Court rules on bankruptcy interest in matrimonial home

Background and Legal Context

The High Court recently delivered a significant judgment in the case of Scherzade Khilji vs Amy Mehers and David George Hartwell, addressing the interpretation and application of the 'use it or lose it' provisions under section 283A of the Insolvency Act 1986. The case revolved around whether the trustee in bankruptcy exceeded the three-year period to decide on the interest held by the bankrupt in a property, which was the matrimonial home.

Factual Background

The appellant, Scherzade Khilji, was the widow of Abdur Rasheed Taj Khilji, who died intestate in 2014. A bankruptcy order was made against her in July 2018, and Amy Mehers was appointed as her trustee in bankruptcy. The property in question, occupied by the appellant and the deceased as their matrimonial home, was registered solely in the deceased's name. The trustee and the administrator of the deceased's estate, David George Hartwell, acknowledged a 5% beneficial interest for the appellant based on a common intention constructive trust. However, the appellant claimed a much larger interest.

Legal Issues and Arguments

The central issue was whether the trustee had been informed or had become aware of the appellant's interest in the property within the statutory period, as required by section 283A of the Insolvency Act. The appellant argued that she had informed the trustee of her interest, while the trustee contended that the information provided was insufficient to trigger the statutory period.

Court's Analysis and Decision

Mr Justice Richards examined the sufficiency of the information provided to the trustee and the trustee's awareness of the appellant's interest. The court concluded that the appellant had not informed the trustee of her interest in the property within the required three-month period following the bankruptcy. Furthermore, the trustee had not become aware of the interest before the statutory period expired.

Interpretation of Section 283A

The court clarified that the statutory language focused on the trustee's actual knowledge rather than constructive knowledge or notice. The judgment underscored the importance of clear communication from the bankrupt to the trustee regarding any interest in the property.

Implications for Trustees in Bankruptcy

The ruling emphasised the need for trustees in bankruptcy to be diligent in their inquiries but also highlighted the responsibility of the bankrupt to clearly assert any interest in property. The decision provides guidance on the interpretation of the 'use it or lose it' provisions and the importance of timely action by trustees.

Conclusion

The High Court's decision in this case provides important clarification on the application of section 283A of the Insolvency Act, particularly regarding the trustee's knowledge and the bankrupt's obligation to inform. This ruling will have implications for future cases involving bankruptcy and property interests.

Learn More

To understand more about bankruptcy and property interests, see BeCivil's guide to UK Housing Law.