Brake & Ors v Swift & Anor

The background to this claim is complex. I summarise it briefly here, based on summaries of the litigation which I have given in earlier judgments, supplemented by evidence in this case. I go into many of these matters in more detail later in this judgment. In September 2004, the first applicant (then Mrs D’Arcy, but whom I shall call by her current name, Mrs Brake) acquired West Axnoller Farm from local landowners, the Vickery family (who continued to have substantial landholdings locally). This property included a substantial dwelling-house known subsequently as Axnoller House (marked as “1” on the plan below). In 2006 Mrs Brake began to operate a holiday letting business at the Farm, subsequently joined in partnership in 2008 by her husband, the second claimant (“Mr Brake”).

Just outside the southern boundary of the Farm, on the other side of the private lane leading to the Farm, lies another residential property known as West Axnoller Cottage (the “cottage”, marked as “2” on the plan below). In July 2002 a Mr and Mrs White had purchased the cottage from the Vickery family and were living there when Mrs Brake bought the Farm. In 2006 Mrs Brake bought and was registered (again under her former name of D’Arcy) as proprietor of two further small parcels of land from the Vickery family, one on either side of the cottage (marked “3” and “4” on the plan below). The one on the west side is long and thin, and runs alongside the private lane for some distance (but not as far as the public highway). It also runs east on the south side of the cottage as a narrow strip of land only 4 feet wide. (On the plan below, it is shown simply as a thick black line.) The parcel on the east side of the cottage is more regular in shape, in effect two rectangles put together to form an L shape. Together these two parcels have in this litigation been variously referred to (by the applicants) as “the Cottage Access Land” and (by Chedington) as “the strip” or “the ransom strip”. Despite the name given to that land in this litigation by the applicants, Mr and Mrs White never owned them. The cottage had direct access to the lane. I will call these two parcels the “Adjacent Land” or the “adjacent parcels”. The land to the south of the cottage continued to belong to third parties, although Chedington finally bought it in 2019.

In January this year Chedington applied to strike out the proceedings against the liquidators and most of those against Mr Swift and itself, on the basis that the Brakes lacked standing to bring them. I heard those applications in early March 2020, and acceded to them. I struck out the whole of the Liquidation Application ([2020] EWHC 538 (Ch)), and most of the Bankruptcy Application ([2020] EWHC 537 (Ch)), for lack of standing (on application, I gave permission to appeal; those appeals are still outstanding, with ‘hear-by’ dates in November 2020). The main matter left still to be tried in May, against the trustee and Chedington, was the revesting issue under section 283A.

It was agreed by the parties before me on 3 March that that issue was divided into three sub-issues: (1) whether the Brakes’ as yet unvindicated claim in proprietary estoppel to the cottage as against the liquidators was an interest in a dwelling-house within section 283A (“the interest issue”); (2) whether the adjacent parcels of land fell within the definition of a dwelling-house within that section (“the dwelling-house issue); and (3) whether the cottage and the adjacent parcels were the Brakes’ sole or principal residence at the date of bankruptcy (“the residence issue”). By this stage the trustee accepted that, having ceased to hold office, he no longer had any interest in the proceedings, and did not propose to play any active part. His successors as trustees have not applied to be substituted for him. He did however give evidence at the trial, called by Chedington.

Following the hearings on 2 and 3 March 2020, further applications were made by the current applicants, on 13 March 2020. In summary these sought to bring forward the Eviction Proceedings to May, and to list a preliminary issue in those proceedings at the time of the trial of the remaining part of the Bankruptcy Application (that is, the section 283A issue), and at the same time to adjourn the trial of the section 283A

On 24 April 2020, I held the pre-trial review in this matter. At this hearing, I gave directions for the remote hearing of the trial, by virtue of the Zoom videoconferencing platform, to be curated by a third party technology company, and to be web broadcast, as it would not be possible for the public to attend in person. I also directed that Chedington’s application dated 9 April 2020 be heard and determined separately before the trial. Given the shortness of time before the trial was to begin, I heard the application on 1 May 2020 and I handed down a written judgment on 4 May 2020 ([2020] EWHC 1071 (Ch)). I held that in substance the application succeeded, although it was neither necessary nor desirable to make a declaration to this effect in the circumstances.

This judgment was almost immediately followed by two further applications by the applicants. One was an application by notice dated 4 May 2020, asking me to recuse myself from trying the matter. The other was an application asking for a stay, or alternatively an adjournment, of the trial either generally or pending final determination of appeals against the earlier decisions of mine on 2 and 3 March 2020. Because of the imminence of the trial, I heard both these applications on Thursday 7 May 2020, and announced my decision at the end of the hearing, but only putting my reasons in writing and handing them down formally on Monday, 11 May 2020 ([2020] EWHC 1156 (Ch)). I refused both applications, for reasons then given. The applicants sought permission to appeal against both decisions, which was refused by Patten LJ in the Court of Appeal on the next day, 12 May 2020. The way was therefore clear for the trial to begin, as it did, on 14 May 2020.

The following witnesses were tendered for cross-examination: Mrs Nihal Brake (the first applicant), Mr Thomas Hyde, Ms Susan Maslin, Mr Andrew Brake (the second applicant), Mr Russell Bowyer (director of the second respondent), Ms Lorraine Brehme, and Mr Duncan Swift (the first respondent). Although a number of witness statements of other persons were in the trial bundle, I was not asked to admit them as hearsay evidence.

I give here my impressions of all the witnesses tendered for cross-examination.

Mrs Brake was an intelligent and quick-witted witness. Her background in asset management was evident. She had a very good recall of facts and control of details. However, she wished very much to control the process too, challenging counsel and asking him many questions instead of answering them. Indeed, she frequently interrupted counsel, and sometimes me, presumably because she felt that she could deal with the point under consideration more quickly that way. Invariably, however, this made the process longer. She also insisted on giving a great deal of history and unnecessary information in answering questions, which made her responses extremely discursive. This tended to happen when she had difficult questions to answer. From time to time I intervened and asked Mrs Brake not to ask questions and to answer simply the question she was asked rather than giving speeches. She always apologised.

Overall, it seemed to me that she considered that she was completely in the right and that others (especially Mrs Brehme and Dr Guy) were responsible for everything bad that had happened to her. She was taken to statements of case and witness statements she had made in other related legal proceedings (of which there are a great many), which contained elements which were inconsistent with the case that she was now making and the evidence she was now giving. Her efforts to explain the inconsistencies were unconvincing. In addition, she also shifted her position during cross-examination and re-examination, for example in relation to the date on which she said that the change from one principal residence to another had occurred, and in relation to moving furniture from the house to the cottage.

However, I also bear in mind that more recently (since 2017) she has suffered serious ill-health, and still has a number of ongoing medical conditions. I also bear in mind that her evidence was given over a poor internet connection and there were a number of problems of connectivity during the time she gave evidence. Indeed, the latter part of her evidence had to be given over the telephone, because the video picture was inadequate. Chedington sought to make something of this, insisting that in some way Mrs Brake had sabotaged her own connection. I am entirely unpersuaded of this, and proceed on the basis that, whatever the cause, it was not her doing. Nevertheless, I am sure that it unsettled her, and I have made allowance for that. I do not think that Mrs Brake deliberately told me anything which she knew to be untrue. However, I think she exploited uncertainty and ambiguity so as to put the best ‘spin’ on the evidence. I also think that in certain respects she has convinced herself that, because she is right, reality must match her case. In all the circumstances I felt that I could rely with confidence on her evidence only where it was confirmed or corroborated by an independent source.

Mr Hyde was very precise, professional witness. He did not attempt to go beyond what he knew, and was unshaken in cross-examination. I accept his evidence entirely.

Ms Maslin was an elderly lady who spoke in clear and straightforward terms, with firm opinions. It was clear to me that she sympathised entirely with the applicants. I also had some doubts about the accuracy of her memory. A more serious problem arose from the fact that she was assisted in giving her evidence by a lady called Kate Ellison, whom Ms Maslin described as one of her riders. Ms Ellison’s task was to hand the volumes of the trial bundle to Ms Maslin as they were needed. However, on at least one occasion (when I intervened) I clearly heard Ms Ellison prompt Ms Maslin as to the answer to give (which Ms Maslin then gave). In itself that particular answer was not very significant, but I intervened to remind Ms Maslin that her assistant should not be prompting her. She immediately accepted this. Ms Maslin was recalled on the following Monday, and Kate Ellison called for the first time, to give further evidence about this aspect of the matter. Both firmly denied that any prompting took place. I cannot accept this. It is clear that it did. I gave permission for the transcribers to listen to the recording again to check this Maslin’s evidence, and they revised the transcript accordingly. That shows prompting taking place. I have also listened to and watched the recording of Ms Maslin’s evidence myself in order to check my recollection and also the transcript, and I am entirely satisfied that Ms Ellison did prompt Ms Maslin on at least one occasion. I am afraid that the result of the prompting episode, and then the flagrant denial that it took place, means that I have very little confidence in the truthfulness of Ms Maslin’s evidence. In any event, even without this, I considered that some of her evidence was too good to be true.

I should also say that there were also electronic sounds which came from Ms Maslin’s location during the giving of her evidence. It was suggested by Mr Sutcliffe QC that these may have been the sounds of instant messaging devices, possibly telling Ms Maslin what answers to give to questions. In revisiting the recording of the evidence, I have paid attention to the sounds. In my judgment they are far too frequent for them to be the product of a person sending instant messages to Ms Maslin, and even if they were, I am confident that Ms Maslin would not have been able to absorb the information sent in any such messages and give the answers she did without apparently having any regard to such messages. Whatever the source of these noises, I am satisfied that they did not affect the evidence of Ms Maslin. However, for the reasons given I have largely discounted it anyway.

Mr Brake was a straightforward witness who spoke plainly and with great deliberation. He is not a man of any great business experience, and it is clear that he is not comfortable, or at home, in the worlds of business or of law. Indeed, he could properly be described in those worlds as naïf. He is of west country farming stock. His passion is the world of horses. Quite understandably, he was protective of his wife, whose word he accepted unconditionally, and he bridled at some of the questions put to him. I also think he failed to understand much of the complexity of the situation, and the detail of the documents. It simply went over his head, and he just accepted what his wife told him. As a result, I am satisfied that he was telling me the truth so far as he understood it. In other words, he told me what he thought. In this sense, I accept his evidence as truthful, without meaning that I accept what he said as objectively correct.

Mr Bowyer was a clear and straightforward witness, and I had no doubts about accepting his evidence as truthful.

Mrs Brehme was a straightforward, focused and honest witness. She did not try to play games. She knew her limits, stood her ground, and cross-examination made little or no impression on her. She is not a party to the present litigation, but I bear in mind the fact that she regards Mrs Brake as responsible for the loss of her investment in the partnership. Nevertheless I regard her evidence as truthful, and where there is a conflict between her evidence and that of Mrs Brake, I prefer that of Mrs Brehme.

Mr Swift was a very fair and honest witness, who accepted correction and took no false points. He was quick, with a good grasp of detail, and had answers to nearly all the important points put to him. Cross-examination made no real impression upon him. He came across as a highly professional insolvency practitioner. I accept his evidence as truthful.

Thirdly, in commercial cases where there are many documents available, and witnesses give evidence as to what happened based on their memories, which may be faulty, civil judges nowadays often prefer to rely on the documents in the case, as being more objective: see Gestmin SGPS SPA v Credit Suisse (UK) Ltd[2013] EWHC 3560 (Comm), [22]. Oral evidence and cross-examination are however still important. They enable proper scrutiny of the documents, and they also permit the judge to gauge the personality and motivations of witnesses.

