Stonham v Ramrattan & Anor

This appeal, brought by Mr Ramrattan and his wife Ms Bortolussi, is against an order of Mr Justice Mann made on 7 May 2010 by which he allowed an appeal by Mr Stonham, the respondent before us, who is the trustee in bankruptcy of Mr Ramrattan. That appeal was brought against an order of Mr Registrar Simmonds made on 26 January 2010.

The proceedings concern property called 76 Rosendale Road, London SE22 which is and has since 1987 been the matrimonial home of Mr Ramrattan and his wife. The issue on the appeal is whether, and if so how, the provisions of section 283A of the Insolvency Act 1986 apply to the facts of the case, which are in some respects unusual. Permission to appeal was given by Lord Justice Mummery explicitly on the basis that the point was of importance.

The appellants are represented, as they were before Mr Justice Mann, by Mr Mather, who acts pro bono. They had acted in person before the registrar. The trustee in bankruptcy is represented by Mr Ascroft, as below, but he is now led by Mr Stephen Davies Q.C.

The property was bought on 13 August 1987 and was then transferred to and registered in the name of Mr Ramrattan. On 28 September 1990, on the face of it, Mr Ramrattan transferred the property into the sole name of his wife by way of gift. She became registered as the sole proprietor on 14 November 1990. The transfer is not in the appeal bundle but it appears that it was stated as being made in consideration of natural love and affection. It later became clear that this document was not all that it appeared to be, but it was at least effective in securing that Ms Bortolussi became the legal owner of the property.

On 16 October 1995 a bankruptcy order was made in relation to Mr Ramrattan, on a petition which had been presented on 15 September 1995. Mr Stonham was appointed as the trustee in bankruptcy on 28 December 1995. At that point Mr Ramrattan’s assets vested in Mr Stonham under section 306 of the Insolvency Act. What it was that so vested is defined by section 283 and I will need to refer to that later.

On 23 April 1997 Ms Bortolussi attended for a private examination by the trustee. After that, on 4 June 1997, the trustee’s then solicitors, Burstows, wrote to her to say that the trustee intended to apply to set the transfer to her aside, to seek a declaration that Mr Ramrattan had least a half interest in the property and an order for sale. She was invited to make an offer to buy out his share. She ignored the letter and the trustee did not follow it up by any proceedings or otherwise for long time. There is no explanation in the papers for that delay. On 17 December 2004 new solicitors acting for the trustee, Messrs Ashfords, who still act for him, wrote to Mr Ramrattan saying that the trustee was considering applying to set aside the transfer as having been made at an undervalue or as a preference. He was invited either to apply to annul the bankruptcy or to offer to buy the trustee’s interest in the property out. By then Mr Ramrattan would have been long since discharged from his bankruptcy, but the assets that had vested in the trustee remained so vested and the trustee still had all relevant powers that he needed in order to secure the payment of the debts.

In the meantime the Enterprise Act 2002 had amended the Insolvency Act in a number of relevant respects with effect from 1 April 2004. I will refer to those provisions later.

Mr Ramrattan made no response to the letter sent to him and again the trustee failed to follow it up for a considerable period; again the delay is unexplained. Finally on 11 October 2007 the trustee issued these proceedings, against both Mr Ramrattan and Ms Bortolussi, seeking a declaration that the transfer was a transaction at an undervalue and that Ms Bortolussi had no beneficial interest in the property, that the transfer be set aside and that the property be sold and vacant possession be given for the purposes of the sale. Mr Ramrattan defended the proceedings on the ground, so far as relevant, that in fact Ms Bortolussi had paid for the purchase in 1987, that it was only by mistake that it had been transferred into his name rather than hers, and that the purpose of the 1990 transfer was not to make a gift to her but only to correct the mistake and to reflect the correct underlying position that she was the owner of the property. Thus he maintained that it had never been an asset of his and he had not therefore transferred anything other than the bare legal estate to her. Ms Bortolussi adopted the same line of defence. The proceedings took a long time to come to trial for reasons that do not now matter. They came on for trial before Mr Registrar Simmonds on 24 and 25 November 2009.

In the course of the hearing it became clear from the evidence that although the 1990 transfer purported to be executed as a deed by Mr Ramrattan and Ms Bortolussi, in fact Mr Ramrattan had signed for himself and had forged the signatures of Ms Bortolussi and of the two witnesses to the parties’ execution. The registrar recorded Mr Ramrattan having admitted this at paragraph 26 of his judgment. The registrar also found that it was not a mistake that Mr Ramrattan was the transferee of and the registered proprietor of the property in the first place, at paragraph 29 of his judgment, and he also held that Ms Bortolussi had no beneficial interest in the property, at paragraph 34. He said that the 1990 transfer was a forged document intended to deceive creditors, among others, and said that it was a sham document. Alternatively, if he was wrong, he held that it was intended as a gift to Ms Bortolussi and therefore was a transfer at an undervalue. In his first judgment, given on 11 December 2009, he did not decide what order should be made and he expressed some concern as to the details of the order sought. It turned out that his concern, which is entirely understandable, was about the delay on the part of the trustee in bringing the proceedings. Following further argument, in a second judgment given on 26 January 2010 he declined to grant any relief to the trustee because of the delay in bringing the proceedings although he did in his order declare that the transfer was a sham or that, if it was not, it was a transaction at an undervalue. He gave permission to appeal and the trustee accordingly appealed.

