Avis v Turner & Anor

On a trustee in bankruptcy’s application for sale of land held on trust for sale, the jurisdictional question is whether the bankrupt could have applied for sale under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 if there had been no bankruptcy. If so, the trustee may apply and section 335A of the Insolvency Act 1986 governs the application. A consent property adjustment order postponing sale does not, without special force, create an absolute right that the property remain unsold. Section 6(6) of the 1996 Act does not prevent a section 14(2)(a) order directing trustees to execute a trust for sale. After one year, section 335A(3) requires the court to assume that creditors’ interests outweigh all other considerations unless exceptional circumstances exist.

The appeal was from an order made by His Honour Judge Pelling QC in the Chancery Division on 13 December 2006, itself arising from an order made by District Judge Sykes in bankruptcy proceedings. The trustee in bankruptcy sought an order for sale of the former matrimonial home in which the bankrupt had a one-third interest in the proceeds of sale.

A 1985 consent property adjustment order postponed sale until specified events and gave Mrs Avis exclusive occupation. The central issue was whether that order deprived the court of jurisdiction to order sale under section 14 of the Trusts of Land and Appointment of Trustees Act 1996, thereby preventing application of section 335A of the Insolvency Act 1986.

The Court of Appeal dismissed the appeal. Chadwick LJ gave the principal judgment, with May LJ and Ward LJ agreeing.

1. Jurisdictional threshold. The relevant question was whether, absent bankruptcy, Mr Avis could have applied under section 14 of the Trusts of Land and Appointment of Trustees Act 1996. The question was jurisdictional, not whether a sale would probably have been ordered as a matter of discretion. If Mr Avis could have applied, the trustee in bankruptcy could apply under section 14 and section 335A of the Insolvency Act 1986 applied.
2. Effect of the 1985 order. The trustee took the bankrupt’s property subject to equities and liabilities affecting it. However, the 1985 order did not confer an absolute right that the property remain unsold. Mrs Avis’s right to resist sale was qualified by the other interested person’s ability to seek a court order for sale under section 14.
3. Section 6(6). The property was held on an express trust for sale, subject to a power to postpone sale. Section 6(6) restricted only powers conferred by section 6 of the 1996 Act. It did not restrict the court’s separate power under section 14(2)(a) to direct trustees to execute the trust for sale or to cease postponing sale. An order for sale therefore did not contravene the 1985 order or section 6(6).
4. Liberty to apply. The liberty to apply in the matrimonial order did not provide the relevant jurisdiction. The order had been made under section 24(1)(c) of the Matrimonial Causes Act 1973, and the limited variation power under section 31 did not permit the trustee’s application. The reasoning in Thompson v Thompson and Norman v Norman supported that conclusion.
5. Consequences. Section 335A(1) required the application to be made to the bankruptcy court. Section 335A(2) governed the matters relevant to the just and reasonable decision, displacing section 15(1)–(3) of the 1996 Act. Since more than one year had elapsed from vesting, section 335A(3) required an assumption in favour of creditors unless exceptional circumstances existed. The Court expressed no view on whether that exception was established. The application was to proceed to a hearing on its merits.

• Court of Appeal (Civil Division) dismissed Mrs Avis’s appeal from the order of His Honour Judge Pelling QC.
• High Court, Chancery Division dismissed the appeal from District Judge Sykes’s order, substituted a declaration that section 335A of the Insolvency Act 1986 applied, and remitted the outstanding issues for determination.
• Liverpool County Court had adjourned the trustee’s application to allow consideration of exceptional circumstances and mortgage repayment credits.