The relevant facts in this case go back about fifteen years. The present case is at least partly a commercial case, and there are sufficient written records, letters, emails and so on as to make the Gestmin approach relevant to this case. I will therefore give appropriate weight to both the documentary evidence and the oral evidence, bearing in mind both the fallibility of memory and the relative objectivity of the written evidence available.

Andrew Young Brake and

Patley Wood Farm LLP 33%

Clause 8.5 of the partnership agreement reflected the earlier understanding between the applicants and Mrs Brehme that the cottage would be acquired so as to give the applicants somewhere to live whilst the house was being renovated and then let. For this purpose (as the clause says) the applicants were to be entitled to live rent free in the partnership premises (including both the house and the cottage) as licensees of the partnership. However, in October 2010 the applicants decided that they did not want to live in the cottage. Mrs Brake said it was uninhabitable. She later said to Mrs Brehme that she (Mrs Brehme) had walked around the cottage when it was bought and said “it needed to be knocked down it was so damp and cold”. Mrs Brehme denied this, and said it was Mrs Brake who had gone round the cottage at the time saying that. However, she did agree that once the business was prospering the cottage could be demolished and rebuilt as another letting unit. I prefer Mrs Brehme’s evidence.

Mrs Brake also said the cottage was needed to house “staff”. Mrs Brehme disagreed. Nevertheless, in October or November 2010, Mrs Brake hired a housekeeper, Hazel Apps, for the estate properties and installed her in the cottage. However, the housekeeper left suddenly over Christmas 2010. In February 2011, when Mrs Brehme was abroad, Mrs Brake hired a personal assistant, Simon Windus, as an employee of the partnership (though without reference to Mrs Brehme) and moved him and his family into the cottage, where they lived until June 2012 (by which time Mrs Windus had unfortunately become ill with cancer). Whenever the house was let during this time, such that the applicants could not stay in the house, they moved to a hotel or stayed with friends. They did not stay in the cottage.

When Simon Windus moved out of the cottage, Mrs Brake insisted that more work be done before it would be suitable for her to stay in. In an email from Mrs Brake to Mrs Brehme dated 30 November 2012, Mrs Brake said:

Renovation work on the cottage was carried out in the period 2012 to 2014. Some of this at least (it is not clear to me that exactly how much) was carried out at the expense of the partnership. Nor is it clear for how much of this period the cottage was habitable by anybody. The applicants did stay there from time to time, when the house was booked out. Even then certain rooms in the house were entirely private, and not available to guests. But it is also apparent that the applicants had bigger and grander plans for the cottage site. Mrs Brake’s witness statement says this:

Relations between the applicants on the one hand and Mrs Brehme on the other had deteriorated during 2011. There were partnership meetings in September and October 2011 to try to resolve matters. It is on discussions at these meetings that the applicants base their claim to a contractual right, alternatively proprietary estoppel equity, to the cottage. But it is not necessary for me to investigate, much less decide these claims now, or indeed what were the causes of the deterioration in the parties’ relationship. In part, at least, this became the subject of the arbitration referred to earlier, which commenced in 2012. In the meantime the applicants continued to run the business, from 2012 including the hosting of weddings. The drawing room on the ground floor of the house was licensed for the holding of marriage ceremonies. In May 2012 the applicants instructed plans to be prepared for a more modest refurbishment of the cottage.

The arbitration concluded with an award in favour of Mrs Brehme and her corporate vehicle in June 2013. That award found that the applicants had breached the partnership agreement, they had excluded PWF from the management of the partnership business and failed to provide full and proper financial information to PWF. The arbitrator also held that there was evidence of misuse of partnership money by the applicants. The award accordingly dissolved the partnership and ordered that it be sold as a going concern. The arbitrator also made an award for the applicants to pay Mrs Brehme’s costs of the arbitration, in the sum of £518,539.23. In July 2013, Mr Justice Newey granted a without notice freezing order in support of the awards. This order was continued after inter partes hearings by Mr Justice David Richards later in July and Mr Justice Birss in September.

The applicants challenged the arbitration awards in the High Court, but Mr Tim Kerr QC (as he then was) dismissed the application on 25 April 2014 in a reserved judgment, also ordering the applicants to pay the costs, assessed in the sum of £30,000.

Mrs Brake’s evidence in cross-examination at trial was that they lived in both places between 2010 and 2015, but that the house was their main residence, until 2015, when they lived in the cottage and elected for it to be their principal residence. She accepted that by the end of 2016 they had moved back to the house. I do not accept that they stayed in the cottage before 2012. I accept that they did not stay overnight in the house from May 2015 until October 2016, with some exceptions, such as Christmas

Mr Brake’s written evidence was that it was clear to him from the appointment of the receivers in October 2014 that, although up until then the applicants had been able to use both the house and the cottage, the house would now be sold and they would be able to live only at the cottage. He further says that there

In fact, in cross-examination Mr Brake said (and I accept) that the applicants were still using both properties (and could do so as much as they wanted) at least until the end of April 2015, and that it was only from then that he considered that they were resident only at the cottage. He explained the statement about the end of 2014 as that bythen he was convinced that they would have to move to the cottage in due course. In November and December 2014 he painted the interior of the cottage. Later he moved some furniture, put down carpets, cleaned the windows and installed a wood burner.

The receivers appointed by the bank envisaged that, in accordance with the arbitration award, the Farm would be sold under a closed bidding mechanism between the applicants and PWF. The receivers did not seek possession of the Farm as against Mrs Brake or the partners. On the contrary, they permitted the applicants to continue in occupation of and trade from the Farm. However, on 19 November 2014 the arbitrator

The prohibition on the applicants’ buying the Farm or the cottage indirectly was extended to nominee and similar transactions by the terms of the order. They could not, without the written consent of PWF (not to be unreasonably withheld) or the arbitrator, enter into any agreement to purchase the Farm and/or the cottage through a third party such as a nominee or limited company, or enter into or carry out any agreement to provide services directly or indirectly with any purchaser or prospective purchaser of the Farm and/or cottage. Thus a sale of either property to a nominee for them, or to a company which they beneficially owned, would breach the order. Even if the sale were to a person who is not their nominee and not a company beneficially owned by them, any provision of services to such a purchaser would also be a breach.

The judge’s order also provided that the applicants should agree to the sale of the cottage at the same time as the Farm if the receivers so requested. At this date, the partnership which owned the cottage, although in dissolution, was not in any form of insolvency procedure, and therefore the sale of the cottage was a matter for the partners alone. Since PWF had sought the order, it plainly wished the receivers to have the power to include the cottage in the sale of the Farm. This order achieved that. The judge also ordered that the applicants should give up possession of the Farm, and (if they were sold together) the cottage, on completion of the sale. The practical effect of the judge’s orders was that from January 2015, first, the applicants’ lack of funds meant that in practice they would be unable to bid for the Farm, whether in their own names or that a nominee, and second that their occupation of the cottage was as precarious as that of the Farm, because in effect the receivers now controlled the sale of both.

Mrs Brehme wished to view the Farm in order to consider what bid to make herself. On 19 February 2015 she offered the receivers’ agent 2, 4 or 6 March 2015 as dates when she was available for this purpose. The agent responded to say that these dates were not possible, as the property was then occupied with guests, and instead offered 16, 18 or 19. Mrs Brehme responded that those dates were far too far in the future and did not comply with the directions of the receivers. Moreover, in the booking documentation available to her there was no evidence of any bookings on 2 March. Following a telephone conversation between them, it was agreed that Mrs Brehme could view the property on 6 March at 10 AM. Mrs Brehme asked for confirmation that this would include the cottage.

On 6 March 2015 Mrs Brehme, together with her advisers, was given access to the Farm. They were accompanied by an agent from Strutt & Parker on behalf of the receivers, but also accompanied by two security men, who were said to be there to protect the applicants’ “assets and chattels” and to make sure that Mrs Brehme “did not rifle through their personal belongings”. The visitors were not allowed to separate during the visit. Mrs Brehme saw the main house, the two rental properties, the bungalow, the stables and the cottage. Her evidence was that there could not have been any guests staying at the Farm during the week of 2 March, as was obvious from the state of the letting houses and the main house. On the other hand, she noted that a shower in the applicants’ bathroom in the main house was wet. She concluded that it had been recently used.

All furniture on the ground floor of the main house had been placed in the centre of the rooms and covered up. No furniture was visible. Bedding other than pillows and duvets had been removed from all the beds in the house, the cottage and the old tack room. There were no signs of recent occupation or use of the cottage, unlike in the house. A large bathroom upstairs was only half finished and the upstairs rooms contained only boxes. Turning to the equestrian accommodation, there were no horses on the site at all, although “the odour of horses was intense and could be identified around 100m from the building”. There was also a large stock of hay and straw. Mrs Brehme’s evidence as to the state of the cottage was unchallenged, and I accept it. Her evidence as to the state of the house was challenged, but I nevertheless accept that too.

A week later, on 1 April 2015, PWF made an application to the High Court in London for an order pursuant to its final charging order that the cottage be sold. A hearing date for the application was set for 22 July 2015. On 7 April 2015 the receivers’ solicitors wrote to PWF’s solicitors noting that PWF had instructed them to apply for an order for sale of the cottage. The receivers’ solicitors pointed out that PWF’s action would

On the same day, Mrs Brake wrote to Mr Lee, the arbitrator, referring to the application by PWF for an order for the sale of the cottage and asking for a direction from him that the cottage should be sold with the house by the receivers. On 15 April 2015 Mrs Brake wrote to Mr Lee again, repeating her point about selling the house and the cottage together, and telling him (amongst other things) that the house was her home, it had been furnished by them, and they would not vacate it without a possession order being made against them. It is not clear to me how this stance was consistent with the order of 16 January 2015, by which the applicants were ordered to give vacant possession of the house (and, on request, the cottage) on a sale by the receivers.

In a witness statement of 23 April 2015, Mrs Brake repeated the statement she had made in an earlier statement of December 2014 that “Andy and I have to move into

In early April 2015, the receivers appointed by Adam & Co put the Farm on the open market. On 21 April 2015 the receivers’ agents invited bids on a blind basis by 12 noon on 24 April 2015. Some bids were for both the Farm and the cottage, and others were for the Farm alone. On 7 May 2015 the agents asked for “best and final offers” to be submitted by noon on 15 May 2015. The email of 7 May also confirmed that the receivers had decided not to sell both the house and the cottage. So bids were invited only for the Farm, expressly excluding the cottage. Various persons, including Mrs Brehme and Mrs Foster, made bids.

As I have already said, in May 2015 there were wedding and other functions booked and the luxury furnishings remained in the house throughout. I do not accept that they were taken away. Although some personal possessions (on the evidence, small and fragile objects) had been taken to the cottage, many personal effects of the applicants were still in the house, but locked away so that guests had no access to them. Selfevidently the Brakes could not stay in the house when it was let for functions. But they continued to have a presence there, by reason of the furniture, some personal possessions, and the personal attendance of the applicants in running the events and serving the needs of their clients.

In cross-examination, Mrs Brake was asked:

On 12 May 2015, the County Court at Bristol heard and determined the bankruptcy petitions presented on 24 March 2015. The hearing lasted all day. The petitioning creditor was represented by counsel, and Mrs Brake appeared in person and also on behalf of Mr Brake. Mrs Brake made an application for an adjournment which was refused. Ultimately, both applicants were adjudicated bankrupt on that day at 5:45 pm. During that week (8-15 May) the house was occupied by guests and the applicants were living at the cottage.

