Brake & Ors v Swift & Anor

Section 283A of the Insolvency Act 1986 applies only to an interest comprised in the bankrupt’s estate. A partner’s interest in partnership property is ordinarily a share in the partnership, subject to partnership debts and accounting, rather than a beneficial interest in a specific asset. A proprietary estoppel equity may nevertheless constitute property and an interest in land before adjudication, where it concerns a recognised property right. The statutory concept of a dwelling-house may include land serving the dwelling, but separately owned land is not included merely because it adds amenity or convenience. Whether a property was a bankrupt’s principal residence is an objective question, assessed by the view of a reasonable onlooker with knowledge of the material facts. A purported election by the bankrupt has no immediate legal effect.

The applicants, who had been adjudicated bankrupt in May 2015, sought revesting under section 283A of the Insolvency Act 1986. They relied on three alleged interests: a proprietary estoppel claim concerning West Axnoller Cottage, their registered title to the cottage, and Mrs Brake’s fee simple interests in two adjacent parcels of land.

The cottage had been acquired as partnership property. The adjacent parcels were separately owned by Mrs Brake but used with the cottage. The issues were whether the claimed interests were interests in a dwelling-house and whether the cottage or parcels had been the applicants’ sole or principal residence at the bankruptcy date.

1. Application dismissed. The applicants failed on the residence issue, and therefore could not obtain revesting under section 283A.
2. Section 283A applies only where the relevant property was comprised in the bankrupt’s estate. The applicants’ registered legal title to the cottage was held on trust for the partnership and was excluded from the bankruptcy estate by section 283(3)(a). Their partnership interests vested only as partnership shares, subject to the partnership regime, and not as two-thirds beneficial interests in the cottage. Partnership creditors had priority and there was no realistic surplus. Section 283A was therefore irrelevant to those interests.
3. The pleaded oral agreement to transfer the cottage could not support specific performance because it was not evidenced in signed writing as required by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. An alleged agreement to remove the cottage from the partnership also required signed writing.
4. A proprietary estoppel equity arises when the relevant assurance, reliance and detriment are complete, before adjudication by the court. It is property for insolvency purposes and may amount to an interest in land under section 283A where it concerns a recognised property right. The applicants therefore passed the interest threshold only in respect of the proprietary estoppel aspect of their claim.
5. The definition of dwelling-house in section 385(1) is inclusive. Land must belong to and be occupied with the dwelling-house, serving it as part of a coherent whole. The adjacent parcels were separately owned and occupied, were not essential to use of the cottage, and could not be combined with it for section 283A purposes.
6. Principal residence is determined objectively. The relevant question is what a reasonable onlooker with knowledge of the material facts would regard as the person’s home at the material time. The applicants’ subjective intention, electoral registration, insurance description, intermittent occupation of the cottage and later statement to the trustee were relevant but not conclusive. The evidence showed that the main house remained their principal residence on 12 May 2015.
7. A purported election identifying one of several residences as principal has no immediate statutory effect and does not bind the trustee or court. The application under section 283A was dismissed.

First-instance decision. The judgment records earlier interlocutory decisions in the same proceedings, including [2020] EWHC 537 (Ch), [2020] EWHC 538 (Ch), [2020] EWHC 694 (Ch), [2020] EWHC 1071 (Ch) and [2020] EWHC 1156 (Ch), but this judgment determined the remaining section 283A issue.