Scherzade Khilji v Amy Mehers (Trustee in Backruptcy) & Anor

For the three-year “use it or lose it” period under Insolvency Act 1986, a trustee’s being “informed” of, or “becoming aware” of, a bankrupt’s interest requires a fact-sensitive assessment of the trustee’s actual knowledge. The statutory language does not impose constructive or deemed knowledge based on facts that reasonable enquiries might have revealed. Clear assertions may suffice, particularly where an undocumented beneficial interest is alleged, but equivocal facts ordinarily do not. An appellate court should not interfere with factual findings unless they are plainly wrong or rationally insupportable. The appeal was dismissed because the evidence did not establish the trustee’s actual knowledge of the alleged common intention constructive trust interest within the relevant period.

The appellant, a bankrupt widow, occupied a property registered in her deceased husband’s sole name. She claimed a beneficial interest under a common intention constructive trust. Her trustee in bankruptcy later sought possession and sale.

The deputy ICC judge held that the interest had not revested under s283A of the Insolvency Act 1986, because the trustee’s possession claim was issued within the applicable three-year period. The appellant appealed, arguing that the trustee had been informed of, or had become aware of, her interest earlier, including through documents recording her occupation, mortgage payments, matrimonial-home rights and interim charging orders.

The central issues were the meaning of “informed” and “become aware” in s283A(5), and whether the judge had correctly evaluated the evidence.

1. Appeal dismissed. The appellant failed on both grounds of appeal. The court also refused permission to adduce new evidence concerning disciplinary sanctions against the trustee.
2. Section 283A(5) focuses on the trustee’s actual, subjective knowledge. Its ordinary language does not introduce constructive knowledge, deemed knowledge or knowledge of matters which reasonable enquiries might have revealed. Parliament could have enacted an attributed-knowledge provision, as it did in s14(3) of the Limitation Act 1980, but did not do so.
3. The trustee may become aware through information from sources other than the bankrupt. Nevertheless, whether the information is sufficient is fact-sensitive. Where an undocumented common intention constructive trust is alleged, a clear assertion of a beneficial interest may suffice. A court should be slow to infer such knowledge from equivocal facts where the bankrupt has not clearly stated that she considers herself to have an interest.
4. The judge was entitled to find that the appellant’s mortgage payments, matrimonial relationship, occupation of the property, statutory inheritance rights and matrimonial-home rights did not establish the relevant proprietary interest. The interim charging orders suggested only that creditors believed the appellant might have an interest, and other evidence indicated that belief might have been mistaken.
5. The challenge to the factual findings was governed by the principles in Volpi v Volpi [2022] EWCA Civ 464. The judge had considered the material evidence, and his conclusions were not plainly wrong or rationally insupportable. Even on the appellant’s alternative constructive-knowledge case, the trustee and Official Receiver had made reasonable enquiries and were entitled to conclude that the responses did not disclose the asserted interest.
6. The trustee’s possession claim was therefore made in time and stopped the statutory clock. Consequential matters, including costs, were left for agreement or a short further hearing.

• High Court (Chancery Division): appeal from the order of Deputy ICC Judge Curl KC dated 2 March 2023; appeal dismissed on all grounds.
• Insolvency and Companies Court: judgment handed down on 17 February 2023, concluding that the beneficial interest had not revested under s283A of the Insolvency Act 1986.