Preliminary information questionnaires for the official receiver were filled in on 4 June 2015 by each of the applicants. They gave their address as “West Axnoller Cottage, West Axnoller Farm”. In answer to a question about “Freehold land and property”, each replied “Cottage held in trust for partnership 1/3 West Axnoller Cottage”. Mr Swift’s evidence was that he did not accept these answers as true, so far as they suggested that the applicants lived at the cottage rather than the house, because they were contrary to other documents which were made available to him after his appointment as trustee. I will come back to this. It is also to be noted that neither these questionnaires nor the notes of an interview with the official receiver on 9 June 2015 disclosed the existence of the proprietary estoppel claim to the cottage, although they did refer to the damages part of the claim against Mrs Brehme.

The Farm was sold to Sarafina Properties Ltd (the corporate vehicle of Mrs Foster) by Mrs Brake acting by the receivers by contract dated 23 July 2015. It appears that completion of the purchase took place on the same day. The receivers wrote also on the same day to the applicants, informing them that the completion had occurred,

In fact, clause 6.3 of the contract provided:

Much of the documentary evidence available at trial however tended to show a different picture. For example, the electricity supply to the cottage was billed to Mr Brake at “West Axnoller Farm”, though the cottage is stated to be the place of supply. I have seen bills dated 6 November 2014, 8 December 2014, 6 January 2015, 6 February 2015, 6 March 2015, 6 April 2015, 26 May 2015, but there may be others. That for August 2015 is however in the names of Mr and Mrs Brake. The declaration of trust of 28 January 2015 made by the applicants shows their address as West Axnoller Farm. Similarly, a notice of change of solicitor (from Michelmores to in person), in claim no HC-2012-000131, dated 12 February 2015, gives their address as West Axnoller Farm. It is signed by both applicants. In the bundle there is a Lloyds Bank statement of 3 March 2015 addressed to Mrs Brake at West Axnoller Farm. There are also Barclays Bank quarterly statements for the whole of 2015 addressed to Mr Brake at the same address. The signed IVA proposals of both applicants, dated 23

The applicants gave evidence that there was a single postbox for all the properties on the estate. This was an old breadbin on the private lane. The postcode was the same for all the properties too. So it did not in fact matter where post was addressed to or from. Any incoming correspondence would come to the same box. I accept this point, as far as it goes. But it is nonetheless odd that, if the applicants really had made up their minds that they would cease to live in the house and focus for the future on making the cottage their principal residence, they should continue not only to receive correspondence from others without alerting them to the change (which I accept would not be a priority, given the common mailbox), but also continue to write letters from the Farm, in some cases asserting in those letters that the Farm was their home. Nor does it explain why they should make a declaration of trust, give notice of change of solicitor, and make IVA proposals, all from the Farm, if they were really living in the cottage.

Mrs Brake said in evidence that ‘West Axnoller Farm’ referred to all the five residential properties: the main house, the cottage, a bungalow and two holiday houses. I accept that in some contexts (particularly historical) that expression could refer to all five properties and the other facilities and land included in the Farm, even though the cottage had been separated in ownership from the rest of the Farm since

There were also photographs which the applicants produced showing them apparently living in the cottage. Mr Bowyer’s evidence was that of the 16 photographs only two were taken in 2015, in July and October respectively. The July photograph corresponded with a wedding taking place at the house. The October photograph did not appear to correspond with an event. I accept this evidence.

Ms Maslin gave evidence that she visited the applicants at the cottage on many occasions starting from the summer of 2013. She also gave evidence that she visited them there on many occasions from 25 April 2015 to 25 July 2015, that is, before and after their bankruptcy. However, she qualified this by saying that quite often Mr Brake was there on his own with Mrs Brake’s son Tom upstairs in his room, whilst Mrs Brake was dealing with weddings at the house. She said she often watched show jumping or horse riding on the television with Mr Brake. Her evidence was that she did not go to the house because she was “too untidy for that”. So she has no evidence to give about the applicants’ occupation of the house, one way or the other. I accept that Ms Maslin saw the applicants at the cottage from time to time, and especially Mr Brake, when they talked about horses. Since they stayed in the cottage whenever the house was let, there would have been many opportunities for that. Ms Maslin said that she knew “that by the summer of 2015 they were living at the cottage”. Ms Maslin’s evidence is however suspect, as I have already explained.

In November 2015 Mrs Brake sent an effusive email to a lady called Charlotte Skene Catling, congratulating her on her design of a property for Lord Rothschild. Mrs Brake reminded Ms Catling that she came to the Farm in 2010 when they were thinking of rebuilding the cottage. She mentioned the dispute with Mrs Brehme, and said that they had emerged from it, and “will resurrect our plans to convert the cottage.” However she gave no timescale for this, merely referring to “when we are ready to press go”. So far as I can see, it was an isolated communication, as there is nothing further on this subject in the materials before me. It did not commit the applicants to anything.

Mr Swift’s evidence was that, on 23 December 2015, he happened to be in the area visiting another property a few miles away, so he made an unannounced visit to West Axnoller. He drove up the private lane, and approached the two properties, to the north and south respectively of the lane. The house to the north was clearly occupied, “lit up like a Christmas tree with lights on in all rooms and all external lights”. On the other hand, the cottage to the south of the lane was not occupied, having no lights on either externally or internally, and none of the windows had any windows drawn, “it looked tired, cold and neglected”. He did not call at either property. I accept his evidence. This is however many months after the bankruptcy date, and tells me virtually nothing about the position as at 12 May. On the other hand, it suggests that the applicants stayed in the house at Christmas 2015, when (according to the records available) there were no bookings in the main house. It is consistent with the view that

Mr Brake gave evidence at the trial that, after April 2015, the next day that he stayed overnight in the house was September or October 2016. He explained that this was because the house was let until then. But the evidence of forward bookings available to me at the trial did not show any events at a number of dates, including Christmas 2015, and Mr Swift’s evidence (which I have accepted) was that when he visited on 23 December 2015 the house was lit up whereas the cottage was dark. I conclude that although Mr Brake is right to say that there were long periods when he did not stay at the house, he has forgotten about Christmas 2015 (at least), and that he did stay then.

On 6 January 2016 a hearing took place at the High Court in London of PWF’s application for an order for the sale of the cottage, based on the final charging order granted in September 2014. PWF was represented by counsel and Mrs Brake appeared in person on her own behalf and on that of her husband. After a lengthy discussion between the parties, the Chief Master adjourned the application, pending a possible appointment of either an administrator or a receiver of the partnership estate. It appears that by that date PWF had already issued an application for the appointment of an administrator, and the applicants had made an application for the appointment of a receiver. So far as I can see from the transcript, the Chief Master made no findings on the application itself. In particular, he did not decline to make an order for sale on the grounds that the applicants were living there. In fact he did not decide at all whether the cottage was or was not the applicants’ family home.

On 19 August 2016 the Weymouth office of the Land Registry wrote to Mrs Brake to inform her that Mr Swift had applied to register a restriction against the title to the parcels of land adjacent to the cottage. Her fee simple estate in these parcels would have vested in him as trustee in bankruptcy, but she was still shown as proprietor on the register.

On 17 February 2017, Chedington bought all the shares in Sarafina Properties Ltd from Mrs Foster. A disclosure letter provided by her as vendor on the same date said:

Mr Brake built a gravel driveway on the easternmost part of the adjacent parcel on the west side of the cottage in November 2018. At that time the adjacent parcels were vested in the trustee in bankruptcy. It does not appear that any permission was sought for this. It appears that a track for vehicular access to the cottage existed along the same line to connect the rear of the cottage to the private lane running to the public highway. There are photographs in the bundle which show a driveway or trackway of some kind leaving the rear of the house, and others (in the brochure prepared for sale in 2009-10) showing a track over the eastern side of the adjacent parcel.

Chedington referred me to a number of statements made by the applicants in witness statements and statements of case in other proceedings which dealt with residence in the house and in the cottage. These statements said or implied that the applicants were principally resident in the house rather than the cottage. They were put to the applicants in cross-examination, who had some difficulty in dealing with them. The most significant of these statements were contained in a witness statement of Mrs Brake dated 8 January 2019, which was confirmed by Mr Brake in a short supporting witness statement. In that witness statement, Mrs Brake said that the acquisition of the

In the same witness statement she also sought to retract evidence she had given in other proceedings, in which she had referred to the cottage as their principal residence. These other proceedings were brought by AEL as owner of the Farm to recover possession of the house from the applicants. Mrs Brake said:

In cross-examination, Mrs Brake sought to explain this by saying that this evidence covered a 14 year period, and did not provide a specific view of the position as at the date of bankruptcy. But that is not what the witness statement said. It was perfectly clear, and I reject this explanation. She also said that she had given that evidence in response to evidence from Dr Guy to the effect that the applicants, having elected the cottage as their principal residence at the date of bankruptcy, could not later elect the house to be their principal residence. Yet (again) Mrs Brake’s statement is perfectly clear that the house has “at all times” since 2004 been the applicants’ principal residence. So I do not consider that the context changes anything. She also claimed to have been mis-advised at the time of her statement of 8 January 2019, and only realised this after she had had the benefit of advice from counsel. I fail to see why this makes any difference. The witness statement of 8 January 2019 makes a number of clear statements of fact, which could not have been changed by any advice of counsel.

In cross-examination on the same material, Mr Brake said that he simply did not understand the various statements in his wife’s witness statement. I have already remarked that Mr Brake did not understand much of the complexity of this case, and I find it hard to avoid the conclusion that he simply signed whatever his wife put in front of him, whether he understood it or not. These inconsistent statements in other proceedings are not evidence in these proceedings, and are of no probative value in the context of the present litigation and the question before the court. But they and their treatment of them by the applicants in cross-examination support my view that I should not put any weight on the uncorroborated evidence of the applicants.

So far as material, section 283 of the Insolvency Act 1986 provides as follows:

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

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.

Subsection (1) does not apply to …

property held by the bankrupt on trust for any other person … ”

Section 283A of the Insolvency Act 1986 was inserted by the Enterprise Act 2002, ss 261(1), 279, and brought into force in 2004. In its current form, it provides (so far as material to this case) as follows:

the bankrupt,

the bankrupt’s spouse [or civil partner], or

a former spouse [or former civil partner] of the bankrupt.

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

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

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

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

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

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

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

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.

Where an application of a kind described in subsection (3)(b) to (d) is made during the period mentioned in subsection (2) and is dismissed, unless the court orders otherwise the interest to which the application relates shall on the dismissal of the application—

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

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

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 subsection

shall not begin with the date of the bankruptcy, but

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

It is clear that section 283A is limited to property which has been “comprised in the bankrupt’s estate”. If property is never comprised in the bankrupt’s estate under section 283, it cannot revest in the bankrupt under section 283A: see Stonham v Ramrattan[2011] 1 WLR 1619, CA, at [39] per Lloyd LJ (with whom Rix and Longmore LJJ agreed). In the present case, the argument is essentially about the meaning of three phrases in subsection (1): (i) “an interest in”, (ii) “a dwellinghouse”, and (iii) “sole or principal residence”. I will deal with them in that order.

In paragraph 12 of the particulars of claim in these proceedings, the applicants allege that at a meeting in October 2011 an agreement was reached between the partners and Mrs Brehme to transfer the cottage to the applicants, and that the applicants thereby became the owners in equity of the cottage or alternatively entitled to a beneficial interest in it (which is subsequently referred to as “Beneficial Interest”). In fact, there is no pleading in the 2012 claim that I can find to the effect “that the claimants thereby became the owners in equity of the cottage or alternatively entitled to a beneficial interest in it”. But I do not think anything turns on this. As the applicants themselves say, it is not necessary to plead legal effects flowing from factual allegations: see Metall & Rohstoff v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391, 436, CA.

