(1)Where any property consisting of an interest in a dwelling house which is occupied by the bankrupt or by his spouse or former spouse or by his civil partner or former civil partner is comprised in the bankrupt’s estate and the trustee is, for any reason, unable for the time being to realise that property, the trustee may apply to the court for an order imposing a charge on the property for the benefit of the bankrupt’s estate.
(2)If on an application under this section the court imposes a charge on any property, the benefit of that charge shall be comprised in the bankrupt’s estate and is enforceable , up to the charged value from time to time, for the payment of any amount which is payable otherwise than to the bankrupt out of the estate and of interest on that amount at the prescribed rate.
(2A)In subsection (2) the charged value means—
(a)the amount specified in the charging order as the value of the bankrupt’s interest in the property at the date of the order, plus
(b)interest on that amount from the date of the charging order at the prescribed rate.
(2B)In determining the value of an interest for the purposes of this section the court shall disregard any matter which it is required to disregard by the rules.
(3)An order under this section made in respect of property vested in the trustee shall provide, in accordance with the rules, for the property to cease to be comprised in the bankrupt’s estate and, subject to the charge (and any prior charge), to vest in the bankrupt.
(4) Subsection (1), (2), (4), (5) and (6) of section 3 of the Charging Orders Act 1979 (supplemental provisions with respect to charging orders) have effect in relation to orders under this section as in relation to charging orders under that Act.
(5)But an order under section 3(5) of that Act may not vary a charged value.
Cases considering section 313 8
[2009] EWCA Civ 448 · 12 June 2009Interprets
A charging order fixes the estate’s interest in monetary terms, with interest, and gives future increases in the property’s value to the bankrupt. This supported construing section 283A as a scheme for timely crystallisation (see paras [17]; [20]-[24]).
The provision’s reference to inability for the time being to realise property could conceivably extend to a deferred-consideration sale. The court treated that possibility as insufficient to displace the generally uniform cash-conversion meaning found elsewhere (see para [17]).
The charged value under this subsection was construed with subsection (2A) as the value specified at the date of the charging order, rather than future increases in the property’s value (see para [20]).
A charging order secures the amount specified as the value of the bankrupt’s interest at the date of the order, plus interest. Later increases in value therefore benefit the bankrupt rather than the estate (see para [20]).
[2006] EWCA Civ 1080 · 25 July 2006
The court treated the statutory order as creating a proprietary charge over the property. The section’s purpose is to defer realisation while preserving the value of the bankrupt’s interest for creditors. (see paras [27]; [36]-[38])
The amount payable otherwise than to the bankrupt out of the estate was held to be the principal sum secured by the charge. Its fluctuating amount and the absence of a personal debtor did not alter that conclusion; accrued interest was distinct. (see paras [27]-[30])
The incorporation of the charging-order regime supported the conclusion that the section 313 charge was enforceable as an equitable charge and could be realised by judicial process. (see para [27])
[2005] EWHC 2576 (Ch) · 17 November 2005Interprets
Applies the statutory power to impose a charge over an interest in a dwellinghouse occupied by the bankrupt or spouse where the trustee cannot realise the property. The charge was imposed over the bankrupt’s interest in the home. (see paras [1], [3], [8]-[10])
Limits the charge to the value of the property secured and identifies the amounts payable out of the estate for which the charge is enforceable. The court used this provision in analysing the trustee’s secured rights. (see paras [3], [10])
Requires the order to provide for the charged property to cease to be comprised in the bankrupt’s estate and to vest in the bankrupt subject to the charge. That separation was central to the conclusion that the trustee’s rights were outside the bankruptcy. (see paras [1], [3], [27])
Applies specified provisions of the <span class="legis">Charging Orders Act 1979</span> to a section 313 order as they apply to charging orders under that Act. The court treated the charge as having the effect of a charging order and therefore as an equitable charge. (see paras [3], [8]-[10])
What each judgment says about section 313 is in the case-law panel in the full Act.