The appeal came before Mr Justice Mann on 5 May 2010. In his judgment given on that day, [2010] EWHC 1033 (Ch), the judge expressed the view that “sham” was not the most appropriate label for the 1990 transfer. As a forgery it was simply devoid of any legal effect. Taken with the registrar’s finding, which was not challenged, that Ms Bortolussi had no beneficial interest in the property, the inevitable conclusion was that, although by virtue of her registration Ms Bortolussi held the legal estate, she held it on trust for Mr Ramrattan absolutely, so that the full beneficial interest in the property was and always had been an asset of Mr Ramrattan, and therefore one which had vested in the trustee under section 306.

He went on to deal, although expressly not necessarily to his decision, with the impact of the court’s discretion in relation to section 339, under which an application can be made in effect to set aside or remedy the effect of a transaction at an undervalue. On that too he would have come to a different conclusion to the registrar. After giving judgment, and when turning to consequential matters, he was presented with a new argument by Mr Mather on behalf of the respondents before him. This is the point now taken on appeal. On this he gave a second judgment following a hearing on 7 May 2010, [2010] EWHC 1059 (Ch), in which he ruled against Mr Mather’s argument. He therefore went on to allow the appeal and to make orders broadly as sought by the trustee in his application.

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. In general I will refer directly to the main provisions and only where necessary to them as applied by the transitional provisions of the Enterprise Act.

The starting point is section 283A, of which I will now set out subsections (1), (2) and (3):

“(1)

This section applies where property comprised in the bankrupt’s estate consists of an interest in a dwelling-house which at the date of the bankruptcy was the sole or principal residence of

(a)

the bankrupt,

(b)

the bankrupt’s spouse or civil partner, or

(c)

a former spouse or former civil partner of the bankrupt.

(2)

At the end of the period of three years beginning with the date of the bankruptcy the interest mentioned in subsection (1) shall

(a)

cease to be comprised in the bankrupt’s estate, and

(b)

vest in the bankrupt (without conveyance, assignment or transfer).

(3)

Subsection (2) shall not apply if during the period mentioned in that subsection

(a)

the trustee realises the interest mentioned in subsection (1),

(b)

the trustee applies for an order for sale in respect of the dwelling-house,

(c)

the trustee applies for an order for possession of the dwelling-house.

(d)

the trustee applies for an order under section 313 in Chapter IV in respect of that interest, or

(e)

the trustee and the bankrupt agree that the bankrupt shall incur a specified liability to his estate (with or without the addition of interest from the date of the agreement) in consideration of which the interest mentioned in subsection (1) shall cease to form part of the estate.”

On Mr Mather’s argument, the beneficial interest in the property, vested in Mr Ramrattan in 1995, is within subsection (1). No act or event such as is mentioned in subsection (3) happened by the end of the relevant three year period, and accordingly the consequence set out in subsection (2) followed.

The bankruptcy order pre-dated the effective date of these provisions, so the section applies indirectly rather than directly. A transitional provision in section 261 of the Enterprise Act 2002 applies it by reference to a transitional period of three years from 1 April 2004, subject to the equivalent provisions as set out in section 283A. If the trustee’s originating application had been brought no later than 31 March 2007, then this argument would not have been available. However it was brought six months too late for this purpose.

The critical provision of section 283A, for present purposes, is subsection (5):

“(5)

If the bankrupt does not inform the trustee or the official receiver of his interest in a property before the end of the period of three months beginning with the date of the bankruptcy, the period of three years mentioned in sub-section (2)

(a)

shall not begin with the date of the bankruptcy, but

(b)

shall begin with the date on which the trustee or official receiver becomes aware of the bankrupt’s interest.”

Again, by virtue of the transitional provisions, the period of three years mentioned in sub-section (2) is to be understood for present purposes as the transitional period from 1 April 2004. There are other incidental provisions in section 283A, including one in sub-section (6) under which the court has power to substitute a longer period, but none is of special interest for this appeal.

In the present case Mr Ramrattan did not inform the official receiver or the trustee of his interest in the property before the end of the transitional period. Indeed his position, if he had been challenged at that time, would have been the same as it was later, namely that he did not have any interest in the property, since it belonged absolutely to Ms Bortolussi.

