Trustee granted possession over bankrupt’s jointly owned property

The court has considered whether to make an order for possession and sale of a bankrupt’s property, where the costs of the bankruptcy significantly outweigh the value of the debt owed to creditors, and where it's likely that any realisation will be absorbed by bankruptcy costs.

Mrs Temblett (T) had been made bankrupt upon debts relating to empty property premiums, payable in respect of a property she owned in Bath. The petition debt amounted to c.£15,000.

T failed to cooperate with her trustee in bankruptcy. She failed to attend for public examination and an arrest warrant was issued as a result. She failed to assist the trustee with insuring and realising the value in the Bath property, which meant that the trustee had to take possession action.

She also made various lengthy allegations against a wide number of parties, alleging political conspiracies, corruption, forged documents and judicial misconduct, impeding the trustee from administering and winding-up the bankruptcy estate in a cost effective manner. These actions increased the costs unnecessarily.

The costs in the bankruptcy significantly outweighed the amount of the petition debt. The trustees now sought an order for possession and sale of T’s London property, which she jointly owned with her husband. The judge noted that the net proceeds of sale in the London property may be absorbed by the costs and expenses of the trustee, leaving little or no distribution to unsecured creditors.

That did not mean that the possession and sale should not be ordered. The creditors have an interest in an order for sale even if the whole of the net proceeds go toward the costs and expenses of a trustee in bankruptcy (Trustee of the Estate of Bowe v Bowe [1997] BPIR 747 and Harrington v Bennett [2000] BPIR 63 followed).

The judge ordered that 50% of the beneficial interest in the London property had vested in the trustee, and granted an order for possession and sale.