The original particulars of claim in the 2012 action are dated “December 2012”. But the particulars as they appear in the bundle for this trial (volume F/1) are amended particulars of claim. They are “Re-dated 19 July 2013”, which I understand to be the date of the amendment. The facts alleged in the 2012 claim, as amended, include that the agreement to transfer the cottage was made in October 2011 (“the Cottage Agreement”: paragraphs 45-46), and then that the claimants (the applicants) acted in reliance on this agreement in a number of ways, including applying for a mortgage and paying for a valuation, moving their possessions into one room of the house and staying in hotels to enable the house to be let, and spending money on repairing the cottage (paragraphs 47-48). Paragraph 49 alleges that the claimants (the applicants) have requested that Mrs Brehme executed a transfer of the cottage from them and her to them alone, but she has refused to do so “and thereby acted unconscionably”.

Paragraph 50 states:

Since the agreement alleged appears to be an oral agreement, the reference to “specific performance” does raise an eyebrow. In his extempore judgment given in the 2012 claim on 10 September 2014, Chief Master Marsh observed that the claim for specific performance

Then, in paragraph 31 of the particulars of claim in the present claim, the applicants say this:

So the claim under section 283A is based on each of three different interests (or claims to interests), namely (i) the “Beneficial Interest” said to arise under the alleged agreement in 2011, at least once relied on by the applicants, (ii) the Brakes’ “registered title”, ie the estate in the cottage registered in the joint names of the applicants and Mrs Brehme on its acquisition in 2010, and (iii) the adjacent parcels (the “Cottage Access Land”), the fee simple estate in which was acquired by Mrs Brake in her sole name in 2006.

The second interest was “the Brakes’ registered title”. A property lawyer, looking at that expression, would think that it referred to the legal estate in the land, as registered at HM Land Registry, because what are registered at the land registry are legal estates in land and certain charges (see the Land Registration Act 2002, s 132(1)). Beneficial interests under trusts of land are not registered, and indeed cannot even be the subject of a notice on the register: see the Land Registration Act 2002, section 33(a). (In some circumstances a restriction may be entered on the register to protect a beneficial interest, but that does not indicate what the beneficial interest is, or to whom it belongs.) Chedington and its lawyers addressed the point on that basis. And, on that basis, I think they were right.

The legal estate in the cottage was still vested in the applicants and Mrs Brehme, as it had been since the cottage was acquired, as trustees for the partners, pursuant to clause 5.2 of the partnership agreement. Therefore, by virtue of section 283(3)(a) of

At the trial, however, the applicants’ submission was developed far beyond this point by Mr Davies QC. By the end of the trial the applicants’ submission was that the beneficial interest of a partner in a partnership asset was properly an “interest” within section 283A, and that, as a matter of fact, the applicants had had such interests in the cottage at the date of their bankruptcies, amounting to two thirds of the beneficial interest in the cottage. This therefore must have formed part of their bankruptcy estates. It could therefore revest in the applicants under section 283A. The applicants too referred to paragraph 5.2 of the partnership agreement (set out above), which provided for “a trust for sale for all of the Partners” and submitted that:

The clear view expressed by Mr Swift in giving evidence as a witness at the trial was that he as trustee in bankruptcy of the applicants had nothing to do with partnership assets as such assets. He did not consider that any beneficial interest of the applicants in the cottage vested in him at all. He said that it vested in the partnership, and that was why he did not attempt to realise it during the three-year grace period. Mr Swift is not a lawyer and may not have been aware that in English law a partnership is not a legal person separate from its members. However, in my judgment, his instincts were not wrong. I may add that Mrs Brake herself had exactly the same idea when she sent an email to Mr Swift on 22 September 2015, in which she said

The other is the form TP1 for the transfer of the cottage to Chedington in January 2019. The applicants refer to paragraph 11.4 of that form, where there is the following statement:

With respect, this is not an acknowledgement by Mr Swift during the bankruptcy of the applicants that any proprietary interest in the cottage vested in him as a result of the bankruptcy. It is a document dating from well after the bankruptcy, and following the back to back sale transaction with the liquidators of the partnership, under which Mr Swift bought the partnership’s interest in the cottage for the benefit of the bankruptcy estates, and then immediately sold it on to Chedington. This is one of the transactions attacked by the applicants and referred to in my initial summary at the beginning of this judgment (see at [8] above). That is why Mr Swift certifies as he does. In any event, paragraph 11.5 of the form makes clear that Mr Swift transfers to Chedington only

In this case, the cottage was purchased by the applicants and Mrs Brehme to be subject to the terms of the partnership between the applicants and PWF, and therefore to be partnership property. Section 20(1) of the Partnership Act 1890 provides that:

It is therefore necessary to see what happens to assets which belong to a partnership rather than to individuals who are not in partnership. Thus, in Popat v Shonchantra [1997] 1 WLR 1367, CA, Nourse LJ, with whom Evans LJ and Sir Ralph Gibson agreed, said:

In my judgment, that was the position from the moment of the acquisition of the cottage in 2010. No partner had any entitlement to require any share of the cottage to be vested in him or her. No partner could successfully apply for an order for the sale of partnership property, such as the cottage, under section 14 of the Trusts of Land and Appointment of Trustees Act 1996. The whole cottage was instead to be subjected to the partnership regime agreed upon by the partners, as supplemented by the general law. One important aspect of this, of course, was that the interests of creditors of the partnership assume a more important position than they do in the case of a simple beneficial trust for individuals. Essentially, once the asset becomes a partnership asset, it is subjected to a kind of statutory trust for the purposes of carrying on the partnership business and paying the partnership debts, for distributing any profits, and finally for returning any partnership capital to the partners once the partnership was dissolved and (if necessary) wound up. Just as an individual partner has (in the absence of agreement) no right to resort to any specific asset or share of an asset to satisfy his own partnership share, so his or her trustee in bankruptcy can be in no better position.

Here, following the award of the arbitrator in 2013, the partnership was in fact dissolved, and different provisions in the Partnership Act became applicable, even though the substantive result was similar. As Nourse LJ said in the Popat case,

Section 39 of the Partnership Act 1980, referred to by Nourse LJ, provides:

And section 44(b)of the Partnership Act 1890, also referred to by Nourse LJ, relevantly provides:

In Sandhu v Gill[2006] Ch 456, Neuberger LJ referred to Popat, and said this:

As I have said, a trustee in bankruptcy can be in no better position than the bankrupt was. It is clear law that the purpose of the bankruptcy regime is to reallocate existing property rights, and not to alter those underlying property rights: cfCambridge Gas Transportation Corporation v Creditors of Navigator Holdings plc [2007] 1 AC 508, PC, [14]. Lindley and Banks on Partnership, in the current 20^th edition, puts the matter this way:

Accordingly, when the applicants became bankrupt, what fell into their bankrupt estates, and later vested in the trustee in bankruptcy, was not a two thirds beneficial interest in the cottage, but their respective shares of the partnership. In my judgment, it is not the law that the beneficial interests in the cottage, being partnership assets, can on the dissolution of the partnership be somehow released from the partnership regime so as to vest on the Brakes’ bankruptcies in their trustee as if it were an ordinary beneficial co-ownership trust of land. On the contrary, all that vested in Mr

I only add that Mrs Brake analysed the situation at the time in her email to Mr Swift of 23 September 2015, where she said:

In my judgment Mr Davies QC has approached the position as if, on the acquisition of the cottage by the applicants and Mrs Brehme, it was simply held by them on trust for themselves as tenants in common in equal shares, like an ordinary trust of land, and nothing more. If that were so, then on the applicants’ bankruptcies their two thirds beneficial interests in the cottage would indeed have vested in their trustee in bankruptcy. But in my judgment it is not so, for the reasons already given. In addition, as I have already said, the partnership agreement provided:

Mr Davies QC cited Wild v Southwood[1897] 1 QB 317, and Re Dennis (a Bankrupt)

must therefore consider each of these two decisions. I deal with them in turn.

Wild v Southwood was a case where the plaintiff had obtained a money judgment against the defendant, who was a partner in a firm carrying on business with two other persons. He obtained a charging order for the judgment debt under section 23 of the Partnership Act 1890. This relevantly provides:

The High Court, or a judge thereof, … [or the county court in England and Wales or a county court in Northern Ireland,] may, on the application by summons of any judgment creditor of a partner, make an order charging that partner’s interest in the partnership property and profits with payment of the amount of the judgment debt and interest thereon, and may by the same or a subsequent order appoint a receiver of that partner’s share of profits (whether already declared or accruing), and of any other money which may be coming to him in respect of the partnership, and direct all accounts and inquiries, and give all other orders and directions which might have been directed or given if the charge had been made in favour of the judgment creditor by the partner, or which the circumstances of the case may require.

The other partner or partners shall be at liberty at any time to redeem the interest charged, or in case of a sale being directed, to purchase the same.

The plaintiff took out a summons to enforce the charging order by a sale of the defendant’s “interest in the partnership property and profits” (as section 23 puts it), and then obtained an order under the section by which the partners were directed to pay into court a sum sufficient to pay the judgment debt and costs. The partners complied with this order. Unknown to the plaintiff at that time, the defendant had committed an act of bankruptcy prior to the judgment on the strength of which the plaintiff had obtained the charging order. The defendant was then adjudicated bankrupt. When the plaintiff subsequently applied for the money in court to be paid out to him, he was faced with the effect of the then doctrine of “relation back”, by which the title of the trustee to the property of the bankrupt vested from the date of the act of bankruptcy. The question therefore was whether the charging order was a transaction protected by what was then section 49 of the Bankruptcy Act 1883.

Vaughan Williams J held that it was not. I am not concerned with that aspect of the decision. But on his way to that conclusion, the judge said (at 319):

Re Dennis (a Bankrupt) [1996] Ch 80 was a much more recent case, about severance of a beneficial joint tenancy in land. Nevertheless, the facts occurred before the reform in 1985 abolishing the doctrine of relation back, and so the court needed to discuss that too. A husband and wife owned two properties as beneficial joint tenants. They were not in a partnership. The husband committed an act of bankruptcy, and a bankruptcy petition was presented. Before the petition was heard, however, the wife died, having by her will left her property to the couple’s children. Subsequently, the husband was adjudicated bankrupt. At first instance, the judge decided that it was only at the moment of adjudication of bankruptcy that any severance of the beneficial joint tenancy occurred. Since the wife had died before that moment, the trustee in bankruptcy was entitled to the beneficial interest in the whole of the two properties. On appeal, the Court of Appeal reversed that decision, holding that the trustee in bankruptcy’s title related back to the first available act of bankruptcy, which in this case preceded the death of the wife. Accordingly the severance had taken place before the death of the wife, and their children were entitled to her beneficial tenancy in common in the properties.

In itself, this case is not of assistance to me, because it does not concern a bankrupt partner. But Mr Davies’ interest in citing it lies in the fact that, in considering when severance of the beneficial joint tenancy occurred, Millett LJ (with whom Sir Thomas Bingham MR and Kennedy LJ agreed) examined a number of old cases in which this question arose, and some of them were partnership cases. So this is really a question of citation by reference. The cases on which Mr Davies QC relies are four in number: Fox v Hanbury (1776) 2 Cowp 445; Fraser v Kershaw (1856) 2 K & J 496; Ex parte Smith (1800) 5 Ves 295; and Smith v Stokes (1801) 1 East 363. It will be noted that they all precede the Partnership Act 1890 and (so far as land is concerned) the Law of Property Act 1925. They must be read on that basis.