The reference in sub-section (5) to the bankrupt informing the trustee in bankruptcy or the official receiver of his interest in the relevant property needs to be seen in the context of the obligations on a bankrupt to give information to the trustee in bankruptcy or the official receiver. The first obligation, in point of time, is to submit a statement of affairs to the official receiver in the prescribed form within 21 days of the commencement of the bankruptcy, in the case of an order made on a petition by a creditor: see section 288(1). The statement of affairs is to contain prescribed particulars of the creditors, the debts and liabilities, and the assets: see section 288(2), Insolvency rule 6.59 and Form 6.33. We have not seen the prescribed form but there can be no doubt that it required the bankrupt to set out information as to his assets such that, if he did own any interest in the home in which he lived, he must say so. There can also be no doubt that Mr Ramrattan did not state, in his statement of affairs, that his assets included any interest in the property. The provision of the statement of affairs would be the normal means by which a bankrupt would, within three months of the commencement of the bankruptcy, inform the official receiver or the trustee in bankruptcy or both of his interest in a relevant property. The official receiver may require the bankrupt to fill in a bankruptcy questionnaire in addition, which may seek additional information. We do not know whether that was done, and if so in what terms, in the present case.

The obligation in section 288 is reinforced in more general terms by section 333 which obliges the bankrupt to give the trustee in bankruptcy the information as to his affairs which the trustee reasonably requires for carrying out his functions.

Given that Mr Ramrattan did not inform the official receiver or the trustee in bankruptcy of the fact that he owned any interest in the property, it follows that section 283A(5) applies. If the bankruptcy had been on an order made after 1 April 2004, the question would then be what was the date on which the trustee “becomes aware of the bankrupt’s interest”? That would be the date on which the three year period started to run. The effect of section 261(10)(b) of the Enterprise Act 2002 is that, in a transitional case such as this, the first question is whether the bankrupt informed the trustee in bankruptcy of his interest within three months of 1 April 2004. He did not do so. The next question therefore is when the trustee became aware of the bankrupt’s interest.

Mr Mather submits that the trustee is “aware” of an interest of the bankrupt, for this purpose, as soon as he has reason to suppose that he may have a viable claim to recover property for the benefit of the bankrupt’s estate under, for example, section 339 of the Insolvency Act. He argues that the trustee was in this position by 1997 at the latest when the first threat of such proceedings was issued. Accordingly, he said, by 2004 the trustee was already aware of an interest of the bankrupt and section 260(10) does not delay the end of the three year period beyond 1 April 2007. The fact that the trustee later came to know of another reason to argue that the estate included the beneficial interest in the property is, he contends, immaterial since he was already sufficiently aware of the bankrupt’s interest in the property long beforehand.

I said earlier that the facts are in some respects unusual. That is true because of the forgery aspect. However, it is by no means unusual for there to be a possible claim to set aside a transaction as being at an undervalue, though how often such a transaction affects the bankrupt’s home is another matter. At all events I can understand why Lord Justice Mummery regarded the interaction between section 283A and claims under section 339 as being of sufficient importance to justify granting permission for a second appeal.

In order to address the issue I must next say something about section 339. I start by setting out sub-sections (1) and (2) and part of sub-section (3):

“(1)

Subject as follows in this section and sections 341 and 342, where an individual is adjudged bankrupt and he has at a relevant time (defined in section 341) entered into a transaction with any person at an undervalue, the trustee of the bankrupt’s estate may apply to the court for an order under this section.

(2)

The court shall, on such an application, make such an order as it thinks fit for restoring the position to what it would have been if that individual had not entered into that transaction.

(3)

For the purposes of this section and sections 341 and 342, an individual enters into a transaction with a person at an undervalue if

(a)

he makes a gift to that person or he otherwise enters into a transaction with that person on terms that provide for him to receive no consideration …”

I record that it is common ground that a claim under this section to set aside a transaction is subject to a limitation period of twelve years under section 8 of the Limitation Act of 1980, it being a claim on an Act of Parliament and therefore a claim on a specialty. I digress to mention, though it is not relevant to the decision in this case, that it seems to me to be well arguable that, under section 339, the period of twelve years runs not from the bankruptcy order but from the necessarily later date when a trustee in bankruptcy is first appointed, or when the official receiver becomes a trustee. This is because only the trustee in bankruptcy can bring proceedings under section 339. So, until a trustee is constituted, proceedings cannot be brought and time should not therefore run. I mention this point, expressly obiter, because Mr Justice Charles in Re Yates [2005] BIPR 476 at paragraph 182 said that time ran from the bankruptcy order, though he was concerned with both section 339 and section 423. In Hill v Spread Trustee [2007]1 WLR 2404, concerned with section 423 rather than section 339, the bankruptcy order was taken as the date but others can apply under that section whereas under section 339 only the trustee can take proceedings. I note that in Muir Hunter on Personal Insolvency, at paragraph 3-2257, the date of the appointment of the trustee is said to be the starting point for the limitation period.

