trustee does not vest in the trustee in bankruptcy under section 306 of the Insolvency Act 1986. Only the appellant’s beneficial quarter share in the sale proceeds vested in bankruptcy.

3. A proposed stay under section 285(2) of the Insolvency Act 1986 was misconceived. The appeal was pursued by the appellant as trustee and was unaffected by the bankruptcy. Further, proceedings to forfeit a lease held on trust for sale were not proceedings concerning a bankruptcy debt which the landlord should prove in the bankruptcy.

4. An early hearing was appropriate because there was no practical impediment, the legal issue was short, the appeal had been outstanding for more than two and a half years, and further delay would prejudice the landlord and other occupiers through continuing non-payment of charges. The court did not determine the substantive Housing Act 1996 issues at this hearing.

• Court of Appeal (Civil Division): By this directions decision, Chadwick LJ ordered an early hearing of the appeal and directed that the application for permission on further grounds be heard with it: [2002] EWCA Civ 472.

• Brentford County Court: On 26 July 1999, Miss Recorder Knowles decided the preliminary issue for the landlord. She granted permission to appeal only on the section 95 jurisdiction point.

• Queen’s Bench Division: Default judgment for arrears of rent and service charges was entered on 12 May 1998. An application to set it aside was dismissed on 16 June 1998.