What is common to all these cases is that the bankrupt was a member of a partnership, and the partnership property was held by the partners as joint tenants at law (though not in equity). And, at this date, there was nothing to prevent a joint tenancy of a legal estate in land from being severed so as to produce a legal tenancy in common. What was also in issue in three of these cases was the (legal) title of some person to bring an action in trover or detinue (which, as a general proposition, could not be brought by

In none of these cases was there any express statement by the court to the effect that a beneficial interest in partnership property, untrammelled by the partnership regime, vested in the assignees in bankruptcy. They were instead about the severance of the legal estate in the partnership property, thereafter held by the partners as tenants in common, so that (as a result) each of the partners had a separate undivided share at law. This mattered because what was in issue in three of the cases, as I have said, was whether the assignees in bankruptcy had a sufficient (legal) title to bring a claim in trover or detinue against the sheriff who had executed a judgment on partnership property or against the purchaser from the sheriff. (This kind of execution was prohibited for the future by section 23 of the Partnership Act 1890, which as I have said introduced a new method of executing a judgment against an individual partner.) Insofar as there are any statements by the court about the relationship after bankruptcy between the solvent partner or partners and the assignees in bankruptcy, necessarily reflecting the then possibility of severing a legal estate, they reflect the rules already stated, which is that the assignees (now trustees) in bankruptcy take over the share and rights of the insolvent partner under the partnership, and are subject to the same regime as he was.

Thus, in Fox v Hanbury, Lord Mansfield said (at 449):

I was also referred to the decision of Chief Master Marsh in the 2012 Cottage Claim, given on 10 September 2014, when he was asked to make final an interim charging order in favour of Patley Wood Farm LLP. The judgment debt secured by the interim charging order was of the order of £537,000, arising from the arbitration award made by Mr Lee in August 2013. That order was made on the interest that the defendants in that case (the applicants in this) claimed to have in the cottage. As to that, the Chief Master observed that:

should just observe that these quotations – and the others below – are taken from a transcript of the judgment, made from the original recording, and approved by the Chief Master pursuant to a request made over four years after delivering it, and without the benefit of any papers.)

The Charging Orders Act 1979 relevantly provides:

in any asset of a kind mentioned in subsection (2) below, or

under any trust; or

The Chief Master then considered passages in the decisions of the Court of Appeal in Popat and Sandhu, and said this:

Ultimately, the Chief Master made the interim charging order final. In my judgment, the Chief Master was not making any decision as to exactly what interest, if any, the present applicants had in the cottage. He was simply saying that, on the claims made in the various pieces of litigation between the parties, there could be an interest as claimed in the 2012 proceedings, or there could be an interest arising under the (dissolved) partnership, which on the evidence before him could not be considered to be insolvent. If there was a surplus after paying debts, the partners could expect a return of capital. It is to be remembered that this decision was made in September 2014, eight months before the applicants became bankrupt, and three years before the partnership went into insolvent liquidation. In my judgment, this decision does not assist the applicants in showing that, as at the date of their bankruptcies in May 2015, they had a beneficial interest in the cottage in specie. At best, it shows that they had an interest in some asset which could be the subject of a charging order. Indeed, the Chief Master made this point during a further hearing (for an order for possession and sale of the cottage) on 6 January 2016:

As to the claim to specific performance of the alleged agreement, no authorities were cited to me by the parties, but perhaps I can take as an uncontroversial summary of the relevant law two paragraphs from the recent decision of the Court of Appeal in Ezair v Conn[2020] EWCA Civ 687, where Patten LJ (with whom Henderson and Rose LJJ agreed) said:

In that case, the question for the court was whether, if A contracted in 1999 to sell land to B, but although the consideration passed the parties deliberately did not complete the contract (in order to avoid stamp duty), and B contracted in 2003 to sell the same land to C (and again the purchase price was paid but the matter was left in contract rather than proceeding to completion), C was then entitled to call upon A directly to transfer title to the land to C, without the need for serving notices to complete pursuant to the contracts. The Court of Appeal answered this question in the negative:

It is not necessary to consider the question further, however, because as a matter of law the agreement alleged in the present case cannot give rise to a claim for specific performance and therefore to any equity which could amount to an interest within section 283A. This is because the agreement pleaded is not alleged to be an agreement in writing and signed by the parties so as to satisfy the requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Accordingly what is alleged is not a valid agreement in law, and it cannot be relied on to produce an interest in the cottage.

The more substantial question relates to the second aspect of the claimed Beneficial Interest, arising by virtue of the claim to a proprietary estoppel equity. Here there is no requirement that the promise relied upon should have been in writing, so the problem referred to with the claim to specific performance does not apply. The applicants say that the pleaded facts in the 2012 cottage claim are “sufficient for the court to make findings of constructive trust or proprietary estoppel” amounting to a beneficial interest or an enhanced beneficial interest in the cottage. Hence the applicants had an interest in a dwelling house for the purposes of section 283A. They rely on section 116 of the Land Registration Act 2002, Snell’s Equity (34^th edition) at paragraph 12-054, and on the decisions in Webster v Ashcroft[2012] 1 WLR 1309, Walden v Atkins [2013] EWHC 1387 (Ch).

Chedington says that an “interest” within section 283A is confined to the beneficial interest which accompanies sole legal ownership or a beneficial interest under a trust of land in a domestic property. This, it says, is consistent with the policy behind the section, which was to protect the bankrupt’s home from trustees in bankruptcy waiting many years (perhaps in the hope of a rising market) before realising the interest vested in them in respect of that home. So it should be construed restrictively. In particular, they rely on Young v Official Receiver [2010] BPIR 1477. The claims in

Pleading: I can deal straight away with the argument that no estoppel was pleaded at the date of bankruptcy. In fact, the proprietary estoppel claim was introduced into the 2012 claim with the amendment to the points of claim in July 2013, nearly two years before the bankruptcy. The claim as amended makes factual allegations that the relevant parties agreed that the cottage would be transferred to the applicants, and that the applicants relied on this in stated ways, to their detriment. No more is needed. In particular, it is not necessary to say that this amounts to a claim in proprietary estoppel, because, as I have already said above, it is not necessary to plead legal conclusions. In fact there is an express reference to a proprietary estoppel equity in the prayer to the claim as amended.

General law: I now turn to consider the place of a proprietary estoppel in the general law. Under the general law, the equity is constituted when all of the preconditions are met. That is something which happens before the court hears the case and decides whether the equity has been established on the evidence, and how, if at all, it should be satisfied. As Hoffmann LJ once said, instead of looking forward, like a contract, proprietary estoppel looks back, “and asks whether, in the circumstances that have actually happened, it would be unconscionable for the promise not to be kept”: Walton v Walton, Court of Appeal, 14 April 1994, para 21; see also Thorner v Major [2009] 1 WLR 776, [38].

It is well known that a specifically enforceable contract relating to the sale or lease of land is treated in equity as transferring the fee simple or as creating that lease, by virtue of the principle that “equity looks on as done that which ought to be done”. As I have already noted, in Shaw v Foster the Houseof Lords treated the vendor of land as a trustee of the property for the purchaser pending completion (albeit a trustee of a special kind, so that you cannot rely on this trust to avoid contractual obligations: cfEzair v Conn, above). And, in Walsh v Lonsdale (1882) 21 Ch D 9, the Court of Appeal treated a contract for a lease which had been implemented (by taking possession and paying rent, but not actually granting the lease) as if in equity the lease had been granted, long before any legal proceedings were launched. So there is no especial problem with the fact that the court has not yet dealt with the matter. The rights of the parties are to be considered as at the time of the facts concerned, and not when the court adjudicates upon them.

There are vigorous ongoing debates today about the doctrine of proprietary estoppel. I do not need to decide any of those debates in this litigation. In order to avoid some of the more complicated aspects, I will simply say that, for present purposes, claims in proprietary estoppel are of two main kinds. One arises when a person makes a statement (intending it to be relied upon) as to the current legal position, such as “I do not own this land” or “you own this land”. The person to whom this statement is made in fact relies upon it to his or her detriment. If it is unconscionable for the representor to go back on the representation a proprietary estoppel equity arises (see eg Hopgood v Brown [1955] 1 WLR 213, CA). In some cases, for example where the first person sees another person labouring under the mistaken impression of the true position, and realises what the mistake is, but says nothing to disabuse that other of the mistake, equity treats the silence of the first person as equivalent to a representation of the present legal position (see eg Ramsden v Dyson(1866) LR 1 HL 129, 140-41).

The other kind of proprietary estoppel arises where there is no statement made about the present legal position, but a promise is made or an expectation created as to the future position. It is not a contract enforceable at law, because there is no consideration. Hence the promise is not enforceable at that point. But if the promise, being intended to be acted upon by the promisee, is so acted upon by the promisee to his or her detriment, and it becomes unconscionable for the promisor to resile from the promise, then the proprietary estoppel equity comes into existence (eg Crabb v Arun DC [1976] Ch 179, CA). This kind of proprietary estoppel equity is generally satisfied by requiring the promisor to perform the promise or make good the expectation, provided at all events that this is not disproportionate in the circumstances (eg Jennings v Rice [2003] 1 P & CR 8, CA, [50]). If it is disproportionate, then some lesser remedy may be ordered. In the present case, it is this kind of proprietary estoppel equity which is in play. It is a promissory form of the doctrine, rather than a propositional form.

The proprietary estoppel equity has the single most important characteristic of a property right or interest, that is, that it binds third parties. It also takes effect from the point in time at which all the elements of the right are complete, even though the court has not at that stage adjudicated upon it. Thus, in Re Sharpe (a Bankrupt)[1980] 1 WLR 219, Browne Wilkinson J, dealing with a proprietary estoppel claim by one family member against another, who had become bankrupt, said (at 225H):

During the argument I referred to my own decision in James v James[2018] EWHC 43 (Ch), which discussed this point. There I said:

In my judgment there can be no doubt that a proprietary estoppel equity is a property interest for the purposes of the general law of property. As I said in James v James,

Section 116: As I have said, the applicants also referred me to section 116 of the Land Registration Act 2002. This provides:

The applicants also rely on Snell’s Equity, 34^th edition 2020, paragraph 12-054. The relevant part of this paragraph reads:

The quotation from this paragraph relied upon by the applicants ended with the words “effect of dispositions on priority”, about two fifths of the way through the extract given above. Chedington however points to the remainder of the paragraph, down to the words “a recognised property right”, as qualifying that first part. For my part, it is not necessary for me to give any view, much less a concluded view, about the scope of section 116 of the Land Registration Act 2002. It is sufficient for me to say that, in my judgment, the only proprietary estoppel claims which can properly be regarded as ‘property’ rights under the general law, binding third parties in the appropriate circumstances, are those of claims to already recognised property rights or interests. I am satisfied that that is the case for the claim put forward here, even though the applicants have so far only asserted their claim, and the court has not yet adjudicated upon it.

Insolvency Act 1986: I turn then to the meaning of ‘property’ for the purposes of the Insolvency Act 1986. As I have said, the applicants cite two cases. Webster v Ashcroft[2012] 1 WLR 1309 was a case in which a claim to a proprietary estoppel or constructive trust was made in relation to a country estate near Taunton in Somerset. However, the claimant’s claim was that his late father had been entitled to a proprietary estoppel equity in relation to the estate, and that he claimed as a successor in title to him, either through his grandmother’s estate or through a trust created by his father in respect of his proprietary estoppel equity. The father had been made bankrupt in December 1992, being discharged one year later. The first and second defendants applied for summary judgment to dismiss the claim. One ground for this application was that any claim by the father to a proprietary estoppel would be vested in his trustee in bankruptcy, and not in the claimant, so that the claimant had no title to sue.

