“Use it or lose it” revisited – section 283A of the Insolvency Act 1986

Ms Khilji was made bankrupt in July 2018. She occupied a property that was registered in the sole name of her husband, who had died in 2014. The deceased’s estate, including the property, was being administered under intestacy laws.

The administrator of the deceased’s estate applied for a possession order in April 2019. The bankrupt filed a defence and counterclaim in September 2019, asserting a one-third interest in the property under a common interest constructive trust. In December 2021, she asserted that the beneficial interest in the property had revested in her, more than three years having elapsed since her bankruptcy.

The Trustee in Bankruptcy issued an application pursuant to s.283A of the IA1986. The trustee and administrator agreed that the bankrupt’s beneficial interest in the property was 5%.

The bankrupt asserted that in attending an interview with an OR examiner in September 2018, and in completing a PIQB and standard trustee statement, she had “informed” the OR and / or the trustee of a potential interest in the property (albeit no interest was positively asserted), and that the interest had revested in her.

S.283A requires that the trustee has to be informed of the interest in the property, or to become aware of the interest; knowledge is required. Notice of a potential claim does not amount to knowledge. On the facts, neither the trustee nor the OR was informed or otherwise became aware of the bankrupt’s interest in the property before September 2019. None of the earlier pieces of evidence relied on by the bankrupt came close to informing the trustee or the OR of any such interest or was otherwise capable of causing them to become aware of one. Given that time did not start to run until September 2019, the trustee acted within time.

The court confirmed that a beneficiary's interest in an unadministered estate does not give rise to any legal or beneficial interest in any of the assets comprised in that estate.

The case is a useful reminder of a bankrupt’s duty of co-operation and disclosure.

Khilji (In Bankruptcy), Re Mehers v Khilji [2023] EWHC 298 (Ch)

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