It is an entirely fair comment on the part of Mr Mather that, that on the face of the document, the trustee had at least a promising claim under section 339 to have the 1990 transfer set aside, since it was expressed to be made for consideration of no monetary value, so as to fall within section 339(3)(a). It is also fair to observe that the trustee could have started such proceedings soon after the first threat in June 1997 or after the second threat in December 2004 and if he had done so the present problem would not have arisen. It is however also clear that the limitation period had not expired when the actual proceedings were brought.

The court’s power, if the grounds for an application under section 339 are made out, is to make such order as it thinks fit for restoring the position to what it would have been but for the transaction. This is amplified by section 342. Expressly under section 342(1)(a), the court may require any property transferred as part of the transaction to be vested in the trustee in bankruptcy as part of the estate. Under section 342(1)(b) it may require any property to be so vested if it represents in any person’s hands the application either of the proceeds of sale of property so transferred or of money so transferred. Equally under section 342(1)(d) it may require any person to pay, in respect of certain benefits received by him, such sums to the trustee in bankruptcy as the court may direct. By subsection (3), any sums required to be paid to the trustee in accordance with an order under section 339 “shall be comprised in the bankrupt’s estate”.

Mr Mather submits that, ignoring section 283A, if property is recovered under section 339(2) by an order under section 342(1)(a) or some similar order, it is then treated as forming part of the bankrupt’s estate. With that I agree. The normal order in a simple case where no value was given would be that the transfer be set aside and the property be vested in the trustee in bankruptcy to be held as part of the bankrupt’s estate.

Mr Davies invited us to consider how the sections would apply in relation to a less straightforward case than that of a transfer by way of gift. He took as his hypothetical example a case in which a transfer was made before the bankruptcy order by the bankrupt in favour of a third party, the transfer being of property which was the home, at the date of the bankruptcy order, of the bankrupt’s former spouse, and being expressed to be for a monetary value, but where, on evidence available to the trustee, the value given was somewhat less than the open market value of the property. Mr Davies submitted that that might be a case in which the transaction had been at an undervalue so that some remedy would be available to the trustee under section 339 but that it might well be that the order made at the end of day, if any, would be to require the transferee to pay the difference between the value given and the market value at the time, so that it would end up as a monetary order, the sum in question being held as part of the bankrupt’s estate by virtue of section 342(3).

Reverting, however, to Mr Mather’s arguments by reference to the simpler facts of the present case, his next point was to argue by reference to section 283 that, once the property was recovered for the benefit of the bankrupt’s estate, it was treated as having belonged to or been vested in the bankrupt at the commencement of the bankruptcy. Section 283(1) is as follows

“(1)

Subject as follows, a bankrupt’s estate for the purposes of any of this Group of Parts comprises

(a)

all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, and

(b)

any property which by virtue of any of the following provisions of this Part is comprised in that estate or is treated as falling within the preceding paragraph.”

Mr Mather’s argument is that property recovered by an order under section 342(1)(a) falls within the second limb of paragraph (b) rather than the first limb of that paragraph. He submits that whereas paragraph (a) deals with whatever property was vested in or belonging to the bankrupt from the outset, paragraph (b) deals with two different types of case. One is the case of property which, by virtue of any of the following provisions of Part IX of the 1986 Act (dealing with bankruptcy), is comprised in the bankrupt’s estate. The second deals with property which by virtue of any such provisions is treated as falling within paragraph (a). He goes on to submit that, if it is treated as falling within paragraph (a), it must be treated as belonging to or vested in the bankrupt at the commencement of the bankruptcy. He took us through a number of the provisions of Part IX under which property comes to be part of the estate which would not otherwise be or be treated as such.

The first case to which Mr Mather referred, though principally in order to distinguish it, is section 284 of the Insolvency Act which deals with restrictions on dispositions of property. It applies to any disposition made by a person who is adjudged bankrupt, at any time between the presentation of the bankruptcy petition and the appointment of the trustee in bankruptcy. Thus it may apply to a disposition made before the bankruptcy order which is on the face of it valid and which is only invalidated if a bankruptcy order is made. Equally it may apply to a disposition made after the bankruptcy order. Because the section makes any such disposition void except to the extent that it is made with the consent of the court or is subsequently ratified by the court, Mr Mather’s argument is that a disposition made before the bankruptcy order becomes void upon the making of the bankruptcy order and therefore automatically re-vests in the bankrupt and is accordingly within section 283(1)(a) as property belonging to the bankrupt at the commencement of the bankruptcy.

