Martin Charles Armstrong (as Trustee in Bankruptcy) v Vanessa Temblett & Anor

A bankruptcy order remains effective and must be obeyed unless and until it is set aside. A trustee in bankruptcy is entitled to realise vested property interests and may seek possession and sale of a bankrupt’s home.

Where an application is made more than one year after vesting, Insolvency Act 1986 s 335A requires the court to presume that creditors’ interests outweigh other considerations unless exceptional circumstances are established. The court may order sale even where the proceeds may be absorbed by the trustee’s costs and expenses.

The applicant trustee in bankruptcy sought a declaration that the bankrupt’s beneficial interest in a jointly owned London property had vested in him, together with possession and sale.

The bankruptcy followed unpaid council tax liability orders and an unsuccessful challenge to the statutory demand. The respondents disputed the bankruptcy, failed to cooperate with the trustee, did not file evidence in answer to the application and did not attend the final hearing.

The issues were whether the bankruptcy order remained effective, whether the beneficial interest had vested in the trustee, and whether possession and sale should be ordered under the statutory regime.

1. Application granted. The bankruptcy order remained extant until set aside. The court applied Isaacs v Robertson [1985] AC 97 and Re Mid East Trading Ltd [1998] BCC 726.
2. The trustee’s statutory function was to get in, realise and distribute the bankrupt’s estate under s 305(2) of the Insolvency Act 1986. On bankruptcy, the joint beneficial interest in the London property was severed, following Re Gorman (A Bankrupt) [1990] 1 W.L.R. 616, and the bankrupt’s beneficial interest vested automatically in the trustee under s 306.
3. Section 14 of the Trusts of Land and Appointment of Trustees Act 1996 enabled the trustee to apply for an order, while s 335A of the Insolvency Act 1986 governed the application. As more than one year had elapsed since the bankruptcy order, the statutory presumption that creditors’ interests outweighed other considerations applied. No exceptional circumstances were established.
4. The respondents’ non-cooperation, extensive unsupported allegations and failure to provide evidence did not displace the statutory presumption. The court also applied Trustee of the Estate of Bowe v Bowe [1997] BPIR 747 and Harrington v Bennett [2000] BPIR 63 in holding that sale could properly be ordered even if the net proceeds were absorbed by the trustee’s costs and expenses.
5. A declaration was made that 50% of the beneficial interest in the London property was vested in the trustee. Possession and sale of the London property were ordered.

First-instance application. The judgment recounts earlier bankruptcy and possession proceedings but states no appellate decision relevant to the present application.