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Trusts of Land etc Act 1996

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Trusts of Land etc Act 1996

Section 13

Rodway v Landy
[2001] EWCA Civ 471

Under s13 of the Trusts of Land and Appointment of Trustees Act 1996 trustees and the court have power to exclude particular beneficiaries from part or parts of the property and thus to partition it between them for purposes of occupation.

In this case GPs in a practice were in dispute. The court refused to order a sale of the practice premises as requested by one of them but instead divided up the property into different areas of occupation.


Section 14 - order for sale

(See also Orders for sale in relation to ss 14 and 15 of the Act where a lender is seeking an order for sale.)

Bankruptcy

Nicolls v Lan and Nicholls
[2006] EWHC 1255 (Ch)
Paul Morgan QC sitting as a Deputy High Court Judge

Introduction

On an application by a trustee in bankruptcy of a beneficial co-owner of real property, the court can declare the parties' beneficial interests and consider making an order for sale under s14 Trusts of Land and Appointment of Trustees Act 1996.

However, by s 335A(1) Insolvency Act 1986, an application for an order for sale has to be made to the court having jurisdiction in relation to the bankruptcy, and the court is required to have regard to the further matters in s 335A(2)-(3).

Statutory provisions

The relevant provisions of the Insolvency Act, as amended (words in square brackets in subsection (2)) by Civil Partnership Act 2004 are as follows:
    335A Rights under trusts of land

    (1) Any application by a trustee of a bankrupt's estate under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 (powers of court in relation to trusts of land) for an order under that section for the sale of land shall be made to the court having jurisdiction in relation to the bankruptcy.

    (2) On such an application the court shall make such order as it thinks just and reasonable having regard to:

      (a) the interests of the bankrupt's creditors;
      (b) where the application is made in respect of land which includes a dwelling house which is or has been the home of the bankrupt or the [bankrupt's spouse or civil partner or former spouse or former civil partner]:

        (i) the conduct of the [spouse, civil partner, former spouse or former civil partner], so far as contributing to the bankruptcy,
        (ii) the needs and financial resources of the [spouse, civil partner, former spouse or former civil partner], and
        (iii) the needs of any children; and

      (c) all the circumstances of the case other than the needs of the bankrupt.

    (3) Where such an application is made after the end of the period of one year beginning with the first vesting under Chapter IV of this Part of the bankrupt's estate in a trustee, the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt's creditors outweigh all other considerations.

    (4) The powers conferred on the court by this section are exercisable on an application whether it is made before or after the commencement of this section.
It will be noted that where the application is made after one year from the date on which the bankrupt's estate first vests in his trustee, subsection (3) imposes a statutory assumption that unless the circumstances are exceptional the interests of the bankrupt's creditors outweigh all other considerations.

This case

In this case the High Court Judge on appeal had to consider the exercise of discretion by the District Judge, and the application of these provisions in general.

Facts

The facts were fairly unusual. Mr N had been discharged from bankruptcy in September 1998 but a trustee was appointed in May 2003 and subsequently applied for a declaration as to Mr and Mrs N's respective beneficial interests in a property, and for an order for sale. The Judge commented that the appointment and application were probably prompted by the limitation period on applications for sale subsequently imposed by the Enterprise Act 2002.

First instance

The District Judge declared that the parties were beneficially entitled in equal shares. On the question of whether there were exceptional circumstances in s 335A(3), he held that on the psychiatric evidence of Mrs N's chronic schizophrenia, there were.

A significant feature at trial was that Mrs N's Counsel presented an open offer of compromise, in which he proposed an order for sale, suspended on terms but which involved securing the trustee's interest over another property of which Mrs N was interested with her brother. The District Judge held that he had no jurisdiction to make an order in accordance with the proposed offer, because it extended to other property, not the subject of the present application. He therefore went on to carry out the balancing exercise having regard to the matters in s 335A(2), and concluded that there should be an order for sale; that the trustee should have conduct of the sale; and that the vacant possession should be delivered up within 18 months of the date of the order.

Mrs N appealed.

Decision

It was held that the District Judge did have jurisdiction to make an order for possession suspended on such terms as he thought appropriate, until the happening of certain specified events, as reflected in the open offer. However, that did not result in the order being set aside because the District Judge had said that even if he had felt that he had jurisdiction to make the order suggested, on the basis of the open offer, in his discretion he would have refused to do so.

As to the challenge to the exercise of the District Judge's discretion to order sale, the case raised yet again, the scope of the appellate court's powers to interfere. Since the appeal amounted to a challenge to the balancing exercise carried out by the District Judge, it was held that an appellate court could only interfere if the judge had erred in law in his interpretation of s 335A, or in some other respect, such as leaving out of account relevant considerations or taking into account irrelevant considerations, or otherwise being plainly wrong in his conclusion.

The Judge reviewed the various competing factors considered by the District Judge: the effect of the psychiatric evidence; the impact on Mrs N being forced to leave the matrimonial home; the problems of being pushed into sharing with her brother etc. He also reviewed the allegation that too much weight had been attributed to the interests of the bankrupt's creditors, relying on Article 8 of Schedule 1 to the Human Rights Act 1998.

The Judge held, on authority (Jackson v Bell [2001] EWCA Civ 387) that the statutory balancing exercise in s 335A was not inconsistent with the qualified nature of Mrs N's rights under Article 8 or Article 1 of the First Protocol.

Overall, it was held that the District Judge did not commit any error which would allow an appellate court to interfere with his discretion as to what was just and reasonable for the purposes of s 335A


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