The next relevant provision is section 307, dealing with after-acquired property. In such a case the trustee may serve notice on the bankrupt. If he does so the property to which the notice relates “shall vest in the trustee as part of the bankrupt’s estate”. The trustee’s title to the property relates back to the time at which the property was acquired by or devolved upon the bankrupt. Necessarily this is after the commencement of the bankruptcy. Mr Mather submits that that is a case falling within the first limb of section 283(1)(b). He argues that the same applies under section 308, the vesting in the trustee of certain items of excess value, which depends on a similar notice, and also to certain tenancies which can vest in the trustee under a notice given under section 308A and to money payable under an income payment order made under section 310. In the latter case by subsection (5) “sums received by the trustee under an income payments order form part of the bankrupt’s estate”.

There is a provision which could be relevant under section 283A, for the trustee to apply to the court for an order imposing a charge on property for the benefit of the estate of the bankrupt: see section 313. If such an order is made the benefit of the charge is comprised in the bankrupt’s estate and the property subject to the charge ceases to be comprised in the bankrupt’s estate and vests, subject to the charge, in the bankrupt.

The only other significant provision to which Mr Mather referred us is section 342 in relation to which there are both the provisions for property to vest, for example under section 342(1)(a) and (b), and also for the benefit of an order for the payment of money to vest under section 342(3), all of which I have mentioned.

Mr Mather’s argument on this is that both limbs of paragraph (b) of section 283(1) must have distinct content. He argued that, apart from section 342, all these instances were to be seen as falling within the first limb of paragraph (b), as instances of property which by virtue of the relevant provision of Part IX “is comprised in” the bankrupt’s estate. Accordingly none of them could explain the second phrase “is treated as falling within the preceding paragraph”. For that reason he argued that any recovery, whether in cash or in kind, under section 342 must fall within the second limb. If it did it must by virtue of the wording be treated as vested in the bankrupt at the commencement of the bankruptcy.

This seems to me an over-refined treatment of the contents of paragraph (b) of section 283(1). Nor can I accept that property which is ordered to be transferred pursuant to an order under section 342(1)(a) is thereby treated as forming part of the bankrupt’s estate at the commencement of the bankruptcy. Mr Mather argued that such retrospective effect would be the natural consequence of the court seeking to restore the position to what it would have been if the transaction had not been entered into, as required by section 339(2). However it seems to me that it would read a great deal too much into the words of that section. The effect of an order of whatever kind under section 342 will depend on the terms of the order, to some extent. If, as it might very well have been in the present case, the effect of the order is to require the property transferred to be vested in the trustee as part of the bankrupt’s estate, it seems to me that that vesting takes effect as from the date of the order and no earlier. Ancillary provision might be made by other provisions of the order, in respect for example of benefits obtained in the meantime, but the actual vesting does not seem to me to have a retrospective effect by virtue of section 342. Equally it would be artificial to suggest that it has a retrospective effect by virtue of section 283(1).

Mr Mather accepted and asserted as an integral part of his argument that it was necessary to show that property recovered under section 339, falling into the estate of the bankrupt, was treated as property belonging to the bankrupt at the commencement of the bankruptcy. Only on that basis could he contend that, during the normal three year period under section 283A or, in the present case, during the transitional period under section 261 of the Enterprise Act, was the interest already vested in the bankrupt’s estate so that it could be divested from that estate in favour of the bankrupt under section 283A(2). I agree that that is a necessary part of his argument.

It seems to me clear from section 283A(2) that, in order that the interest should vest in the bankrupt, it must first be comprised in the bankrupt’s estate. That is apparent from the juxtaposition of paragraphs (a) and (b) of subsection (2). Otherwise in relation to property recovered from a third party under section 339, or which might be recovered from a third party under that section, one might have the strange proposition that until an order made under the section the property is vested in the third party but, according to Mr Mather’s argument, in the absence of proceedings brought under sub-section (3) within the three year period, the property vests in the bankrupt without having passed through the bankrupt’s estate. On that footing, if Mr Mather was correct, and ignoring for the moment the forgery or sham point, when the bankruptcy order was made and when the trustee in bankruptcy was appointed no interest in the property did form part of the estate because it belonged to Ms Bortolussi beneficially by virtue of the 1990 transfer. If a successful application had been made under section 339 against her, commenced before 1 April 2007, then the property would have become part of the bankrupt’s estate and realisable for the benefit of creditors. If however such a claim was first brought on or after 1 April 2007 then according to Mr Mather it would be too late and although its success would deprive Ms Bortolussi of the beneficial interest in the property, the property recovered would come to be treated as owned by the bankrupt at the commencement of the bankruptcy. So, he argued, section 283A as applied by section 261 of the 2002 Act would apply to it and, in the absence of proceedings of a relevant kind brought before 1 April 2007, it would immediately cease to be part of the bankrupt’s estate and would vest in Mr Ramrattan.