The deputy judge, Nicholas Strauss QC, referred to the wide definition of “property” vesting in a trustee in bankruptcy under section 436 of the Insolvency Act 1986, and said:

[Counsel for the claimant] submitted that [the father] had not acquired any property by December 1992. In cases of this kind, no property interest arose until the death of the promisor, unless the promisor did something inconsistent with the promise in his lifetime to the knowledge of the promisee: if he did, the promise she had an immediate claim, as in Gillett v Holt.

This seems to me to confuse the right with the circumstances in which the right is enforced. Normally, the promisee would not bring proceedings unless and until the promisee’s personal representatives refused to give effect to the equity. … But the property here is not the cause of action but the equity, described by Slade LJ in Jones v Watkins, unreported, 26 November 1987 as ‘a right in equity to a transfer of the whole property’. On the facts pleaded in this case, [the father and the mother], alternatively [the father] alone, had acquired such a right long before December 1992. Although there is no authority directly in point, in my view [the father]’s right was property which passed to the Official Receiver as his trustee in bankruptcy.”

The other case, Walden v Atkins [2013] EWHC 1387 (Ch), was similar to Webster v Ashcroft. There a claimant making a claim for a proprietary estoppel equity had become bankrupt before the claim could be vindicated before the court. HHJ Simon

The examination relevant to determining whether the subject matter of the equitable estoppel is property for the purposes of s.436 IA 1986 requires consideration of the circumstances at an earlier point in time, namely as they were at the time of the bankruptcy.

The fact that it may not be possible to say, until after the happening of some future contingent event, whether or not an equity has been satisfied and, if not, to identify the minimum relief necessary to satisfy the equity does not mean that the equity did not come into existence, or that it could not have existed, unless and until the future contingent event occurs.

The equity comes into existence, if at all, as the result of a promise being made to and relied upon by and a detriment being suffered by a promisee. It is at that point that the promise becomes irrevocable, the equity is recognised, and it is this equity to which the definition of property at s.436 IA 1986 is to be applied.”

I respectfully agree with both decisions. They show that such a proprietary estoppel equity is property at least for the purposes of falling into the bankrupt estate under section 283 of the Insolvency Act 1986.

Section 283A: Section 283A derogates from section 283, by taking certain property out of the bankrupt estate in stated circumstances. The question therefore is whether there is anything special about section 283A to require a different or narrower meaning to be given to the word “interest” compared to section 283. Chedington says that there is. First of all, it says that a claim to an interest in the dwelling house is not itself an interest in the dwelling house for the purposes of section 283A. For this purpose, it refers to the decision of Mann J in Young v Official Receiver[2010] BPIR 1477.

In that case the claimant and his wife had bought land in about 1999 and built a house upon it. They encountered planning problems and the house had to be demolished. In 2006 the claimant and his wife began legal proceedings for damages against their own solicitors for negligence, the vendors of the land for misrepresentation, and a neighbour for obstruction of a right of way and harassment. Shortly before doing so the claimant presented a petition for his own bankruptcy, which resulted in an adjudication of bankruptcy shortly after the proceedings were commenced. A few months later, the official receiver executed a disclaimer of the land. A question arose thereafter as to whether the damages claims had also been disclaimed, or whether that

On appeal (though not at first instance) the claimant also relied on section 283A to say that the land, and therefore the claim associated with the land, had re-vested in him, more than three years having passed since his bankruptcy, without its being disposed of in the bankruptcy. The judge said this:

These were, of course, claims for damages for misrepresentation, negligence, obstruction of a right of way and harassment. These claims were (nearly) all directly connected with the land, but they were not claims to an interest in the land. They were claims for damages. The interest in the land which the claimant had had (with his wife) was that of ownership of a fee simple estate, and this claim was not to recover or vindicate that. It is of course possible to conceive of a claim in misrepresentation which has a proprietary objective, to undo a transfer, for example. However, Young was not such a case.

But if the subject matter of the ‘interest’ said to fall within section 283A was itself a claim to another ‘interest’ in land, in my judgment that claim can itself be an ‘interest’ for the purposes of that section. As I have said, a claim under a specifically enforceable contract to purchase land, or to take a lease of land, is an interest in the land under the general law, and I can see no reason why it should not also be for the purposes of section 283A. If a bankrupt lived in a house which he or she had purchased, and for which the purchase price had been paid in full, but for some reason the bankrupt had never actually completed the contract and taken a conveyance, I can see no reason at all why the claim to the fee simple or lease (as the case may be) under the executory contract should not itself be an interest under the section. And, if that is so, it is hard to see why a claim to a proprietary estoppel equity (at least under the promissory version of the doctrine, which is this case) should be any different.

Chedington says “One cannot live in an estoppel claim”. With respect, this is quite meaningless. You cannot live in a fee simple absolute in possession, or a term of years absolute, either. What you can live in, and people do live in, is a house or flat built on land in respect of which you have an estate or interest, such as a fee simple or a lease. But it might be a beneficial interest under a trust of land, or (as I pointed out above) pursuant to an uncompleted contract for the sale and purchase of the house. The law reports are littered with cases where people were living in properties in respect of which they had a claim to a proprietary estoppel equity, and succeeded in that claim, to obtain the remedy of an order for the transfer of some estate or interest in the property.

A further argument made by Chedington is that section 283 implements the policy of the insolvency law that as much of the bankrupt’s property as possible should be collected in and realised for the benefit of creditors. Section 283A derogates from that policy by releasing a particular kind of property back to the bankrupt under certain conditions after three years, in order to remedy an abuse which was perceived to have been taking place before 2002. Accordingly, they say that, as section 283A is a derogation from section 283, it should be construed restrictively. I accept the submission as far as it goes. Since the section is designed to prevent the abuse of section 283 by unfairly depriving bankrupts of their home after a considerable time has elapsed without the trustee in bankruptcy realising or attempting to realise that home, the section should be confined to remedying that abuse.

Accordingly, the courts have interpreted “realisation” as requiring an immediate cash payment (Lewis v Metropolitan Properties Realisation Ltd[2010] Ch 148, CA), and restricted claims to the part of the property which constituted a dwelling house (Re Hunt (a Bankrupt)[2014] 1 WLR 254; Hunt v Withinshaw[2015] EWHC 3072 (Ch)). Chedington says there is no market in proprietary estoppel claims, so the trustee cannot have been expected to ‘realise’ the value of the claim. Hence it does not count as an ‘interest’ within the section. I accept that the market is restricted. But there will still be potential buyers. These include (i) the putative defendant, who will pay something to have the claim on his or her title removed, (ii) the putative claimant, who has after all the greatest interest (as this case shows) in prosecuting it, (iii) the friends and relatives of the putative claimant (in case the claimant is still a bankrupt or without sufficient resources), and (iv) neighbours of the disputed property, who may be affected and have their own reasons for wanting either to prosecute or to stifle the claim. I do not accept that there is nothing that a trustee can do to ‘realise’ the claim. Overall, and despite the restrictive approach taken to the construction of section 283A, I can see no good reason why a claim, by way of a proprietary estoppel equity, to a recognised property right enabling a person to occupy a property in relation to a dwelling house which was the home of the bankrupt at the date of bankruptcy should not amount to an interest within section 283A. And (subject to the residence issue) that is this case.

The third aspect of the claim to the ‘Beneficial Interest’ is a claim (made clear in the applicants’ written opening submissions) that the partners of Stay in Style agreed that the cottage should cease to be partnership property and become the exclusive property of the applicants. Chedington complains that this claim is advanced for the first time. However, and as I have already said, the applicants are not obliged to plead conclusions of law. Here, the conclusion argued for arises on the facts which are alleged, namely that the partners in the firm agreed to transfer the cottage out of the partnership property to the applicants’ beneficial ownership. Chedington says that a deed would be required for any disposition of land such as the cottage, even in the context of a partnership. They refer to paragraph 16.46 (but evidently meaning 18-46) of Lindley and Banks on Partnership, 20^th edition, 2017.

Paragraph 18-46 relevantly provides:

If therefore there is to be a change in the beneficial ownership of the cottage as between the partners, by moving the cottage out of the partnership and into the applicants alone, then there must be signed writing, as required by the Law of Property Act 1925, section 53(1), and the Law of Property (Miscellaneous Provisions) Act 1989, section 2. (Chedington is wrong to refer to the need for a deed, but in the event nothing turns on this. There is also a stray reference in the applicants’ submissions to Strover v Strover[2005] EWHC 860 (Ch), but that was not a case involving land, and so the point could not arise.) This means that the case is in practical terms the same, and stands on the same footing, as the first of the three aspects examined, namely an agreement to dispose of an interest in land, required by section 2 of the 1989 Act to be in writing. Since there is no allegation here of a written agreement, this cannot be treated as an interest within section 283A.

I now turn to consider the “dwelling house” issue. In substance, this is whether at the date of her bankruptcy Mrs Brake’s undoubted interest in the two small parcels of land adjacent to the cottage was “an interest in a dwelling house”. I begin with the relevant issues as defined by the statements of case. In the particulars of claim, the applicants say:

Somewhat curiously, the applicants’ written submissions states that the above paragraph 31 is actually contained in the amended defence of Chedington. They also go on to say that Chedington is “correct to assert in [their] pleading that the Cottage and the Cottage Access Land ‘each constituted an interest in a dwelling house’.” I assume that this is just a mistake. It is the applicants who say that. So far as I can see, Chedington has not asserted any such thing, as is shown by its amended points of defence. These provide (in part) as follows:

The applicants submit that, as a result, there is no issue in the present proceedings that the two adjacent parcels of land do not constitute a dwelling house for the purposes of section 283A. Chedington denies this. It says that the interest under section 283A must be “in” a dwelling house, and that there is no dwelling house on either parcel. Even if they were part of the same place of residence (as paragraph 1 of the points of claim asserts), it is only the “unit of accommodation” which revests. The applicants object that these arguments have not been pleaded. But they are matters of law, which (as the applicants themselves argued in this case) do not need to be pleaded. Even if Chedington pleaded a legal result, it is

The facts pleaded by the applicants in paragraph 1 and admitted by Chedington are that the cottage and the adjacent parcels are contiguous, are used together and form part of the same place of residence. That does not preclude arguments of law as to whether Mrs Brake’s interest in the parcels was an interest in a dwelling house. I doubt whether the statements in paragraph 11 of the points of claim are strictly matters of fact at all. They add little, and seem more like an expression of opinion than a statement of fact. But in any event Chedington’s admission of paragraph 11

Chedington says that the test is whether the parcels of land comprised a “unit of accommodation”. It relies on the decision of Morgan J in Hunt v Conwy BC[2015] EWHC 3072 (Ch). In that case Mr Hunt had been the owner of the fee simple estate in a seaside pier. On the pier there was a small apartment in which it was accepted Mr Hunt had his principal residence at the time he was made bankrupt. Just before the expiry of the three-year period, the trustee in bankruptcy made an application for possession, and thus prevented the automatic revesting under section 283A. Subsequently, however, the trustee disclaimed his interest in the pier. Mr Hunt sought to argue that the disclaimer was invalid, and that the pier should have revested in him under section 283A. Morgan J held that this was wrong. He said:

The reference to the decision of Sir William Blackburne is to a decision at an earlier stage in the same proceedings, on appeal from the county court: Re Hunt (a Bankrupt)[2014] 1 WLR 254. On that appeal Sir William said:

In my judgment, the decisions of Sir William Blackburne and Morgan J do not show that the test to apply is whether the parcels of land comprised a “unit of accommodation”. However, they are decisions on the interpretation of section 283A and I should take them into account in reaching my decision in the present case.

