Holtham v Kelmanson

A bankruptcy court may review an order under Insolvency Act 1986, section 375 where the bankrupt was absent or unrepresented at the original hearing and later obtains a proper opportunity to oppose the application. Delay in administering a bankrupt estate does not, without more, engage Convention article 6 or give the bankrupt a defence to the trustee’s right to realise property vested in the trustee. A trustee in bankruptcy is not a trustee of land for the purposes of the Trusts of Land and Appointment of Trustees Act 1996. The bankrupt may nevertheless be ordered to deliver possession under section 363(2) of the Insolvency Act 1986. Payments made towards the mortgage may give rise to subrogation and an equitable account.

Mr Holtham appealed against an order directing the sale of his leasehold home, made by Mr Registrar Rawson in his absence, and against Mrs Registrar Derrett’s refusal to review that order. The property had vested in the trustee in bankruptcy, John Kelmanson, following Mr Holtham’s bankruptcy. Its value later increased sufficiently to provide a substantial realisation for creditors.

The trustee sought possession and sale. Mr Holtham relied on the delay in administering the bankruptcy and alleged breaches of Convention articles 6 and 8. The issues were whether the earlier order could be reviewed, whether the trustee had a right to possession and sale, and whether the Convention arguments provided a defence.

1. The appeal succeeded only to the extent that the order for possession and sale required variation. The order was varied to provide for the accounts and inquiries necessary to determine Mr Holtham’s entitlement to subrogation in respect of mortgage payments.

2. The fact that Mr Holtham had been absent and unrepresented at the first hearing, while being represented at the later hearing, was a material difference permitting review under section 375 of the Insolvency Act 1986. Section 375 was the appropriate route for reviewing bankruptcy orders, rather than relying on the general CPR provisions.

3. The property had vested in the trustee under section 306. The trustee was not a trustee of land within section 1(1) of the Trusts of Land and Appointment of Trustees Act 1996. The application therefore fell to be dealt with under section 363(2) of the Insolvency Act 1986, under which a discharged bankrupt whose estate remained under administration could be ordered to deliver possession for the purposes of the bankruptcy.

4. The delay in realising the property did not engage article 6. Administration of a bankrupt estate involved gathering and distributing assets, rather than determining the bankrupt’s civil rights and obligations. Mr Holtham had no enforceable right to occupy property vested in the trustee, and any Convention remedy for delay would not affect the trustee’s right to realise the asset. Article 8 added nothing on the evidence.

5. Section 335A was not engaged because the trustee did not require an order under section 14 of the 1996 Act. In any event, the bankrupt’s needs were excluded from the relevant consideration. Mr Holtham could claim subrogation for qualifying post-discharge mortgage payments, subject to credit for notional rent and an equitable accounting. The position concerning pre-discharge payments required consideration of section 307.

The judgment records appeals from orders made by Mr Registrar Rawson on 18 April 2005 and Mrs Registrar Derrett on 19 July 2005. The High Court varied the order only to provide for accounts and inquiries concerning mortgage payments.