It may be that, as between Mr Ramrattan and Ms Bortolussi in the present case, such a diversion of ownership would not cause any problem, but it is at least a curious side-effect of the argument. Mr Mather submitted that although the position as between Mr Ramrattan and the trustee would be that the trustee could not claim the property, as between Mr Ramrattan and Ms Bortolussi the former could hardly succeed in claiming the property back from the latter by virtue of this provision which would not on the face of it affect her ownership in any way.

I agree that this is not the effect of the provision but not for the reason Mr Mather submits. It seems to me that what the argument overlooks is the need to find that, before the property can vest in the bankrupt, it forms part of the bankrupt’s estate. On Mr Mather’s hypothesis, unless proceedings were brought before 1 April 2007 the relevant interest would never have formed part of the bankrupt’s estate. Before an order is made it necessarily does not form part of the bankrupt’s estate. That is the whole point of proceeding to recover it under section 339. After an order is made it does form part of the bankrupt’s estate but only as from that moment.

What can be said in favour of Mr Mather’s argument in terms of policy is that the emphasis under the new provisions introduced by the Enterprise Act on the need for a trustee to get on with deciding what to do about an interest of a bankrupt in his home represents a strong policy which should guide the interpretation of the legislation. He cited to us paragraph 15 of the judgment of Mr Justice Lawrence Collins in Re Byford [2003] EWHC 1267 and the judgment of the Court of Appeal in Lewis v Metropolitan PropertiesRealisations Limited [2010] Ch 148, [2009] EWCA Civ 448 at paragraphs 19 to26. In the latter in particular, endorsing what Lawrence Collins J had said, not only the policy but the detailed scheme of the legislation is described in a helpful way. I agree that these passages are well worth examination. I will not cite them as they do not bear on the specific point at issue before us.

Mr Mather argued that the legislation introduced in 2004, as explained in the cases which I have just cited, demonstrates a strong statutory policy in favour of requiring a trustee in bankruptcy to take action within a reasonable but limited time, in order to realise any interest that the bankrupt estate may be entitled to in relation to the home of the bankrupt, his spouse or his former spouse. He argued that it would be consistent with that policy for the legislation to be read so as to require the trustee to take steps within the three year period following his becoming aware of the facts on which a claim to recover a relevant property interest for the bankrupt estate under section 339 could be advanced. On that footing he submitted that it was right to construe section 283A(5), and the phrase “becomes aware”, as including the case where the trustee becomes aware, not of an interest which the bankrupt had held at the commencement of the bankruptcy and which therefore already formed part of the estate, but of an interest which could be recovered for the benefit of the estate by virtue of proceedings under (for example) section 339. On that footing he also argued that it mattered not if the trustee later became aware of some other basis of claim as he did in the present case at trial in 2009, because on facts such as those of the present case the three year period would already have run and the vesting effect of section 283A(2) and correspondingly section 261(9) of the 2002 Act could not, he argued, be subverted or reopened by the later discovery.

The effect of this argument would be that, in relation to an interest in a relevant home, in place of a 12 year limitation period running from either the bankruptcy order or, as I think, the appointment of the trustee in bankruptcy, for a claim under section 339 there would be a 3 year period under section 283A from the commencement of the bankruptcy or in a transitional case from 1 April 2004 or, in either case if later, from the date on which the trustee in bankruptcy became aware of the possible claim. Whatever might be the effect of the relevant provisions as between the bankrupt and the transferee, he contended that the effect of section 283A would be not only to bar a claim but, at any rate as between the bankrupt and the trustee, to take the interest away from the trustee and vest it in the bankrupt. He submitted that the strong policy manifested by the legislation was sufficient to justify overriding or abbreviating the limitation period in this type of case, especially since the limitation period is not one laid down expressly for claims under section 339 or the like, but applies because claims under statutory provisions of this kind happen to be regarded as falling within section 8 of the Limitation Act as a claim under a specialty, and therefore entitled to the unusually long period of 12 years.

Mr Mather’s arguments face a number of serious difficulties. One of them, in relation to his hypothetical substitution of a 3 year period under section 283A for the 12 year limitation period running from the commencement of the bankruptcy or the appointment of the trustee, is that the starting date under section 283A(5) would be extremely difficult to identify. That would matter rather less if the issue is as to what steps the trustee could take to realise an asset which is already vested in him as part of the bankrupt’s estate. It would matter a great deal more if it applied to potential claims against a third party such as would generally arise under section 339. If the question for that purpose is when did the trustee first become aware of the claim, that would require investigation, potentially, of the state of knowledge of the trustee from time to time as regard the facts that would be necessary to be considered in order to mount a claim under section 339. In the present case it would be relatively easy to answer that question because sight of the 1990 transfer would have given the trustee a good prima facie indication that a claim under section 339 might well succeed. But it would be possible to imagine any number of cases in which the position would be a great deal less clear, if for example value was given for the transfer but arguably not enough value. In such a case the viability of the claim would depend on valuation evidence as to the true value of the property at the time of the transfer. That is one problem that Mr Mather’s construction of section 283A(5) would present.

