WHEN IS AN APPLICATION MADE? IT CAN BE VERY IMPORTANT: SANDS -v- SINGH

The judgment of HH Judge Purle, QC in Sands -v- Singh [2015] 2219 (Ch) considers the issue of when an application is made under the Insolvency Act. It also has wider  and more relevance in relation to the calculation of time limits for applications. (It also shows that problems can occur if actions and applications are left to the 11th hour).

“...it seems to me that any construction of the Act which prevents the rights of the parties being subject to the vagaries of the court system must be preferable to one which allows the vagaries of the court system to intrude.”

THE CASE

The claimants were the trustees in bankruptcy of Mr Singh. They wanted to sell the bankrupt’s property, which was lived in by his former wife.  An application in relation to that property had to be made within three years of the bankruptcy.

KEY POINTS

  • An application under s.283A(1) of the Insolvency Act 1986 was made when the application, and the appropriate fee, was delivered to the court.
  • Any later delays by the court did not have any impact on the relevant date for the purpose of the Act.

SECTION 283A(1) OF THE INSOLVENCY ACT 1986

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

(a) the bankrupt, or

(b) the bankrupt’s spouse or civil partner, or

(c) a former spouse or former civil partner of the bankrupt.”

  1. It is further provided by s. 283A(2):

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

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

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

  1. Subsection (3) continues as follows:

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

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

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

(c) the trustee applies for an order for possession of the dwelling-house …”

THE APPLICATION IN THE CURRENT CASE

The issue was whether an application had been made for possession and sale within the three year period.

  • The bankruptcy order was made on the 28th September 2011 in the Coventry County Court. The file was then transferred to the Chancery Division in the High Court in Birmingham.
  • On the 26th September 2014 the applicants’ solicitors sent an application along with a cheque for £155 to the County Court at Coventry.
  • That fee was not accepted as the staff at Coventry insisted that the fee was £70.
  • The application was then transferred to Birmingham and was processed by the Birmingham Registry of the HIgh Court (which, incidentally, promptly demanded the balance of £85 to bring the payment up to the sum of £155 originally offered).
  • The application was issued out of the High Court Chancery Division, Birmingham District Registry on the 1st Nov 2014.

THE RESPONDENTS’ ARGUMENTS: THESE PROCEEDINGS WERE NOT ISSUED IN TIME

Technically proceedings were issued in the wrong court (the action was not transferred to Birmingham only the file), however this, in itself, did not render the application invalid. The respondents argued that proceedings  were not issued until the 1st November 2014 – that is outside the three year period.

THE JUDGE’S DECISION: THE APPLICATION IS MADE WHEN THE FIRST APPLICATION WAS DELIVERED TO COURT

  1. The condition of s. 283A(3) is that “the trustee applies for” an order for possession or sale, and here the trustees have applied for both. The only issue is: when did the trustees apply?
  2. In my judgment, the trustees applied when they delivered the application notice and tendered the relevant fee to the County Court at Coventry , which that Court centre then passed on to Birmingham upon finding that the papers were there. Birmingham ultimately issued the application on 1stNovember 2014. S. 283A(3) merely required the making of an application by the trustees. What happened to the application once made was out of the trustees’ hands, but was in the hands of the Court. The operation of s. 283A(3) is not however dependent upon the Court doing anything. It merely requires that “the trustee applies”, which the trustees did in this case on 26th September 2014. It cannot be right to construe those words so as to require something to be done by the Court. The section focuses upon something to be done by “the trustee” alone. If that is right, as in my judgment it is, then the trustees in this case applied in time. They could not do anything over and above what they did, and therefore complied in my judgment with the statutory condition. It is immaterial that this results in the disapplication of substantive property rights which would otherwise arise. That is the effect of s. 283A(3) but does not govern the construction of the words “if … the trustee applies”, which are straightforward words with no hidden meaning requiring the Court to act before the trustee can be said to have applied. In my judgment the application was made when the papers were lodged with the Court and the appropriate fee tendered.
  3. Mr. De Waal reinforced that argument by reference to the decision of Evans-Lombe J. in Secretary of State for Trade and Industry v. Vahora and Others [2008] Bus. L.R. 161. In that case, which concerned section 7 of the Company Directors Disqualification Act 1986, the question was whether an application for a disqualification order had been made in time. The relevant wording was
“(2) Except with the leave of the court, an application for the making under that section of a disqualification order against any person shall not be made after the end of the period of two years beginning with the day on which the company of which that person is or has been a director became insolvent.”
  1. This wording, referring as it does to the making of an application, is much closer to what we have in this case. Evans-Lombe, J., after a full review of the authorities, including the Salford decision relied upon by Mr. Curl, held that the wording was concerned not with the commencement of proceedings, but the bringing of proceedings, and proceedings are brought before issue by delivery of the relevant papers to the court office, a point which applies in my judgment not just to limitation but to the making of applications generally.
  2. Comparison can also be made in this connection with CPR 23.5 which applies to proceedings under the Act by virtue of Insolvency Rule 7.5(1). CPR 23.5 reads as follows:
“Where an application must be made within a specified time it is so made if the application notice is received by the court within that time.”
  1. It seems to me that CPR 23.5 is readily applicable to the provisions of s. 283A. Section 283A(2) provides what is to happen at the end of the period of three years beginning with the date of the bankruptcy, and subsection (3) says that that shall not apply if an application is made for a relevant order, as in this case.
  2. The effect of those provisions is that the trustee in bankruptcy must make an application within the time specified in s. 283A(3) if the dwelling house is not to cease to be comprised in the bankrupt’s estate. It is pointless to say the application could be made outside that period, because the application would simply be hot air in that event. For the application to have any effect, it must be made within the time specified in subsection (2).
  3. Moreover, as Mr. De Waal emphasised, paragraph 5.1 of Practice Direction 7A, whilst providing that proceedings are “started” when the court issues a claim form, goes on to say:
“…where the claim form as issued was received in the court office on a date earlier than the date on which it was issued by the court, the claim is ‘brought’ for the purposes of the Limitation Act 1980 and any other relevant statute on that earlier date.”
  1. Whilst that is clearly directed in the main towards the Limitation Act 1980, it is also directed to “any other relevant statute“. If, as Mr. Curl says, the application in the present case must be treated in the same way as a claim form, then I do not see why the Insolvency Act 1986 is not “another relevant statute”, and that the claim can be treated as “brought”, albeit not “started,” earlier than its issue. If the claim is treated as “brought”, the trustees’ must also be treated as applying for the orders sought, as a claim could not otherwise be brought.
  2. Be that as it may, it seems to me that any construction of the Act which prevents the rights of the parties being subject to the vagaries of the court system must be preferable to one which allows the vagaries of the court system to intrude. In my judgment, this application was made, in the sense that it was brought, in time, and that is sufficient for the purposes of s. 283A(3).

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