Skeete v Pick & Anor

A bankrupt’s beneficial interest in property vests in the trustee in bankruptcy on the bankruptcy order. The bankrupt therefore has no proprietary interest, and ordinarily no locus to oppose or appeal a declaration concerning the division of the property between the trustee and another beneficiary. Mere non-objection to a draft order is not, without prior agreement, a consent order. A proposed remortgage will not justify setting aside a possession order where the available borrowing is insufficient to discharge the secured and unsecured liabilities and associated costs. The court may nevertheless have jurisdiction under sections 303 and 375 of the unknown 1986 Act to control the trustee’s conduct and to review, rescind or vary its own order.

Mr Skeete, an undischarged bankrupt, and Mrs Mighton were joint legal owners of a property held under a 1989 declaration of trust. That declaration provided for repayment of £26,000 to Mr Skeete and division of the remaining beneficial interest two-thirds to him and one-third to Mrs Mighton.

Mr Pick, the trustee in bankruptcy, obtained an order from Deputy District Judge Simpson for possession and sale, together with a declaration reflecting the trust deed. Mr Skeete appealed against the possession order and the declaration. He relied on a later remortgage offer and argued that Mrs Mighton’s interest had been bought out in 1991. The central issues were whether the remortgage made possession unnecessary and whether Mr Skeete could challenge the declaration.

1. The appeal was dismissed. The proposed remortgage of £130,000 was not a practical means of discharging the liabilities. The secured mortgage debt was approximately £50,000 and the unsecured debts and bankruptcy costs approximately £85,000, before further interest, sale or remortgage costs and any amount potentially due to Mrs Mighton. The possession order therefore stood.

2. The court accepted that, on bankruptcy, the whole of Mr Skeete’s legal and beneficial interest vested in the trustee in bankruptcy. The declaration concerned the trustee’s relationship with Mrs Mighton as the possible co-beneficiary. Mr Skeete consequently had no proprietary interest and, technically, no locus either to oppose that relief below or to appeal it.

3. The court nevertheless considered the procedure unsatisfactory. The trustee’s application had apparently been based on advice that the trust deed remained applicable because Mrs Mighton had not been removed as joint legal owner. That advice was not legally correct: her beneficial interest could have been sold without transferring the legal title. There was a good arguable case that the £3,500 payment bought out her beneficial interest, although the issue could not be determined summarily.

4. Mere non-objection when a judge asks whether a party objects to a form of order is not a consent order, which requires prior agreement that the order should be made. The appropriate route for Mr Skeete would have been an application under section 303 to control the trustee’s conduct, potentially combined with an application under section 375 to review, rescind or vary the declaration. The judgment expressed no view on the result of any such future application.

1. High Court (Chancery Division) — The appeal from the order of Deputy District Judge Simpson was dismissed. The possession and sale order remained in force, subject to any properly made application under sections 303 or 375 of the unknown 1986 Act.
2. Luton County Court — On 5 December, Deputy District Judge Simpson ordered possession and sale of the property and declared the beneficial interests in accordance with the 1989 trust deed.