Another difficulty is that the courses open to the trustee under section 283A are set out in sub-section (3), which lists five alternative cases in which, if the relevant thing is done within the three year period, the re-vesting effect of the section does not apply. The first of those is that the trustee realises the interest in the dwelling house which is comprised in the bankrupt’s estate. That is plainly not something that can be done if the interest is no more than a potential claim to recover some interest in the relevant property from a third party. The next three involve the trustee applying for an order to the court, for sale or for possession or for a charging order. There is, of course, nothing to prevent the trustee applying for any such order together with his proceedings under section 339. That is what the present trustee did in the proceedings he began in October 2007. The fifth possibility is that the trustee and the bankrupt agree that the bankrupt shall incur a specified liability in consideration of which the interest shall cease to form part of the estate. That too shows that the interest in question must at the time form part of the estate because otherwise it is not easy to see how the trustee and the bankrupt could come to some agreement. If the interest of Ms Bortolussi, capable of being recovered for the benefit of the estate as it might be under section 339, is to be regarded as an interest within the ambit of the section, first of all it is highly unlikely that the trustee and the bankrupt would be able to come to any such agreement, and secondly, the agreement would have to involve the third party as well as the trustee and the bankrupt. For those reasons it seems to me that sub-section (3) provides a clear indication that the interest of which sub-section (1) speaks is an interest which is at the relevant time comprised in the estate of the bankrupt, and does not include a possible claim to recover such an interest for the benefit of the creditors whether under section 339 or under any other equivalent provision.

That conclusion seems to me to be even more strongly indicated by sub-section (2) and correspondingly sub-section (4). Both of those speak of the interest mentioned in sub-section (1) as (a) ceasing to be comprised in the bankrupt’s estate and (b) vesting in the bankrupt. Mr Mather accepts that he has to take account of both of those parts of the sub-section. He seeks to devise a way in which the relevant interest, though originally vested in the third party, is treated for an instant as comprised in the bankrupt’s estate before becoming vested in the bankrupt himself. That submission seems to me not only to depend on an extremely artificial reading of section 283(1)(b), but also to fail to give proper effect to section 283A(2). The simpler and more straightforward reading of sub-section (2) is to take it consistently with sub-section (1), and for that matter, with the indication that I have already found in sub-section (3), and to hold that the entire section is concerned with, and only with, an interest in the relevant home which not only was at the date of the bankruptcy the sole or principal residence of a relevant person, but where the interest itself was at that date vested in the bankrupt and accordingly became part of the estate of the bankrupt by virtue of the direct operation of section 283(1)(a).

I consider this also to be consistent with the natural reading of section 283A(5) in any event. That section deals with the case where the bankrupt does not inform the official receiver or the trustee in bankruptcy of his interest in the relevant property before the end of the period of 3 months beginning with the date of the bankruptcy. Now, a conscientious bankrupt might, within that period, not only inform the trustee or the official receiver of assets which he owned at the commencement of the bankruptcy but also provide information about possible claims arising from dispositions in the previous 5 years which might be said to have been at an undervalue. I doubt whether there are many bankrupts who would disclose the latter information voluntarily and, so far as I am aware, the statement of affairs required under section 288 does not oblige the bankrupt to disclose any such matter. It does on the other hand oblige the bankrupt to disclose his assets as they were at the commencement of the bankruptcy. What he ought to do therefore, within the 3 month period, is to inform the trustee or the official receiver of any interest that he owned at the date of the bankruptcy in a relevant home. If he does not do so, it seems to me that the alternative date provided for by sub-section (5)(b) is a substitute for the instance where the bankrupt does, in accordance with his obligations, provide the necessary information to the official receiver or the trustee in bankruptcy. That shows two things, to my mind. The first is that the provision is dealing with the case where the bankrupt did have an interest vested in him at the commencement of the bankruptcy. The second is that the position in which the trustee in bankruptcy becomes aware of the interest must be the equivalent of that in which he would be having received information from the bankrupt that he does have an interest in the property, from whatever source he may gain this knowledge. If becoming aware means anything less than that, then it does not put the trustee in bankruptcy into an equivalent position as regards knowledge as he would be in if the bankrupt had provided the information in the first place. It seems to me that there is no sufficient reason to suppose that the legislature intended the trustee in bankruptcy to be put on the spot, so to speak, with the limited time provided for under section 283A in which to take steps with a view to the realisation in one way or another for the benefit of creditors of the interest of the bankrupt, unless he knows of an interest which is already vested in the bankrupt’s estate.

