Walden v Atkins

An equity arising from a promise, reliance and detriment may constitute property for bankruptcy purposes even though its ultimate value or enforcement depends on a future event. The relevant question is whether an existing right or interest, relating to identified property, was capable of being got in and realised at the bankruptcy date. The possibility that a future event may satisfy, reduce or extinguish the equity does not prevent its earlier existence. This differs from an unenforceable prospective award arising from a personal injury. Once the equity is property within the Insolvency Act 1986, it comes under the official receiver’s control and vests in the trustee in bankruptcy.

The claimant alleged that agreements concerning a property transferred to his uncles created an equitable estoppel or remedial constructive trust in his favour. The original property was sold and its proceeds used to purchase another property. The claimant had been adjudged bankrupt before the death of the surviving uncle and later sought a beneficial interest in the replacement property and repayment of an £8,000 loan.

The defendant raised standing as a preliminary issue, contending that the claimant’s equity was property which had vested in his trustee in bankruptcy. The court considered whether the alleged equity existed before bankruptcy and fell within the statutory definition of property.

1. The defendant’s application was treated as equivalent to an application for summary judgment. The claimant’s alleged equitable estoppel and remedial constructive trust claims disclosed no realistically arguable basis on which he retained standing. The claim was struck out, and the forthcoming trial was vacated.

2. The court rejected the submission that an equity arising from proprietary estoppel remained merely personal until the promisor’s death or an inconsistent act. The relevant inquiry was retrospective only in the sense that the court later measured or valued an equitable interest which had already arisen.

3. An equity arose, if at all, when the promise was made, relied upon and acted upon to the promisee’s detriment. At that point the promise became irrevocable and the equity was an interest to which section 436 of the Insolvency Act 1986 applied. The possibility that the equity might later be satisfied, partly satisfied or extinguished did not prevent it from being property.

4. The court applied a “get in and realise” analysis at the bankruptcy date. The claimant’s prospective interest in the property and the £8,000 loan was capable of actuarial measurement and valuation, or the trustee could wait for the relevant event. It therefore constituted property from 19 January 1976, came under the official receiver’s control on 12 June 1992 and vested in the trustee in bankruptcy on appointment.

5. In re Campbell was distinguishable because an unenforceable Criminal Injuries Compensation Board award was not comparable to an enforceable negative obligation concerning identified property. The court expressed misgivings about the obiter suggestion in that case that a lottery ticket might fall outside the statutory definition.

6. Discharge from bankruptcy released the claimant from bankruptcy debts but did not affect the trustee’s remaining functions. The defendant was not thereby entitled to deal with the replacement property or the £8,000 in accordance with the deceased’s will. A further hearing was directed for consequential applications.