Chedington also relies on other authorities which, however, arise in different contexts, including planning (Gravesham BC v Secretary of State for the Environment (1984) 47 P&CR 142), commons registration (In re 1-4 White Row Cottages, Bewerley

As Chedington itself says in written submissions, in meeting an argument of the applicants based on (i) the meaning of the words “belonging to and occupied with” in a tax statute (the House Tax Act 1808), and (ii) the extent of a ‘dwelling house’ for capital gains tax purposes:

The definition of dwelling house in section 385(1) of the 1986 Act (set out earlier) is an inclusive rather than exhaustive definition. However, the structure of the definition is itself useful in understanding the scope of the concept of dwelling-house. It begins with the idea of a building (or part) occupied as a dwelling. The second part expressly extends beyond the building (or part) to (i) land which is not built on (yard and garden) and (ii) separate structures (garage and outhouse). But, to qualify, any of these must belong to the dwelling-house, and be occupied with it. Here the concept of

In the Hunt cases, the bankrupt owned a fee simple estate in a seaside pier. On the pier there was a unit of accommodation in which it was accepted he had his principal residence. He said the non-living accommodation part of the pier was like a yard and a garden, and so the whole pier could revest in him under section 283A. The courts refused to accept this, and the dwelling-house within section 283A was confined to the unit of accommodation alone. That is a rather extreme example, and the result is unsurprising. But it does illustrate the important point that the extension beyond the basic idea (the unit of accommodation) must serve or be useful to the accommodation, and must be capable of being realistically described as a yard, garden, garage or outhouse. In that case the rest of the pier was neither. The purpose of the section is to enable bankrupts to get back their homes if they have not been dealt with in the bankruptcy within three years. There is no need to expand the notion of the bankrupt’s home artificially in order to achieve that purpose.

In the present case, the cottage and the parcels were acquired separately, by different people, at different times and for different purposes. They were in different ownership and different occupation. The partnership owned and occupied the cottage, whilst Mrs Brake owned and occupied the parcels. Since Mr and Mrs Brake used the cottage on behalf of the partnership, in that factual sense the applicants used both the cottage and the parcels (as is pleaded and accepted). But the Brakes’ occupation of the cottage was as licensees on behalf of the partnership, whereas that of the parcels was as beneficial owner (by Mrs Brake). The parcels themselves were not essential to living in the cottage (as the Whites did without them), although both added amenity value, the western parcel by enabling a more convenient access to be obtained, and the eastern by allowing an extension of the garden.

The western parcel beyond the drive is long and thin, extending alongside the lane. In general terms, it is not obviously within the words of extension “yard, garden, garage or outhouse” at all. However, that easternmost part that was used as a track (and later a gravel drive) leading from the lane to the rear of the cottage could conceivably be regarded as within the term “yard”. The encroachment by the cottage extension to the south onto a few feet at most of the western parcel does not alter matters. That is a question of title, trespass and possibly of acquiescence, as between neighbouring landowners. The eastern parcel can properly be regarded as falling within the word ‘garden’. But, in my judgment, neither parcel could properly be regarded as ‘belonging to’ the cottage at the relevant time, not then being in the same ownership, or forming parts of a coherent whole. Nor indeed was either parcel ‘occupied with’ the cottage at the relevant time. The occupiers were different.

I have already set out section 283A(1) of the Insolvency Act 1986. It applies to an interest in a dwelling-house which “at the date of the bankruptcy was the sole or principal residence” of one of certain persons, including the bankrupt and the bankrupt’s spouse. If the dwelling-house was the cottage, the question is whether on 12 May 2015 the cottage was the “sole or principal residence” of Mr or Mrs Brake (or both of them). There is no definition or further elucidation in the Act of the meaning of the phrase “sole or principal residence”, and so far as I am aware, there is no judicial decision on this section as to its meaning.

I was referred, however, to a number of authorities dealing with the same or similar phrases in the context of other legislation. These include Frost v Feltham[1981] 1 WLR 452 (“only or main residence” in the Finance Act 1972, Sch 1 para 4(1)), Crawley BC v Sawyer(1988) 20 HLR 98, CA (“only or principal home” in the Housing Act 1985, s 81), Williams v Horsham DC[2004] 1 WLR 1137, CA (“sole or main residence” in Local Government Finance Act 1992, s 6(5)); Islington BC v Boyle[2012] PTSR 1093, CA (“only or principal home” in the Housing Act 1985, s 81). Mr

I have already referred to the problem of authorities on similar phrases to be found in other contexts. The policy which leads the legislature to provide for some consequence to flow from a phrase like “sole or principal residence” in the context of (say) a residential tenant holding over after a contractual tenancy has come to an end is not the same as the policy which provides for the revesting in a bankrupt of an interest in a dwelling-house three years after the bankruptcy, that interest not having been disposed of in the meantime for the purposes of the bankruptcy. That does not mean that the other authorities are of no assistance at all. But it does mean that the court has to be careful in the way that those authorities are used.

Section 283A is designed to prevent trustees in bankruptcy from abusing their position, and depriving the bankrupt of a home after (for example) simply waiting for the market to rise, instead of getting on with the realisation of that asset for the benefit of the creditors. It is not designed to protect the home from realisation for the benefit of creditors at all. If the claims of the creditors outweigh all other interests (as is generally the case after one year into the bankruptcy), then it is likely that the court will order a sale under section 335A of the Insolvency Act 1986. Unlike (say) cases of protected tenancies, there is therefore no need for a generous or expansive approach to the concept of “sole or principal residence”.

The phrase “sole or principal residence” also shows that the concept of “residence” does not require physical presence at all times in the property, since a person having more than one residence can be physically present in one but not in both or all at the same time. By extension, it also shows that one of a number of dwelling-houses in which a person resides may continue as that person’s residence even during absences from all such dwelling-houses. Questions may arise as to the need for that person to have the intention to return to reside again, and the need for some symbolic occupation in the meantime (eg a licensee or furniture). In Tickner v Hearn [1960] 1 WLR 1406, CA, for example (a Rent Act case), Ormerod LJ said at 1410:

This approach was adopted much more recently, by the Court of Appeal in Islington LBC v Boyle[2012] PTSR 1093. This was a case concerned with the concept of a secure tenancy within the Housing Act 1985, section 81, which refers to a tenant’s occupying a dwelling-house “as his only or principal home”. The tenant and her partner had three children, one of whom was severely autistic, attending a special school near the flat. The relationship broke down and the partner moved out, and bought a house about 100 miles away. The autistic child became aggressive towards the other two children, and the tenant and the partner effectively swapped homes, the tenant taking the other two children and the ex-partner returning to the flat to care for the autistic child. Although this was intended only as a temporary arrangement, it lasted for several years, until the local authority landlord discovered the arrangement and served the tenant with a notice to quit. It then claimed possession on the basis that, since the tenant was no longer occupying the flat as her principal home, the tenancy was no longer secure. The judge dismissed the claim and the landlord authority appealed. The Court of Appeal allowed the appeal on the basis that the judge had failed to consider the proper question, and remitted the case to be retried.

Etherton LJ (with whom Mummery and Patten LJJ agreed) said:

The phrase in question in the Islington case was almost the same as the phrase in section 283A of the 1986 Act. And in his judgment Etherton LJ referred specifically to the problem of two home cases. It is also an example of a two-home case where a

It is also clear from the authorities on other statutes (for their statutory purposes, at least) that it is not necessary for a person to have an ownership interest in a property in order for it to amount to one of two or more residences, one of which is the principal residence. In Williams v Horsham DC[2004] 1 WLR 1137, CA, for example, the taxpayer schoolmaster owned a cottage which was furnished and available for his use, but was also licensee of furnished residential accommodation provided at the school where he was employed. For council tax purposes, he was held to have his principal residence at the school, where he as simply a licensee.

Another instructive example is Frost v Feltham[1981] 1 WLR 452. This was a case about the deductibility of mortgage interest paid on a loan to purchase the taxpayer’s “only or main residence”. The taxpayer was the licensee of a public house in Essex, but with mortgage finance had bought a house in Wales. It was the only house he owned. But he visited it only for two or three days a month and sometimes for longer in the summer. He said it was his main residence, despite the fact that he spent much more time at the public house where he worked. The Inland Revenue refused him tax relief, and he appealed to the general commissioners, who allowed the appeal. The Inland Revenue appealed to the High Court, but their appeal was dismissed. Nourse J said (at 455):

It is easy to see why that should apply to tax. No property rights were in contention. But I consider that similar considerations apply under section 283A. The concept of residence or principal residence is simply a gateway for the claim. If a person has no interest in a particular property which is his or her principal residence, then the trustee in bankruptcy cannot realise it for the benefit of creditors, and the bankrupt cannot claim a revesting under section 283A.

In Frost v Feltham (discussed above) Nourse J said at 475G:

The case of Williams v Horsham DC also adopts an objective test for determining which of two or more residences is the principal one. Lord Phillips MR, giving the judgment of the court, said:

Earlier in this judgment I referred to the Official Receiver’s technical manual, and in particular to a reference contained in paragraph 31.3.79 (second subparagraph) to the need for a bankrupt having more than one residence “to elect which property was the principal residence”. The concept of election as to which of two or more residences is the main residence is not unknown to the law. In the context of capital gains tax, section 222(1) of the Taxation of Chargeable Gains Act 1992 provides an exemption from capital gains tax on capital gains realised by the disposal of a dwelling house

Section 283A, however, contains no such provision for any election to be made (by anybody) in the case of a bankrupt’s having two or more residences. Yet the Official Receiver’s technical manual assumes the existence of such a procedure, without citing any authority for it. Counsel were unable to help me as to where this might be found. As at present advised, therefore, I consider that there is no such authority, and that any such “election” under section 283A has no immediate legal effect.

It is clear from the evidence of Mr Swift that it is usual for incoming trustees in bankruptcy to require the bankrupt provide information about residences, and if there is more than one, to state which is the principal one. As I have said earlier, Mr Swift did this, and Mrs Brake responded on behalf of both applicants. In my judgment, however, providing this information to the trustee in bankruptcy does not bind the trustee in bankruptcy so that he or she is unable to attribute the description of principal residence to any other of the bankrupt’s residences. A fortiori, it does not bind the court. As set out above, the test is not a subjective one depending on the intentions of the bankrupt, or on his or her desire to select one particular property for revesting if not disposed of in three years’ time, although that is a relevant consideration. Instead it is an objective test, dependent on the view of the “reasonable onlooker, with knowledge of the material facts”.

I add a footnote to this. I said that a purported election would have “no immediate legal effect”. By this I mean that it would not immediately bind either the bankrupt or the trustee in bankruptcy. It may perhaps be that a statement by the bankrupt in answer to a question from the trustee in bankruptcy as to which of two or more residences was the principal one could found an estoppel as against the bankrupt, if the trustee in bankruptcy relied on that representation to his or her detriment. And even vice versa. But that question does not arise in this case, and I say no more about it.

Chedington complains of a failure by the applicants to call other relevant evidence. In particular, it points to Mrs Foster, Mr Peter Williams (their former solicitor), and other friends and neighbours who would have visited them at the cottage and be able to say that they were living there at the material time. Chedington relies on Wisniewski v Central Manchester Health Authority [1998] PIQR 324, CA. In that case, Brooke LJ (with whom Roch and Aldous LJJ agreed) said:

If a court is willing to draw such inferences they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.

There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.

If the reason for the witness’s absence or silence satisfies the court then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.”

