BANKRUPTCY: Gotham v Doodes [2006] EWCA Civ 1080

25 JUL 2006

(Court of Appeal; Sir Andrew Morritt C, Carnwath and Moses LJJ; 25 July 2006) [2006] 2 FLR (forthcoming)

The trustee's 2005 application to enforce a 1992 charge upon the bankrupt's property, by orders for possession and sale, was not barred by s 20(1) of the Limitation Act 1980. If a charge imposed by an order made under s 313 of the Insolvency Act 1986 secured a future obligation then, until the obligation was a present one, no right to receive the principal sum secured accrued. Hornsey Local Board v Monarch Investment Building Society (1889) 24 QBD 1 established that a right to receive the sum secured was not the same as a right to enforce the security. It was true that if the bankrupt had wished to redeem the charge he would have had to pay the relevant sums to the trustee in bankruptcy or into court, but that did not mean that the trustee in bankruptcy had a present right to receive those sums. There was no inconsistency in having a right to enforce a charge by sale at a time when there was only a deferred right to receive the proceeds. A right to enforce the security could precede or follow the right to receive the sums secured. In the case of charges imposed by orders made under s 313 of the Insolvency Act 1986 the right to receive could not predate an order for the sale of the property. It followed that time had not started to run under s 20(1) of the Limitation Act 1980.

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