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Insolvency Law

Expert guidance on all aspects of corporate and personal insolvency

24 FEB 2011

Section 283A of the Insolvency Act 1986 considered - Stonham v Ramrattan & Anor [2011] EWCA Civ 119 (16 February 2011)

The Court of Appeal (Lord Justice Rix, Lord Justice Longmore and  Lord Justice Lloyd  has handed down its judgment in Stonham v Ramrattan & Anor [2011] EWCA Civ 119 (16 February 2011). The case concerns the issue of whether, and if so how, the provisions of section 283A of the Insolvency Act 1986 apply to the unusual facts of the case. As Lloyd, LJ notes, "The point arises in this way. One of the provisions introduced into the Insolvency Act by the Enterprise Act is section 283A which, speaking generally, gives a trustee in bankruptcy three years from the date of the bankruptcy in which to decide what, if anything, to do about any interest in a house which is the home of the bankrupt, the bankrupt's spouse or civil partner, or a former spouse or civil partner of the bankrupt. If the trustee does not take any action of a kind specified in the section within the three year period, then the bankrupt's former interest ceases to be part of the bankrupt's estate and vests in the bankrupt. I will come to the detail of this shortly. Mr Mather's submission to Mr Justice Mann was, as it is to us, that, accepting that the outcome of the trustee's application is that Mr Ramrattan's beneficial interest in the property either was always part of his bankruptcy estate, or became so under section 339, it ceased to be so after a period of three years and vested in Mr Ramrattan under the section. The point is slightly complicated by the fact that section 283A applies to the case not directly but by virtue of transitional provisions applying where the bankruptcy order was made before 1 April 2004, the commencement date for section 283A. However almost all of the points apply, in principle, in the same way as they would to a bankruptcy under an order made after that date." After an exhaustive exposition of the facts and salient provisions Lloyd, LJ concludes:

"In my judgment, the interest that section 283A(1) is concerned with is an interest which is part of the bankrupt's estate because it was vested in the bankrupt at the commencement of the bankruptcy. It does not include an interest in property which is currently vested in a third party even if it might be recovered for the benefit of the estate by proceedings under section 339 or some similar provision, however plausible and apparently strong the claim might be. Correspondingly, in my judgment, the trustee in bankruptcy does not become aware of such an interest for the purposes of section 283A(5) unless the interest of which he becomes aware is an interest which is already vested in the bankrupt estate because it was vested in the bankrupt at the commencement of the bankruptcy."

Rix, LJ's final sentence is also of note for the purposes of this brief blog. He notes: "...trustees who for no good reason sit on their hands when aware of a claim under section 339 in respect of a matrimonial home, may find themselves in difficulty."

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