(Court of Appeal; Ward, Chadwick and May LJJ; 19 July 2007)
During matrimonial proceedings it was ordered by consent that the trusts upon which the parties had formerly held a property be varied so as to provide that the proceeds of sale be held as to two thirds for the wife and one third for the husband. The terms of the order included a term that any order for sale should be postponed until the wife re-married or co-habited with another man, died, or required the property to be sold. The wife had an exclusive right to occupy the property until it was sold. The husband was declared bankrupt and thereafter his trustee in bankruptcy sought an order for sale under the Trusts of Land and Appointment of Trustees Act 1996 (the 1996 Act) and the Insolvency Act 1986 (the 1986 Act). At this time the wife was in occupation of the property. Under s 335A of the 1986 Act in conjunction with s 14 of the 1996 Act the court was required to assume (unless the circumstances of the case were exceptional) that the interests of the bankrupt's creditors outweighed all other considerations.
In the High Court it was held that the terms on which co-owners agreed to postpone the sale of a property were not necessarily determinative. Where one co-owner had been adjudged bankrupt and the application under s 14 of the 1996 Act was made by the trustee in bankruptcy s 15 of the 1996 Act was displaced by s 335A of the 1986 Act. The wife appealed, arguing that no order for sale could be made on the trustee in bankruptcy's application because none of the events specified in the 1985 order had occurred and the application should be dismissed without consideration under s 335A of the 1986 Act. Under s 283(5) of the 1986 Act, it was argued, the trustee acquired the bankrupt's property subject to the wife's rights, specifically the right under the 1985 order not to have the property sold.
The judge had been correct to dismiss the s 283(5) argument on the grounds that the order did not give rise to any absolute rights: the wife's rights concerning sale were qualified rights which could not be violated by an order for sale made on the application of the trustee. The 1985 order did not confer on the wife an absolute right that the property remain unsold unless and until one of the specified events occurred. Her right to resist a sale was qualified by the right of any other person interested in the property to apply to the court for an order for sale. If the bankrupt, absent bankruptcy, could have made an application under s 14 of the 1996 Act then so could the trustee in bankruptcy and s 335A of the 1986 Act must apply. The court had jurisdiction to make an order for sale.
The fact that the 1985 order conferred liberty to apply would not be of assistance in this case as s 24A of the Matrimonial Causes Act 1973 only permitted the court to order a sale which would have the effect of implementing the original order as a response to changed circumstances.
The property was held upon express trust to sell but with the power to postpone sale, not with the power to sell. The power under s 14(2)(a) of the 1996 Act could be interpreted as including a power to direct trustees to concur in a decision that they would no longer exercise their power to postpone sale. The restriction in s 6(6) of the 1996 Act did not apply. It would have been open to the court to make an order for sale under s 14 if the husband had applied for such order. There was no doubt therefore that it was also open to the court to make an order for sale on application of the trustee in bankruptcy, s 335A of the 1986 Act applying. The appeal would be dismissed and the trustee's application would proceed to a hearing on the merits in the High Court to decide whether the circumstances of the case were exceptional, so as to displace the assumption that the interests of the bankrupt's creditors outweighed all other considerations.