However, as Sir Ernest Ryder SPT (with whom Sales LJ agreed) made clear in Manzi v King’s College Hospital NHS Foundation Trust [2018] EWCA Civ 1882:

More recently, in Magdeev v Tsvetkov[2020] EWHC 887 (Comm), Cockerill J, dealing with the same point, said:

This evidential ‘rule’ is, as I have indicated above, a fairly narrow one. As I have noted previously ([2018] EWHC 1768 (Comm) at [115]), the drawing of such inferences is not something to be lightly undertaken.

Where a party relies on it, it is necessary for it to set out clearly (i) the point on which the inference is sought (ii) the reason why it is said that the ‘missing’ witness would have material evidence to give on that issue and (iii) why it is said that the party seeking to have the inference drawn has itself adduced relevant evidence on that issue.

The Court then has a discretion and will exercise it not just in the light of those principles, but also in the light of:

the overriding objective; and

an understanding that it arises against the background of an evidential world which shifts - both as to burden and as to the development of the case - during trial.

The first question is whether Chedington can point to witnesses who might be expected to have material evidence to give on an issue in this case. In my judgment Mrs Foster is one such. In the trial bundle are two witness statements from Mrs Foster at earlier stages in these proceedings. Since she was not called, those are not evidence at this trial (although they were used as material for cross examination). However, those witness statements are in themselves material to the question of the principal residence at the time of the applicants’ bankruptcies. And they also indicate that Mrs Foster may have further evidence which bears on this question. I do not think the same is true of Mr Williams. Although he was intimately involved with the applicants’ affairs, and wrote numerous letters on their behalf, it does not appear that he had any first hand evidence of his own as to where the applicants were in fact living at any given time. There is (for example) no evidence that he visited the estate at a relevant time (unlike his partner Mr Hyde). So far as concerns the failure to call other friends, Chedington does not identify any particular candidates, and it is impossible for me to assess whether there is anyone else who would have had the necessary relevant evidence.

No explanation has been advanced for the failure to call Mrs Foster. It is clear that she has been willing in the past to assist the applicants, to the extent not only of buying the farm at a crucial time, but also later making two witness statements in their support in these proceedings. Her evidence would in my judgment be material to the question whether the cottage was the applicants’ principal residence or not. This is an issue on which Chedington has adduced evidence and there is a “case to answer”. Accordingly I have a discretion in the matter. In my judgment, bearing in mind the overriding objective and the whole background to this present litigation, I consider it would be just to draw an inference adverse to the applicants arising from their failure to call Mrs Foster. This goes to strengthen the case put forward by Chedington that the house rather than the cottage was the applicants’ principal residence at the time of their bankruptcies.

A further point is raised by Chedington, and this relates to alleged failures to give proper disclosure in this case. Chedington submits that, where a party has failed to provide proper disclosure, and that appears to be a conscious decision, it is open to the court to draw adverse inferences. In Gray v Haig & Son (1855) 20 Beav 219, Gray was the agent for the defendant distillers, to sell their products on commission. On the termination of the agency an account was ordered. But Gray had destroyed his books, essential to the taking of the account, after the dispute had arisen. Sir John Romilly MR said (at 226 and 229):

In Malhotra v Dhawan [1997] 8 Med LR 319, CA, Morritt LJ (with whom Saville LJ and Sir Patrick Russell agreed) set out these passages from Gray v Haig & Son, and said that counsel for Mr Malhotra

In Earles v Barclays Bank [2008] EWHC 2500 (Mercantile, [28]) HHJ Simon Brown QC referred to this principle, saying:

Chedington relies on four alleged failures to give disclosure. The first alleged failure was not to disclose witness statements of Mrs Brake made in December 2014, January 2015 and April 2015, all of which refer to the house (rather than the cottage) as the family home, and referred to the cottage as used only when the house is booked up. The second alleged failure was not to disclose the letters sent by Mrs Brake to the arbitrator on 7 and 15 April 2015, arguing that the cottage be sold by the LPA receivers with the house and that house was their home. The third alleged failure was not to disclose any of the “everyday” documents such as bank statements, utility bills, communications from school, the GP and so on. The fourth alleged failure was to disclose the TP1 transfer form from the Vickerys to Mr and Mrs White in 2002 less than one week before the trial.

All of these may well be failures to disclose known adverse documents (the last would be a failure to disclose in accordance with the time limits under the CPR and court orders). And, if so, they were certainly convenient for the applicants. Chedington invites me to infer that they were deliberate failures. However, on the limited evidence before me, I cannot be satisfied that they were such deliberate failures. Accordingly, I do not consider that I may properly rely on this principle in the present case.

The applicants say their principal residence moved from the main house to the cottage in the period late 2014 to early 2015. However, the evidence is confused. Moreover, the applicants themselves were unable at trial to be clear as to when exactly they say that the change took place. Mrs Brake said in her evidence (written and oral) that their principal residence changed from the house to the cottage (i) in November 2014, (ii) in April 2015, (iii) after 7 May 2015 but before 12 May 2015 (when they were made bankrupt), and (iv) at no definite date, because it was a question of election. Mr Brake said in his evidence (written and oral) that their principal residence changed from the house to the cottage (i) at the end of 2014, (ii) during March 2015, (iii) in mid April 2015, and (iv) at the end of April 2015.

The applicants say that this is an unusual case, because they accept that they used both the house and the cottage to live in during the period running up to their bankruptcies. But they say that they stopped living in the house at some point before the date of bankruptcy. They also point to the fact that the two properties are less than a hundred yards apart, and that they had enough furniture, domestic appliances and personal effects in each of them to be able to move from one to the other without having to engage a removals firm.

They rely on a number of factors to show that they changed their principal residence before 12 May 2015 from the house to the cottage. These include (i) the insurance policy effected in November 2014, (ii) the change to the electoral address at which they were registered to vote, also in November 2014, (iii) the movement of personal items between the house and cottage in March 2015, (iv) the need for Mrs Brake’s son Tom to be able to study for his GCSEs in peace and quiet during 2014-15, (v) the applicants’ response in December 2015 to the enquiry from Mr Swift as to which was their principal residence as at the date of their bankruptcies, (vi) the fact that the bank’s receivers were proposing to sell the house but not the cottage, (vii) visits from their friend Ms Maslin to them at the cottage in the period before and after their bankruptcies, (viii) the visit at the cottage by Mr Hyde of Michelmores in early June 2015, and (ix) the fact that the applicants did not stay overnight in the house between May 2015 and September or October 2016. I will deal with each of these points in turn.

The receivers were appointed over the Farm in October 2014. They permitted the applicants to continue in occupation of the house and to continue to operate their business. But it would have seemed likely that the house was going to be sold at some point in the future. The arbitrator was keen that, if the house was sold, the cottage should be sold with it, and the order of Sir William Blackburne in January 2015 gave the receivers the power to include the cottage in the sale of the Farm. The receivers marketed the properties together. Early in 2015 the applicants’ friend Mrs Foster had indicated that she would try to help them and that if she was successful in buying the property they could stay on. On 1 April 2015 PWF issued a claim for an order that the cottage be sold under the terms of the charging order which it had previously obtained against the interests of Mrs Brake in the cottage.

It was only on 7 May 2015 that the receivers informed the applicants and others that they no longer intended to proceed with the sale of the cottage at the same time as that of the Farm. Until that point, it would have seemed just as likely that the cottage was to be sold as that the Farm was to be sold. On the other hand, if Mrs Foster was successful in her bid, the applicants would not have to move at all. It was only as at 7 May 2015 that the position changed, and then only in part. Even then (1) there was still the application by PWF for an order for that sale of the cottage and (2) Mrs Foster might be successful in her bid. Final bids were not due until 15 May 2015, after the date for the hearing of the bankruptcy petitions. No reasonable onlooker with knowledge of the facts would have considered in the run up to 12 May 2015 that the cottage was a better prospect in the medium to long term as a home for the applicants.

All in all, I do not think there is anything much in the way of objective phenomena to support the reasonable onlooker, with knowledge of the material facts, in forming the view that the Brakes changed their principal residence from the house to the cottage by 12 May 2015. I have no doubt that, subjectively, Mr Brake did regard the cottage as his principal residence by May 2015. But I do not accept that Mrs Brake did. She much preferred the house to the cottage. It was bigger, grander, more comfortable and had the luxury furnishings which she was used to, as well as the equestrian facilities for their horses. It suited her lifestyle. She was prepared to stay at the cottage when necessary, because that was how she gained an income, but in my view she never ceased to regard the house as her principal residence.

Sometime after the bankruptcy, and certainly by July 2015, she began to assert that the cottage was their principal home, or their only home, because it suited her purpose to do so. Perhaps she had been alerted to the significance of section 283A, or perhaps she was simply concerned to prevent an order for the sale of the cottage being made. I do not know, and for present purposes it does not matter. For a long time she held the view that she had elected for the cottage to be their principal residence for the purposes of section 283A, although at the trial she told me, first, that she elected for the cottage because it was their principal residence, and then simply that she had made a statement of what the present position was (see [231] above).

Weighing up the factors, I start with the fact that the applicants’ principal residence was in the house for many years, and it was only in late 2014 or early 2015 that they say they changed it from the larger, more comfortable house to the smaller less comfortable cottage (without being able to agree when this happened). I accept that the appointment of the receivers would have prompted a consideration of what would happen in the future. However, the receivers were from an early stage proposing to deal with the cottage as well, and only renounced this intention a few days before the bankruptcy date. Accordingly, I cannot see that any reasonable onlooker would regard this as a good reason for changing one’s principal residence from one of the properties to be sold to another (even if there were any outward sign at that time). This was particularly so once Mrs Foster had expressed her interest in seeking to acquire the whole estate so that the applicants could stay there. As it happens, Mrs Foster was successful, and the applicants did stay there.

In my judgment, there is nothing in any of the matters relied upon by the applicants (whether taken separately or together) which shows objectively that they had changed their principal residence from the house to the cottage by 12 May 2015. On the contrary, they still had all their luxury furniture and furnishings in the house, they continued to occupy it by day, and to live in it overnight when it was not let (for example at Christmas 2015), and, when it was let, they locked up rooms with their personal effects in.

After I had circulated this judgment in draft, both sides made suggestions for correction. Chedington asked me to remove short passages from paragraphs 77 and 81 above. These were:

The applicants were able in their own suggestions to comment on this suggestion because they did not serve their list of suggested corrections at the same time as Chedington, but only on the following day. They said that, if prejudice by reference to other proceedings were a criterion for correcting the draft judgment, they would have made several similar suggestions, but they considered that this went beyond the scope of review of a draft judgment. They also said that these were

I do not agree that what I said in the passages objected to were core findings, but they were certainly findings on the evidence before me. They were marginally relevant to the factual issue which I had to determine about the principal residence of the applicants as at 12 May 2015. However, they were not issues in themselves and, as I observed above, since they relate to the period after 12 May 2015, their probative weight was small. I do not think that either passage was necessary to my decision, but I was telling the story as I found it on the evidence. In these circumstances I see no prejudice to Chedington, and no reason to remove them. Accordingly, they have been retained. I do not need to decide whether, if they had caused prejudice to Chedington, it would have been right to entertain the application to remove them.

I should also add that the applicants in their suggestions asked me to alter some passages in paragraphs 228 and 234 (now 231 and 238), by reference to an extract from the transcript. Having considered that passage, I consider that what I wrote was strictly accurate, but I have added some more words to make the points clearer, and so that the applicants do not think that I have ignored the transcript.

Finally, I mention that, in finalising this judgment for hand-down, I have taken the opportunity to subdivide some longer paragraphs. This means that the paragraph numbers from the draft and the final versions do not coincide all the way through. I am sorry if this causes any inconvenience.