I do not see that it would make sense to regard the trustee in bankruptcy as becoming aware of an interest of the bankrupt which at the relevant time was in fact vested in the third party, which the bankrupt would at that time deny having, as would the third party, and in relation to which, even if a claim were made under section 339, the bankrupt and the third party would firmly deny, as they eventually did, that there had been any transfer at an undervalue.

Before Mr Justice Mann the argument put to us had not been developed at all fully. He considered that the point did not arise because the trustee in bankruptcy’s real claim was not that under section 339 but rather the forgery- based claim of which the trustee only became aware in 2009 at the trial before Mr Registrar Simmonds. I agree that this was the real claim. However, Mr Mather’s submission to us has to be tested by reference to the position during the transitional period, as to whether, by the beginning of that period, the trustee in bankruptcy had already become aware of Mr Ramrattan’s interest in the property. That could only have been, on the facts, by virtue of there being a potential claim against Ms Bortolussi under section 339. In those circumstances the judge expressed considerable doubt about the argument, but he did not decide it.

The points have been more fully developed before us than they were before the judge. Despite Mr Mather’s clear, sustained and well articulated submissions, both in his skeleton argument and in particular orally to us, it seems to me that the judge’s instinctive conclusion on the point was correct, and that Mr Mather’s argument should not be accepted. 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.

The trustee in bankruptcy served a respondent’s notice taking four points. Three of them are points which arise on Mr Mather’s arguments in any event and I have dealt with them in the course of what I have already said. The fourth is a quite different point which would only arise if Mr Mather were right. Since I consider that he is not I do not need to take time on that fourth point.

Mr Mather argued in the alternative that the policy of section 283A ought to be applied by analogy so that the interest in the family home should re-vest in the bankrupt if the trustee in bankruptcy does not take prompt action to realise it. That seems to me to be an impossible argument. The new regime was introduced and applied in a detailed manner by section 261 of the Enterprise Act and the relevant rules. It is not proper or possible to treat the Insolvency Act as amended yet further in ways not provided for by the amending legislation. That said it could be that, in circumstances in which the court does have to exercise a discretion, the policy behind section 283A would be something that could legitimately be borne in mind. In my judgment that question does not arise in the present case.

Whether or not it is a matter of oversight that the legislation does not deal with the impact of the section 283A policy in relation to the product of claims under such provisions as section 339 and section 340 is unclear. It is also unclear what provision would have been made if it had been addressed specifically. It can be said that if proceedings do need to be taken, whether under section 339 or some other provision, it is highly likely that those proceedings will include a claim for an order for sale or possession or otherwise to enforce the trustee’s rights so that it may be that in practice, once such proceedings are brought, the issue will be joined in a way consistent with section 283A(3).

I well understand the registrar’s criticism of the delay on the part of the trustee in bankruptcy in taking action. It may be that this delay has had a prejudicial effect on the appellants. We have no information on which we could form a view as to that, or as to the justification, or otherwise, for the delay. Mr Davies had neither knowledge nor instructions as to the reasons for the delay. The delay is not relevant to the issue on the appeal. If there is any recourse for the appellants in respect of the delay and its consequences, it is not by way of this appeal.

For the reasons that I have given, although Mr Mather’s argument is interesting and ingenious, in my judgment it is clearly wrong and I would therefore dismiss the appeal.

I agree with both judgments.

I agree with Lord Justice Lloyd’s judgment.

The oddity of this case is that because of the forgery, the matrimonial home was always part of the bankrupt’s estate, but that was something which the trustee did not know about; whereas he did know soon enough about the apparent gift to the bankrupt’s wife and thus of the opportunity to take action under section 339, but he did nothing about that until not long before he would have become time barred after 12 years.

For the reasons given by Lord Justice Lloyd I am satisfied that section 283A does not deal with claims under section 339 to bring a matrimonial home within a bankrupt’s estate. Nevertheless, the possibility of such claims arising out of transfers between spouses or civil partners of interests in their home cannot be unusual in this context, and I very much agree with Lloyd LJ’s comment in [53] above that the policy behind section 283A would be something that could legitimately be borne in mind in dealing with the discretion under section 342.

In the present case the registrar, while unaccountably setting on one side his own finding that the transfer had been a sham, would have exercised that discretion against the trustee. I have some sympathy for his position, but it has to be said that he ought to have had more information about the reasons for the delay and possible prejudice to the bankrupt and his wife before reaching his conclusion. However, 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.