Sleight v The Crown Estate Commissioners

A trustee in bankruptcy cannot apply for a vesting order merely because he seeks to have disclaimed property vested in him. The applicant must already claim a proprietary interest, or fall within another statutory category, such as a person under an undischarged liability in respect of the property. Section 320 of the Insolvency Act 1986 permits vesting of the disclaimed property itself, not simply a later surplus arising after its sale. Where the trustee lacks standing, the court cannot use its discretion over the terms of a vesting order to direct payment of unclaimed sale proceeds to the bankrupt estate.

The applicant was trustee of an insolvent deceased estate administered under the Administration of Insolvent Estates of Deceased Persons Order 1986. He had disclaimed two mortgaged freehold properties as onerous property. The mortgagee later sold them and held surplus proceeds after discharging the secured debt and sale costs.

The Crown Estate Commissioners were joined because the properties had escheated, or might have escheated, to the Crown. They did not attend and took no position on the application. The trustee sought orders under section 320 of the Insolvency Act 1986, principally to vest the properties and corresponding surpluses in him for creditors. The central issues were whether he had standing and whether section 320 could be used after the properties had been sold.

1. Application dismissed. The trustee did not fall within section 320(2)(a) of the Insolvency Act 1986. His argument that he claimed an interest because he sought an order vesting the property in himself was circular. Section 320(2)(a) refers to an existing proprietary interest, or at least a genuine claim to one, rather than a person with a broad or practical interest in the asset. The separate categories in section 320(2)(b) and (c) confirm that construction.
2. The statutory power concerns vesting the disclaimed freehold property. The properties had already been sold, so a vesting order in relation to them was no longer realistic or appropriate. The court was not asked to determine definitively which of several legal mechanisms had operated after disclaimer. On the assumed basis that the mortgagee had relied on its existing proprietary interest, the prima facie entitlement to the surplus was in the Crown.
3. Lee v Lee illustrated a different situation. There, a mortgagee with standing obtained a vesting order, and the court used its wide discretion as to terms to provide for surplus proceeds to be paid to the trustee in bankruptcy. That discretion could not be exercised here because no vesting order could be made in favour of this applicant.
4. The court noted the unsatisfactory practical result that, although neither the Crown nor the mortgagee wished to assert the money, the surplus might remain with the court funds office. An application under rule 19.11 of the Insolvency (England and Wales) Rules 2016 was also out of time. Although time could be extended under section 376 of the Insolvency Act 1986 and Schedule 5 to the Rules, there was no point in doing so given the lack of standing. Consequential matters, including the form of order and any permission to appeal, were adjourned.